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Operator: Ladies and gentlemen, welcome to the Cembra Full Year 2025 Results Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Mr. Holger Laubenthal, CEO. Please go ahead, sir. Holger Laubenthal: Thank you, Sandra, and good morning, everyone. Great to be here for the presentation of our full year results for 2025. As usual, here with our CFO, Pascal Perritaz, our CRO, Volker Gloe and look forward to walking you through the presentation, and then as always, we'll take your questions. We start with the key messages we have for you this morning. First, with continued focus on delivering on our transformation and executing our strategic programs, we have yet again been able to increase an income to -- for the year to CHF 180 million. Second, our efficiency drive continues to deliver with CHF 19 million of cost savings. We're at the upper end of the guidance that we provided. In a volatile global economy and interest rate climate and a somewhat less predictable macro environment, we have successfully defended our net interest margin, [Technical Difficulty] and loss performance with well-calibrated volume price risk management across our product lines. This active portfolio management has led to selective growth across our products, as you know, we're optimizing for profitability. The slowdown in personal loans has largely been offset through growth with a bias towards secured assets in less risky segments. Given this overall strong performance in capitalization, we're pleased to announce the proposed dividend increase of 8% to CHF 4.60, and extraordinary dividend of CHF 1. Finally, with revenue growth expected in line with GDP and further significant cost savings, we continue to pace towards our financial targets and expect a 2026 ROE of around 15%. Let me give you the highlights of last year's performance. Net income, up 5%, as explained with net revenues and net financing receivables lower, reflecting focus on profitability. Further significant improvements in cost income ratio to 45.2% and 43% in the second half. Loss performance came in at 1.1%, in line with the guidance and ROE at 13.7%. This resulted in very strong Tier 1 capital ratio of 17.6%. And with that, the proposal of an ordinary dividend of CHF 4.60 and extraordinary dividend of CHF 1. If we zoom in and the specific segments in the market, as already mentioned, lending in 2025 reflected the continued shift into more secured business and payments, followed with growth in credit card assets. By product, this means in personal loans, we continued our approach with growth on better performing, more profitable segments and degrowth in less performing segments. This approach is delivering as planned with very solid [indiscernible] risk metrics and more on this later from Volker. We have also held our market share in a contracting market in the second half. Auto continued to grow nicely. Our new leasing platform has further strengthened our proposition and net financing receivables were up 3%. Cards assets also up slightly driven by our own proposition and co-brand partnerships and buy now pay later core activities were up, as you see in financing volumes, billing volumes down to -- due to the portfolio consolidations we already explained and articulated. So overall, and in the mix across products with a bias towards secured assets, we continue to hold very solid positions in our markets. A few items to highlight operationally aligned with our dual transformation objectives. As you know, both efficiency as well as generating increased customer value. On the business and operating model simplification, we've aligned our distribution network into regional centers, consolidating our presence and enabling full-service capabilities in high-visibility locations across the country. We've also driven infrastructure consolidation forward meaningfully. It is an important element of our efficiency programs, retiring and decommissioning numerous major systems and apps and in-sourcing others to drive further simplification and business model resilience. We discussed the auto platform in the summer. We're extremely pleased here with significant tangible efficiency increases, higher automation as well as faster and simpler processing for our partners. Our app with now over 600,000 enrollments evolves increasingly into a comprehensive integrated platform for our users. We now serve card, auto and loan customers through this app and continue to launch value-added services and products on a regular basis. We're also excited about our new and enhanced loyalty proposition for the Certo! credit card family. This is a unique program in Switzerland with a comprehensive loyalty ecosystem that allows merchants to connect with targeted customer segments and offers enhanced and seamlessly accessible and visible benefits for our customers. We've already signed up over 30 retail partners and plan to add more as we go along. So with that, let me hand over to Pascal to go through the financials in more detail. Pascal Perritaz: Thank you, Holger, and good morning, everyone. I'm pleased to report a strong financial performance for the full year 2025. The net income increased by 5% to CHF 179.6 million, demonstrates the resilience of our business model and the continued benefits of our transformation program. With that, let me go through the P&L. The increase in net income was primarily driven by lower operating expense and continued solid risk performance. The net revenue decreased by 2% to CHF 542 million, reflecting the selective growth in receivables in lending and lower interest income in cards following the regulatory change in maximum interest rates. The net interest income decreased slightly by 2% with the impact of this lower pricing and assets as well as reduced interest income from cash and securities, partially offset by lower interest expense. We successfully defended our net interest margin at 5.5%. Commission and fees income amounted to CHF 170 million and remained broadly stable across all revenue streams. The consolidations of the BNPL portfolio and the runoff of the Cumulus credit card migrations portfolio were both successfully completed in 2025. Provisions for losses remained stable at CHF 74 million, resulting in a loss ratio of 1.1%, and Volker will further comment soon. Operating expense decreased by 7% to CHF 245 million, and this is mainly driven by the efficiency gains from our strategic transformation, including the completed infrastructure consolidations and continued progress automation. As a result of this decrease in operating expense, the cost income improved by 2.9 percentage points to 45.2%, compared to 48.1% in 2024. Let's now talk about the net financing receivables and the yield development. The net financing receivable declined slightly by 1%, precisely 0.6% to CHF 6.6 billion, and this is reflecting our active portfolio management and the focus on our high-quality assets as part of our Cembra DNA. The auto lease and loans mainly secured business grew by 3%, supported by the increased used car penetration and the successful rollout of our new leasing platform. The personal loans declined by 6% due to the selective underwriting and pricing to maintain risk-adjusted returns. Credit cards grew by 1% with stable customer engagement and a continued rollout digital features like Scan2Pay, InstallmentPay or newly launched loyalty program. Risk-adjusted pricing across auto and personal loans contributed positively to yield stability through the year in lending. Cards yield was impacted mainly by the change in maximum interest rates. Let's now talk provisions for losses, and I would like to hand over to Volker, our Chief Risk Officer. Volker Gloe: Yes. Thank you, Pascal. Loss provisions for '25 came in at CHF 73.6 million. The loss rate stayed stable at 1.1%. So very much comparable with a long-term trend in line with our expectations and also the guidance that we provided for 2025, when we have been speaking about a loss rate of around 1%. Numbers in '25 continued to be impacted by the past changes in accounting estimates. We've been explaining the need to synchronize collections and write-off procedures before and its purpose to allow for more collections activities to finalize before writing off an asset. As expected, the effect -- so the positive effect on losses have been more prominent in the first half of the year than the second half. It has also influenced the portfolio quality metrics throughout the year, as shown in the numbers on the 30+ delinquencies and NPL. A computation of how normalized numbers look, you can see on the upper right of this page. While reported NPL numbers are going up, they are mainly driven by this aforementioned synchronization effect and its mechanics. When taking out these effects, numbers are about stable, though, there are certainly some product-specific variations. As this synchronization effect now is tapering off, we expect going forward, more stability in reported numbers and not only in the adjusted figures. Generally, we stayed very prudent in our risk taking in '25 and have been selective in what areas we wanted to grow and where we, in the current environment rather stay cautious. And we continue to calibrate our strategies in this triangle of risk price volumes for hitting the right balance for optimizing profitability. This is then also reflected in our new business quality where the portion of good quality CR1 and CR2 volumes, especially CR1, is increasing. Our deliberate focus on leasing volumes is impacting this development was specifically on personal loans, we kept our cautious approach for ensuring an overall strong portfolio quality. As we feel comfortable with the current risk reward level, we started to adapt our policies to allow for more, though, obviously, still controls growth going forward. We do that through data analytics, more granular segmentation and it allows us to reenter segments that we deliberately excluded before. This seems justified when looking into the vintage write off performance where we see that the recent changes and prudent policies are paying off as illustrated on the bottom left where the latest vintage, the very short curve, is certainly among the best ones. When it comes to outlook, I mean, the current environment might create some difficulties to come with the exact predictions for the future. Nonetheless, currently, we would not see any reason why loss performance for '26 would materially deviate from '25. In other words, so simpler words, our expectation is that losses for 2026 would again come in at around 1% loss rate level. And with that, I hand it then back to Pascal. Pascal Perritaz: Thank you, Volker. Let's talk about operating expense. As mentioned before, the operating expense decreased by 7%, and this is reflecting our strong cost discipline and the benefits from the efficiency initiatives. 10% reductions in personnel costs, compensations and benefits and this is supported by the continued FTE optimizations, mainly due to the automation initiatives and the optimization of our operating models. Lower depreciation driven by completions of amortization of some intangible assets related to past acquisitions and other legacy assets. And we have seen as well as some lower marketing and professional services expense due to the tighter spending discipline. This effect resulted in a cost income ratio, as mentioned before, 45.2%, and particularly pleased with the second half of the year, a cost/income ratio below 43% precisely 42.9% On the next page, the ongoing technology initiatives including the infrastructure consolidation, automation, reduced amortization of further legacy assets and continued discipline expense management will contribute to the 2026 OpEx reductions between CHF 15 million to CHF 20 million. With the expense trend and the actions triggered over the last 2 years, it puts us firmly on track to reduce our cost base by this amount, CHF 15 million to CHF 20 million in 2026 reaching 39% to 41% for the full year 2026, respectively, further improvements towards the 39% target cost-income ratio. Balance sheet. Our balance sheet remains robust. Net financing receivables slightly lower at 6.6% with the portfolio quality improving with the continued shift towards secured and higher quality assets, as mentioned earlier. Funding increased modestly, driven by continued growth in retail deposits. The shareholder equity increased by 5%, reflecting the net income, partially offset by CHF 125 million dividend. Funding. We further strengthened and diversified our funding base. The retail deposit continued to grow following the successful product redesign, savings product. In 2025, we successfully launched two auto cover bonds issuance of each CHF 150 million, and this is adding a low-cost and flexible funding tools to our funding mix and the end of period, the funding cost improved to 1.33%, continuing the trend of lower funding expense supported by the easing of the interest rates and environment. Liquidity metrics remained strong with LCR at 744% and NSFR at 116%. Let's talk capital. Our capital position remained strong with a Tier 1 capital ratio of 17.6%, above our midterm target of 17%. The risk-weighted assets increased by 3%. This is mainly due to the adoption of the FINMA Basel III final standards, reducing the Tier 1 by 0.6 percentage points as we communicated as of previously. Reflecting both on one side on the strong financial performance and the confidence in our future earnings power, we will propose an increased ordinary dividend of 8% to CHF 4.60 per share and an extra dividend or a special dividend of 1% (sic) [ CHF 1 ] per share, leading to the 17.61% capital ratio mentioned before. Our capital policy remains unchanged. Balancing organic growth, disciplined accretion on M&A and the return of excess capital to shareholders. We expect the Tier 1 ratio -- Tier 1 capital ratio to be at around 17% by year-end 2026 and dividend growing at least in line with sustainable earnings growth. With a consistent strategy execution, disciplined risk management and strong operational delivery, we entered 2026 with solid momentum. With that, I would like to hand over to you, Holger. Holger Laubenthal: Great, Pascal. Thank you. So let me walk you through our strategy execution scorecard here on this next page. As you know, four strategic programs built on our DNA. Some of these I had mentioned already, but prudent risk management continues to deliver, particularly against a less predictable market environment. Our funding position is strong with an extended toolkit, as Pascal just explained. We're pleased with our progress and operational excellence, leading to continued improvement in the cost-to-income ratio on the back of almost CHF 20 million cost reduction in 2025. On the commercial side, we're accelerating product and service innovation. We're excited about the new loyalty proposition as explained. We've added new partners, and we see good growth in our partnership with TWINT. Last, not least, we're proud of the work our teams do every day and the recognition such as being recognized by Great Place to Work as one of the best workplaces. You can see the KPI we track on the right, both for 2025 and also for the strategic cycle to date, as we're now in the final year, of course, of that cycle and really mostly on track across growth, capital, cost income loss and others and continued trend towards the target corridor such as an ROE. So let me bring this together in our outlook for the last year of this cycle, again, along our defined programs. First, you can expect us to continue our careful calibration of risk, volume, price as it relates to originations mix between secured and unsecured business, balance sheet, nonbalance sheet income as well as growth across our products. It's a proven concept for us. Second, we will continue to drive automation simplification across the company, with a focus on personal loans and continued consistent decommissioning of legacy systems, we've mentioned the related cost reductions for the year. Commercially, we're looking to leverage the cashgate expansion and product initiatives such as embedded finance and personal loans and continued benefits from our auto platform for profitable growth in the lending business and the range of new services launched the new loyalty program and partnership penetration to drive growth in payments, mostly through commission and fees. On our culture side, we're driving the organization alignment with the new customer and growth division to embed customer centricity, even deeper in our operating model to deliver against these initiatives mentioned. Last, we're excited about defining the strategy and key programs for the coming strategic cycle as we take Cembra into its next chapter. And we're planning to have an update for you on this towards the end of the year in the fourth quarter. What this implies for 2026, we expect continued resilient performance with net revenues growing in line with GDP, stable net interest margin for the significant improvement in the cost income ratio, stable loss performance and strong capital overall delivering an ROE of around 15%. This implies substantially all KPIs we set out around 4 years ago to land at or within range of the objectives we communicated at the time, including cumulative EPS growth before we head into the next strategic cycle, including further performance improvements going forward. Now a few words about the change in our management board. And it is with sincere appreciation that we mark the conclusion of Pascal's tenure here at Cembra. Over the past 8 years, he's played a pivotal role and strengthened our financial position, reinforcing our capital discipline, supporting the consistent execution of our strategy. On a personal note, I have greatly valued our partnership and the trustful collaboration that we've built. Together with this outstanding team, we've achieved a great deal since we've worked together. Pascal leaves Cembra in a strong position and his contribution will have a lasting impact. I'd like to thank him sincerely for his commitment and leadership and wish him, of course, all the best for the future. At the same time, I'm very pleased to welcome Christoph Glaser as our new CFO effective March 1. Christoph brings more than 2 decades of experience in finance, risk and operations across international and listed organizations with deep expertise in consumer finance and lending. He combines strong and broad technical competence with leadership experience and strategic perspective. Given this, he is a strong addition to our leadership team as we continue to execute our strategy and drive the next phase of Cembra's development. With that, thank you for listening to the presentation, and we look forward to your questions now. Operator: [Operator Instructions] Our first question comes from Máté Nemes from UBS. Mate Nemes: I have three questions, please. The first one is on risk. We are seeing a quite clear material inferior swing in the loss rate first half around 0.9%, second half about 1.25%. Could you elaborate what drove this or confirm better, my understanding is correct? Is this mainly related to the synchronization of collection and write-off procedures? And if so, is the second half loss rate indicative of what we can expect on a run rate basis, without any further management i.e. how do we get back to the 1% -- roughly 1% level from here onwards? That's the first question. The second question is costs. Clearly, another round of ambitious cost savings planned for 2026, CHF 15 million to CHF 20 million. And it seems like the bulk of that is coming from strategic initiatives benefits. If you could elaborate on what exactly is included here? That would be helpful. And the last question is on NII and more specifically, the margin. I think you're expecting a stable margin. We can clearly see a decline in funding costs, but at the same time, on the asset side, the now lower interest rate cap clearly means you have to reprice some of your personal loans. Could you give us an approximate bridge in 2026 as to the margin and if you could also highlight how much of your personal loan portfolio is currently at rates above the regulatory limit? Holger Laubenthal: Thanks, Máté, and good morning, and let me hand over to Volker for the first question, and Pascal will take the next two. Volker Gloe: Yes, yes, Máté, you're absolutely right in your observation. So first half loss rate was at 0.9% and second half at 1.2%. And this difference between first half and second half is driven by the synchronization effect. That's an activity that we started to execute in Q4 '24 already, and that has been benefiting the first half more than the second half because we have now reached the kind of new equilibrium basically. What I want to add to that is that we also in the past have been seeing always it kind of [ tends ] a bit of seasonality between the first half and the second half. So typically, the second half is slightly worse than the first half, which is -- probably comes a bit on top. And I think generally, obviously, when it comes now to looking ahead, we do not manage the loss rate in isolation. We manage in this triangle for profitability. I mean, we are now guiding for a loss rate in '26 of around 1% level. And I think we can get there. We will get there by actually managing this triangle. Holger Laubenthal: Pascal? Pascal Perritaz: Thank you, Máté. Second question is related to cost and ultimately, as the continued expected reductions of operating expense of CHF 15 million to CHF 20 million in 2026. And this is basically as a result of four specific activities, I would say, three of them are highly strategic. The first one is obviously lower personnel costs expecting -- resulting from the work we have done now over the last 1 to 2 years, meaning particularly as the automation. So we have achieved in some of our processes and continued optimization of our operating models and service deliveries. The second one is we clearly expect in 2026 further efficiency gains in IT. So we have done a lot of work related to IT consolidation, decommissioning of infrastructure, which we also still continue to do in 2026. And we'll have a bit of less funding costs related to strategic initiatives. Obviously, we'll start in 2027, this new strategic program for 2026, it's more the end of the strategy cycle. The third one is we will start to see a bit certainly less than what we have seen this year, but continued reductions in depreciation and amortization expense from some software and tangible assets reaching the end of life in 2026. And the last one is, I think what we have demonstrated is now for almost decades this very disciplined approach on expense management, depending on how revenue was developed, although we clearly have proactively managed any discretionary costs. So with that, and particularly as the initiatives which are being implemented, what we have achieved in 2025, although we are -- we firmly believe that the CHF 15 million to CHF 20 million is achievable. The last question around the NIM, so we expect for 2026, a stable NIM around the level that we have been as in 2025. And given as the strategy, as we have implemented the last 1 to 2 years in the personal loans, so we have more focus on high-quality assets by default, although we have limited exposure now to contracts, which are today priced at the max level. Mate Nemes: That is very helpful. And Pascal, I just wanted to thank you for the years of constructive collaboration and discussions we had on earnings calls and other venues. I wish you the best in the next stage of your career. We'll clearly miss you dearly. Operator: The next question comes from Daniel Regli from ZKB. Daniel Regli: Yes. And obviously, I first would like to follow, Máté. Also from my side, thanks a lot, Pascal, for the years of collaboration and working together was always a pleasure. To my questions. First, quickly on the personal loans book. And obviously, we have seen another decline in H2, which was not that unexpected due to more restrictive lending. Can you maybe talk a little bit about how you have kind of released your lending policy again early this year and whether there was some kind of connection to the U.S. tariffs and expected short time work in certain segments of Switzerland? And then secondly, a follow-up on the net interest margin. Can you maybe give us a little bit of guidance on the cost of financing side and how far you expect the cost of financing to go down this year? Holger Laubenthal: Thanks, Daniel, as well. Let me just start on the P loan side and then, Volker, over to you and Pascal on the NIM question. So the second half, there's a couple of dynamics here, right, Daniel. So firstly, as I mentioned, we held the share in the second half, which implies that the market sort of moved in a similar direction, right? I think this is something that you've seen from us frequently as a leader in the market. We typically set the tone in pricing. We set the tone in risk management and others in the market end up following in a way. That's just to give you some context. Let me hand over to Volker indeed for the questions on the policy and the impact of what we see in the market. Volker Gloe: Yes, Daniel, the -- I mean, it's part actually of regular risk management to optimize underwriting procedures and adjust it to the macro environment that we are currently seeing. With that said, I mean, macro in Switzerland is obviously very resilient. So even if there would be swings, we wouldn't be hit by that immediately, that would take some time to kind of eat into the portfolios. I mean, when it comes to the releasing lending policies, the kind of adjustments that we have been doing, it's actually also part of regular risk management. We have been identifying segments that we have been exiting before because we wanted to be cautious. And now currently, also with more granular segmentation, we feel comfortable that we can reenter these segments. And by that support the growth, given that this is profitable growth. And that's kind of -- again, back to this triangle, where we try to find the right balance between risk, between the pricing and also the volumes to support growth in the business. Pascal Perritaz: On the NIM and particularly on the cost of funding or interest expense, first of all, I would like to reiterate the approach we have around first managing the net interest margin. So we have certainly some volatility in swap rates. We have implemented a very clear dynamic pricing and depending on how these interest rates develop, although we can -- we go up or down with the pricing, with the target to calibrate the net interest margin around stable. If I look at now the interest expense, how they developed '24 to '25, 153% in '24, now 133%, we would expect a slightly reduction in 2026 as well. Operator: [Operator Instructions] Gentlemen, there are no further questions. Mr. Laubenthal, back over to you for any closing remarks. Holger Laubenthal: Excellent. Thank you. Well, look, thanks for dialing in, everyone this morning and listening to our webcast here in terms of the earnings. I think good results. Income at CHF 180 million. I think we're delivering on the key controllables in terms of cost loss. I think a good outlook for the remainder of the year, and we look forward to continuing to discuss this with you. Thank you very much for listening in this morning. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
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 Irish Residential Properties REIT plc 2025 Preliminary Results Conference Call. My name is Harry, and I'll be coordinating your call today. Joining us on today's call are Eddie Byrne, Chief Executive Officer; Brian Fagan, Chief Financial Officer; and Stephen Mulcair, Investor Relations. [Operator Instructions] I will now hand the call over to Stephen Mulcair with Investor Relations to begin. Please go ahead. Stephen Mulcair: Good morning, and welcome to the Irish 2025 Preliminary Results Call. We're excited to share our strategic progress and financial results with you today. Joining me is CEO, Eddie Byrne; and CFO, Brian Fagan. Before I hand over to Eddie, please note that some statements made today may be forward-looking and subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. For detailed information, please refer to the Risks section of our results issued today. I'll now hand over to Eddie to provide an overview of the results for the year. Eddie Byrne: Thanks, Stephen. Good morning, everyone, and welcome to our 2025 preliminary results presentation. The past 12 months have marked a step change in both our operational and financial performance, driving meaningful improvements in margins and earnings. Our strategic initiatives have delivered tangible results, underpinned by our relentless focus on operational excellence and cost control, all powered by our internalized operating platform. Our asset recycling program continued to deliver, generating sales premiums over 25% above book value. Our disciplined approach to capital allocation is totally focused on creating sustainable long-term shareholder value, and the momentum is set to accelerate as we look to capitalize on favorable regulatory and market trends. The coming year will present exciting opportunities to expand on the strong foundation we built in 2025. Turning to the numbers. Our unwavering commitment to cost management has driven a 120 basis points margin uplift, directly boosting earnings. In 2025, we have sustained and strengthened on the earnings growth trajectory we established in 2024, with adjusted EPRA earnings per share up 2.3% year-on-year. Operationally, our platform continues to deliver. Occupancy remains at an impressive 99.5% with rent collections exceeding 99%. Asset disposals into the owner-occupied market have further enhanced our results with adjusted earnings, excluding fair value movements, growing by a strong 7.4% across the full year. And in line with Irish REIT legislation, we are proposing a final year-end dividend of EUR 0.0253 per share, bringing our full-year dividend to EUR 0.0489, an increase of 20% on 2024. As at the 31st of December 2025, our EPRA net initial yield stood at 5.2%, with asset values improving slightly compared to the prior year due to improved operating performance rather than any yield tightening. PRS prime yields have now been stable for 2 full years. And looking ahead, we are confident in the outlook for valuations as major headwinds, including elevated inflation, interest rates, and restricted rent controls, have largely subsided. Greater liquidity and embedded reversion in the market in general is expected to have a positive impact on yields over time. On the balance sheet, we successfully refinanced our debt and returned surplus capital to shareholders through an accretive share buyback during the year. We continue to see an increasing number of opportunities for growth in the market. There has been a significant shift in market sentiment in PRS since the government announced a suite of changes to the regulatory landscape. We are very positive on the outlook for growth for the business over the coming year. Importantly, overall, we have continued to deliver across all measures within our control. The regulatory landscape is shifting positively with the government's announcement of the revised rental regulation, representing a very positive development. These changes will substantially enhance our business outlook, and I'll go into further details on the reforms later in the presentation. Turning now to Slide 6. As we look at this slide, I want to highlight the core strategic pillars that underpin our business and drive our success. These pillars provide a clear blueprint for our management team to maximize value creation for our shareholders. We are constantly refining our operating strategy to ensure we stay ahead of market trends and seize every opportunity to deliver outstanding results. We also maintain a sharp focus on reviewing all capital allocation options available to the company, ensuring we remain agile and responsive in a dynamic environment. Our unique and fully internalized operating platform, further strengthened by advanced digitalization, sets us apart in the market. This enables us to consistently drive operational excellence and cost efficiency, maximizing value for shareholders. We are relentless in our pursuit of value creation. Our strategy is anchored by a commitment to maintain a robust balance sheet, moderate gearing, and flexible financing by managing our loan-to-value ratio, financing costs, and maturities with discipline and foresight. Optimizing our portfolio is at the heart of our approach. We are actively recycling capital from assets, channeling proceeds into either our existing portfolio or looking to selectively acquire high-quality, better-yielding assets whilst continuing to manage the LTV. Where it makes sense, we are ready and able to return capital to shareholders efficiently, demonstrating prudent capital management, evidenced by our share buyback during the period. Sustainability is also a core element of our strategy. We consistently work to ensure our portfolio is fit for purpose over the long term and continues to generate the returns we expect. As a plc, we operate as a responsible business with strong governance frameworks in place. As we look across our performance for the full year, we've executed strongly on each of these strategic priorities. Our operational metrics are exemplary. Our asset recycling program continues to deliver significant value. Our capital allocation remains highly efficient and aligned with our strategic framework, and our balance sheet and financial position has strengthened. Having executed on our strategic priorities, the business enters 2026 well-positioned to capitalize on the growth opportunity and deliver strongly for shareholders. Moving on now, I'll discuss some of the positive changes that we've seen across the regulatory spectrum. As you are all likely aware, rent regulation has long presented significant challenges for the Irish residential sector. However, the landscape has now shifted decisively for the better. Following the government's substantial changes to rental and other regulations, we are entering a new environment that is set to stimulate investment and accelerate the development of much-needed homes across Ireland. This progressive suite of rent, building design standards, and VAT reforms marks a pivotal moment for the sector. The headline changes include Rental property owners will be able to reset rents to market levels for all new tenancies commencing from the 1st of March 2026, bringing greater flexibility and transparency to the rental market. Importantly, this will allow us to gradually bring rents across our portfolio back to the prevailing market rate over time as units turn over. While annual rent increases remain capped at 2% or the rate of inflation, whichever is lower, the index for inflation will move from HICP to CPI, which has historically tracked higher, ensuring a more realistic market conditions. Crucially, new build properties will be exempt from the 2% cap and instead will only be limited to CPI, providing a genuine incentive for development and investment in new builds. Under these rules, every unit in our portfolio with the lease commencing after the 1st of March 2026 can be relet at prevailing market rents once vacant. Currently, our independently assessed rents are approximately 20% below market. And while in 2024 and 2025, around 14% of our portfolio turned over, we do see this moderating slightly into 2026 to around 10%, but we do not see it going below that level based on historical data from our resident surveys. The opportunity to realize this embedded reversion is substantial, and we expect it to translate into enhanced returns for the company and our shareholders. But importantly, whilst this change is set to be a substantial driver for our business and will enable us to contribute to increasing the supply of rental accommodation in Ireland, the mechanics of the legislation ensures that renters will continue to be protected at the same time. Looking at the wider market, these changes are set to make a real difference. By addressing long-standing viability challenges, the reforms will encourage greater investment into the Irish residential sector, improving liquidity, which will potentially lead to a tightening of yields over time. As shown by the graph on the bottom right-hand side of the slide, restrictive regulations have led to a substantial drop in investment in PRS assets over the subsequent years. The new changes will take time to translate to the level of investment that is needed, but we are already seeing a shift of sentiment and the potential for new fresh capital to enter the market since the government has announced these changes. We are optimistic about the future. The new regulatory framework puts Ireland on a more competitive footing and will unlock fresh investment, drive growth, and support the creation of new homes nationwide. It's an exciting time for our sector and a positive turning point for the Irish housing market. I'll now hand over to Brian to run through the financial results for the year. Brian Fagan: Thank you, Eddie. Good morning to everybody. Moving to Slide 10, where we provide a summary of our financial performance for the year. Growth delivered through continued operational excellence. Looking at the P&L, these results reflect our team's expertise and commitment. We manage one of Ireland's largest highest quality residential portfolios, delivered by an experienced in-house team and with a fully integrated digital platform that adds significant value. Our unique operating model is what sets IRES apart. We are Ireland's only solely residential rental company with permanent capital and a fully internalized management team. No other public or private residential owner matches this. By managing maintenance, leasing, revenue management, and operations in-house, we achieved material cost efficiencies while maintaining exceptional resident service. This structure allows us to build deep operational knowledge and harvest large amounts of data, which helps improve decision-making, efficiency, and scalability. As a result, we consistently deliver near full occupancy and rent collections in excess of 99%. This market-leading performance directly drives shareholder value. Today's results demonstrate the strength of our operating model and its ability to deliver significant value for shareholders, not only in the short term, but particularly over the longer term as the opportunities to leverage these capabilities through scale materialize. We are very pleased to report an excellent performance for 2025. Revenue increased by 0.2% year-on-year despite being impacted by the sale of approximately 1% of units in the portfolio and a lower HICP outturn, inhibiting our ability to capture rental growth. NRI margin increased by 120 bps to 78% as a result of our continued intense focus on cost management and driving ancillary revenues. At 99.5%, the portfolio remains effectively fully occupied. Financing costs increased by 4% during the year, mainly reflecting accelerated amortization of deferred loan costs associated with our owned RCF, which was refinanced in March 2025. Adjusted EPRA earnings increased by 1.5% to EUR 29.4 million. Adjusted EPRA earnings per share increased by 2.3%, reflecting improved operating performance and the benefit of our share buyback program. Our ongoing asset recycling program continues successfully, resulting in adjusted earnings increasing by 7.4%. This strong operational performance and also the fact that we had no nonrecurring costs in the year means we have delivered EPRA EPS growth of 16%, whilst we have also returned to profitability with profit before tax of EUR 49.7 million. Following today's results, we have proposed that a final dividend of EUR 0.53 per share will be paid, in line with our policy of maintaining an 85% payout ratio and in compliance with Irish REIT legislation. This brings the full-year dividend to EUR 0.0489 per share and represents a 20% increase on 2024. And now turning to Slide 11. Robust financial position and improving valuations. On the financing front, we successfully refinanced our revolving credit facility in March 2025, securing a new EUR 500 million RCF plus a EUR 200 million accordion facility, adding greater flexibility to our capital structure. The facilities have a 5-year term to March 2030 with 2 potential 1-year extensions. We have put in place EUR 275 million of hedging instruments for 5 years, maintaining fixed-rate debt at approximately 85% of drawn facilities. As a result, our weighted average cost of interest for 2025 was 3.71%, slightly lower versus 2024 at 3.79%. Following this refinancing, our weighted average debt maturity has increased to 4.1 years, ensuring no near-term refinancing risk for the company. In line with our ESG principles, we converted the RCF to a sustainability-linked loan in November. In 2025, our portfolio recorded a fair value gain on investment properties of EUR 17 million, underpinned by improving asset and operational performance and aided by the stable yield environment across the wider Irish residential market. At year-end, our gross yield stood at a robust 7%, providing a good spread over our weighted average cost of interest at 3.71%. Our net LTV at year-end was 43.6%, down from 44.4% at December 2024. Market dynamics remain favorable. Prime PRS yields have held flat for 2 years, even as inflation has moderated towards the 2% target and the ECB has implemented 8 interest rate cuts since peak. Despite Ireland's 10-year sovereign yield being lower than many developed European nations and the country's strong credit profile, the spread to prime residential investment yields in Dublin remains wider than in peer cities. This, coupled with Ireland's exceptional market fundamentals and the easing of headwinds such as inflation, interest rates, and regulation, positions us well for potential future yield compression in line with European peers. We are seeing further support for valuations, thanks to new rental regulations, which will allow rents to be reset when a tenant vacates and the new lease commences. Legislation is set to take effect on the 1st of March, so has not yet impacted valuations, but we anticipate a positive uplift to property values as income profiles improve, provided market yields remain unchanged. Moving now to Slide 12. Executing on asset recycling strategy. During 2025, another 41 units were disposed of as part of our ongoing multiyear asset recycling program. We are achieving strong pricing with average sales prices coming in at over 25% above book values. As a result of these disposals, adjusted earnings, excluding fair value movements, increased by 7.4%. This brings the total number of unit sales to date to 107. And at December 2025, we had an additional 21 units classified as held for sale. To date, total proceeds amount to EUR 35 million. We will continue to actively dispose of the identified units once they achieve vacancy. And given the sales prices achieved in 2025, we expect that the disposal premium will continue to remain strong in 2026. We have seen a real increase in the number of investment opportunities in the market. There's been a significant shift in market sentiment and development activity in PRS since the government announced a suite of changes to the regulatory landscape. We are very positive on the current growth outlook. And given the performance of the disposal program, proceeds of EUR 35 million reduced LTV, we are confident that we will be able to execute on opportunities to recycle this capital into higher-yielding bolt-on acquisitions at attractive prices over the coming period. Before I hand you back to Ed, as many of you know, this will be my last full set of results before my retirement, and I would like to take this opportunity to thank all of you for your continued support over my last 5 years as CFO. I wish Mari Hurley all the best in the CFO role, and I look forward to meeting with many of you to discuss this set of results over the coming weeks and months. Thank you. Eddie Byrne: Thank you, Brian. Looking now at Slide 14. The key message on this slide is that Ireland is operating from a position of economic strength, with the current macro backdrop highly supportive of long-term investment in residential rental accommodation. Ireland combines strong domestic fundamentals with improving external conditions. Employment remains exceptionally high. Economic growth continues to outperform European peers. The interest rate environment is improving, and the state's fiscal position is one of the strongest in Europe. Together, these factors create a stable, low-risk environment that underpins sustained demand for housing. High employment and personal income visibility support household formation, rental affordability, and occupancy, which are drivers of residential property performance. At the same time, Ireland's superior growth outlook relative to the EU and euro area reinforces long-term population and housing demand, particularly in cities and commuter regions where supply remains structurally and chronically constrained. Importantly, the macro cycle is now turning more positive. The shift in the ECB policy following a series of rate hikes, which peaked in 2024, improved funding conditions and sentiment across real assets. This supports valuations, enhances development viability, and increases investor confidence at a point where new housing supply is urgently needed. Overlaying all of this is a very strong sovereign balance sheet. Ireland's budget surplus and low relative debt position provide resilience against external shocks and give the government flexibility to continue supporting infrastructure and housing delivery. This brings a materially reduced macro risk compared to many other European markets. In summary, Ireland offers a rare alignment of strong labor markets, above-average growth, easing financial conditions, and fiscal strength. When set against a persistent undersupply of housing, this macroeconomic environment provides a compelling foundation for investing in residential accommodation with visibility on demand, stability of income, and long-term growth. Moving now to Slide 15. At a more structural level, Ireland continues to experience sustained population growth driven by both natural increases and strong net migration. This is occurring alongside high employment levels and income growth, which together are expanding the pool of renters and reinforcing depth of demand across the private rental sector. Importantly, this demand growth is not cyclical in nature, but rooted in long-term demographic and labor market trends. These forces are translating directly into persistent rental demand, particularly in Dublin and other key urban areas where housing supply has consistently failed to keep pace. As a result, occupancy remains high, and income visibility is strong, providing a stable foundation for residential cash flows. From a pricing perspective, Irish prime PRS yields have remained unchanged for the last 2 years despite the easing of inflation and interest rates. While Irish yields continue to be an outlier relative to European peers, this can largely be explained by Ireland's more restrictive rent regulation framework rather than weaker market dynamics. Looking forward, there is growing regulatory clarity and stability in the PRS market. With a more balanced framework governing rent setting, it is expected we will see increased institutional investments, improve liquidity, and ultimately encourage new supply. As regulatory risk diminishes, Irish PRS yields are increasingly positioned for compression, particularly when set against comparable European markets and considering the relative spread to sovereign yields in those markets. In combination, strong demographic growth, resilient employment, stable income performance, and improving regulatory certainty create a highly compelling macroeconomic backdrop. Set against chronic undersupply, these factors support sustainable rental growth, low vacancy risk, and attractive long-term returns for residential investors in Ireland. Turning now to Slide 17. There is a clear and compelling opportunity ahead for IRES. Our strong operational performance and delivery against our strategic priorities has positioned the business extremely well as market conditions improve. Demand for high-quality rental homes in Ireland remains exceptionally strong, providing a resilient foundation for our income and long-term growth. At the same time, the headwinds that have constrained the PRS market in recent years have now reversed and have materially improved the outlook for our business. We enter this next phase with clear strengths. We have operational excellence, improving NOI margins, exceptional collection rates, efficient leasing and turnovers, and high tenant satisfaction. We have a market-leading platform fully internalized, vertically integrated, and highly digitalized, giving us control, scalability, and efficiency. We have a strong balance sheet, LTVs within target range, improving valuations because of improving operational performance, and long-term flexible debt in place. We have a high-quality, fully occupied portfolio, modern assets located in high-performing locations with strong reversionary income, values well below replacement cost, and excellent sustainability credentials. These company strengths are now aligned with a rapidly improving external context, lower interest rate environment, optimistic outlook on valuations, regulatory and planning frameworks have improved. Transaction activity is returning and gaining pace. And importantly, demand for rental accommodation continues to significantly exceed supply. This dynamic is unlocking new opportunities in the Dublin PRS market, and we believe we are uniquely positioned to capitalize. Our asset disposal program is delivering exceptional outcomes, with sales delivering premiums of more than 25% above book value, equivalent to selling at around 4% net yields. We see a strong pipeline of earnings-enhancing assets coming to the market, which are suitable for reinvestment of those disposal proceeds. Our message is clear. We are delivering on what we said we would do. We are confident and optimistic about the direction of the business. With strong operational execution, improving market conditions, and some of the most supportive demographic dynamics in Europe, we believe the scale of the opportunity ahead is very significant. And before I move to questions, I would just like to mention Brian, who has highlighted that this will be his last full set of results, and I would like to take the opportunity to thank him. But there is plenty of work to do before he hangs up his boots for good. So we'll get on to that before we do the formal thank you. With that, I'll open it to questions. Operator: [Operator Instructions] And our first question today will be from the line of Colin Grant with Davy. Colin Grant: A couple of questions from me. Congratulations on a very good set of results, and well done to the team. Just firstly, in terms of your net rental income margin, which increased 120 basis points during the year, that's very strong given the dilutive impact of disposals. And you've mentioned the cost efficiencies that you've put in place. I wonder if you could give us a bit more color on some of the actions that you've taken during the year and whether or not you see more scope for things to take place in 2026 in that area on the net NRI margin? And secondly, just in terms of the market, which is clearly strengthening, and you've mentioned the potential for a strong pipeline there. I'm just wondering if you can give us a bit more color on the scale of what you see potentially coming 2026 and beyond in terms of portfolios coming to the market, and also just the kind of liquidity that you see in the market at present. Brian Fagan: Thanks, Colin. Colin, I'll take the question around the margin, okay? Yes, look, you are correct. We improved our margin year-on-year by 120 bps, right? And that involves initiatives right across the range of our operating costs and also then some ancillary revenues. So ancillary revenues, we increased car parking income, for instance, right, okay? On the cost side, it would have involved us looking at our -- basically our purchasing arrangements, and trying to get better bang for our book. So one example was insurance, right, okay? So we had renewed our broker, and we've got our broker to go out to the market for ourselves, but also then to use our buying power, together with the OMCs to go and get better savings. We didn't just go to the Dublin market. We also went into the London market. Other aspects we have been organized on a geographical basis in the Dublin area. So we've 3 offices, right? And each of the locations must, we say, buying a lift contract from Colin, from Brian, from Amedi, we've combined that now, so they're just buying from the best price provider. Do we see much scope going forward? At the half year, we were at 78%. There had been some one-offs in the first half. We said we would work very, very hard to maintain that in the second half. As Eddie said, we have done that. Look, our ability to go forward, we absolutely will strive. And no stone will go unturned. However, as we are all aware, our rents are 20% reversionary, right? So it does limit our ability to go and get into the [indiscernible] But as we see the new rent regulations coming in, there should be definitely benefits to our NRI margin. Eddie Byrne: And maybe, Colin, if there's no follow-up on that, then I will just take the scale of the opportunity that's out there. We have seen a very significant increase in the pipeline that the sales brokers would talk about, right? So if you went into this time last year, there might have been -- you could count the potential deals on the finger of one hand. You'd probably need a 4 hall now to count what the pipeline looks like at this stage. So we would see not just of standing stock, and we were saying this 12, 18 months ago that there is a -- once the rent legs changes and that brings certainty to the market, whatever the changes happen to be, as long as there was certainty, you would see all the deals that hadn't traded in the previous number of years start to come to market. So we see a very significant pipeline. In addition to that, we also have a number of conversations ourselves, our own pipeline around some potential new build stock. So it's not just all necessarily standing stock. And I think we have explained this before. Every development within the Greater Dublin area must -- because of densities, must have houses, apartments, and duplexes. And there hasn't been a viable exit for a lot of the apartments unless they were going into the state, and that's starting to change now. So we see an increase in that. And then more importantly, that's all on the sales side. In terms of capital coming to the market, the last couple of deals that have gone say and agreed, maybe under contract now at this stage, are contracted to new entrants in the market, new European in both cases. So I think there is -- there will be a lot of supply. But very importantly, there is also demand, and that's been our own experience as we go and talk to various forms of capital throughout Europe. There is a -- I think the expression that's used is this makes Ireland investable again in terms of the rent regulations. So I think the liquidity, the scale of the opportunity, I think that's all very positive. Operator: The next question will be from the line of Eleanor Frew with Barclays. Eleanor Frew: Three questions from me, if I may. I'll go one by one. Firstly, can you give any indication of where you expect your like-for-like rental growth to land this year, thinking about balancing inflation with upside you can get from retrofitting, and of course, the impact from the new regulation? Eddie Byrne: Well, I guess, Eleanor, as you know, we don't do guidance. However, we have seen a number of -- including your own models. And look, I mean, it's not a complicated sum really. We expect about 10% of our portfolio to turn over this year. We expect 90% of the portfolio to remain at the 2% level. And then we would expect to see that 10% grow at the level of reversion, the independently assessed level of reversion in the portfolio of 20%. So when you do those sums, it comes up with a number pretty close to the number that I think most of the analysts would have. Eleanor Frew: And then occupancy, obviously very high. How do you see that trending over the year? And then more broadly, looking further out, do you see any risk to that occupancy from the new supply, given the more attractive regulatory environment? Eddie Byrne: Well, you know what, the new supply, Eleanor, is -- it takes at least 2 years to build anything. So that's definitely not an issue for 2026 or 2027. I mean I think in terms of our occupancy, it -- well, it's not going to go up much. I can tell you that. But in terms of going down, one of our key operational metrics for our staff is to maintain that occupancy level. I don't think turnovers will impact that as much, possibly a couple of small basis points, but it's really -- that's a point in time. So I don't see the rent regulations having a negative impact on our occupancy because we will continue to drive what we think is our operational excellence to make sure that we don't have vacancies. So I think occupancy remains fine. Eleanor Frew: And then last one, so you mentioned a strong pipeline of earnings-enhancing assets. Are you going to limit yourself to just reinvest in your disposal proceeds? Or is there scope for external capital if the deals are accretive enough? Eddie Byrne: Well, certainly, in the first instance, what we would see ourselves doing is reinvesting the capital that we have internally generated. So over the last 2 years, we've generated somewhere in the low to mid EUR 30 million, and we would see ourselves reinvesting that in the first place. Above and beyond that, then will depend on the opportunity and the circumstances at the time. But we absolutely are tracking all of the opportunities in the market, and we'll consider how we could participate in those. So we are -- all options are on the table for us. But in the first instance, it's reinvesting our internally generated capital. Operator: Your next question will be from the line of Denis McGoldrick with Goodbody. Denis McGoldrick: I just have one, actually. I got a couple of the other ones ahead. Just in terms of the asset recycling program, so 41 disposals in '25, 21 sales agreed. Just wondering how we should think about that pace of disposals into '26 and then the implications of that for net rental income. Eddie Byrne: Yes. So what I would say is we would view the program has been very successful to date, Denis. And I think one measure obviously is how many units we sell, but the other measure is the total proceeds. I mean you can see that we've generated a premium of 3.4 million above book value on the 41 units we have sold. That 3.4 million is in excess of the premium that we expect to generate across 50 units for the year. So that really is a key measure that we look at because it is very hard to predict exactly when a unit will close because you have at least 2 sets of lawyers, buyer and seller. And in many cases, because we're selling apartments, we also have a lawyer for the OMC, 3 sets of lawyers, and the banks involved in the financing, typically. So getting our own side of the transaction in shape is one thing, but we can't control the others. And I think if you look across -- even government are going to multiyear targets now rather than single-year targets because they've seen the folly of trying to predict exactly what gets delivered in a 12-month period. Having said all of that, we would continue -- we would see -- obviously, the units held for sale, and I would just clarify there, I think you said sale agreed. Held for sale is not exactly the same as sale agreed. So these are units that are vacant, which we are currently selling, some of which may be on contract and some of which are not. But 20 units is -- 21 units is a strong pipeline. In addition, we have another -- probably another 10 units at this stage, which are not vacant, but where we have received notice of the tenant leaving. So our pipeline is of the order of 30 units in February for 2026. So we would feel comfortable that we will continue to do on the order of what we said this year or last year, we were hoping to do 50 units. And I think one of the things that you will see going forward is that selling units is just a normal course of our business, right? It's not -- we did announce a program in 2024 of 314 units, and we will continue to sell all of those units. And when those units are gone, we will continue to refine our portfolio and look at units that are non-core. So I think that's probably the way to think about our sales program is that every year, we will have -- we will consider the previous year of business that we need to do to refine our portfolio. that will become our target for the year. But for 2026, I think you can think about it in the same quantum of the 50 units there or thereabouts that we had said we would do this year. Operator: The next question today will be from the line of Steven Boumans with ABN AMRO ODDO. Steven Boumans: I appreciate the positive view on the investment opportunity set and understand, of course, you want to fund it with proceeds from disposals. However, if some great opportunities arise, some questions, could you -- which debt metrics, such as LTV, would you be willing to go to if good investment would rise? And second, would a scrip dividend be possible next year? Maybe provide your considerations on the potential of a scrip dividend. Brian Fagan: Okay. Stephen, thanks for the question. I think what I would say in the first instance is we've been pretty clear over the last couple of years, management and the Board have a strategy around LTV to manage it between 40% and 45% through the cycle. So I don't see that changing. We'll continue to manage it within that range. Clearly, with the view to being at the lower end of the range as we reach the end of a cycle now we're -- we have to be very careful, and everybody needs to be careful about calling the top and bottoms of markets, right? But as we move through the cycle, we will be managing that down a little bit. So any acquisition has to fit within that plan of 40% to 45%. And in relation to a scrip dividend, look, we keep everything -- we have not done a scrip dividend in the past. We keep everything on the table. There is -- we feel a little bit of a lack of clarity just around the regulation and scrip dividends. So that is something that we have been spending some time looking at. And I would say -- as I said, we will keep everything on the table to ensure that what we're doing is the right allocation of our capital. Steven Boumans: And maybe one last question. I understand correctly that you see also opportunities in development. So you are also looking at funding deals. There's a probability that you will sign something like that in '26. Brian Fagan: That is definitely part of the suite of potential opportunities that we see. We think one of the issues for development in Ireland has been lack of capital available to a lot of developers. We think we can bring our balance sheet to bear on that and enter into contracts with those developers, take, which will then allow them to go and get financing. So we do think that that is an important part of the role that we will play in terms of increasing housing supply in Ireland. So yes, funds are definitely on our agenda. And I would certainly see us doing that before we would necessarily develop ourselves. We don't really feel the need to definitely not take planning risk, other than we have 2 very small sites of our own, which we will continue to bring through the planning process. But in terms of buying land and taking planning and development risk, that would -- I don't see that happening. And in the first instance, forward funds developers take the planning and development risk, and we will take the completed product, and will absolutely be part of our suite of options. Operator: Thank you. That will conclude our Q&A session for today, and I'll now hand the call back to Ed for closing remarks. Eddie Byrne: Thank you very much, everybody, for listening in today, and we look forward to meeting many of you on the road over the next couple of weeks. We've got a lot of meetings in the diary. So hope to catch up with you then. Thank you very much. Brian Fagan: Thanks, everybody. Operator: This concludes the Irish Residential Properties REIT plc 2025 Preliminary Results Conference Call. Thank you all for your participation. You may now disconnect your lines.
Michel Aupers: Good morning, everyone, and welcome to the Royal BAM Group Analyst Meeting. My name is Michel Aupers, Investor Relations Manager. I'm pleased to have you with us today. The meeting is hosted by our CEO, Ruud Joosten; and our CFO, Henri de Pater, who will take you through the key highlights of BAM's full year 2025 results. The presentation slides are available on our website. After their remarks, we will take your questions. I draw your attention to the disclaimer here. Ruud, over to you, please. R. Joosten: Thank you, Michel, and good morning all. On the front page, you see an image of one of our flood protection projects in the U.K. Along the Norfolk coastline, we replaced aging timber groynes with new rock groynes, significantly strengthening coastal defenses for our local communities and the Norfolk broads. We began this project in October '24 and successfully completed it in June '25. It's a good example of the impactful work we deliver to protect people, nature and vital infrastructure. Let's start with the key points over 2025. The group has delivered a strong performance in 2025, reflecting the success of our strategy and our core strength in the energy transition, transportation and Dutch residential markets. First of all, our '25 results show a very solid top line development. Revenue increased by 9% to more than EUR 7 billion with consistent disciplined growth across both divisions. This underlines the strength and focus of our current portfolio and the progress we have made. We also delivered a substantial improvement in our adjusted EBITDA margin, increasing from 5.2% a year ago to 5.7%. This reflects our disciplined execution and our continued efforts to further lower our risk profile and drive profitable growth. In 2025, our reported adjusted EBITDA increased by 20% to EUR 400 million. And we're also proud to present a net result of EUR 211 million, a strong increase compared to the last year. All our activities contributed strongly this year, demonstrating the resilience and effectiveness of our business model. We also continue to make solid progress on our legacy projects. In 2025, we handed over the final school project in Denmark, completed the Co-op Live arena in the United Kingdom and saw the successful opening of the Silvertown Tunnel in London. In December, we started handing over the first section of the new children hospital. These milestones mark an important step in closing out our legacy portfolio and further strengthening the foundation of our company. Regarding the Fehmarnbelt tunnel project in which BAM holds a 12.2% stake, the consortium continued to engage in constructive dialogue with the clients. We expect to emerge the first tunnel element in the first half of this year. Our other key performance indicators also remained solid. We maintained a strong financial position by focusing on projects with an attractive risk/reward balance, along with effective cost and working capital management. This has resulted in a robust solvency and further strengthening of our cash position. It's good to see that our order book was maintained at a high level of EUR 13 billion. A substantial part of our recent project wins aligns with our strategic objective to expand in sustainable solutions while we remain focused on the quality of our order intake. Continuing to strengthen our safety culture remains a key priority. We made further progress in embedding our group-wide safety program, and we continue to invest in development of our people to ensure BAM remains an employer of choice. Finally, our leadership in sustainability was reaffirmed once again. We received the prestigious CDP Climate A rating for the seventh consecutive time, underscoring the consistent efforts to mitigate climate change and our long-term commitment to responsible business. Looking ahead, for 2026, BAM expects to deliver further growth in revenue and adjusted EBITDA. With that in mind, let's continue to the next slide, where I will highlight how our solid performance translated into meaningful shareholder remuneration. We intend to distribute circa 55% of our net income to shareholders. We are proposing a dividend of EUR 0.30 per share over 2025. This represents a 20% increase compared to the EUR 0.25 paid over 2024. We will supplement this dividend with a EUR 40 million share buyback. This program is supported by our strong operational performance and solid cash position. Share buybacks executed since 2023 have already reduced the number of shares entitled to dividend by almost 7% at year-end 2025. Taken together, BAM will return EUR 357 million to shareholders in the period 2023, 2026. This demonstrates the disciplined execution of our capital allocation framework and our clear commitment to sustainable value creation. Looking beyond '26, further share buybacks will depend on our balance sheet structure and the strategic opportunities available to us. We will continue to take a disciplined value-driven approach that supports both our long-term strategy and attractive shareholder returns. Now let's look at the performance of our 2 divisions. Hart van de Waalsprong is the sustainable and vibrant new city center of Nijmegen North, a place where homes, shops, workplaces and green public spaces come together. You will also find there the first energy-neutral shopping center in the Netherlands. Together with our co-developer, we delivered there 524 homes, nearly 12,000 square meters of commercial space, 2 parking garages and a high-quality public realm. The project was completed in 2025. In the Netherlands, we delivered a strong performance. Revenue increased by 8%, and our adjusted EBITDA rose sharply from EUR 161 million to EUR 250 million, reflecting a solid margin of 7.2%. This improvement was driven by the high activity level in nonresidential construction and our civil engineering operations in the Netherlands also continued to deliver strong results, and we saw excellent momentum in our housing activities. Home sales increased by 27% to 2,354 units, supported by several larger transactions with institutional investors. Overall, these results highlight the strength and resilience of our Dutch platform. Let me take you through our Dutch residential property development portfolio, where we are seeing promising traction and clear opportunities for further growth. In 2025, we invested significantly in expanding the development pipeline of our Dutch residential property activities, which now comprises around 30,000 homes. We secured an attractive development pipeline for the next years, and we reinforced our position as one of the leading residential developers in the Netherlands. During the year, we added approximately 5,500 homes to our portfolio. This included strategic positions in [indiscernible] and Amsterdam. With the acquisition of Gebroeders Blokland, we strengthened our portfolio of land positions and residential projects across South Holland, Utrecht, [indiscernible]. This portfolio includes land and building rights for roughly 2,400 suburban homes. Together, we can accelerate the joint sales, expand our combined network and optimize our project pipelines. We also see an increasing focus on large-scale area development. In 2025, the Ministry of Housing and Spatial Planning together with local authorities and market partners identified 24 breakthrough locations where construction can be accelerated, representing a potential of 150,000 new homes. Our strategic positions in or near many of these areas allow us to contribute meaningfully to faster housing delivery. In 2025, our total investment in Dutch property developed increased by circa EUR 100 million to EUR 640 million. Moving on to the U.K. division, U.K. and Ireland, I have to say. In Waterford, Ireland, we are delivering a 207-meter sustainable transport bridge, a key element of the North Quay public infrastructure project. This low-carbon pedestrian and cyclist focused crossing will connect the city center with the North Quays district and support Ireland's largest urban regeneration program. Designed with an opening span for river traffic and built using reduced carbon materials, the bridge reflects our commitment to sustainable future-focused infrastructure. In the U.K. and Ireland, we also delivered an excellent performance. Revenue increased by 10%, and the division achieved a substantial improvement in profitability with adjusted EBITDA rising to EUR 160 million. This is an increase of 40% compared to last year, and it translates into a margin of 4.7%. I'm particularly pleased that Construction U.K. returned to profitability. This reflects a disciplined project selection and solid operational execution. An important milestone was the finalization of Co-op Live, one of the most significant and complex venues delivered in the U.K. in recent years. Our civil engineering activities in the U.K. and our activities in Ireland continue to perform robustly even compared to the particularly strong year 2024. Now Henri will elaborate on the financials. H. Pater: Thank you, Ruud, and good morning, everyone. What you see on this slide is one of our key contributions to the future of the Dutch energy system, the new high-voltage connection between Borssele and Rilland. This project sits within our EUR 367 million multiyear framework agreement with TenneT. It's a strategic investment aimed at strengthening and expanding the national electricity grid, ensuring it can support a steadily increasing integration of sustainable energy. It underscores our disciplined execution, our leadership in the energy transition and our enduring partnership with TenneT in developing a more resilient and future-ready network. As Ruud has already said, we are reporting a strong adjusted EBITDA result of EUR 400 million. And in addition to this strong result, it's also worth pointing out our strong order book of EUR 13 billion and a further improvement in our solvency, in line with our expectations. We are showing a strong cash position of EUR 0.9 billion, which is an improvement of EUR 120 million compared to a year ago. These strong results have been achieved through solid performance across all our activities and confirm that we are effectively executing our strategy. Let's zoom in on some details of our income statement. Our total turnover has increased by 9% and it's very encouraging to see that both divisions and Belgium are contributing to the top line growth, which has been achieved largely organically. Comparing our results with last year, we see an EBITDA growth of 20%. This improvement is not only based on growth in revenue, but also shows even more clearly that we are benefiting from a strong margin, in line with our strategic principles. The divestment of our remaining stake in Invesis, which was formally completed on the 25th of March last year, had no further impact on the results in 2025. Our depreciation and amortization amounted to EUR 158 million. This represents an increase compared to last year, which can be explained by our ongoing investments in sustainable modular solutions, including the further electrification of our plant and equipment and is fully in line with our plans. Our financial result improved slightly compared to the year ago, showing a result of more than EUR 10 million. And this is mainly due to a lower-than-expected interest cost in the property business, our strong cash position and the payment agreements related to the Invesis divestment. The adjusted items in the income statement related to reorganization costs, positively offset by the reversal of impairments within our property business. The tax charge amounts to EUR 38 million. This represents a tax rate of 15%, which reflects the recognition of additional tax losses to be used in the next 5 years to offset Netherlands profits. The strong result in 2025 also indicates that going forward, tax rate will gradually increase. The bottom line shows a delivered net result of EUR 211 million, which translates into earnings per share of EUR 0.81, a substantial improvement with regard to the EUR 0.31 a year ago. Let's take a look at the cash flow statement together. Our strong operating results translate into a strong cash flow of EUR 354 million. We can see that the cash flow from our working capital is slightly negative, noting that this amount includes a net investment of EUR 55 million related to investments in property. This amount is lower than the EUR 90 million we reported in the first half of this year, which can be easily explained by the higher number of transports of sold homes in the second half of this year. It goes without saying that we are very pleased with the development of our trade working capital efficiency over the past year. This percentage has improved slightly, but is now stable for the second year in a row. The net cash flow from our investment activities was limited to EUR 4 million. And the most important elements are investments in our CapEx in line with our plans of EUR 83 million, payments received in the amount of EUR 108 million relating to the Invesis divestment and the payment for our previously announced purchase of WL Winet. Next, it's good to look at the cash flow related to financing activities, which amounts to EUR 198 million. This amount consists of the payment of our dividends amounting to EUR 66 million, the purchase of shares amounting to EUR 50 million and the remaining part related to leases and a small increase in property funding. It can be concluded that our total cash position has increased by EUR 120 million over the past year to the previously mentioned strong level of EUR 0.9 billion. Let's now look at our financial position. As you can see, our net cash position after loans and lease obligations is EUR 501 million, which is an improvement of EUR 61 million compared to last year. We have just explained a slight improvement in our trade working capital, which means that we are now looking at shareholders' equity, which has increased by EUR 62 million compared to a year ago. The explanation for this is as follows: We have earned a net income of EUR 211 million. We had a negative effect of EUR 24 million related to the exchange rate. And as explained earlier, we paid a total of EUR 160 million in dividends and share buyback, and we have an effect related to the post-employment benefit obligations. Next, it's good to look at solvency, which has been further strengthened compared to last year. And finally, we can also see on this slide that our return on average capital employed has increased. This is a positive result that demonstrates strong financial effectiveness. Now back to you, Ruud. R. Joosten: Thank you, Henri. I would like to conclude with the market trends and our outlook for the full year '26. Here, we show you a photo of Deleers in Belgium. At Project Deleers in Anderlecht, we are creating a modern vibrant district that brings living, working and learning together in one integrated development. BAM Kairos as developer and BAM Interbuild together with partners delivered a state-of-the-art school campus and childcare facilities. This project reflects our capability to shape inclusive communities and deliver long-term value for the city and its residents. We are pleased with the developments of our order book, which has maintained at a high level of EUR 13 billion. This while we continue to focus strongly on order book quality and selective tendering in key markets where we have a proven competitive advantage. Now over to the market trends. In the Netherlands, the residential market remained strong, driven by stable consumer confidence. The nonresidential market is cautiously optimistic, specifically in the education and office sector. In Civil, there are many attractive growth opportunities driven by the energy transition and the transport market. There remains a strong rationale for essential investment in energy transition, infrastructure, defense and sustainable and affordable homes. The Dutch coalition agreement, Aan de slag or Getting to Work, creates opportunities to move forward such as building faster, increasing grid capacity and improving our roads, bridges and [indiscernible]. We also see opportunities in it to achieve the goal to build 100,000 homes per year, but it does require decisiveness, clear choices, collaboration and investment. The construction market in the United Kingdom is expected to strengthen, supported by the government's continued focus on energy security. The government's 10-year infrastructure plan is ambitious and defense investment is also set to increase. The recently approved U.K. planning and infrastructure bill has the potential to accelerate approvals for major projects. In London, commercial planning activity is rising with growing emphasis on retrofit developments. In Ireland, the EUR 275 billion national development plan is expected to provide a significant boost to the construction sector. Delivering complex infrastructure projects and new homes are essential for creating thriving communities. But this requires stability, clear planning and commitment beyond short-term political agendas. Now over to the outlook for the full year. We continue our disciplined contract and risk management approach, which is a fundamental priority with our strategy to enhance our financial performance and predictability. For 2025, BAM expects to deliver further growth in revenue and adjusted EBITDA. Thank you for your time. We are proud of the set of results we've just presented to you. In our view, these numbers emphasis that our strategy, focus, reform and expand is paying off. Now let's go to your questions. Unknown Analyst: Firstly, let me address the loss I do see in your German, Belgium and international business units. You mentioned that U.K., Ireland, Belgium did well. So it seems that you still booked a loss in Germany or international. So could you share some additional information about this EUR 9 million EBITDA loss? R. Joosten: Yes, that is true. That line is kind of a combination of the Belgium result and some legacy items we still need to solve. In this case, one of the 2 legacy items we still had in Germany that was settled not so long ago during the year. And yes, that balances that out with the, let's say, the positive result in Belgium. Unknown Analyst: Okay. Secondly, you made a nice improvement in the Netherlands and the U.K. There's not a Dutch construction company listed in the Netherlands making an EBITDA margin more than you do in the Netherlands. Is that something you -- is it a targeted margin for you? Is it realistic for you to also generate such a profitability? U.K. is a different story, different structure. But if I just look at your Dutch operations versus those of the Rosmalen base one, is there a major difference why you could not or should generate a similar margin? R. Joosten: Of course, I fully respect our competitors, including our friends from Rosmalen, but it's not up to me to discuss their results. Of course, I'm here today to discuss the BAM results. Of course, we try to improve margins. We also try to improve revenues. It's also in the outlook for this year. We see good development of the financials of the Dutch division. And of course, it's very difficult to compare the exact mix of activities with the different companies. So that's maybe a game I'm not going to play. So I look at the individual, let's say, segments of our business and try to maximize results there. I see a lot of opportunity to increase revenue and to look at profitability. Of course, this year, we also had a good growth in revenue. So that's also the balancing act of looking for attractive projects with higher margins and lower risk. So that's a balancing act we are playing. I'm really happy with the 2025 results because we saw this organic growth in the division with improvement of the margin. And of course, we are aiming further margin improvement going forward also for the Dutch division. Also one of the reasons why we invest heavily in property. In the last year's financials, you see a big increase in investment in property, normally leading also to a higher margin in the balance. But there are a few thoughts, I think, on looking at our margin. Unknown Analyst: You sold much more homes than what you indicated because you expected more or less -- the guidance was more or less flat, but you clearly beat that number. Has home sales been brought forward into this year? And are you also willing to provide a guidance for what you expect for this year, excluding this Blokland acquisition? R. Joosten: Yes. Of course, also selling of homes is kind of a mixed bag of homes over the year. You have the -- that's more, let's say, out of the city homes, family homes, but you also have a lot of -- and that's getting more important in the Dutch market, apartments, smaller apartments as well. And you saw that in the last part of the year, our sales numbers were heavily impacted by some deals with investors, a few bigger deals that gave a real push to the number of homes in the last quarter, especially. So no, we brought nothing forward. That are deals that are developed over a longer period and then they appear at the moment -- in this case, at the end of the year, pushing the end of the year. And then that leads to a big increase, can be a few deals that can make a difference of hundreds of homes. So we are very happy with the development. More importantly, of course, we are investing strongly in property to have a structural increase of our home sales for the next years. The Blockland acquisition was important in that sense as well, leading to approximately 200 additional homes a year. So looking for these kind of opportunities is important to have a structural increase of the number of home sales. Unknown Analyst: And then lastly, for the moment, I think this one is for you, Henri. We do see depreciation edging up quite a bit lately. It has not so much to do with your capital expenditure in tangible and intangible assets, but much more to the lease liabilities. So could you provide some guidance for this year, what we should expect for CapEx and lease liabilities and depreciation. H. Pater: Yes. If you're talking about the depreciation, indeed, as you compare it to a year ago, an increase, but it was also based upon temporary site accommodations, which were required by the client and causing a higher depreciation and a specific element in our energy sector. We are expecting for 2026, you're talking about CapEx more or less similar numbers like we are now reporting for 2025 and the same for [indiscernible] as well. Martijn den Drijver: Martijn den Drijver, ABN AMRO. I would like to start off, as I usually do with the guidance. You mentioned in the press release, earnings visibility continues to improve, solid high-quality bidding pipeline, continued discipline. If I take out the claim settlements in Germany, your EBITDA margin was closer to 6% than the reported 5.7%. So I was wondering what is keeping you from providing an update on your medium-term targets? Is that the usual under-promise, over-deliver bump strategy? Or are there other elements at play? R. Joosten: No, that is clearly part of it. We like to be very predictable in that sense on how we communicate, especially at the beginning of the year. So normally, in this meeting, we are always a bit cautious on giving an outlook for the whole year. And then during the year, based on performance, we will give you more detail in the outlook. That's what we do every year. And in that sense, we like to be predictable going forward. On the other hand, indeed, we are in the last year of a 3-year strategic cycle where we promised the market a 4% to 6% margin window and more than EUR 6 billion company. In 2025, we delivered already EUR 7 billion and almost 6%. So that brings us into the situation where we have to rethink strategy going forward. And that's what we are doing now. So probably by the end of the year, early '26, there will be a new strategic window announced to the market with our new strategic financial targets for the market as well, including capital allocation strategy for the years to come. So we try to keep -- to stick to that kind of rhythm every 3-year, let's say, an updated strategy. Of course, we're happy to see that we already touched our targets in 2025, but it's no reason now to jump to conclusions. For this year, we are rethinking our strategy. It is working over the last couple of years with big improvement. Also happy to see that our shareholders are profiting from that too with the biggest increase, the most successful share in the mid-cap last year. I think they are seeing that this strategy is working. And of course, we try to, in that sense, under-promise and over-deliver again also for the next phase of the strategy. But we're doing our homework for that right now. Martijn den Drijver: Got it. Then my second question is on BAM Construct U.K. Would you be willing to share -- if you take out the facility management part and the property development part, but roughly, you can use ranges if you like, on how that unit has performed in 2025 relative to 2024 just so we can get a bit more clarity there. H. Pater: Yes. So back in the days of the first half of 2025, we already achieved a positive result in that Construct U.K. arena. In the second half of 2025, it improved further. And if you take out the revenue related to facility management and also the EBITDA part of that, then the difference is roughly 0.2%. That means that Construct U.K. on its own is already delivering a very strong result, and we are expecting a further improvement in 2026 as well. Martijn den Drijver: That is indeed a strong performance. And just one follow-up, a tiny one on [indiscernible] question. I think this settlement in Germany was the final one, right? With this settlement, the whole BAM Germany warranty element is gone? H. Pater: There were 2 settlements. First of all, it was related to an old project like we discussed and also explained in the first half of 2025. And the second one was indeed related to BAM Deutschland entity, and that was the so-called SPA share result mechanism together with the buyer. And then there is still a receivable in our balance sheet, which is also explained and disclosed in our annual report, which we are discussing with the customer from -- back in the days in terms to solve that topic as well. Martijn den Drijver: Got it. Okay. And then on the Civil U.K. performance, maybe we've gotten a little bit too enthusiastic. But I was wondering if you could clarify why the EBITDA margin actually performed the way it did. The U.K. civil engineering market is quite buoyant, but yet the EBITDA margin declined year-on-year. Can you explain that to us? What happened there? Unknown Executive: Yes, I can start and maybe you can help me [indiscernible] of projects [indiscernible] projects. R. Joosten: Sorry for that. I was just saying it has to do with the phasing of big projects. In '24, we had some finalization in the mix more than in '25 where we started up some of these bigger projects. And then you can see that in the finalization of a project, normally the margin goes up. And in the beginning, there's a more conservative look at these projects. So in the mix, it looks like a negative development, which is absolutely not true because we see in the order book going forward an increase in margin for these projects. But that's how we, in IFRS used to, let's say, estimate these results of these projects. I see fantastic revenue growth over the last 3, 4 years. I think it doubled the business almost, the Civil engineering U.K. So it's a star performer in the group. But I think that's a bit the explanation. But Henri, I'm looking to you as well... H. Pater: That's the complete story indeed. I'm really pleased also with the developments over there as well. And the difference between 2024 and 2025 is roughly EUR 10 billion. On that high level of revenue, that's quite normal and normal pattern also in this business. Martijn den Drijver: Got it. And then one question on industrialization, BAM -- BAM Flow. First part of that question is, did it contribute positively to EBITDA in 2025? And my second question is, how should we think about that activity going forward? R. Joosten: Yes. I think in all honesty, that is still a development, let's say, part of the strategy. We started up the factory late '24, I think. So we were really in the market in '25 for the first time with, let's say, real homes. So it's not an EBITDA contributor at this moment in time. That will take probably this year to get to that kind of numbers. You need to, of course, also convince the market that these are fantastic homes to live in. We have now several people living in these homes, and they're pretty excited about it. But it takes some time in a country where people are very much used to concrete and stone houses. Of course, you need to take some time to change that kind of conservative issue, if you can call it like that, attitude towards these houses. We are convinced that these houses are, let's say, more convenient to live in from an atmosphere point of view. But it takes some time. And it's not, let's say, financially a big issue. Of course, we want to make it EBITDA plus as soon as possible. But for the long term, it's really important to build these more sustainable homes that indeed take out CO2 from the air instead of emitting CO2 into the air. And yes, I think that is a big opportunity. And of course, we are not the only ones in the market to do that. And together, I think we will develop that culture in a positive way and get these homes in the market as soon as possible. Martijn den Drijver: Just one short follow-up. Is there any other industrialization plan ongoing that we should be aware of? R. Joosten: Yes. I think it's a broader item in all construction. So also looking at nonresidential, you see that more and more, let's say, parts of the building are industrialized and coming from factories before they are installed into, for example, the new ABN AMRO office that you saw is coming, you see parts of that coming from suppliers from their factories directly. It also has to do with all kind of cables, for example, cable channels that come from factories, you don't see that, but it's all industrialized. It comes, let's say, ready-made into the building and is then installed. So this is a more broader development also in infrastructure, apart from only the wooden homes. Simon Van Oppen: Simon Van Oppen, Kepler Cheuvreux. I have a follow-up question on Construct U.K., good development there. And you mentioned project selectivity. Could you please give some more color on what drove this strong development also in terms of project selectivity and how this is progressing into 2026? R. Joosten: Yes. Let's say, after the disappointing results earlier '23, '24, we decided to reshape the strategy for Construct U.K. cost-wise, but also strategy-wise, much more focused on, for example, education and health care in the U.K. going from midsized projects with now and then, let's say, a special in the commercial field. So that portfolio is now much more clear, way to go for. And luckily, the U.K. government is investing heavily in these frameworks as we call them, for health care and education, where we are, let's say, participating in for the long term. So it's partly looking for that new portfolio that gives us the trust and confidence that margins will go up in the near future. And it was also, let's say, finalizing some, let's say, legacy projects that we still had where Co-op Live, I think, was by far the most important one. Now that combination of profitable projects, cost drive and ending Co-op Live led to the performance in 2025. And you see indeed, like Henri is saying, an improvement in the second half of the year. So indeed, getting to a more normal profitability already in the second half. And we trust that, that will then increase in this year as well. Simon Van Oppen: And could you share roughly how much education and health care within Construct U.K. makes up of that specific division or what you are targeting to achieve? R. Joosten: I don't think we have that percentage on hand. We have to look that up. H. Pater: Yes. But I think it's mainly looking back education at this moment in time and some commercial wheels. Leontien de Waal: Leontien de Waal, ABN AMRO. A few questions from my side. First one is defense and energy security opportunities. You mentioned them both for U.K. and the Netherlands. Are there any difference in, I would say, margin perspective concerning those opportunities? R. Joosten: Difficult to say. I think the defense is probably a different segment than the energy security segment of our market. In Defense, it's also a very wide range of activities. I think there's still a lot of development to do to get that really developed by governments and bring it to the market. We're already doing some important jobs in the defense sector. For example, the new head office of the Belgium Army in Brussels near to the NATO building. We are building together with others. It is a EUR 350 million building. But it can also be -- indeed investment in infrastructure can also have now a defense kind of character as well. It can also be a hangar for planes. So it's a very wide range. It's also housing for soldiers, something that was neglected by governments for decades. And now we need huge investments to get that to, let's say, an acceptable level for people to live in. So margin-wise, of course, we will be very critical there as well and have, yes, let's say, the same kind of criteria for margin as for other projects. So I'm pretty positive there that especially when there is speed required, yes, then also we need to see, let's say, margins linked with that in our portfolio. In the energy transition segment, yes, we see good margins because the parties, our customers there, they see how scarce our capabilities and skills are and are willing to come to realistic pricing if they can trust our delivery. And that's the same in the U.K. as in the Netherlands. Leontien de Waal: So there are no big differences in margin potential considering the 2 regions, no big differences. R. Joosten: No, I don't think so. I don't think so. I think it's the same. You see the same kind of project. It's very nice to see, for example, that National Grid, which is a kind of TenneT for the Dutch-speaking audience, comparing to TenneT in the Netherlands. Yes, we are doing for them the same project as we do for TenneT for National Grid. So for example, a land station, bringing energy from the sea, wind energy to consumers on land. So these projects are, let's say, copies of each other and very nice to see that now we brought these companies together with our teams to learn and to get some synergy from these projects. But I don't see a big difference in margins now. Leontien de Waal: Okay. Maybe to stick to grid congestion a bit. Concerning your property development portfolio in the Netherlands, how much of the development portfolio is impacted by grid congestion, especially as there's what was a huge message from TenneT last week concerning 3 provinces in the Netherlands and acute stop was communicated to happen maybe this summer, start of this summer. How does that affect your property development portfolio? R. Joosten: Well, I think it's a very valid point, that's one. We also have the nitrogen issue as well in the Netherlands. These are things that are not helping. In BAM, we see it like that, there could be a huge acceleration of homebuilding in the Netherlands if these things were not there. Everybody wants that acceleration. And of course, that would be very profitable for companies like BAM if that would happen. We are pushing and pulling and trying to drive this, let's say, decisiveness in provinces, in communities, but also on a national level to take these barriers out of the way. But it's a pretty complex game in solving nitrogen, solving the congestion. In solving congestion, of course, BAM can play a role. We are doing that in several regions. But yes, again, it needs central direction, I think, to make this happen. So I don't see it as, let's say, a major issue for our actual numbers, but it would be very good, of course, for acceleration of our numbers. That's more, I think, how also, together with our partners in the market and our competitors in the market, we are looking at this. Yes, if you want to build more homes, you have to have some decisive action because you can talk about regions where you need acceleration or breakthrough areas or all kind of building 10 cities. But it's easy to say that. But to have the real central direction and government decisions to make it happen, including nitrogen, including congestion, including necessary infrastructure to these homes, yes, that takes a lot of different decision-making, I think. And that's over the last year is not happening in the Netherlands. Leontien de Waal: It's a complex issue. Could you give an indication how much -- which percentage of your property development portfolio is related to those provinces in the Netherlands who are impacted most at the moment? R. Joosten: Yes, that's difficult because indeed, you have the nitrogen issue, you have the congestion issue. Of course, we try to then balance that out. And if we see issues there with these 2 elements, we try to rebalance the portfolio into different directions to still deliver these kind of numbers. And until now that works out fine. For '26, that will work out fine. But yes, longer term, of course, these issues need to be solved. And of course, we are hoping that the new government will take a decisive action there as soon as possible. Ministers will be appointed on Monday, I think. So let's see what happens. Leontien de Waal: Last question from my side. You mentioned high activity level of nonresidential activities in the Netherlands, especially. In the outlook for 2026, you used the words cautiously, optimistic. Could you elaborate a bit on the nonresidential opportunities in the Netherlands? What kind of segments? Will it be new build? Will it be renovation? R. Joosten: Yes. You saw that over the last couple of years, it was very difficult to -- for the office market, for example, was really, really difficult, 0 activity or almost 0 activity. There, we see cautiously some activity coming back to the markets -- to the Dutch market anyhow, but also in London, we see the same issue, which is positive. So that's why we're cautiously optimistic about some investment also from institutional investors in nonresidential. Yes, in '25, we had a very good year based on a very good portfolio in the Netherlands. And we see some good wins there as well, for example, with De Sax, for example, in Rotterdam, which is also in nonresidential, but it is in a way residential as well because there are 900 apartments in that building. But also some other wins and some possible wins that we see in our agenda. We see a kind of positive development in 2026 for nonresidential as well in the Netherlands and in the U.K., indeed. Based on our participation in the frameworks, we're also having a very cautiously positive view on U.K. nonresidential. Dirk Verbiesen: Dirk Verbiesen,[indiscernible]. Question on the outlook and the property development in the Netherlands. Maybe, let's say, 2,000 houses sold in '25 was a bit of a normalized number. As you said, a few hundred were sold to investors in the later part of the year. Taking that as a base for '26 in your outlook, what do you expect in number of houses sold as an assumption in that? And also on average prices sold '25 versus '24? And what do you see in those trends -- in that trend looking at the project pipeline? R. Joosten: Yes, difficult indeed because these things are heavily impacted by the mix of homes and deals with investors that can make a difference of hundreds of homes. We're cautiously optimistic there as well, looking at you as well, Henri, for this year with the number reached over '25. Looking at developments over the next couple of months, I don't see a big difference there in prices of these homes in '26 as well. So there, I see still positive developments looking at pricing in the market. The number, yes, probably better to, after Q1, look at that and give you a better idea on that one. But yes, is it normalized? Strategy is anyhow to increase the number of home sales for BAM, and that's why we do the property investments. How it exactly will turn out in '26 for me, at this moment in time, I don't know. H. Pater: No, indeed. So I think it's not needed to deduct all kind of one-offs from the sold houses in 2025. So we see it as a normal figure. Dirk Verbiesen: Okay. Maybe then on the energy transition, National Grid and TenneT. If you -- can you share what kind of revenues you are realizing in those, let's say, specific segments as it also looks very promising maybe for the next decade plus. What do you realize in those fields? H. Pater: Yes. That's a really valid question. So if you are looking through the lenses of sustainability projects, roughly 15% of the revenue currently is related to those kind of topics. So we are moving much faster in that direction, which is really helpful, also taking into account that it's really profitable and helpful also to drive our EBITDA in the right direction as well. Dirk Verbiesen: And then on the legacy projects, you mentioned some specifics on the children hospital and sections being delivered to the customer in the coming weeks, I think, even. When is this project? Can you remind me when should it be fully completed and delivered? R. Joosten: Well, we mentioned first half of the year. So before summer, we need to deliver the whole hospital. We want to deliver the whole hospital. Sixth floor has been delivered to the customer, and that's really helpful because then they can fit it out with their beds, but also very high-tech equipment that are now, let's say, bringing into the hospital, which is really positive. They're very excited about the building. So it's pretty high quality, which is good to say, after many, many years of construction, the good news is indeed that handing over and commissioning is now in process. I think that's an important step. Dirk Verbiesen: And in financial terms, there was no negative impact anymore over the course of '25. H. Pater: No, we settled. Maybe you remember there was a claim somewhere in 2024. The result at this moment in time is stable. Dirk Verbiesen: And then the Fehmarnbelt, yes, because it's such a recurring topic. Can you give some more details? You said, yes, we are in discussions. We have 12.2% in the consortium. First elements are completed or delivered. So where are you in this process on the construction side and also in the discussions with the client? R. Joosten: Yes. I think that's absolutely true. And I think we -- since a couple of years, we're pretty transparent on this legacy portfolio we still have from the past. So probably 5 years ago, we had something like 23 of these projects on the agenda. So we had long discussions with you guys all the time about these projects. This year, it's very important indeed like the new children -- National Children Hospital, I have to say, will be delivered to the customer. We have still the Brisbane project where we deliver a metro system to the city of Brisbane in Australia that will be delivered in Q -- well, let's say, first half year '27, I have to be careful. So also in the last phase of the project. And then remaining is the famous Fehmarnbelt tunnel between Denmark and Germany, very complex, huge project. We have 12%, a little bit more. And indeed, like with all these big projects, yes, we are in constant discussion with the customer on how to proceed and how to look at the risks and how to look at the timing of the project. Today, we see the first immersion planned for first half year. So we are now preparing everything to make that happen together with local authorities. And I think that's a big moment. If that happens, that proves as well that this whole system can work. And then for the next 4 years, this will be part of this element or this project will be part of these meetings because there is something like 4 years planning to immerse all the 92 elements of the tunnel, resulting in an 18-kilometer tunnel between the 2 countries. Dirk Verbiesen: But let's say, on timing of -- so discussions with the clients on finding a solution within those 4 years? Or what should we expect for that? R. Joosten: Probably you will have these discussions throughout the whole project. Of course, what we try to do is to work together and get this as efficient as possible into the sea. But it's pretty complex and many, many elements are linked to this from a sustainability point of view, from a planning point of view. You have the German government. You have the Danish government. It's pretty complex. Not many tunnels like this were immersed in the world of this size. So I expect this to be, let's say, highly on my list of activity for the next 4 years. Dirk Verbiesen: Okay. And maybe to round up, in your order book of EUR 13 billion, what is the amount of the legacy portfolio? R. Joosten: Looking at U.S. [indiscernible] it's pretty small, I think... H. Pater: Yes, pretty small. As I already said, Brisbane is mostly done. So if you're talking about the delivering of that metro, that's still about commissioning. So the construction work is done. So no big amounts left there. Yes, and then still a 12.2% stake related to FLC. Dirk Verbiesen: But you can't say in euro million terms, what is? H. Pater: Not talking about... R. Joosten: I think far below the 10%... Dirk Verbiesen: Far below the 10%. And children's -- yes, Children's Hospital is also close to... H. Pater: That building is already, as explained, complete. It's about commissioning. So the construction work is done. And phasing [indiscernible] hospital [indiscernible] journey. So you need more time to deliver all those stories. So also the remaining part in our order book is really limited. Martijn den Drijver: Martijn den Drijver, ABN AMRO with a few follow-ups. Well, I guess some pretty specific questions. I'm going to continue a little bit on that front. Completion of the Children's Hospital and commissioning and transfer, should we read that as a final settlement is also quite near? Or can those discussions, mediation or perhaps even arbitration linger on, continue a bit longer than the official handover? How should we think about that? H. Pater: Yes. So normalized such a case, you deliver the hospital and then there is a final moment in terms of building up your total documentation, your final account. Then we need to submit it to the client, and then there's at least 2 to 4 months discussion about the content and all those kind of stuff. And then still a question how to move forward. Do we have then a final settlement? Or is there still kind of a conciliation part of that process ongoing as well. Martijn den Drijver: Okay. And taking that into account, that dialogue is still constructive. Now that completion is nearing that parties are taking perhaps a stricter stance given the... H. Pater: It's always strict. There's quite [indiscernible] component part of it as well, but it's still constructive. Martijn den Drijver: And then on the tunnel, I understand your cautiousness, Ruud. But the way I read it is that if you can immerse, the trench issue must have been solved. If you immerse, the client has accepted the installation vessel. So some of the hurdles must have been resolved up until a certain extent. That doesn't mean that the discussion about potential costs related to the delays have been resolved. But it seems as though things are moving in the right direction. Is that the right way to think about it? Or should we really be more cautious in... R. Joosten: Of course, I would wish to say yes to that question, but it's pretty complicated because the trench, of course, is also 18 kilometers. So of course, the immersion is now on the first element is, let's say, 200 meters. So there's still work to do also on the trench, I think, going forward. I don't think that's impossible to do, but I'm cautious because of, yes, technicalities are complex on that trench. And let's see what happens when we start to emerge more elements. But it's an important moment. I fully agree with you. Of course, if that works, then indeed, let's say, the system then proves it can work. That is important for all of us, I think. Martijn den Drijver: I know that VINCI is the lead contractor within FLC. Are you as BAM consulted on every step on every discussion that you're having with [indiscernible] or even the Danish government? R. Joosten: Absolutely. I'm personally involved there, yes, to a large extent. Martijn den Drijver: Moving on. On your trade working capital, if the proportion of nonresi is moving in the right direction and your infrastructure projects and the grid related is moving in the right direction, what would be a normal guidance then for trade working capital? I would assume that it actually becomes more negative. H. Pater: First of all, we are really happy with the current status. [indiscernible] has already said that the fact that we are now stable for 2 years in a row and expecting for the upcoming period of roughly minus 12% as a kind of a proxy. And I think it's still a healthy number relating to this type of industry. Martijn den Drijver: Okay. So no major movement at that level. Got it. And then my final question, I couldn't derive the actual amount of the restructuring charge. Was it a material amount in 2025, the restructuring charge? H. Pater: Yes, a very small number. Martijn den Drijver: Okay. Then I'm not even going to ask what it is about. H. Pater: Neglectable. Unknown Analyst: [indiscernible] a follow-up from my side. You have signed a cooperation agreement with Rolls-Royce SMR for the U.K. and for the Netherlands. Why have you not signed an agreement, a global agreement to offer your services? And what has now become -- with Hochtief also joining this market arena, has it become a threat to you that they might take business outside of the Netherlands and the U.K.? R. Joosten: No. We have a very specific role in that group of companies. We deliver a patented structure that is necessary or that has the function of protecting the buildup of the reactor. And that's our contribution to this whole system, which then will be removed when the final structure is there. That's the only thing we do in this system, and that's why we were selected by Rolls-Royce to be part of this. So there will be other people involved in the total theme -- of set of things that are necessary to build a reactor like that. But we are the partner for that part of the construction. Unknown Analyst: Only for the U.K. and for the Netherlands? Or have you signed a new agreement that you will service them throughout Europe? R. Joosten: No, that's still not clear, to be honest. I think we are still in the phase of getting some evidence that this can work. So there are discussions on building a few of these reactors in the U.K. and some of them in Europe. But it's also a strategic decision we have to take further on for ourselves because we have a very clear strategy to focus on the U.K., Ireland, the Netherlands and Belgium. So any movement outside these regions will be an important decision we have to take. Unknown Analyst: I understand that, but this is really one specific product, which you build and then remove -- how would say, [indiscernible], but you can build up somewhere else in Europe as well. For example, in Czech Republic, you most likely will build the first one. To have a head start, I would presume that would be very attractive to service. R. Joosten: That is true. I think it's a repeatable model. But again, I think we are more focused now on getting these things on the road -- to show on the road, to say it maybe with some disrespect because these are nuclear reactors. This is not an easy product, of course. And I think it's really important to have some evidence that this can work, I think especially for the U.K. government as well, where we will be the partner. I think there is time enough for us to think about, let's say, strategies outside our core markets. [indiscernible] really not for tomorrow. Unknown Analyst: No, no, no. But we're also looking at the long term for BAM. But again, hopefully [indiscernible] might have become then a competitor in this respect? R. Joosten: Well, that depends then on the very long-term discussions on implementation outside our core activities. I don't know. We have the patent on this system. So we have it in our hands to make that decision strategically going forward. Michel Aupers: Maybe final question. Martijn den Drijver: Yes, two. Again, Martijn den Drijver for ABN AMRO. If you take EUR 7 billion as a basis, 6% EBITDA, roughly EUR 400 million in EBITDA, you take out EUR 80 million CapEx, EUR 100 million in leases, EUR 60 million in taxes, you add back some trade working capital flowing. I'm not assuming any M&A, of course, you get to a free cash flow of roughly EUR 200 million. The real question is, why are you so careful with the share buyback? Why just EUR 40 million? Your balance sheet can bear much more than that, and you can even do that on an annual basis if the market continues to operate at this level or you improve. So how did you get to the EUR 40 million? H. Pater: Yes. As already alluded to also in previous meetings, we do have our capital allocation strategy, which is built upon 4 pillars, looking to our solvency, also our equipment, what is needed to improve our equipment. It's about M&A activities, land bank and indeed the dividends and share buyback. If you look to the total of dividend and share buyback, it's a similar figure compared with a year ago in total and paying 55%. You know about the acquisition there with regard to Blockland, which we are going to organize in the remaining part of this year. And we need a bit more flexibility also for land bank acquisitions as well. So I think it's not really a cautious approach. I think it's a very, how to say, realistic approach. Martijn den Drijver: Okay. Got it. And then just a final almost bookkeeping question, but provisions and pensions resulted in a positive cash inflow in 2025. How is that possible? What did you provision for? H. Pater: Yes. Looking to the provisions, we see an increase there, not using it at this moment in time. And that has mainly to do with the fact that our revenue, as already said, growth over time. I think in the last 2 years, roughly 12%. That means your normal warranty related to our obligations with regard to our built environment is also growing as well. We are not utilizing it. Michel Aupers: Maybe, [indiscernible], the final question, yes. Unknown Analyst: On the Fehmarnbelt, just from my understanding, the work that you've done over the past period, and let's say, the revenues recognition, of course, is there. But in terms of billing and cash payments by your client, are you on track? Or is there a significant amount of stuck in work in progress because of the ongoing discussions? R. Joosten: Yes, we never go into details on specifics on projects. That's our normal policy, but it's also out of respect for our JV partners and our customer and the negotiations we are in or discussions we are in. So maybe later, we can come back to this one. But for now, we don't go into the specifics of this project. Unknown Analyst: And maybe as a last one, the EUR 13 billion order book now versus EUR 13 billion last year, do you sleep better because of the EUR 13 billion as it is today in terms of quality and visibility that you have? R. Joosten: I sleep better because we had a revenue of EUR 7 billion. So if you look at the EUR 13 billion, you have a revenue of EUR 7 billion and you have again EUR 13 billion. That's a pretty good performance. Unknown Analyst: And in terms of overall quality? R. Joosten: Well, we see the quality improving margin-wise, slowly, but steadily. And of course, people expect that to grow maybe even faster. But these are thousands of projects. So to get the whole chain of margins up, yes, that is a long-term game. It's a marathon. And steadily, but slowly, we see that improving, less risk, higher margin coming through the P&L. That's how we play this game. Simon Van Oppen: One last question, please. Simon Van Oppen, Kepler Cheuvreux. I was wondering on your, let's say, recurring business, long-term maintenance contracts. Can you share roughly for the Netherlands, but also U.K. and Ireland, how much of your revenues is related to more recurring revenues? R. Joosten: Yes. More and more, we see, of course, like in the facility management, you have long-term contracts. So there it's easily to calculate. But more and more in all our other businesses like civil engineering, for example, you see that we have long-term relationships with, for example, SSE in Scotland and with TenneT in the Netherlands is that recurring revenue in definition. For us, it almost is because we see already the pipeline for the next 5 to 10 years. Same with companies like Enexis, for example, in the Netherlands and the local energy providers. We also have 10-year kind of contracts. In Contract U.K., you see more and more that our business is in education, like Henri is saying, these are frameworks. Is it recurring. From a definition point of view, we can debate. But in that framework, we see for 7 years, for example, business coming to us not per default, but it happens like that, of course. So more and more, let's say, our business is in a long-term kind of approach. Also the number of customers is decreasing all the time, and we are focusing on less customers with long-term frameworks or long-term contracts. Sometimes we have a one-off project that can happen. We are not against it. But strategy is to work within these frameworks and have, let's say, fewer customers with long-term relationships. The percentage, well, I think it's already a big percentage of our revenue today. I don't have it behind the comment, but... H. Pater: Yes, that's a bit depending upon the definition of [indiscernible]. But I think in the meantime, quite a significant number. Michel Aupers: Okay. Thank you very much. Ladies and gentlemen, this brings the meeting to an end. We hope to welcome you in the near future. Thank you, and have a good day.
Operator: Good morning. Operator: My name is Jordan, and I will be your conference operator today. At this time, I would like to welcome everyone to the Brookdale Senior Living Inc. Fourth Quarter 2025 Earnings Call. Today's conference call is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. At this time, I would now like to turn the conference over to Michael Grant, Brookdale Senior Living Inc.’s Vice President of Investor Relations. Please go ahead. Thank you, operator. Good morning, everyone. Welcome to Brookdale Senior Living Inc.’s fourth quarter 2025 earnings call. Participating on today's call are Nikolas Stengle, Brookdale Senior Living Inc.’s Chief Executive Officer; Dawn L. Kussow, our Executive Vice President and Chief Financial Officer; Mary Sue Patchett, our Chief Operating Officer; and Chad C. White, our Executive Vice President, General Counsel, and Secretary. On today's call, we will discuss fourth quarter and full year 2025 results as well as our financial guidance for the 2026 year. We will also provide other general business updates. During today's call, our remarks, including our answers to your questions, will include forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act. These statements are made as of today's date and we expressly disclaim any obligation to update these statements in the future. Actual results and performance may differ materially from forward-looking statements. Certain other factors that could cause actual results to differ are detailed in the earnings release we issued after market yesterday as well as in our Securities and Exchange Commission filings, including the risk factors described in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. I direct you to the earnings release for the full safe harbor statement. Also, please note that during this call, management will discuss non-GAAP financial measures. For reconciliations of each non-GAAP measure to the most comparable GAAP measure, I direct you to the earnings release and to the company's quarterly supplemental financial information, which may be found at investors.brookdale.com and was furnished on an 8-K yesterday. With that, it is my pleasure to turn the call over to our CEO, Nikolas Stengle. Thank you, Mike. Good morning. Nikolas Stengle: I appreciate everyone for joining us on today's call and for your interest in Brookdale Senior Living Inc. This morning, I will provide a high-level commentary on our fourth quarter and full year 2025 results. I will also review our strategic priorities and guidance for 2026 and our outlook through 2028. Note that we provided preliminary financial highlights for the fourth quarter and full year 2025 on January 28 in advance of our Investor Day, which we held on January 30. Today's results and guidance are consistent with what we previously shared. Speaking of our Investor Day, I would like to thank everyone who participated, and I am especially grateful to those that made the trip to Nashville. Prospective investors, the engagement and insight provided by our investors and equity analysts, both those that formally cover Brookdale Senior Living Inc. and those that have an interest even if not providing coverage today, was amazing. The Brookdale Senior Living Inc. management team left the event with even stronger conviction in our multiyear projection. For those that were unable to participate, we do have the video recording and presentation available on Brookdale Senior Living Inc.’s Investor Relations page. When Brookdale Senior Living Inc. initially provided guidance for 2025 in February, the team guided to RevPAR growth of 4.75% to 5.75% and $430 to $445 million of adjusted EBITDA. Now as we report the completed year, we finished at the top end of our initial RevPAR guidance, at 5.7% and we handily exceeded our initial adjusted EBITDA expectations, delivering $458 million for the year. Likewise, Brookdale Senior Living Inc.’s fourth quarter delivered on our expectations for RevPAR and adjusted EBITDA, as the positive trends seen in the first three quarters of the year continued into the fourth quarter. Let me start by calling out a few highlights from the quarter. First, I would like to highlight occupancy. Our trend of steadily improving occupancy growth continues, and we also continue to see positive movement in addressing our opportunity communities. Our fourth quarter occupancy achieved a weighted average of 82.5–83.5% on a same community basis, our highest level since the beginning of the pandemic in Q1 2020. Notably, our consolidated fourth quarter occupancy represents a 310 basis point improvement over the prior year quarter and a 70 basis point improvement from the preceding sequential 2025. We closed the last day of the quarter with a consolidated occupancy of 83.7% or 84.3% on a same community basis. As our longer-term investors will recall, the 80% occupancy level roughly marks a meaningful inflection point for Brookdale Senior Living Inc.’s margins and cash flow generation due to the fixed cost leverage in our operating model, so we are excited about our continued occupancy progress. While much of this occupancy growth is underpinned by overall market dynamics associated with increasing demand from baby boomers and continued stagnation in inventory growth, our own internal focus on occupancy growth has accelerated our ability to capture the opportunity that exists within the senior living industry. In previous calls and events, we described our SWAT teams. These are internal teams that use a structured process that includes a top-to-bottom review of a community to determine performance opportunities, with tools including capital investment, leadership and marketing assessment, as well as pricing recalibration. As a result of this process and our previously announced disposition and lease termination activity, we continue to see good progress across our occupancy bands. Consolidated communities where occupancy is below 70% fell from 23% of total in 2025 to just 15% of total consolidated communities in 2025. At the other end of the spectrum, 25% of communities exceeded 90% occupancy in 2025 and that percentage increased to 34% by 2025. For the fourth quarter, 80 communities remain below the 70% occupancy threshold. Of those, 14 are expected to be sold during 2026 and 21 are working with our SWAT teams. Excluding communities to be sold or working with SWAT teams, a further 17 need three or fewer move-ins to move out of the sub-70% occupancy band. Adjusted EBITDA is the second item I would like to highlight. For 2025, Brookdale Senior Living Inc. grew adjusted EBITDA 19% to $458 million, a level that exceeded the midpoint of our final guidance for the year—a guidance level that was increased three times earlier in the year. Notably, this 19% growth also marks our fourth consecutive year of double-digit adjusted EBITDA growth. I do want to acknowledge that we fell just short of our adjusted free cash flow guidance of $30 to $50 million. Dawn will provide more color on this metric, but the shortfall is related primarily to timing issues in working capital, and we still delivered significantly positive adjusted free cash flow of $23 million, our first positive year since 2020. Next, I would like to provide an update on how Brookdale Senior Living Inc. is progressing against our five strategic priorities: number one, excelling operationally; number two, optimizing our real estate portfolio; number three, reinvesting capital into our communities; number four, reducing leverage; and number five, elevating quality for residents and associates. Starting with Brookdale Senior Living Inc. excelling operationally, you have already heard about our significant improvements in occupancy and adjusted EBITDA during 2025. There is still plenty of room for improvement as we sprint through various occupancy target milestones. To that end, during the fourth quarter 2025, we brought on an experienced Chief Operating Officer, Mary Sue Patchett. This is the first time in over ten years that Brookdale Senior Living Inc. has had a COO and clearly aligns with the fact that we are, first and foremost, an operating company. Concurrently, we implemented a new regional operating structure with six distinct regional leadership teams that encompass all functions integral to senior living operations. The net effect of these two changes is to have a company that can concurrently draw on the deep resources we have as the largest operator in senior living while also having the nimbleness to operate in a manner similar to six regional companies of roughly 100 communities each. Additionally, we have created and hired the new position of Senior Vice President of Strategic Operations. This role consolidates under a single leader that reports directly to Mary Sue several functions that are key to operations excellence. Chief among them is centralizing our pricing strategy, pricing analytics, and pricing implementation and our labor management. Additionally, this role consolidates prioritization and decision-making for all capital investments that go into our communities. This organizational structure will create a true asset management approach similar to how a portfolio manager would view investment decisions in their portfolio of assets. At the end of the day, these moves will define and sharpen our organization for faster responsiveness and greater accountability. Our second strategic objective is to optimize our real estate portfolio as we continue to focus our portfolio on communities with the strongest long-term value creation potential. By 2026, we anticipate that we will have 517 communities in our consolidated portfolio, meaning communities that we either own or lease. As of December 31, Brookdale Senior Living Inc.’s consolidated portfolio included 548 communities, 370 owned and 178 leased, a reduction of two owned and 43 leased communities since the end of 2025. The significant decline in the lease portfolio represents the completion of our previously disclosed master lease reset with Ventas, from which we will continue to lease 65 communities going forward. As we shared last quarter, during 2026, we anticipate the sale of 29 owned communities and we expect those transactions to generate approximately $200 million of proceeds. These sales mark the final meaningful streamlining of our portfolio, bringing us to our ongoing portfolio of 517 owned and leased communities. As we previously stated, the exit of these groups of assets will result in improved occupancy, RevPAR, and adjusted EBITDA, all while generating cash proceeds that can be used for capital investment. Note, of the 29 assets that remain to be sold at 2025, 14 were in our under-70% occupancy band. Turning now to capital investment. Our total nondevelopment CapEx for 2025 was $170.7 million, most of which was reinvested into capital projects in our communities. Capital investment remains a priority, and we are particularly focused on ensuring that investments are prioritized to community projects that result in improved NOI in addition to necessary life safety and structural improvements. These larger projects often fall under what we call first impressions, or upgrades to public spaces that update aesthetics and functionality, as opposed to the smaller piecemeal replacements we may have favored historically. We believe these larger projects can have an outsized impact on growing occupancy and community-level NOI. For 2026, we are projecting nondevelopment capital investment of approximately $175 to $195 million, an increase from 2025 as we believe investing today will help us capture enhanced occupancy growth and rate into the future. Reducing leverage is the next strategic objective that I would like to comment on. Brookdale Senior Living Inc.’s adjusted annualized leverage at 2025 was 8.9 times adjusted EBITDA on a trailing twelve-month basis, a meaningful improvement from the 9.9 times ratio at the end of the prior year. We will continue to reduce leverage meaningfully as our adjusted EBITDA continues to grow. As a reminder, we believe we can drive leverage to under six times by 2028 primarily through adjusted EBITDA expansion. Notably, 90% of our total debt is non-recourse debt, secured by property-level mortgages. Dawn will provide a deeper update, but following recent refinancing activity, all of our mortgage debt is refinanced through 2026 and our team has made excellent progress toward working with our lenders on the 2027 tranches. The next strategic objective I will discuss is elevating quality for our residents and associates. One of the broadest measures of service delivery quality that we look at is our Net Promoter Score, or NPS. Since 2022, our NPS score has risen steadily. It is now 19 points higher, which is very strong improvement in the eyes of our most important constituents—our residents. This improvement does not happen by accident. We survey our residents consistently to understand what would drive a better product, and we listen and respond through our offerings. We have improved consistently in such areas as food. We have been recognized by outside rating services, such as U.S. News & World Report, for high performance in food and dining across all our care segments, independent living, assisted living, and memory care. Another example of Brookdale Senior Living Inc.’s ability to elevate quality is the continued expansion of our Health Plus platform, which works to improve residents' quality of life through care coordination and chronic condition management resulting in the prevention of avoidable emergency room visits and hospitalizations. During 2025, we rolled Brookdale Health Plus into 58 additional communities across eight states, including three new states. This brings the Brookdale Health Plus platform to a current total of over 180 communities served. Finally, we aim to elevate quality for our associates. One of the best measures of associates’ experience at Brookdale Senior Living Inc. is employee turnover. Turnover of our key three community leaders, meaning the executive director, and the leaders of sales and clinical, improved again in 2025. Our K3 turnover has improved 390 basis points over the past two years. Overall associate turnover across all positions also declined in 2025 and we have now nearly returned to the levels experienced before the pandemic. To close out my remarks, I want to comment on the financial guidance for 2026 that we provided in our earnings release last night and also pre-released in advance of our Investor Day. I will also comment on our longer-term financial outlook. As we look to 2026 and the next several years, we are excited about our outlook. 1946 marked the start of the baby boom with over 600,000 more Americans born in 1946 than were born in 1945. 2026 is the year the first baby boomers hit the 80-year age mark. This age is an important benchmark for Brookdale Senior Living Inc., as over half of our move-ins occur at between 80 to 90 years of age. Our average age at move-in is about 83 years. The demand outlook is robust starting this year but also looking many years into the future. Demographic reports show that the population of 80-year-old Americans will grow at a 4%+ compounded annual rate for the next decade. On the other side of the equation, senior housing supply growth has severely stagnated, and the rate of unit growth at 2025 was just 0.6%, a historical low. Comparing the 80-year-old and greater population growth of 4%+ with the current unit growth of 0.6% indicates a strong trend toward increasing occupancy for the entire senior living industry. For 2026, Brookdale Senior Living Inc. is projecting RevPAR growth of 8% to 9%, which is an improvement over the most recent years. Dawn will dive into the specifics, but the 8% to 9% RevPAR should include a balance of positive occupancy and pricing with some mix support from last year's lease terminations and completed and ongoing dispositions. Occupancy and pricing in excess of cost inflation are both very positive drivers of EBITDA, particularly once communities are above 80% occupancy, the approximate level at which we leverage our fixed costs. As such, we believe we will be able to attain mid-teens adjusted EBITDA growth from our $445,000,020.25 baseline level to $502 to $516 million for 2026. As we look out over the next several years, we expect these trends to continue. As such, we are reiterating our expectation that we can drive mid-teens adjusted EBITDA growth through 2028. Additionally, based on that expansion of adjusted EBITDA, we believe we can end 2028 at under six times leverage. Every day, we are thankful for our residents, our associates, and also our shareholders. Each of you puts your trust in us, and we do not take that lightly. We remain confident in the intrinsic value of the company, which is built upon a bedrock of specialized and scarce real estate. We remain confident in our ability to serve and care for seniors with excellence while being an employer of choice. And we remain confident in our ability to drive durable shareholder value. I will now turn the call over to our CFO, Dawn L. Kussow, for more details on our financial performance and outlook. Thank you, Nick. Dawn L. Kussow: This morning, I first want to recap Brookdale Senior Living Inc.’s performance against 2025 targets, then turn to a deeper dive into the fourth quarter, followed by a discussion of our recently issued 2026 guidance and the assumptions that underpin that guidance. As Nick mentioned, we are very pleased with our fourth quarter and full year 2025 financial and operating results. Here is a quick recap of the targets we established for 2025 and how we delivered against them. Our 2025 target for annual RevPAR growth was 4.75% to 5.75%, which we later increased two times to 5.25% to 6%. Brookdale Senior Living Inc. delivered against that target as we reported 5.7% RevPAR growth on a consolidated basis, coming in above the midpoint of our increased target. Our 2025 target for adjusted EBITDA started at $430 to $445 million and increased three times over the course of the year to a range of $455 to $460 million. Again, we delivered on that goal as we reported adjusted EBITDA of $458 million, also above the midpoint of our increased range. For 2025, we set a goal of generating $30 to $50 million in adjusted free cash flow. We fell just short of that goal with full-year 2025 adjusted free cash flow of $23 million. I would characterize this modest shortcoming as related primarily to working capital timing and refinancing-related interest prepayments. Importantly, $23 million in adjusted free cash flow generated in 2025 marks our returning to generating positive cash flow for the first time since 2020. 2025 was also an exciting and successful year for Brookdale Senior Living Inc.’s portfolio transition as we worked to right-size our footprint by exiting nonstrategic or underperforming owned and leased communities. On the lease side, during 2025, Brookdale Senior Living Inc. exited 58 communities with 6,466 units through lease terminations. Notably, pursuant to an amendment of our master lease arrangement with Ventas during December 2024, we agreed to terminate the leases for 55 communities comprising 6,125 units that we had previously leased from Ventas. Most of the associated transitional activity as we exited those 55 leases occurred during the third, and particularly the fourth quarter of 2025 when we exited 42 leases. Note that we will continue to manage eight of those nonrenewed communities. As we enter 2026, we continue to lease 65 communities from Ventas, comprising 4,055 units, through 2035 with an economically improved lease structure, including landlord-funded capital improvement allowance and an annual rent escalator of 3%. During 2025, we also completed the sale of 12 owned communities with 482 units for proceeds of $26.1 million net of transaction costs. As we have previously shared, the disposition of nonstrategic owned communities will continue into 2026 as we plan to sell the remaining 29 previously announced communities comprising 2,364 units. We expect the bulk of these transactions to be completed by mid-year 2026 and we estimate the total proceeds for these communities to be approximately $200 million. Once these dispositions are complete, we do not foresee significant changes to Brookdale Senior Living Inc.’s consolidated portfolio on a forward-looking basis. Turning now to full-year 2025 and fourth quarter financial results. For the year 2025, we expanded our consolidated adjusted EBITDA by $72 million, a 19% increase over 2024. Operator: As Nick mentioned, this is our fourth consecutive year delivering double— Dawn L. Kussow: —digit adjusted EBITDA growth, and we believe that we can maintain mid-teens annual growth from our 2025 baseline results over the next several years. During the fourth quarter, our consolidated adjusted EBITDA increased $7 million, or 7% year over year, consistent with our implied guidance from the third quarter. Overall, Brookdale Senior Living Inc. has already made significant progress on our lower-occupied communities through performance improvements and portfolio optimization efforts, and we anticipate further income flow-through as these efforts progress. We are pleased with our continued progress and are optimistic about our ability to drive adjusted EBITDA higher over the next several years. In the fourth quarter, we grew our occupancy sequentially by 70 basis points on a consolidated level and by 50 basis points on a same community level. This is stronger sequential growth as compared to our pre-pandemic sequential growth, and in addition to a strong third quarter, our normal selling season, so growth on top of that is an accomplishment and gives us momentum coming into 2026. Our fourth quarter consolidated weighted average occupancy was 82.5%, an improvement of 310 basis points year over year, our highest year-over-year rate of increase of the year. Brookdale Senior Living Inc. has now reported three consecutive quarters with consolidated weighted average occupancy above 80%, our first quarters above that pivotal 80% level since before the pandemic. For the year, our consolidated weighted average occupancy was 80.9%. On a same community basis, weighted average occupancy for the fourth quarter was 83.5%, representing an increase of 250 basis points year over year. The occupancy growth stems directly from Brookdale Senior Living Inc. initiatives to drive occupancy, including our SWAT approach, targeted pricing actions focused on communities in lower occupancy bands, and a focus on operational accountability. For the full year, same community weighted average occupancy was 82.3%. Turning now to our top line results. For the full year, resident fees increased 2.4% to $3.0 billion. The components of this 2.4% year-over-year growth are a 5.7% increase in RevPAR partially offset by a 3.2% decline in the number of total average available units from our previously announced portfolio optimization, including the disposition of both owned and leased communities. For the fourth quarter, resident fees of $715 million declined by 4% over the fourth quarter of last year. The key factors underpinning the revenue decline versus last year were a 10.5% reduction in total average units, the result of community lease nonrenewals and targeted dispositions, which accelerated in the second half of the year, partially offset by a 7.1% RevPAR increase. The 7.1% increase in RevPAR from the fourth quarter of the prior year was driven by an ongoing acceleration in year-over-year weighted average occupancy. Fourth quarter same community move-ins were 5% below the prior year, while move-out volume was beneficial in the quarter. Resident rate increases more than offset the ongoing trend of lower resident acuity, as revenue per occupied room, or RevPOR—essentially our realized pricing metric—increased 3.1% year over year. The fourth quarter exhibited sequential steady occupancy with notably strong move-in volume to close out the quarter, which should create a tailwind to start the first quarter. Indeed, January 2026 consolidated occupancy improved 310 basis points year over year. Fourth quarter same community RevPAR increased 5% over the prior year, driven by 250 basis points of occupancy growth coupled with a 1.8% increase in RevPOR. Our fourth quarter same community weighted average occupancy continued to improve with 50 basis points of sequential growth. While pre-pandemic, the fourth quarter typically displays the flattest sequential growth trend of the year, Brookdale Senior Living Inc.’s fourth quarter occupancy growth exceeded its normal seasonality for this period. Now turning to expenses. On a consolidated basis, fourth quarter expense per occupied unit, or ExPOR, increased 2.6% over 2024. Our 3.1% increase in RevPOR exceeded the 2.6% increase in ExPOR, generating a 50 basis point positive spread between realized revenue and expenses per occupied unit. As we successfully move lower-occupied communities up in the occupancy band, we expect to see flow-through continue to expand. For 2025, consolidated community RevPOR improved 2.7% while ExPOR increased 1.8%, creating a positive spread of 90 basis points. Same community operating income increased 6.1% for 2025, and operating margin improved by 30 basis points over 2024. Fourth quarter same community operating income grew 4% from the prior year while the operating margin declined by 30 basis points. Note that the fourth quarter typically has a lower operating margin as the quarter has 92 days, which drives labor costs higher than the first two quarters of the year, which have fewer days. Our revenues are based on monthly billings while labor costs reflect hours and days worked. Full year general and administrative expense, excluding noncash stock-based compensation expense and transaction, legal, and organizational restructuring costs, was flat year over year as a percentage of revenue, reflecting cost structure optimization undertaken earlier in the year in advance of the anticipated revenue reduction associated with disposition activity that occurred later in the year. As we complete the optimization of our portfolio, Brookdale Senior Living Inc. will remain focused on the appropriate cost structure. Cash facility operating lease payments during 2025 were $43.7 million, down a significant $12.2 million from $55.9 million in the prior year quarter as a result of the Ventas lease dispositions, which occurred throughout the third and fourth quarter of the year. Adjusted EBITDA for the fourth quarter was $106 million, an increase of $7 million, or 7% above the prior year quarter. For 2025, adjusted EBITDA of $458 million increased 19% year over year. We delivered $23 million of adjusted free cash flow in 2025, marking our return to positive adjusted free cash flow for the first time since 2020. During the fourth quarter, our adjusted free cash flow was an outflow of $23 million. Seasonally, we note that a significant proportion of our annual real estate taxes are paid during the fourth quarter, so the fourth quarter typically requires the use of cash for changes in working capital. Additionally, the timing of working capital and prepayments associated with our refinancing activities negatively impacted adjusted free cash flow. As of 12/31/2025, Brookdale Senior Living Inc.’s total liquidity was $378 million, up $26 million from the third quarter. Our adjusted annualized leverage continues to improve and finished the year at 8.9 times. Our leverage has improved significantly, primarily as a result of our strong adjusted EBITDA growth over the last several years. Now I would like to shift from reviewing the past quarter and year to looking ahead. On January 28, we preannounced fourth quarter financial highlights in advance of our Investor Day event, and in that release, we also included our financial guidance for 2026. Before I get into our specific guidance, I would like to briefly reiterate how Brookdale Senior Living Inc. approaches its guidance philosophy. Delivering on our financial commitments is paramount to what we do. There is a great deal of thought and work that goes into defining appropriate targets—targets that we believe are credible and grounded in reality, but at the same time, compel the Brookdale Senior Living Inc. team to strive for growth and improvement. As a company, we will always look for opportunities to outperform over a multiyear horizon. Our 2026 guidance has two components: 8% to 9% RevPAR growth and $502 to $516 million of adjusted EBITDA. Let us start with our RevPAR target of 8% to 9% annual growth, which reflects accelerated growth in comparison to what we have achieved in the past two years. We believe 8% to 9% RevPAR growth is attainable, and there are a few main components underpinning that growth. First, at the start of this year, we implemented a higher in-place rate increase compared to the prior year, which is supported by higher occupancy levels both at our communities and throughout the industry. Second, occupancy growth is expected to be supported by strong move-in demand, which is a result of both internal efforts as well as the undeniable demographics of America's aging population. The final component is the accretive impact of disposition communities, which will positively impact RevPAR. Our annual guidance for adjusted EBITDA is a range of $502 to $516 million. This guidance is consistent with our longer-term mid-teens adjusted EBITDA annual growth outlook from a baseline of $445 million. Improving occupancy and rate are the key drivers of this adjusted EBITDA expansion, as both have very significant flow-through with Brookdale Senior Living Inc. now exceeding 80% occupancy—roughly at the level at which our fixed costs are covered. Labor is our single largest cost item, at approximately 65% of our facility operating expenses. We have continued to make progress on reducing labor turnover and we project a stable and predictable labor cost environment for 2026. We estimate general and administrative expense, excluding noncash stock-based comp and transaction, legal, and restructuring costs, at approximately $162 million for 2026. Cash facility operating lease payments should be approximately $180 million during 2026. Reflecting on our guidance of adjusted EBITDA expansion to $502 to $516 million, we expect our annualized leverage to continue to decline significantly both in 2026 and in the coming years. Modest additional deleveraging may also result from the disposition activity we are currently undertaking through roughly midyear 2026. We believe that we have the ability to drive leverage below six times by 2028. On the topic of leverage, I would like to highlight that during January, we announced the refinancing of all of our remaining 2026 mortgage debt maturities as well as a portion of our 2027 mortgage debt maturities. These refinancings extend our more imminent maturities, thereby furthering our well-staggered debt maturity schedule. Our intention is to always be proactive in managing our balance sheet, and our improving operating results and strong lender relationships make that possible. As you consider the quarterly progression of our financial results, there are a few factors to keep in mind. Firstly, we will start the year with more available units than we anticipate during the second half of the year, consistent with our planned dispositions. Second, our occupancy rate is expected to ramp over the course of the year, reflecting rising demand, community-level improvements, as well as positive mix dynamics resulting from our dispositions. Other typical seasonal factors are expected to remain consistent with history, and as a reminder, those seasonal factors are called out in the last page of our investor presentation. In conclusion, we are pleased with our fourth quarter and 2025 operating and financial results. As we look forward to 2026 and beyond, we remain confident in our strategic and operational plans, which are generating solid adjusted EBITDA growth. Our team was enhanced significantly during 2025 through the addition of Nick, an operations-focused CEO, and also by the addition of Mary Sue Patchett, as Brookdale Senior Living Inc.’s first dedicated Chief Operating Officer in over a decade. As evidenced by our 2025 results and our outlook, Brookdale Senior Living Inc. is confident in our ability to create sustainable, long-term growth and value for our shareholders. Operator, we will now open the call for questions. Operator: As a reminder, if you would like to ask a question, simply press star followed by the number one on your telephone keypad. Your first question comes from the line of Joshua Richard Raskin from Nephron Research LLC. Your line is live. Joshua Richard Raskin: Thanks, and good morning. I have actually got two. I guess the first is, and Nick, you started on some of this. Just maybe talk a little about the progress you are making around that transition to an operating company. And if you could give some maybe specific examples. I heard on the workforce side, but maybe changes around workflows or budgeting and how you guys were approaching that as you came into guidance would be helpful. And then second question, just if you could walk us through expected progress on Health Plus. You gave some great statistics for 2025. But I am just curious if you could remind us targets for 2026 rollouts. And have you looked at data around rents or rent increases or, you know, even retention data in the communities that have rolled out Health Plus and maybe where they were the year before and any tangible progress that you can point to. Nikolas Stengle: Yes, excellent. Good morning, Josh. Thanks for the question. I will tackle the first one first, and we will go to the second one. So very clearly, and I have articulated this now several times, both in the Q3 Investor Day and even on this call today, this idea that we are an operating company, first and foremost. Obviously, we have now described Mary Sue’s role as our COO, and she is in the room with us this morning to tackle any really deep-dive ops type questions. That is fundamentally kind of how we are thinking of everything. And the regional model really is an extension of that. So not only do we have a dedicated COO, wake up every morning focused on driving great performance, driving great residents’ and experience, driving move-ins. We also have regional teams. And, again, I sort of described it in the Investor Day, and it is far more impactful maybe even than a slide can really capture. But it is this idea that we have six regional leaders with a dedicated team, and truly dedicated team of a sales leader, a clinical leader, asset management leader, a dining leader, all the different functions so that we can really focus in and be very nimble and very focused on that super hyper-local type decision that a customer faces when they are contemplating senior living. The other part that I just announced during my prepared remarks is we have hired a brand-new position here at Brookdale Senior Living Inc. It is a Senior Vice President of Strategic Operations. This role will consolidate all our pricing decision-making, the analytics, the reporting, the implementation, how we deploy pricing strategy within all our communities. Now we had a similar structure in the past, but it was not truly consolidated under one leader, specifically under operations. Concurrently, in a similar manner, all our labor management, our staffing ratios, our workforce management, overtime control, all those types of things will also be under this role. And probably most importantly, our CapEx decision-making. As I have shared quite a few times now, we are really leaning into this idea of redeploying capital into our communities, and for those that were fortunate enough to be with us at Investor Day and got to do the tour of our Franklin—sorry, our Brookdale Green Hills—community, I think it showed pretty clearly what you can do with a 16-year-old building when you have a very deliberate and comprehensive capital deployment plan, and we are centralizing all that capital deployment and how we think of it under this role. So it is a very meaningful position that we have now hired under this SVP of Strategic Operations. The second part—actually, let me pause there. Mary, is there anything to add on Josh’s question? Dawn L. Kussow: I am just very excited about this next step for us because it puts all of those specialized so that we can go to market to support our regions in winning locally. Yep. Perfect. Nikolas Stengle: I think the second question was around Health Plus. So as I shared, we rolled out 58 communities in 2025, expanded our footprint in, I think, three new states if I can recall my prepared remarks correctly there. As far as going forward, the real focus, Josh, and as you recall for those that listened to me yesterday, and again, I encourage everyone who has any interest in Brookdale Senior Living Inc. to take a look at our Investor Day presentation and video that is still on our Investor Relations website. We leaned in on this idea of winning markets, and pivoting the thinking of how we win by saying we will win a market. And the two examples I happened to give at Investor Day were Kansas City and Dallas. Obviously, we are in many more markets where we have some critical density. The Health Plus plan going forward will be to really fill out those gaps that we may still have in markets, use that as yet another lever to driving performance around care, around service. And the net effect of that—and I think this is the next part of your question on Health Plus—is we have seen a definite improvement in turnover of residents. For one, they enjoy and appreciate the care coordination that is provided. Then there is a very practical objective component where they are just going to the hospital less. They are going to the emergency room less. And those are both areas of, I will call them, leakage that happens in our industry where folks who are in assisted living or memory care, if they land in an inpatient unit in a hospital because of some acute event, quite often do not come back to senior living. They go to a different level of care or, unfortunately, sometimes actually pass. So our Health Plus program is helping quite a bit on our retention of residents, which then in turn drives our occupancy growth. Michael Grant: Perfect. Thing I might add to that— Nikolas Stengle: Josh, is that we have also seen some really favorable— Chad C. White: —impacts to our associate turnover rates. Our Health Plus communities—that has actually been very, very good. Our associates like the technology that is provided. They love the system that is in place. It has been very, very beneficially received, and it is helping on the move-in side. As you are able to talk about the benefits of the program and what you can provide to residents, family members love that, and it has been very, very positively received. Yep. Operator: Your next question comes from the line of Joanna Sylvia Gajuk from Bank of America. Your line is live. Dawn L. Kussow: Hi. Good morning. Thanks so much for taking the questions. So maybe first, on the centralized pricing strategy. Right? Your peers talk about in-place rent increases in the high single digit. So is that kind of what you were able to push as well? And to that end, have you noticed any change in financial-related move-out because of that? Nikolas Stengle: Yes. Good morning, Joanna. Very good question. And I will characterize what you just said roughly in line with what we were able to achieve with our in-place rate increases that went effective on January 1—mid-to-high single digits is definitely aligned. The way I think we will say it even more clearly, our in-place rate increases for 2026 are more akin to what we did two years ago in 2024 and definitely more than what we did last year. And that is a very important metric because our entire resident base gets the same in-place rate increase, and it, in some ways, underpins our overall RevPOR growth for the entire year. The other thing I want to comment on RevPOR growth is as the year progresses and we get new move-ins, those new move-ins are typically replacing residents who moved in on average, let us say, two years ago back in 2024 when our occupancy was meaningfully lower, where our discounting was a little bit higher. So, typically, as the year will progress, we will be moving in new residents at a different price point than those that are moving out because of the strength in our business, the overall strength in the senior living industry, and for sure, the occupancy that we have within Brookdale Senior Living Inc. specifically. Dawn L. Kussow: Yes. And, Joanna, I will follow up on the financial-related move-outs and our experience there. You know, we are monitoring as we roll out our rate increase what we would see, and I would just say that it is relatively in line with what we saw when we rolled out kind of the same rate increase two years ago. Now what I would also say is if you look at our attrition rates, we have seen some favorability in our attrition rates over the two years. Our attrition rate has been coming down, and so that has been favorable. You can see that in our investor presentation, and we are continuing to see that in 2026. K. Thank you. And I have another one, a different topic I guess, somewhat related. But in terms of your CapEx commentary, so you expect the nondevelopment CapEx to increase from last year. Can you give us a little bit more, maybe, details there in terms of the number of projects? And, I guess, as it relates to going forward, you know, without giving specific numbers, I guess, if you are not ready to talk about it. But, you know, how should we think about this, you know, '27, '28, and so on in terms of, you know, how long will it take to touch all locations that need that CapEx? Thank you. Operator: Yes. So I— Nikolas Stengle: —so as a real estate company, you always have to reinvest in real estate no matter the age. And, obviously, the older it is, the more you potentially have to do. But the reality is there will always be ongoing real estate capital reinvestment. That is true of any real estate type, and senior living for sure falls in line. You know, it is fairly highly lived-in type real estate, just as hotels are, just as things of that nature. So I will reiterate what we said we expect to execute, to deploy, in 2026, the range that I had in my prepared remarks. But the reality is that the real focus and the real shift in mindset under this new SVP of Strategic Operations is to really take that asset management perspective, really take this view of we invest into a portfolio to get a return. So if anything, that spend will pivot more towards these larger projects. And we do have a list. I mean, we have prioritized it. We have the high impact, and it kind of is aligned with this idea of winning markets. So we are going to deploy our capital in a more deliberate way in the markets that we want to win so we can create an overall market lift for Brookdale Senior Living Inc. Again, I used Dallas and Kansas City as illustrative markets. There are far more, and, obviously, we will not disclose kind of where our strategy is and where we are leaning in. But that is really the real meaningful part. As far as the spend going forward beyond that, I mean, we cannot, you know, specify a number. But I think if you think of continuing to be roughly in line with what we are doing, feels like a comfortable run rate. We can cover more than enough of the required items while continuing to expand these really high NOI-driving type projects. Dawn L. Kussow: Great. Thank you so much for taking the question. Operator: Thank you. Your next question comes from the line of Ben Hendrix from RBC Capital Markets. Your line is live. Great. Thank you very much. Just a quick question on the— Chad C. White: —occupancy bands. I appreciate all the color on the sub-70 bucket. Talked about that a lot, but I wanted to focus a little bit more on the 70 to 80 band, the 90 or so communities there. It is like there is a lot of earnings power in that bucket. I just wanted to think about the timing and considerations for getting those more meaningfully above 80%. Can you maybe talk about those in terms of their profile for key leadership? Are there geography considerations to think about how your pricing strategy shifts to address that bucket? And just anything you can, and CapEx needs, anything that is kind of the gating item for getting those over 80. Thanks. Nikolas Stengle: Yes, great question, Ben. And, oh, by the way, the SWAT communities that we have identified are predominantly in that 70 to 80 and then also the below 70. Now a lot of the below 70 we are disposing, so, obviously, we are not putting a lot of SWAT energy into those as they unwind. But the reality is, even though we quite often benchmark and use milestones around the less than 70, because at that point you are really talking about breakeven, the real magic of flow-through occurs as you enter that 80. So the fact that you are highlighting that is definitely top of mind for us as well, where a lot of our efforts with our SWAT team is actually specifically in that mark. Then, usually, once it accelerates beyond 85 to 90, it is never cruise control or autopilot, but it kind of enters that phase pretty quickly, just based on where the community is. I will tell you that really is kind of the sweet spot of where we focus a lot of our energy: first, let us get communities above breakeven. That usually happens fairly quickly, and, again, we are just booking a lot of them. And then the next point is how do you nudge them, how do you push them beyond that 80% benchmark to get them above— Dawn L. Kussow: Yes. And then the other thing that I would add is that there are a few communities—Nick was explicit about the 14 communities in the less than 70 that are on the disposition list. I would say the next largest group on our disposition, because as I said, there are 29 that are coming out in ’26, is in that band as well. And so as they continue to move up, and there is a large number of communities in that 70% to 80% band that are already in our SWAT team group that we are already focused on, whether it is CapEx, it is pricing, it is turnover with our associates—make sure that we are highly focused to continue to move them up. Nick already talked about the progress that we made during the year, and we would expect to continue to make that progress here in ’26. Operator: Great. Thank you. Your next question comes from the line of Brian Gil Tanquilut from Jefferies. Your line is live. Nikolas Stengle: Hey. Good morning, guys, and thanks again for hosting us back in January. So maybe, Nick, as I think about occupancy that you reported for January, it seems like that kind of tracks your typical seasonality for the December to January move. But as we think about the snowstorms or the ice storms that hit the South, how should we be thinking about the recovery that you are seeing there and what it tells you about the health of the demand equation for the business. Thanks. Yes, I appreciate it, Brian. So historically, our December to January sequential occupancy trend is around a 30 to 40 basis point decline, and that is pre-pandemic. Even since the stabilization post-pandemic, that 30 to 40 basis point decline from December to January—very typical, by the way, for the industry and, for sure, Brookdale Senior Living Inc. And that is exactly what we achieved this year, 2026. And I will say that is despite this winter storm. The other reality that occurs in senior living: most move-ins occur at the very end of the month, the last week of the month, and you can see that in our own numbers. If you ever look at our month-end number as compared to the weighted average for the entire month, nearly every month, if not every single month, it is always higher. So the fact that that big storm that kind of transitioned through Texas, where we have a meaningful footprint, through Tennessee, for sure, where we have a meaningful footprint, then off to the East, right in that last week of January, definitely clipped us. I mean, folks did not have power. Everything was frozen over. There are not many move-ins or tours that occur in that environment. So sure, that impacted our occupancy gain in January. But the nice thing about our industry and the nice thing about the segment of the industry we are in—we are in a very nondiscretionary, needs-based, not many alternatives. Oh, by the way, it was the entire market that was impacted. So folks who needed senior living, assisted living in January still need it today. So, in fact, we are already seeing it in our February numbers. The pace of move-ins in the first few weeks of February are already ahead of what we typically see, and that is a direct spillover from January. So I think the better way to look at it is to combine our January and February numbers to get a better sense of how Q1 is progressing. And from our perspective, it is already progressing very nicely as we would expect despite that storm. Brian Gil Tanquilut: Awesome. Thank you. Operator: As a reminder, if you would like to ask a question, simply press 1 on your telephone keypad. Your next question comes from Andrew Mok from Baird. Your line is live. Nikolas Stengle: Good morning. Wanted to follow up on the CapEx spend. I think the range you gave implies about $4,400 per unit across the continuing portfolio. Is that the right level we should be thinking about then? Nick, I think you—yes. I think I heard you say this is a comfortable run rate. So should we be thinking about this as a structural increase in ongoing maintenance CapEx versus a cyclical acceleration? Thanks. Yes, Andrew. I will take the first swing, then Dawn will chime in with some more details. So the per-unit number, I think, is right if you do the math. So 40—now, actually, we have—no. I think, yes, Andrew, we can maybe— Dawn L. Kussow: —talk about your units, but I think it is more around that $3,500–$3,600 on a net basis because the number we are giving is a net. Nikolas Stengle: But the real point is we are looking to reinvest in our communities. As we expand our EBITDA and as we expand our cash flow generation—again, overall, thematically, the run rate feels about right. We are also looking to reinvest. And the real point I think I am going to make is even on an—you know, we always look at it on an average per-unit basis. The reality is we are going to overinvest in some communities, so the number will be much higher in a community that we really lean into. Other communities will be, you know, near zero or something almost meaningless as far as the CapEx. And that is the real point of the shift—it is less this idea that we have a bolus, a big grouping of CapEx that we deploy in a peanut-butter-spread type fashion. It is more we are going to target specific communities in specific markets to drive that return and that NOI. So it is less of a piecemeal approach, which is what we have done a little bit of, and more of a comprehensive, targeted, deliberate approach of our CapEx deployment. Andrew Mok: Great. And then just a follow-up. I think I heard in the prepared remarks that rate increases offset an ongoing trend of lower resident acuity. Can you elaborate on what you are seeing on the acuity side? Is this a mix effect of younger seniors moving in? An actual decrease in same resident acuity? Thanks. Dawn L. Kussow: Yes, I can start, and I think from an acuity side, the comments are around the fact that as you have a higher-acuity resident move out, you generally are having a lower-acuity resident move in, which if you look at our RevPOR throughout the year, you can see that in our rates because of the care rate. You had someone with a higher acuity that is moving out and a higher care rate, and someone lower moving in, you are naturally going to have a lower care rate, which is impacting our RevPOR trending throughout the year. And I think that those are the comments. From an overall acuity level, you know, we obviously monitor overall acuity. As our acuity levels have come down since COVID—we certainly saw them spiking up as we were coming out of COVID—but we certainly have seen them starting to come down. The benefit of that is that you have a longer length of stay with your residents. Nikolas Stengle: Yes. Our overall resident turnover rate is slowly decreasing, which is actually a very positive sign because our length of stay is increasing, which, again, very much underpins overall occupancy growth. So it is kind of a balance between acuity and length of stay. Obviously, the sicker or the older the resident, the less the length of stay. So it is actually balancing out pretty nicely. Andrew Mok: Great. Thank you. Operator: There are no further questions. I will now turn the call back over to Nikolas Stengle, CEO, for closing remarks. Nikolas Stengle: Excellent. Thank you, Jordan. I really appreciate everyone joining us today. I appreciate the continued interest and engagement with Brookdale Senior Living Inc. As I have shared in Investor Day and on previous calls, excited to make the entire management team available to any folks, any stakeholders who have an interest in Brookdale Senior Living Inc. So please reach out to Michael Grant, and we will set it up. So with that, let us wrap this up, Jordan. I wish everyone a pleasant Thursday and end of the week.
Operator: Ladies and gentlemen, thank you for holding, and welcome to the Wesfarmers 2026 Half Year Results Briefing. [Operator Instructions] This call is also being webcast live on the Wesfarmers' website and can be accessed from the homepage of wesfarmers.com.au. I would now like to hand the call over to the Managing Director of Wesfarmers Limited, Mr. Rob Scott. Robert Scott: Thanks very much, and hello, everyone. Welcome to our 2026 half year results briefing. I'm joined here today in Perth with all of our divisional Managing Directors and our CFO, Anthony Gianotti. I'll begin, as I always do, with a summary of the group's performance, highlights across the portfolio, and then Anthony will talk through the financial results in more detail. And I'll conclude with some comments on group outlook, and then all of us would be very happy to take your questions. So starting on Slide 4, a slide that will be familiar to most of you. Wesfarmers' primary objective is to deliver a satisfactory return to shareholders. We define satisfactory as a top quartile total shareholder return over the long term. And we recognize that we can only achieve this if we continue to anticipate the needs of our customers, look after our team members, engage with suppliers in a fair and ethical manner, contribute positively to the communities where we operate, take care of the environment and act with integrity and honesty. And over the last half, our teams and our divisions have made great progress in each of these areas, and you'll hear about this through the presentation. So turning to Slide 5, the financials. This half, Wesfarmers' net profit after tax increased 9.3% to $1.6 billion. This growth was underpinned by strong earnings contributions from our largest divisions, including Bunnings and Kmart, alongside significant improvement in our newer growth platforms of Lithium and Health. And I'd really like to thank the Managing Directors of these divisions, Mike Schneider, Aleks Spaseska, Aaron Hood and Emily Amos for what them and their teams have delivered in a challenging operating environment. Now our results really reflect strong operating performance and disciplined execution of the group's strategies. Productivity initiatives helped our businesses navigate these challenging market conditions as higher cost of living pressures continue to weigh on many households. Our businesses performed well in this environment, making good progress digitizing business operations and using technology to mitigate cost pressures and to keep prices low for customers. Our retail businesses continued to expand their addressable markets and improve in-store space productivity, whilst WesCEF progressed key expansion projects. As a result of the higher profits, the Board has determined to pay a fully franked interim dividend of $1.02 a share, which is a 7.4% increase on the prior year. Overall, I'm pleased that we've been able to deliver strong growth in profit while keeping prices low in our retail businesses. This reinforces our long-standing commitment to delivering a win-win outcome for customers and shareholders, especially at a time when inflation is persistent. For some businesses, low prices can result in margin erosion. But for businesses such as Bunnings and Kmart, low prices drive sales growth and support operating leverage with earnings growing faster than sales. Turning to Slide 6, which provides some of the divisional highlights for the half. I'll let Anthony talk in more detail to divisional performance, but I wanted to make a few comments. All of our divisions with the exception of Officeworks grew earnings in the half. The strongest earnings growth was delivered, as I said earlier, by our new growth businesses, namely Lithium and Health. And these businesses have made good progress in the last half and are still very much at the early stages of realizing their potential. In Officeworks, the earnings decline was largely a result of costs associated with its business transformation program. These changes are tough to make, and we've shown in the past that we're not afraid to make proactive changes and to take a long-term view to help our businesses realize their potential. We have given the new MD, John Gualtieri, a mandate to make these bold changes. And as one of our most experienced retail leaders, he understands and has driven retail excellence through his roles in Kmart over many years. John can talk in more detail on the program and its strategies to unlock future growth and earnings. Turning to Slide 7. At Wesfarmers, we recognize the alignment between long-term shareholder value and sustainability performance. The group's TRIFR improved year-on-year from 9.9 to 9.6 with Bunnings delivering continued improvement in performance through its multiyear injury prevention program. We contributed $59 million in direct and indirect support to communities across Australia and New Zealand. And it was also really pleasing to see that scope -- group's Scope 1 and 2 market-based emissions fell by more than 27% half-on-half, largely as a result of our retail businesses achieving their 100% renewable energy target in 2025. And this is a significant milestone demonstrating how the group's ambition to build climate resilience aligns with stronger business performance. Now turning to Slide 8. You can see the summarized financial performance of the group. I'll now hand over to Anthony, who can talk to this in more detail and provide more context on balance sheet and cash flow. Anthony Gianotti: Well, thanks, Rob, and hello, everyone. On Slide 10, we've provided details of the sales performance across the group for the half, but I'll speak to both sales and earnings across each of our divisions in a little bit more detail on Slide 11. At a total level, divisional earnings increased 6.8% for the half, supported by strong results in Bunnings, Kmart Group and WesCEF and good momentum in Health. In Bunnings, sales growth of 4% was supported by growth across all product categories, operating regions and in both consumer and commercial segments. Strong consumer sales growth reflected resilient demand for home repair and maintenance, pleasing performance from new and expanded ranges and growth in digital sales. Sales growth across all customer types in the commercial segment reflected the strength of the offer during a period in which residential building activity has remained subdued. During the half, Bunnings completed the rollout of its new warehouse tool shop format now in 283 stores, which continued to support the higher sales in the tools category. Bunnings benefited from productivity improvements enabled by rostering and supply chain initiatives and further investment in technology, supporting reinvestment in price, range and customer experience. Overall, excluding the net impact of property contributions, Bunnings earnings increased 5% to $1.39 billion. Kmart Group delivered earnings of $683 million for the half, an increase of 6.1%. Kmart Group continued to benefit from its strong value credentials and the uniqueness of the Anko product range, delivering growth in customer numbers. Product innovation in Anko's one-up and two-up price tiers generated strong customer demand with home and general merchandise categories performing consistently well over the half. Higher sales growth in Kmart was partially offset by lower sales in Target, which was impacted by more difficult trading conditions in apparel, particularly in seasonal categories and the forced closure of a Target distribution center in Queensland due to a severe weather event, which impacted availability. The earnings result was supported by disciplined pricing and inventory management in a competitive environment and an ongoing focus on productivity, which mitigated cost of doing business pressures and supported margin. WesCEF's earnings increased 18.1% to $209 million, benefiting from a positive contribution from the lithium business for the first time. In Chemicals, earnings were broadly in line with the prior year as lower ammonia earnings were offset by ammonium nitrate, which benefited from strong WA mining demand. In Kleenheat, earnings decreased due to a lower Saudi CP price, while fertilizer earnings benefited from improved margins. In lithium, earnings of $6 million reflected strong operating performance from the mine and concentrator with the plant achieving above nameplate capacity towards the end of the half as well as a more favorable pricing environment. Following the achievement of first product at Covalent's lithium hydroxide refinery, commissioning activity has been pleasing with the refinery producing high-quality product, demonstrating that the underlying process is operating as intended. Production ramp-up has been affected by intermittent odor issues with engineering works to address the issue underway and due to be completed by mid-calendar year. While the ramp-up continues, excess spodumene concentrate is being sold profitably. In Officeworks, sales increased 4.7%, while earnings of $68 million were $19 million below the prior corresponding period, in line with our previous guidance. As Rob has already mentioned, during the half, Officeworks commenced a significant transformation program as it transitions to a low-cost operating model to support low prices for customers and long-term earnings growth. Earnings were impacted by $15 million in one-off costs associated with the program, largely reflecting restructuring activities and ERP-related costs. The balance of the earnings decline on the prior year was largely driven by clearance activity completed to support the introduction of new and expanded product ranges as well as lower sales in the furniture category. In the second half, the transformation program is expected to continue with a further $25 million in one-off costs, reflecting continued restructuring activity and higher ERP spend. Importantly, successful execution of the program will structurally lower the cost base and provide a foundation for improved performance with benefits to positively impact earnings in the 2027 financial year. At Wesfarmers Health, earnings of $38 million included $7 million of amortization expenses. Excluding these expenses and restructuring costs in the prior period, earnings increased 9.8%. Priceline Pharmacy's headline network sales increased 14.4%, supported by network expansion and a strong customer response to key initiatives executed during the half. These included the promotional campaigns, investment in everyday value lines, differentiated skin care and beauty products and an expanded private label range. MediAesthetics delivered profitable growth, supported by an improved operating model following network consolidation and digital health maintained strong momentum driven by growth in instant script services. Wholesale delivered a material improvement in performance, supported by new customer acquisitions, increased volumes from existing customer pharmacy partners and continued demand for weight loss and high-value drug categories. In the supply chain, lower cost per unit were supported by increased automation in the DC network and the delivery of productivity initiatives. In Industrial and Safety, excluding Coregas, revenue increased 1.3% to $869 million, supported by Blackwoods' growing share in a challenging market. Earnings were broadly in line after adjusting for $7 million of restructuring costs in the prior corresponding period, supported by proactive actions taken by both Blackwoods and Workwear Group in the 2025 financial year to reset their operating models and reduce their cost base. Pleasingly, Workwear Group secured new strategic customer commitments in the defense sector with these commitments to commence in the 2027 financial year and expected to support improved financial performance. Turning now to Slide 12. Our other businesses and corporate overheads reported a loss of $71 million which was a $17 million improvement on the prior corresponding period. The key driver of this improvement was upward property revaluations in the BWP Trust and the contribution from BWP increasing from $35 million in the prior corresponding period to $52 million in this half. Group overheads increased by $8 million to $86 million, while other corporate earnings were broadly in line with the prior corresponding period. Other EBIT includes our continued investment in OneDigital, including the OnePass membership program, the group's shared data asset and retail media network. This investment was slightly higher for the half, reflecting the establishment costs for the group's retail media business. As noted previously, the benefits from these investments through incremental sales and earnings are reported through our divisional results. Turning to working capital and cash flow on Slide 13. Our divisional operating cash flows were broadly in line with the prior corresponding period and divisional cash realization remained solid at 103% for the half. The divisional cash flow results reflected disciplined net working capital in WesCEF, which was partially offset by Bunnings' investment in working capital to support the rollout of its new tool shop format and further category expansions. At a group level, operating cash flows decreased 3.3% to just under $2.5 billion, primarily due to higher tax paid. Free cash flows increased 35.6% to $2.75 billion, largely due to the proceeds received from the sale of Coregas and the sale of Wesfarmers 100% interest in BWP Management Limited, which occurred during the half. Moving to capital expenditure on Slide 14. The group invested gross CapEx of $619 million during the half, which was 4.2% higher than the prior period. The increase reflected further investment in new omnichannel supply chain facilities in both Kmart Group and Officeworks, partially offset by reduced spend in WesCEF following the completion of the construction of the Kwinana lithium hydroxide refinery in the 2025 financial year. Net capital expenditure decreased by 44% to $311 million after allowing for the BPI sale proceeds of $274 million. For the 2026 financial year, we're expecting net capital expenditure for the group, excluding BPI sale proceeds of between $1 billion to $1.3 billion. Turning to balance sheet and debt management on Slide 15. Following the capital return to shareholders, which we executed at the end of the half, the group's balance sheet continues to provide significant flexibility and capacity to support investment in growth and productivity initiatives. Net financial debt increased to $4.9 billion following the distribution of $1.3 billion in fully franked ordinary dividends and a further $1.7 billion associated with the capital management initiative. We continue to actively monitor the group's debt mix and manage our exposure to variable interest rates. The average cost of funds for the year decreased from 3.8% to 3.6% and the weighted average debt term to maturity remained at 4.5 years. Other finance costs, including capitalized interest, decreased 14.4% to $83 million for the half. The reduction in finance costs reflected the lower cost of funds and a lower average debt balance throughout the period. Higher net debt as a result of the capital management initiative paid in December will result in higher average net debt and higher finance costs in the second half. While Wesfarmers' debt-to-EBITDA ratio increased from 1.7x to 1.9x, we retained significant headroom against key credit metrics, and we've maintained our strong investment-grade credit ratings with both Standard & Poor's and Moody's. The group retains considerable funding headroom. And at the end of the half, we had available committed unused bank financing facilities of around $1.3 billion. And finally, to shareholder distributions on Slide 16. As we previously noted, the capital management distribution of $1.50 per share was approved during the half and paid in December. This distribution is consistent with our shareholder focus by providing surplus capital back to shareholders in a tax-efficient way and has enabled a more efficient capital structure while still maintaining balance sheet capacity to take advantage of opportunities as they arise. As Rob mentioned, the Board has determined to pay a fully franked interim dividend of $1.02 per share, and this is consistent with our dividend policy, which has regard to available franking credits, our balance sheet position, credit metrics and our cash flow generation. In line with our recent practice, the group does intend to purchase shares on market to satisfy shares issued as part of our dividend investment plan. I'll now hand back to Rob to cover off on outlook. Robert Scott: Thanks, Anthony. So turning to Slide 18. Before we discuss the outlook, I wanted to make 3 points on how the group is well positioned to deliver on our objective. First, our portfolio of high-quality businesses offers a unique combination of growth and resilience. Our retail divisions have broad customer appeal, strong value credentials and a demonstrated capacity to scale. Our globally competitive industrial businesses provide key inputs to strategically important industries. And we're well positioned to benefit from growing demand in the health and lithium sectors. Second, we are accelerating the execution of long-term growth and efficiency opportunities across the group. We're expanding addressable markets, investing in store networks, leveraging omnichannel assets and capabilities and progressing capacity expansion projects in WesCEF. And finally, the strength of our balance sheet supports continued investment across the portfolio and helps us remain agile in responding to risks and opportunities that arise. Turning to Slide 19. I wanted to spend a couple of slides just outlining a bit more how we are looking to accelerate our growth and productivity agenda before turning to the outlook. I think this is particularly important given our aspirations to deliver a top quartile TSR that accelerating our growth opportunities is critical. But also in the current inflationary environment we face in Australia, accelerating productivity benefits has never been more important. Over the last 5 years, many of you have heard us talk about our elevated focus on productivity and many productivity benefits achieved to date have been through digitizing business processes. While this has been successful, new technologies such as generative and agentic AI create an opportunity for us to accelerate our progress. And the great news is that this isn't about reinventing our strategies. It's about executing our existing strategies much faster at a lower cost while delivering better outcomes for our customers and teams. So this slide outlines the areas where we see the most opportunity, areas we talk to you about all the time. And I'm excited about how we can use this to extend our EDLP leadership in our retail divisions to support customers and grow earnings. Since in a world of agentic commerce, value will continue to be a point of differentiation. There are understandable concerns in the community about the implications of new technologies to people's jobs, their data and the service they receive from companies. And we're very mindful of the high levels of trust that the community and our teams have in Wesfarmers and our brands. So our approach will very much be driven by the principle of people-first, digitally-enabled. People first recognizes that it's our team that will lead the changes, and we will always put our teams, customers and other stakeholders at the center of decision-making. We're investing to train all 120,000 team members so they can be part of our journey. Their judgment, teamwork and empathy will continue to be a point of competitive advantage. Importantly, we'll also adopt a responsible approach to AI through data governance. Digitally-enabled acknowledges that the acceleration of our strategies will occur by leveraging investments in technology as well as the strategic partnerships I mentioned. Our approach is very much consistent with the Wesfarmers operating model. Our divisions are responsible for implementation, owning delivery for their customers and teams, and we've already seen great progress across our divisions. And then with the support and access to common technology and tools through OneDigital and our strategic partners, all with the shared objective of delivering satisfactory returns to shareholders. So turning to Slide 20. This slide sets out our current areas of focus and the KPIs and outcomes associated with the areas of focus as we leverage these new technologies. And as you can see, it's all about enhancing customer experience, supporting team member productivity engagement and driving long-term earnings growth. And we've highlighted a few of the opportunities that are already in play across the group. We'll be talking more about this at our Strategy Day, but I just believe it's a very important point to emphasize in the current environment as we look to accelerate our growth and productivity agenda. So now turning to the group outlook on Slide 21. We recognize the impact of inflation and the recent increase in interest rates on households and businesses. In this context, our retail divisions play an important role in the community with their commitment to offering everyday low prices. Their focus and progress driving productivity allows us to deliver market-leading value whilst also delivering returns for shareholders. At a macro level, Australian consumer demand is solid, but cost of living pressures are being felt unevenly and continue to impact many households. Uncertainty regarding the outlook for inflation and interest rates is also affecting consumer and business sentiment and while operating expenses continue to weigh on business confidence and investment. So looking ahead, our retail divisions are very well placed to drive profitable growth supported by strong value credentials, expanding addressable markets and continuing to focus on the customer experience. As I've said, there are many areas within our control to accelerate growth and productivity. For the first 6 weeks of the second half, the group's retail divisions continued to trade well. Bunnings and Officeworks sales growth were broadly in line with the growth experienced in the first half of the financial year, and Kmart Group sales growth was stronger compared to the first half, supported by its ongoing commitment to value. Turning to Lithium and WesCEF. As Anthony mentioned, the Covalent Lithium joint venture's refinery is producing high-quality hydroxide, and we're excited to report positive earnings from our lithium JV for the first time. And the production ramp-up is expected to be extended for the refinery with work underway to address the intermittent odor issues that were mentioned. In the meantime, WesCEF has the flexibility to sell spodumene concentrate in excess of refinery requirements. And based on customer contracts for the majority of our spodumene in the second half, earnings in the second half are expected to be profitable and slightly above the first half. The Health division will continue to build on its strong momentum, focusing on accelerating growth in its consumer business and expanding on recent gains and improvement in wholesale. Across the group, the divisions will maintain their cost discipline and continue driving productivity to mitigate inflationary pressures, which enables us to provide low prices for customers and deliver shareholder returns. And we remain committed to investing to strengthen our businesses and accelerate the growth and productivity agenda I mentioned. So with that, we'll now be very happy to take your questions. Operator: [Operator Instructions] Your first question today comes from Adrian Lemme with Citi. Adrian Lemme: I think the rise in currency at the moment is quite topical. So I was just hoping the key businesses could talk to how these benefits may flow after hedging, how you're looking to balance these benefits to EBIT versus passing them on to customers, given it's still a very competitive environment. Robert Scott: Thanks, Adrian. I might get Aleks and then Mike can add some additional comments. Aleksandra Spaseska: Thanks, Adrian. Obviously, for us, a stronger Australian dollar is always helpful. The one thing to remind us all about, though, is the fact that we have a pretty clear hedging policy in place. So we tend to hedge up to 18 months in advance for our U.S. dollar purchases, which means the spot rate improvements that you see in the market take some time to flow through our P&L. However, clearly, it's better to have that as a deflationary outlook than not. We tend to think about it within the overall mix of our margin profile as well. So it's one factor which impacts amongst other things, like the raw materials inputs and our CODB inflation. And we're always looking at it in the context of our pricing policies as well. So to the extent that it provides opportunities to continue to invest in lower prices for our customers, that's absolutely our priority, and you've already seen us talk about increasing our level of price investment as we head into the second half. We've recently dropped prices on just over 1,000 products across Kmart, which we think is really important in the current environment as customers are really, really focused on value. And we think, particularly in the current interest rate environment, that continues to be really important as part of our overall pricing strategy. Michael Schneider: And Adrian, just to sort of build on what Aleks said, very similar perspective from a Bunnings global sourcing point of view. So that's sort of accounting for around about 30% of our range, but incredibly focused there on entry-level products and commodity products. So the real focus on value is strong, slightly different for our supplier base. And obviously, we just continue to work with them because hedging policies will vary supplier to supplier, but always looking for opportunities to extract value from that to both drive our productivity agenda, but also support our customers. Operator: The next question comes from James Meares with UBS. Shaun Cousins: It's Shaun Cousins here, sorry. Just a question for Aleks just regarding Kmart. Revenue growth slowed from, I think, at the AGM running in line or thereabouts with the second half '25, which was 5%, let's say, the first 17 weeks, and it's down at 3.2% for the half. Just some questions on the back of this. While I don't expect you to break up the sales sort of by week, but did sales grow in the remainder of the half? Or did they fall? And then could you maybe specifically for Target, could you break down the relative impact of that? You've called out apparel and the DC closures. I mean, did Target grow in the -- revenue grow in the first half? Or did it fall? And then regarding Kmart, was growth negatively impacted by competition from peers like Temu and Shein and how did the supply chain handle that? Just Kmart was running at a good rate and the result on a revenue line was stepped down. So just curious around the outcomes and digging into that, please. Aleksandra Spaseska: There's a bit in that. So I'll try and go through each of the individual components. Clearly, Q2 set back for us relative to Q1 and the trading update we provided at the AGM. There's 3 key drivers of that. The first one, which we've talked to is on the 28th of October, we lost the Queensland DC for Target. Now that impacted not just availability within Queensland, but also across the entire East Coast because we were down to one DC in Victoria, really trying to service all of the East Coast. So it really did have quite material impacts on our availability in our key trading period for Target. The second component is we really saw a later start to summer relative to the prior year. And so our performance in seasonal apparel categories was impacted in the second quarter. Target received a disproportionate impact of that just given the nature of the product mix within the Target business. And then the third factor I'd talk to is if we look at that November period, in particular, it was highly promotional from a market perspective. And I'd say we saw kind of longer, deeper discounts running within the market. Now our model is not to participate in that. We're very focused in terms of everyday low prices for our customers throughout. And so while we maintain good pricing disciplines over that November period, that contributed to good profit conversion for our business, but it did impact our sales. So they're probably the 3 impacts in Q2. If I talk to the positive within that, our Kmart performance was good throughout the half. And as we mentioned, we saw a really strong customer demand for our one-up and our two-up categories in particular. So the extreme value that we continue to provide in those price tiers is really resonating strongly with our customers, and that delivered good growth throughout the half and into that key December Christmas period where customers really responded to our value proposition. Our home and general merchandise categories, again, performed consistently well throughout the half. And if you look at our trading update, we've talked about the first 6 weeks of this half, now always cautious to extrapolate from 6 weeks. It's a short trading period. But our trading momentum has improved and apparel has been a key driver of that. Specifically, to answer your question of was Target positive or negative in the half, the DC impact was quite a material one on Target. So if you were to exclude the impact of that, the business was broadly flat year-on-year in terms of sales growth for the half, but the availability issues did mean our sales for Target were below the prior year. Operator: Your next question comes from Michael Simotas with Jefferies. Michael Simotas: Just a question on Bunnings. We've now had about 5 years of average sales growth running around 4%. And that's a period where you had a couple of fairly substantial and successful product or category launches as well as the relaunch of the tools shop. Through the cycle, would you hope to grow sales faster than that? Or is that a reasonable mid-cycle type growth number? And at sales growth of around 4%, is that enough to consistently get some operating leverage through the system? Or does it get difficult maintaining or growing margins with that backdrop? Michael Schneider: Yes. Thanks, Michael, great question. On sales, obviously, we are absolutely committed to growing the top line. And I think that the investments we've made in expanding our addressable market, both from the core. So if you think of categories like tools, but also through adjacent categories and new growth categories, I think that's been a real hallmark of our ability to continue to sort of broadly outperform the market as we see it. The thing to bear in mind is the period that you sort of described has also been very similar from a very flat to challenging commercial environment. And I think our ability to successfully grow commercial sales in that environment is a real credit both to our sort of merchandise and sales teams. And I absolutely believe that as the housing market recovers, we're incredibly well positioned for quite significant growth on the commercial side of our business. And I think it just underscores the incredibly resilient business model that we've developed at Bunnings, that mix of discretionary necessity across both consumer and commercial. On leverage, the short answer is yes. But the longer answer is that it absolutely remains a balance. Fundamentally, we have to earn the right to be chosen by our customers. They deeply, deeply understand value, and there's absolutely no room for any trickery in that as we know. We're doing that through enhancing and expanding our offer. Our teams are buying better through our supplier partners and our global sourcing program continues to ramp up, which is really exciting for us. But we're also investing significantly in price. So in the half just completed, we invested over $120 million into price, which is quite up on about the $108 million, $109 million from the prior corresponding period. So the reason that we can do that, Michael, is because our productivity agenda is really diverse, and it's giving us the opportunity to make those investments and continue to deliver through our productivity agenda to the bottom line. So when we think about that, our store productivity changes, supply chain support centers, which I know Rob touched on, are always -- are all working really well, but there's lots of runway still to come with those. And with technology powering quite a lot of things there, we're really excited by that. But at the end of the day, we remain absolutely focused on our customer. We know we've got to continue to expand addressable markets and come Strategy Day, I think we'll be able to sort of share some quite exciting changes in the way we're thinking about a couple of core categories, but also some new growth categories as well. And I think we've got a really great track record on delivering that over the period. So I'm confident in our long-term growth outlook from a total earnings point of view, but it really does come back to making sure that when it comes to winning the customer, we're well positioned for that because without that, the rest becomes very difficult. Operator: Your next question comes from David Errington. David Errington: Rob, can you -- I think Aleks and Mike have explained beautifully issues in Kmart and Bunnings. I think that's really well covered. Can you describe now what's going on in Officeworks? Can John give us a bit of an overview there? Because I must admit, when you look at JB Hi-Fi's performance and they're really doing very, very well. It looks like Officeworks have been left behind. And now you're trying to get it on a low-cost model, transition to a low-cost model. What's the game plan with Officeworks at the moment? I don't quite understand where you're at, how long it's going to take. And as a bit of a follow-up, these productivity initiatives that you're trying to drive, whether it be in Officeworks or whether it be in your other businesses with all this AI, is that an impediment to earnings? Or is that a tailwind to earnings? I mean when I say as an impediment, the transitions that you're having to do, whether it be in Officeworks or other transitions, I was listening to Mike, I'm just worried that this -- all this new technology that's coming on, you're wearing costs in your businesses rather than enjoying benefits from this transition of new technology. I don't know if you understand the question there, but I'm just wondering is one thing that's holding you back a little bit is you're wearing more costs in transitioning than you're actually benefiting from the new technology coming in. Robert Scott: Sure, David. Well, look, I'll answer the Officeworks question, and then I'll let John talk to it in more detail, and I'll also touch on your question around cost of transition around leveraging these new technologies. So look, coming back to Officeworks, over the last 5 or 6 years, Officeworks has -- it's performed -- I'd say it's performed okay. We've grown our earnings. We've grown -- obviously grown the business. We now have a greater business in the technology category. But the reality is that we see a lot more potential in Officeworks, and there are areas where we felt Officeworks was lagging behind our other market-leading retail businesses. A low-cost operating model is part of it. It's not the only part of it. There are other aspects of merchandising processes, digital engagement, ranging new categories that go to the broader offer, and I'll let John talk to all of that. But look, I want to give John a bit of a leaf pass just for the moment that one of the things that we have shown over the years, David, as you know, is we're not afraid to lean in and make proactive changes where we see an opportunity to step change performance. So I've given John the license to go hard, make the changes that he needs to, not to be overly focused on short-term earnings. So get through what you need to get through this year to really set the team and the business up for the future. So look, John is halfway through that process. He'll talk more about it at the Strategy Day. He can give you a few -- a bit of an update now on how it's progressing. But look, I think this is all about -- and I'll let him talk to relative performances and how he's thinking about technology. But we're making these changes because we see opportunity and potential. The final point -- and look, when we get to the other divisions, we'll be able to talk more specifically to how they are leveraging technology to accelerate their productivity agenda. And I might actually get once John's answered the Officeworks question, I might let Mike just give some practical examples for you. But one of the really exciting things about what's available with new technologies and what's available through our strategic partnerships, David, is that this is -- it's not large CapEx, super large cost of investment to drive the change. We are able to leverage quite cost-effective solutions here. As part of our strategic partnerships, we've been able to negotiate some very competitive terms and rates and also access to investment funding and expertise that's not otherwise available in an Australian context. So look, we'll be able to demonstrate to you how this is flowing through to improvements in the business. We were very deliberate in putting that slide in our pack showing you exactly what the KPIs are that we are working towards because quite frankly, if we cannot see the commercial value of these initiatives or if we cannot see a discernible benefit for our customers, we won't be doing it. So I'll now hand over to John. And then after that, I might let just Mike talk to some of the more practical opportunities on the technology side. John Gualtieri: Thanks, Rob. Thanks, David. Coming into the business with a fresh pair of eyes, I see significant opportunity for the Officeworks business to really realize its growth potential and bring performance up to retail best practice. But in terms -- the opportunities are clear. It's transforming our tech offer and service model, scaling our B2B and education and also strengthening the omnichannel customer experience. For us to unlock these strategies, we really do need to kind of transition to that low-cost operating model, and it's important for 2 reasons. The first is to provide low prices for customers, and they really are looking for low prices at the moment. And the second is to support more substantial earnings growth over the longer term. With the transition, which we've started in half 1, it's got many different elements, but probably the first has been the restructuring activities to reset the cost base, and that's really focused in on simplifying the business. And it's been focused at a above store, replacing an ERP to improve efficiency. Our ERP is over 20 years old. And by replacing that, it does create a whole lot of efficiency moving forward, strengthening the talent and capability, constructing a new automated DC in Queensland, which will actually help with throughput and lower cost of throughput over time, but also improving sourcing and expanding branding as we move forward. So the major work that we did in half 1 was around restructuring of the support office and simplifying. It helps us remain competitive for the long term. The new ERP about the operational efficiency and also the distribution center that I spoke about. I think if I just focus a little bit on I guess, technology and how we're going to compete in technology. We've made good progress on our strategy to transform the tech offer. And there's a whole lot more that we need to do in this space to actually become retail best practice. Today, we roughly -- our sales are made up of around 60% in the category of technology. So we've got a right to play. We see strong growth in the coming years as homes become more connected. Today, there are about 22 connected devices in a home. And over the next 5 years, that's going to double to 44. So there's lots of room for growth. But as I said, the only way that we're going to be able to achieve the results that were required by structurally lowering our cost base to actually be able to deliver, I guess, it's a more sustainable model, but also lower prices to our customers. Robert Scott: Sorry, David, just to give you the opportunity to follow up if you had any clarification questions for John before I hand over to Mike. David Errington: No, it just seems like it's the starting of a journey. That's probably the only clarification. It's a journey that you're committed to it, and it might be just you're going through this period where you just have to reinvest back into the business. That's what I thought it was answered it excellently, but it just looks like it's a journey rather than a one-off. That would be my only clarification. Robert Scott: Look, I think that's right, David. And I think just the point I'd mention from a portfolio point of view is we definitely share John's optimism about the opportunity here. We do see -- this is a business across technology, office products, education, arts and crafts. It's a very broad market, and we really want to go after this with some intent, and we want it to be a best practice operator. So look, time will tell, but we'll be able to -- you'll be able to track the performance in the coming halves. I might hand over to Mike just to get to the practical issues to your question around AI and so forth. Michael Schneider: Thanks, Rob. David, I think as Rob said, there's not -- they're not insignificant costs, but they're not huge costs when we start to think about the transition to AI deployment. And really, from a Bunnings point of view, that's largely built on what's getting to close to a decade of really high-quality disciplined work to develop the architecture, the tools, the systems, the process and the training to be able to accelerate the things we want to do. And we've moved beyond AI experimentation into scale deployment right across the enterprise now. And that approach combines a traditional -- combines traditional AI, so machine learning, generative AI, agentic AI workflow and low-code automation. And all of that continues to drive our really deep productivity focus. And to the sort of response I gave Michael earlier, it's giving us a lot of confidence around how we can continue to drive productivity and obviously, leverage. We've got team member productivity tools like our AI price markdown tool, which has now been integrated into internal apps. That saved our team around about 100,000 hours of duplicated team effort, helping to simplify what we do in stores and allow our team to focus more on serving their customers. Our team chat bot is live across our store network. In the half just finished, it's answered close to 100,000 questions, reducing team time for looking for policies and procedures and the like. In our support function, we've got 620 or so live agents and 95% active Copilot usage across support functions. So Rob touched on this focus on training earlier. We're really committed to that. You'll have seen no doubt in our Bunnings app, the Bunnings Ask AI, which is allowing customers to have conversations with our app, and that's helping to drive the really strong lift that we've seen in our online performance in the first half. We're trialing some things in AI for our trade customers, and we'll share that at Strategy Day. And I think if you sort of thought 10 years ago, Bunnings was sort of the slow learner in the digital space. We're right at the forefront now of launching with Google, our AI platform, Gemini Enterprise for customer experience, which will really allow us to play in the agentic commerce space and really be one of the first retailers in Australia to be able to do that. So I think you can sort of see the leapfrogging work that's there, but they're very practical tangible examples, and we'll be driving that really hard in the years ahead. David Errington: Well, thank you all for your answers. They're really, really impressive, and it's great to see a company really driving for the longer term rather than just trying to meet short-term earnings hurdle. So thank you all for your answers. Excellent. Operator: Your next question comes from Bryan Raymond at JPMorgan. Bryan Raymond: I want to check on Bunnings as well. Just trying to understand the shape of the sales growth. And I think Michael mentioned earlier about the tool shop, and there was a -- obviously, that's a meaningful change within the stores. I'm just looking at your bricks-and-mortar growth at about 2.6% in the half. I'd be interested in terms of the phasing that you saw from the tool shop in the PCP. I recall it was about 49 stores completed in 1H '25. I think that might have been towards the back end of the half, but I'm not sure. I'd just be interested if you strip that out, what growth would look like because you're about to start cycling it. And I do look at that as probably one of the more meaningful improvements you've seen from a bricks-and-mortar perspective in the Bunnings stores for some time. So yes, I'm not sure if you can shed any light on that dynamic. Michael Schneider: It's a good question, Bryan. Like I think it's certainly going to play an important role for us, and I think it demonstrates to our team, to our customers, to our suppliers that we can really innovate within existing space and space productivity and stock turn in there has been great. The partners that have had the confidence to really back us like Makita and Stanley Black & Decker have reaped really significant benefits, and it's really given us credibility with the trade as well. I think the pro customer is really responding very strongly to that. I think there's going to be still some time to sort of understand what it looks like on an annualized basis. But I'd actually sort of reflect on the fact that if you looked at our barbecue outdoor leisure category this season, it was really strong. Our festive performance was really strong. Our automotive launch has been really pleasing. We're gearing up for Round 2.0, which will launch from around about March with some great new brands coming online. So I do think it's a bit of a full court press across the warehouse, but noting, as I made in my comments to Michael earlier, the continued challenge of commercial. It's continuing to grow, but it is softer. And we're really anticipating some great opportunities as the housing market recovers. Bryan Raymond: Okay. Just as a quick follow-up on that. Is the tool shop continuing to grow? Like where you did some of those earlier ones, are they continuing to penetrate as trades or those that are sort of after that more premium experience from a tool perspective. Are they -- is there still growth underlying coming through? Or is it a step change and then you to cycle over it and then that growth kind of goes once we get to, say, 2H '26? Michael Schneider: I don't think that's going to be the case, Bryan. I think we've not only seen power tool growth. We've seen tool accessories and those sorts of things grow because as we -- I think as I touched on it at Strategy Day last year, we took out automotive from the tool shop. That gave us the opportunity to introduce over 1,000 new SKUs in there. And our merchandising team never stands still. They're always focused on new products, new categories. We'll have a couple of really interesting things to talk about in terms of brand and expansion cum Strategy Day. So constant renewal and evolution, particularly in our core categories is a really sort of deeply ingrained disciplined at Bunnings. Operator: Your next question comes from Tom Kierath at Barrenjoey. Thomas Kierath: Just a couple of questions on the Health division. Firstly, just the 14.4% growth, is that mostly comp growth? And then second, can you maybe just help us understand what's driving that? Obviously, GLP-1s are a popular one, but maybe growth outside of that particular category, please? Emily Amos: Yes. Sure, Tom. Thanks for the question. So that 14.4% is the Priceline headline sales number. We don't -- we haven't traditionally released our like-for-like sales growth. But what you can assume is it's a couple of points behind that. So we're really pleased with the growth of Priceline in the half, really driven by a couple of things. The investment we've been making in the overall value proposition and I would say, some very strong execution of key promotional activity and the introduction of expanded and new ranges. So we've benefited from network growth. We've also benefited from strong performance from refurbishments. We've invested over the period in value. So that's everything from price reductions to enhancing benefits for our members in loyalty program, an expanded private label offer. So this ongoing investment that we've been making in our value proposition is really starting to resonate. I think the thing to note in that number is we're a full-service community pharmacy. So it's not just for example, the beauty range that's performing well, it's health and beauty are growing kind of in equal amounts. And one of the ways that we've really been differentiating ourselves is this investment in health. So everything from products to a very significant investment into women's health with a menopause campaign. That's resonated really strongly not only with our customers, but also with our franchise partners. So every part of the shop, if you like, from the dispensary to the health category to the beauty category is in growth. From a dispensary point of view, whether it's in Priceline or wholesale, weight loss drugs are definitely driving growth. But if your question is, is all the growth as a result of weight loss, it's not. In the wholesale business, weight loss drugs are definitely in growth, and they're definitely contributing positively right across the industry. But when you look at medicines, a couple of years ago, we had strong growth in COVID antivirals. We're now seeing these weight loss drugs start -- more than compensate for the loss of that. So I think the nature of drugs is that new drugs come in and other ones go off -- sort of roll off, but they're clearly here to stay, and they definitely are driving some headline growth right across the industry. Thomas Kierath: Can I also ask on Infinity and just how I guess, confident you are that you'll retain those stores in the Priceline network? Emily Amos: I think -- look, it's really hard to speculate on what's going to happen. We've worked really for a really long time with the Infinity Group, to help them get themselves back into a better financial position. But at the end of the day, they took on sort of too much debt, and we really lost trust in their ability to resolve the issue. So there's a really transparent process being run by the administrators. The important thing to note is that the stores are trading, they continue to trade and our franchise agreements remain on foot. You can see from the results today that Priceline Pharmacy and the brand is really resonating with franchise partners and we're comfortable kind of with our overall position, but we're not going to sort of speculate on what's going to happen because we're just sort of midway through a process at the moment. Operator: Your next question comes from Caleb Wheatley at Macquarie. Caleb Wheatley: I have another question on Kmart Group, and I appreciate some of the shorter-term commentary a bit earlier. But just wanted to come back to some of those key categories you called out at the Strategy Day last year and how you're sort of feeling about the opportunity there and the product development has happened over the last few months, particularly kind of the apparel, general merchant home and living were called out as some fairly meaningful opportunities. So yes, any updated thoughts or how you feel you're tracking towards taking a greater share in those categories would be great, please. Aleksandra Spaseska: Yes. Thanks for the question, Caleb. Look, I think if I look at our results through the half, what it has done for us is it's reinforced just the strength of the Anko product development capability, and we continue to be able to leverage that to extend our ranges in existing categories to enter new categories as well as to continue to deliver really extreme value for our customers, as I mentioned, at those one-up and two-up price tiers, which we're seeing really strong demand for. The strategic categories that we've been talking about in terms of whether it's youth apparel, cleaning, furniture, kid, we continue to see really strong growth within those over the half. And I think that reinforces our confidence around our ability to continue to grow the addressable market as we move forward. I think the thing I'd add to that is we still see quite considerable opportunity to continue to grow our share of wallet with our customers as well within the existing product ranges. So one of the things that we talk about historically is our ability to drive cross-shop across key departments and we know that our average customer shops far fewer departments than our best customers do. What I've been really encouraged by is the performance that we've seen out of our Plan C+ stores, where we're seeing really good items per basket and transaction growth, and this is really being driven by a high level of cross-shop within the store. So I'm confident that through the store investments we're making, we're finding ways to unlock the opportunity for customers to explore more of our range. Online is another one. It's a really big part of our strategy. We know our online market share is considerably below our total market share across all of the categories that we participate in. We're seeing good growth. We're investing quite heavily to improve the customer experience. We've still got a way to go on that, whether it's through fulfillment or just our digital experience. But our customers are responding well. We continue to grow the number of omnichannel customers we have. And what we do see is when customers interact through one of our digital channels and in particular, with our app, the in-store sales growth increases subsequent to that. So again, customer share of wallet through our digital strategy is really key for us. And then the last one I'd mention would be our marketplace, which saw us also launch Target on kmart.com.au. Very early days, but we're pleased by the early performance of that. It's allowing us to further extend our addressable market into branded product categories where brands are important, but it's also actually seeing customer acquisition continue to be driven by that. It's been quite interesting to see the performance of Target on Kmart, where we've been able to see a large proportion of the customers that are shopping Target on Kmart are new to the Target brand, and they are now shopping the Target brand more frequently than they were before. So across a number of our strategies, we're very focused on growing our addressable market in totality through our product development capability in Anko, but secondly, continuing to grow our share of wallet within the existing product categories that we participate in as well. So I hope that covers your question. Operator: Your next question comes from Craig Woolford at MST Marquee. Craig Woolford: I just wanted to explore the topic of operating leverage essentially, particularly as it relates to Bunnings and the Health division. With Bunnings, the EBITDA margin, excluding property, was down slightly. You talked about that price investment, which I've calculated about 17 basis points. Are there any other margin headwinds we should be cognizant of in that Bunnings business? And the question for Health is fairly similar. Ultimately, you had 8.4% sales growth, 9.8% EBT growth adjusted for the amortization and restructuring. It's a little surprising there wasn't stronger leverage in that business, too. Michael Schneider: Craig, it's Mike. I'll kick off and then hand to Emily. But as I said to Michael earlier, we've got an array of tools and sort of hopefully, what you heard in my answer to David was similarly on the AI front, there's an enormous range of things now going starting to drive productivity. And we see, particularly in the work that we're doing in supply chain, some significant productivity improvements right through the supply chain from inbound supply chain in the way we flow stock to stores and freeing up labor and making it safer and more productive for our team through to outbound with our investment in rapid fulfillment centers and the work we're doing with delivery partners. On a sort of a margin front, we continue to work hard to identify the products across our network that make more sense for Bunnings to be sourcing directly, and we're doing that in partnership with suppliers where we're really relying on them to drive innovation and brand and work with us on the more technical products building materials and consumer goods. So that's sort of giving us some opportunities to buy better and improve margin as we go forward. But there's this arbitrage between making sure that we're really present for the customer. And I think you've heard both Aleks and I refer to the importance of value in all of this. But we've got to have the productivity agenda right to be able to have that optionality. We've got to be able to win the customer, and we've got to be able to reward our shareholders. Absolutely, both stakeholders are critically important and being able to do that over the long term, I think, is what's really important. And we're doing that in what remains a pretty uneven and challenging market, particularly on the commercial side. So I think as commercial continues to come back, our opportunity to really sort of drive top line performance and flow more of that to the bottom line is going to be there. And we're really excited by the productivity initiatives that we have underway. So our confidence and our conviction is very high on not only what we've got in front of us, but our ability to execute that and deliver for those key stakeholders. Sorry, Craig. Craig Woolford: Is there any -- there must have been some other cost headwind that you may want to call out given lots of positives you talked about there, but ultimately, there was margin improvement and you've given us a 17 basis point price investment with some other [indiscernible] on costs that impacted the first half. Anthony Gianotti: Yes. Craig, I'm a bit confused. I guess the EBIT margin, excluding property, actually lifted for the half and we actually had better leverage. So I'm not sure what was your question in relation to reduced leverage? Craig Woolford: Yes, I've got the EBITDA margin roughly flat, but maybe I'll... Anthony Gianotti: Yes, I guess we're focused on EBT margin because, I guess, bearing in mind that with the accounting standard and leases, you need to look at the interest component, which is only in relation to leased assets. and the right-of-use assets. So overall, excluding property, we actually saw leverage improve. So 5% growth in EBT. EBT margin actually grew from 12.9% to 13%. Emily Amos: Craig, it's Emily here. Thanks for the question. I think if you go back to our strategy, we're really focused on moving our business into higher margin, less capital-intensive parts of the business, really focusing on our growth in consumer. If you look at our results and just look at the one-offs that we had last year, it was actually a 21% profit uplift. And I think what that is showing is that we are starting to see some operating leverage come through. We've always been pretty clear that this is a multiyear transformation journey, and we have been investing in our supply chain. And we've got a new warehouse opening shortly. We've just opened a new warehouse in Cairns and another one opening in Adelaide. What's been pleasing in this half, certainly from our wholesale business is we've really started to see the benefits of the automation investments come through. So we're getting good top line sales growth. We're improving our service delivery to customers, and we're actually lowering our cost to serve, and that is really coming through in that kind of core part of our business. And that's really important over the coming years to deliver this continuing sort of operating leverage as well. So that's going to be a key enabler. But we're midway through, if you like, the deployment and those benefits will kind of roll out over the coming years. Operator: Your next question comes from Richard Barwick at CLSA. Richard Barwick: I've got a question for Aleks just on Anko. Just note the bottom of the outlook slide, you're talking about a review of the global expansion strategy and very focused on branded stores. So there's a couple of questions sort of caught up in that. Are you thinking more JV stores like you're doing in the Philippines? Would you entertain going 100% owned? And what does this mean for the existing sort of wholesaling approach you have been up to is that being abandoned? Or is it just saying that you're considering both the priorities on the retail? Aleksandra Spaseska: Yes. Thanks, Richard. There's a bit in that, so I'll try and answer the different components. I think if I go back to when we started, we started with 3 models to really test the Anko Global strategy. We had white-label partnerships. We had wholesaling to retailers. And of course, we had our direct-to-consumer business through our Anko-branded stores in the Philippines. I think what we have now is a period of operating history across each of those 3 that's allowed us to sit back and really assess as we look forward, where do we see the most material opportunity for sales and earnings growth and where do we see a clear path towards being able to generate an acceptable return on capital on our investment. And what we've concluded from that is really out of the 3, we think that Anko-branded stores are where we see the greatest sales and earnings opportunity in the future. That doesn't mean abandoning the wholesale piece entirely. We're very focused on continuing to support our retail partners, and we've got some good partnerships in place. But in terms of where we want to really focus our capital and our energy for the Anko global strategy, that's really around the stores. In terms of the stores specifically, we've got 5 trading now in the Philippines. That's through a joint venture arrangement. And one of the 5 has now cycled 1 year since it opened. I guess why are we encouraged by the performance of that business model is 2 things. One is the sales per square meter that we've been able to deliver has been in line with our expectations, and it reflects a really good customer response in the local market. And then the second part is for the store where we have cycled 12 months since opening, we're seeing good comparable sales growth, which gives us confidence around the ability to continue to improve sales density. It is a completely new format for us. So we've still got a lot to learn in terms of how we optimize the operating model, and that's really what we're focused on over the next 12 months to gain even further confidence around future investment and what the path to an acceptable return on capital look like. But I think an encouraging start. In terms of how to think about it is we're very much focused on being measured in our investment approach, and we will be led by the evidence and the trading performance. We'd like to be in a position in the next 12 months where we look to open another 5 stores in the Philippines, and then that will give us additional trading information to inform any future investment plans. In terms of more broadly beyond the Philippines, I think if we can really prove out our model here and have an operating model and a format that's generating good returns, then the opportunity more broadly across Southeast Asia is one that we would look to evaluate over the longer term, whether that's through wholly owned stores or JV partnerships, I think, would be dependent on the specific markets that we look at. But for the time being, we're very much focused on making the Philippines a success. Operator: Your next question comes from Ben Gilbert at Jarden. Ben Gilbert: I appreciate the detail you guys are giving on the call, so it's pretty helpful. But maybe just one for you, Emily. Just interested in your comments just around the performance of Priceline and that acceleration that you've seen through the half. Do you think that you're seeing market growth is strengthening? Or do you think you're taking some share in market? Because there's been some discussion around when we're going to start cycling through GLP-1, for instance, when are we going to get to that point where the comps get more challenging. Just interested in maybe first one, how you're seeing the market? Do you think you're taking share at a faster rate? Or do you think the market has held or accelerated through the half? Emily Amos: Thanks, Ben. I think your question on the market, look, the health -- the pharmacy market, I think, is in growth. I think the whole category and sector is in growth in general. It really is a reflection of the aging population and the complete consumer trend that really is focused on health and well-being. So I think there's really good underlying macro trends in health. I think definitely, weight loss is really boosting script volume, but our businesses are not just scripts, they're front of store. So I think the growth that we've got, I think, is definitely through the investment in the front of store category. I think the market data is sometimes hard to see. I think we're growing at least in line or probably slightly ahead in certain categories would be our view. And your specific question on weight loss, like there's no question that it's in double-digit growth year-on-year from a drug perspective. I think the demand will continue to grow as the effects really play out on people's health in the broader community. I don't quite know. I'm sure no one does. It will slow down at some point as we cycle it. But as a category, I think it will continue to be a strong contributor overall. Ben Gilbert: Just your opportunity to get more stores into your network, either under the Priceline banner or through just leaning in through to bring them across. I appreciate there's a bunch of stores probably coming available over the next 12, 18 months from some of your competitors. How competitive is that process? Have you got any ambitions around store growth targets in terms of the network that you're supplying to? Emily Amos: Yes, sure. I think we definitely have an ambitious store network growth pipeline. I think it is always really competitive. The pharmacy market really relies on switching. So you've got to convince someone to join your brand. What we've been doing is really investing in our brand. And our results, I think, are really -- the investments we've made are really paying off because our customers and franchise partners are really pleased and seeing the growth. So it's a dual answer. We've been investing in the proposition and making sure that we've got a model that really works for franchise partners. And then while it is competitive, we're pretty confident that we're going to be able to continue to expand the network. Operator: Your next question comes from Phil Kimber at E&P Capital. Phillip Kimber: I just want to ask a question about the Covalent business and in particular, the lithium hydroxide plant. You called out having a few issues that you're working through and the ramp-up will be slow. We've seen one of the other players sort of step away from the market. Longer term, I mean how are you thinking about this project and the ability to be competitive in the global market sitting in Australia in the lithium hydroxide plant? Aaron Hood: Thanks, Phil, for the question. I think you just got to, first of all, step back and look at the original investment thesis, which was obviously to produce a vertically integrated project. So first phase was to obviously get the mine and concentrator built and get that to nameplate capacity. We've been going at that for just over 2 years now since we opened the mine and shown a very consistent performance improvement over that period where we're now consistently month in, month out, starting to hit nameplate capacity for that plant. And I think we need to acknowledge that for the team out there on site that once you start doing that, you're starting to fractionalize all of the costs on the spodumene side, and we're starting to narrow the gap with the more mature hard rock spodumene producers here in Western Australia. So Mt Holland is starting to come into where it should be as a globally competitive hard rock producer just given the size and grade of the deposit. We obviously then came into completing construction of the refinery and really commenced that a similar kind of ramp-up and commissioning pathway for that plant, which has actually shown really promising signs, and we can compare -- we often get compared to the other West Australian refineries. I think the early signs for our project have been really positive in producing battery-grade product, which we announced we'd commenced that in August last year. Wesfarmers and our joint venture party, SQM have actually now sold hydroxide into the market just to further prove that it was battery grade product. We were pleased with the pricing we achieved on those tonnes. We do have a short-term issue that we're working through that Rob touched on, on the [indiscernible] side of things. We're confident we've got an engineering solution that we can put in place there by the middle of the year. And then really, that allows us to recommence and get back on that ramp-up pathway. Between now and that period, we are constrained in how much spodumene we're going to be able to feed the refinery. I think by the May Strategy Day, we'll be able to give a good update on how that engineering solution is going and be more definitive on the timing. But the good news is because of that performance back at the mine site and getting the cost down and really by then, we'll be running at nameplate capacity much more consistently. Any tonnes that we won't be feeding the refinery, we'll be able to make good money in the market at these current prices, obviously, if they hold. Phillip Kimber: Yes. Can I ask just a follow-up on the -- I think there's a bullet point there saying costs incurred during the ramp-up will continue to be capitalized until commercial production is achieved. So does that effectively take some what otherwise costs would have been in the second half, which you're now saying will be slightly more profitable than the 6 in the first half and sort of push them into '27. So is that part of the reason why you're profitable in the second half? Or is it more around the pricing environment, which is way better now? Aaron Hood: So it's a couple of factors. So the capitalization piece, we'd always assume that the refinery was going to still be in a ramp-up path for the second half. So there's currently no change to capitalization approach there. That's well defined on when the refinery has to ultimately be producing at a commercial scale before that will flip over into expensing. The real driver, to be honest, for the profit improvement has been 2 things. One, the mine consistently hitting nameplate capacity, lowering costs. We've been happy with that and the rising price environment. Operator: Your next question comes from Scott Ryall at Rimor Equity Research. Scott Ryall: I'd like to just a follow-up to that. So you've answered the first half of it. So I'm just wondering, just can you give us an update on when you believe you will start capitalizing and when ramp-up is done, please? Anthony Gianotti: Scott, yes, it's Anthony here. I think it will depend largely on what the ramp-up profile looks like. As Aaron said, we need to get to a stage where the refinery is operating commercially. And at that point, we will start obviously expensing. But as Aaron said, I think you can assume for the rest of this financial year that we will continue to capitalize costs. As Aaron said, we'll give you an update at the Strategy Briefing Day on where we're at in relation to the solution around the odor issue, and that will give us a better line of sight around the ramp-up profile of the refinery and then what impact that might have on our capitalization or not. Scott Ryall: And are you thinking when you operate commercially, is that the way you're thinking about it, is that a proportion of nameplate capacity or something like that? Anthony Gianotti: Yes, it would be getting towards nameplate capacity. I'm not saying we would wait until we got to nameplate capacity. But certainly, we need to be on that path. And I think given the sort of extension because of the odor issue, then that's why I think you can assume for this financial year, we'll be -- continue to capitalize those costs. Operator: Your next question comes from Shaun Cousins at UBS. Shaun Cousins: Just further regarding Officeworks maybe for John. You were early in your tenure when you called out the $15 million to $25 million of costs. There's now an extra $25 million of one-off costs. Will there be any one-off costs in '27? Or is -- or will all of that be sort of quarantined to '26? And just more generally, how will you go about building the reputation of Officeworks as leading technology, particularly what do you need to do to get access to better brands? I mean that you don't have the best brands in technology, you don't have a store format or a team that know how to sell or a brand that's known for selling latest technology if we were to compare you, say, to JB Hi-Fi. I'm just curious about what you need to do? And have you got enough cost savings to fund that investment? Because it looks quite a significant challenge to improve your credentials with customers in that broader technology and television space as well, please? John Gualtieri: Yes. Thanks, Shaun. What I might do is just break up the costs, I think, for this year and how they translate first half, second half and how they'll land in '27 and onwards. So I think if you take in half 1, we had $15 million in restructuring costs, partially driven by the ERP and the simplification of our structures. As we move into half 2, we go into a larger -- there's higher ERP costs due to the phasing of the program, and there's additional restructuring costs also. So the FY '26 year is a transitional year with the benefits starting to flow in FY '27 and more material thereafter. Now some of the benefits from the actions that we've taken this year, they're going to be partially offset for some of the ongoing transformation-related costs next year related to the new Queensland DC and the ongoing ERP costs. Hope that gives you a flavor of those costs. Then as we think about -- there's quite a lot to do. And come to Strategy Day, I'll be able to kind of talk to you a little bit more detail on all the different elements. But we do today have over 60% of our sales are made up of technology. So I think we've got a right to play in technology. And we do have quite a few large technology brands that our teams sell to customers, including Apple, you've got Samsung, Sony, and there's quite a few as you kind of go through. The work that we're undertaking at the moment is how do we actually service the customers that come into store with our ability to sell product to those team members. And that's through both, I guess, team members, but also through the use of technology. And that's the work that we've currently got under play with our teams. And with the restructuring and moving to a low cost, it gives us a lot more opportunity to explore different ways to service those customers. Shaun Cousins: Does that involve sort of incentive selling into the commission-based selling that you need to do where they get part of it where your team members get part of the economics? And do you have the team at the moment to actually sell those products? Or do you need to train and/or bring in new sales team -- people on the floor? John Gualtieri: Yes. Shaun, I will go into more detail at the strategy update on -- particularly around the incentive and the sell. There's different things that we are looking. But we have brought in 100 new team members, which we did talk about at the last Strategy Day, and they're in our stores currently. And we can see through the investment in training that they are delivering a higher sales than what would be with traditional sales assistance. So the investment is paying off. Robert Scott: Shaun, Rob here. In addition to John's comments about the opportunities that he's facing into at the moment, I think it's important just to step back and realize that Officeworks has driven quite remarkable growth in technology over the last decade. So I don't think there's any questions that customers are comfortable buying technology in Officeworks. What John is flagging is that we see many opportunities to do more, many opportunities to improve our range, improve the service proposition. But I don't think there's any question that Officeworks has arrived and has indeed been quite successful in selling technology products over the last decade. But obviously, a lot of work ahead. Operator: There are no further questions at this time. Robert Scott: Okay. Thank you, everyone, for your time. And if you have any other follow-up questions, please call Dan and the team, and we'd be happy to help. Good afternoon. Operator: That does conclude our conference for today. Thank you all for participating. You may now disconnect.
Operator: Thank you for standing by, and welcome to the Insmed Incorporated Fourth Quarter and Full Year 2025 Financial Results Conference Call. All lines have been placed on mute to prevent any If you would like to withdraw your question, again, press 1. Thank you. I would now like to turn the call over to Bryan Dunn, Head of Investor Relations. You may begin. Thank you, Rob. Day, everyone, and welcome to today's conference call to discuss Insmed Incorporated's fourth quarter and full year 2025 financial results and provide an update on our business. Before we start, please note that today's call will include forward looking statements. Statements represent our judgment as of today and inherently involve risks and uncertainties that may cause actual results to differ materially from the projections discussed. Please refer to our filings with the Securities and Exchange Commission for more information. Information we will discuss on today's call is meant for the benefit of the investment community. It is not intended for promotional purposes, and it is not sufficient for prescribing decisions. Today's call will feature prepared comments by William H. Lewis, Chair and Chief Executive Officer and Sara M. Bonstein, Chief Financial Officer. After their comments, they will be joined by Martina Flammer, Chief Medical Officer, for the Q&A session. I will now turn the call over to William H. Lewis. Thank you, Bryan. Good morning, everyone, and thank you for joining us. William H. Lewis: 2025 was an exceptional year for Insmed Incorporated. Defined by extraordinary execution and transformative impact. Commercially, we witnessed the approval of Brinsupri and its stunning early months of launch performance. As well as the continued global performance of ARIKAYCE. Which showed significant acceleration from commercial efforts in Europe and especially Japan. Clinically, we saw best in class performance from TPIP entered two new gene therapies into the clinic for DMD and ALS, and completed the acquisition of INS 1148. These accomplishments represent a significant expansion of our clinical pipeline despite the discontinuation of CRS without nasal polyps program last quarter. We entered 2026 with momentum that positions Insmed Incorporated for sustained leadership in both bronchiectasis and NTM. In the year ahead, we intend to accelerate and expand The US launch of brinsupri while continuing to grow ARIKAYCE. Rarely does a company have the opportunity to own an entire disease category by virtue of having the first approved medicine in a disease with no competition on the immediate horizon. Insmed Incorporated enjoys two such opportunities in bronchiectasis and NTM both of which also share a similar call point among pulmonologists. To the strong foundation, we intend to pursue other first or best in class therapies within our three target therapeutic areas, which include respiratory, inflammation, and immunology, and neurology and other rare diseases. Today, we are pleased to announce revenue guidance for brinsupri of at least $1,000,000,000 in 2026. Are confident providing this guidance earlier than expected due to the additional visibility we have gained into the market access environment and the early performance we have seen from Brinsupri so far this year. To our knowledge, only 15 drug launches in history been able to surpass the billion dollar mark in their second through fifth full quarters of launch And every company that has achieved that milestone has gone on to reach a market valuation of $70,000,000,000 or more. Coupled with another expected strong year of performance from ARIKAYCE, we anticipate total company revenue in 2026 to be more than double the revenue we produced in 2025. This guidance gives us confidence that we can achieve cash flow positivity without needing to raise additional capital. However, we may choose to source capital as necessary to support new business development internal programs, or other potentially value creating initiatives. We are currently evaluating several such opportunities and will continue to do so as we prudently seek to expand our pipeline. Let us now dive deeper into Brin Supri. In 2025, The US launch of Brinsupri surpassed even our most ambitious expectations. Pre launch, we set a very high bar for what we believe brinsupri could achieve using a basket of historically strong respiratory launches as our guide. With a $144,600,000 in net revenue in its first full quarter, I am proud to say that Brinsupri is exceeding that bar. And let me be clear, the launch continues to go well and the team continues to execute at a very high level. As with many successful medicines, the shape of the launch from one month to another can be inherently variable. But the overall trajectory for this launch is strongly up into the right. And we believe Brin Supri has the potential to be among the best if not the best, specialty respiratory launch ever. Let me now take a moment to illustrate where we expect the brinsubri opportunity to evolve over time. In these early months of the launch, we see brinsupri establishing itself at the forefront of treating bronchiectasis with no competition for several years. We had previously framed out a peak sales estimate above $5,000,000,000 for this indication and everything we have seen so far from this launch has only added to our conviction that the opportunity is at least that large. I wanna emphasize this point. We believe there may be much more. Let us get specific. We previously defined the total addressable market in The US based on brinsupri's label as five hundred thousand currently diagnosed patients with non CF bronchiectasis. Within that diagnosed population, we estimate that approximately half or hundred and fifty thousand patients have had two or more exacerbations in the last twelve months matching the profile of the patients who participated in our clinical trials. Based on those figures, the roughly eleven thousand five hundred and fifty new patients who have started treatment with brinsupri in 2025 represent less than five percent of that patient population. So there remains an enormous amount of runway within that initial total addressable market. And as a reminder, the greater than $5,000,000,000 peak sales estimate was based on us successfully addressing these two hundred and fifty thousand patients only. In addition, we believe that over time, more of the remaining two hundred and fifty thousand currently diagnosed patients with less than two exacerbations will start to move into the category of those who have had two or more exacerbations in a twelve month period. This is due to the progressive nature of the disease and better patient reporting and documentation of exacerbation events now that there is an available treatment. This belief is supported by real world data. In the two year study of claims data for nearly fifteen thousand patients with bronchiectasis, about forty seven percent had two or more exacerbations in the first year of follow-up. Then in the second year, another nine percent joined that group. Meaning that fifty six percent of study patients had two or more exacerbations in either the first or second year. Based on that study, it is our expectation that patients will continue to move into the two plus category over time, and this would represent upside to our peak sales estimates. Now I can leave you with one item to focus on, it is this. There are thirty two million diagnosed patients with COPD or asthma in The US. We believe that many of those patients could have undiagnosed bronchiectasis and as a result, may continue to exacerbate despite treatment with standard care for those diagnoses. I would encourage you to consider and assess this potential for yourself. Recognizing the size of that opportunity, we are turning our attention to outreach and education to physicians in the hopes that they can assess these patients for the presence of bronchiectasis. The potential additional patients from these populations which would be on label for brinsupri if they are confirmed to have bronchiectasis, dwarfs the initial total addressable market we have just been discussing. Are currently working on a number of different programs to advance the exploration and quantification of these patients. This effort will be supported by evidence generation in several large respiratory centers who intend to use retrospective data to identify bronchiectasis in patients diagnosed with COPD and asthma who are still exacerbating. We are also creating dedicated teams within our medical and commercial operations to identify these potential patients given the substantial populations they represent. As many of you know, historical medical literature on this topic provides a wide range of estimates. But a more recent publication that looks specifically at the overlap between COPD, asthma, and bronchiectasis suggests that bronchiectasis could be involved in thirty to over fifty percent of patients with moderate to severe COPD and in twenty five to forty percent of patients with severe asthma. These patients may not have received attention or been identified in the past, because until Brinsupri came along, there had been no medicine that physicians could turn to upon diagnosis. As we are able to identify patients that may benefit for Inbrinsa supra from within this broader population, we have a chance to help physicians physicians deliver what we believe could be a game changing medicine for the benefit of their patients. It is an enormous opportunity to serve patients and it will take several years to more fully manifest, but it has the potential to expand for in super impact by orders of magnitude. This is something we are actively working on and will continue to monitor but it is our belief that we could begin to see these patients as early as the end of this year within the pulmonary practices we already call on, and more evidently, in 2027 and beyond. Let me now take a step back and describe what we are seeing within the launch to date. Today, we are still in what I would call the exploration stage of the launch. This is a new medicine, and as is customary, physicians often wanna try it out on a patient or two to see how it works. Assess safety, and then determine how much more broadly they intend to prescribe. For example, of the 4,000 physicians who have written a prescription through the 2025, nearly half have prescribed burnsupri to just a single patient. As those first patients return to their pulmonologist and share their experience with the treatment early this year, this should play an outsized role in their physician's interest and willingness to write again. Today, we have heard very positive feedback through our interactions with physicians, and directly from patients through our support services, as well as through the patient experiences that have been shared in public forums or on social media. It can often take several months for patients to return to their physician's offices to be able to convey these experiences, but this positive early feedback suggests that the knock on effect of these experiences should start to result in additional prescribing behavior by the second quarter. Given the large number of new patients that were added in the 2025. We believe these positive experiences with the current diagnosed bronchiectasis population should also increase the likelihood that physicians will be receptive to proactively tracking exacerbations and screening their COPD and asthma patients for bronchiectasis. Turning now to the mechanics of how patients gain access to brinsupri. Critical element of successful launches is favorable payer access dynamics. And I am pleased to say that this is progressing very well. In fact, over ninety percent of targeted patient lives have access to GETRA and SUPRI reimbursed either through a documented payer policy or medical exception. We chose to engage payers in an effort to encourage them to make access for appropriate patients as frictionless as possible. For those who have been willing to engage with us and settle on simple attestation based prior authorization and reauthorization criteria, we have offered modest rebates. Others have chosen to require documentation within their medical policies, which typically means requesting documentation of the CT scan and proof of two or more exacerbations. Importantly, we have seen a very high payer approval rate so far even for payers requiring documentation, which is very promising. Given our long history with ARIKAYCE, which even now has primarily reimbursed through medical exception, we become skilled at providing education to health care providers and their offices about documentation and process requirements. We expect these high approval rates to continue in the months ahead as physicians and their staff become more accustomed to the payer reimbursement requirements. While we expect contracts to continue to officially go into effect over the course of the first half of this year, we have concluded enough of these negotiations to feel confident the general direction of the market access landscape for VINSupri. I am pleased to say this landscape is aligned with our prelaunch expectations with broad access to the treatment for appropriate patients and either physician attestation or manageable documentation required for reimbursement in most cases. In summary, the Brinsubri launch continues to be very strong. The rate of patient adds, new physicians, and manageable market access dynamics gives us comfort that from the initial patients we are targeting, we see a clear path to reaching our stated peak sales goal of more than $5,000,000,000 with potentially significant upside from the adjacent populations outlined a few moments ago that could take that peak sales number much higher. We will have much more to say in the quarters to come as we gain a clear picture of how big and when those patients may be diagnosed and become on label for brinsupri. The opportunity itself is one that any biotech company would be fortunate to have and we intend to aggressively resource the launch to maximize its potential. Now let me spend a moment on ARIKAYCE. Our commercial teams continue to do an excellent job of driving growth of the product. Japan had a particularly impressive 2025, delivering 40% growth compared to 2024, and contributing more than a quarter of ARIKAYCE's global revenues. In Europe, ARIKAYCE grew even faster, albeit from a more modest revenue base. This strong commercial execution sets the stage for ARIKAYCE's next clinical readout the phase III ENCORE trial, which we expect to announce in March or April. Success in ENCORE could open an opportunity to increase the addressable market for ARIKAYCE from around 30,000 patients today to more than 200,000 patients. Let me now switch gears and spend a moment on TPIP. Which was significantly derisked by strong clinical data in 2025 opening up the opportunity for us to pursue four phase three clinical programs in peril. Parallel. We are very excited to announce that last month, we were informed by the FDA's office of Orphan Drug Products Development of their decision to grant orphan drug designation to treprostinil palmitil for the treatment of pulmonary arterial hypertension. So you can understand the basis for this designation in their own words I read here from the actual letter we received from the FDA. Quote, our decision to grant designation is based on the plausible high hypothesis that your drug may be clinically superior to the same drugs already approved for the same indication because your drug may be more effective due to greater placebo corrected improvement in six minute walk distance compared to other approved oral or inhaled formulations of treprostinil and by means of a major contribution to patient care compared to the approved subcutaneous and intravenous formulation of prepostinil, close quote. This decision, was based on the FDA's assessment of our phase two data released last year, is a striking validation that our belief that TPIP has the plausible chance to be a meaningfully differentiated treatment compared to other treprostinil options. In our view, this supports our long held conviction that TPIP could become the prosanoid of choice for physicians and patients. Last month, we presented the trial design for our PAH phase three trial of TPIP in patients with PAH at the PVRI conference in Dublin. Recall that the FDA agreed based on the strength of phase two results, we would need just one phase three trial powered at the standard point o five alpha for a registrational submission. On this slide, you can see a depiction of the trial design for PAH. While much of the design is similar to our phase two trial, there are some key differences. First, the trial has a longer treatment period of twenty four weeks versus sixteen weeks in phase two. This longer treatment period is intended to provide patients with a practical titration window given that this trial will allow patients to dose up to twelve eighty micrograms or double the highest dose used in phase two. To put that high dose into perspective, twelve hundred eighty micrograms of TPIP after subtracting the weight of the 16 carbon chain contains about eight hundred and thirteen micrograms of treprostinil. That is more than three times the highest labeled daily dose of Tyvaso DPI for patients that fully comply with the four doses required per day with that treatment. Another difference is that the phase three study will allow patients to be on background cetatricept. Enrollment of those patients will be capped at twenty percent of the overall population and stratified to ensure balance between treatment arms. Finally, the primary endpoint of six minute walk distance will be measured one to three hours post dose to approximate TPIP's peak effect similar to trials of other treprostinil products. Prof measurements will also be captured as secondary endpoints. We are incredibly excited to get this trial started in the first half of this year. To recap, I am very pleased with where we are as a company. The Brinsupri launch continues to go well, allowing us to announce revenue guidance for 2020 of at least a billion dollars for that therapy. When combined with the strong performance that we expect for ARIKAYCE in 2026, we expect to produce revenue on a company wide basis that more than doubles from last year. And even that could be just the beginning as we await a near term pivotal readout for ARIKAYCE could expand its label and we work to identify new patients who could benefit from brin supra For TPIP, we have received an orphan drug designation for treprostinil palmitil for the treatment of PAH and have released a phase three trial design for that indication. If successful, the FDA has indicated that this single phase three would be sufficient to support a filing for TPIP in patients with PAH. Finally, we have a strong and growing pipeline of potentially first or best in class investigational programs behind the ones we have spoken about today. Many of which should also begin to contribute catalysts over the next year and beyond. William H. Lewis: With that, let me turn the call over to Sara. Sara M. Bonstein: You, Will, and good morning, everyone. Given that Will has already walked you through our 2026 revenue guidance for ARIKAYCE and Bransubri, let me Sara M. Bonstein: provide you with a few additional comments on our expected gross to net in 2026. In the past, we have highlighted a range of 25 to 35% as a reasonable analog for ransupri's gross to net at launch. This range was based on precedent launches and the impact of new catastrophic coverage required under IRA legislation. Today, we believe we have good visibility into where payer contracting is headed and are now positioned to provide a gross net guidance range of mid twenties to low thirties for bransupri in 2026. Importantly, our 2025 gross to net for BRENTSUBRI was also in that range. Which implies that the rebating expected to go into effect into 2026 will be modest and is therefore not anticipated to have a significant effect on the overall GTN of the product. For ARIKAYCE, GTN for 2026 is expected to range from the low to mid twenties, a slight increase from 2025 due primarily to the impact of the small manufacturer phase in and other provisions on under IRA. Let me spend a moment on our cash position. As of the end of 2025, we had approximately $1,400,000,000 in cash, cash equivalents, and marketable securities. Cash burn in Q4 included approximately $70,000,000 of onetime items largely attributed to the asset acquisition of INS 1148 and the milestone payment to AstraZeneca related to bransupri's US approval. Excluding those onetime items and the cash received related to stock option exercises in the period, our underlying cash burn for the quarter was similar to the underlying burn levels that we saw in the prior quarter. Keep in mind that only a portion of the Bronsubri revenue we recognize quarter had been received in cash as of December 31, so our cash burn does not reflect that full benefit. As we have said before, we expect both revenue and spending to continue to increase as we fully resource and support brands launch as well as other programs from across our portfolio that are expected to continue to ramp in the near and medium term. Finally, I would like to reemphasize the statement Will made earlier as it relates to our pathway to profitability. Based on our existing development plan and the strength of our commercial engine and its revenue capabilities, I am confident we can achieve cash flow positivity without needing to access additional capital. That said, I will remind you that we have and will continue to invest in appropriate business development opportunities as well as internal programs and therefore may choose to source additional capital to advance and expand our pipeline and support of additional future value creation. Moving now to other relevant financial metrics for the fourth quarter. Which are displayed on this slide. Cost of product revenues in the '25 was $44,200,000 or 16.8% of revenues, which is lower on a percentage basis based on our historical performance reflecting the positive contributions of Brinsupri to the company's gross margin profile. Additionally, as expected, research and development in SG and A expenses increased this quarter compared to prior year period due to the necessary investments made to support The U. S. Launch of ransupri and to continue to fund our growing pipeline. In closing, I am pleased to report that Insmed Incorporated remains an a strong financial position, providing us with the capacity to pursue our ambitious goal to expand our reach and our impact on patients. We look forward to continuing to utilize our resources to pursue the potentially value creating opportunities we have in front of us. We will now open for questions. Operator, may we take the first question, please? Operator: Thank you. We will now begin the question and answer session. We ask that you please limit yourself to one question. You may reach you for any follow-up questions. Your first question today comes from the line of Joseph Patrick Schwartz from Leerink Partners. Your line is open. William H. Lewis: Great. Thanks so much and congrats on the very strong performance. It certainly seems like the TAM for Brinsupri has a lot of room to expand with a very well designed strategy to identify patients with COPD or asthma who are exacerbating with bronchiectasis but might not yet be identified as such I look forward to hearing about that progress on that as you embark on this initiative, but I was wondering if you have any plans Operator: to develop other DPP one inhibitors within respiratory disease in order to William H. Lewis: expand your, franchise further? And if so, how do these other agents differ from from Supri? William H. Lewis: Yeah. I appreciate the question. Absolutely. We intend to bring other DPP ones forward, not just in the respiratory indications, but in others. As an example, ten thirty three will enter the clinic this year for rheumatoid arthritis and irritable bowel disease a couple of of indications within that, and that will be in the second half of this year. In parallel, we are also advancing other DPP ones into conditions in respiratory like COPD and asthma. That is absolutely on the horizon for us. I you know, Martina perhaps can comment a little bit here on the distinction between the patients we are targeting who may be responsive to brinsupri because they are bronchiectatic versus those who are asthmatic and or COPD of a particular profile distinct from the bronchiectasis patient that these other DPP ones would would target. Martina, do you want to address that? Sara M. Bonstein: Yes. Sure. So we are we are looking at a phenotype, of patients who continue to exacerbate, even so they are optimally treated for COPD or for asthma already. And most of those patients not only have a higher increase in pulmonary exacerbation, but also an increased acceleration in lung function decline as well as an increase in mortality. So that is a specific phenotype of population that we are looking for. Operator: Your next Operator: question comes from the line of Jason Eron Zemansky from Bank of America. Your line is open. Jessica Macomber Fye: Great. Good morning. Congrats on the progress, and thanks so much for taking our question. Will, I was hoping you could provide some additional color regarding the guidance for brenstupri. Can you speak to some of the specific elements of of patient behavior that gives you confidence at this point, specifically with regards to dynamics like compliance, discontinuations, prescription abandonment, I know it is early, but do you have a sense of what that looks like and how did that influence you know, your projections? Thanks. William H. Lewis: Sure. So we have, as you might imagine, a number of different data sources we examine, but there is generally a very detailed dashboard. And what I would convey to you is that across all the metrics, we are seeing at or above our our targets. And that is very much behind why we have the conviction that we will do at least 1,000,000,000 in revenue in Brinsupri this year. So I would I would say across the board, we are very encouraged you know, whether it is market access metrics, whether it is, you know, use you know, low discontinuation rates, reauthorizations going through, I would I would say we feel very, very good about where things are. Operator: Your next question comes from the line of Olivia Brayer from Cantor. Your line is open. Sara M. Bonstein: Hey, good morning. Thank you for the question and my congrats as well on the quarter. Can you comment at all on the scripts trends that Symphony is picking up? Are those January and and early February trends indicative of of what you guys are seeing on your end? And and anything you can tell us at this point just about how new starts are trending so far this year, And then I I did just wanna ask around interest in BD activity. It looks like you guys flagged that a couple times. In the slides, and and potentially raising capital around that. What kinds of deals are you guys interested in pursuing? And and what is the rationale for potentially doing a a bigger deal at this point? William H. Lewis: Yeah. Thanks. As it relates to the to the performance, I mean, I think things just are very strong out of the gate is the only way I could describe it. And so we we see we hear a lot of talk about the Symphony data, obviously. We do not track it. We do not pay attention to it. But what our what we were trying to accomplish today because we are always very detailed and I would say transparent about the puts and takes that may be in operation in any given week for any given medicine. This is what could hold it back. This is what could accelerate it. That, I think, is often interpreted as caution or conservatism on our part. And what I wanna make sure we get across today is that we feel great about the way this launch is going, and we do believe we are gonna join that very rarest of groups that can produce a billion plus in revenue by adding quarters two through '5, together. There are not many in history that have done it and those that have have gone on to be very successful companies. And that is because, you know, to get to that level by the end of the fourth quarter, gonna have to be at a run rate that would imply you are gonna continue to do very well as you go into '27 and beyond. So with all that confidence that comes from doing the examination at a very refined level, of script trends, physician behavior, surveys that we do, behavior of patients on medicine. The market access picture. All of these things come combine to give us a very good feeling about the direction we are traveling and that is why we are able much earlier than expected to give this direction that we will do at least a billion. That then feeds into the notion that we are on track to get the cash flow positivity without having to access more capital, and that is absolutely the case. The only potential issue we wanna raise is that if we see something that is interesting, on the business development side, we would not hesitate to bring it on board. We think now is the time to press the advantage should we find first or best in class compounds that we can bring on board. An example of that would be I n s one one four eight, which we got in our view for a very modest amount and which has what we consider to be DPP one like potential its application across a range of different potential diseases. So more to come on that asset. But assets like that that we can add that are sort of phase two ready those are in our sweet spot for sure where we can step right into the clinic, bring to bear our capabilities and clinical developments and trial design and get to a next candidate molecule that could be first or best in class. Operator: Your next Operator: question comes from the line of Ritu Subhalaksmi Baral from TD Cowen. Your line is open. Operator: Good morning, guys. Sara M. Bonstein: Thanks for taking the question. Will, can I dig into some of this baseline guidance a little further? And Sara as well. When could when will you and when will we get more clarity on refinement of this $1,000,000,000 plus level? Consensus already fits right around that, and if you stretch the numbers out, it implies, you know, percent quarter over quarter guidance, which strikes me as relatively modest given the past few quarters and all of the patient finding initiatives. Does this have so can you comment on that? And also, does does this idea of requiring the additional paperwork, I guess, and the two or more exacerbations factor into the uptake? Because it it sounds like you guys are expecting a certain number of plans to still require this documentation. And that it might be higher than you previously expected. Thanks. Those are the questions. William H. Lewis: Yeah. So let me be really clear. The market access picture is fantastic from our point of view. It is ahead of where we thought it was gonna be internally. So in no way do I want you to interpret our mentioning of some plans requiring documentation and some not as being indicative of any impact on anything other than enthusiasm for our forecast. I would tell you about that existence of those requirements of documentation, we always expected that some portion of these plans would require that. That is why we fielded so many field access managers who can support the back office effectively in navigating that. And to be clear, to date, that is how everybody has done it. It is been all medical exception. So now that the policies come into place, that smooths the uptake because our concentration has always been on patients with two or more exacerbations even though our label is for any and all bronchiectatic patients. Jessica Macomber Fye: So William H. Lewis: strong position with regard to market access and uptake. And with regard to the baseline guidance, look, we have one full quarter under our belt. So it is, I think, audacious to put out a billion dollar plus forecast for quarters 02/2005 since only 15 product in history have ever done it. The best of our knowledge, and that includes all the COVID products, the GLP ones, Harvoni in in hep c, SKYRIZI, you know, household name programs. And to that list, Insmed Incorporated intends to add its name. So we are incredibly happy about where we are and where we are going. I would not interpret at this stage, which is very early, one one full quarter under our belt, thinking that by saying a billion we in any way mean to imply that we are slowing down. On the contrary, is what is giving us the confidence to go and suggest that there is gonna continue to be acceleration throughout the year. We will provide more qualitative guidance at least as we go through the year on how the quarters are progressing But given the dashboard and the direction we are traveling right now, feel very good about this launch. Operator: Next question comes from the line of Gavin Clark-Gartner from Evercore ISI. Line is open. Jessica Macomber Fye: Hey, guys. Thanks for taking the question. So you said you have not seen any change in approval rates from start forms to paid drug? What is that actual approval rate right now? And just on a similar topic, have you seen any changes in the conversion speed from StarForm to paid drug? Thank you. William H. Lewis: Yeah. So we are not disclosing particular elements of it, like the approval rate itself. I would tell you is that our benchmark internally based off of our experience with Aircase, which is very good, is very high, and we are at or exceeding that level. Then with regard to any other thing that is actually driving the launch, as I said, the the dashboard for us is is green. So I do not know how else to to convey to you that we feel that in a very strong position. Operator: Your next question comes from the line of Yuxi Dong from Barclays. Your line is open. Sara M. Bonstein: Hi. This is Jasmine on for Ali. Thank you for taking the question, and congratulations on the progress. What is the ex U. S. Contribution to your guidance of $1,000,000,000 or more for '26 And can you just talk a little bit more about your launch strategy, US for this year? Thanks. William H. Lewis: Sure. So I will ask Sara to comment on the on the different components of our of our revenue in a moment. You know, the strategy is to launch in Europe and in Japan We want clarity on the MFN policies that are that are coming forward now. I think we are gonna have that in the in the coming weeks and at the most months. But, but until that is clear, it seems to us that the prudent thing to do is to sort of things on hold until we know what that is gonna look like. To be very clear, that does not you know, reduce our enthusiasm for going to Europe and Japan. And our teams there are continuing to advance work in contemplation of when that day comes, but we really need clarity from the administration first on what these policies are gonna are gonna look like so we can, those trade offs and understand where we need to go to. Sara, do you wanna take the the composition question? Sara M. Bonstein: Sure. Happy to, and thanks for the question. What I would comment on is, as we have said previously, any Ex US contribution for Brent Supri in 2026 was going to be very, very small given the original timelines we would put out. We are obviously going to be monitoring The US policy as well as well stated. So we feel very confident in the billion dollars plus for Brent Subri regardless of sort of the timing of the of the pause. As we are thinking about contributions. And broadly speaking, the contributions for Brunsupri will be vastly weighted towards The US. Operator: Your next question comes from the line of Gao Yi Chen from Wolfe Research. Your line is open. Jessica Macomber Fye: Hey. This is Brandon on for Andy, and thanks for taking the question. Regarding additional capital to support business development or other value creation, Benjamin Burnett: To us, this sounds like incremental spend on clinical programs. How are you thinking about this relative to achieving cash flow positivity? And is achieving cash flow positivity more of a near term 2026 goal, or the outer years? Thank you. Yeah. William H. Lewis: Yeah. So we I would just say we see a very clear path to cash flow positivity. I I view it as an inevitability. Just based on our assumptions about where revenues will go for both Brinsupri and ARIKAYCE, Our base business that this cash flow positivity journey contemplates includes phase three programs for HS, which may or may not happen as we all know. But it contemplates some expenditure in these programs that you are making reference to. So we we would put the cash flow positivity journey separate from BD. BD is the thing that is incremental that would result in us approaching the markets, for capital. And and look, there is plenty of different ways we can do that. And, Sara, maybe you wanna just take it from here and and share your thoughts. Sara M. Bonstein: Sure. Happy to, and thanks for the question. Yeah. It is well said. We have the one 400,000,000.0 provides us that ability to fund through cash flow positivity for our base business, inclusive of the programs that we have under our umbrella today. BD is obviously separate from that. As we think about different ways to augment balance sheet, there are, you know, all levers that are that exist are available to us, and we have the ability to be, thoughtful on that if and when, the appropriate BD opportunity did present itself. Operator: Your next question comes from the line of Leonid Timashev from RBC Capital Markets. Your line is open. Hey, guys. Thanks for taking my question. I wanted to ask a little bit about Nick Lenard: depth of prescribing. I think you mentioned that a lot of scripts are currently coming from physicians writing just one script. I guess, is there something that they are waiting for in that initial experience with patients that giving them pause from increasing their prescribing right now? Is there any additional education that you guys are doing to sort of try to drive that depth? And I know earlier at one point you had mentioned that in some of the centers of academic centers of excellence, the drug is still working its way through P and T committees, I guess. Are you seeing that work its way through? And can we expect an increase in-depth of prescribing across physicians and centers? William H. Lewis: Yeah. So this is really important. With almost half having written only one prescription and, obviously, the vast majority of patients added in the fourth quarter, what we are trying to frame out is that what we have seen is physicians will try with one or two patients And as I just mentioned, fully half of them have only done one. So as those patients experience the use of the drug, with the with what has been to date a benign safety profile and a pretty good experience that is reported back, we know that that will fuel the, use of the medicine in other patients within those practices. And all of these practices we think of as having multiple patient candidates for the drug. Now if we take a deeper dive on these physicians and their behaviors, it is typical that they would wait a few months for the patient to return to the office to express what their experience has been. That dovetails nicely with what we saw as the onset of symptom benefit during the phase three and phase two programs. That gives us some confidence that as we enter the first and second quarter of the year, those patients come back in, they report positive experiences, Obviously, that will not be universal, but it has been our experience that it has been very positive. And the consequence of that is those physicians are gonna be inclined to write again. Of note, we have a very broad prescribing base already. So the ability to gain depth from that positive experience and reinforcement is just one office visit away. And that to us is incredibly encouraging as we come into 2026. And, yes, we are absolutely drawing attention to that. We now have up and running an extensive speakers bureau So this is a compliant way of of educating people on the experience of the medicine, peer to peer, and I think that is gonna be very beneficial. We have a number of other programs that we activate to make sure that we get if you will, vocal about what people are seeing, and that allows everyone to understand what the benefits could be make their own assessment. But I would say universally, their experience to date, we have had a very good feedback loop beginning, and I think that is gonna enter a benefit throughout '26 and beyond. Operator: Your next question comes from the line of Jessica Macomber Fye from JPMorgan. Your line is open. Sara M. Bonstein: Guys. Good morning. Thanks for taking my question. You talked about the launch being up strong and to the right. Well, I think also in prepared remarks, noted that quarters can sometimes vary along that strong trend line. And back at JPMorgan, you would kind of flagged some unknowns just related to being so early on in the Brin Supri launch. So I am curious, have any of those unknowns that you alluded to at the start of the year just become more known now that we are at least halfway through the first quarter? And then just quick Operator: kind of Sara M. Bonstein: second part to my single question. With revenue guidance now in the picture, should we expect Insmed Incorporated to continue providing things like patient starts and prescriber metrics going forward? Thank you. William H. Lewis: So with regard to the unknowns becoming known, yes. We have seen some things that we were not aware of and how they would shake out things that are very important, like market access, policies, the actual experience and timing of getting a prescription filled, Are patients staying on drug or dropping off? Are they getting reauthorizations? Even as they change plans, are those going through What is the approval rate? Whether you have a policy or it is just, medical exception? All of those things, would say, are trending positive from our internal benchmarks in a way that gives us confidence, to be able to provide the guidance we have. And I think as we think about that revenue guidance going forward, we will obviously provide additional clarity Operator: But William H. Lewis: I think, you know, in general, the most important thing we recognize, which is why we put it out today based on our our confidence, is that people wanna know what this drug's potential could be. From a revenue generating point of view. We see behind each one of those dollars obviously, a patient that is benefiting from the medicine, and so the revenue is derivative of that patient benefit. And it is very important to keep that north star in mind because, ultimately, that is what we are in the business of doing is helping these patients and the positive stories that are coming back from the use and experience with this medicine we believe, will yield additional revenue benefit and that is where this revenue guidance is coming from. And as those those unknowns that I have some of which I reviewed, become clear, it absolutely gives us greater confidence that we are gonna be as we say, up into the right. It is a little bit hard after only one quarter full quarter, and a partial first quarter to give upside, you know, direction in terms of what the what the cap could be. But I would say we see this as a year of incredible potential sitting there with at least a billion of just for Brinsupri and $4.50 to $4.70 for ARIKAYCE, that is a very interesting profile where both drugs are first in disease, have no competition for the foreseeable future, and are called on by the same commercial infrastructure. So there is synergy, there is leverage, there is upside and growth, And when Encore comes out, assuming those results are positive, we have the expansion of that market opportunity. So, you know, this is just the beginning of this kind of direction and guidance. Operator: Your next question comes from the line of Maxwell Nathan Skor from Morgan Stanley. Your line is open. Jessica Macomber Fye: Great. Thank you very much for taking my question. So I was just wondering, how do you expect William H. Lewis: pulmonologists to navigate payer requirements around ruling out COPD or asthma as the primary driver of symptoms? Jessica Macomber Fye: I am just trying to think about what needs to change in these practices to potentially recognize bronchiectasis as the main driver in maybe a comorbid patient? Thank you. William H. Lewis: Sure. So in our phase two and phase three trial, we had about fifteen to twenty percent of patients who were comorbid with asthma and COPD. And importantly, particularly if we take something like asthma, it is a spirometry test in the office that enables the diagnosis of COPD. In order to get a definitive diagnosis of bronchiectasis, you need a CT scan and a pulmonologist evaluation. But you are you are you are that proximate to that diagnosis. In many cases, CT scans do not get ordered because say, you were able to diagnose it as bronchiectasis. Good does that do if there is no medicine to treat it? Now there is something that can treat it that can lower is demonstrated to lower exacerbations and all the other benefits we have received we have discussed in the past of note of the twenty five milligram arm preservation of lung function, which is particularly relevant for a COPD patient. So these are exciting opportunities for those patients who have bronchiectasis to gain potential benefit from this treatment. And they are literally one CT scan away. So it is not a difficult distinction to make, if you do the CT scan and that is really the the funnel change that will have to take place. And why we are encouraging physicians to give consideration when they have asthma or COPD patients who are on max treatments and still experiencing exacerbations hey. Maybe there is an undiagnosed bronchiectatic patient in front of me. And the numbers that are suggested by the literature are quite substantial here. While this may take a little time to turn and activate in terms of a patient population, Literally, internally, we think of it as another launch. It will eventually yield, we think, significant number of patients on on label for brinsupri treatment. Operator: Your next question comes from the line of Matthew Phipps from William Blair. Your line is open. Jessica Macomber Fye: Thanks for taking my questions. Congrats on continued execution commercially. The work that you guys have mentioned that looks that the COPD and bronchiectasis overlap is there any correlation with eosinophil levels? And just given, you know, we have had two biologics targeting type two inflammation, approved for COPD recently, wonder if that just becomes another step for physicians before they order a CT scan as they are thinking about, you know, the additional pathophysiology for their patients? Thank you. William H. Lewis: Sure. And, Martina, do you want to do you want to field that question? Operator: Yes. Sure. So I think if you if you think about the COPD or the asthma patients, physicians will go with what are their standard of care and then add medic as patients needed. Many COPD patients or asthma patients have multiple treatments. So for COPD, clearly, those are bronchodilators and healers, but also, labelloma combinations. And, of course, corticosteroids. So it depends very much of what is the status of your COPD patients, are they benefiting it or not, and then you have the opportunity to accelerate into a different treatment paradigm and potentially consider what are biologic treatments and may these patients benefit from them. So there is always a treatment, treatment paradigm that you that you look at from depending on what the clinical status is of of your patients. Operator: But, Operator: you have to have as a physician also the clinical suspicion that it may not only be the underlying disease that you are treating. So the COPD and or the asthma that you are treating But if your patient is becoming optimally treated, even if this is a biologic and continues to exacerbate then the question has to be raised of is that what is driving an exacerbation. Not really COPD or asthma. They may still have that, and you are treating that optimally. But then you are asking, now I have to see if there is something else. And that is where the question comes in. Have I run a CT scan? And I think often patients if you add additional in medications along that treatment paradigm, physicians will ask themselves the question, what else, do I have to look for before I continue escalating a treatment paradigm? Operator: Your next question comes from the line of Danielle Brill from Truist. Your line is open. Jennifer M. Kim: Hey guys, this is Alex on for Danielle. Thanks for taking the Nick Lenard: I was curious if you could give a a little bit of a breakdown of the payers that are requiring documentation versus attestation versus the plans that require medical exception and what percentage of covered lives does that represent? And then lastly, just comp you know, if you could share your confidence in getting policies in place that are currently using medical exemption going forward. Thanks so much. William H. Lewis: Yeah. So, Alex, I am gonna disappoint you. I am not gonna break out the covered lives and and what is documentation, what is not. I would just tell you this. Which is the benchmarks we set for what percentage would be you know, required documentation, they are they are right in line. We are probably a little better than what what we were thinking. And I think what is important is that all of the guidance that is coming out that we have seen so far is aligned with the guidance that came out at CHEST which is that the patients you wanna you wanna be thinking of first for this are two or more exacerbations, and that is the way that the market access world is interpreting it. It is the way we have driven physicians to think about the use of this drug in terms of first patients to try it on. And so I think all of that aligns nicely And so what you have seen in the partial third quarter and first full quarter in the fourth quarter, is this market access picture that is not expected to change dramatically in terms of our ability to add patients without a lot of friction. And that is because not only are we very experienced with the market, medical exception pathway, but we are getting many plans to agree to doing attestation which should, if anything, help the process. The more predictable it becomes, the easier it is for the back office to know what to do. And our teams are there in a compliant way to support that. Education and execution. So I I feel very good about the market access picture. I think within the launch when we look back at this and talk about what has gone very well, market access is gonna be one component, that we got right. Operator: Your next question comes from the line of Adam Walsh from Roth Capital. Your line is open. Adam, your line is open. Your next question comes from the line of Stephen Douglas Willey from Stifel. Your line is open. Jessica Macomber Fye: Yes. Good morning. Thanks for taking the question. William H. Lewis: Just curious if you are expecting the majority of Jessica Macomber Fye: patient reauthorizations to occur six months after starting therapy and know your comments seem to suggest that some payers have already required reauthorization at earlier William H. Lewis: time points. So just curious if there is anything that you can say about Jessica Macomber Fye: the the seamlessness of the of the reauthorization experience in Thanks. William H. Lewis: The point of greatest friction, I think, in in this world is when you get into the first quarter and you have some patients who change medical plans, does that get bridged effectively? Is the reset of the copay, you know, what what kind of a break does that put on things? And I would say that, you know, in our first quarter, we feel very good about the way things have gone, so much so that we can give the guidance that we we provided. Know that we can give a lot more detail beyond that except to say that say you know, if we were seeing difficulty or breaks of some kind, we would be calling that out, and we are just we are not. Operator: Your next question comes from the line of Graig C. Suvannavejh from Mizuho. Your line is open. Nick Lenard: Thanks. Good morning. Congrats on the quarter, and thanks for taking my questions. I really want to tap into the additional Brinsupri in the thirty two million or so patients who have COPD and asthma as a potential revenue opportunity Just to clarify, to be able to tap into that patient population, is there anything that you need to do, I. E, do you need to run a clinical study, or how how would that mechanically work to be able for a doctor prescribe that medicine? Would that be off label or or just any color there, please? William H. Lewis: Yeah. No. So we are speaking very specifically on label. Exclusively, and that is all we would ever focus on. And the way that flow occurs is for a physician who has, as Martina described, either asthma or COPD, perhaps is is fully treated for that condition. And yet continues to exacerbate and and perhaps have sputum expectoration, that patient becomes potentially a candidate for a CT scan to evaluate if the additional difficulties they are experiencing are a byproduct of bronchiectasis. The moment that CT scan and pulmonologist have a definitive diagnosis of bronchiectasis, they are on label for our drug. If they have had two or more exacerbations, their path to reimbursement for the use of the medicine should be very smooth. And so, that is really what we are describing is that all of the COPD and asthma patients thirty two million we estimate is the number, what percentage of those may still be experiencing exacerbations despite best treatment. And then of those, how many have either already had a CT scan? And so we can go back and review those CT scans to see if there is evidence of bronchiectasis. Because remember, if you do a CT scan and it is not that uncommon for many of these patients to have one, it does not mean that they would have identified bronchiectasis. They have to go looking for it. Or perhaps the radiologist called it out, but it does not get coded because back then there was nothing approved to treat it. So there is advantage in going back and looking at existing CT scans and and doing a definitive assessment of whether there is bronchiectasis in evidence. There is also the the patients that are having the experiences I am describing getting an additional CT scan for the first time and having it evaluated at that moment. So our education efforts are both medical and through commercial channels. Compliantly raising the index of suspicion about this and hopefully identifying those patients who would benefit with a definitive diagnosis of bronchiectasis and getting them on brinciubri. Operator: Your next question comes from the line of Ashwani Verma from UBS. Your line is open. Jessica Macomber Fye: Morning. This is Spy Josh on for Ash. A question on the TPIP IPF study design. How critical do you think it is for you to show survival benefit to claim a major contribution to patient care versus Tyvaso? Nick Lenard: And does your potential study design change Jeff Hung: based on what Tyvaso shows on the survival endpoint in the ketone one study that is about read out? Jennifer M. Kim: Thanks. William H. Lewis: Yeah. So what I would say is that that study design is not yet finalized. I do not know if, Martina, you wanna comment on on anything further with regard to where we are going with that? With that TPIP program and IPF? And particularly the the survival endpoint he was raising. Operator: Yeah. So we had not really looked at exactly what that what the design will be. I think looking at Teton and what endpoints they use and also the design is looking at Teton and what endpoints they use and also the design is is is a good guidance. Certainly, that will be one one consideration for us, but we have not, at that point, really communicated on the design. But we will discuss that also with the FDA, and then we will share it with you once we have a better picture of what we will move forward with. Operator: Your next question comes from the line of Benjamin Burnett from Wells Fargo. Your line is open. William H. Lewis: Hi. This is Jin Chi on for Ben. So Jessica Macomber Fye: for taking our questions. William H. Lewis: Two quick ones. First one, just wanna make sure understand correctly. So the 1,000,000,000 guidance is all two pulmonary Benjamin Burnett: exacerbation patients. Jessica Macomber Fye: And any one PE patient is going to be upside. And second one on ARIKAYCE, data is around the corner. William H. Lewis: Any commentary that you can provide it on blinded data, whether it is PRO or sputum conversion rate. And what is kinda internally, how do you think about a bar for approval and most importantly, like, commercial success Thanks for the thanks for your Jessica Macomber Fye: time. William H. Lewis: Sure. So on the billion dollar question, are they all you know, is that that revenue guidance, is that based off patients who have two or more exacerbations? Yes is the answer to that. We think there is upside from the additional 250,000 patients is a progressive disease, and and we do anticipate as the as the most recent paper I mentioned in the in the remarks, identifies that some of those patients with less than two or more exacerbations will fall into two or more exacerbations as time goes on because the progressive nature of the disease and the heightened awareness of diagnosis and all the rest. In response to your second question, you will be pleased to know we have decided we are not gonna be getting into the game of blended blended data anymore. We certainly monitor that. I think the challenge of it is always knowing that there is an alternate explanation for whatever promise direction it may be suggesting, where I feel confident in the error case ENCORE readout is that we have already run studies using this drug in this disease and have seen the primary endpoint and secondary endpoints measured with success on more than one occasion. The exception to that, obviously, is the newly developed PRO that PRO was developed in conjunction with the FDA using the arise data. As the benchmark for understanding what we think is like likely to be the way to interpret clinical relevance. And what does that mean? It means that we feel very good going into the discussion with FDA that the results will be compelling enough to enable a full approval for all MAC NTM. In Japan, all they want is culture conversion. Obviously, it has to be safe and effective, but they measure effectiveness by culture conversion and that is the primary endpoint. We have never had a trial where we have not definitively won on that front. To remind you, the ARRISE trial was basically a six month trial with one month off and the ENCORE trial is simply a longer version of that same trial design We recruited the patients at the same time. We simply randomized more of them. To the shorter term ARRISE trial. And so for all of these reasons, we feel very good about ENCORE ENCORE. Being producing data that will enable approval in The US and Japan. Obviously have to see the data to to make final conclusions, but that is right around the corner, and it will unlock a very substantial additional population for 30,000 addressable patients to over 200,000. So this is a very substantial future contributor starting in '27, assuming that these data are what we expect them to be. And then we are able to launch in The US and in Japan. Operator: Your final question comes from the line of Adam Walsh from Roth Capital. Your line is open. Jessica Macomber Fye: Great. Thanks for taking my question. Good morning. My question's on Grinsupri persistence. We recently talked to a pulmonologist who would like in Brinsupri to the blood pressure pill. That it prevents long term damage but does not deliver necessarily immediate Nick Lenard: symptomatic relief, and he flagged the one year mark as the key discontinuation Jessica Macomber Fye: risk based on his biologic experience. With your earliest patients now approaching six months on therapy, can you Nick Lenard: share any aggregate persistence or refill data and talk to your strategy about ensuring persistence Jessica Macomber Fye: with the medicine. Thank you. William H. Lewis: Yeah. So the first thing I would say is that refills so far are going very well. So I I think that that is a very positive sign early on. We know that what is great about this medicine is as was once described by someone at one of the faculty at ATS who described it as the holy grail of pulmonary medicine because it was the last unaddressed patient population and the treatment burden of a once a day pill is unbelievably low relative to what these people typically take for other indications in the respiratory arena or otherwise. It is often inhaled medicines, as you know, and those kinds of treatments. As we think about where we go from here, I would tell you that that profile, that dynamic should in their benefit to the uptake of the medicine. We know from the secondary endpoints in the phase three study especially at the twenty five milligram dose, these patients, had a highly nominally statistically significant finding in favor of feeling better on the medicine. So it is our expectation that that storyline will come back and and empower physicians to write additional prescriptions And through that process, we would expect, things to to grow and expand as our depth increases. I do not worry so much about the continuation of the use of the drug given some of the early stories we have heard about patients feeling better on the drug. But even without that, knowing the avoidance of losing lung function, which many of these patients are focused on at twenty five milligram dose, we were statistically significant in preserving lung function. So even if you do not feel it, to be told that by your physician, I think, is a very compelling driver for use, and certainly the refill rate would suggest that. Operator: This concludes today's conference call. We thank you for your participation, and you may now disconnect.
Operator: Welcome, and thank you for joining the fourth quarter and full year 2025 earnings conference call for Herbalife Ltd. [Operator Instructions] As a reminder, today's conference call is being recorded. I would now like to turn the call over to Erin Banyas, Vice President and Head of Investor Relations, to begin today's call. Erin Banyas: Thank you, and welcome to everyone joining us. With us today are Stephan Gratziani, our Chief Executive Officer; and John DeSimone, our Chief Financial Officer. Before we begin today's call, I would like to direct you to the cautionary statement regarding forward-looking statements on Page 2 of our presentation and in our earnings release issued earlier today, which are both available under the Investor Relations section of our website. The presentation and earnings release include a discussion of some of the more important factors that could cause results to differ from those expressed in any forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. As is customary, the content of today's call and presentation will be governed by this language. In addition, during today's call, we will be discussing certain non-GAAP financial measures. These non-GAAP financial measures exclude certain unusual or nonrecurring items that management believes impact the comparability of the periods referenced. Please refer to our earnings release and presentation materials for additional information regarding these non-GAAP financial measures and the reconciliations to the most directly comparable GAAP measure. And with that, I will now turn the call over to our CEO, Stephan Gratziani. Stephan Gratziani: Thank you, Erin, and thank you all for joining us today. As we look back on 2025, I want to take a moment to reflect on what we have accomplished and more importantly, discuss where Herbalife is headed and how we are positioning the company for long-term growth. Our vision is clear: to be the world's premier health and wellness company, community and platform. And in 2025, we took deliberate steps to ensure our vision is supported by a strong and resilient financial foundation. We executed with discipline, reducing our total leverage ratio to 2.8x. This meaningful step down from 3.9x at the end of 2023 underscores the strength of our business and our strong sustainable cash generation. We also sharpened how we operate, how we engage and how we create value for our community, the company and our shareholders, and we are advancing innovation, modernizing our digital ecosystem and deepening engagement across our distributor network. With the momentum generated in 2025, we enter 2026 in a position of strength, advancing our strategy to build a more innovative and digitally enabled Herbalife. Let's turn briefly to our fourth quarter and full year financial performance. Q4 marked our second consecutive quarter of year-over-year net sales growth with net sales of $1.3 billion, up 6.3%. India delivered its highest quarterly net sales in Q4. And even without India's outperformance, our Q4 net sales would have still come in above the midpoint of our guidance range. Adjusted EBITDA for the quarter was $156 million. For the full year, net sales were up nearly 1% to just over $5 billion; and excluding FX, net sales were up 2.5% compared to 2024. Full year adjusted EBITDA was $658 million, with margin at 13.1%, marking our second consecutive year of adjusted EBITDA and margin expansion, and we exceeded guidance for both the fourth quarter and full year on each of these metrics. For the year, we generated $333 million in operating cash flows, and we continued strengthening the balance sheet, repaying $283 million of debt in 2025. It was a strong close to the year, and behind these positive financial outcomes is a growing engaged distributor network. Equipping them for success is one of our top priorities. This commitment is reflected in the continued strengthening of our distributor network. In Q4, North America delivered its second consecutive quarter of double-digit year-over-year growth in new distributors, up 19%. Latin America continued its positive trend, achieving its seventh consecutive quarter of year-over-year growth. And while new distributors joining worldwide was down 5% versus a very strong prior year, the 2-year stack provides a more meaningful view. On a 2-year basis, new distributors are up 16%, with 4 of our 5 regions reporting increases, reflecting sustained multiyear momentum. These results underscore the foundational work we have done to support our distributors with enhanced training, improved digital tools and comprehensive resources, all tailored to the needs of each region and designed to position them for success. We will continue to provide them with innovative products and effective tools and training to help them generate interest, drive stronger engagement, increase repeat purchases and maximize long-term customer value. Innovative products are a key part to that equation, providing our distributors with products that excite existing customers, attract new customers and support increased sales remains central to our strategy. Driven by this commitment, 2025 was a strong year for product innovation as we continue to broaden and strengthen our portfolio across key categories. In July, we advanced our weight management offering with the successful launch of MultiBurn. In September, we broadened our skin care portfolio with HL/Skin in EMEA, which is based on cutting-edge K-beauty formulations and supported by an AI-powered facial analysis tool. And in December, we expanded into the high-growth healthy lifespan category with Life I/O Baseline. Beyond these innovative launches, we continue to optimize our global product portfolio to align with the evolving consumer trends and preferences while tailoring our offerings to resonate with local markets. In 2026, we are building on this momentum with exciting new product launches that further modernize and expand our portfolio, supported by new digital capabilities that enhance human connection. The human connection has always been at the heart of Herbalife. As a distributor-led nutrition company, our strength lies in the one-to-one relationships our distributors build with their customers. Our distributors take the time to understand a person's individual needs and support them throughout their health and wellness journey. These fundamentals remain unchanged. What is changing is how we deliver them because we see a future of health and wellness that is even more personalized data-driven, proactive and accessible. We are modernizing the experience to make it more connected and more effective. We will continue to provide curated product recommendations while laying the groundwork to deliver personally formulated nutritional supplements. Over time, this personalization will leverage data and insights from multiple inputs such as blood biomarkers and connected devices. Central to this strategy is Pro2col, our health and wellness operating system. Since acquiring the Pro2col technology in April of 2025, our focus has been on building a digital experience that supports the strength of our business. leveraging digital tools to enhance, not replace the human connection at the core of our go-to-market strategy. We've implemented a strategic phased beta rollout designed to integrate in-market insights from distributors and customers, enabling us to enhance capabilities and introduce new features in a way that drives the greatest impact. In December, we advanced to the second phase of our beta program with the release of Pro2col Beta 2.0, which included enhancements to the recently launched distributor marketing pages and coach dashboard. We believe our phased strategy is working. The beta group is engaged, providing feedback that is helping us refine the digital experience to ensure it integrates into distributors' daily methods of operation and meets real-world needs. We have expanded the availability of beta access to distributors and customers in the U.S., Canada and Puerto Rico and will begin extending it to select EMEA markets this year. Pro2col is more than a digital tool. It's a key strategic component of our platform vision. It adds a connective digital layer that enhances distributor engagement, supports customers in building sustainable nutrition and healthy lifestyle habits, and generates data that helps our distributors support customers more effectively. Over time, we believe this approach will broaden our reach, making Herbalife more attractive to a wider audience of future customers and distributors. By combining Pro2col's data and technology with our recently acquired proprietary manufacturing capabilities, we are set to deliver precision-made nutritional supplements tailored to an individual's needs and goals at scale. U.S. distributors in the initial Pro2col beta group will have first access to these personalized nutritional supplements by the end of the first half of 2026. Before I close, I want to highlight the exciting announcement we made earlier today. Global sports icon Cristiano Ronaldo has acquired a 10% equity stake in HBL Pro2col Software, which is the Herbalife subsidiary that holds the Pro2col technology. Cristiano invested $7.5 million, along with the commitment to provide services and sponsorship rights to Pro2col. It reflects Cristiano's deep personal commitment to nutrition and performance and our shared vision to scale personalized nutrition and wellness around the world, bringing together science, data, AI, innovation and community to improve the lives of millions. We believe Cristiano's involvement will elevate the visibility of Herbalife and Pro2col, expanding awareness and supporting broader engagement and adoption. After 12 years as Cristiano's global nutrition partner, we are thrilled to welcome him as a strategic investor and business partner. Over the past 45 years, we have built an incredible company with a strong foundation. As the largest publicly traded direct selling company with a global network of more than 2 million independent distributors across 95 markets and over 60,000 nutrition clubs worldwide, we are uniquely positioned to extend our leadership in global health and wellness in ways we believe no other company in the world can replicate. We will continue to build on this solid foundation while also forming strategic partnerships like the one we announced today with Cristiano Ronaldo. We will also continue to identify opportunities that bring differentiated products, services and capabilities that are aligned with our platform vision and add value to our customers, distributors, company and shareholders. As we move into 2026, we are carrying forward the momentum of 2025 with confidence in our strategy, our leadership team, our distributor community and our ability to execute with discipline. Now I'll turn it over to John DeSimone for a detailed review of our results. John DeSimone: Thank you, Stephan. Turning to our fourth quarter financial highlights on Slide 8. Our remarks today focus on the quarter with a summary of full year results in the appendix. As Stephan just described, we delivered a strong finish to 2025. Net sales for the fourth quarter were $1.3 billion, with 6.3% growth versus Q4 of 2024 and exceeding the high end of our guidance of 1.5% to 5.5% year-over-year growth. Q4 marked our second consecutive quarter of growth and our strongest year-over-year increase since the second quarter of 2021. On a constant currency basis, net sales increased 5.5% year-over-year, also exceeding guidance. We have now delivered year-over-year constant currency growth in 7 of the last 9 quarters. While FX rates moved slightly against us versus our Q4 guidance assumptions, we still realized an 80 basis point tailwind. Our Q4 net sales outperformance was driven by a record quarter in India with net sales of $250 million, up nearly 15% year-over-year and exceeding our expectations. We believe this was fueled by stronger demand following the reduction of the goods and services tax rate on the majority of our products in late September 2025. Importantly, while India outperformed our expectations, even without this upside, Q4 net sales growth would have been above midpoint of our guidance range. Adjusted EBITDA was $156 million, exceeding the high end of our guidance range of $144 million to $154 million. Adjusted EBITDA margin was 12.2%, down 20 basis points year-over-year, driven primarily by FX headwinds of 100 basis points and an approximately 90 basis point headwind from employee bonus accruals, which we previously communicated as a meaningful and expected headwind given the 2024 annual employee bonus was fully accrued by the end of Q3 of 2024, and therefore, we had no bonus expense in last year's fourth quarter. These pressures were partially offset by pricing benefits. Adjusted EBITDA excludes an approximately $11 million transition charge related to the September 2025 India GST amendments as the company no longer expects to fully utilize certain input GST credits generated before the law changed. CapEx for the fourth quarter was $19 million, at the low end of our guidance range of $18 million to $28 million. Capitalized SaaS implementation costs were approximately $9 million in the quarter. Gross profit margin was 77.5% for the quarter, down 30 basis points year-over-year. Gross margin was pressured by approximately 100 basis points of FX headwinds, 30 basis points of unfavorable sales mix and 30 basis points of input cost inflation. These were partially offset by 80 basis points of pricing benefits, 10 basis points from lower outbound freight costs and 30 basis points from other favorable cost changes. Fourth quarter net income attributable to Herbalife of $85 million includes $54 million of noncash deferred tax benefits related to the release of valuation allowances in certain of our European subsidiaries, which were established in the fourth quarter of 2024 following changes to our corporate entity structure. Adjusted net income for the quarter was $48 million. Adjusted diluted EPS of $0.45 includes $0.07 FX headwinds versus the fourth quarter of 2024. Our adjusted effective tax rate was 34.7%, down from 40.6% for the Q4 of 2024, which drove an approximately $0.04 favorable impact to adjusted diluted EPS. The lower effective tax rate in 2025 was driven primarily by the geographic mix of income, partially offset by noncash updates to our assessment of uncertain tax positions. For the full year 2025, our adjusted effective tax rate was 29.1%, slightly above our expectations of 27% to 28% due to discrete items in the quarter but still below last year's tax rate of 30.2%. For full year 2026, we expect our adjusted effective tax rate to be approximately 30%, in line with 2025. Operating cash flow was another highlight this quarter at $98 million, up 41% year-over-year. For the full year, operating cash flow totaled $333 million, up 17% versus 2024 and underscoring the durability of our cash generation. Credit agreement EBITDA for the fourth quarter was $173 million. We also repaid $30 million of debt in the quarter, maintaining a total leverage ratio of 2.8x while also increasing our cash balance by approximately $50 million. For additional details regarding the adjustments between adjusted EBITDA and credit agreement EBITDA as well as the calculation of our total leverage ratio, please refer to the presentation appendix and the earnings press release. Turning to Slide 9. Reported net sales for the quarter increased 6.3% year-over-year, while constant currency net sales were up 5.5%. We achieved year-over-year volume growth on a worldwide basis for the second consecutive quarter, up 3.1%. Pricing benefits were approximately $40 million in the quarter, and country mix represented approximately $10 million headwind to net sales. FX had a favorable impact of approximately $9 million in the fourth quarter, representing a year-over-year tailwind of 80 basis points I mentioned earlier. Moving to Slide 10. We have the regional net sales results for the fourth quarter. 3 out of 5 regions delivered year-over-year net sales growth in the fourth quarter on both a reported and local currency basis. On a sequential basis, these same regions showed sequential improvement on both the reported and local currency basis. Latin America delivered its second consecutive quarter of double-digit year-over-year growth. Reported net sales increased 18%, with local currency results up 11%. Results reflected favorable year-over-year pricing and sales mix, approximately 3% volume growth and a 660 basis point FX tailwind. Within the Latin America region, Mexico posted another solid quarter with reported net sales up 19% year-over-year and local currency net sales up 9%, driven primarily by favorable year-over-year pricing, approximately 3% volume growth and significant FX tailwinds. EMEA reported net sales growth for the third consecutive quarter with reported net sales up 9% and local currency net sales up 5%. Higher year-over-year pricing, favorable sales mix and FX tailwinds were partially offset by less than a 2% decline in volume. In Asia Pacific, reported net sales increased 5% year-over-year, while local currency net sales were up 9%, driven by approximately 9% volume growth and favorable pricing, partially offset by unfavorable sales mix and FX movements. As I mentioned earlier, India delivered its highest quarterly net sales in the fourth quarter with reported net sales up 15% year-over-year and 21% up in local currency. Top line growth was driven primarily by an approximately 18% increase in volume, along with a favorable year-over-year pricing and sales mix, partially offset by FX headwinds. In North America, sales declined by less than 1% year-over-year on volumes that were down less than 2%. This is consistent with the expectations we've previously communicated. Execution remains strong and momentum continues to build as we enter 2026. We expect the North American region to deliver full year net sales growth in 2026. China net sales were down 4% year-over-year on a reported basis and 6% on a local currency basis, driven primarily by an 11% year-over-year decline in volume. This was partially offset by favorable impacts from changes in the benefits and timing of the China customer loyalty program as well as favorable FX. Turning to Slide 11. We see the key drivers of the year-over-year improvement in fourth quarter adjusted EBITDA despite an approximately 100 basis point FX headwind and an approximately $11 million employee bonus accrual headwind, given the 2024 bonus was fully accrued by the end of Q3 2024, as I previously mentioned. Adjusted EBITDA for the quarter was $156 million, with margins of 12.2%. On a constant currency basis, adjusted EBITDA was $168 million, underscoring the continued underlying strength of our business. Looking at the bridge, we first see the drivers of the year-over-year change in gross profit, including our second consecutive quarter of volume growth, along with pricing benefits, partially offset by unfavorable sales mix and input cost inflation driven by lower absorption rates. Salaries represented approximately $8 million headwind, largely reflecting merit increases implemented in the first quarter of 2025. Promotional-related expenses declined by approximately $6 million year-over-year. And lastly, unfavorable year-over-year FX movements resulted in an approximately $12 million reduction in adjusted EBITDA. Before moving on, I want to highlight a presentation change we made to the financial statements to simplify how we report distributor-related compensation and to better align with how we model these costs internally and have historically presented them in the segment disclosure in our 10-K and 10-Q. In summary, we have separated selling expenses from SG&A. We've taken the service fees of our China independent service providers and combined them with distributor compensation previously reported as royalty overrides. These expenses are now presented together within selling expenses on the P&L. Similar updates were made to the balance sheet and cash flow presentation. Importantly, this had no impact on prior period results or key financial metrics. This was simply a presentation change that combined distributor and service provider-related payments within our financial statements. For those looking for continued visibility into China independent service provider fees, that information remains available in our segment reporting disclosures in both the 10-K and 10-Q. For additional details, please refer to the presentation appendix, earnings press release and Form 10-K. Moving to Slide 12. I'll provide an update on the capital structure. We ended the quarter with $353 million of cash, up nearly $50 million from the end of the third quarter of this year. During the quarter, we made the scheduled $5 million amortization payment on the Term Loan B and repaid the $25 million outstanding under the revolving credit facility as of September 30. As of December 31, the revolver was undrawn. Over the last 2 years, we have paid down over $530 million of debt and reduced our leverage ratio from 3.9x to 2.8x. Our financial profile today is much stronger than it was 2 years ago; and depending on market conditions, we may consider refinancing portions of our existing debt. While there can be no assurances regarding timing or outcomes, a successful transaction could meaningfully lower our borrowing costs. Regardless of whether or not we pursue any capital structure initiatives, we remain committed to reducing our gross debt to $1.4 billion by the end of 2028. Turning to Slide 13. I will walk through our outlook for the first quarter and full year 2026. We are continuing to provide net sales and adjusted EBITDA guidance on both a reported and constant currency basis. For guidance on a reported basis, we used the average daily exchange rates for the first 3 weeks of January 2026. For the first quarter, we expect foreign exchange to have an approximately $31 million positive impact on net sales. While currency is expected to be a meaningful benefit to the top line in the quarter, it's expected to be neutral to EBITDA for the quarter due to timing. On a reported basis, we expect first quarter net sales growth of 3% to 7% year-over-year, including an approximately 250 basis point tailwind from currency. On a constant currency basis, we expect net sales growth of 0.5% to 4.5% year-over-year. Adjusted EBITDA for the first quarter is expected to be in the range of $155 million to $175 million on both a reported and constant currency basis. Planned capital expenditures for the first quarter are expected to be $10 million to $20 million. Moving to our full year guidance. For the full year, we expect reported net sales growth of 1% to 6% year-over-year, including an approximately 100 basis point tailwind from currency. On a constant currency basis, net sales are expected to be flat to up 5% year-over-year. Adjusted EBITDA are expected to be in the range of $670 million to $710 million or $665 million to $705 million on a constant currency basis. With respect to tariffs, our 2026 guidance includes a preliminary estimate of the impact of tariffs enacted through yesterday, which we are currently expecting to be immaterial. For 2026, we expect capital expenditures to be in the range of $50 million to $80 million. Separately, we anticipate capitalized SaaS implementation costs of $40 million to $60 million, which are incremental to CapEx. Lastly, for the full year 2026, we expect an adjusted effective tax rate to be approximately 30%. Before moving to Q&A, I want to close my opening remarks with one final comment. The financial performance of this business has transformed significantly over the past 2 years. our sales trajectory looks much different now than it did 2 years ago as we carry a lot of momentum into 2026. Our adjusted EBITDA margin continues to expand and has improved by 180 basis points over the 2-year period. And we've generated substantial cash over the prior 2 years, despite meaningfully higher interest costs. And we have used that cash to pay down over $530 million of debt while lowering our leverage ratio from 3.9x and to 2.8x. And while our performance over the last 2 years has improved substantially, more importantly, we believe we have a strong foundation, both strategically and financially, to further generate shareholder value over the long term. This concludes our opening remarks. Operator, please open the call for questions. Operator: [Operator Instructions]. Our first question comes from the line of Chasen Bender from Citi. Chasen Bender: So I know you guys don't traditionally give guidance by region, but I was hoping you could do a little bit of around the world and give some more color on how you're thinking about sales for the different geographic segments in 2026. I know you called out you're expecting growth in the U.S. But if you could kind of flesh out the comments for your other geographies, especially given the really strong India results and how the GST impact should kind of flow through until we lap those changes, that would be great. John DeSimone: Yes. So we don't guide by region. I do want to give maybe a little bit of commentary. It'll be a very high level. I will say that we're expecting net sales growth in every region with the exception of China. China is expected more of a 2027 event. And that's about, I think, all I really feel comfortable giving out. Chasen Bender: Okay. Okay. Got it. And then as it relates to Pro2col, obviously, there's a lot of excitement building around the organization on that. I was hoping you could kind of frame your expectations in terms of the sales contribution you're expecting from that program and kind of what you've assumed in 2026 guidance. And then I guess to kind of stay in the realm of guidance, just on the EBITDA side, too. You've exceeded your quarterly guidance in each of the last 8 quarters, and if my math is right, you're only guiding to 20 to 30 bps of margin expansion in '26. It seems like you've built in a lot of flexibility there. So I'm just curious to understand kind of what your assumptions are and what's driving that degree of expansion. John DeSimone: So Chasen, that's a lot of questions. So let me see if I can hit them all. So... Chasen Bender: I'm sorry. John DeSimone: No, that's okay. It's great. On the Pro2col side, there's very little from a top line built in at this point. There's a lot more upside from vertical than risk. We're in beta phase right now. We launched commercially in the U.S. in July, and there will be a build from there, of course. So we haven't built a ton in. We have a few other beta tests we'll launch this year in some other markets, but again, the beta doesn't drive the kind of volume. It's more of an acclimation process and a build. So again, more upside than downside risk there. On SG&A, there's one complexity, which is the -- it's GST in India. So one of the drivers of sales in India is the government lowered its GST rate, which is a goods and services tax, so think of it as a sales tax, from 18% to 5% of a lot of our products. That's a big price decrease for consumers, and it's been very beneficial. However, on services, which is what our distributors provide to us and what we pay to them and on our intercompany services, that rate did not get lower. It's still 18%. We used to be able to offset those, the input and the output credits, and now we don't. So one of the things that's happening next year in -- with GST is there's a net of about $16 million incremental cost between G&A and member comp. The net-net is $16 million on -- negative impact on the bottom line. So our margins ex GST would be about 30 basis points higher than what you're seeing in guidance. So I know guidance -- by the way, we're getting margin enhancement and improvement next year anyway, and I think that's an important point. But there's also a slight drag on the percentage from the GST in India. However, the GST in India is great for our business because it's driving a lot more volume. Operator: [Operator Instructions]. Our next question comes from the line of Nicholas Sherwood from Maxim Group. Nicholas Sherwood: Kind of looking at the product categories, energy, sports and fitness was the fastest grower in 2025. Can you kind of talk about where that momentum came from? And how do you expect to continue that in 2026? John DeSimone: Well, if you look historically over the last few years -- not that -- I don't even know how many years, but it goes back quite a ways. We've been seeing that category outpace our overall performance as a company. So you see a slight decrease in the percent of our sales coming from weight management and a slight increase coming from targeted nutrition and from sports. And it comes from a various number of regions. But I also think we launched sports in India, had some growth this year in the sports products. I don't have a breakdown by market for each one of those categories. So that's just the general picture of what's happening in the business. Stephan Gratziani: There was also a little bit of an uplift with Nutrition Clubs with Liftoff, which is a very popular product that specifically was designed in the H24 product brand. So that's helped a little bit of the growth here as well. Nicholas Sherwood: Okay. And kind of talking about Nutrition Clubs, I noticed in the 10-K, there was wording about doing training in Europe, Middle East and Africa of -- on Nutrition Clubs for the distributors there. Can you kind of go into any more detail on sort of expanding that Nutrition Club infrastructure in that market or other markets? Stephan Gratziani: Yes. Nick, I think you're referring to the Breakfast Budget Clubs, which is a particular model that started in the U.K., which there's a lot of interest, and we do kind of biannual master classes where we'll have thousands of people actually that will come either virtually or physically to learn about this particular model that started in the United Kingdom, which now is starting to take roots in other markets as well. It's a really powerful, small club grassroots where people are literally coming to the club every single day. They're interacting with distributors. They're weighing themselves. They're talking about what kind of food they're eating. They're taking products, and it's really a community-driven one. We actually have a little bit of an uptake as well here in the United States with some of the distributors that have gone to the U.K. and understanding the model. So that's part of the strategy that we have in terms of master classes and making sure that our distributors understand what's happening in different markets, so they can see how it relates to their own and to be able to kind of import it into models in areas and geographies that make sense for them. Nicholas Sherwood: And then my last question is positive sales leader retention rates, especially in North America and Latin America in 2025. How much is that attributed to some of these training programs that have been going on for almost 2 years now, such as the Mastermind program? And kind of what -- where are you seeing is why so many more sales leaders were retained in 2025 compared to 2024? Stephan Gratziani: Yes, I think you see an incremental improvement. We have a very strong sales leader base. And so all of these programs that are designed to support them better, better education, better support, the key account management program, which has key account managers that are working with certain levels of leadership and going through their business metrics, I think everything helps. I just revert back to my experience as a distributor leader of an organization. And the more educated people are, the more understanding, the better strategy they have towards their business. It all makes a difference. So I think it's hard to point to one thing. I think it's really the totality of the things that we've been doing over the last couple of years, but it definitely -- all the pieces make a difference. Operator: [Operator Instructions]. Our next question comes from the line of William Reuter from Bank of America. William Reuter: So my first question is around products and how much they may have contributed to expanded sales in fiscal year '25 versus previous years. Was there an increase in that percentage of what you offer that was part of the contribution? Stephan Gratziani: Well, just to talk to kind of North America. We had a very successful launch of MultiBurn that was launched at Extravaganza just previous to -- prior to Extravaganza, which really helped us to have the performance that we had in Q3. Overall, I think we're doing a good job. In EMEA, we had the launch of the Skin, which really -- HL/Skin, which was, again, a successful launch. I think we have been launching successfully products probably the most that's ever happened in the history of the company. It's 2 very successful launches. So we continue -- I think there's learnings that are taking place, and as we roll out more products, we're just getting more effective at how we're rolling out product lines and products. William Reuter: Got it. And then just secondarily for me, you have been increasing your number of distributor events over the last 2 years really. What is your expectation for fiscal year '26 in terms of are you going to be doing more events? Are you going to be doing fewer larger events and what the total spending on those may be on a year-over-year basis? Stephan Gratziani: Yes, I'll let J.D. hit the total spend. Overall, we really go by the markets and regions. India had increased to more Extravaganzas, which are the big one based on the needs. Asia Pacific last year went to 2 Extravaganzas instead of 1. So it really depends. I think, overall, we try to stay in line with what the spending is based on the region. But I would say, in general, we try to do more events, more attendance. We've been tracking increases on an annual basis. Obviously, coming out of COVID, where we didn't have events, there's been a ramp up. But I'll let J.D. -- I'll refer to J.D. on the costs overall. John DeSimone: Yes. There's multiple lines we look at when we think of supporting our distributors, and events is just one of those lines. And event costs are expected to go up next year. A little more than sales is going to go up. But we're funding it both from the sales and from some other lines in the advertising promotion area. So it's not a material change overall. Operator: [Operator Instructions] Our next question comes from the line of John Baumgartner from Mizuho Securities. John Baumgartner: I'd like to ask -- Stephan, I'd like to ask, as you're making these investments in the personalized technology and more specialized new products, the MultiBurn, the Life I/O, it really feels like a new Herbalife that's much more geared to where the health and wellness market is going. And as you move down this path with an evolving product portfolio, how do you think about product customer fit? Is there a need to maybe also augment your legacy customer base with maybe higher income households or consumers who are more intense users of supplements? Just how do you think about complementing an evolving product offering with also evolving or expanding your consumer base to maximize the revenue opportunity? Stephan Gratziani: Yes, it's a great question, John. I think the strength of our business, when you look across the geographic regions, is you have different levels of people using the products through different models for different reasons. Number one, we believe there is a more sophisticated customer that has higher expectations in certain markets, the United States, for example. Europe is another example. There's other markets that lag a little bit just in terms of what they're seeing and what the competition is doing. Overall, as a company, we believe that the world will come to a place where everyone wants a more personalized solution. And for some, that means a bespoke personalized formulation in a product in certain markets. In others, it means just the best data that leads for the certain individual, the best product for them. And so we're expanding the breadth of what we're offering to attract more people, and I appreciate, by the way, the comment just on kind of a new Herbalife. That's the goal, that we can go out and attract customers like you've seen with MultiBurn, with Baseline. And we believe, ultimately, with a personally formulated product, which actually there is -- I don't want to say 0 competition but very small competition for, we want to own that category. And so we believe that it's going to attract customers that we never would have had. At the same time, we want to double down and be more strategic on the current business that we have because it's an existing $5 billion business across 95 markets. And so we -- our strategy is across everything actually. We want to expand. We want to attract more, but we actually want to engage more of our current customer and go deeper in the product lines that we have. One of the things -- I mean, no one's mentioned it yet, so I'll just make mention of it right now. The other announcement that we made today around Cristiano Ronaldo, so number one, you have an athlete that is probably, number one, has the most following in the world in terms of any athlete. Number two, he's now 40 years old but is still competing at the highest level in terms of performance, and it's someone that has his entire career has been built around measuring and having inputs into his own health and wellness and performance and then personally customizing by formulation and by curation what to take in terms of supplementation. That's how we got together 12 years ago in terms of a partnership. And so then his lifestyle, right, in terms of how much sleep does he get, the recovery, all of the things that he does to recover to be at the top of his performance, this is the philosophy around Pro2col. This is where the company, we are going, and this is why we have this alignment and this partnership because we believe the future of health and wellness. And this is what Pro2col and Herbalife is really about, is data in and the more data and the precise data that you have that leads to your health and wellness and where you are on your goals with the output of what your precise nutrition should be, which is where personally formulated comes in and curation comes in, then the lifestyle aspect of it, which is making sure that everything else you're doing besides your data in and what you're taking, you're doing the best that you can for your lifestyle because that's where real long-term change comes and results come. And then we believe with our community, which is our superpower, the 2 million distributors, that they are in the best place to do what they've been doing for 45 years, which has helped people get the best results possible. So again, I know it was a question around the products. It was probably a little bit more than you asked for, but we will go broader. We're going to go and get more different types of customers, and we're going to support the existing and go deeper in the current markets and portfolios that we have. So we're super excited about where we're going in the future. John Baumgartner: That was great. And then my follow-up on India, the volume growth there has decelerated going back to, I think, around mid-2024, but you saw a really nice bounce back in Q4 '25. And John, you mentioned the GST benefit. And I'm curious to the extent to which you saw any sort of related one-off benefits supporting volume this quarter relative to the extent to which this reduced GST, you can ride it as a tailwind until it's lapped late in 2026. John DeSimone: Yes. So it is -- we expect it to be a tailwind until we lap it in late September of 2026. It may be a declining tailwind. I mean the GST is not going to change from this reduced rate. At least, that's not our expectations, right? But maybe the excitement around it will get reduced a little bit, but it will definitely -- our expectation is it will definitely be a tailwind for the next 9 months. Operator: [Operator Instructions]. Our next question comes from the line of Carolyn Popelka from Barclays. Carolyn Popelka: This is Carolyn Popelka on for Hale Holden. My question relates to the distributor to member model. we've seen pretty outsized distributor growth, especially on a 2-year stack. So I was wondering if you could expand on the relationship between distributor growth and members growth. I think intuitively, with the current market, you might think more people want to be distributors looking for extra income, but on the other side, people might have less discretionary income for health and wellness. So is there a mismatch there? Stephan Gratziani: Carol, thanks for the question. I think I just want to make sure, but you're talking about preferred members, I think, which is more of the customer type that you're talking about? Carolyn Popelka: Yes. Stephan Gratziani: Okay. Good. Yes. Well, look, it's both, right? The opportunity that people are looking for to have a financial opportunity, I think we're all clear that, that remains and will continue to remain something that there's a large attraction and interest and need for. At the same time, you said it. Health and wellness and people taking care of themselves and reaching their goals and what's important to them is also a major factor. The one thing that you might see just in terms of the distributor recruiting numbers versus the preferred member numbers is that we did launch 2 years ago something that we called Herbalife Premier League, which put a bit of a focus on distributor recruiting. And when we did that, there was a little bit of a focus on distributors more than preferred customers. For the first year that we ran the program, it ended up having more of a focus on the distributors. We made an adjustment in 2025 to actually account for preferred customers because a lot of markets in their models and flows they really kind of led with preferred customers. So I think as you see those numbers, there might be some level of fluctuation. All in all, it really depends on the distributor models. We could have more preferred -- so for example, preferred customers in India, it drives a lot of growth for us. It's not direct distributor recruiting it drives because it's really attuned to their model and the way that they actually build the business there. So I would say both remain highly interested and attractive, and our distributors are focused on both. Operator: [Operator Instructions] Our next question comes from the line of Doug Lane from Water Tower Research. Douglas Lane: I just want to follow up on the Pro2col here. You made the small IP acquisitions last year, and I don't remember Herbalife making a lot of acquisitions in the past. And now you have Ronaldo with an equity partnership in one of your parts of your business, I don't remember you doing a lot of equity partnerships in the past. So is this just one-off opportunistic? Or is this part of a new strategy going forward? John DeSimone: Doug, this is John. I think most of that question is going to go to Stephan, but let me see if I can set it up financially anyway for this audience. So our superpower, our strength is our distribution reach, right? We're in 95 countries, tens of thousands of communities, great reach into the consumer base around the world. We are interested from an acquisition standpoint in companies that are relatively small that have great content that don't have that distribution. And so we can buy the content and leverage that strength of ours. And for investors, what I think is important to understand is it augments the core business. It's not instead of. Second is it's not a huge use of cash. We're still looking to do small acquisitions but still get our total debt down to $1.4 billion by the end of 2028. And that content can be technology content. It can be product content. In addition, of course, if we can partner with somebody that can help expand our business in a way that makes economic sense, we're looking to do that, too. So it all has to fit our vision. And so I'm going to pass it to Stephan. He can maybe talk more a little bit about the vision and how things fit. Stephan Gratziani: Yes, Doug, thanks for the question. I think it comes down to, when you think about the 4 things that we've done historically for 45 years, it's been the what to measure right, the inputs for health and wellness. By the way, I'll just kind of -- my experience, when I came in at 1991, we were primarily weight loss. If I had a customer, the question would be how much do you want to lose. And the measurements would be how much did you weigh this morning, and then let me take a tape measure and let's measure your hips, your waste, your thighs, your arms. And let's start with those measurements. And then let's track. So we've always been measuring. It's just, today, in the world of health and wellness, what people measure has grown exponentially. And so we believe that there's a lot of value in what people are looking at that are insights into their health and their wellness. So in terms of acquisitions and partnerships and things, building on what John mentioned, in the what to measure space, there could be some interesting opportunities. That's all I'll say in that area. On the what to take space, because for 45 years, we've been telling people what to take, which is our Herbalife products, right, we believe also that in that space, if there are opportunities of products that we believe are beneficial or technologies like personally formulation of product technologies, these could be things that could be interesting because, like John said, it aligns with our platform. On the what to do space, it's the same thing, right? So telling someone -- and I used to sit down with the customer and write on a piece of paper, this is how you're going to -- you're going to take 2 shakes a day, 3 times your tablets, have 1 normal meal. Here's some protein intakes that you should have. We don't do things on paper anymore. It all happens through a digital layer. So when you think of Pro2col and you think of actually helping people know what to do -- and by the way, where their measurements are going to come in, too, and then telling them what to take or personally formulating something for them, you need a digital application layer. And so not just to be able to tell them what to do but to help them do it, like a reminder. Are you drinking enough water? Are you taking in enough protein? Are you eating within the eating window? So those 4 buckets, the what to measure, the what to take, the what to do and support in doing it, and then the who to do it with, which is the distributor that we want to connect closer to their customers and so that they can support their customers better to create more value for the customers and gain more value, a longer customer, someone that refers more, someone that buys more and longer; and so ultimately, someone that says, I love what you do, I love what you're about, and I want to be a part of this, and I want to help other people. So acquisitions, as we look at this, it's really about what really fits in our platform vision and in terms of partnerships, this is what Cristiano Ronaldo -- this is why we are partners. This is why he's invested because he believes in this vision. The one thing that I will say that this is not a diversification of business for us. We don't make these acquisitions because we think that our direct sales model, we need to diversify and move into other channels. This is an acquisition strategy to support our superpower, which are the 2 million distributors in 95 markets, that the business that we have today is because of them. And our whole goal is to give them more interested products, opportunities to talk to people, bring more people into their business, their ecosystem, our ecosystem and deliver more value. And so I think John said it. Small, products and services, capabilities that can deliver more value to our vision and to our platform and to our distributors and to our customers, that's really how we're looking at this. Operator: At this time, I would now like to turn the conference back over to Stephan Gratziani for closing remarks. Stephan Gratziani: Well, thank you, everyone. I'm going to keep this brief, but I think we can say that we've returned to growth. We delivered growth in Q3, Q4 and for the full year of 2025. We're guiding growth in Q1 and for the full year of 2026. I think the performance is reflected in the team that's really disciplined. We're being fiscally responsible. We strengthened the foundation, expanded margins, generating strong cash flows, fortified the balance sheet, reduced total leverage down to 2.8 from 3.9, are positioning the company for sustainable and profitable growth. And we're looking at things differently. Number one, we understand that our superpower is our distributors and this base and this foundation that was built over 45 years. So now we announced today a partnership with Cristiano Ronaldo, which is going to give Herbalife Pro2col and what we can deliver to the world more visibility than ever before. We recently made some acquisitions that we believe are giving us an expansion and will give us the possibility of leading in terms of where we believe nutrition is going for the future. And we're focused. We have not -- and by the way, this is not a departure for who we are. The results that we have today is really about what we've been doing for the last 2 years. It's the culmination of so many things that we've implemented. Market optimization efforts, the Diamond Development Mastermind, key account management programs, the Premier League, bringing in Eric Worre to support our distributor leadership, product launches, master classes and DMO and so many different things. So doubling down on our existing business, doubling down on the fact that we believe that the direct sales channel and our distributors and Herbalife in the 45 years and the 60,000 Nutrition Clubs around the world puts us in a position to do something that no other company can do. And so we thank you for being with us, and it's kind of joke -- a little bit of an inside joke because I think I'm ending every quarter by saying stay tuned next quarter, and you've been doing that. So I thank you for that. And I'll just end with saying stay tuned until next quarter. Thank you, everyone. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good day. Operator: And welcome to the Endava plc Second Quarter 2026 Results. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Laurence Madsen, Head of Investor Relations and ESG. Please go ahead. Laurence Madsen: Thank you. Good afternoon, everyone, and welcome to Endava plc's second quarter of our fiscal year 2026 conference call. As a reminder, this conference call is being recorded. Joining me today are John Cotterell, Endava plc's Chief Executive Officer, and Mark Thurston, Endava plc's Chief Financial Officer. Before we begin, a quick reminder to our listeners. Our presentation and our accompanying remarks today include forward-looking statements, including, but not limited to statements regarding our guidance for Q3 fiscal year 2026 and for the full fiscal year 2026, the impact of headwinds facing our industry and business, trends in our industry, including with respect to development with AI, enhancements to our technology and offerings, the benefits of our partnerships, demand from clients for our technology services, our ability to create long-term value for our clients, our people, and our shareholders, and our business strategies, plans, operations, and growth opportunities. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. Actual results and the timing of certain events may differ materially from the results or timing predicted or implied by such forward-looking statements and reported results should not be considered as an indication of future performance. Please note that these forward-looking statements made during this conference call speak only as of today's date, and we undertake no obligation to update them to reflect subsequent events or circumstances other than to the extent required by law. For more information, please refer to the Risk Factors section of our annual report filed with the Securities and Exchange Commission on 09/04/2025, and in other filings that Endava plc makes from time to time with the SEC. Also, during the call, we will present both IFRS and non-IFRS financial measures. While we believe the non-IFRS financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with IFRS. Reconciliations of such non-IFRS measures to the most directly comparable IFRS measures are included in today's earnings press release as well as the investor presentation, both of which you can find on our Investor Relations site or on the SEC website. The link to the replay of this call will also be available on our website. With that, I will turn the call over to John. John Cotterell: Thank you, Laurence, and welcome everyone. Mark Thurston: We appreciate you joining us for our second quarter fiscal year 2026 earnings call. Twenty-six years since its founding, earlier this month, Endava plc passed. During these years, we have been through significant technology shifts, each time with a founder mindset intent on driving transformation as fast as possible in order to emerge as a leader. Today, my mindset is no different, as the AI shift is underway. Over the past several quarters, we have been investing heavily in our pivot towards AI to establish Endava plc as an AI leader. These investments have encompassed recruitment and training of next-gen talent, introducing a shift towards becoming AI-native, building our partner ecosystem, and evolving our engagement strategy. I would like to flag some highlights of the quarter. Revenue totaled £184,100,000, representing a 5.9% decrease year on year and up 3.3% from Q1 FY 2026. We are seeing strong initial interest with clients on Dava Flow, our AI-native engagement life cycle. We continue to expand our network of strategic partners and broadened several existing relationships, further expanding our reach. A PayNetNets joint venture, recently appointed as NexSys technical operator by NexSys Global Payments, has selected Endava plc to design and build its cloud-native cross-border payment switch on AWS, underscoring our depth in the payment vertical. We believe we are building the operational agility required to achieve long-term growth. Over the quarter, we advanced several enterprise-scale AI projects that illustrate both the breadth of client demand and the speed at which AI-native delivery models can create measurable impact. We are helping a leading global payments network modernize a critical driver of revenue. John Cotterell: The chargeback dispute system. Mark Thurston: That currently needs more than a thousand people to run. The challenge is a rule book that amounts to thousands of pages and is hard for anyone to follow. Our system uses AI to read those rules, turn them into clear, checkable logic, and link each one to the right data so cases can be routed and analyzed automatically. Halfway through the six-month projects, early results are promising. The new system is easy to use, fully auditable, and will sharply cut manual effort while making decisions more consistent when it goes live. Over several years, we have helped a leading global specialty insurer use AI and data science to streamline pricing, insight generation, and automated data ingestion. Traditional operating models limited impact, so facing increasing competitive pressure and new entrants, the insurer committed to a faster AI-native approach. Working with the client, we set up a ring-fenced incubator inside the organization that can build an end-to-end AI-native insurer while keeping clear governance and visibility for leadership and underwriting teams. The program has three linked work streams: digitization, the automation of submission data enrichment, pricing and quoting; hypothesis-driven change, which tests value-add ideas such as new data sources and new revenue models; and tactical value creation, which feeds proven ideas back into business-as-usual in partnership with stakeholders. To date, the digitization work stream has been rolled out across two business lines. Using agent-based delivery, we stood up a fully operational AI-native workflow in roughly three weeks and built a backlog of more than 50 improvement hypotheses. Though still early, the results underline how rapidly AI-native capabilities can scale when governance and execution are explicitly tuned for speed. These milestones show that the initiative has moved beyond experimentation and is now entering a more mature, scaled phase of AI implementation across the organization. Let me now turn to Dava Flow. Client interest continues to build. Clients report faster delivery, tighter control, and full traceability versus legacy models. In a recent project, we opened with a signal session, the first step in an engagement, where agents and teams capture, enrich, and interrogate market, client, and operational signals to test assumptions and define a clear value hypothesis. In just 90 minutes, the session gathered live inputs, ran synthetic workshops, and produced an opportunity assessment, market and strategic insights, product requirement documents, and an agent-ready backlog—work that would normally take several weeks. Two live Dava Flow engagements now sit at different delivery stages. Early results show higher productivity, better quality, and strict policy adherence. Autonomous agents manage routine tasks under policy-as-code governance, freeing engineers for orchestration and critical decisions. Over the coming quarter, we expect to broaden the delivery portfolio, convert growing interest into larger outcome-driven programs, and further refine the model using feedback from live engagements. I will now turn to recent developments in our strategic partnerships. January marked the completion of our first year as an official services partner of OpenAI, and we are seeing growth in demand as clients scale proofs of concepts into enterprise-wide deployment of Enterprise ChatGPT. Our partnership with OpenAI's go-to-market team is resulting in a pipeline of potential opportunities across industries such as insurance, healthcare and life sciences, and public sector. In collaboration with OpenAI, we have been engaged by Entain, one of the world's leading betting and gaming operators, to roll out enterprise-wide ChatGPT enablement and role-specific AI training that supports responsible generative AI adoption and measurable productivity gains. Additionally, last quarter, we broadened our expertise across OpenAI's product suite, continuing to graduate additional sales and technical specialists from our intensive training programs across APAC and EMEA. Demand for our services across all three of our major hyperscale partners—AWS, Google Cloud, and Microsoft Azure—is accelerating, primarily fueled by clients' core modernization initiatives to retire costly legacy systems and by their accelerating adoption of AI solutions. With AWS in particular, we secured several notable wins and renewals, particularly in the financial services sector in the UK, USA, and Asia Pacific. Clients are asking for repeatable, proven solutions that de-risk technology change. In response, we released two new AWS Marketplace offerings: an accelerator for cloud application engineering and an AWS Landing Zone. Our multiyear strategic partnership with Paysafe, a leading payments platform, aims at enhancing innovation in payments and digital community engagement, notably fan engagement. As part of accelerating Dava Flow, we have forged two complementary partnerships. First, with Miro, by embedding their AI innovation workspace across our global delivery network. Through this process, we increased the speed of decision-making, improved team alignment, and enabled scalable AI-driven workflows, providing clients with greater speed and confidence in their AI transformation journey. Second, our partnership with Cognition broadens the reach of our agentic coding, giving thousands of AI-native engineers access to Devin and strengthening our joint go-to-market for enterprise-grade outcomes. Together, these partnerships deepen the capabilities of Dava Flow, from collaborative ideation through automated code delivery, creating an end-to-end AI-powered change delivery engine. We believe our partner ecosystem, ranging from global hyperscalers and sector leaders to emerging scale-ups, is essential to both client outcomes and our profitable growth. To support this initiative, in November, we launched Dava Rise, a venture acceleration program that converts start-up innovation into solutions deployable at enterprise scale. By connecting high-potential ventures with Endava plc's AI-native global delivery capabilities and established client relationships, Dava Rise accelerates the path from concept to enterprise-ready solutions. This collaborative model gives clients access to emerging technologies that address specific business challenges and deliver measurable impact across industries. We launched the inaugural Dava Rise cohorts in partnership with Octopus Ventures, selecting ventures in their portfolio whose offerings align with identified client needs. I would like to highlight several client wins that demonstrate the tangible value we are delivering. As mentioned earlier, a PayNetNets joint venture, recently appointed as NexSys technical operator by NexSys Global Payments, has selected Endava plc to design and build its cloud-native cross-border payment switch on AWS. The platform is intended to interconnect national instant payment systems into a single real-time network, advancing global interoperability. The appointment of the PayNetNets joint venture follows a competitive multivendor tender and underscores Endava plc's expertise in real-time payments architecture and delivery. We extended our strategic delivery commitments with two of our largest payments customers, reinforcing the strength of retained trust and delivery assurance we continue to enjoy with these major industry names. We worked with Accor Plus, a leading lifestyle loyalty subscription program in the hospitality sector, to successfully overhaul their payments infrastructure and loyalty program across Asia Pacific. In the first phase of the project, we replaced their legacy processor with a scalable plug-and-play solution, simplifying the loyalty architecture to support rapid membership growth and deploying the solution across 10 markets. In the first 30 days following launch, product page conversion increased by 39%, providing Accor Plus with a more reliable, scalable foundation for future expansion. At December, we expanded a strategic partnership with a manufacturer of vehicles, replacing a leading global technology services competitor in this arena. The new workstream adds an AI-enabled digital CRM to raise delivery efficiency and elevate customer and digital experience. Endava plc has entered into a three-year strategic partnership with Bolero International. A banking-grade software company that simplifies the B2B trade of goods and enables the secure, compliant digitization of international trade processes. Our partnership supports the development and expansion of Bolero International's product portfolio, giving organizations the confidence to operate at a scale that was previously too complex and costly for most. Additionally, through Endava plc's Dava Rise program, Endava plc is working closely with Bolero International to accelerate product buildouts and take advantage of mutual partnership opportunities. Endava plc is partnering with a global life sciences company to turn its agentic AI prototypes into governed, platform-supported products that can be measured and replicated across the business. The program accelerates delivery of safe, repeatable AI at scale, while defining and helping implement the organizational changes needed across talent, operating model, and culture for the company to become an AI-first enterprise. To drive adoption and demonstrable results, Endava plc has also introduced dynamic solution squads that co-create with domain owners through an outcomes-focused approach. We ended the quarter with 11,385 Endavans, representing a 2.4% decrease from the same period last year. We continue to streamline roles in areas of softer demand while broadening and upskilling our AI talent base, embedding new capabilities across the business to help clients integrate new technologies into their workflows. Before we close, I want to thank every Endavan. Your dedication and professionalism continue to steer us through a fast-moving technology landscape and convert change into tangible results for our clients. I will now hand over to Mark for a closer look at our quarterly financial results and guidance for the upcoming quarter and the remainder of the fiscal year. Thanks, John. Our revenue exceeded the upper end of the guidance issued for the quarter ended 12/31/2025. Revenue totaled £184,100,000 for the quarter, as compared to £195,600,000 in the same period in the prior year, representing a 5.9% decrease. On a constant currency basis, our revenue decreased 5.1% from the same period in the prior year. On a sequential basis, revenue increased by 3.3% compared to Q1. Loss before tax for the three months ended 12/31/2025 was £7,200,000, compared to a profit of £2,500,000 in the same period in the prior year. Our adjusted PBT for the three months ended 12/31/2025 was £10,700,000, compared to £21,800,000 for the same period in the prior year. Our adjusted PBT margin was 5.8% for the three months ended 12/31/2025, compared to 11.2% for the same period in the prior year. Our investment in our AI-native delivery model and in next-gen talent has impacted our adjusted PBT margin and will continue to do so as we continue our shift towards becoming AI-native. We estimate it has reduced the adjusted PBT margin by approximately 3% through Q2 FY 2026. Our adjusted diluted earnings per share, which fell within our guided range, was 16p for the three months ended 12/31/2025, calculated on 52,900,000 diluted shares, as compared to 30p for the same period in the prior year calculated on 59,600,000 diluted shares. Revenue from our 10 largest clients accounted for 35% of revenue for the three months ended 12/31/2025, compared to 36% in the same period last fiscal year. The average spend per client from our 10 largest clients decreased from £7,100,000 to £6,500,000 for the three months ended 12/31/2025, as compared to the three months ended 12/31/2024, representing a 7.9% year-over-year decrease. Of this, John Cotterell: FX movements contributed to a 2% year-over-year decrease. Mark Thurston: In the three months ended 12/31/2025, North America accounted for 40% of revenue, Europe for 23%, the UK for 31%, while the rest of the world accounted for 6%. Revenue from North America decreased by 5.1% for the three months ended 12/31/2025 over the same period last fiscal year. The decrease was driven mainly by an FX headwind of 3.3% and the lack of contribution in the current quarter from the significant media client whose loss we reported last fiscal year. Comparing the same periods, revenue from Europe declined 8.5% due mainly to weakness in payments and mobility. The UK decreased 9.1% due mainly to the reclassification of a large payments client from the UK to North America as the relationship with that client is now based there, which was mentioned last quarter. We also experienced weakness in TMT in the UK this quarter. The rest of world increased 21.8%, driven mainly by the payments and TMT verticals. Our adjusted free cash flow was £20,100,000 for the three months ended 12/31/2025, down from £31,600,000 during the same period last fiscal year. Our cash and cash equivalents at the end of the period totaled £68,500,000 at 12/31/2025, compared to £59,300,000 at 06/30/2025, and £60,100,000 at 12/31/2024. Our borrowings increased to £202,700,000 at 12/31/2025, from £180,900,000 at 06/30/2025, and £123,700,000 at 12/31/2024, in support of the funding requirements of our share repurchase program. Spencer Anson: Capital expenditure Tyler DuPont: for the three months ended 12/31/2025, as a percentage of revenue were 4.4% compared to 0.2% in the same period last fiscal year. The increase is mainly related to a onetime spend on Payments Accelerator, our internally developed payments gateway accelerator, which broadens our ability to secure a wider range of commercial engagements. Payments operators. The development of this solution leverages our Dava Flow ways of working. As of 01/31/2026, we purchased approximately 8,000,000 ADSs for $121,900,000 under the share repurchase program, and we had $28,100,000 remaining for the repurchase under our Board's share repurchase authorization. Before moving on to the guide, I would like to provide some context. The U.S. Dollar's ongoing weakening against our reporting currency, GBP, continues to create revenue headwinds. Revenue guide is being largely maintained in absolute terms, but the growth is stronger in constant currency terms by 1% for the full year. In addition, as I mentioned previously, we continue our investment in AI-native delivery and next-gen talent, which also continues to impact the adjusted PBT margin in the guide. Now moving on to the guide. Our guidance for Q3 fiscal year 2026 is as follows: We expect revenue to be in the range of £182,000,000 to £185,000,000, representing constant currency revenue decrease between 4%–2.5% on a year-over-year basis. We expect adjusted diluted EPS to be in the range of 18p–21p per share. Our guidance for full year fiscal 2026 is as follows: We expect revenue to be in the range of £736,000,000 to £750,000,000, representing constant currency revenue decrease of between 3.5%–1.5% on a year-over-year basis. We expect adjusted diluted EPS to be in the range of £0.80 to £0.86 per share. Spencer Anson: It is above guidance for Q3 fiscal year 2026. Tyler DuPont: And the full fiscal year 2026 assumes the exchange rates on 01/31/2026. And the exchange rate was £1 to $1.37 and £1 to €1.15. This concludes our prepared comments. Operator, we are now ready to open the line for Q&A. Operator: We will now begin the question and answer session. Our first question comes from Puneet Jain with JPMorgan. Please go ahead. Puneet Jain: Hey, thanks for taking my question. Bryan Bergin: So I wanted to ask about the fiscal year guidance, which implies nice sequential growth in Q4 after flattish third quarter on FX-neutral basis. So can you talk about what drives that growth in fourth quarter? Is it the large deal ramps, billing days? If you can double-click on drivers for growth in fourth quarter. Tyler DuPont: Thanks for the question, Puneet. I think stepping back to Q3, it looks flattish when you look at it, but as I said in the opening comments on the guide, due to the weakness of the U.S. Dollar, there is FX headwind quarter on quarter about 1.5%. I think the other thing that needs recognition in our Q3, which is a quarter to March, is we have lower working days than we had in the previous quarter, which is a further headwind of minus 3%. So the underlying growth in Q3 quarter on quarter is about 4% at the midpoint of the guide. Now going to Q4, we actually have an increase in working days when compared to the quarter to March, which had about sort of 2% growth. So the midpoint, it looks like a sequential growth of about 8%. It is actually about 6%. That compares against an underlying growth that we saw in Q3 of about 4%. Now in terms of what underpins that Q4 pickup, it is basically some of the deals that we have highlighted that we have won that have been secured that provide the underpinning for growth. Got it. Got it. Bryan Bergin: And then I think you also mentioned extending commitments with two largest payment clients. Can you share more details around the scope, type of work? And if we should expect continued sequential growth beyond this year, given the pipeline and overall opportunities you see? Mark Thurston: Yes. So that was extensions of work with a couple of our larger payments clients, in fact the two largest. There has been quite a stream of that coming through as we went through the new calendar year coming into play. And most of it is extensions. There is a little bit of incremental in it, but most of it is extensions on the run-rate level that we had in Q1 and Q2. The relationships remain good. The sort of work is in the switch or gateway type space and continuing to help our clients rationalize the costs of those estates, but then also enhance the value propositions for customers coming out of their capabilities in that space. Bryan Bergin: Okay. Thank you. Operator: And the next question comes from Kate Kronstein with TD Cowen. Please go ahead. Hey, thank you for taking my questions. Wanted to follow up on some of the guidance assumptions here. Wanted to ask, particularly on the margin front, you guys talked a little bit about the increased investments here that are going to drive some of that adjusted PBT to be a little bit lower. Are those investments coming in higher than expected now in the second half because the EPS guide is a little bit lower? Just trying to think Maggie Nolan: better revenue view with the lighter EPS view. Is that largely investments coming in higher than expected, or is there any sort of FX impact there in terms of the guidance? And if possible, can you break out the FX impact on the margin front? Tyler DuPont: Right. Thanks for the question. I would say that it is slightly heavier investment in the second half. I mean, John referenced partnerships with Miro and Cognition, which are key components for Dava Flow. So we have entered into licensing the software with those providers. And it is a wider partnership than just a supplier-vendor relationship. So they weigh a little bit more on margin. So that sort of 3% is continuing investment I see being about that level as we go forward into the second half. In terms of FX, I think it does weigh on us in terms of the gross margin certainly. The weakness of the dollar certainly at 1.37 and, you know, even a quarter ago when we were guiding for this quarter it was 1.32. It impacts gross margin. It is a little bit at the edges. It is like about 0.5% or so as we have a balanced global workforce, but it is a headwind. And it does mainly impact revenue growth rather than margin for us. Maggie Nolan: Gotcha. And I know that you guys have been a strategic partner for OpenAI, one of the early actual deployment partners there. So curious if you could touch up a little bit on the OpenAI GPT Enterprise adoption trends that you guys are seeing in the market? Then additionally, we have heard some comments in the past few weeks. There has been a little bit of a narrative around services and software displacement as a result from some of the offerings coming from these foundational model providers. Do you guys have a view there? Just curious if there is any sort of way to dispel some of those fears. Spencer Anson: Yeah. Sure. Mark Thurston: I mean, OpenAI, our relationship with them is very strong. We have adopted Enterprise ChatGPT across the business. And so it underpins a lot of our AI approaches. We are also in the market jointly selling with them. And that is leading to some success. I covered one or two of those in my opening remarks. I mean, with OpenAI, the opportunity is opening up the enterprise market for them. They have had a lot of success from a consumer market point of view. And we are one of the people who are going down the learning curve with them on how to really make their platforms work in an enterprise context. And those approaches and what we are doing with them there is what is leading to success in the market and some of the opportunities that are coming through. So we remain very excited about that relationship with them. You all have picked up we also have relationships with the other hyperscalers and large language model providers in the market. And we are seeing equally exciting opportunities with those guys. On the services and software displacement question, I think Maggie Nolan: you know, Mark Thurston: a lot of the reaction is looking at some of these things at a very simplistic level, i.e., almost a consumer market level. Or you can create code much more quickly using agentic AI solutions and so on. Actually, when you project that into the enterprise market, the adoption challenge is different. It is much higher, requires a different delivery model that is going to handle the governance, the regulatory framework, and the value realization, and the access to data, the modernization of legacy systems all come into play. And the out-of-the-box consumer-level, small project-level solutions do not address all of those things. It is one of the reasons why we have created Dava Flow as a replacement to Agile as a delivery method. Because Dava Flow addresses the governance and the regulatory, the consistency John Cotterell: the Mark Thurston: enterprise environments that you are plugging into in a way that Agile does not. Agile was a methodology that was set up to enable interactions between people in the creation of software. When you start moving into an agentic type situation, Operator: the Mark Thurston: people interactions person-to-person are less important than the interactions people-to-machine. And that requires a different development methodology, which is what we have built to work in these complex enterprise environments. So we actually see a lot of opportunity as enterprises start to address all of these complex issues around the implementation of AI and a growth in demand because there are many things that enterprises have not been able to do in the last 20 or 30 years, like address their legacy systems. The AI actually enables a cost-effective route to addressing as well as then delivering business benefits that were not possible without AI. So actually, we see the uplift in market opportunity, certainly for the next five to ten years, outweighing, as enterprises start to adopt at scale, outweighing the productivity headwinds that people are concerned about. Thank you. Operator: Our next question comes from Antonio Jaramillo with Morgan Stanley. Please go ahead. Hey, guys. Thank you for the question. I wanted to go back Maggie Nolan: to your guys' top line guidance here and kind of go back to the Operator: assumptions baked in there. Could you walk through how your spend around your top customers are baked into that? And then also, could you remind us what your pipeline and your booking assumptions are as well? That would be helpful. Tyler DuPont: I am not quite sure what you mean by the top spend clients. Do you mean the sort of profile of our top 10 clients and Operator: the profile quarter on quarter? Yep. So okay. So Tyler DuPont: I think broadly, we see a lot of stability in that top 10. It is dominated by our payments clients. We expect a little bit of a slowdown in our large healthcare client in Q3, but then for that to resume as we go into Q4. But that is the only change in the profile. So we do expect sequential growth quarter on quarter. In terms of pipeline assumptions, we usually quote this split of contracted and committed to pipeline. So certainly for Q3, which we are guiding at, it is around 95% and slightly lower at the top of the guide. And then as we look into Q4, we are at a 70%–75% contracted and committed, which is typically what we have seen in recent history. I think there is a high degree of confidence around pipeline conversion. And that is based on deals that we have secured throughout the course of the year and also the strength of the order book, including the ones secured in January. So it may look as though, as I said, the caller that we have this step up from Q3 to Q4, but actually it may look like that. But it is actually an underlying 6% compared to a 4% sequential growth in Q3. So it is a relatively modest underlying quarter-on-quarter growth expectation from Q3 to Q4. Mark Thurston: I think the only thing that I would add to that is the market continues to have a level of uncertainty to it that we did not see three or four years ago. And that is reflected in the breadth of the guide that we have put forward. The top to bottom is very wide for Q4 given it is only six weeks away. And I think that is how we have tried to capture the market dynamics in the way in which we have guided. Operator: And Mark Thurston: and Tyler covered all the details that have gone into it. Operator: Great. That is helpful. Spencer Anson: And then Operator: just on the broader pricing environment, could you maybe walk through how GenAI engagement pricing is versus core work, and are you seeing transitions from proof of concept into production for those GenAI projects? And does that vary by industry segment, by customer? Any trend there would be helpful to call out. Mark Thurston: So I think, and this will take a while to get through into the overall stats. But if you look at the new business that is coming through, it is shifting quite strongly to outcome-based solutions with our AI approach supporting how we are going to drive the outcomes. And the Dava Flow model that we have really helps to early on get a grip on what the benefits are that are going to be delivered, the appropriate levels of functionality, and so on. So the new business stream that is coming in is much more outcome-based. That does offer a wider range of margin outcomes depending on how we perform and the benefits that we deliver to the clients, which at the top end are strong and, at the bottom end, they are reasonably well protected. I think would be a good way of describing it. Operator: Great. Thank you both for the time. Spencer Anson: Thank you. Operator: And the next question comes from Jonathan Lee with Guggenheim Securities. Please go ahead. Maggie Nolan: Great. Thanks for taking my questions. I wanted to dig into Dava Flow a little bit more. It is good to hear about traction with clients there. But can you provide more detail on adoption, approximate number of clients or percentage of revenue touched by Dava Flow today? And whether there is any impact on pricing or margin versus your traditional engagements because of that shift to more outcomes-based pricing or fixed price? Mark Thurston: So the focus that we have got for Dava Flow is not to roll it right across our estate, but to focus it on the outcome-based deals that we are signing. Because our expectation is that with Dava Flow, and actually we are seeing this in the places where we are using it, we can get a much, much higher level of velocity. And so applying it in the space where we are writing outcome-based deals with clients gives us a lot more opportunity to participate in the upside as we deliver using the Dava Flow method. And so that is where we are applying it. So it is in larger, outcome-based projects. We are seeing a good pickup and enough to actually see the metrics across a number of clients as to how it performs, but we are not going to start giving actual numbers of clients because I think that would be misleading, as in the numbers will be low, but the scale of the project that it is applied to would be higher. Maggie Nolan: Appreciate that color there. And just as a follow-up, help us understand trends in signings, including trends across large and small deals, and whether there have been any surprises such as delays or cancellations that you have seen across the quarter into this quarter? Mark Thurston: No. I think the loss Tyler DuPont: velocity has been the normal level of what is now this environment we are in. So we have had no surprises from that score. Obviously, we would like things to progress more quickly than they do. But increasingly, the larger deals, one of the differences is there is a lot more due diligence that goes into it because of the scale and the engagement, which is multiyear on both sides, the client and us. I think the velocity of opportunities has stabilized, albeit at this lower level. Are we seeing any uptick in it? I would not say so. I think we are seeing particular strength maybe in the payments and banking, capital markets space, so financial services more broadly. Operator: Got it. Helpful color. Thank you. Spencer Anson: Thanks, Jonathan. Operator: This concludes our question and answer session. I would like to turn the conference back over to John Cotterell, CEO, for any closing remarks. Mark Thurston: Thank you, and thank you all for joining us today. Spencer Anson: To close, Mark Thurston: we continue with our sustained investment in AI spanning talent development, the rollout of Dava Flow, deeper partner alliances, and an evolved engagement model. And this quarter's momentum underscores that clients view Endava plc as a trusted partner for AI-enabled change. I look forward to seeing you in our next quarterly earnings in May. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Thank you for standing by, and welcome to the IGO Half Year Financial Report. [Operator Instructions] I'd now like to hand the conference over to Mr. Ivan Vella, Managing Director and CEO. Please go ahead. Ivan Vella: Thanks, Darcy. Good morning, good afternoon, everyone. Great to have you join us here for our half-year results. Welcome for that. With me on the line is Kathleen Bozanic, our CFO, as for usual. And I was joking with her earlier saying, "Well, this is your conference to talk to." But look, we'll probably keep the focus on financials pretty short and sweet. It's reasonably straightforward and then cover any other questions or things on your mind. Before we go into a, I did want to just note that Kath, as you know, she wraps up end of next week after -- over 5 years with IGO and in that time, made a huge contribution both as a director and as CFO; she leaves big boots and is in the process of handover, preparing a team, getting everything ready. Johan starts with us on the 1st of April. And obviously, he's going to have a lot to pick up and get into as you get settled. But just to call out to Kath to thank her for her significant contribution in that time. In terms of slides, we've got a couple on the financials in the half, but then dive into, as you've seen a few other areas around Greenbushes and the changes there. We'll cover what we can in that sense. But as usual, I wanted to just start on safety and also just talk a little bit to sustainability as well. Firstly, on safety performance and with the quarterly just passed, nothing particularly new other than continued trajectory of improvement, credit to the leadership at Nova and across the business. They've done a great job and the whole team out there continue to improve. And I think we're really starting to see that downshift in both leading -- well, upshift in leading results, the work that they're doing every day and a downshift in the impacts of the injuries and incidents across the business, which is fabulous. Never ends, there's still lots of work to do as we embed that culture and make it more mature, but I'm really pleased to see that continuation is something we'll keep talking about, keep elevating. A couple of other thoughts or points just on sustainability more broadly across the business. We have just launched our latest reconciliation action plan last year and got that moving. That was after the sort of inaugural one that we've done actually started before my time. And great to see, there's a really strong partnership there, and that goes certainly through our operational footprint with Nova and the sites in care maintenance but also across our exploration presence as well. So good to have that in place, and we've got a really strong Board there, that advisory board that guides us and helps support our work. And the other point I wanted to just call out on this first slide was our closure readiness at Nova. That work is continuing in earnest, making good progress. There's a lot to do, working through to get our feasibility ready, aiming for the midyear so that that's in hand, and we know where we stand as we bring the to a close in the back end of the year. So that's just a couple of quick highlights on safety and sustainability. With that, I'm going to turn it over to Kath to talk through the headlines from our first half '26 financials, and I'll add a couple of comments, and then we'll get into an operational update as well. Thanks, Kath. Kathleen Bozanic: Thanks, Ivan. Our financial results showed our focus on costs and safe production at Nova and helped to deliver improved underlying result. Revenue was AUD 194 million compared to AUD 284 million in the corresponding period. The decline is a result of lower nickel and copper prices and volumes from Nova and no revenue for Forrestania, which was put in care and maintenance last year. This accounts for about AUD 64 million of the difference. Underlying EBITDA was AUD 49 million, driven by improved EBITDA, up 15% to AUD 67 million and lower spending exploration down from AUD 30 million to AUD 15 million, and this is demonstrating our focus on costs and safe production, as I noted earlier. IGO share of underlying net loss from TLEA improved to AUD 1 million compared to AUD 20 million in FY '25. This includes Greenbushes EBITDA of AUD 464 million on 100% basis and Kwinana a loss of AUD 71 million, also on a 100% basis. It's important to know, and we say in all our calls now that the Kwinana result includes AUD 33 million of capitalized items in accordance with the accounting standards following the full impairment of Kwinana by IGO. The underlying net loss after tax was AUD 39 million, and the statutory net loss after tax was AUD 34 million, and it includes the proceeds from the sale of the Stockman royalty. In the prior corresponding period, statutory losses were $782 million, reflecting impairments at Kwinana derecognition of deferred tax assets at Kwinana and also impairment of exploration assets. We've maintained our prudent capital management approach and as such, have not declared a dividend for this half. So if I move to the cash flow. Net cash flow from operating activities was AUD 28 million, which is a great result, up from AUD 7 million outflow in the first half of '25. Underlying free cash flow was AUD 29 million with a strong contribution from Nova, while some care and maintenance spend is ongoing at Forrestania and Cosmos. The Forrestania spend will face following the expected completion of its sale to Medallion Metals. Exploration and corporate spend continues to trend down, notwithstanding some lumpy corporate payments in the first half of the year. We ended the period with AUD 299 million in cash and have AUD 300 million of undrawn debt facility. So our balance sheet remains extremely strong. We will continue to maintain our cost discipline focus and our focus on safe production at Nova as we come to the closure of that mine. That covers the financial results. So I'll hand back to you now, Ivan. Ivan Vella: Brilliant. Thanks, Kath. Look, maybe just a couple of points to reinforce, I guess, talking to the cash chart there, number four. You can see that we've continued to focus on cost discipline and managing that across the business. We are going to see, obviously, another step down again as far as Forrestania unwinds, and we're expecting that transaction to close with Medallion at the end of this month. And Cosmos, as we announced a little while back, having stopped dewatering, that was a big part of the cost, the energy cost of pumps and so on, sad situation, but just the right call, looking at the long-run economics of that resource. And that will step down as well. Exploration, as you've seen, has stepped down. And it's very targeted. I still believe very strongly in our role in exploration, our deep capability in the team and our focus. That does not mean to say that we won't apply a lot of rigor and scrutiny on our expenditure there and make sure it's very targeted. John and the team and I look forward at some point soon to get John on one of the quarterly, so you can hear from him more directly on our exploration activities, is doing a great job looking at generative and allocating our expenditure very carefully and the drilling. And I guess, the more substantial elements of the expenditure and cash you see in that half, have really related to lithium targets that we pursued in pretty prospective ground. Nothing that has got us jumping up down yet, but that's the work that we've got to keep doing to translate into value. And of course, our corporate costs, we continue to taper. And with Nova's close at the end of this year, naturally, that will adjust accordingly and taper with the business. So that work continues. I think you've seen that cost discipline over time and that there's no expectation that should change. If I move on to Slide 5 and the operations summary, and let me start bottom up because I really want to call out the performance at Nova. I think if you look back at the half and in the appendix of this slide pack, if you've got that handy, you can see Slide 13, 14 and 15, and they just give you a half-by-half comparison for Greenbushes for Kwinana and Nova. And if you look at Nova, I mean, it's really pleasing seeing a mine at this point in its life. So it gets really difficult in that last 12 months. And everything is pointing in the right direction. We're seeing better production, lower costs, much, much better safety, really stable operations. Yes, they have issues that from time to time, but the team will collectively working through those very well, I think demonstrating really, really professional operations under very difficult circumstances, and that's translated into cash generation and the performance overall. And so a set of numbers to really be proud of in this last part of the mine life. And as full expectation, the team will continue that good work right through to the end of this year. It's also fabulous, despite obviously nickel market starting to recover a little, but through a very difficult period in the cycle, it generated cash for the business and helped us to fund other activities across our portfolio. On Kwinana, I'm not going to dive in too much detail. Certainly, half-on-half comparison is better and you expect that to come through given some ramp-up and amortization of fixed costs and so on. But it's still ultimately underperforming. It's missed its plans and expectations and promises on all fronts and ultimately, no change in our outlook. And with [ Camden's ] news, we saw just last week, a very difficult situation. Our [ mill ] has been incredibly strong and committed to trying to make that work. You can see how difficult lithium processing and refining is in Australia in that context. Kwinana is only more challenged because of the nature of the asset and the challenges the team have to work through there. Look -- and Greenbushes, I'll talk forward-looking in a minute. But backward-looking, it's not a stellar half. And look back on the time and the work we've done at Nova to really focus in on the team on safety and on production stability, and they've made a really substantial difference. And I think, as I said, something to be very proud of. Greenbushes, we're not at that point yet. And that's not for lack of effort or energy or drive. Rob Telford and the team are working extremely hard to lift the performance, productivity, the safety performance, the cost performance across that business. It's a bigger job, there is more to do. There's more complexity. They probably aren't feeling the green shoots and the momentum that we all hope for at this point yet, but that will come. And just as we've seen that shift in gears in Nova and I've seen in other assets in my career, I know that's coming with Greenbushes. We've just got to keep out of doing the right work, and we'll see that significant lift in performance. But going through the specifics, still a very good EBITDA margin from a world-class asset. Sales volumes really just about timing, nothing more than that. And a big focus for us is, of course, on the optimization work on the life of mine and then the productivity program that's underway across the business. The next slide, I guess, just points to CGP3, and I thought I'd spend a minute there just talking to what we're seeing in the early days. That's an image of the asset as it's been built and delivered. It's in ramp-up now. And I think I flagged in the quarter that with a couple of early commissioning issues they had to work through, we certainly lost a little bit of time. I wanted to put some numbers to it to just try and give you some context. And the specifics of the numbers are meaningless. It's more about the direction that we see in the way it performs. We expected in January for it to deliver about 7,000 tonnes, 7 kilotonnes, and it delivered a fraction of that because of those delays, time offline, time remediating and fixing things. In February, the plan was that we would hit 11 kilotonnes. And this is the natural early ramp-up allowing for commissioning for checks for issues, et cetera. Halfway through the month, they've already passed that number. And so what we're seeing, and I was reluctant to share too much in the first update in the call because we just didn't have enough runway to see what was going on and see how the asset was going to perform, but we are starting to really get a better feel. Very early, and you've got to be super careful calling these things, but I'm just trying to give you a flavor that Certainly, the indicators are positive. We've seen a 24-hour period of 1,000 tonnes of production, 60% average recoveries, which at this stage ramp-up. Anyone who knows within would be going, "Wow, that's very impressive." And con grade above 5.5 up to 6. So we're hitting the grade there and hitting the recoveries already. So the team is getting all the right indicators and signals. That's not to say the job is done, but I think when we're sitting here in -- just after the half in February, that's certainly encouraging and gives some good clear data to work with and focus on the rest of the ramp-up as we continue this year. We'll provide more updates as they come, certainly through the quarterlies. And if there's more called for in between, we'll certainly do that, but the early indications are quite positive. The optimization update on Slide 7, look, gives you a little bit of color there on that work that's ongoing. You've all seen, I'm sure, now the resource and ore reserve estimate that we provided recently. We timed that to link up with Albemarle's SK-1300 report. As you know, they do that on [ net ] cycle as we do with the reserve resource report. Due to the timing, they picked up some of the changes in the pit shell and so on. And that's why we basically adjusted the timing of our report just to match that to make sure the market was updated consistently across the different investor groups. The work is not complete. So I think you could treat that as a mark in time. It shows you progress, shows you direction, shows you the magnitude or the nature of the changes that we're making through the optimization. There is still a lot to do. And as you can appreciate, our competent persons can only report or sign off on things that have sufficient confidence, which generally means a study and all of the backing and the data to support it. And so there is clearly a whole bunch of other work that's going on that we can't report on yet. I can't speak to it yet. When it's ready, we will certainly report and share that. We're proud to be able to share the changes. I'm very excited to see what's coming through. But what we have seen, obviously, is a snapshot partway of the things that we could talk to where we've done enough geotech assessments and other work on the ore body. Some big highlights there, of course, that new underground resource, which I think everyone talked to, thought about, reflected on, now we've put some shape to it, and we'll continue to refine that, develop that and draw it out. We expect that to be at the back end of the mine schedule based on what we're seeing. More on that to come as we go. But certainly nice to see that the team at Talison has done enough work to be able to define that resource. Obviously, that's also meant that we could really tighten up the open pit mine and with steeper wall angles, actually, the critical thing here is surface more metal. So just shy of 10% more metal that we surface with a much lower strip ratio. Those are the kind of structural changes that you want to see when you go and do these optimizations because you're really adding material slabs of value. There's still a lot of work to do around it in terms of our operating productivity, performance, cost, all of the support elements of water and tailings and so on, all still work in progress. But something as important as waste management, waste storage for all the ore waste or mine waste that comes off the ore body. That changes dramatically when you reduce your strip ratio to the level we have. And all of that requires a lot of rethinking and replanning. Of course, it changes our costs, our CapEx, et cetera, and that's work that we've still got to get through. So the point just to reinforce what we've shared in that resource reserve is a snapshot in time. It's far from complete. It's not something that you should delve into and assume that's the end of the work that we're doing, it's certainly not. The team has got a lot more in front of them. And as that work is -- reaches that level of certainty and clarity and studies are done, then we can come back and share more with you. I'll move on from there, and I wasn't going to talk in any more depth to Kwinana. We can touch base on that in Q&A, if need be. But just looking forward, I would put a slide in on growth, just to sort of refocus, nothing new here, doesn't change from where we've been since we refreshed the strategy. But coming back to that, a focus on that full life cycle, discover, develop and deliver across the battery materials that the world is depending on and a big focus on lithium and copper. And I think I've explained why we think those two are so complementary. Nickel, far from off the list, it's just much harder to see the return expectations that we have. But if we found another Nova, that would be delightful. In terms of delivery approach, those themes again continue, nothing new here. I think we continue to have conviction that our technical capabilities our approach and our operations capability embedded in the playbook and our willingness and ability to partner well with others is key to success here. They're all elements that will come together in anything we do in the growth. And at the core of it is being very disciplined with capital. We're conscious of the high returns that we receive from Greenbushes and the last thing we want to do is dilute the business by getting into or investing in a project an asset that doesn't offer approximate returns. That's hard, but that's a challenge we keep pushing for ourselves, and we continue to look through that lens. Naturally, that takes us to Greenbushes being a very important place to deploy capital and focus our reinvestment. And through the optimization work that's going on, we'll naturally surface what that looks like, what that growth is. CGP4 is naturally on the list. It will have its place in time. We'll figure out exactly where and how that looks. And that's the kind of very good capital that we can allocate in due course. Lastly, just an outlook on where we're focused on priorities this year and into next. Greenbushes, we've talked about, and unlocking that is getting huge attention. The team is very focused on partnering with the other JV members and with Talison to do what we can and contribute as we can to support them and unlock all that value. Kwinana, look, really no changes. There's nothing new there. We continue the discussions with Tianqi to find that pathway where we're in a place that our shareholders find acceptable. Nova, continue what we're doing, safe, stable operations to the end of mine life, which is the end of this year. Exploration. And as I said, I'll get John on the call for a broad update in the next quarter or 2 to talk to the work he's doing. He's working through the prospective targets that we've got, and there's more this year in the lithium space. Generation of new targets around predominantly copper, and it's mostly offshore, as you'd expect, in good jurisdictions. They're making some very good progress. And again, we can update as needed. A real shift in approach here on [ Failfast ], very targeted and really leveraging the capability to drive to near-term results rather than that very broad greenfield exploration that IGO had been pursuing for a long time. And I've talked to strategy and growth, which will continue to be highly disciplined, as we've shown over the last 2 years in the way that we approach those things. So that's all I really want to cover at this point. I think that sort of sets out the key points for the business. Let's open up for Q&A, and then we'll go from there. Operator: [Operator Instructions] Your first question today comes from Levi Spry from UBS. Levi Spry: Maybe if we can just spend a little more time on the reserve and resource update. I guess, can you maybe just step us through what the sequence of the next projects that will be addressed in the bigger plan that comes out later this year and how we think about that in relation to the prospect for dividends from TLEA? Obviously, the context here is prices recovering. We're talking about growth projects with all of your peers. You've got one that's turning on, but what's the next one? Ivan Vella: Okay. Thanks, Levi. Yes, great way to place the focus. Let's talk -- and I'll separate two parts of the question, the dividend from the focus and the optimization work we're doing. The good news in Talison or Greenbushes is that you've got an asset base there that has never run at full potential, in fact, far from it. And so the very best capital or the very best projects you can ever hope for in mining is where you've got large plants or other assets that are running below full potential, below their capacity, and you've got a market that will take it. And we know the market is in a good place, and that's great news. Our customers have had strong pull for any tonnes we can produce. And in fact, we would love to have seen more already this year. So there's no issue there. And so it's -- you look back into the business and say, what can we do with CGP1 and 2? What can we do with that tailings retreatment facility and tech grade plant? How do you leverage those and drive them harder? And so that very basic run time, so getting the asset to perform better, getting it healthier, getting more consistent performance from it. Secondly is throughput and making sure that the tonnes per operating hour without losing recoveries is moving, and that's tuning, refining the ore feed, doing better on fragmentation, doing better on the blend, managing that across 3 plants, which do take slightly different feed grades. And then equally, running the plant well, I mean, there's a link there with the uptime and the general asset reliability, you'll get better throughput if it's running more consistently. And the last lever, of course, then is recoveries, and that -- it's a function of head grade for sure, but it's also a function of all of the good technical work the team is doing on improving recoveries through a whole range of strategies. They've got some very deep capability. They performed very well. A lot of it, they protect very closely for good reasons because I think the IP and experience built up there really is a standout. And there's a lot of work happening there to continue to lift recovery. So bringing those three levers, focusing on those existing plants and uplifting their output is key, and that doesn't cost a lot of capital. Don't get me wrong, there's pieces of capital along the way, but it's very different to something like CGP4, which is a fundamental change project. Now that doesn't mean to say that the tonnes that you receive there are just incremental tiny pieces. It can be quite substantive. And I think anyone who's been around the industry for a while will know that assets older assets that have not been pushed and run to their best can actually offer quite a lot. So that's the first goal. Supplementing that will be then other projects we can do that basically just give those assets an uplift supporting it. And I think the tailings retreatment is an example where as we work through the available tailings, which we think will extend out beyond what we've said, and I think we've pointed to some of that in the report, that will ultimately finish, when it does, then how do we repurpose that facility to maintain that capacity and continue processing fresh ore in front of it. And then, of course, you come -- if you've dealt with all of those elements, you come to CGP4, which would be the next logical plant to build. And we haven't finished the work to say, well, what is the natural run of mine? What's the pace at which that mine can run and feed and deliver? We certainly think there's scope for CGP4, but the team needs to finish that study work and really understand how that's going to fit, what the value equation is and then work out the timing. I don't think that's anything new. I've sort of shared those elements before. And I think as we get further into it, we get closer to the detail and what's required. That's the work that I'm really looking forward to be able to report back more specifics when the team is finished to give you a sense of what does that do for tonnes and for cost and so on across the asset. There's also a piece of work going on just general productivity. So running that mine in a better way, improving truck productivity, improving drill and blast fragmentation, generally making that mine perform better, gives us confidence, obviously, to run the asset, the plants harder, but it also lowers our costs net-net, both in terms of strip and in our normal mining process. Beyond that, there's, of course, a focus on productivity across the business, which is just managing our costs tightly, really improving our underlying systems and processes to make that business stronger. So that's the work that's underway. Now coming to your point on dividend, I don't see -- look, I don't have a crystal ball to start looking at what the market is going to do, but I don't think -- it's not going to be cyclical. It will be. It will be up and down, and that's fine. This is a mine that has demonstrated that through the cycle, it still generates cash. And I see no reason to think that we have to withhold large amounts of cash in Winfield, meaning no dividends out of Winfield due to the growth plans that we have there. I just don't think that makes sense. And so that's certainly not something that I'd be looking at. This is a business and probably one of the few, if not only, lithium operations in the world that actually produces cash through the cycle and pushes that cash out to its shareholders through the cycle. And that's what makes it such an attractive asset, such a powerful asset in this context. I think, through the current period that we're in now, some very favorable pricing, we're seeing that flow through. And obviously, the cash balance will build quickly, and we'll then look at that thoughtfully and take a view on the scale and timing of dividends. We've also talked on the quarterly, I think, about how we might think about paying down debt and that we would take into account. But there's certainly no intent sitting here that we would retain that cash inside Winfield that just doesn't fit with the way that we look at the business. Hopefully, that's covered at Levi and I've talked a bit around a few aspects there. Does that sort of hit your question? Levi Spry: Of course. I guess, what about inventories? Like you mentioned specifics. Can you talk about inventory? So what are they at site? What's the plans to flush the sheds out empty through this calendar year? What are they now? Ivan Vella: What are you talking about spodumene inventory? Levi Spry: Yes. So you're talking about how the Tier 1 asset behaves through the cycle, hasn't necessarily been running it like a Tier 1 asset, might necessarily behaves -- holding back material. So where is it now? Ivan Vella: I could look it up. I don't know off the top of my head what the inventory is. But I mean, there's no holdback. I think your comment is fair that it has not run as a Tier 1 asset or it hasn't run as well as it should, agreed, and we're working hard on that. And I expect quarter-on-quarter, we're going to demonstrate that. But when we're having inventory build up and down or shipments or sales and shipments that vary quarter-to-quarter, that's purely about shipment timing in the port facility. There's no intention to hold back or change there, no one's playing with the inventory. It's purely about a complex supply chain in the Southwest of WA that we need to manage. And when ships move and when they don't move. So look, they'll continue to refine that. Naturally, we try and move every tonne we can. There's no intent to hold inventory in spot. And sometimes that runs in our favor. And recently, we had a shipment that moved a quarter and moved across a quarter line, and that will pick up a much more favorable price, and that's nice. But that wasn't intentional. That's really just a function of how the port is running and the trucks and so on. Operator: Your next question comes from Austin Yun from Macquarie. Austin Yun: First one is on the discussion on Kwinana, like as you mentioned during the opening remarks, Kemerton has put on kind of maintenance. And your peer [indiscernible] Minerals also made a comment saying that Australia doesn't have an ecosystem to support the downstream. It seems like this issue is well known. I know you've been flagging this for quite a long time. Just keen to get more color on this, if you can could provide any commentary on the potential options that have been contemplated or discussed with your JV partner on the future of Kwinana. Ivan Vella: Yes. Austin, look, I can't really speak to that. I mean it's ongoing discussion, something that's still private between us. I mean we've not been fixed on anything. I think I've said to our investors on several occasions. Our focus is on net cash. The last thing we want is more cash to be poured into an asset we don't believe has an economic future. We've impaired it fully. We've been clear about our position. And we've said to achieve that, there are various pathways. We're not fixed on one. What we are fixed on is as quickly as possible, reducing any cash that goes towards that asset on a net basis. And you can imagine there's different ways of achieving that. Tianqi has maintained a different view. I think we can all take that in and ask lots of questions, and I recommend that suggest that you continue to pursue that with them, ask them for the basis for their decision-making. I think the Albemarle decision just, in my mind, points to the challenges that we see in the sector in this region in Australia. And I don't think that was all that surprising, to be honest, given where we see costs and what it takes. And ultimately, it's a very, very competitive industry because China does this so well. They perform extremely well. They produce at a very low cost, and it's effectively a tolling business and you'll make a margin on that tolling business. You're not going to see some excess rents unless there was some massive shortage of capacity, which I guess no one sees coming. So I struggle to see how you would ever justify the materially higher costs in Australia for the same work against China and make that work in the global marketplace. That's not dissimilar with other commodities. And I think we've seen the same with something like aluminum. It's really, really difficult to compete unless you've got some other structural advantage like your power costs or something else that supports you. So yes, that's, I guess, just covering the points again, Austin. But unfortunately, I can't get into the specifics of the options or the pathways we're discussing with Tianqi in any more depth. Austin Yun: No worries. And the second question is just on the reserve and resource update. In that document, there is a production or production profile of the last mine, and I think it's in calendar year view. And if I look at that number, it indicates that the current financial year production could be tracking below the previous guidance. Just want to get some update on that. And given the recent performance at CGP3, what's your latest view on the mining and the production performance from Greenbushes? Ivan Vella: Yes. Thanks, Austin. Look, yes, the year is certainly running at the low end of guidance. No question, I called that out in the quarterly. It's good to see CGP3 starting to find its feet. Very early, so it's hard to draw that out too far. But I mean, certainly, if we were seeing other issues, more and more issues come up, that would really give me cause for concern. At this point, we're not changing our guidance. The team still got plenty of work to do in front of them. But -- and we talked about the grade factor through Q1 and partly in Q2 that, that naturally flows through, and that's what we're seeing. Those grades do move around based on where you are in the ore body, and we can reconcile back to the impact from that in our production so far this year. I think the piece that I'm looking forward to seeing is the productivity work that is going on, and we are seeing good effort and good progress there. I want to see that translate into hard production. And I know Rob is working very hard with his team to do that because that's the thing that will move the dial very quickly and as that starts to flow through. But the -- they're doing the work. It's partly a bit about being patient at this stage. CGP3, we took a view on what we thought that ramp-up would look like, obviously, when we set guidance before the financial year. And I've been open that we are starting that ramp up later, and it did have some early disruption that, of course, we didn't anticipate fully in our guidance. So that puts us at the bottom end. But we'll continue to work closely with the team and watch them deliver. We still are maintaining a focus that we will land around the end of -- around the bottom end of guidance. Operator: Your next question comes from Kaan Peker from RBC Capital Markets. Kaan Peker: On the recent Greenbushes resource and reserve update, it sounds like some of those initiatives of the optimization study work are being incorporated in reserves. On the life-of-mine strip ratio decreasing about 30-odd percent, how confident are you that these are sustainable through the deeper zones of the central load? And it sounds like ore sorting is being considered. What work has been done? And I think the resource and reserve suggests starting in 2027. Is that feasible? Ivan Vella: Yes. Thanks, Kaan. Look, this is obviously, as I said, the first pass, and there's a lot of work going on across the mine in a lot more detail, looking at all characterization aspects further drilling, much better reconciliation processes. There's a lot of changes that Rob is driving through the mine. So all of those elements will be focused on being able to deliver and maintain a lower cost performance in the mine, better productivity, but also give us confidence that we can hit the mine plan as it's shaped up. So I don't think there's any reason for you to think, "Oh, well, that's an ambitious target." It's not. I think it's based on good geotech assessment, a good review of the mine plan that fundamentally, Talison had been running off a very old and long-dated approach. It hadn't been challenged, it didn't need to be challenged because the mine was so profitable and performed from a cash point of view so well. But it was just leaving value behind. And I think this is the first big example we've sort of pointed to of saying, hey, rethinking this bringing in some fresh eyes can really change the game. So that's coming. I think the broader performance of the asset as they ramp up, we'll also start to see a better sense of how those plants can perform. And coming to the ore sorting, we know that, that works technically. So it's a much simpler process than say, sorting copper ore feed. Lithium feed is largely black and white. So it's more straightforward. There's still a lot of questions around maintainability and performance at scale. One of our competitors has been focused on this for a while now and seeing some results. We're in study mode. So we're working through that and looking at how and what approach we would take to try and implement it, where it fits in the ore body, so how it manages some of the more complex sections of the mine, which we know are coming and the value uplift that we can get there, obviously, through that sorting process and how that improves the performance of the plant. So there's a few pieces that come together there. The mine plan as that's recut the plant performance, getting better feed and more consistent feed. And obviously, ore sorting is one of the tools that helps us do that. It needs to fit with very good mine planning, drill and blast to get your fragmentation more consistent. So there's a number of other pieces that plug together. But I guess to bring that answer to a close, I think ore sorting does have a place. We'll see what the studies tell us and the economics and how much of an uplift in performance we think we can get from it. And that's work that will come through this study process at the moment. Kaan Peker: And then the second one is more around the TLEA net debt. It looks like net debt has increased by about $120 million half-on-half despite gross debt falling. Can you maybe please help us understand the cash outflows, working CapEx, pricing lag, sort of the key buckets that we should be thinking about? Ivan Vella: Sure. I might throw to you, Kath. Do you want to just walk through some of the key movements in Winfield, please? Kathleen Bozanic: Yes. Obviously, we're finishing CGP3. So that takes some cash as we go through that. But I think the core reason there is the timing of cash flows. So this half, we haven't seen the uptick in the pricing because we've got a 1-month lag. And then there also is a longer payment period with our shareholders who buy the stock. So it's about a 90-day period before they actually pay the bills, so -- or pay for the spodumene. So that's contributing to that. What I would say is we'll see a good second half based on current pricing, and you should see an improvement in that over the next sort of 6 months. Operator: Your next question comes from Daniel Morgan from Barrenjoey. Daniel Morgan: Just could you help me think about the cash flow implications from -- obviously, Nova is going to come to the end of its life. Can you just talk to what cash bills will be expected at the end of that? And then also, I guess, a related question is, obviously, you've got 3 corporate entities, the Greenbushes or Winfield corporate entity, TLEA and then the Nova one. Just how do you think about running your balance sheet, the IGO balance sheet and -- in light of cash that isn't necessarily assured to come through you through the corporate structures? How do you manage that going forward? Do you expect to have a net cash position as a management tool to insulate that risk of dividends? Ivan Vella: Thanks, Daniel. Yes, look, all work in progress, and we have obviously a reasonable view on that and what the business will look like post Nova. The first point to note, which I think states the obvious is that its shape will change and has already changed, will continue to change to adjust to that world without the cash flows from Nova. And when you take that operating asset out, the relevant functional support and other activity that goes on, we will adjust accordingly. We're still going to maintain a focus on exploration, as we've talked about, and that will still be disciplined and targeted. But I think that's a key part of our growth strategy and the value that we believe we can bring. We'll maintain that core capability in our business. We likely be -- expect to be complete, obviously, with Forrestania and working on closure for Nova. So there will be some work to do as we progress that activity. And Cosmos, we're looking at some options there, certainly some very prospective ground and some value there that we're looking at how we best monetize that for our shareholders. Coming back to the JV, then, of course, through the cycle, we see some variability in the cash that, that JV pushes out. And we're probably -- we're coming into this next phase now where there's a bit of an uptick. The last part of your question, do we think that you're running some net cash in the business is useful as a tool to deal with some of the volatility? For sure. We'll look at how best to do that and how to make sure that we're allocating very carefully. But yes, the business will behave and look differently, obviously, when we don't have that internal cash generation from one of our operations. Daniel Morgan: Just. To follow up on that, Ivan, so I imagine that Greenbushes does pay a reasonable dividend as one might expect in the next half year. That would then go to the TLEA joint venture. Can you just remind us of the influence you can have to kind of sweep that cash out of TLEA or might it be for JV purposes, might it be there partially elevated to fund some Kwinana cash outgoings? Ivan Vella: Yes. Look, there is an order of events, let's say, or priority that we have inside TLEA, which is again not new. The first priority for any cash that we have from Winfield or otherwise is to fund the existing operation of the business, and that means Kwinana. It can only be Train 1 because that's all there is. We've obviously decided as a JV that we're not going to pursue Train 2. And so the net cash demand of Kwinana is the first call on cash that's available through Winfield as the generating asset. And having some liquidity there again and making sure we're covered is important. We've got some stability in that forward look. And naturally, I've said already on the call that the last thing I want to be doing is putting cash in. So we're desperately keen to find a plan with Tianqi where we're not continuing to put net cash in. But until that time, then that needs to be covered. After that, then the cash goes out to the shareholders. There isn't any other basis to or means to hold cash inside that JV or any other call on it, unless as shareholders, we decide as such, whether that's through a growth project or other investment or other decisions. But I mean, that's provided for in the structure of the JV. It literally runs in that priority order. Operator: Your next question comes from Matthew Frydman from MST Financial. Matthew Frydman: Can I ask a couple more on the Greenbushes reserve and resource statement? Firstly, on the underground resource, obviously, a pretty sizable underground resource there. And I'm sure the optimization study will consider exactly how that gets developed. So I don't mean to try and preempt any of that. But I guess just wondering, to what extent approvals and permitting are part of the consideration around an underground. I suppose I'm referring to weighing off the ability to get an underground mine approved compared to maybe expansion of the open pits or the waste dumps and so forth. Is that sort of element relevant or it's not particularly high up the list of considerations compared to, I suppose, the impact on incremental production or the impact on the pit shell and those sorts of things? Ivan Vella: Yes, Matt's not -- good question, but not particularly relevant for us. We think that underground will be pretty long dated. I don't think the permitting and approvals and design and engineering of it is going to be an issue. It's a critical path. We've got plenty of time before that would come into play. There was some notion that these might run in parallel. I think that's probably unlikely. I mean it's early. I don't want you to bank that yet, but certainly, the initial views is that these would run in sequence underground following the open pit. So yes, that's not a big concern. And I think, look, with the change of the pit design that we've done so far, again, not finished, but good progress, change in strip, change in waste generation. Again, that's taking a lot of pressure off our permitting and approvals. So we're working through that, and the team have been really rigorous, a lot of close engagement and focus on the community. I think they're doing a great job to talk about the impacts and talk about the future of what this business looks like over time with the community. I think being particularly transparent, which I really like to see, it's great that they're building a stronger connection and level of trust there and being able to describe that future in a more meaningful way for the community. All of that permitting approvals will continue, but it's not something that I see huge pressure on our business as we look forward. Matthew Frydman: Got it. That's helpful. And then secondly, on the cutoff grade, I guess, particularly the resource cutoff grade getting dropped to 0.3%, you referred to an improved metallurgical understanding that's driven that. So I think it added 42 million tonnes at 0.37% lithia. Understanding that, that material is not currently included in the reserves, obviously, which is still cut at 0.5% cutoff grade, yes, just whether you could shed a light on why the change in thinking there? What's driven that improved metallurgical understanding? And I suppose, ultimately, do you expect it will be feasible to recover and process that material over time? Ivan Vella: Definitely. Yes. I mean, look, I was surprised, I guess, when that came through, Matt. It's a very good question because I queried it as well. And the team has done the testing, done the hard work on it and believe that there's value there that they think they can extract hence why we see what we see. Now as you said, there is another step to go in terms of working that right through to the endpoint, but it's not a case of just putting it in because it's a theoretical goal seek. They've genuinely done some work to understand what it would take to get at that metal. And this is also a good challenge in general for mining. When we open up an ore body, when we open up the impacts that we have, we should be trying to squeeze everything we can out of it, and we should be pushing ourselves to make that economic to find the ways to process and extract it and not be effectively wasteful when you leave potentially valuable material behind. Operator: Your next question comes from Hugo Nicolaci from Goldman Sachs. Hugo Nicolaci: And good to see the Greenbushes optimization is progressing well. Gather once that work is done, you've probably got a bit of flexibility to move quickly there, given that your CGP4 and ore sorting already have environmental approvals. But just given a number of my questions have been asked, maybe one for Kath on the JV financials picking up a bit from Kaan. It looks like there's some pretty lumpy cash flow movements in the JV beyond just the dividends coming out of Winfield. So Kath, can you maybe just talk us through any of the significant movements? Maybe is it inventory? Is there some drawn debt in the JV now? And then any updates on the outstanding ATO determination on tax for the JV, please? Kathleen Bozanic: Yes, there's no updates on the ATO determination. I think that you'll see the contingency note, which is Note 11 in the financials that we've given an update on that. There's been submissions from TLC, remembering that this is a TLC issue, which we have indemnified a certain portion of. But that's got a little ways to run because it needs -- the ATO is now considering the responses that TLC has provided, and we're anticipating that progressing over the next 2 quarters. In respect of the lumpy cash flow, I don't think it's really that lumpy. It's more about the timing of money coming through from the revenue side of things. And there was a little bit of delay around one of the shipments during the quarter as well. So that could have had an impact there. During the period, and I'm just going to refer back to my notes, there was a bit of a paydown of debt at Greenbushes during the period. So that might be accounting for some of what you're seeing as well. I'm hoping that answers your question. Ivan Vella: I think, Hugo, just to jump in, it was about $150 million down on drawn debt and about $200 million down on cash. So there's a little bit of differential there between the two, but there was a step down in debt in the period to 31 December. Hugo Nicolaci: Just confirming, there's still no debt in that TLEA vehicle? Ivan Vella: No, no, no, no. This is all Winfield debt, just to be absolutely clear. Operator: Your next question comes from Lyndon Fagan from JPMorgan. Lyndon Fagan: Yes, I just wanted to talk about the Greenbushes reserve and resource update. So in there, it talks about the optimized pit shell considering a fourth plant similar to CGP3 that lifts production up to 10 million tonnes per annum of throughput from 2032. I'm wondering if we can explore that a bit more. So is that CGP4? Is it CGP4 plus tailings retreatment plant sort of reconfigure? Is it a combination of both? And just, I guess, looking at your color on the deliverability of that, I know this is all part of the kind of optimization, but considering it's written in there, it'd be good to try and explore it a bit. Ivan Vella: Sure, Lyndon. And there's plenty of work that's been done, nothing that's finished and definitive yet. But I think you're getting to the numbers that matter, right? That's a critical number. Is it 10? Or can you do more? Or is it a bit less? And that's -- what can that mine consistently feed at an appropriate cost that we really think is set and optimized appropriately and then you're obviously running the plants. You don't want to throw a lot of capital at something if you can't use it wisely. There's no point in having particularly with the capital intensity of building things in WA. So that actually does include an uplift in the other plants and some tailings retreatment as well. So net-net, we've got to then sort of scale and size what we think that additional capacity would be if we're building another plant and make sure that it's pushed. I'm a big fan of not putting excess capacity in plants on site because inevitably, you effectively are just running a lazy asset then. We need to be pushing the assets hard, and they haven't been yet. CGP1 and 2 have not outperformed and gone past the nameplate yet. So we've got to chase that out. And again, make sure CGP3 not just ramps up well, but also then outperforms. So all of that will be in focus. As I've said earlier on the call, we will go in order, which is work the existing assets hardest first, reconfigure and add CapEx around supplemental CapEx, things like ore sorting and other things, work on the tailings retreatment. And then the last point of allocation is a new plant, CGP4 in whatever shape that takes. Lyndon Fagan: And would you say that 2032 date is something that we should work with for now? Ivan Vella: Yes. I mean I haven't got one better. So I think this is a business where it's as quick as possible, right? There's going to be -- once you know the mine can deliver, it's going to be value accretive. We see that with everything we do at Greenbushes. What we've got to do is make it more stable and perform to its optimum or full potential. And I think then you've just got to be realistic about what it takes to design, engineer and deliver a plant. And certainly, my goal is to make sure the CapEx intensity is improved from where we've been in the past. So CGP3, for me, is a very expensive asset. Yes, it's still incredibly value accretive and delivers incredible returns, but what a high ordering price ticket given the costs associated with doing some of these things at this point in the cycle. Operator: Your next question comes from Ben Lyons from Jarden Securities Limited. Ben Lyons: I'll keep it quick and just one question given the time. And it's bringing it right back from 2032 to the immediate future, so the rest of calendar '26, let's just call it. I know you haven't changed guidance at Greenbushes, but I'm just trying to gain more comfort on those second half sales, particularly in light of Albemarle's decision over Kemerton, obviously taken into consideration their comments around no expected impact on their chemical sales and the potential to toll that material through Chinese refineries. But maybe you can just give us more comfort with how those annual nominations work at the Talison level, how compliance versus the nominations is enforced? And if tolling doesn't make sense, and it doesn't look like it does on the economics at present, just remind us whether there's any restrictions on third-party sales of that con into the merchant market. Ivan Vella: Okay. Thanks, Ben. Great question. I'll try and keep it brief. The customers that we have, who are also shareholders, Tianqi Lithium and Albemarle are very hungry for tonnes. And that demand is strong. It's a quarterly nominations process. So we're always one quarter ahead in what's coming. So we have basically a view to the end of the financial year. I think we have a view beyond that and subject -- obviously, haven't got a crystal ball that the world can't change, but there's no sense that any tonne we can't produce, we can't sell. The sales that you've seen, as I've mentioned earlier on the call, has purely been about shipping and logistics. It's just a physical set of issues at times when we miss shipment windows and so on. And that the team continue to work on, but completely disconnected from customer demand, which is very strong. And without getting into the specifics of [ Camden ], I don't have all of their details in front of me, of course, I don't speak to it. But it's pretty immaterial in the scale of the overall production that Greenbushes has. So I don't think that's super relevant looking forward. It probably just changes the logistics patterns a little bit and means that we need to make sure that we're handling not just the extra tonnes from CGP3, but also some extra tonnes that don't just get trucked to their site rather they get trucked to the port and shipped out. So the biggest challenge in all of this is just making sure that Bunbury port is really performing. Operator: There are no further questions at this time. I'll now hand the conference back to Mr. Vella for any closing remarks. Ivan Vella: Thanks, Darcy. Look, we're right on time, so I'll keep it short. Thanks again for joining for our half year results. As I said, I think that looking back on the half, we've got a great set of results from our operation at Nova, safety, production performance and so on. And that's exactly where we've been focused to demonstrate our operating capabilities. The same focus continues at Greenbushes, and we're not there yet. There is plenty of good work happening. And just as you've seen that step-by-step improvement in safety and operating performance at Nova, I expect we're going to be able to share the same suite of results quarter-by-quarter as Talison works through the improvements at Greenbushes. With that, I'll leave it there and look forward to catching up in -- with this results period now behind us and talking further about our results. Thanks, everyone. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Evan Gappelberg: This is the beginning of what I believe will be a long and powerful exciting journey. And so it's way bigger than just this quarter. The global events industry is transforming. AI is the thing that's transforming it. We are at the forefront of that. It's reshaping how enterprises connect, engage and communicate. And we're really just getting started, Steve. Steve Darling: Welcome back inside our Proactive newsroom. And joining me now is Evan Gappelberg. He is the CEO of Nextech3D.AI. And Evan, good to see you again. How are you? Evan Gappelberg: Great. Great to be back, Steve. Steve Darling: Yes. So the company out with your Q3 2026 numbers and Evan, just off the top, very strong numbers. I imagine you're pretty happy with what you're seeing. Evan Gappelberg: I am. And I just want to address our shareholders because let's be honest, a lot of companies didn't make it through this last bear market cycle. We did. And not only did we survive, but we came out of it stronger, leaner and more focused and more determined than ever. While others were pulling back, we kept on building. While the market lost faith, we stayed committed to our vision. And now, Steve, with 59% revenue growth, with 95% gross margins, which is unheard of and accelerating enterprise adoption, I can feel the shift, you can feel the shift. I think our investors can feel the shift that this momentum is very real, and this is the beginning of a powerful new growth curve for Nextech. And again, as we go forward, we're looking at even better growth in the quarter ahead. This quarter, Steve, really marks a true inflection point for the company. It wasn't just a strong quarter. It was an inflection point. And it really signals, I think, to the market and especially to me that this is real and that we have emerged from this bear market over the last couple of years, leaner and stronger than ever. Steve Darling: Let's talk a little bit about those numbers. You mentioned 59% revenue growth. Talk to me a bit about where that revenue is coming from and how you look to improve on that in the coming quarters to come. Evan Gappelberg: Yes. So as you mentioned, it's not just the 59% revenue growth, that's huge. But we also showed 20% sequential growth, which means quarter-over-quarter, and record gross margins, all at the same time. That's a very, very powerful combination. And what you're seeing is the beginning of a new sustained growth curve as our unified AI Event platform gains real traction in the enterprise market. And let's just be clear, Steve, this is about enterprise, enterprise, enterprise. Enterprise deals are the big deals. These are the deals with the Googles, the Meta, the Microsofts, the BNP Paribas, which we mentioned. So this is just the beginning of a much larger acceleration. We're still in the early innings. The momentum we're seeing is just the start. So our pipeline going into the next quarter, which we're in now, we're already halfway through is larger, stronger and more enterprise-focused than at any time in our history, except maybe back in 2020 during COVID, which was like a 1 in 100-year thing. So you can't really look at that, but we expect next quarter to be even better. We expect the quarter we're in to be even better than this quarter with accelerating platform adoption and a growing number of high-value enterprise deals. So to answer your question, it's a platform strategy. The revenues coming from all of our businesses, it's working exactly as designed, Eventdex, MapD, and Krafty Labs, although Krafty Labs wasn't even in this quarter. This quarter was not including Krafty Labs. This was just Nextech with Eventdex. And even with Eventdex, it wasn't for the full quarter. So enterprise is the main event. One platform is the main event, and the best is still about to show up in the quarter that we're in and the future, Steve. Steve Darling: Yes. Just on that Krafty Labs, that was my next question was really about that and that it wasn't included in this yet. They come into the company already generating revenue. So it sounds like it's in a good position as the company moves forward. Evan Gappelberg: Absolutely. Krafty Labs is a very, very exciting acquisition for us. It's the second acquisition we've made in really just over a quarter. So as we rolled into the end of 2025, we acquired Eventdex and then January 2, we acquired Krafty Labs and Krafty Labs is gaining enterprise adoption rather quickly. We have some really big news coming on Krafty Labs in the coming weeks ahead. Krafty already has hundreds of Fortune 1000 companies, Google, Microsoft, Meta, Netflix, General Motors, BNP Paribas. These are existing customers. And so these global companies really validate the technology and help build trust around the Nextech ecosystem. And really, that's what we're building. It's -- when you get into an enterprise deal and then we expand that into our ecosystem, and we're seeing that starting to take hold where there's a much, much larger multiplatform opportunity that we're starting to just take advantage of. Steve Darling: So Evan, I guess the message you're trying to send everyone is that you're seeing momentum and you want people to understand the momentum of the company? Evan Gappelberg: Yes. I mean the message to our shareholders really is thank you for your confidence. Thank you for your support, for your long-term belief in our vision. We are entering a new phase of scalable, high-margin growth, and we're just getting started. As the CEO, but also as the largest shareholder and someone who believes deeply in what we're building together, this quarter really wasn't just another financial report, and it shouldn't be seen as that. It was a clear signal that Nextech has turned a corner, and we're stepping into a completely new phase of growth, 59% revenue growth is a huge achievement. But what matters most isn't the numbers themselves. it's really what it represents. They represent proof that our strategy is working. They represent validation from some of the biggest companies in the world. They represent momentum that is now building faster than ever before. So this is the beginning of what I believe will be a long and powerful exciting journey. And so it's way bigger than just this quarter. The global events industry is transforming. AI is the thing that's transforming it. We are at the forefront of that. It's reshaping how enterprises connect, engage and communicate. And we're really just getting started, Steve. And in the next couple of weeks, we're going to be unveiling the next-generation platform for our investors and stay tuned for that. Steve Darling: All right. We'll leave it there. Evan, thanks so much. Good to see you again. Evan Gappelberg: Thank you, Steve. Steve Darling: Evan Gappelberg, the CEO of Nextech3D.AI.
Operator: Ladies and gentlemen, thank you for standing by. Today's conference call will begin shortly. Hello, everybody, and welcome to the Lemonade, Inc. Q4 2025 earnings call. My name is Elliot, and I will be coordinating your call today. If you would like to register a question during today's event, please press 1 on your telephone keypad. I would now like to hand over to the London team. Please go ahead. Good morning. Welcome to Lemonade, Inc. Fourth quarter 2025 earnings call. Executive: Joining us on our call today, we have Daniel Schreiber, CEO and Co-Founder; Shai Wininger, President and Co-Founder; and Timothy Bixby, Chief Financial Officer. A letter to shareholders covering the company's fourth quarter 2025 financial results is available on our Investor Relations website at lemonade.com/investor. I would like to remind you that management's remarks made on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the risk factors section of our most recent Form 10-K filed with the SEC and our more recent filings with the SEC. Any forward-looking statements made on this call represent our views only as of today. We undertake no obligation to update them. We will be referring to certain non-GAAP financial measures on today's call, including adjusted EBITDA, adjusted free cash flow, and adjusted gross profit, which we believe may be important to investors to assess our operating performance. Reconciliations of our non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our letter to shareholders. Our letter to shareholders also includes information about our key performance indicators, including number of customers, in-force premium, premium per customer, annual dollar retention, gross earned premium, gross loss ratio, gross loss ratio, CAT, trailing twelve-month loss ratio, and net loss ratio, and a definition of each metric, why each is useful to investors, and how we use each to monitor and manage our business. With that, I will turn the call over to Daniel Schreiber for some opening remarks. Daniel Schreiber: Good morning, and thank you for joining us to review Lemonade, Inc.'s results for Q4 2025. By any measure, this was our strongest quarter ever, and it capped a year of excellent financial execution and operating performance. In the fourth quarter, in-force premium grew to $1,240,000,000, up 31% year over year, and this extended our streak of accelerating growth to nine consecutive quarters. Revenue grew even faster, up 53%, reflecting both growth and improving economics across the business. Indeed, I am pleased to share that this growth translated directly into profitability metrics. Gross profit increased 73% year over year to a record $111,000,000, and if I zoom out to take in a three-year perspective, our gross profit has been compounding at an annual compounded growth rate in the triple digits. As a result, adjusted EBITDA loss narrowed to just $5,000,000 in the quarter, placing us on the brink of breakeven, and this represented a $19,000,000 improvement year over year. Indeed, we generated $37,000,000 in positive adjusted free cash flow in fourth quarter, capping a strong year of cash generation. 2025 was our second consecutive year where we saw our cash reserves swell. Somewhat unusually, insurance is a business that tends to turn cash flow positive before GAAP accounting positive. There the one almost inevitably follows the other. This then is as good a spot as any to reiterate a longstanding expectation that we will be EBITDA profitable in Q4 this year and EBITDA positive for the full year of 2027. We continue to be highly focused on growth and accelerating growth because it is a gift that keeps on giving. Faster growth drives better data and further sharpens our segmentation and pricing capabilities. This powers improving underwriting performance and rapid gross profit growth, and we can swiftly redeploy gross profit thus generated into profitable growth investments with compelling unit economics. And so the cycle continues. It is energizing to see the flywheel continue to compound even as we scale. What is particularly encouraging is that all this progress is broad based. Pet, car, and Europe are all coming into their own as powerful growth drivers, each combining hyper growth with improving underwriting performance. Our shareholder letter, we highlight critical initiatives we are investing in this year to leverage the latest AI technologies to further enhance our go-to-market operations, pricing, and cross-selling capabilities. We believe that these initiatives can drive durable competitive advantage in and unit economics that support our ability to sustain an industry-leading gross profit growth profile for years to come. One last thing, I wanted to take a moment to draw your attention to our upcoming Investor Day. This event is scheduled to take place in November in New York and online. Specifics will follow, and we certainly hope you will be able to join us for significant updates on our vision, AI capabilities, and ambitious plans. I will now turn the call over to Shai Wininger. Shai Wininger: Thanks, Daniel. Shai Wininger: Key vector for us is autonomous insurance, and specifically Lemonade autonomous car, which we announced and launched a few weeks ago starting with Tesla. As physical objects such as vehicles increasingly shift from being controlled by humans to being operated by AI, insurance needs to evolve as well. Historically, the industry has priced auto insurance using proxies—credit scores, marital status, education, and other similar features. We always believe that telematics is a much more precise tool than this blunt proxy, measuring the driving itself rather than something broadly correlated. But when a car is not driven by a human, these proxies lose touch with reality altogether. Lemonade autonomous car is priced based on three modes: when a car is parked, when it is driven by a human, and when it is driven by AI. By integrating directly with the car's onboard computer, we can tell which mode that car is in at any given moment, distinguishing between various kinds of risk and pricing each accordingly. When the car is driving itself, and doing so more safely than a human, the price reflects that. Our system accounts for the vehicle's software version, as well as for the quality and precision of the hardware—sensors and computational unit. As the car becomes better and safer with software updates or hardware upgrades, our pricing will automatically respond and continue to drop. As of this moment, autonomously driven miles using Tesla's FSD are priced at about 50% of the equivalent human-driven mile, and we expect this to get better over time. We believe this represents a fundamental shift for the industry. As autonomous driving becomes safer and more widely adopted, prices should fall transparently, dynamically. With that, I will hand it off to Timothy Bixby who will cover our financial performance and how to Tim? Thanks, Shai. Timothy Bixby: Let's start with our Q4 scorecard. In-force premium grew 31% year on year to $1,240,000,000.00, driven by customer growth of 23% and premium per customer growth of about 7%. We added about 550,000 new customers 2025, 35% more than the prior year. Prior period development, within our reported gross loss ratio of 52%, our favorable of 9% was driven entirely by non-CAT prior period development, primarily from our home and car products. Prior year development, which we report on a net basis, was $11,000,000 favorable in Q4 and about $30,000,000 favorable for the full year. Gross profit increased 73% to a $111,000,000 while adjusted gross profit increased 69% to a $112,000,000, for a gross margin of 48% and an adjusted gross margin of about 49%. These metrics use revenue as their denominator. As a reminder, adjusted gross profit as compared to gross earned premium was 39% in Q4, up 10 points from 29% in the prior year. Revenue grew 53% to $228,000,000 while our adjusted EBITDA loss improved to a loss of just $5,000,000. Notably, revenue grew more than 20 percentage points faster than IFP, a dynamic we expect to continue. Importantly, adjusted free cash flow was positive for the third consecutive quarter at $37,000,000, has been positive six of the last seven quarters, while operating cash flow was $21,000,000. We ended the quarter with roughly $1,100,000,000 in cash and investments, of which about $250,000,000 is required to be held as regulatory surplus. Annual dollar retention, or ADR, remains stable as we continued our clean-the-book efforts in our homebuzz home business at 85%, flat versus the prior quarter. Operating expenses excluding loss and loss adjustment expense increased by $30,000,000, or 24%, to a $154,000,000 in Q4 as compared to the prior year. Let's break those expense lines down a bit. Our other insurance expense grew by just $1,000,000, or 6%, in Q4 versus the prior year, as compared with 31% growth rate of our top line IFP. Total sales and marketing expense increased by $17,000,000, or 35%, due primarily to increased growth spend versus the prior year. In Q4, growth spend was $53,000,000, up 48% as compared to the prior year. Importantly, as we continue to ramp growth spend, our marketing efficiency levels remained stable and strong in the fourth quarter, with an LTV-to-CAC ratio above three times in line with prior year. We expect Q1 growth spend to be at a similar level as Q4, and expect a total growth spend of about $225,000,000 for the year. Technology development expense was up 14% year on year to $25,000,000, while G&A expense increased 29% as compared to the prior year to $43,000,000. The year-on-year increase in G&A expense of roughly $10,000,000 was made up primarily of three items: an increase in non-cash stock compensation expense of about $2,000,000, an increase in interest expense of roughly $1,000,000, and an increase in bad debt expense of approximately $5,000,000. Our headcount increased slightly by about 4% as compared to the prior year to 1,282 in Q4. Our net loss was $22,000,000 in Q4, or a loss of $0.29 per share, as compared with net loss of $30,000,000 or $0.42 per share in the prior year. Our adjusted EBITDA loss was $5,000,000 in Q4, dramatically improved versus a $24,000,000 EBITDA loss in the prior year. Our detailed guidance for Q1 and the full year of 2026 is included in our shareholder letter and represents 32% Q1 and full year top line growth year on year, roughly 60% full year revenue growth, and, of course, positive full-quarter EBITDA expected in Q4. I will now pass back to Shai Wininger to answer some questions from our retail investors. Shai Wininger: Shai? Thanks, Tim. Shai Wininger: We now turn to our shareholders' questions submitted through the SafePath. Timothy Bixby: There were a couple of questions from Paperbag about our loss ratio and recent autonomous car insurance launch. Thanks, Paperbag. As we have explained on a few occasions before, perhaps in more detail during our most recent Investor Day, we do not think of loss ratio as a standalone target, but rather as one metric or lever to optimize our quest for maximizing gross profit. Sometimes, gross profit is achieved by lowering loss ratios, sometimes by raising them. Shai Wininger: Our pricing strategy is solving for maximum gross profit in absolute dollar terms, Timothy Bixby: rather than any ratio. Turning to our total car product, with our telematics infrastructure, we are able to evaluate and price the risk associated with every driven mile accurately. In the case of Tesla FSD, the data we have shows that miles driven with it are more than 50% safer than when driven by a unit. This allows us to drop rates and become more attractive to customers versus peers, which is in turn lowering the customer acquisition cost and helps us win and retain more business. Responding to your question about our 30% growth, I would think about this autonomous car insurance launch as a first step of a much broader strategy and direction that will materialize over time. Shai Wininger: Indeed, it could take years before we see a step change in autonomous car ownership, and with that said, we believe it is critical to begin now with building the best product for that future. Timothy Bixby: With the best experience, pricing, underwriting, and coverage. In the near term, as we highlighted in our shareholders letter, our growth drivers are increasingly diverse, diversified, such as we are not reliant on any one segment or product line to drive growth above 30%. Pet and car are both seeing ISP growth in the fifties, and Europe in the triple digits, for example. In another question, we were asked how soon car will expand to remaining U.S. states. We launch new states as soon as we can from a regulatory perspective, Shai Wininger: but only after we are confident that we can competitively and profitably price risk in each state. Timothy Bixby: Our improving car results, both top and bottom line, speak for that discipline. Launching a state requires thoughtful preparation from marketing, pricing, product, tech, legal, and finance perspectives. With our local platform and the agentic automations we are constantly layering into it, we are becoming very effective in this process, collapsing stages that used to take months into days. Shai Wininger: Believe we now have the most advanced regulatory and compliance process in the market, and we are only getting started. Timothy Bixby: That said, Shai Wininger: states we have already launched Timothy Bixby: represent roughly 50% of the U.S. car insurance market, a TAM measured in many tens of billions. Shai Wininger: And car is available to about 60% of our existing customers. We have been launching multiple car states since 2025, Timothy Bixby: and expect to continue to launch new states with our autonomous car product throughout 2026. By 2027, Shai Wininger: I expect the Lemonade car product Timothy Bixby: to be available to the overwhelming majority of the U.S. population. In another question, Charwak asked, with AI simplifying the insurance industry, what will keep Lemonade, Inc. in an advantaged Shai Wininger: position over incumbents who might be willing and ready to modernize their software stack? Timothy Bixby: How does Lemonade, Inc. continue to differentiate and stay ahead? This is a question we get a lot, and I think the answer comes down to structural and cultural differences that are nearly impossible to overcome. Lemonade, Inc. was built as an AI-first organization ten years ago. Every team member was hired into that environment. People who did not thrive in a tech-first, fast-paced culture like ours moved on. Today, estimate more than 95% of our team operates with an AI-first mindset. Our product and tech organizations are the core of the company, which makes us product-led, Shai Wininger: customer-centric tech organization. In many ways, the AI explosion is the moment Lemonade, Inc. was built for. Timothy Bixby: We built the data infrastructure from day one. We collect every signal, Shai Wininger: and we have been doing so for a decade. Timothy Bixby: We have a highly rated app that customers love and actively use, Shai Wininger: which keeps them connected and allows us to continuously optimize pricing for the safest customers. Now compare that to traditional choice. Timothy Bixby: These are companies built on the foundations of people, not technology. They treat tech as a cost center, not their core. They rely on third-party vendors that are themselves built on legacy systems, which leaves insurers with hundreds of disconnected systems they need to run their business. It is very hard for an organization like that to compete with a full-stack, tech-first company like Lemonade, Inc. In fact, in the history of all tech revolutions, you can probably count on the fingers of one hand the companies that dominated Shai Wininger: prior to the tech revolution Timothy Bixby: and still were there in a dominant position when the dust settled. Shai Wininger: It would be naive to expect that incumbents will be in this place forever. Timothy Bixby: Of course, they are already talking about increasing investments in AI and sharing a case study here and there, but by the time they make meaningful progress, we believe we will always be several steps ahead. In the next question, CyberKat asked, Shai Wininger: how does Lemonade, Inc. think about AI reducing uncertainty while creating new risk categories? I have to say, CyberKat, that a shrinking TAM does not keep us up at night. Timothy Bixby: Even if AI compresses pockets of TAM, the resulting market opportunity remains essentially limitless relative to our current size. But with that said, I agree with the premise of your question. Shai Wininger: We are already seeing this in our existing suite of products, with the expansion of autonomous driving. Timothy Bixby: I think it is true that AI will continue to redefine the insurance industry with regards to the types of risks and product that are relevant over time, perhaps in ways that are not immediately obvious today. With that, I will pass it over to the moderator and we will take some questions from Operator: Thank you. If you would like to ask a question, please press 1. When prepared to ask your question, please ensure your device is unmuted locally. First question comes from Jason Helfstein with Oppenheimer. Your line is open. Please go ahead. Jason Helfstein: Hi, everybody. Thanks for taking the question. So when we look at the numbers, we can clearly see on the in marketing efficiency. You obviously talk about it. We can see it kind in a contribution margin. When I think about what that kind of implies to 2026, it would like that looks like the EBITDA guide would be particularly conservative unless you plan to make other OpEx investments or essentially kind of, like, lean into potentially pricing for growth. Operator: So Jason Helfstein: maybe talk about how you are thinking about that, i.e., reinvesting marketing efficiency into growth? Or just that it is conservative. And maybe, tie that you made three points in the earnings letter, that you plan to lean more into cross-selling Operator: and Jason Helfstein: kind of automated pricing and improved pricing accuracy. So maybe just, like, take those three comments, and I do not know if you want to link that back to, like, the first question or, you know, if it is connected. Thank you. Timothy Bixby: So I will take a a a shot at a a subset of that, Jason, then maybe my partners will jump in. Daniel has joined me here, and we have also asked Nicholas Stead, our SVP of Finance, to join us to perhaps answer a few questions. If I kind of think, you know, zoom out and think about 2026 generally from a growth perspective, you know, actually, Q4 was a pretty good proxy for how we are thinking about it. So you saw a couple things happening really coming together in Q4. Certainly, the underwriting or loss ratio side of the business came in very nicely. But from a growth perspective, which is really the core of the focus right now, which is how do we grow effectively? How do we maintain an LTV to CAC that we are comfortable with, number one, and excited about improving over time, number two, and how do we lean into that over time? And so you saw that come together nicely in Q4 where we are able to see free up a little more spending, free up a little more capital to invest because we saw nice underwriting results, and we plow that back into additional growth. So you see overperformance on the top line versus our guidance. That is because we deployed a little more growth spend than anticipated, and that is a good thing. So that is a backward-looking view. If you take a forward-looking view into 2026, we are guiding to our, you know, very strong track record of being able to maintain a solid LTV to CAC of three or better. We do see here and there in certain pockets in channels and certain products and certain geos is overperformance, and that is when we are able to lean in. So I think what you see embedded in the guidance is some of that continued goodness, but we have not changed our philosophy of taking everything good happening in the most recent period and extrapolating that forward. So I think you are right. There is probably a similar potential to overperform. We think growing a little bit faster each quarter is important, and we grow at a pace of our own choosing. Guiding to 30% plus, obviously, the market will enable us to do more. It is essentially an endless market. But I think for at this point of the year, we are six weeks in. We like what we are seeing in January and February to date, and so that guidance reflects real optimism about being able to spend more—significantly more—in 2026 and in 2025. That is a continuing trend and to potentially see that growth rate accelerate. Daniel Schreiber: Yeah. I agree with everything. Is there anything I would say, Jason, hi. Thank you for your question. There is not designed buffer or conservatism built into the number. We are guiding as best we can as we always do. Operator: We do always look for opportunities to surprise ourselves and you and everybody, but our guiding strategy is to go into pretty much what we have line of sight to. And Daniel Schreiber: what I think may be making the difference that you are kind of pointing to is captured in some of the things you referenced, which is we are investing quite a lot of R&D work this year. So we highlighted three areas of investment. There are others that we did not detail, and even those we just touched on in passing, but we are undergoing very significant investments really that compound one another. Operator: We see 2026 as a year of multiple engineering efforts Daniel Schreiber: quite aside from the fact that the ground beneath our feet is moving because the models keep getting better and better. Every day we wake up to a more powerful Operator: brain at the very core of what we are doing. But beyond that, Shai mentioned the local platform that is going to look very different by the 2026 and is at the beginning of the year. Daniel Schreiber: We spoke about our cross-selling platform, our pricing machine as we are calling it, and our revenue machine. Operator: All big initiatives that should collapse time, increase Daniel Schreiber: precision, and ultimately lower expenses. But perhaps some of the delta that you are pointing to and that you are assuming is conservative Operator: is actually going to be spent on those initiatives. Nicholas Stead: That is not in Jason. It is—hey, Jason. It is Nick. I just wanted to jump in on your question around expenses in 2026. You can think about operating expenses as being broken into two chunks. There is growth spend and then the remainder of operating expenses. Growth spend will continue to increase in 2026, as it has in 2025 and 2024. The remainder of the expense base should generally remain stable or closer to stable, growing in the single digits as compared to the top line, which is growing above 30%. Operator: We now turn to John Barnidge with Piper Sandler. Your line is open. Please go ahead. John Barnidge: Thank you very much. I appreciate the opportunity. My question is about adjusted EBITDA profitable in 2027. Timothy Bixby: How do you think about the target for premiums to surplus at that time? John Barnidge: And do you think he can operate at greater leverage given some of the operational scale he has begun to achieve? Thank you. Timothy Bixby: Yeah. So from an EBITDA—maybe two questions in there, perhaps. From an EBITDA perspective, we do expect Q4 this year, 2026, to be fully positive as well as the full year of 2027, which would be the first full year of EBITDA positivity. While we have not indicated growth rates beyond 2026, we have been in our communication that a 30% plus growth rate is our goal, and an accelerating growth rate quarter is also our goal. And so I would expect that ambition to continue into 2027 and beyond, given the immense size of the market that we are in and the markets that we can potentially be in. From a surplus leverage perspective, we noted that we have about $250,000,000 currently that is held as required for surplus. That is relatively quite capital light. You take advantage of a captive structure, and we have reinsurance in place and other structures that in combination enable us to keep that surplus satisfactory for all regulatory requirements, but also to a minimum, so that we can deploy capital in all the ways we choose to to grow the business. We expect that to continue. All of our forecast modeling tells us that we have more than ample surplus to support very ambitious growth rates even beyond our current growth rate, and with ample cushion left over. And I think you can take real confidence. Our forecasted breakeven points for EBITDA has essentially been unchanged for almost four years at this point. Operator: So Timothy Bixby: our visibility is quite good. Our leverage enables us to continue to be capital light, and we are more than sufficiently capitalized to grow at really ambitious paces. Operator: Through 2027 and beyond. Thank you. We now turn to Tommy McJoynt with KBW. Your line is open. Please go ahead. Tommy McJoynt: Hey, guys. Good morning. Thanks for taking our questions. Jason Helfstein: The first one here is, obviously, there has been a lot of headlines around some advancements in ChatGPT and sort of the integration of carriers with that distribution model. Do you guys have any plans to allow, you know, tools like ChatGPT to actually bind policies for Lemonade, Inc., or would the preferred route be to use ChatGPT as a search tool that ultimately leads to Lemonade, Inc. where they could bind the policy. Operator: I was talking on mute all this time. I am sorry. Timothy Bixby: Daniel, please continue. Yes, sir. Operator: I am so sorry. I am so sorry. Daniel Schreiber: Let me start over. Can you hear me okay now? Operator: Okay. Jason Helfstein: Yeah. Operator: Okay. I gave you a wonderful answer, but it was all lost because I was on mute. I that is right. Timothy Bixby: What I was saying was that Operator: we use AI in many, many of our marketing. At the moment, it is not on the most front-end aspect Daniel Schreiber: of our marketing, but everything other than the skin-deep kind of chat interface, which ChatGPT has integrated with some players—obviously, the skin on in—it is all AI. When it comes to that outermost layer, Operator: we generally love our own AI for that. My Daniel Schreiber: bot does and has done a great job chatting with customers, offering them an incredible experience. That is not to say that we would never use something like a ChatGPT interface, but it is not something we have launched yet, and if we decide to do that, you will be the first to know. Tommy McJoynt: Okay. Understood. And then switching gears, as you guys have rolled out this autonomous vehicle insurance product on the car side, that obviously introduces a variable level of premium that is charged to customers on either a, you know, six-month basis or a monthly basis. Is it your vision that over the long term, most car insurance will move to a variable level of pricing rather than, you know, a fixed six-month term premium? Daniel Schreiber: Yes and no. We, today, have both models. We have models where you can pay for Operator: and we have others where it is fixed and it is kind of customer's choice. We do not have all objections in all the markets right now, but is where we see this going and several states are there already. Daniel Schreiber: And this is really a Operator: choice, a style choice. You know? If you want, you can remember the early days of mobile where you could pay by minute or by Daniel Schreiber: plans and family plans and other things where you bought buckets and roll of the month and all that kind stuff. We think there are plenty of ways to do pricing around it. The big difference between what we are doing and everybody else is that we know the cost per mile. We are making predictions. Shai spoke about this in his comments earlier. Timothy Bixby: We are making predictions Operator: based on Daniel Schreiber: a plethora of data that comes to us in real time at very high granularity from really high-fidelity machinery. Allows us to know that when you are driving Operator: where you drive, how much you drive, how you drive, if it is Daniel Schreiber: you driving with a car. All of that means that we can price per mile with tremendous Operator: precision. If you then prefer to buy a bulk and have a fixed Daniel Schreiber: price, that is fine. We can use all of that information in order to price it for you as a fixed price Timothy Bixby: which will correct. Operator: Episodically, and other people prefer to pay per mile, and we offer that as well. Daniel Schreiber: Both of them are fueled by the same AI engine and dataset onto me. Operator: Thank you. As another reminder, if you would like to ask a question, please press 1 on your telephone. You now turn to Jack Matten with BMO. Your line is open. Please go ahead. Jason Helfstein: Hey. Tommy McJoynt: Good morning. Just a follow-up on the strategic initiatives in each about it in the letter, including the enhanced cross-sell platform. Just wondering if you could unpack that a little bit more. I know it references cross-sell car and home. And over the past year or so, think you have deemphasized home insurance growth a little bit. So just wondering how you view that line of business and as part of Lemonade, Inc.'s overall mix longer term? Timothy Bixby: Sure. So Shai Wininger: that was a Timothy Bixby: a good tidbit that we put in the shareholder letter to give a feel for the kinds of things that not, in a year when we are really continuing to focus on growth, on autonomous car, on really nice financial results, we are also continuing to invest in farther-reaching capabilities that we think over time will continue to not only help us maintain our advantages, whether AI-enabled or otherwise, but actually to expand those advantages versus incumbents. And those three areas we noted are really the core of what is a lot of interesting activity going on in terms of investment in future stuff. Cross-selling continues to be important. More than 5% of our customers have multiple policies at this point. That is a really important metric. Almost 20% of our in-force premium, however, is coming from customers with multiple policies. So cross-sell, our ability to cross-sell, which is a really efficient way to increase IFP and accelerate growth without quite as much of a growth spend investment, is important. And then the other two pieces—really pillars—of the are underwriting capability, which is pricing; constantly focusing on being able to de-average price and pricing, price on a car driver's behavior and not under credit score; and also to optimize how we allocate growth spend. So those are really three of the real key areas we are continuing to invest both with current resources, and actually, we will grow those resources to some extent over 2026. All of that is embedded in the guidance. All of that, we expect to deliver significant future Operator: ROI. Timothy Bixby: Yet when you peel it all apart, our overhead expense, even with those incremental investments, is growing very modestly in the low single digits. An operating expense standpoint, almost our entire growth and expense is on growth expense to acquire new customers. That is a theme you have seen now for several years running, and that will continue, we expect, well into 2026, 2027, and beyond. Jason Helfstein: Got it. Thanks. Then, I just just wanted the Tesla FSD Tommy McJoynt: initiative, and I appreciate the color you gave earlier on this. But just wondering if you could unpack the opportunity you see for Lemonade, Inc. and how much you think it could eventually contribute to the share of your business. And then just given Tesla also has its own insurance offering, can you just talk about how Lemonade, Inc.'s positioning, you know, is offering from a competitive standpoint? Timothy Bixby: We love talking about Lemonade, Inc., but we will shy away a bit from talking about Tesla and their plans and their goals. They are a terrific partner and setting a standard in so many ways, but we will let them speak for their goals and aspirations. From our view, we want to be where our customers are and where our customers are going. We have got a paper-mile product in place for years. It is not right for every customer, but it enables us to do what we are best at, which is take deep levels of granular data and use that to price a customer most effectively, and often that is to give the customer a better price. An autonomous vehicle, autonomous driving is called an electronic or without question. Shai Wininger: Pricing Timothy Bixby: the driver of the car, that is whether that driver is a human driver or an AI driver or no driver at all. The risk is still there, and we are best placed in the market to be a—I think, we think—to be a partner to Tesla, but also to be a—kind of lay the groundwork as this part of the car market evolves. We think it helps us accelerate things that change more quickly, play to our best strength, which is agility and a data-driven platform. And so we are really optimistic about it. Jason Helfstein: We do not Timothy Bixby: little premature for us to say the impact on the financial and forecast model is. And as Daniel said, when it is the right time, we will certainly do that. You will be the first to know. Operator: Thank you. Ladies and gentlemen, we have no further questions. So this concludes our Q&A and today's conference call. We would love to thank you for your participation. You may now disconnect your lines.
Operator: My name is Ellie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Six Flags Entertainment Corporation 2025 fourth quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' prepared remarks, there will be a question and answer session. If you would like to withdraw your question, press the pound key. Thank you. I will now turn the call over to the Six Flags management for opening remarks. Please go ahead. Good morning, everyone. And thank you for joining us to discuss Six Flags Entertainment Corporation's Michael Russell: 2025 fourth quarter and full year results. My name is Michael Russell. I'm Corporate Director of Investor Relations for the company. Earlier this morning, we issued our earnings release which is available on the Investor Relations section of our website. Before we begin, I'd like to remind you that today's comments include forward-looking statements within the meaning of the federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings for a discussion of those risks. Joining me today are President and Chief Executive Officer John Reilly, and Chief Financial Officer Brian Witherow. John will kick things off with his observations of the business since joining the company late last year. Brian will provide a review of our financial and operating results, then John will close things out with his outlook for the business and how we are approaching the 2026 season. We will then take your questions. With that, I would like to turn the call over to John. Thanks, Michael, and good morning, everyone. John Reilly: Thank you for joining us for our fourth quarter earnings call and my first earnings call as CEO of Six Flags Entertainment Corporation. On today's call, I will start by providing some background information on my experience in the industry, why I jumped at the opportunity to become Six Flags' next CEO, and my initial observations after spending the past two months on the ground. First, a little bit about me. I started out in the regional theme park business many years ago, selling popcorn as a teenager, before working my way up to executive positions in two of the world's largest regional amusement park companies, one based here in the U.S., and the other based in Europe. Theme parks are in my blood, and I am very proud of the work I have done at each career stop to deliver exceptional experiences for our guests, to provide a fun and dynamic work environment for our team members, and to drive higher profits for our owners. So what excited me about the opportunity to join Six Flags? First, I love this industry. The regional theme park is a resilient and growing industry, with high barriers to entry leading to limited supply, resilient performance during recessions, and consistent demand when parks are well managed. In addition, Six Flags Entertainment Corporation has a dominant position within the industry, as the largest regional theme park player in the world. Michael Russell: Second, John Reilly: Six Flags parks are located in some of the largest and fastest-growing markets in North America. There are more than 200,000,000 people living within easy driving distance to our parks, providing a huge opportunity to increase our penetration and to grow attendance over time. And finally, this company has tremendous assets and significant earnings potential. Throughout my career and, particularly as I have assumed executive-level positions over the past decade, I have often been tasked with turning around underperforming assets. I can tell you this: There is no better feeling than unleashing the potential of a talented team of people to revise strategy and to improve execution, all with the goal of delivering sustained earnings growth over time. I am not here to spend time on the past. I am here to build a disciplined operating culture that consistently delivers reliable, fun, and memorable guest experiences, as well as dependable financial outcomes, and to earn credibility with our guests and investors quarter by quarter. This role is personal for me. Growing up in the theme park industry, I know what great looks like. Over the past several weeks, I have been spending time in our parks. A lot of time. Walking the midways, meeting with park leadership teams, conducting focus groups with guests, and engaging with our frontline associates. Those visits have been invaluable, and they have reinforced my conviction about the underlying strength of our company. What I have seen reinforces two things: The underlying demand is there, and the biggest value creation opportunity is through better execution. Let me just share a few examples from my park visits, because I believe they highlight the kind of high-return work that can change consumer perception and quickly improve results. At Six Flags Magic Mountain, I visited the park's maintenance shops during my tour, and from my interactions there, it was clear the maintenance team took great pride in their efforts this past year to restore coaster trains, put them back into service, driving better ride uptime, more rides for guests, and higher guest satisfaction. With a fleet of more than 60 coaster trains, we will benefit from their hard work and our investments even more so going forward. We are already seeing positive signs of this work and investment in guest KPIs in 2025 and early in the 2026 season. We expect to see significantly increased ride uptime and throughput at Magic Mountain and at other parks. Important work like this is going on in all operating areas across our parks. On the food and beverage front, we have placed executive chefs in the park to elevate food quality and improve guest satisfaction. During my tour of Carowinds, Eraj, our executive chef there, showed me how innovations are expanding the park's menu offering this year, and he and his team explained how they are more efficiently approaching food preparation during varying demand levels, with monitored holding times to ensure guests are getting the freshest and best-quality food. The placement of chefs has been fully deployed already, and now with the right resources in place, we are positioned to reliably deliver higher quality food across our parks. Our scale provides us with a clear mandate to constantly improve efficiency. As I have traveled to parks and conducted leadership town halls, I am encouraged that our park teams are not only embracing the challenge, but taking pride in driving efficiency. They are committed to do this work the right way, always protecting the guest experience. When I visited Kings Island, our maintenance team shared their idea how we could save thousands by purchasing certain equipment we are currently renting. I can assure you this is something we are digging into further. During my stop at Canada's Wonderland, Vivendra, our workforce director, proudly explained how his efforts ensured labor is being scheduled according to forecasted demand levels, so that park labor is deployed at the right time and the right place throughout our entire enterprise. Effectiveness in this area helps reduce costs and ultimately helps drive improved guest spending. The workforce management program was deployed across the portfolio year, and now we stand to benefit from the resources and systems that are in place to drive efficiency and increase reliability in our business. Having been through this process a number of times, I can assure you this: The best ideas and highest-return innovations come from the people closest to the work. At Six Flags, that is our ride operators, our maintenance teams, food and retail leaders, call center teams, finance and accounting staff, among others. Michael Russell: Therefore, John Reilly: we have recently created a formal feedback channel for associates to submit their ideas for innovation at all our parks. So far, we have received more than 300 proposals from our parks alone, recommending projects to create efficiencies and automate workflows. These submissions are currently under evaluation, as we look to activate the ideas with the highest paybacks. We want to recognize great ideas, reward them, and scale what works across our entire park portfolio. Everyone should expect a faster operating cadence and higher accountability across the board. We are committed to the operations levers that drive our guest experience in our business: reliability, throughput, cleanliness, value, and fun events and experiences. By mastering these, we will fuel demand and increase guest spending. Moving forward, we will simplify our processes and remain highly disciplined about where we invest to ensure maximum returns. For our employees, my commitment to you is to provide clear standards, to remove obstacles to progress, and to make decisions quickly so you can do your best work. For our guests and fans, when you come to our parks, your entertainment experience each visit should meet or exceed your expectations. We want you back, so we plan to earn your trust to ensure that happens. With that, I will turn it over to Brian to walk through the quarter and full-year results in more detail. I will then share some thoughts on our initial areas of focus. Brian? Thanks, John, and good morning, everyone. I will begin with a recap of our fourth quarter and full-year results before providing an update on select balance sheet items as well as early performance indicators for the season ahead. For the fourth quarter, we are in the middle of our guidance range. Brian Witherow: Delivering adjusted EBITDA of $165,000,000 on attendance of 9,300,000 guests and revenues of $650,000,000. Two dynamics impacted the quarter. First, results for the quarter were up against a performance in October 2024, which we discussed on our last earnings call. Secondly, operating days in the winter holiday calendar mattered a lot. We operated 779 days in 2025, versus 878 days last year. As was expected and as we discussed last quarter, a significant portion of the decline in operating days reflects our decision not to operate winter holiday events at four parks, a decision that was made earlier in the year. In hindsight, that decision did not optimize profits at every park the way we needed it to. Those events can be meaningful demand drivers; removing them created a self-inflicted headwind in terms of both attendance and operating leverage. We are taking that learning directly into our planning for 2026, and we will rethink the winter holiday strategy with a tighter, returns-driven approach market by market rather than applying a broad brush. And while weather created variability in the quarter with 15 park closure days versus three last year, the more significant impact on demand was our decision to eliminate the winter holiday events, which created an attendance headwind of approximately 425,000 visits. At the same time during the quarter, spending by guests visiting our parks was strong. Per capita spending was up year over year supported by higher guest spending on admissions and on in-park products. That matters because it reinforces that when guests get through the gates, there is clear opportunity to drive revenue and profitability through better execution, including higher throughput, better staffing alignment, efficient food and beverage operations, and overall guest flow. For the full year, we produced net revenues of $3,100,000,000 and adjusted EBITDA of $792,000,000 while entertaining 47,400,000 guests and delivering per capita spending of $61.90. Similar to the quarter, the year reflects a mix of strong guest spending and execution gaps that impacted attendance and operating efficiency, particularly around the operating calendar. We are using those outcomes as inputs into a tighter operating plan for the upcoming season, with a focus on consistency and repeatability across the portfolio. As we noted on our last earnings call, this past season taught us a lot. It proved to be a tale of two cohorts. Our best-performing parks overcame their operating challenges, and in several instances, parks delivered record or near-record years. At the same time, there were other parks in our portfolio that were not as well positioned to withstand the operating challenges. The stark difference in park performance reinforces the notion that some of the profitability challenges we faced in 2025 were episodic, execution related, rather than structural or systemic in nature. This distinction matters as we strategize our path forward. Turning briefly to the balance sheet, in early January, we completed a significantly oversubscribed refinancing of our April 2027 notes at attractive rates. It is an important step in strengthening our capital structure and increasing financial flexibility as we focus on execution and performance. We have substantial covenant cushion at extended maturities and a clear deleveraging framework. Our leverage reflects 2025 depressed EBITDA, not structural over-indebtedness. Touching quickly on our longer lead indicators, at year end, deferred revenues were up approximately 1%, driven primarily by higher advanced sales of single-day tickets and increased deposits from our group business channel. More importantly, sales trends of season passes and memberships have accelerated since year end, supported by our new season pass architecture that includes guest access to multiple parks via newly designed regional pass products. While this represents a small sample size, the improved sales from the past few weeks are an indication that the strategic changes we have made are resonating with consumers. We are entering the most important part of the selling season with improving momentum, clear offerings, and a stronger platform to convert demand into park visits, a dynamic John will speak to in more detail in just a moment. Lastly, while we are not issuing formal guidance, our internal plans for the season are built around improving revenue and cash flow relative to 2025. With that, let me turn the call back to John. John Reilly: Thanks, Brian. Let me build on that with how we are approaching the business as we plan for 2026. While demand was pressured this past year, spending by guests who did visit remained solid. That and the early strong response to changes we have made to our pass programs that Brian just mentioned tells me something important: The revenue engine is intact. This is not a broken model, but one that requires sharper execution, clearer focus, and tighter alignment between commercial strategy and operations. The opportunity is to run this portfolio with greater consistency, more disciplined decision-making, and a refined playbook to convert demand into durable earnings and stronger cash generation. I am early in my tenure, and I will not pretend to have every answer. But I have spent my career in this industry, and I know what high-performing parks look like. And what I see across this portfolio are very addressable opportunities that can unlock meaningful upside under disciplined execution. Brian Witherow: First, we are evaluating how we go to market. John Reilly: We operate powerful regional brands, and we must deploy them with greater precision. Our guests are not identical market to market, and our marketing strategy should not be either. Over the past year, we saw the same promotion produce very different outcomes across regions. This is not a demand problem. It is an opportunity for us to better tailor our efforts to our local communities by applying tighter test-and-learn discipline. Marketing then becomes a demand lever, not just a traffic driver. Pricing is part of that same reset. Our architecture must be simpler, clearer, easier to communicate, across ticket types, passes, and add-ons, with fewer and stronger offers that improve conversion and yield, better alignment between promotional timing, operating calendar, and staffing levels, not simply to produce more demand, but more profitable demand. Operator: Second, John Reilly: we are driving consistency of execution and margin expansion. This business rewards operational excellence. A portfolio of our size should benefit from scale, and our guests should experience reliability everywhere—parks open on time, rides operating consistently, clean park environments, energized teams. Brian Witherow: To deliver that, John Reilly: we have tightened our operating procedures, established clear standards, defined measurable KPIs, and developed protocols for rapid follow-through. A critical lever in this effort is throughput—how efficiently we move guests through every touch point. Brian Witherow: Entry gates, parking flow, food service, John Reilly: retail counters, and ride operations. Throughput directly influences guest satisfaction, in-park spending, and improves cost efficiency. Third, we are applying disciplined ROI standards to our business Michael Russell: decisions. John Reilly: Every investment must answer a simple question: Does it enhance the guest experience in a way that drives profitable demand, reduces cost, or strengthens free cash flow? And does it do so at returns that justify the investment? That discipline applies to events, rides, and attractions at every level. Our experience with several winter holiday events this past year provided valuable lessons. We will approach seasonal programming with market-specific rigor, clear ROI thresholds, and test-and-scale methodology. It applies equally to capital investment. Safety and ride reliability are nonnegotiable. Beyond that, discretionary investments will prioritize projects that attract incremental visitors, improve throughput, enhance guest value, and generate measurable returns. And some of the highest ROI opportunities are operational improvements—reducing downtime, eliminating inefficiencies, and standardizing systems that allow our teams to perform at their best. Taken together, these actions are designed to accelerate attendance recovery, deepen guest engagement, and restore durable earnings power. Let me wrap up with these closing thoughts. Our near-term priorities are clear: Improving profitability, strengthening the balance sheet, concentrating our time and resources on the assets and initiatives that generate the highest returns. Six Flags Entertainment Corporation is a company with unique assets and significant earnings potential. Together, our teams are working to further our progress on elevating the guest experience, realizing the benefits of our incomparable scale to improve efficiency and margin, correcting missteps in marketing and operations, and continuing to create financial flexibility through deleveraging and disciplined capital allocation. We will be transparent about where we are. We will move decisively on what we can fix. And we will earn credibility and your trust the way it should be earned—through execution and results. The opportunity in front of us is meaningful, I am energized by what I have seen across the parks, I am confident in our path forward, and excited about what we can deliver together. With that, operator, please open the line for questions. Operator: We will now open for questions. Please press star followed by one on your telephone keypad. Your first question comes from the line of James Lloyd Hardiman of Citi. Your line is now open. Hey. Good morning. Thanks for taking my questions. And, John, certainly welcome aboard. John Reilly: I I James Lloyd Hardiman: in your prepared remarks, I think you said something along the lines of you are not here to spend time in the past. But I wanted to maybe take a minute and just get your thoughts on 2025 in its totality, you know, maybe do a brief postmortem here in an effort to sort of diagnose some of the problems that you are gonna be looking to solve for in 2026. And maybe specifically, if—and this is a question I get a lot, I am sure a lot of other people get this question a lot—like, how do we put the various issues into buckets? Right? Clearly, there are some cyclical pressures here. Clearly, there were some weather issues in 2025. I think you guys have spoken to maybe some unforced errors along the way. And then there is this sort of secular piece, right, that I think a lot of people struggle to identify, much less quantify. But, you know, ultimately, is there changing consumer behavior here at play? I think one of the other statements you made is that you think this is a resilient and growing industry, so maybe you do not think that there is, you know, meaningful changes there. But maybe help us put some of the issues into these categories so that we can get a better framework for the, you know, business going forward. Thanks. Operator: Yeah. Thanks for the question, James. Michael Russell: So John Reilly: when we say we are not here to dwell on the past, it does not mean we are not taking the lessons that we have learned from 2025 and correcting missteps and addressing other opportunities as we see them. So, you know, first, if you look at the consumer, we launched products in markets, as we said, that were not sufficiently localized. And in some markets that produced some abrupt changes. As we were integrating—and in those markets, the consumers were used to different messaging. In some cases, they were confused about their benefits on passes, for example. In some cases, they were paying more for a pass than they felt they had paid in the past. And so we are looking at all of those opportunities and then looking to address that misstep. So Brian mentioned on the pass program, we recently, I think two weeks ago, launched a regional pass. This is a really powerful product. And we are, you know, we are in the very early stages. Brian Witherow: But John Reilly: we see opportunity here, and we see increased cross-visitation. We see people in markets where we have membership moving to membership. So in terms of the consumer—no. We do not think this is a consumer problem. We think we can address this through improving our execution and through addressing some missteps and learning from what was done last year. And then, also, I would say in terms of performance, we have a clear mandate to do margin work. And our scale gives us that mandate. And you see in the numbers, we closed out at 27%. And we need to do better than that. And I am encouraged by what I am seeing internally that the team is embracing this challenge and doing it the right way. So we see opportunity on that front, and we are working to execute a number of initiatives there. The other thing I would say about 2025, James, is since joining the company, I have been surprised. You know, I could see the performance from the outside. But since I have joined the company, I have been surprised at the level of foundational work that was done in the integration. So in parks, bringing coaster trains up to full capacity as we had discussed. Improvements in parks, our tech stack, a lot of that work is behind us. And so as you look forward at our capital spending, it will be less in terms of IT and technology going forward. You know, we have ERP systems in place. And then the condition of the parks has been a positive indicator for me. I have been to 14 so far. So I will qualify that to say I have not been everywhere. And we have opportunities like any park chain. But it is better than I expected. So I think in terms of the consumer, we do not see any sign there is an issue with the consumer. We think we can address that through our own behavior, through our own plans. In terms of margins, we are working clearly on that. And then I think that a lot of the foundational work, especially in terms of the parks themselves, has been laid, which should help us as we go forward. James Lloyd Hardiman: That is a really good outline. And maybe to the latter point, about cost and margins, just curious to hear your philosophy as it relates to cost. Obviously, there is a fine line between sort of streamlining the cost structure and, you know, impairing the customer experience and, by extension, the demand of the business along the way. So maybe speak to how you have, you know, operationalized some of those cost savings at previous stops. And then, Brian, I think we have maybe lost a little bit of a thread in terms of the cost savings that were previously outlined. Maybe give us an update—what has been completed, how much is left for 2026, and if there is anything incremental that is been identified. Thanks. John Reilly: So I will start over, and then I will turn it over to Brian, James. In terms of the line between the guest experience and cost savings, I think the thin line you mentioned, I would say it is a red line. And that is what I have learned in doing this cost work in other chains. You have to protect the guest experience. It has to be a guardrail. Every initiative has to be weighed and measured. Brian Witherow: And you have to be willing to reverse if you do something that ends up with an unintended consequence. John Reilly: What really works here, I gave some examples on the call, but we have these 300 ideas that were under evaluation. And, you know, maybe just some specific anecdotes will give you an idea of the power of this. You know, we have a suggestion from Magic Mountain where they are renting an air compressor for $32,000 a year. It will cost us $35,000 to buy one and take that rental out of the P&L forever. At Knott's Berry Farm, it will cost them $14,000 to buy a forklift that we can capitalize. It costs us $19,000 a year to rent it. And then there are a lot of ideas like that where they are just one-offs from parks, and we can scale them across the enterprise. We have not begun to do that work yet. So storage units for events. We are in the event business in a big way. We are going to be in the event business as we go forward. But we are renting equipment that we could buy for the same price that—for the same price we could purchase it for. And then automation—parking lots, automated entry at tolls, other things—those can actually improve the guest experience while creating efficiency. There are a lot of studies that show that guests actually prefer that type of frictionless entry. So I am confident that we will do the cost work the right way. I have done this before. We will renew the initiatives because at the same time, we are working to improve the guest experience. Brian Witherow: Yeah, James. And then as it relates to your follow-up, you know, in terms of the original gross cost synergies that were part of the merger, we have effectively delivered on 100% of those by the end of 2025. But as John just outlined, you know, we are not satisfied or stopping there. We are going to continue to look for more meaningful opportunities to offset other cost pressures, other inflationary pressures that are in the business, whether that is through more efficiency initiatives, a few of which John just gave some examples to, additional and further standardization of procedures and policies. And then, you know, as you are fully aware, right, labor is our largest single cost. You know, more labor productivity improvements in the system. So not going to put a specific number on it at this point in time. A lot of work is in motion, and there is more to be done, but we are confident that we can get more efficiencies rung out of the system over the course of 2026. Great color. Thank you both, and good luck. Michael Russell: Thanks. Operator: Next question comes from the line of Arpine Kocharyan of UBS. Your line is now open. Good morning. Thanks for taking my question. John, it is very clear you know and understand this business well. If you look at the performance for 2025, it was clear to even someone that is not an operator, right, that decremental margin and some of the underperforming parks is very large. So my question is, do you feel like you have a good handle on capturing that this year regardless of demand? In other words, a leaner organization that is more flexible to adapting to demand levels, or do you think it can take some time to get to that leaner organization? John Reilly: Yeah. What I can tell you is that the work is underway to improve the margin, to work on these initiatives that we have mentioned both in workforce deployment, in efficiency, automation, and in other efficiency initiatives that we have underway in the company. I do not have a timeline today to get to a specific target. I have, you know, I am just joining here. But as I said before, 27% gives us a mandate. And I have been quite encouraged by our team members who are embracing that and embracing doing it the right way. So we have to do it the right way. The work is underway. We believe there is considerable opportunity over time. And then the last thing, I think, that you mentioned in terms of organization, you know, getting the organization to do that is also very important. What we are doing is important, but I think the why, the how. You know, we believe strongly in pushing more decisions back, with local input, to the parks. We believe strongly in simplicity. We need more urgency in the organization. More localization. And more accountability, quite frankly. So we are working while we work on the initiatives, we are working in the spirit of more accountability, more localization, and more urgency in execution to get it done. Operator: Okay. Helpful. Thank you. Then a quick follow-up. I was curious how you think about asset optimization, and it could be early still, since you, as you said, you just got there. It is clear, you know, there are at least maybe six to eight parks generate less than 5% of EBITDA in this portfolio. At the same time, it seems to me it is not straightforward to even decide what can be pruned because there will be underperforming parks that are worth investing in to improve operations, and maybe there are assets that is not quite worthwhile to invest in. How do you think about that? Michael Russell: Yeah. We John Reilly: we approach asset evaluation through a disciplined return framework. We have rigorous work underway on that front in terms of assessing. But our highest ROI parks represent the core of the portfolio. And certainly, as you mentioned, there is a—done right, this could benefit leverage to optimize the portfolio. But really, one of the opportunities that we are looking at is the strategic focus it gives us, in order to be able to dedicate management time, expertise, know-how, capital investments, resource allocation. And I think that has, in the longer term, the potential to be the greater benefit. Thank you. Operator: Your next question comes from the line of Steven Moyer Wieczynski of Stifel. James Lloyd Hardiman: Yeah. Hey, guys. Good morning. And, John, welcome in. So I guess my first question is around guidance or lack of guidance for this year. Brian, you kind of touched on this in your prepared remarks. But maybe wondering what drove the decision not to give formal guidance. And then maybe from a high-level perspective, Brian, if you could give us some color on maybe how you think the year could play out, whether that is from an operating days perspective, whether that is from an attendance perspective, anything there would be helpful. And then, Brian, also, do you have forecast for CapEx and interest this year as well? Thanks. Operator: Hey, Steve. John Reilly: John. I will start and then turn things over to Brian on the latter part that you mentioned. Look, in terms of guidance, I just got here. You know, I have been on the ground just a little bit over two months. Now is not the time for me to come out with guidance. We are really early in the season. We have some nascent signs of growth, but it is too early to go down that road. And we want to earn your trust with execution and results over time. And, you know, just for me, two months is not enough. We are confident, however, that we have the opportunity in volume, pricing, operating costs, off the 2025 base to begin to deliver sequential improved results. I will turn it over to Brian for the second part there. Brian Witherow: Yes, Steve. In terms of operating days, as we alluded to in the prepared remarks, there is still work being done in the field as we challenge our park leadership teams to ensure that we are, you know, we are optimized on the operating day front and the operating calendar. And so there is still an opportunity to see this move. But if we look at our outlook for '26, sans the sunset park in Bowie, Maryland, I would say that the overall operating days right now are expected to be up slightly, maybe as much as 1%. That could change as we get, you know, further into the year and the opportunity to potentially add back a winter holiday event, as an example, or two. Those decisions, you know, will be made, you know, in the next several weeks. But that is the outlook on that front. In terms of CapEx, we are still expecting that our spend is going to be in the $400 to $425,000,000 range for the calendar year 2026, versus a cash spend this past year of closer to $475,000,000, and interest is expected to be in the $135,000,000 to $145,000,000 range. James Lloyd Hardiman: Okay. Gotcha. Thanks for that color. And then second question, you know, back to you, John. You mentioned in your prepared remarks you have a history of working with, you know, with so-called underperforming parks. So as you have kind of had the chance now to go through the portfolio, it sounds like you have been to, you know, about half of the portfolio at this point. What would you say as you kind of think about the underperforming parks, what are some of the top two, three, four things that, you know, you can identify and potentially make John Reilly: changes to. And I am not sure that makes sense, but hopefully it does. Yeah. I think it is a good question. So I would say that the top takeaway I have as I have toured the parks and then as we have—Brian and I and the teams in the parks and in the park support center here—is that the issues are not systemic. The issues are market by market, park by park. And, for example, you know, we have parks where price—you know, maybe price was an issue in terms of lost opportunity. We have parks where attendance was an issue. And we have parks where cost was an issue. And then we have parks that, you know, where two of those were a factor. So I think the key for us is to approach these parks issue by issue and to address it that way. And that is how—so that is how we are approaching the 2026 plans for these parks. Brian Witherow: It is not systemic. John Reilly: In some parks, we have opportunities, and, you know, for example, as I traveled to Mexico—mean, this is a great park and a great market with great weather. And so, for example, I think in Mexico is a place to lean in. We are going to add over 20 operating days in Mexico. Brian Witherow: So, you know, it really is case by case. That is a different situation than John Reilly: many other parks. So it really varies by site. Operator: Okay. John Reilly: Thanks for the color, guys. Appreciate it. Michael Russell: Thanks, Tate. Operator: If you would like to ask questions, please press star followed by one on your telephone keypad. Again, if you would like to ask a question, please press star followed by one on your telephone keypad. Your next question comes from the line of Thomas L. Yeh of Morgan Stanley. Your line is now open. Brian Witherow: I wanted to ask about the particular strength in per cap in 4Q. I know the shoulder season has some mixed factors to it, but you maybe just talk about the sustainability of that growth? And Thomas L. Yeh: Brian, I think you mentioned pass uptake improvement, recognizing it is still early in the cycle relative to last year, can you share how units and pricing are pacing on a blended basis given some of the uptake on the higher priced regional passes? Brian Witherow: Yeah. Maybe I will start with the latter, Thomas, and then John can provide some color after that. But, you know, on the season pass side, we are not going to give, you know, specific metrics at this point in large part because it is a small sample size. And I think sometimes, you know, the law of small numbers, right, some of these percentage year-over-year variances, you know, can be a little less informative than not. But we are encouraged not only by the volume and the pickup in that, but also, you know, with the reconstructed architecture of the pass, you know, as we talked about even last year, moving over to a single unified ticketing platform is going to give us more opportunity, more flexibility around things like the regional pass. We are seeing folks migrate up to more higher-priced products. I guess, I would say it that way. And, you know, that is certainly helping at certain parks in regards to that average price. Now, not all of our parks are in right now, as you know, Thomas. And so that is, you know, you have got not only a small sample size in terms of window of time, but also in terms of the parks that are in play. So, you know, there is more work to be done, but the team is very encouraged by the early signs there. In terms of per cap, again, very encouraging. Fourth quarter is not—as you get deeper into the quarter, not nearly as meaningful in terms of the number of parks in operation or the total number of days, say, third quarter—but seeing the impact of some of the late-season changes we made around promotions and pricing benefiting the admissions per cap, as well as then seeing guests continuing to spend inside the park on those in-park products like food and beverage, extra-charge attractions, to name a couple. It is very encouraging. And I think supports what John said before, which is we do not see a problem with the consumer or the health of the consumer. They are spending when they visit our parks. And, you know, our job is to just continue to find ways to improve that demand level. And I would say, this is John again. John Reilly: The, you know, as we said, the solid spending that we saw a sign that the revenue engine is intact. Along with the regional pass that we have laid out. But I would—I am taking the fourth quarter in-park per caps with a bit of caution. Because there is a lot of change in there with the reduction of the events, with the reduction of the operating days. Brian Witherow: With the change in John Reilly: both the mix of visitors by ticketing category because of the loss of the events and the mix of parks because of the loss of events. So, Michael Russell: you know, as we look at Brian Witherow: 2026, we expect growth John Reilly: in our in-park spending, but I think we are going to be careful about modeling what we saw in Q4 going forward because of the sort of noise in the quarter. Thomas L. Yeh: Okay. Understood. That is very helpful. And then one last one, just on the points about optimizing the investment structure. Wonder if you could just drill down a bit more on planned marketing spend because last year, I think you leaned into areas that did not stimulate as much demand as you desired. Just maybe any insights on unpacking the right level for that. Was it allocation issue? Or was it, you know, just kind of marketing into a weather situation that was the problem, how would you approach kind of taking that into the knee season? John Reilly: Yeah. So I would look at a couple of factors when we look at our marketing spending. I would look at, number one, the timing of the spend is something that is under evaluation. So, you know, we need to be sure that we are putting it in the right period of year that gives us the highest return on the ad spend. So that is one thing that is under review. We also have to look at the—you know, in terms of the power of the return on marketing, we have to look at the quality of creative. So the team is doing a lot of work to address some creative that they do not feel was as effective as it should have been last year. And then finally, in terms of our marketing spend, just more of the general sense, we have to look at our mix of awareness versus conversion spend. And, you know, one of the really great things about these parks is we have very high unaided awareness in our markets, but we are doing a lot of awareness marketing. And we think there is an opportunity to move more of our spend into dedicated conversion. So those are just three more general factors, if it helps, that are some of the work underway. Thomas L. Yeh: Yeah. Very helpful. Thank you. Operator: Next question comes from the line of Adam Fox of Truist Securities. Your line is now open. John Reilly: Yeah. Hey. Good morning. This is Adam on for Patrick Scholes. Just wondering if there is anything, you know, going back to the park ops optimization efforts, if there is anything you can share about Enchanted Park Holdings in particular? Thanks. Yeah, Adam. We do not have anything to share today on that front. Okay. Thank you. I will pass it along. Thank you. Operator: Thank you. Our last question for today comes from the line of Anthony Burney of Jefferies. Your line is now open. Brian Witherow: Hey, good morning. This is Anthony on for David Brian Katz. Thanks for taking our questions. The first one is, can you talk a little bit about your capital allocation priorities? How should we weigh deleveraging versus CapEx spend? John Reilly: And on CapEx, can you provide any ROIC targets that you have for that spending? This is John. I will start out. You know, first, what I would say is we have sufficient flexibility in our CapEx spend. You know, once we look at what is required for maintenance, which we would, you know, which we would always do, the remainder—you know, there is a lot of discretion in terms of attraction investments and other investments. I would say in terms of a change in focus or an accelerated change in focus would be CapEx dated to efficiency and automation that we talked about early. But we feel, you know, overall, we have a good amount of flexibility in the plan even when we address the maintenance CapEx as a given. Brian Witherow: Yeah. And I think, Anthony, just maybe adding on to that, you know, as we have been very clear, you know, in addition to, you know, continuing to reinvest in the parks and to drive growth, to mine more of those cost efficiencies, as John just mentioned. We are looking to those projects—we are going to focus those on our highest and best ROI, certainly looking to exceed our weighted average cost of capital in any of those investments. But our priority, you know, in addition to growing the business through the right level—and we think that the $400 to $425,000,000 for plan for 2026 includes a very attractive and comprehensive capital program. Beyond that, it is continuing to funnel all of our excess free cash flow back towards paying down debt until we get net leverage back inside of 4.0x on a sustained level. Okay. Very helpful. Thank you. And just a quick follow-up. D&A was a little elevated this quarter. It seems it was due to some changes in accounting. Should we expect this to be sort of the new run rate for D&A? Or is this a one-time change? Yeah. I would say you are right. I mean, it is a little bit of accounting noise, related to some purchase price adjustments on some of the legacy Six Flags parks as well as an accounting change related to the Cedar side, the legacy Cedar side of the ledger. I think, at this point in time, sans any significant change in the asset base, that is sort of the normalized run rate for Steven Moyer Wieczynski: for the go forward. John Reilly: Great. Thank you very much. Michael Russell: That concludes Operator: today's question and answer session. I will now turn the call back to Michael Russell for closing remarks. Michael Russell: Thanks again, everybody, for joining us today. Our next earnings call will be in early May when we will report our financial results for our February. Ellie, that concludes our call today. Thanks, everyone. Operator: For attending today's call. You may now disconnect. Goodbye, everyone.
John Streppa: Good afternoon, everyone, and welcome to Amplitude's Fourth Quarter and Full Year 2025 Earnings Call. I'm John Streppa, Head of Investor Relations. And joining me today are Spenser Skates, CEO and Co-Founder of Amplitude; and Andrew Casey, Chief Financial Officer. During today's call, management will make forward-looking statements, including statements regarding our financial outlook for the first quarter and full year 2026, the expected performance of our products, our expected quarterly and long-term growth, investments and our overall future prospects. These forward-looking statements are based on current information, assumptions and expectations and are subject to risks and uncertainties, some of which are beyond our control that could cause actual results to differ materially from those described in these statements. Further information on the risks that could cause actual results to differ is included in our filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements, and we assume no obligation to update these statements after today's call, except as required by law. Certain financial measures used on today's call are expressed on a non-GAAP basis. We use these non-GAAP financial measures internally to facilitate analysis of our financial and business trends and for internal planning and forecasting purposes. These non-GAAP financial measures have limitations and should not be used in isolation from or as a substitute for financial information prepared in accordance with GAAP. Additional information regarding these non-GAAP financial measures and a reconciliation between these GAAP and non-GAAP financial measures are included in our earnings press release and the supplemental financial information, which can be found on our Investor Relations website at investors.amplitude.com. With that, I'll hand the call over to Spenser. Spenser Skates: Good afternoon, everyone, and welcome to Amplitude's Fourth Quarter and Full Year 2025 Earnings Call. Today, I'm going to cover 3 things: First, our strong Q4 results and progress in the enterprise. Second, how AI is driving demand for analytics, and our strategy to deliver. Third, a look at our new AI agents in action and a spotlight on customer stories. Q4 represents one of these strongest quarters in Amplitude history. Our fourth quarter revenue was $91.4 million, up 17% year-over-year and exceeding the high end of our revenue guidance. Our annual recurring revenue was $366 million, up 17% year-over-year and up $18 million from last quarter. This was our highest net new ARR quarter since 2021. Non-GAAP operating income was $4.2 million or 4.6% of revenue. Customers with more than $100,000 in ARR grew to 698, an increase of 18% year-over-year. Over 25 AI companies are now included in that $100,000 cohort as well. This quarter was marked by balanced execution. No single deal was over $1 million, yet we had our highest ever number of multiproduct and $100,000 ARR lands. I want to talk more about AI and our strategy. Over the past year, AI coding assistance from Anthropic, OpenAI, Cursor and others have compressed development cycles dramatically. The velocity at which companies are shipping new products has accelerated. When software is this easy to build, it creates a gap between how fast teams can ship features and how fast they can learn if they are working. This shifts the pressure to the right side of the product development loop that you see here, the use and learn side. Understanding how users behave, what works and what doesn't and what actions to take next becomes the bottleneck. The constraint is no longer knowing how to build, it is knowing what to build instead. This is the hardest problem in software today. I say that because builders and their AI assistants need a system of context that combines multiple data streams. They need structured behavioral data. They need the correct retention and funnel logic, and they need the right analytical tools exposed in a way that enables AI to reason effectively. The AI then needs to be able to iterate with that system, test hypotheses, refine queries, identify root causes and recommend actions accurately and repeatedly. This is not something that can be bidecoded over a weekend or replicated accurately with an LLM on a data warehouse. However, it is exactly what Amplitude is purpose-built to do. We have worked with thousands of companies over the past 13 years and amass the world's largest database of user behavior. Our AI can explore patterns, explain changes and guide teams on what to do next more accurately and reliably than any other system. Over the past 6 months, our Agentic analytics platform has reached a 76% success rate on complex production-grade queries, that is 7x better than a straight text-to-SQL approach. With the new agents we launched yesterday, teams can now move from insight to action in minutes, not weeks using analytics, cohorts, experiments and messaging in one continuous agenetic workflow. Through our MCP integrations with Anthropic, Figma, OpenAI, GitHub, Lovable and Slack, we are bringing behavioral intelligence to teams where they already work. Understanding user behavior now becomes as simple as asking a question in a chat window. This puts Amplitude in a unique position. The frontier labs are pushing the boundaries of AI models and they recognize the complexity of analytics experimentation and behavioral understanding, so they turn to Amplitude. As I mentioned earlier, more than 25 of the leading AI native companies, including some of the names you see here, our customers with over $100,000 in ARR with Amplitude. In addition, one of the world's largest frontier AI labs is a 7-figure customer as well. They came to us to replace a manual system built from fragmented internal tools and raw warehouse data. Using Amplitude Enterprise Analytics and Session Replay they can now understand activation, engagement, retention and monetization end to end. With Amplitude MCP, they can offer those insights directly within the AI environments, their teams already use, dramatically improving the ability for them to automate development. And it's not just AI companies, companies of all sizes need a system that gives them trusted data, insights and action to successfully deploy AI in the real world. So they turn to Amplitude as well. This momentum, combined to one of our strongest quarters across gross bookings and new ARR alongside meaningful improvement in churn. Our go-to-market motion has matured. There is a tighter focus on value-based cases in the enterprise and on expanding with multiproduct deployments. We continue to consolidate the fragmented market. Platform win rates are increasing against point solutions and our newer products are gaining traction. Guides and surveys launched less than a year ago, is our fastest-growing product to date. We are also seeing a large increase in AI native usage as agents connect directly to Amplitude. Over the past few months, the total number of queries triggered by AI agents has increased dramatically. In October last year, there were almost none, and today, it is 25%. Agents also drove the vast majority of overall incremental query growth. This tells us that customers are trusting agents with analytics work. It also indicates that our platform offers the accuracy and the context needed in production environments. Taken together, this creates a powerful tailwind for Amplitude as we continue building a durable, scalable company that can unlock the next frontier and software. Over the years, we have intentionally expanded beyond core product analytics and into adjacent workflows. We have continued that work and acquired InfiniGrow, an AI-native marketing analytics start-ups that connect spends, behavior and revenue impact. InfiniGrow brings strong AI native engineering talent to Amplitude. This strengthens our platform as a system of context and expands our ability to bring acquisition, activation and retention into one continuous feedback loop. Yesterday, we launched our global AI agents, specialized agents and MCP. This represents the start of a fundamental shift in how teams work with their analytics data. Historically, analytics has required humans to do most of the heavy lifting, writing queries, building dashboards, monitoring changes, interpreting results and then figuring out what to do next. That process does not scale in the world where teams are shipping faster and faster. AI agents change that model. Instead of asking questions one at a time, teams can now delegate work to agents that continuously analyze behavior, surface insights and guide action. Our agents understand events, funnels, cohorts, experiments, session replay and outcomes because they operate inside a context system specifically designed for them. Agents make life easier by doing the work that slows teams down today. That is very, very different from bolt-on AI tools from SaaS companies that sit outside the data and try to infer meaning after the fact. The best way to see this and understand this is to look at it in action. I want to show you a quick teaser video, and then I'm going to show you a demo of what we've released. Let's go ahead and roll the video. [Presentation] Spenser Skates: It's a great question all product builders should ask themselves now, what will you build? I want to now walk you through what we've launched in AI analytics yesterday. I'm really excited about the future, and I want to show you Global Agent. Global Agent radically changes how our customers interact with their data. Starting your day with a dashboard is dead. Take a look at this interface, no dashboard, no graphs, no charts, just a chat box and a few simple prompts if customers need help getting started. I can talk to Global Agent like I talked to a colleague. I'm going to go ahead and ask it how's our loyalty program doing? In seconds, it comes back with a summary. Notice, I didn't use any jargon about event totals or taxonomy, just a regular question. It's calling out some pretty concerning numbers. Only 5% of users who view our welcome page actually go on to join the loyalty program. That is low, so I'm going to click in and investigate more. The Global Agent has followed me to a deep dive on this chart. I can keep investigating with another simple question. Break this down by traffic source. Here's the breakdown. Facebook and Instagram are driving loyalty sign-ups at 5.6% and 5.2%, while Google and direct traffic lagged behind. The Global Agent summarizes it perfectly. Social media converts 10% to 15% better. Since social media outperforms Google, I might shift ad spend, but looking overall, all the rates are low. So before reallocating budget, I'm going to go deeper. Is this a channel problem or an audience problem? Let me ask, do new users convert differently than existing customers? Without AI, this kind of analysis takes a lot of time, segmenting users, comparing funnels, pulling insights together, the Global Agent does it in seconds. And here it is, 14% conversion for repeat purchases, 5.4% overall. That's 2.6x higher. That answers my question. It's an audience issue, not a channel issue. I should reallocate my budget towards repeat purchases. Again, simple language, fast answers, deep learning that anyone can use. Analytics is the perfect use case for agents. So I want to show you specialized agents. Our specialized agents work continuously on specific jobs that would usually take dozens, if not hundreds of hours, monitoring dashboards, analyzing session replays, processing feedback, running conversion experiments, legwork now done automatically. We're going to be eating our own dog food on this one. I already have a session replay agent set up to monitor our own session replay tool and have it set in addition to sending a slack when it has a strong finding. This specialized agent has been watching hundreds of replays and sent me some summarized findings. Users with multiple saved filters type search terms, but cannot find filters without scrolling through the full list. Power users cannot preview filter criteria before applying, forcing trial and error selection. These are all things we should improve. We could have had someone watch all those replays. We could have talked to customers from hours on end or we could have let these continue to be issues. Instead, I get these findings served to me on a daily basis with a full report and a detailed breakdown with key findings, suggestions on what to explore next and even a highlighted [ brief ] set of replays of these issues. Okay. We're going to save the best for last. Finally, I want to show you what I'm most excited about, which is Amplitude MCP. We're releasing a fast-growing library of expert level workflows that customers can trigger in AI clients like Claude with a simple slash command. I'm going to go ahead and use Amplitude and Claude by typing use slash create dashboard and create a dashboard that tracks our growth conversion performance, hit, I hit enter and it goes to work. Instead of me manually creating 15 charts, running the segmentations myself, and piecing together an explanation in a doc, this skill handles it in 1 click. With MCP apps, Claude is opening and building Amplitude charts right inside itself. It's done it. So I've now gone to the link it gave me in a perfectly built dashboard with top-level metrics, conversion funnels and segment breakdowns. Amazing. Moving on to customers. We had a great quarter for new and expansion deals with enterprise companies, including one of the largest music streaming apps, the Cheesecake Factory Asana, PGA of America, CrossFit, Stewart Title Guaranty Company, Crunch Fitness, WHOOP, Once Upon Publishing and NTT DOCOMO. I'm going to highlight 3 examples that demonstrate the power of the platform in different ways. Japanese telecom NTT DOCOMO is using Amplitude across more than 1,000 active users to drive efficiencies at scale. As an early design partner for our AI agents, their data platform team uses agents to streamline analysis across existing dashboards. In 1 project, an agent reduced campaign analysis time by over 90%. Our AI-powered session replay summaries automatically localized into Japanese help UX teams identify issues faster and improve the digital journey for millions of customers. We are now working closely with NTT DOCOMO to shape our agents road map with feedback on collaboration features and AI-powered insights. Siemens, the $70 billion global technology leader partnered with Amplitude over 3 years ago to power analytics across its website presence and broader digital ecosystem. By consolidating onto our AI analytics platform from a series of point solutions, Siemens gained a unified real-time view of user behavior. Recently, the team organizing their annual user conference use Amplitude to identify their overreliance on direct e-mail and organic channels. They experimented by reallocating spend into targeted web promos plus paid and organic social. This delivered a 90% year-over-year increase in web traffic and a projected 50% increase in registrations in attendance to their conference. Lastly, we landed one of the largest music streaming apps in the world. We are working with the teams that lead checkout optimization, upgrades, churn prevention and recovery as they seek to understand the revenue drivers for hundreds of millions of monthly active users. They will use Amplitude analytics combined with session replay to get a holistic view on these monetization drivers. These stories all point to a common theme from AI start-ups to global enterprises, customers are betting on Amplitude as the AI analytics platform that will help them thrive in this new era. Before I hand it over to Andrew, I want to be clear on how AI is shaping our opportunity. There is a common misconception in public markets that AI makes analytics either irrelevant or easy to replicate. The exact opposite is true. AI has made software easier to create, but creation is no longer the moat. The real advantage is how quickly a team can learn, iterate, improve and automate. Agentic analytics is the key. It unlocks the bottleneck on the right side of the product development loop and enables teams to learn as fast as they ship. AI is a structural tailwind for Amplitude. It is why I believe the opportunity ahead is massive and why I'm excited about what's to come. Now over to Andrew to walk you through the financials. Andrew Casey: Thank you, Spenser, and good afternoon, everyone. 2025 was a year of innovation, execution, and we delivered a solid base for our future long-term growth strategy. When we met at our Investor Day last March, we laid out a deliberate road map to capture the enterprise and accelerate multiproduct adoption, while leading the industry in innovation. Today's results demonstrate that we haven't just met those goals, we've established a new baseline for durable growth. The enterprise is now our core growth engine. ARR from our enterprise customer cohort is up 20% year-over-year, with higher retention and expansion rates than the rest of our business. This was not by accident or luck, our AI analytics platform has been designed to be enterprise-grade with trust and safety of our customers at the center. Our go-to-market team has worked for the past 3 years to orient our go-to-market motion to focus on the enterprise, increasing customer value through selling our platform and engaging in longer-term contracts. 2025 was the coalescence of this work to focus on our customers' value and creating durable base for future growth. We sustained growth of current RPO greater than 20% throughout the year. And in Q4, total RPO grew 35% year-over-year. Our average contract duration is now above 22 months. In addition to our success in the enterprise, we have also formulated our product and our go-to-market team to embrace our AI platform strategy. By combining niche point product solutions surrounding analytics into a comprehensive platform, we are able to deliver greater value than stitching together point solutions. We also believe that having a platform is essential to the harnessing capabilities of AI to reduce friction in our customers' workflows. In 2025, we did a great job expanding our multiproduct attach rate for our customers. 74% of our ARR is from customers with more than 1 product, up 15 percentage points from last year. We still have a great opportunity to expand our multiproduct customers as well. Only 51% of our ARR comes from customers with greater than 3 products. Looking at a full platform deployment of 5-plus products, that percentage is 20%, doubling year-over-year. We have a massive opportunity to expand with our customer base. We believe our market opportunity expands dramatically with the inclusion of our new AI products that promise to expand adoption and use cases. The progress in selling our platform is best exemplified through improvement of our retention and expansion motion with dollar-based net retention now above 105%, after exiting 2024 at 100%. However, our work is not done. At the beginning of this year, we introduced a new pricing and packaging strategy to our sellers. Let's start with what's not changing. We are not changing our core billing metric of events. We believe this is a great representation of the value our customers receive from our platform, and it is also an appropriate monetization strategy as we center AI engagement on our platform. What has changed is we are centralizing the monetization of our other products, such as experimentation, session replay, guides and surveys to be a percentage uplift on the core platform charge, which is events based. This reduces the friction of adoption of those products by making it easier to understand for our customers and reduces the need to estimate how many sessions or experiments they want to run in the near term. Longer term, this will also encourage greater consumption on our platform as comes no longer fear over using certain parts of the contract or underutilizing others. It's a radical simplification of our pricing that acknowledges our customers' needs for greater cost transparency and certainty on their costs as the volume of data ingested into our platform expands. It also supports our focus of integrating AI into all of our product offerings and expanding customer usage, which can be a tailwind longer term on easier lands and faster platform expansions. In summary, as we've transitioned to an AI analytics company, we have created a more durable base of our business focused on the enterprise. We've driven expansion of our platform through innovation, and we're making it easier for customers to get value quickly and encourage expansion. We've done all this while being disciplined in our spending and driving to non-GAAP profitability with record free cash flow. Looking at the rule of 40, which we measure based on free cash flow yield and ARR growth, we've now improved from a rule of 15 in 2024 to over 24% in 2025. We'll continue to focus on driving top line growth through a disciplined manner in 2026. Now turning to our fourth quarter and full year results. And as a reminder, all financial results that I will be discussing with the exception of revenue, are non-GAAP. Our GAAP financial results, along with a reconciliation between GAAP and non-GAAP results can be found in our earnings press release and supplemental financials on the Investor Relations page of our website. Fourth quarter revenue was $91.4 million, up 17% year-over-year versus 9% in fiscal 2024. Fiscal year 2025 revenue was $343.2 million, up 15% year-over-year versus 8% in the fiscal year 2024. Total ARR increased to $366 million exiting the fourth quarter, an increase of 17% year-over-year and $18 million sequentially. Here are more details on the key elements of the quarter. We had a strong quarter for both new and expansion deals in the enterprise. Platform sales were also particularly strong. 44% of our customers now have multiple products with 74% ARR coming from that cohort. The number of customers representing $100,000 or more of ARR in Q4 grew to 698, an increase of 18% year-over-year and up 45 customers since the last quarter, representing the largest sequential increase in this cohort in company history. Additionally, the number of customers representing $1 million or more in ARR grew in Q4 to 56, up 33% year-over-year, demonstrating our ability to land significant accounts and grow them over time. In period net dollar retention progressed to 105%, and led by cross-sell expansions across our customer base. 58% of Q4 gross ARR was driven by expansions across a broad range of customers with no individual expansion exceeding $1 million. It's still driving meaningful progress in that dollar retention. We will continue to focus on driving net dollar retention higher through our platform strategy. Gross margin was 77% for the fourth quarter, flat to fourth quarter of 2024 and up 1 point since last quarter. We continue to make progress on optimizing our hosting, driving multiproduct contracts and monetizing our services engagements. We will continue to look for opportunities to incrementally improve gross margin over time. Sales and marketing expenses were 42% of revenue, a decrease of 1 point from the third quarter. We continue to focus on improving sales efficiencies, driving improvements through our changes in processes, coverage and expansion of enterprise customers. At the same time, we are investing in future growth while balancing those incremental investments with efficiency gains. In Q1 FY '26, we will have higher sales and marketing expenses as a percentage of revenue, reflecting timing of events and our annual company kickoff. R&D was 18% of revenue, flat to the fourth quarter of 2024. We expect to continue to invest in the talent and capabilities of our team to drive greater innovation in the future. G&A was 12% of revenue, down 4 points for the fourth quarter of 2024. We expect G&A to improve as a percentage of revenue over time. Total operating expenses were $66 million, 72% of revenue, down 3 points sequentially. Operating income was $4.2 million or 4.6% of revenue. Net income per share was $0.04 based on 141.5 million diluted shares compared to net income per share of $0.02 with 135.7 million diluted shares a year ago. Free cash flow in the quarter was $11.2 million or 12% of revenue compared to $1.5 million or 2% of revenue during the same period last year. In the fourth quarter, we managed our cash collections and made meaningful progress on shifting contracts with annual payments in advance. For the full year, we had a record free cash flow of nearly $24 million or free cash flow margin of 7%. We have conviction in the long-term value of our platform and have used and will use our cash to minimize the impacts of dilution. We have already purchased in the open market under our current buyback. And given the strength in our balance sheet and the underlying business, our Board has approved an additional reserve of $100 million to be used for buybacks. Our balance sheet position remains strong and allows us the opportunity to be more aggressive in our M&A strategy to accelerate our R&D road map when appropriate. Now turning to our outlook. As a reminder, the philosophy of how we set guidance is through the lens of execution. We are confident we have the right strategy and the right platform to continue to consolidate the fragmented market. We continue to improve our go-to-market motion and are accelerating our pace of innovation. We have the right monetization strategy to encourage the adoption of our AI tools, and we believe those tools will reduce the barrier to adoption of our full platform, leading to greater monetization opportunities. Our strategy remains consistent with our go-to-market is being aided by our simplification of our pricing and packaging. We will continue to focus on gaining new enterprise customers and driving cross-platform sales with our existing customer base. We also believe that with the release of our AI capabilities, our monetization of data ingested in our platform and the cross-sell opportunities of new products gives us the right strategy to align the value of our customers receive with our growth opportunities and grow our business in a profitable way. For the first quarter of 2026, we expect revenue to be between $91.7 million and $93.7 million, representing an annual growth rate of 16% at the midpoint. We expect non-GAAP operating income to be between negative $4.5 million and negative $2.5 million. And we expect non-GAAP net income per share to be between a negative $0.02 and a negative $0.01 assuming basic weighted average shares outstanding of approximately 135.1 million. For the full year of 2026, we expect full year revenue to be between $390 million and $398 million, an annual growth rate of 15% at the midpoint. We expect our full year non-GAAP operating income to be between $7 million and $13 million. We expect non-GAAP net income per share to be between $0.08 and $0.13, assuming weighted average shares outstanding of approximately 145.9 million as measured on a fully diluted basis. In closing, we are accelerating our pace of innovation, and we're growing the value that we can deliver to our customers. We have confidence in our ability to scale a durable and growing business while also bringing a Agentic analytics to the world. With that, we'll open up for Q&A. Over to you, John. John Streppa: Thank you, Andrew. [Operator Instructions] Our first question is going to come from the line of Taylor McGinnis from UBS, followed by Billy Fitzsimmons from Piper Sandler. Taylor McGinnis: Maybe just first on -- you announced a number of exciting agent offerings this week. And at the same time, you've also seen good traction with third-party agents connecting into Amplitude's platform. So -- and then Spenser, you showed a really good example of being able to extract insight using Anthropic Claude. So I guess how do you see Amplitude's agents and these third-party agents evolving? Maybe you just talk about the differentiation that you anticipate with Amplitude's agents versus what's being done with the third-party agents today. Spenser Skates: Yes. So to be clear, they both use the same underlying infrastructure. What will happen with either MCP model context protocol is a way for external products like Claude or OpenAIs, Chat GPT or Cursor to connect into Amplitude and request a set of calls. But that is the same infrastructure that both our global agents and our specialized agents use. And so the way to think about it is there's a whole set of tool calls that are available to these agents. You can say, get me a list of events, get me a retention, get me the list of tools you have like retention and funnels, get me the possible properties for this event. And what we'll do is we'll expose that to an orchestrator that we have that basically interprets a query, whether it's in the chat with Global Agent or whether it's external from MCP. And then it'll kind of pull in all the different contexts I talked about and then spit out the answers that you see. So it's the same underlying infrastructure because the nature and type of questions are the same whether you're asking it from Claude or Slack or whether you're in Amplitudes UI. Taylor McGinnis: Perfect. Awesome. And then Andrew, maybe just one follow-up for you. If we look at the 4Q numbers, it looked like the upside in the quarter was a little bit lighter than what we've seen in the past. Now ARR continued to accelerate. So was that just a function of the quarter being back-end loaded? Or anything to flag in terms of the quarter may be in any areas coming a little bit below as expected? Andrew Casey: So first, I'd say, Q4 was a great quarter for new logo ARR. We had a lot of new customers that are getting value from Amplitude and they're starting their journey with us. Those tend to be ones in which you're working throughout the quarter, and there was a large proportion of ARR that was booked later than we've seen in prior quarters. And as we mentioned before, we didn't see a lot of really big expansion during the quarter. So it was one of those areas where you're building a lot of opportunity for future growth with these new customers. And it's always one you're competing for -- when you're going into a new logo, you have to really compete and show value and sometimes those take a little longer as well. But we're really pleased with all the new customers that have become Amplitude customers, and we think that, that sets us up very well for expansions in the future. John Streppa: Our next question will come from Billy Fitzsimmons from Piper Sandler, followed by Rob Oliver from RW Baird. William Fitzsimmons: I guess maybe to start, can you help us think through the NRR improvement? And how much would you contribute or attribute, I should say, to greater upsells and cross-sells versus maybe better -- more success in kind of mitigating some of the churn in the business? Andrew Casey: Sure. So throughout the year, we've seen our customers increasingly adopting more and more of our applications in the platform. When we started off 2025, we specifically were training our sales team how to sell our platform when we're introducing new capabilities. We acquired new capabilities, and we put those into our platform as well. So predominantly throughout 2025, the improvement in net dollar retention was related to our cross-sell capabilities. And as you were alluding to, in the past, we had situations where we were overselling capacity against analytics. And even with some customers increasing data, it wasn't enough really to offset and contribute materially towards net dollar retention. Now that we're past most of those capacity-related issues that we created for ourselves. We're starting to see customers and their data ingested into our platform contribute towards net dollar retention improvements as well. And so now as we think forward, and I've said in the past that we have full intention to continue to set up our customers and expand with our customers, introducing new innovation. We think that both vectors, both data ingested into the platform, meaning upsells as well as cross-sells will contribute to further improvements. William Fitzsimmons: Makes sense. And I guess on that note, if I could sneak in one more. Can you give us a sense of how the role volume upsells will play in the FY '26 growth algorithm, especially as you start lapping some of the contract rightsizing from the first half of last year. Andrew Casey: So one of the things we talked about in the call was introducing our new pricing and packaging that is aligning not only to our enterprise motion but also towards the implementation of our new AI products. And in the past, I would say there were certain times where customers felt very leery about the amount they'd have to pay based on increasing data rates that we're ingesting in the platform, meaning that those rates were so high that they wouldn't be able to see the benefits associated with marginal incremental reductions in the cost of that data. Well, our new pricing and packaging structure rewards our customers now for adding more and more data into the platform so that they're paying marginally incrementally less. Now that doesn't mean that it's not going to contribute growth to Amplitude as our customers are getting greater value by ingesting more data in the platform. We believe it's fair for us to have some of that fair exchange of value. But if you were going to ask where we are really focused on driving NRR and where that -- the biggest benefit, it will be continued to show from those cross-sell opportunities, that expansion of our products because we want our customers to not fear adding more data. We want them to take advantage of implementing more data into our platform, and we want that to scale, especially as they look at longer-term contracts with us. Operator: Our next question will come from Rob Oliver from RW Baird followed by Clark Wright from D.A. Davidson. Robert Oliver: A follow-up there, Andrew, on the pricing and packaging question. So obviously, enterprises really like predictability. You guys have never been a seat-based model. So if you can just help us understand in the context of the new pricing model, clearly, it sounds like it's driving more engagement, a cross-sell opportunity, less of a friction experience. But how does the buyer manage that predictability? And I guess the inverse of that would be, how do you get comfortable on the cost side with AI embedded in? Andrew Casey: Yes. It's a great question. We spend a lot of time working with our sales team and our customers and showing how, one, the instrumentation with the platform can have -- give the great visibility into the data they're ingesting within it. And we work with our sellers to help them better understand as the marginal incremental data into the platform, grows, how that then translates into the cost that we're going to be charging to our customer. We're encouraging to have that conversation as part of the sales process. It's a kind of a gentler way of showing and working with the customer on how they are going to adopt Amplitude over a period of time rather than guessing what their data implementation of the platform is going to be. We're working with them very closely on it and showing how the instrumentation works. Now the piece that I think is really important, and you touched on it, but I think it's -- we did a lot of work with customers to understand whether we had the right billing metric, whether it's something that they aligned to the value proposition. And we've been testing for quite a while. In fact, nearly 20% of new ARR that we booked in the quarter was actually using our new pricing and packaging in a pilot stage. So we already know that customers like this. We already know that customers look at it as more transparent. They look at it as less friction as you were saying, we also believe it positions us very, very well given that our focus on implementing AI products into our platform is, one, it's reducing the barriers to adoption. Meaning that customers walk away thinking they're getting great value of what they've already invested in Amplitude and are less fearful knowing that they have greater cost predictability and transparency and how that usage is going to trend over a period of time. Robert Oliver: Great. Super helpful. And then Spenser, 1 quick one for you. Just on InfiniGrow, you guys were very early to the AI acquisitions among our coverage, I think been very aggressive on it. And in particular, it looks like to us like this gives you guys a further opportunity to sort of go for that consolidation play that you guys have talked about. But if you could help us maybe understand what, in particular, what area or what response to what customers need InfiniGrow is going to help address and how that might accelerate that platform opportunity. Spenser Skates: There were 2 big things that stood out to us on the InfiniGrow team. I mean, so first, we're just always looking for great talent out there. And so when the right company and the right opportunity comes along and they are aligned with our vision and excited about it, we're going to act. With InfiniGrow in particular, there were 2 big things that stood about the team. So Daniel, the CEO there as well as the rest of the group, they've been in it on AI analytics and automating workflows for the last few years and have a ton of perspective on how the future of the category is going to be shaped. And I mean we're in uncharted territory. Like we're inventing something new here, AI analytics. And so whenever you get a chance to partner with someone else who's thought about that so deeply, it's a huge deal, and we're going to -- yes, we want to figure out how we can set up a way to work with them. So that's the first one that really stood out about InfiniGrow. The other piece that stood out is they have a lot of familiarity with analysts more on the marketing side versus product management. And particularly as those personas merge over long term and more customers from legacy MarTech tools want to come off and use something bleeding edge like an Amplitude, we want to make sure that we're ready to meet them and serve all their needs and help with that transition. And again, they know a lot of those buyers better than almost any other company that we've seen in the analytics space out there. John Streppa: Our next question will come from Clark Wright from D.A. Davidson, followed by Koji Ikeda from Bank of America. Clark Wright: You noted the cross-selling opportunities continue to be an area of strength, what is the natural pathway you're seeing in terms of product adoption? And what is the role that agents are going to play going forward to help drive additional cross-selling motions? Spenser Skates: I mean it's great on both fronts. So analytics is the core. We're an analytics platform, something we've been very consistent about. You want to be able to track the core -- the base -- the foundation of the user journey. And that makes every single other part of the platform more valuable. So it makes it easier to do experiments because you can target users as well as measure those more effectively, it makes it better do session replay because you can understand, hey, for a group of users that ran into this error, let me see what they did by looking at the session replays. It makes guides and surveys better because you can target guides to specific users based on if you see them confused. So analytics is the core and all of these -- they become more valuable with analytics and vice versa. In terms of agents, I think the big opportunity there, and I just showed the session replay one is that these other products are -- while we launched AI analytics yesterday, and that was the main focus. These other products are actually capable of being leveraged by AI. So the session replay specialized agent demo that I shared earlier is a great example where you can watch 1, 2, 3, maybe 10 session replays, but watch 100. I'll take you a few hours to get through them. And so to have an agent speed up that analysis, still get all the valuable data, summarize it up and kind of put it back to you. I mean that's you're talking a 100x fold increase in productivity versus what you might other do. Experiment is the same thing. I mean one of the things that people ask us a lot is like, cool, do you have a library of best practices for what sort of web pages or what sort of interactions work and what don't? And our experiment conversion agent will actually suggest those based on best practices of what we know from all the companies that we work with. And so it makes experimentation a lot more powerful, too. So -- and then the really cool moment is when these tie together. So you can start out in analytics and say, okay, cool, give me my unhappiest users and suggest ideas for that I could do to improve them? And then it says, "Wow, okay, all of these users, they're unhappy because they ran into a page that wasn't working, and then you could have a session replay agent come in and say, okay, well, let's look at what was it on that page. It's like, oh, okay, hey, this button isn't formatted correctly and wasn't labeled and so that's probably confusing to users. And then you can -- and then go even further and say, okay, great, let's run. Can you propose a variant, an experiment variant to me that would actually fix it? And then it will propose it and propose another web page and you can run the test. And so you can not know anything about analytics, not know anything about your data taxonomy, not know anything about how to use session replay, not know anything how to do experimentation AB testing and do all the work of all of those projects -- products from the Global Agents or specialized agents interface. So I just -- it's going to be a massive unlock in terms of the usage. We're obviously most focused on analytics right now, but I'm really excited about some of the other things [ and a lot so ] it's funny. We already got some comments on Twitter that are like, hey, why does it only watch 100 sessions at a time? Why can't you watch 1,000 or 10,000 like, all right, we're working on it. We're working on it. So. Clark Wright: Appreciate that. And then, Andrew, there's a reference to increasing win rates versus point solutions. Is that an output of the go-to-market changes as well as the pricing and packaging updates? Or are there any other factors that is helping to drive improvements in that metric? Andrew Casey: I'd say the pricing and packaging is relatively new. So I wouldn't attribute that necessarily increasing win rates. I think that the biggest thing is, one, our sales team has just worked really hard at demonstrating value of our platform to our clients, and that's really resonating. And the other is you really have to credit our product team for creating just really great products that work well together. A lot of people claim they have a platform, but the reality is it's a bunch of products that's stitched together, doesn't look really well. When you have a platform, you have workflows that are instrumented well and it's easy to interact with the different modules in the product. And that's the way I would characterize our platform today. And every time that customers are adopting more than 1 product, it's because they're -- that integration, those workflows seamlessly across our platform are coming through as real value. I mean I talked to a number of customers myself with the sales team, and they always come back and say, we're just so far ahead of what everybody else is even representing an analytics platform to be. Spenser Skates: On that, like if I just go through the last 30 buyers I've talked to in the last month, all they want to do is be educated about analytics. And sorry, how AI is going to transform analytics and the whole platform. And they see it coming. They see tons of automation ahead and they're like, hey, teach me how I can be relevant. And so when we can offer that to them by, one, providing a view on how the future unfolds and then two, offering them the products, tools and services that actually enable them to be successful and relevant, they want to spend a ton of time with us. And so the competitive question especially against the smaller point solutions is kind of going away. It really is just is now the right time and can you help me get to this future fast enough and teach me. Operator: Our next question will come from the line of Koji Ikeda from Bank of America, followed by Jackson Ader from KeyBanc. George McGreehan: This is George McGreehan on for Koji. Taking a big step back, one for me on kind of the big picture. Where can we expect Agentic queries to grow to become in the mix from 25% today, maybe over the next 12 to 24 months? Spenser Skates: Yes. I mean I -- none of us have a full crystal ball, but my expectation is the vast majority are going to be done Agentically, where you're just going to have agents that run over your data all the time. They're looking at dashboards. They're looking at KPIs, they're trying to find underlying root causes of why things are changing. They're creating suggestions for your product. They're reviewing session replays. They're constantly trying out and tweaking new experiments. So I mean, yes, like I don't want to put a number out there, but I think the vast majority. I think what we're seeing generally is if you look at query growth from direct usage of the Amplitude dashboards, it's increasing in line roughly with the size of our business. If you look at Agentic query use, it's skyrocketing, as you saw on that chart in the last few months. And so the amount of leverage, I think the same thing happened to coding in the last 2 years, where if you look at it, the best software engineering teams, the majority is produced by the majority of lines of codes are produced by agents. It's mostly humans editing, interpreting them, stitching them together. And kind of giving high-level direction and that's where the best software engineers are. I think the same thing is going to happen in analytics and data analysts, where the vast majority of the data munging of the tool and figuring out what query means what thing? And how do you get to a -- how do you do a segmentation, understand the root cause, like that's all going to be automated by agents. And our goal is to be the first company to do that in a big way. John Streppa: Our next question will come from the line of Jackson Ader from KeyBanc, followed by the line from Scott Berg from Needham. Unknown Analyst: This is Nate Ross on for Jackson Ader. So implied non-GAAP operating margin for 2026 is roughly 2.5%. I guess we were wondering what specific possible sources of upside do you guys see for that number? Andrew Casey: Well, I'll tell you, first and foremost, we've been on this path where we're increasingly driving revenue growth faster than we're driving expense growth. And rooted within that is efforts on changing our go-to-market, changing our processes, modernizing our own application architectures, doing the basics of running the business in a very efficient way such that we continue to go drive growth with leverage. Those same things are not just a onetime event. You continue to focus and learn and understand how you can drive and deliver services more effectively. And so we look at the path we have in front of us with respect to our growth opportunities, what our pipelines look like, how we're managing our cost to serve with the expectation that sales and marketing will continue to improve on their efficiencies, G&A will continue to drive efficiencies as well. So it all kind of culminates in the plan that we put together for 2026. Unknown Analyst: Great. Perfect. And I guess, one more follow-up. So regarding customers' analytics budgets. Have you guys noticed any trends or changes specifically with AI affecting these budgets? Like has the current AI landscape affected customers' propensity to invest in analytics in any way? Spenser Skates: Yes. Yes. So I'd call it two things. I mean one, it becomes -- it's the bottleneck, right? So you remember that [ lumen ] I showed at the start, where it's like, okay, you're shipping all the software. Is it good? Are we even going in the right direction? So the comparative value of the analytics piece becomes a lot greater and more higher urgency. When you have like a year-long road map, it's okay if it takes a while to measure the success of it. But when your iteration cycle is measured in weeks or days like it is with the best of the best companies now, it's like, yes, you need to know if you're going in the right direction all the time. And then I think the other thing is the buyers in addition to that being the pinch point for and the big need in terms of the next big step in product development, they know -- they intuitively all know that this whole space is going to get reformulated with AI. And so they -- again, they're just desperate for education and someone to show them the way. This is not a case of like -- I think one of the differences between selling SaaS and selling AI is, in the SaaS world, it's very much like, okay, talk to your customers, get a list to prioritize features from them and build it and you go back and sell it to them. In this AI world, they don't know. Like they are like, is this model capable of this? Can it automatically look at a session replay for me? Can it analyze the root cause of a breakage in my funnel? And how -- what's the best way to make that happen? And so they're looking at us for all those questions. And this is where sharing the vision of what the future is as well as being close to the leading edge of the technology is super important. John Streppa: Our next question will come from the line of Scott Berg from Needham followed by Nick Altmann from BTIG. Ian Black: This is Ian Black on for Scott Berg. With the new pricing and packaging, are you planning on separately monetizing your AI agents? Andrew Casey: So most of our AI agents are embedded within our core platform. And so what you see there is we're getting access to customers to utilize more of the platform. That exemplifies all the power of our modules together. So there's a high propensity that customers who are utilizing our AI agents are both ingesting more data into the platform as well as expanding into other modules. Now we're also going to introduce new products with continuing -- we've done really well at innovating and some of those products will come out with more fee charges as well. So we're not worried about the ability for us to monetize our AI capabilities. We're actually very excited about the opportunities as we expand the use cases and usage of our platform. Ian Black: Congratulations on the good quarter. John Streppa: Our next question will come from the line of Nick Altmann from BTIG, followed by Elizabeth Porter from Morgan Stanley. John Gomez: This is John Gomez on for Nick Altmann. With the shift to Agentic democratizing the end user and product analytics, can you just talk about whether you're seeing new users or new lines of business leverage Amplitude and how that's shifting to go to market. So just any commentary on new end users and how that's impacting how you think about the go-to-market strategy would be helpful. Spenser Skates: It's not really new end users. I mean it's the same. You're talking about product teams. You're talking about marketing teams, engineering and data teams. And so it's the same people trying to leverage the data. What they're really -- again, what they're really desperate for is education. And so when we can show them Global Agent, specialized agents, MCP, AI feedback, AI visibility, what we're doing with our next products and Assistant and LLM analytics, there's always a whole bunch they want to grab on to and say, okay, great, teach me, how to use this, make it successful, everything else. So that's the biggest difference. It's one where our go-to-market is -- it's about training, getting them to be able to educate, to be able to share the vision, to be able to demo these products and make customers successful. John Streppa: Our next question will come from the line of Elizabeth Porter from Morgan Stanley, followed by YC Wong at Citi. Lucas Cerisola: I'm Lucas Cerisola here for Elizabeth Porter tonight. So with the uptick in new app development that we've seen over the past few months, could you walk through your expectations for balancing this potential new demand from smaller customers with your move-up market as you evolve your go-to-market strategy? Spenser Skates: Yes, we're doing both. I think one of the things we see on the start-ups and newer customers is they're very bleeding edge, and so they're trying to push the capabilities of us. And so we've always had a motion where we've taken innovation that we've done with them and bring it to the enterprise in a deliberate way. So we're going to continue to do that. I think there's actually massive opportunities, particularly with the rise of Vibe Coded apps. There's going to be Vibe-Coded analytics, too, that needs to go along with all those applications. So it's early, but there's a big opportunity for us there, too. Again, the core thing you want in terms of understanding your customers and knowing if you're going in the right direction and building the product is the same, whether you're -- the newest start-up that was just founded yesterday or your 100 year-old long-lasting business. And so for us, it's like we're here to serve all of them. And again, they're very keen on learning the bleeding edge of what's happening in AI analytics. And so if you're able to teach them that, then it doesn't matter your size. Lucas Cerisola: Got it. That's super helpful. And then could you speak to the 7-figure deal pipeline in 2026? And then are there any specific verticals in which you see outsized growth already? Spenser Skates: I mean we're seeing -- like as I said on the call, we're seeing a lot of AI companies use us. We have 25 over $100,000. And then we have a 7-figure contract with one of the largest foundational model labs out there, who's been a customer starting last year. And so that's very, very exciting because they obviously know what's going on when it comes to what's possible, and they see a future world where we're a really big part in that. John Streppa: Our next question will come from YC Wong from Citi, followed by our last question from Arjun Bhatia at William Blair. Yitchuin Wong: Congratulations on a pretty strong close to the year here. I guess maybe I just want to touch on, Spenser, you talked about Amplitude being one of the largest database of user behavior. Just given the rapid progress of agentic capability across our data platform players called Snowflake and Databricks, where we are seeing also customer consolidation towards maybe bigger data platform players. Curious if you're seeing any -- I think customer blur of like your analytics use cases from Snowflake and Databricks versus Amplitude? Spenser Skates: I want to make sure, YC, I want to make sure I understand what you're saying, you're saying do we see competition from Snowflake and Databricks because they have a lot of data too? Yitchuin Wong: Well, it's not just data. They are thinking about doing the application side as well. I mean if you think about Vibe Coding and then you think of application building, you can make it easier to build. I'm just curious if you see anything blurring between customer talking about just use cases between a customer you can use a data platform like Snowflake to build it, they have Cortex versus what you will see with Amplitude? Spenser Skates: So one of the big things that we see is that customers always want the most advanced and bleeding edge capabilities. Like I heard this great analogy the other day where software is very much like sushi. So it's fine that the gas station at 7-Eleven offers it, but Jiro in Japan is not -- probably not going out of business. In fact, it's going to create more demand for him. And so from our standpoint, what we think about is how can we offer the most advanced and robust system for analytics. So if you look at the benchmark that we -- with hundreds of evals that we released, where we got a 76% accuracy rate, if you look at the Cortex or you look at DataBricks Genie, I mean they're going to be in the 10% or sub that. We're working on releasing full metrics on that. And that's because the text-to-SQL is only really one part of it. The other -- there's 2 other big parts. The first is the context layer. So what data sources are you bringing together in the right way, analytics data, session replay data, data from interactions and guides and survey data from other sources and interpreting those in the right way and then giving an LLM agent, the right set of tool calls so that they can iteratively query, okay, hey, what's my onboarding funnel? Where is the biggest drop on it? Why is the biggest drop on it? What's the biggest difference between users who went to the next step versus the previous step, right? So that's like just in that example, that's 4 queries that you're going to have to do in a row all correctly. And to do that, you need to prop the LLM in a very particular way. You need to give the right tool calls, you need to give it the right context. And so we have thought really deeply about because we have the largest repository of user behavioral data in the world, we have thought very deeply. We have seen what millions of analytics queries, what good looks like for millions of analytics queries and translated that into an agent that does the same. And so because, again, you're going to need to give it all that context and then be able to iteratively query a data system, the differences in accuracy are really, really stark if you were just to roll your own or use a Genie or Cortex versus using an Amplitude. And when you're an analyst, that difference between 76% and 10% is a massive difference in terms of your ability to leverage agentic analytics. Yitchuin Wong: No, that's helpful color. Maybe one for Andrew. The profitability definitely came in well ahead of expectations here. Maybe you guys are leveraging some agents internally that helps to drive better sales efficiency. But curious to see going into next year, like what can we expect, especially on the free cash flow that outperformed probably saw an expansion by 4 points. Like curious to see what your expectation into next year? And any other moving parts that we should be aware of or headwind from to be mindful from the strong performance this year? Andrew Casey: I think what you're seeing is that the efforts we've been doing on sales and marketing, on our cost to serve and our G&A and operating more effectively as a company, is not just a one effort, one activity. There's multiple. And certainly, we're introducing agentic capabilities into our own workflows within the company, and that's certainly contributing to it. But there's so many things structurally we've done to the business to create greater durability that that's ending in greater abilities for us to drive efficiencies. I'll give you one example. We've talked a lot about our ability to go drive increasing contract duration to our customers and that our RPO has been growing rapidly. Well, if you don't have to renew your installed base every year or that installed base percentage goes down because you're executing more and more longer-term duration contracts with your customers, then the sales team has more time to dedicate towards selling new and expansion deals rather than working on renewals. And so it's just a great example of a strategy we put in place that's going to accrue benefits for a longer period of time. John Streppa: And our last question is going to come from Arjun Bhatia, William Blair. Willow Miller: I'm Willow on for Arjun Bhatia. Andrew, in terms of guidance, the full year revenue range seems a bit wider than normal at $8 million. Can you help us understand the reason for this? And what scenarios are contemplated at the low and high ends of the range? Andrew Casey: I think when we approach we approach our guidance, we approach it with what we think we can go execute in the period. And I wouldn't read too much into that other than we have a breadth of different opportunities that we're going after both with our product set, with improvements in our targeting enterprise customers. So I wouldn't read too much into it. John Streppa: And that will conclude our fourth quarter earnings call. Thank you for your time and interest, and we look forward to seeing you on the road this quarter as we attend conferences hosted by Baird, Citizens, KeyBanc, Morgan Stanley and others. Take care.
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: Good day, and thank you for standing by. Welcome to Aegon's Second Half 2025 Results Conference Call. [Operator Instructions] Please note that today's conference is being recorded. I would now like to hand the conference over to your speaker, Yves Cormier, Head of Investor Relations. Please go ahead. Yves Cormier: Thank you, operator, and good morning, everyone. I would like to welcome you to this conference call on Aegon's second half year 2025 results. My name is Yves Cormier, Head of Investor Relations. Joining me today to take you through our progress are Aegon's CEO, Lard Friese; and CFO, Duncan Russell. Before we start, I would like to ask you to review our disclaimer on forward-looking statements, which you can find at the end of the presentation. And with that, I would like to give the floor to Lard. E. Friese: Thank you, Yves. Good morning, everyone. I will start today's presentation by running you through our strategic developments and commercial performance in 2025 before Duncan will go through the results in more detail. So let me start with Slide #2 with the key messages for the year. Our results over 2025 demonstrate the strength of our strategy and our ability to consistently deliver upon our ambitions. We have either met or outperformed all our financial targets for 2025. Operating capital generation before holding and funding expenses increased year-over-year to EUR 1.3 billion ahead of target. Our operating results increased by 15% compared with 2024 to EUR 1.7 billion. This increase reflected business growth across all units, stable market impacts, and improved experience variances in the Americas and international businesses. Free cash flow for the full year 2025 was at EUR 829 million, consistent with our target. On the back of our strong capital position and financial performance, we proposed a final dividend of EUR 0.21 per common share, resulting in a full year 2025 dividend of EUR 0.40 per share, in line with our target and up 14% from EUR 0.35 per share over 2024. Furthermore, we executed EUR 400 million of share buybacks in the second half of 2025. And we are currently executing the first half of our new EUR 400 million buyback program for 2026, as announced at our Capital Markets Day in 2025. Commercial momentum remains strong in 2025. In our U.S. strategic assets, we continue to grow WFG as well as our new life sales and our retirement plan assets. At the same time, we continue to reduce our exposure to financial assets. The capital employed in this segment was $2.7 billion at year-end, ahead of our target. We also reported solid results in our other business units in 2025. Our asset manager delivered net third-party inflows. Our U.K. workplace platform generated healthy net inflows. And our international business continued to perform well. Finally, we are making progress with the preparations for our proposed relocation to the U.S. as announced at the Capital Markets Day. U.S. GAAP implementation is still at an early stage, but is progressing as planned. I'm now turning to Slide 3 to run through the commercial performance of the Americas in more detail. As we discussed at our 2025 Capital Markets Day, progress in the Americas remains strong. Starting with World Financial Group, we remain on track to grow the number of licensed agents to around 110,000 in 2027. As of year-end 2025, the number of licensed agents amounted to nearly 96,000, an 11% increase on the previous year. Initiatives to improve agent productivity have led to a higher number of producing agents. In addition, producing agents also sold a higher average number of policies at a higher average premium per policy sold. As a result, new life sales increased by 10% compared with 2024, while sales of annuities increased by 6%. The productivity gains in WFG were one of the key drivers of the 30% increase in new life sales in our Individual Life business. We also recorded strong new life sales of the final expense product that we offer in the instant decision market through a fully digital underwriting platform. Furthermore, we continue to successfully grow our RILA sales. We achieved a 45% increase in indexed annuity net deposits in 2025, thanks to higher gross deposits from further improvements in wholesale distribution productivity. In the Savings & Investments segment, the midsized retirement plans business reported net inflows in 2025 on the back of our strong positioning in the pool plan space and supported by a large takeover deposit earlier in the year. The level of written sales remains solid, which should support gross deposits going forward. We also generated further growth in both general accounts stable value and individual retirement accounts as we work to increase profitability and diversify revenue streams of the retirement plans business. I'm now moving to Slide 4 for an update on our other businesses. At Aegon U.K., we continue to be well positioned in the Workplace Platform business. Net deposits during 2025 were driven by both the onboarding of new schemes and members and regular contributions from existing schemes. For the Adviser Platform business, net outflows in 2025 reflected ongoing consolidation and vertical integration in nontarget adviser segments. As announced at our 2025 Capital Markets Day, the strategic review of the Aegon U.K. is ongoing. In our International segment, new sales continued to contribute to the growth of the book in 2025. Our joint venture in Brazil reported higher new life sales, particularly in credit life products as did our activities in Spain and Portugal. In China, new life sales were negatively impacted by changes to product pricing to reflect the new pricing regulations and the current economic environment. Aegon Asset Management generated positive third-party net deposits during the year in both global platforms and strategic partnership businesses, although at a lower level than last year. In global platforms, net deposits were mostly driven by fixed income products and more than offset outflows from the SGUL reinsurance transaction that we did last year. In strategic partnerships, net deposits were driven by our Chinese joint venture, AIFMC. We are implementing the plan for asset management as presented at the 2025 Capital Markets Day. For instance, we recently expanded our CLO warehouse capacity in the U.S. and Europe in line with our ambition to grow our higher revenue margin third-party business. Before handing over to Duncan, I would like to take a step back and reflect on the outcome of the plan we presented at the 2023 Capital Markets Day using Slide #5. First, as I mentioned, we either met or exceeded our financial targets in terms of operating capital generation, free cash flow, dividend and leverage. Second, at the same time, we have significantly transformed our business. We finished the year ahead of our target in terms of capital employed for the financial assets at $2.7 billion, and our U.S. strategic assets now significantly outweigh our U.S. financial assets, both in terms of CSM and capital employed. This is quite a remarkable shift. These are not only great achievements, but they also lay strong foundations for the next steps of our journey as we relocate to the United States while continuing to increase the profitability of the group and return capital to stockholders. I am very proud of all our colleagues across our businesses for contributing to our success. Well done, everyone. I will now hand over to Duncan to discuss our financial performance in more detail. Duncan, over to you. Duncan Russell: Thank you, Lard. I will zoom in on our second half 2025 results, starting on Slide 7. The operating results increased by 11% year-on-year to EUR 858 million, with all of our businesses delivering higher figures. Operating capital generation increased by 8% with strong figures from Transamerica. Free cash flow in the second half of 2025 amounted to EUR 388 million, and we received remittances from all units. Cash capital at holding decreased to EUR 1.3 billion at the end of 2025, mostly because of capital distributions to shareholders in the form of dividend payments and share buybacks. Valuation equity per share increased by EUR 0.60 with a positive contribution from both shareholders' equity and the CSM balance after tax. Gross financial leverage was stable at EUR 4.9 billion. Finally, the group solvency ratio remains robust at 184%. As announced in May last year, the eligibility of the perpetual cumulative subordinated bonds in our capital stack ended as of January 1, 2026. These bonds contributed 7 percentage points to the group solvency ratio as of December 31, 2025. Now using Slide 8, I will address the development of our operating results in the second half of 2025. Starting with the U.S., the operating result increased by 5% in euros or 14% in U.S. dollars, thanks to a combination of growth and more favorable variances. The operating results of strategic assets increased by 10% in local currency and benefited from business growth, notably in the individual life and retirement plan businesses, partially offset by a lower operating margin in the Distribution segment. In financial assets, the operating result increased because of more favorable experience variances compared to the second half of 2024. On the other units, the operating results of the U.K. increased, benefiting from business growth in favorable markets, which led to both a higher CSM release and increasing noninsurance revenues in the second half. In the International segment, the increase of the operating result was also driven by business growth and a onetime item in China. Furthermore, the results from China benefited from a true-up related to the local implementation of IFRS 17, which is booked in the second half. Aegon Asset Management's operating results improved in the global platforms business mostly from the impact of favorable markets on revenues and from an improved operating margin. Looking forward, as mentioned at our recent Capital Markets Day, over the 2026 to '27 period, we aim to grow the operating result of the group by around 5% per year from the EUR 1.5 billion to EUR 1.7 billion in run rate in 2025, taking into account an assumed euro-dollar exchange rate of $1.20. I now turn to Slide 9. Here you see our IFRS net results for the second half of 2025. Nonoperating items were unfavorable in the period and were largely driven by realized losses on assets transferred in the context of the SGUL reinsurance transaction. These realized losses were taken in the P&L, were fully offset in other comprehensive income and therefore, had no impact on the development of shareholders' equity. Net impairments reflect an ECL reserve increase from new investment purchases as well as a small number of downgrades and defaults of bond investments. Fair value items were negative mostly from revaluations of solvency hedges in the U.K. and other charges were mostly driven by various items in the U.S. and U.K. and partially offset by the positive result from the stake in ASR. I am now on Slide 10. In the second half of the year, our shareholders' equity grew by 2%, and our CSM balance increased by 4% over the same period. The increase in the CSM was largely from business growth in the U.S. strategic assets. We saw a 24% increase in CSM in the second half, thanks to profitable new business, favorable assumption changes and experience variances. The CSM of our financial assets decreased due to the runoff of the book as well as the impact of the SGUL reinsurance transaction. These developments mean that the CSM balance of our strategic assets now accounts for 57% of total Americas CSM. Outside the U.S., the changes to the total CSM balance were limited. Overall, valuation equity per share, which represents shareholders' equity plus net of tax CSM increased by 7 percentage points over the second half of 2025 to EUR 9.06 per share. Moving now to Slide 11. OCG before holding, funding and operating expenses increased by 8% compared with the second half of 2024. OCG from the U.S. increased by 19% or 27% in U.S. dollars over the same period with a higher contribution from both the strategic and financial assets. Mortality and morbidity claims experience was favorable in the second half of 2025, while it was unfavorable in the prior year period. OCG benefited also from a favorable release of required capital from the investment portfolio actions and a reduction in short-term financing. This was partly offset by a higher new business strain from growing our strategic assets. Adjusting for favorable items, the U.S. OCG in the second half of 2025 fell within the guidance of $200 million to $240 million per quarter. In the U.K., OCG decreased mostly because the second half of 2024 includes some favorable items, while the International segment reported lower OCG. At Aegon Asset Management, OCG increased due to favorable markets and an improved operating margin compared to the prior year period. Holding, funding and operating expenses were largely unchanged year-over-year at EUR 142 million, bringing the total for full year 2025 to EUR 295 million. As a result, OCG after holding, funding and operating expenses for the full year 2025 amounted to EUR 992 million. I'm now turning to Slide 12. The capital positions of our business units remain strong and well above their respective operating levels. The U.S. RBC ratio increased by 4 percentage points compared to June 2025 to 424%. The increase was driven by OCG from the operating entities applying the RBC framework. This is partly offset by remittances to the holding. Onetime items and management actions negatively impacted the RBC ratio by 3 percentage points during the period. The negative impact on the RBC ratio of the SGUL reinsurance transaction was offset by capital investment into Transamerica from the group. Market movements had a limited impact. In the U.K., the solvency ratio of Scottish Equitable decreased by 2 percentage points to 183%. Operating capital generation in the period was offset by remittances to the holding and investments in the business. Market movements here also had a limited impact. On Slide 13, you see that cash capital at holding has come down in the second half of 2025 to EUR 1.3 billion. This development is consistent with our aim to reach the midpoint of the operating range for cash capital at holding around EUR 1.0 billion by the end of 2026. Free cash flow amounted to EUR 388 million in the period and included remittances from all our units as well as dividends received from our stake in ASR. For full year 2025, free cash flow amounted to EUR 829 million, consistent with our target of around EUR 800 million for the year. We returned nearly EUR 1 billion of capital to our shareholders through dividends and share buybacks in this period. Consequently, our share count ended 2025, 5% lower than at the start of the year. Capital injections into the businesses amounted to EUR 751 million and mostly related to the investment in Transamerica to offset the impact of the SGUL reinsurance transaction. This is funded by the disposal of part of our ASR stake, 12.5 million shares, as indicated at our Capital Markets Day. The remainder mostly related to investments in our international investment management businesses and in Aegon Asset Management. We have already launched a share buyback for the first half of 2026, totaling EUR 227 million and expect this to be completed on or before June 30, barring unforeseen circumstances. This share buyback covers both the first half of EUR 400 million program for 2026 announced at the Capital Markets Day and EUR 27 million related to share-based compensation plans. After completing this first part, we expect to launch the second half of the EUR 400 million program. I am now moving to my final slide, #14. To conclude, the results over the second half of 2025 were strong, and we are confident we are well positioned to meet our growth ambitions for 2026 and 2027. As discussed at our 2025 Capital Markets Day, the next time we present our results will be in August with the first half figures. We will also move the timing of our results conference call to 2:00 p.m. Central European Time to accommodate U.S.-based investors. With that, I would now like to open the call for questions. Please limit yourself to 2 questions per person. Operator, please open the Q&A session. Operator: [Operator Instructions] And our first question today comes from the line of Farooq Hanif From JPMorgan. Farooq Hanif: My first question is on the operating profit in the second half of the year, which was kind of at the upper end of your guidance range. Having looked at the detail and discussed with the IR team, it feels like it's a reasonably clean number. But obviously, it's towards the upper end. So I'm just wondering about the sustainability of that, given the growth in CSM, the strategic assets that you talked about. So if you could comment on that, that would be helpful. And my second question is on, I mean, the ASR stake. I know you've been reluctant to really give much update on it in the past. But I was just wondering, sort of philosophically, is this something that you would want to or could or would be happy to own once redomiciled in the U.S.? And to what extent do the proposed tax legislation in the Netherlands impact your decision around that? E. Friese: Thanks, Farooq. Duncan, can you take both? Duncan Russell: Sure. Farooq, you're right, the second half operating result was, once you adjust for favorable or unfavorable items, I think, is a reasonable representation of the underlying figure. It benefited obviously from strong markets, which we saw in the second half of the year. But it leaves us in a good place with our ambition to hit the targets we outlined at the Capital Markets Day in December. On ASR, no change there. So that's a shareholding which we're happy with. We've given guidance in the past that there are 2 reasons we would sell that. One is that we feel that it hits intrinsic value and/or we have an alternative use of the capital. Our redomiciliation to the U.S. has no impact on our ownership there. Farooq Hanif: What about the tax, is that something you've considered? Duncan Russell: Again, I think, at the Capital Markets Day, I said that I didn't see tax having an influence on our ownership position with ASR. Operator: Your next question comes from the line of David Barma from Bank of America. David Barma: Firstly, on OCG, which is tracking towards the bottom end of your quarterly run rate in Q4. What conditions do you need to see for you to be closer to the top besides currency movements? And in particular, on the new business strain, which was particularly strong or high in Q4, what kind of strain are you expecting for the coming years? And then secondly, on WFG, results came down in 2025. I'm looking at the first profits here. And if I look at agent productivity or cost income, they both seem to have deteriorated in the period. So are you able to give some color, please, on the trends there? And maybe if you can quantify the investment program that I think is going on at WFG in '25? Duncan Russell: On the first question, on OCG, you know, we had a very strong quarter in OCG. Our reported OCG was actually very healthy. We highlighted three things in there, which supported it in the fourth quarter. The first was, we had positive mortality and morbidity variances. As you know, that's going to move around quarter-on-quarter, but this quarter, it was pretty favorable. Secondly, we had high new business strain versus the guidance we gave during 2025, and that reflects that we had a very strong commercial performance on the life insurance side. And then thirdly, we had a high release of required capital, which was high versus prior quarters. Although if you look at our history there over the last 2 years, you do see that can move around quite a bit, and does tend to spike in the second quarter and the fourth quarter as that's the quarter we paid dividends out of Transamerica. So net-net, it was a strong quarter. Once you adjust for all of these favorable items and also take into account FX, we think we were at the bottom end of the kind of underlying run rate. And if you go back to our Capital Markets guidance, which we gave in December, we feel in a good place with achieving that for 2026 and 2027. E. Friese: So on WFG, we have a lower margin on the back of very strong sales growth and also productivity growth. So there's more producing agents producing also higher premium per policy sales. But the reason why the operating result is lower than last year is that we're investing in the business in a number of areas. It's in leadership and governance of the company as a whole because the company is growing quite a lot, don't forget that, from 56,000 agents a number of years ago to 96,000 now. Also, technology initiatives to strengthen the sales process, a lot of training that we did to improve productivity and making more agents that are licensed producing quicker and compliance and field support for the growing number of agents. So that's the reason -- that's the investments that we are having in the business. Duncan? Duncan Russell: And maybe just to add on that. So if you go back to the Capital Markets Day, we flagged that we saw our strategic assets in the U.S. growing by around 10% per annum over the coming years. For Distribution segment, we flagged also that we expected the operating margin to remain at the lower end and the growth in the profits to be mostly driven by revenue growth. Operator: Your next question today comes from the line of Farquhar Murray from Autonomous. Farquhar Murray: Just 2 questions, if I may. Firstly, on the legal settlement. So I suspect in terms of magnitude, the most we're going to get is that it's part of the $230 million of charges in the U.S., which I can understand. But maybe you could give us some color on those cases where this settlement takes us in terms of the uncertainties around that and maybe what's the process for finalizing this? And then secondly, on the U.K. strategic review, if this ultimately does come to a sale towards the summer, could I ask how you will approach any decision between cash and equity within the offers made around it? And is there any preference or what are the criteria and considerations from your side? E. Friese: Farquhar, this is Lard, I'll do both. So let's start with the legal settlements. They are pertaining to 2 cases, which we settled. The detail of that, it's quite technical. So I will refer to a page, which is Page #269, 2-6-9, of the annual report. It's the first 2 paragraphs under the section proceedings in which Aegon is involved. And if you read those 2 sections, you will find those are the 2 cases that we're talking about here. They are indeed included in the other charges of USD 230 million, as you pointed out yourself. So they're including that alongside other items in that bucket. As pertaining to the process, we settled those cases, they now need to be approved by the courts, and that's a process that will take a bit longer. Then when it comes to the U.K. review, we have launched it, as you know, at the Capital Markets Day on the 10th of December. It's early days, so we will not give any comments on this until such time as we have an update for you. We expect that update to happen somewhere before the summer, let's say. That's what we aim to do. Operator: [Operator Instructions] And our next question today comes from the line of Michael Huttner from Berenberg. Michael Huttner: I had 2 questions. One, in the past, Duncan, you've given us the kind of waterfall to the underlying OCG. I just wondered if you could do that, for my benefit, I imagine my competitors are much more clued up than I am, but that would be really, really helpful for the year. And then the second question, which kind of relates to it, but maybe a bit differently. I'm always obsessed by mortality, and there's that lovely Munich Re update, I think, this week on GLP-1s and stuff. Can you talk a little bit about the improvement in mortality you've seen? So year-on-year, the variance is better, but is there any trends here we should be thinking about? Duncan Russell: Michael, thank you. So we think that the clean 4Q OCG was around EUR 294 million for the group compared to the reported OCG of EUR 372 million. And if I break the movement from one to other down, we had a positive impact of around EUR 47 million in the U.S. from favorable items. And within that, there was EUR 36 million attributable to favorable claims experience. The majority of that was mortality, EUR 29 million was mortality, EUR 7 million was morbidity. So that's good. Against that, we had new business strain, which was EUR 34 million higher than the guidance we gave at the start of 2025, and that's reflecting strong sales. And then against that, we had relatively elevated release of required capital against the guidance we gave at the start of 2025 of around EUR 45 million, and that's reflecting normal ALM activity. And as I noted, we do tend to see that spike a bit in 2Q and 4Q as Transamerica pays dividends. Then in the other units, we had overall positive favorable items of around EUR 31 million, of which about EUR 20 million was in international, split equally between China and Spain. And then around EUR 7 million in the U.K. and EUR 4 million in Aegon Asset Management. On mortality, we saw this quarter favorable severity. We saw that particularly in younger ages and very old ages. You know that number can move around in any single quarter, given the size of our book. But if I take a step back and look at our mortality experience since we made the updates, about 1.5 years ago now, we're happy with how it's performing versus our best estimate. Operator: Our next question today comes from the line of Nasib Ahmed from UBS. Nasib Ahmed: First one on financial assets. At the CMD, you did the universal life deal. And it seems like you've got the SPV set up. So are you going to chip further away at the $2.7 billion this year? Do you have anything in the pipeline in terms of reinsurance transactions or anything else? Any more color on that, Duncan, would be appreciated. And then secondly, I noticed you're focusing a little bit more on IFRS in the presentation slide. You removed the bridge of the OCG where you show the expected in-force and the release of capital. Just wondering why the change? Is it because U.S. GAAP is closer to IFRS? How should we think about U.S. GAAP, is it more closer to OCG or IFRS? E. Friese: Duncan, 2 questions for our CFO. Duncan Russell: So on the reinsurance deal, you're right. In December, we announced at the Capital Markets Day, I think a very innovative transaction on our part, whereby we reinsured a significant part of our secondary guarantee universal life exposure in the U.S., and that brought our required capital down to $2.7 billion. Actually, if you take a step back and look over the last 4 years, I would argue that we've done a huge amount of management actions across all of our books. And we're actually positioned as one of the more innovative parties in the market with the recent transaction, I think, giving us even more optionality because we've established this reinsurer. We continue to look for ways to bring down the $2.7 billion to our targets in 2027. That will be done through a range of actions, management actions we can take ourselves, actions which we engage with policyholders on and then also potentially third-party actions. I think the main message I'll give you is that we're confident we can hit our targets. And we've demonstrated, I think, that we are at the forefront of innovation in dealing with these legacy blocks. On the shift from -- on the emphasis on IFRS, I think we've always placed a great deal of emphasis on IFRS. We've historically run 2 frameworks, OCG and our accounting framework, which is IFRS 17. We are trying to simplify our communication. We took a step of that with the Capital Markets Day, where we have given targets, which I think are simple to understand and simple to track. And so that's how we're going to manage the next 2 years. You know that we're in the early phases of implementing U.S. GAAP. I'm not going to comment on that on how that's going or what the expected outcome of that is. But over the coming years, we will update the market when we have U.S. GAAP figures and eventually transition our disclosures to that of a normal U.S. company. Operator: [Operator Instructions] And our next question today comes from the line of Farooq Hanif from JPMorgan. Farooq Hanif: So just following on from Nasib's questions. You mentioned at the CMD that the reserving on a stack basis, you're happy with across most of your books, but LTC is the one that stands out. Is your position still that it's hard to find market deals that economically make sense to you right now? Is that still your position and that you can deal with it kind of internally through your internal management actions on pricing? And secondly, this is a slightly kind of open-ended question, I guess, but just, I mean, you consistently have lots of positive and negative experience variances on an IFRS basis, for example. And I see quite a lot of assumption changes again in CSM. I'm just kind of wondering to the best of your knowledge, do you feel like you're getting closer to dealing with these variances going forward? Or are there any items we should watch out for going forward in earnings that could still remain volatile under IFRS? E. Friese: Both questions for you, Duncan? Duncan Russell: Okay. On the financial assets, so what we tried to give at the Capital Markets Day was, firstly, a framework whereby we said that we look at third-party transactions on an economic basis, and we referenced our valuation equity and also free cash flow per share, so both cash and economics. So that's the framework when we assess transactions. Second thing we gave was, we stated that our statutory reserving in aggregate for the financial assets was now comparable to on an IFRS basis. But within that, there are obviously blocks which are stronger and blocks which are lower. And we did indeed say that long-term care was lower. If we look at third-party transactions, actually, I think the binding is more the economic price. And if you look at long-term care, the reality there is that there are a lot of -- it's a relatively more sensitive block because it's long duration. The peak reserves are not until sometime in 2030. And that makes it a bit more sensitive to various policyholder and behavior assumptions. And therefore, we've so far taken a view that we are the appropriate owner of that block and our approach to managing that liability is through rate increases and other options we give to the policyholder to manage exposure. And I think that's probably the base case for the coming period. On variances, well, we gave a range of around EUR 100 million within our operating profit, which I think should be enough to cover positive and negative variances in a half year period, both from experience variances and onerous contracts. There will always be variances. This half year, we had positive mortality. We had some negative on premium persistency and expense on onerous contracts. So there will always be a number, and that simply reflects the leverage of the balance sheet to the P&L. But I believe that the operating range we give, which is EUR 100 million range, so plus or minus EUR 50 million should be enough to cover those variances on a go-forward basis. Operator: Your next question today comes from the line of Iain Pearce from BNP Paribas. Iain Pearce: Just one. In the presentation, you flagged some impacts from downgrades and defaults. I was just wondering if you could give us any more details on what this relates to, if there's sort of concerns about further downgrades in the investment portfolio? If it has anything to do with any of your private credit holdings as well? And I assume these are U.S. related as well. Just any details on what's driving that because it's not something we've really had flagged before. Duncan Russell: I can take that. That's a good question. So as you know, under IFRS, we have the ECL. And if you look in our statistical supplement on Page 15 you'll see the movement in the ECL and there you'll see transfer between stages, which we saw some movement from stage 1 to stage 2 and some movement from stage 2 to stage 3, relatively small. I would say, still fairly benign. And that was across a range of bond holdings we have, ABS holdings we have, et cetera, but still pretty benign, to be honest with you, not a meaningful number yet, but it is something we track. On our asset portfolio, in general, it's performing very well, and you can see that in the movement in the ECL. Operator: And your next question comes from the line of Jason Kalamboussis from ING. Jason Kalamboussis: Two quick follow-up questions. The one is in the U.S., plus 14% on local currency is above your -- which you're indicating as guidance. Do you think that this was supported mostly by the stronger markets we saw in the second half? Or do you find that there is a good momentum that could be carried in 2026? And also incidentally, I mean, if you could comment on the fourth quarter, how was it compared to the previous 3 quarters in the U.S. in local currencies? And the second thing is just for my understanding on the U.K. sale process, I understand that you are not going to comment on it, but I was looking just to understand how it works. So you are looking at bids for the whole of the U.K. But within it, do you also take or do interested parties show an interest for part of it and give a price or they have to actually look at it as one piece. And if you want afterwards to sell it in two different pieces, for example, because you're not happy with the price you get for the whole piece, then they have to resubmit, and you start discussions on that kind of second process. Essentially, is it a 2-stage process? Or is the second one folded partly in the first one. So I would be just interested if you could share any thoughts on it. E. Friese: Jason, this is Lard. I will do the U.K. piece and then I'll hand over to Duncan for your first question. On the U.K., as I mentioned, the strategic review that we launched pertains to the insurance business and pertains to the platform business. It does not pertain to the asset management office that we have and business that we have in the U.K. So that's something I want to make sure it's clear for everybody. Secondly, it's in the early stages, and we aim to give an update when appropriate, and we hope to do that before the summer of this year. Duncan Russell: On the operating profit in the second half, what tends to drive -- or what drove a lot of that growth, Jason, was the variances. So in the second half of 2025 for the U.S. on a U.S. dollar basis, we had a positive experience variance on claims of $129 million linked to mortality and morbidity comment earlier, whereas last year in the second half, that was only $33 million. So there's a big swing from variances, which are always going to occur, but hopefully should be captured in our range. If we look forward, the guidance we gave at the Capital Markets Day was that we would expect the operating result run rate to grow around 5%, driven by around 10% growth in strategic assets and shrinking profits and financial assets. As you know, the strategic assets profits are driven mostly by CSM progress and then our noninsurance profits. You see that our CSM is progressing really nicely. So our CSM on Protection Solutions ended the year at $4.3 billion and at half year it was $3.6 billion. So good progress there, which I think is supportive of the growth ambitions on the insurance side. And I just flagged earlier that on distribution, we expect a continued lower margin but good revenue growth. So that should support the overall roughly 10% growth in strategic assets. Against that, the financial assets will continue to run down. You note there that the CSM ended the year at $3.2 billion, began the year at $3.8 billion. So as that runs down, there'll be a lower release from CSM and hence shrinking operating profit over time. And the dynamic of those two things should get you the roughly 5% growth in operating profit. Operator: And the next question comes from the line of Michael Huttner from Berenberg. Michael Huttner: It was on the net inflows rather than -- so what I noted from speaking to your excellent IR, but I wanted to have some comments on how you see it developing. In the second half, net outflows in retirement plans in the U.S. was $0.6 billion. I think that's the retirement of baby boomers. I just wondered what the outlook is there? And then in the U.K., we had EUR 273 million net inflows in H2, which is well below what we had in H1, I think EUR 1.9 billion or something. So I just wondered how you see the run rate here. Then finally, on asset management, EUR 1.3 billion net outflows, I think, again, second half. And I just wondered how you see that developing? E. Friese: These are different business lines. I will go one by one. First of all, our plan assets in the U.S. have gone up by 13% year-on-year. And the net outflows you're reporting, so the business itself is in very good shape. And especially when you look at the written sales, the new plans, the pool plans that we're getting, actually, the retirement business is doing very well. The outflows are indeed something that is in line with what the market sees overall in the U.S., which is baby boomers taken there, taking some of the money out. But also given where the stock markets are, people taking a little bit of money out. And that's what you're seeing there. Nothing else driving it. If you look at the U.K., the outflows we're seeing there is stemming from the same trend that we've been seeing for a longer time, which is a combination of a couple of things. And in the second half, there was one additional thing that I want to mention as well. So first of all, we target, as you know, a target segment of 500 advisers. Beyond that, in the nontarget segment, there's quite a lot of vertical consolidation and that drives where people are buying platforms and as a result, move assets away from it. So we've seen that for quite a number of quarters, and that has not changed. What we also saw in the second half of the year, there was quite some jitters in the U.K. on the budget. It's now settled because the budget is clear. But before that, there were concerns and as a result, clients took some money out because there were rumors that the tax-free pickup of pension money would not be possible anymore. And as a result, that led to a little bit of that. We have good progress actually on the technology improvements that we're making with target advisers providing positive feedback on that. But unfortunately, the commercial result of that is not yet visible. If you look at the AUM flows, so first of all, third-party flows were up. So they were worse than last than 2024. '24 was a record year, by the way, for that. But they were much lower than 2024, but they were positive. So we have positive flows driven -- so both on global platforms, which is our own platform as the strategic partnerships. And in terms of the outflows, we saw 2 main things happening; one client in the U.S. redeemed from our U.S. high-yield fund; and then we had the ASR, so they had some allocation changes in their general account. And as you know, we have a partnership with them on that. We noticed that in our asset management results. That is what we've been seeing. However, bottom line is, the retirement business in the U.S. is doing very well as is demonstrated by the set of numbers here. And the U.K., the workplace business is also in a very good place. It may not have been as high as the previous year because that was like a record year. This one is the second best year that we had, so it's still in a very good place. And on the adviser platform, I gave my views. And on AUM in total -- sorry, on asset management in total, we had positive flows, as I mentioned earlier. I also want to point to the margin improvement that we saw, by the way, in the asset manager, it nearly doubled this year to 17%. Operator: And the next question comes from the line of Nasib Ahmed from UBS. Nasib Ahmed: Just one question. Lard, you mentioned the legal proceedings on Page 269. I had a look, and there's a paragraph, the third paragraph, which has been there for a while around distribution. Just wanted to understand what that's related to? Is that WFG related? Or is it something else? E. Friese: Well, the two that I was referring to are the cases that -- so one has to do with an old block of business and bonuses that were paid on that on universal life policies. Again, it's more eloquently described in the first paragraph of that section in Page 269. And the second one had to do with the topic of the MDR, so the monthly reduction rates that were increased. And also that is described more wholesome in Page #269. Those two cases have been settled. That's good news. And now we await the confirmation. Now, then what you're referring to, the third paragraph, they're not WFG related. So the first two cases -- so the cases I mentioned that we settled are not WFG-related. Nasib Ahmed: Sorry, I was asking about the third paragraph where it says, there's some legal action going on around agents that might be considered independent contractors as opposed to employees. So I was asking about that one, whether that's WFG related? E. Friese: We'll follow up with you on that. But I think you're referring to a case that we mentioned half a year ago, already in our half year disclosure. We'll follow up. IR will give you a ring. Operator: And the next question is a follow-up from Michael Huttner from Berenberg. Michael Huttner: Sorry about that. On the number of advisers at WFG, the total number is up, which is wonderful. The dual or the multiticket number is up, but it's kind of much slower growth. Can you talk a little bit about that? I think it was a question a couple of years ago, and I think the implication was that it didn't worry you too much, but it's the multiticket is obviously the higher value part, I don't know. Any comment would be helpful. E. Friese: You may recall in many of the discussions last year that we wanted to improve productivity, right? And I've mentioned in a number of earnings calls that we were running programs to indeed improve that productivity. Now what has happened is that through our training and through our field support, we have been able to make more agents because the agency sales force has grown quite a bit. So the agents that become fully licensed agents, then also need to learn and to get productive and to become sellers. And that's what you're actually seeing in the numbers. We were able to improve the number of producing agents. Then the second thing that happened is they also sold insurance policies with a higher premium amount. And that also drives the metric of productivity up. That's all good news. So the agency network become stronger, has become bigger, has become more productive and that bodes well for the future, and we will continue to strengthen the network. I mentioned that we are doing investments supporting the field force training, all these good things to ensure that, that massive sales force that we have, which is the second largest in the U.S., and that goes to the underserved mainstream American family class and help them with our protection and retirement plans, et cetera. So yes, it's a good progress that we're making there. Operator: Thank you. We have no further questions. I would like to hand the call back over to Yves Cormier for closing remarks. Yves Cormier: Thank you, operator. This concludes today's Q&A session. If you have any remaining questions, please get in touch with us at the Investor Relations team. On behalf of Lard and Duncan, I would like to thank you for your attention. Thanks again, and have a good day. Operator: Thank you. This concludes today's conference call. Thank you for participating. 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: Ladies and gentlemen, thank you for standing by. Welcome to the Airbus Full Year 2025 Earnings Release Conference Call. I am Sharon, the operator for this conference. [Operator Instructions] The conference is being recorded. After the presentation, there At this time, I would like to turn the conference over to Jean-Christophe Henoux, Head of Investor Relations. Please go ahead. Jean-Christophe Henoux: Thank you, Sharon, and a very warm welcome to everyone joining us today. We are here to dive into the Airbus Full Year 2025 Results, and I'm thrilled to be with our CEO, Guillaume Faury; and our CFO, Thomas Toepfer, with us to break down the numbers and take your questions. This call is planned to last 1 hour and 15 minutes, including Q&A. If you're joining us via the webcast, a replay will be available for you on our website. Speaking about the website, you can already find the supporting information package there that includes today's slides and the detailed financial statements. Before we start, let me remind you that we will be making some forward-looking statements today. I encourage you to take a look at the safe harbor statement in our presentation slides. It's important stuff, please have a quick read. And with that, let's get things started. Guillaume, the floor is yours. Guillaume Faury: Thank you, JC, and good morning, ladies and gentlemen. I'm happy to be here in Toulouse with Thomas to run you through our full year 2025 results. 2025 was a landmark year, characterized by a very strong demand for our products and services in both civil and defense. While we successfully navigated in a complex and dynamic global environment, our primary focus was managing supply constraints that created a desynchronization between production and delivery throughout the year. Against this backdrop, the year was marked by both resilience and record financials. In defense, we're observing great momentum and our large portfolio is perfectly aligned with the capability needs. We do this by delivering mission-critical solutions and being the long-term partner of choice for nations in Europe and worldwide. On the strategic front, we're advancing industrial consolidation with Leonardo and Thales to create a world-class space leader. This initiative is key to achieving the global scale and operational depth required in today's fast-evolving global market. In commercial aircraft, sustained global demand continues to drive the expansion of our industrial footprint. A major milestone in this journey was the acquisition of certain Spirit AeroSystems work packages with the closing on the 8th of December, which allowed us to take control of this production flow, and Thomas will speak more about it later. The A320 panel quality issue that hit us in December was also a significant event that put pressure on our ability to deliver in an already back-end loaded year. We took immediate steps to address the challenge, putting a strong focus on quality and therefore, unfortunately impacting 2025 deliveries. We expect the residual operational impact to be contained and spread mainly over the first half of the year. That said, our operations do not function in isolation. While we have secured a critical portion of our trajectory, some supply chain tensions continue, notably with the engine maker, Pratt & Whitney. On the A320 family, Pratt & Whitney's failure to commit to the number of engines ordered by Airbus is negatively impacting this year's delivery guidance and the ramp-up trajectory into next year. As a consequence, we now expect to reach a rate of between 70 and 75 aircraft a month by the end of 2027, stabilizing at rate 75 thereafter. In this context, I'm very proud of what team Airbus achieved. We delivered on our commitments, meeting our updated guidance with 793 deliveries. Our performance in the fourth quarter was particularly strong with 286 aircraft delivered, and we closed the year with a record year-end backlog. This result demonstrates our collective resilience and our unwavering focus on excellence in everything and everyone. Now looking at our 2025 financial performance. Our EBIT adjusted stood at EUR 7.1 billion, reflecting our commercial aircraft deliveries and the performance at the Helicopter and Defense & Space divisions. This is also reflected in our free cash flow before customer financing, which stood at EUR 4.6 billion. These results led to a record net income of EUR 5.2 billion that supports our 2025 dividend proposal of EUR 3.2 per share. With all that in mind, let's take a closer look at 2025. And moving to our commercial environment, starting with commercial aircraft. In 2025, passenger traffic expanded across all regions, while air cargo demand remained resilient. This year was another commercially successful year with repeat orders and key new customers in both the single-aisle and wide-body campaigns. We booked 1,000 gross orders, including 390 in Q4. On the A220, we booked 49 gross orders, and we see positive momentum. Looking at the A320 family, we booked 656 gross orders. This brings our backlog to 7,163 aircraft, out of which around 75% are for the A321. Moving to the wide-bodies. On the A330, we booked 102 gross orders, another strong year confirming the high demand for this very versatile aircraft. And finally, on the A350, we booked 193 gross orders, underpinning the good commercial momentum, and it was a record year for our freighter. Net orders amounted to 889 aircraft, including the 111 cancellation compared to the 1,000, which were largely anticipated and already embedded in our backlog valuation as of December 2024. Our backlog in units increased to a year-end record of 8,754 aircraft. At group level, our backlog stood at EUR 619 billion in 2025, including a strong book-to-bill above 1 for all businesses as well as the weakening of the U.S. dollar. Looking at Helicopters. In 2025, we booked 536 net orders compared to 450 a year earlier with a book-to-bill well above 1, both in units and value, including a strong contribution from the military segment as well as good order intakes from services. We celebrated orders of 100 Airbus helicopters by the Spanish Ministry of Defense, the largest helicopter purchase by this customer. Additionally, we want to mention the Super Puma family for which we signed a contract with the Royal Moroccan Air Force for 10 H225Ms in the second half of the year. We also saw Germany reinforcing their commitment by exercising the contractual option for 20 additional H145M helicopters. Finally, looking at unmanned air systems, Airbus has been awarded a contract from the French DGA for the production of 6 VSR700 systems, while also receiving a framework contract by the European Maritime Safety Agency for the Flexrotor, our modern vertical takeoff and landing uncrewed aircraft. Overall, we continue to see very strong momentum, in particular on the military market, and we remain focused on our responsibility to deliver on expectations, including ramping up. Finally, moving to Airbus Defense and Space. 2025 reflected one more year of record order intake, which stood at EUR 17.7 billion, corresponding to a book-to-bill of around 1.3. Key orders recorded in Q4 reflect several strategic wins, particularly in our Air Power and Space Systems business units. Starting with Air Power, we observed a good commercial momentum with Spain, including contracts for 18 C295s, plus the development and implementation of the new integrated training system for the Spanish combat pilots. Let me also mention that 2025 was an excellent year for the Eurofighter program. Notably, we recorded an order for 20 aircraft from Germany, the activation of 8 options from Italy, and we also welcome Turkey to the program with 20 aircraft. To meet this growing demand, the program has already announced the first production capacity expansion, transitioning from rate 14 to rate 20 per year. Moving to Space Systems. Airbus was selected by EUTELSAT to build a further 340 OneWeb low earth orbit satellites, LEO satellites, complementing the first 100 recorded in 2024. The 440 satellites will be produced at the Airbus Defense and Space Toulouse facility and will enhance the OneWeb first-generation fleet. In addition, we are proud to highlight a return to the market of OneSat satellites with an additional order from Oman's national satellite operator, providing its position in the telecommunications market, proving its position, sorry. Finally, within our Connected Intelligence business line, we continued to observe good order momentum throughout the year, in particular, in defense, digital and cyber. The success of the division is the result of our transformation efforts, which ensured an improved performance. As we move into 2026, we remain focused on the division's long-term competitiveness and profitability. Now let me say some words on FCAS, Future Combat Air System. The need for an ambitious European FCAS is unchanged. We believe an ambition of this scale can only be delivered through cooperation, fostering operational interoperability and life cycle synergies for European air forces. We believe that the deadlock of a single pillar should not jeopardize the entire future of this high-tech European capability, which will bolster our collective defense. If mandated by our customers, we would support a 2-fighter solution and are committed to playing a leading role in such a reorganized FCAS delivered through European cooperation. Overall, I want to emphasize the commercial performance of both Airbus helicopters and Airbus Defense and Space that delivered record order intake in value in line with our ambition presented in June. Specifically, defense orders, excluding the joint ventures, MBDA, Ariane Group, the order, excluding those joint ventures reached more than EUR 20 billion, meaning around plus 50% upside year-on-year, ensuring robust future growth. And now Thomas will take you through our financials. Thomas? Thomas Toepfer: Yes. Thank you, Guillaume. Hello, ladies and gentlemen. I'm now on Page 6 of the presentation, and I'll take you through our financial performance. Now as you can see on the page, our financial year 2025 revenues increased to EUR 73.4 billion, up 6% year-on-year, mainly reflecting the higher contribution from our divisions, the strong services volumes across our businesses and a higher level of deliveries, partially offset by the U.S. dollar depreciation. On R&D, as you can see on the upper right-hand side, our expenses stood at EUR 3.2 billion in 2025, slightly lower than in 2024 as we continue to benefit from the prioritization of our activities this year. And R&D is expected to increase in 2026 globally, in line with revenues, but notably to support the defense portfolio acceleration. On to EBIT adjusted on Page 7 of the presentation. Our financial year 2025 EBIT adjusted increased to EUR 7.1 billion from EUR 5.4 billion in 2024. And of course, let me remind you that in 2024, after the completion of the in-depth technical review of our space programs, we recorded a total charge of EUR 1.3 billion. In the full year of 2025, the higher commercial aircraft deliveries, together with a more favorable hedge rate and lower R&D expenses were partially offset by the impact of tariffs, of which the vast majority occurred in Q4. And the result also reflects a stronger performance in both divisions. The level of EBIT adjustments totaled a net negative EUR 1 billion, and you can see this on the right-hand side in the box, and the adjustments include a negative EUR 624 million impact from the dollar working capital mismatch and balance sheet revaluation, mainly reflecting the mechanical impact coming from the difference between transaction date and delivery date, of which negative EUR 47 million in Q4. It also includes a negative EUR 188 million related to the acquisition and integration of certain Spirit AeroSystems work packages, of which EUR 100 million in Q4, and it includes a negative EUR 105 million related to the Airbus Defense and Space restructuring recorded already in Q1. On top of that, negative EUR 73 million related to our A400M recorded in Q4 and finally, a negative EUR 56 million of other costs, including compliance and M&A, of which negative EUR 45 million in Q4. So all this takes our full year 2025 EBIT reported to EUR 6.1 billion. Now let me take a moment to bring some more clarity on the negative EUR 188 million adjustment related to Spirit AeroSystems. This notably includes a EUR 738 million gain resulting from the settlement of the so-called pre-existing relationship as described in our financial statements. In other words, the termination of the favorable contractual conditions. And this is offset by provisions for onerous contracts and an impairment of EUR 500 million related to the A220 program. And this A220 impairment is primarily linked to the impact of the acquisition of certain Spirit Aerosystems work packages with a revisited or revised projected cost structure and ramp-up trajectory for the program. The financial result was a positive EUR 268 million and mainly reflects the revaluation of certain equity investments and revaluation of financial instruments, partially offset by the evolution of the U.S. dollar. Now the tax rate on the core business continues to be around 27%. However, the effective tax rate is 21.9%, with positive effects from the revaluation of certain equity investments and from the settlement of the pre-existing relationship with Spirit AeroSystems, which both are not subject to income tax, and this is partially offset by the negative effects of the French surtax and the deferred tax asset impairments. For 2026, we expect the French surtax to be in the same order of magnitude as in 2025, and that is true for both P&L and cash-wise. So that the resulting net income is EUR 5.2 billion with earnings per share reported at EUR 6.61 and our full year 2025 EPS adjusted stood at EUR 6.89 based on an average of 790 million shares. So this strong EPS performance marks a historical record for our company and supports our proposal for a dividend of EUR 3.20 per share for 2025, corresponding to a nearly 50% payout ratio in the very high end of our recently updated dividend policy, and it also reflects the confidence in our future financial performance. Now on to our U.S. dollar exposure coverage, and I'm on Page 8 of the presentation. In the financial year 2025, $23.6 billion of forwards matured with the associated EBIT impact and euro conversions realized at a blended rate of $1.19 versus $1.21 in 2024. And in 2025, we also implemented USD 16.7 billion of new coverage at a blended rate of $1.19. As a result, our total U.S. dollar coverage portfolio in U.S. dollar stands at USD 75.8 billion with an average blended rate of $1.22 as compared to USD 82.8 billion at a blended rate of $1.21 at the end of 2024. And in 2025, as in 2024, we continue to streamline our U.S. dollar coverage and continued implementing collars with an addition of USD 3.9 billion in the financial year 2025. And here, let me remind you that the collars will, at this stage, remain at around a single-digit percentage of the overall coverage. And in addition, I would like to say that these collars are reported at their least favorable rate and as a result, increase the total blended hedge rate of our portfolio, hence, providing a protected view. And our portfolio is currently being adjusted by implementing some rollovers to reflect the delivery target for 2026 and the delivery profile. Now on to a more detailed look at our free cash flow on Page 9. Our free cash flow before customer financing was EUR 4.6 billion in the financial year 2025, and this mainly reflects the level of deliveries, the commercial momentum across all our businesses, resulting in healthy PDP inflows offset by the planned inventory buildup associated with the ramp-up across the programs. The A400M was broadly neutral from a free cash flow perspective in 2025, which is a success. And our financial year 2025 CapEx was EUR 4 billion, and this reflects the investments in expanding and upgrading our industrial footprint. And to support the ramp-up and the successful integration of the Spirit AeroSystems work packages, we expect our CapEx to continue to increase in 2026. The free cash flow was positive EUR 4.8 billion, including customer financing for EUR 0.2 billion, and we continue to see a diverse and competitive financial -- financing landscape. And currently, we expect sufficient liquidity to support our 2026 deliveries. Our net cash position, as you can see on the right-hand side of the chart, stood at EUR 12.2 billion as of the end of December, also reflecting a weaker dollar environment, and our liquidity is now at around EUR 35 billion. So in 2025, we delivered, in our view, very strong financials across the board in the context of many challenges. And with that, I would like to hand it back to Guillaume. Guillaume Faury: Thank you, Thomas. And let's start with commercial aircraft. In 2025, we delivered 793 aircraft to 91 customers. And looking at the situation by aircraft family and starting with the A220, where we delivered 93 aircraft, reflecting a strong growth. The ramp-up is ongoing and still paced by the integration of Spirit AeroSystems work packages and the balance between supply and demand. As we continue to make what I would call tactical adjustments on this ramp-up trajectory, we are now targeting a rate of 13 aircraft a month in 2028. Our teams continue to work on the road to reach breakeven, and we remain focused on engine durability improvements while ensuring operational efficiency. On the A320, we delivered 607 aircraft, of which 387 A321s, representing 64% of deliveries for the A320 family, 64% of A321s. We are very pleased that our newest aircraft, the A321XLR continued attracting new operators. This aircraft with its unique capabilities is proving to be a key asset, acting as a route opener for our customers. The ramp-up towards the monthly production rate of 75 aircraft is ongoing. In 2026, we see shortages of engines from Pratt & Whitney, not matching our needs nor our orders that will limit our aircraft deliveries, and this is really disappointing. In 2027, they must significantly step up their deliveries, which we expect. And as a result, we expect to reach a rate of between 70 and 75 aircraft a month by the end of 2027, stabilizing at rate 75 thereafter. So there were 93 A220s, 607 A320s. That makes a total of 700 single aisle and then again, 93 on the widebodies, easy to remember. So on widebodies, we delivered 93 aircraft, of which 36 A330s and 57 A350s, including the first deliveries to new operators. On the A330, moving forward, no change. We target to reach rate 5 in 2029 to meet customer demand, and you see this is a strong demand. And on the A350, no change either. We continue to target rate 12 in 2028. In a nutshell, we continue to work with all of our stakeholders, such as cabin suppliers, but more importantly, with our narrow-body engine suppliers, particularly Pratt & Whitney, to fully enable the ramp-up trajectory. Now let's look at the financials for our commercial aircraft business. Revenues increased 4% year-on-year, mainly reflecting the higher number of deliveries and growth in services, partially offset by the U.S. dollar depreciation. EBIT adjusted increased to EUR 5.5 billion from the EUR 5.1 billion in 2024, driven by the increase in deliveries with a more favorable hedge rate and lower R&D expenses being partially offset by the impact of tariffs. Page 12, looking at helicopters. In 2025, we delivered 392 helicopters, that's 31 more than in 2024. Revenues increased around 13% to EUR 9 billion, reflecting a strong performance from programs and services growth. EBIT adjusted increased to EUR 925 million, reflecting the higher deliveries as well as growth in services, as I said already. And let's complete the review with Defense & Space. Revenues increased 11% year-on-year to EUR 13.4 billion, driven by higher volumes across all 3 business units. This resulted in EBIT of EUR 798 million, also supported by improved profitability in line with the midterm trajectory and the results of the successful transformation plan. On the A400M program, a contract amendment was signed with OCCAR in the fourth quarter of 2025 to advance 7 deliveries for France and Spain and to further increase the visibility on the program's production. In light of uncertainties regarding the level of aircraft orders, Airbus continues to assess the potential impact on the program manufacturing activities. Risk on the qualification of technical capabilities and associated costs remain stable. And before we move to our guidance and key priorities, Thomas will go through the acquisition of certain Spirit AeroSystems work packages, which was completed, as we said, in 2025. Thomas Toepfer: Absolutely. As you have seen in December, we successfully closed the acquisition of certain Spirit AeroSystems work packages and transitioned to day 1, and we have begun consolidating the 5 new sites that are located in the United States, Europe and North Africa in order to secure operational stability and continuity. Regarding the financial outlook, our assessment has evolved as we gained control of this production flow. And while the 2026 EBIT adjusted impact remains consistent with previous guidance, the headwind in 2026 is slightly higher than what we had initially anticipated. And on free cash flow, we expect a further deterioration in 2026, mainly due to the transaction closing shift and the investment needed to support the ramp-up. And from now, these figures will be included into the broader program performance. The strategic rationale remains clear. The integration is fundamental to derisking the A220 and A350 ramp-up and to make sure that we are on a competitive trajectory. And with that, I would like to hand it back to you, Guillaume. Guillaume Faury: Page 16, on to our guidance. And as the basis for its 2026 guidance, the company assumes no additional disruptions to global trade or the world economy, air traffic, the supply chain, its internal operations and ability to deliver products and services. The company's 2026 guidance is before M&A and includes the impact of currently applicable tariffs. On that basis, the company targets to achieve in 2026 around 870 commercial aircraft deliveries. And EBIT adjusted around EUR 7.5 billion and a free cash flow before customer financing of around EUR 4.5 billion. And to conclude, I want to look forward. Our primary focus remains on the ramp-up with no compromise on the highest standard of quality in everything we do. On defense, the priority is to continue to strengthen our global leading position by leveraging our unique portfolio of products and our international footprint. It means playing a leading role in a fighter project, continuing the good momentum on military products and services as well as strengthening sovereignty and competitiveness in space. We are committed to reinforcing a strong commercial position across all our businesses, continuing on our leadership in commercial aircraft, defense, space and helicopters alike. Finally, we remain committed to leading the future of aerospace with a focus on the next single-aisle generation. Our vision for the future is anchored to our sustainable aerospace ambition, while we continue to deliver profitable growth. And before taking your questions, allow me to say a word to welcome this year, Lars Wagner and Matthieu Louvot to lead, on the one hand, our commercial aircraft and on the other one, our helicopter businesses. They bring deep operational expertise, industrial knowledge and a real strategic vision. And a big thank you and my sincere gratitude and congratulations to Christian Scherer for all he did over his 40-plus years at Airbus and to Bruno Even for what has been achieved at Helicopters under his leadership. All the best to you both. And now we are ready to take your questions. Jean-Christophe Henoux: Thank you, Guillaume and Thomas. We are now ready to open up the floor for your questions. [Operator Instructions] All right Sharon, let's get the ball rolling. Could you please explain the Q&A procedure for participants? Operator: [Operator Instructions] We will now go to our first question. One moment, please. And your first question today comes from the line of David Perry from JPMorgan. David Perry: I'm not used to being first. I just had one question, please. The guidance probably implies that the margin will be down in Commercial Aircraft in 2026. And I'm just wondering if that is due to any one-off items, maybe the spirit integration and how you see the margin kind of evolution thereafter, if you're willing to comment. Thomas Toepfer: So David, on that question, what we are seeing is that the margin in commercial is not particularly affected on a per aircraft basis, of course. But what we do see is that the delivery trajectory is lower than what we had originally anticipated absent the issue that we're having with Pratt. And on top of that, you're making a correct remark, we are having 2 headwinds that we have to keep in mind. One is the FX headwind, which is roughly EUR 0.02. You know the math. It's roughly EUR 150 million per EUR 0.01. So that gives you a rough EUR 0.3 billion of headwind. And secondly, we said we would face a low triple-digit headwind from the spirit integration. You can attach a number to that. And of course, those 2 items do play a role when you build the EBIT bridge from 2025 to 2026. Absent than that, you know that we said for R&D, we would expect an increase in 2026 as well. So of course, we're continuing our lead program. But on the other hand, we have to make the necessary investments in R&D for the future programs that we have on the agenda. So I would say those are the building blocks that you have to take into account for 2026. The margin on a per aircraft basis is healthy, and we're happy with what we have achieved in terms of order intake in 2025. Operator: Your next question today comes from the line of Benjamin Heelan from Bank of America. Benjamin Heelan: The first question for me is on free cash flow. It does come across a lot weaker in 2026 than I was expecting. So could you go through the bridge a little bit? What are the big moving pieces that we can expect there? And then second question is the situation with Pratt. What can you actually do with this situation? And how is it impacting your thinking of engine supply and engine suppliers going forward? Thomas Toepfer: Let me maybe start with the free cash flow bridge. So the main item that you should keep in mind here is Spirit. And again, I'm coming back to what I said in the presentation. We see a deterioration relative to what we assumed before. Remember before, we said it could be up to a mid-triple-digit negative amount. We see this is going to be more negative, mainly because of the late closing of the transaction. So it's a spillover effect between 2025 and 2026. But of course, now with that effect, we're more talking high triple-digit amount in terms of CapEx and investments that we have to make into Spirit. That is the main item that you should keep in mind for the 2025, 2026 bridge. Other than that, there is continued investments into inventory that we have to make to make sure that our trajectory is intact. And finally, of course, the impact of Spirit is also negative on free cash flow because we are not excluding that we might have to build gliders depending on the visibility that we have on engine deliveries. So this is also a negative that we face. Other than that, I would say the positive come, of course, from the positive development of our divisions and the, as I said, good margin that we have on a per aircraft basis in commercial. Guillaume Faury: Maybe on the engine side. Well, that's the one difficult thing we have to face looking at 2026 is that we have a shortage of engines from Pratt & Whitney compared to what was expected and compared to accepted orders from Pratt & Whitney for deliveries of engines in 2026 for 2026 deliveries. That's the one significant thing we have to manage. We want to enforce our contractual rights, but that will obviously take some time. and we had to significantly reduce the number of aircraft planned for deliveries in 2026 due to that situation with some implications, obviously, on profitability and free cash flow. Our understanding is that it's an issue that will mainly impact 2026, probably to some extent, 2027. We are discussing with Pratt, obviously, as you can imagine, on a daily basis on those topics, and that should go away most likely after 2027. That's why we had to adjust slightly the perspective for reaching the rate 75. We believe we continue to pursue reaching rate 75 by end of next year. But due to the uncertainties on engine volumes remaining for 2027 from Pratt, we said that we will now reach between 70 to 75 A320 aircraft per month by the end of next year. So we have to sort of bite the bullet in 2026 of that very painful and unsatisfactory situation with impact on 2026, but working hard to restore a good situation moving forward, and that's the work ongoing with Pratt. Benjamin Heelan: Super clear. Just a very quick follow-up for Thomas. How should we think about the Spirit cash flow drag in '27 and into '28. Is there any color that you can provide how that high triple digit will evolve? Thomas Toepfer: I would say in 2027, with the guidance that we originally gave to you was the same as for 2026. So up to a mid-triple digit. There might be a small deterioration also in 2027. But again, I think the visibility is not super high for that. We're working hard to not make it too negative of a drag. The important thing is the focus on '26. Operator: Your next question today comes from the line of Ross Law from Morgan Stanley. Ross Law: So maybe a bit of a kind of bigger picture question. And just on why engine supplies are impacting the ramp-up. Obviously, I understand the impact deliveries, but not necessarily the manufacturing of aircraft. So is the softening of the ramp-up reflecting risk around Pratt & Whitney engine supplies medium term beyond 26? Or are there other bottlenecks that are driving the slight sort of ramp-up delay on A320. And then just one on Defense & Space. Good margin in the full year, especially in Q4. How sustainable should we view this? Guillaume Faury: I'll start with the first question. So the shortages of engines are impacting 2026 and to an extent that looks more limited, but still to be completely understood also 2027. That's the reason for slightly changing the moment of reaching rate 75, the fact that we intend to reach between 70 and 75 by end of next year is the Pratt & Whitney engine situation that is not limited by other supply issues where we have a ramp-up trajectory that is well supported. And beyond that point and the Pratt & Whitney issue, we continue to target the same rate 75, the stability and being supported by the supply chain. So it's really this one issue, unexpected issue, at least in the dimension and the timing where it comes that is impacting '26. We think to a more limited extent, 2027 and most likely not beyond. Thomas Toepfer: And on the margin of Defense and Space, you know our view is never over interpret the margin of a single quarter. So I would rather look at the margin of Defense & Space for the full year 2026 -- '25, which we found very satisfactory, and we think it is sustainable and will be improved. So my comment would be, you know we said Defense and Space will achieve a mid- to high single-digit margin by 2028. And I would say we are absolutely on track to achieve that and very pleased with what we have achieved already in 2025. Operator: Your next question comes from the line of Chloe Lemarie from Jefferies. Chloe Lemarie: Apologies, I was on mute. I have 2 questions, please. The first one is on the 2026 delivery guidance, which seems to imply A220 slightly below 60 per month. Despite commentary that production rate had been exceeding that level last year. So how are you dealing with suppliers, which were likely prepared for further ramp. Is just glider production the way to think about it. Or any other measures you're taking to mitigate this? The second one would be on FCAS. Could you remind us of the current revenues that you are generating from the program? Is it all NGF related? And beyond the NGF, what would be your involvement and the opportunity set there? Guillaume Faury: Yes. On the 2026 A320, we are in a ramp-up, and we'll continue to grow production rates compared to 2025. We will have to adjust the level of production and the expected number of gliders over the year as we navigate the discussion and the difficult negotiation with Pratt & Whitney on the volumes. We don't give up as we are not satisfied with the low level of volume on engines that they are committing on now, which is insufficient. And as I said, already below the order they had accepted for 2026. And it's very much also a function of the entry into 2027. So we're on the ramp-up on the A320. It's indeed a difficult situation to manage with the other suppliers that are ramping up according to the design, the designated trajectory. But again, we expect to grow significantly in 2027. And therefore, the long-term ramp-up or the midterm ramp-up is not challenged and reaching the rate 75 is in the cards, and we continue to count on our supply chain to deliver on this objective as we have the demand, as we have the industrial system in place and as the very vast majority of the supply chain is in line with this objective. Thomas Toepfer: And on FCAS, I mean, remember, it is a project in the early phase of the development. So there's no material revenues attached to it. The order of magnitude that I would give to you is a low triple-digit number, but that is, of course, mainly covering the cost that we're having in the development phase. So therefore, it's not a material revenue item in our OP period. Operator: Your next question today comes from the line of Sam Burgess from Goldman Sachs. Samuel Burgess: Firstly, just to return to the Pratt & Whitney conversations you're having. I mean what are the company actually telling you about the real bottlenecks that they are dealing with and their concrete plan to rectify them? Just any color there would be really helpful. And then the second one would be just around the Defense business, clearly performing very well and just continuing to see very high demand. I mean a lot has changed in the world and in particular, in European defense since you presented at the Paris Air Show. Have your expectations for that business evolved? Guillaume Faury: So on the Pratt & Whitney, which is the single more important topic we are dealing with. I think Pratt & Whitney have explained their situation and the challenge that comes from the number of aircraft so-called AOGs with their airline customers. This number has not gone down as fast as they were targeting and expecting and as the customers were expecting. And Pratt & Whitney want to allocate a large part of their efforts of their material and engines to supporting the fleet, negatively impacting Airbus in its ability to ramp up. We are very dissatisfied with this. We don't agree with this. They have to increase output more than what they've done so far to be able to serve both needs, but in particular, the needs of Airbus and residing on volumes on orders that have been accepted in the short term as obviously very negative consequences for us on managing the situation with impacts on our own ability to deliver our own profitability, of course, and managing the inventory and therefore, the free cash flow that goes with it. Therefore, the guidance we are delivering for 2026. As you can imagine, we're in dispute with Pratt & Whitney on this. We want to enforce our contractual rights, but this will obviously take time. And maybe for defense, Thomas? Thomas Toepfer: I mean for defense, yes, I would agree with you. Things are accelerating, and I would just reiterate what Guillaume said also in the speech, we had an order intake for Defense, if you take the defense part of helicopters and the pure defense part of Airbus and Defense and Space, excluding civil satellites, and it was over EUR 22 billion in '25, an uplift of 50% relative to the previous year. So I think that shows the good momentum. I would say we are at least on the trajectory with Defense and Space that we had laid out in Paris, but of course, it would be premature to give some new guidance, but we're very pleased with the trajectory that we currently have. Guillaume Faury: And maybe we can say that in our business in Defense and Space, on large systems, it takes time from order intake to delivery and therefore, generating turnover and profits, but it supports very much the long-term trajectory we have for Defense and Space and with the competitiveness of our products. So it's really putting us obviously on the high side of the trajectory. Operator: [Operator Instructions] And your next question comes from the line of Ian Douglas-Pennant from UBS. Ian Douglas-Pennant: It's Ian Douglas-Pennant at UBS. First on -- you made some comments on your -- in your prepared remarks on the panel issue having impacts in H1. The delivery rate that we've seen in January and from what we can see from data providers from February seems to be tracking reasonably slow. Is that related to the panel issue entirely or in the vast majority of that slow, is that the panel issue? Or should we read other issues into that, including Pratt & Whitney? And my second question is, have you communicated with suppliers to lower their production rates for 2026 already? Or is that something you plan to do? Or will you not lower your communication to them, and that's why your free cash flow guidance is where it is because of inventory build? Guillaume Faury: So the January and February deliveries are indeed quite low. It is driven by the management of the panel issue, not only but primarily. It's not related to engine topics at the beginning of this year. Indeed, we have to manage the supply chain situation. It's a bit of a case-by-case, supplier-by-supplier adjustment as we want to continue to fully support the ramp-up in the outer years for the A320 as we want to best manage the situation with the supplier to not have shocks in their production rates or 2 nonlinear situations with the suppliers to maintain the reliability of the supply independently from the Pratt & Whitney situation. As we will navigate and continue to manage the relationship with Pratt and that discussion, we also want to preserve the possibility to have better news at a later stage and to get from Pratt more than what they're telling us today. That's the complex tension between ramping up with uncertainty on engines, but still the need to be there in 2027 and beyond with the right level of volume, the reliability of the supply chain that has done the investments, the ramp-up. So that's indeed the difficult tension that is reflected in the few numbers we give for the guidance that makes the operational management of the ramp-up trajectory for the 320 in 2026 and probably beginning of 2027 quite challenging. We want to smoothen these difficulties for the supply chain, but we have obviously to adapt here and there, case-by-case, supplier by supplier to optimize the situation. Ian Douglas-Pennant: Could I just ask a follow-up on that? So if Pratt & Whitney do not change what they've committed to or they're promising you today and continue this disappointment, how many gliders do you expect you'd end the year with? I don't know whether you want to give a precise number or just kind of rough indication, that would be very helpful. Guillaume Faury: I will not give a number, but what I'd like to say is we don't plan gliders for gliders. We do gliders when we are surprised in the short term by an issue and we can't put engines on planes that were already in the production pipeline or when we strongly believe or we reasonably believe that the engines we don't get at the point will come later. And in that case, we produce gliders voluntarily. But when we are in a planned trajectory of deliveries of engines in that case, with a little hope for change, we don't produce gliders for producing gliders. So that's why the ongoing negotiation, the ongoing discussions we have with Pratt are very important as we need visibility to plan. And today, we have given a guidance to the market for 2026 that relies on what we -- on the current status of the negotiation and the impact it has on inventory, on buildup of planes. And we'll see later in the year whether we want to end up 2026 with a strong limited number of gliders and how we anticipate some upside and the risk we're taking, that's today with a reasonable prudence in the guidance we're giving, but it's obviously something that will be managed over the year. We are just in February at the moment. Operator: Your next question today comes from the line of Douglas Harned from Bernstein. Douglas Harned: First question is on the A350, and we've only seen 2 deliveries so far this year. Could you help us understand what rate you want to be at for the year? And are the -- is the shortfall primarily due to Spirit issues, interior certification or just interiors falling behind? So first question on the A350. And then second, if we go back to last year on the A320 family, the problem was engines from CFM. Can you update us on how things stand right now with respect to the LEAP? Guillaume Faury: Yes. Maybe I'll start with this one. So the issues we had last year with CFM were linked to the sequence of deliveries over the year. As you remember, they had some industrial challenges. There was a 7 weeks strike at Safran as far as I remember, and we found ourselves with the shortage of engine on the short term with the understanding that came through later in the year that CFM would recover and finally deliver on the number of engines we were expecting by around mid of November. This is what happened. That led to a very backloaded year in terms of delivery or contributed to a very backloaded year of delivery, but this is now behind us, and we are with the LEAP on a nominal situation where we get engines when we need and when we expect to get in 2026 the number of engines that were committed by CFM, and they have not modified their outlook, their projection for 2026. So we think we have a reliable source of engines from Pratt & Whitney -- sorry, from CFM from the LEAP this year contrarily to Pratt & Whitney. So the engine issue that we're expecting for 2026 are solely on the Pratt & Whitney engine when it comes to the A320 family. On the A350, no, I have no specific warning when it comes to the ramp-up. You know that we had a lot of deliveries in the last quarter and in the last month of 2025. So we focused very strongly on those deliveries, and we have now to resume a normal pace of deliveries for the planes in general for the A350. The very backloaded and very challenging industrial situation we had end of last year is negatively impacting the beginning of the year. So we have a rather slow start. It's not very satisfactory, but it doesn't impact the ability to deliver the rates and the number of planes we expect for this year, at least from what I can see today. Operator: [Operator Instructions] And your next question today comes from the line of Olivier Brochet from Rothschild & Co. Olivier Brochet: I would have 2 questions, please. The first one, continuing on the previous one on the A350. Can you share a bit more about the signals that you see for production. Seats have been an uncomfortable spot for the industry. Spirit is a challenge to integration. Engines have been so far no problem at all for A330 and A350. Do you have any concerns there? Any comfort on the contrary that you could share? And the second question is, you mentioned that you would be happy to have 2 aircraft for NGF. Do you have any view on what the French position is on that topic, please? Guillaume Faury: So starting with the A350. So 2026 is a year of ramp-up of the A350. Indeed, we had difficulties with interiors, mainly with seats in the past 2 years that has impacted the ability to deliver engines, but not impacting the ramp-up itself. It's not impacting the ability to produce an A350 aircraft. It's impacting the ability to do the customization, the cabin and interiors and then to deliver to customers with the full cabin completed. We find solution one by one in that case. And in many cases, it's also between the airline and its interior or seat supplier in the frame of what we call BFEs, so buyer furnished equipment coming directly from the equipment supplier to the airline. I don't have specific warnings when it comes to the ramp-up of the 350 contrarily to what we had 2 years ago, where we had to actually postpone by sort of a year the start of ramp-up because of the Spirit situation. What we have from Spirit going from last year to deliveries this year is supporting the plans we have. So it's all about execution, obviously, this year, and I'm not suggesting there's no complexity in what we do on a wide-body aircraft. But I don't have, at this point in time, significant warnings when it comes to our ability to ramp up on the A350. On the FCAS, well, we have not said that we would be happy with 2 fighters. What we've said is, would it be the demand of our customers. That's a scenario that we could live with and that we would support in the frame of European cooperation. We are deeply convinced of the need and the relevance of European cooperation in this future combat air system capabilities. That's what -- that's what we think we do reasonably well. We're here to serve cooperation programs, and we are ready to take a leading role if the program has to move in the direction that is not the one of today. So we are a bit in a wait-and-see mode to see how things will move forward on the NGF. Operator: Your next question comes from the line of Ken Herbert from RBC. Kenneth Herbert: Two questions. My first question is, how confident are you now that you've owned the Spirit assets for just a few months here that the guidance fully reflects the downside risk on both EBIT and free cash flow? Or could there be incremental risk as you continue to invest and dig into that business? And then my second question is, again, just on the A350, can you give any more specifics on what kind of ramp we should see this year in deliveries as you think about still hitting 12 in 2028? Thomas Toepfer: So maybe let me start with the Spirit question. I would say we have a reasonably good visibility because as you said, it's only been 2 months that we really own the business, but we have been in -- at the Spirit side with many people already before. So I would say the assessment that we have made is mainly a deterioration for free cash flow, and that is because of the late closing and the spillover of things that already should have been done in 2025, but that now have to be done in 2026. So therefore, I would say that deteriorated number is part of our guidance, and I see limited downside risk with respect to a further deterioration of Spirit because our visibility is reasonably high into where we are with respect to CapEx needs, but also other things that we have to invest, be it people, be it systems, be it processes. So therefore, I would say the downside risk from Spirit on the financials should be maintained. Guillaume Faury: On the A350 question, well, we give a guidance of around EUR 870 million for 2026. And as usual, we don't split it by family. You can think of the A350 coming from the rate of 5 to 6 in the past 2 to 3 years as far as I remember, to 12 ideally in a sort of quite linear way. And we want to see a material increase on that trajectory already as soon as in 2026. Operator: We will now go to the next question. And your next question comes from the line of Christophe Menard from Deutsche Bank. Christophe Menard: I had 2. The first one, going back to Spirit, can you also give us an update on the EBIT impact on Spirit in '26 and '27? And also, my understanding was you got the compensation in 2025, so the kind of the bridge approach in a way on Spirit at the EBIT level. My understanding was it's EBIT adjusted, not necessarily EBIT reported impact or actually, I mean, the -- it's within the EBIT adjusted also if you could mention or give some details on this. And the other question, it's a rather candid question, but you're mentioning the issues with Pratt deliveries. Is there any way to actually increase the volume of LEAP deliveries in 2026 and 2027 to kind of offset the current situation? Or it's, so to say, already set in stone the production schedule? Guillaume Faury: I'll start with the second one and give a bit of time to Thomas to tell the story of spirit, which is not an easy one moving from '25 to '26 and '27. On the engine issue, we have obviously discussed a lot with CFM on the possibility to get more engines already in the past. They have accepted already to increase the volume of LEAP. They don't want to do it more now for 2026 than what they had accepted because they have their own challenges and constraints to manage. They have also the in-service fleet support to provide. And I guess they have also to respect their commitments to other customers. So that's not something that will help, unfortunately, for 2026, at least that's not something CFM is ready to commit on now. We'll continue to have that discussion with them as we move forward in the year. And I told you that we are managing production with the hope that we could improve the picture at a later stage. But I think CFM has been quite clear that 2026 comes with little hope. That's something that could play a role in 2027. You saw that we said from 70 to 75 by end of 2027. I continue -- we continue to target 75 by end of 2027. And would CFM be capable of providing a bit more in '27 compared to what they have committed to us that could contribute to reaching that objective. Spirit? Thomas Toepfer: Spirit. So again, back to what have we said on the EBIT adjusted impact for Spirit in 2026 and '27. We said it would be a low triple-digit impact negative. And I can fully confirm that for 2026. So plug in a number that is in that range. For 2027, it might be slightly more negative than that, but still within, let's say, a low triple-digit range. Operator: We will now take our final question for today. And the final question comes from the line of Robert Stallard from Vertical Research. Robert Stallard: A couple of final questions for you then. First of all, on staffing levels, you've talked about this in the past, how you've been hiring in advance of the ramp. Does that change in 2026 given the 320 adjustment? And then secondly, on foreign exchange and the weakness in the U.S. dollar. At what point does this become a structural issue for operating margins and could require mitigating action? Guillaume Faury: Starting with the staff. Actually, we have already adjusted the staff hiring, the speed of growth in 2025 for 2026 to stay slightly ahead of the curve, but probably a bit less than what we had done before, being satisfied with the way the staff was serving the ability to ramp up. Indeed, we are currently reviewing, that's an ongoing discussion at Airbus, what needs to be adjusted for 2026. Obviously, slightly lower volumes than we were expecting or significantly lower volumes than we were expecting. But as I said earlier, with a view that 2027 should be very much -- pretty much similar to what we had expected, maybe with some adjustments. And therefore, the need to manage that dent into the production ramp-up on the A320 this year as we want at a later stage or not to create opportunities, would we get more engines or create -- accept to have gliders by the end of this year as we enter into 2027 to support the 2027 deliveries. So it's an ongoing discussion. We will adjust. The extent to which we will adjust and the timing is still something that we are working on. Thomas Toepfer: And on the U.S. dollar, I mean, let's distinguish between the short term and the long term. Obviously, in the short term for 2026, we are well hedged, and therefore, it's not an issue for 2026. And I would say almost the same is true for 2027 because we do have sufficient hedging in place. I think your question is more in the long term. My answer to that would be, of course, let's look at the current spot rate, which is still more favorable than what we have in our hedge book. So there is still quite a bit of headroom that we have before the spot rate actually becomes worse than what we have in our book. And secondly, yes, we're actively looking at what are mitigation actions. One is, of course, the general efficiency. This is why we continue to work on the lead program and make sure that we have sufficient headroom in terms of the margin that we produce. And secondly, of course, we're constantly revisiting how can we better balance the dollar revenue/euro cost mismatch. However, we don't want to run into the risk of mitigating maybe the FX exposure, but then running into other exposures, be it suppliers or other things. And so therefore, it's a careful balancing act when it comes to incurring more dollar costs that we don't run into other dependencies that we don't want to have. But the question, how can we mitigate a potential long-term dollar depreciation is certainly something that we're looking at operationally. Operator: That concludes our Q&A session. I will now hand the call back to Jean-Christophe for closing remarks. Jean-Christophe Henoux: Thank you, Sharon. That brings our session to a close for today. We really appreciate you taking the time to join us. If you have any further questions, please don't hesitate to reach out, just drop an e-mail to Olivier Vitor or myself, and we'll get back to you as quick as we can. Thanks again for your interest in Airbus. We are looking forward to catching up with you very soon again. Q1 '26 earnings release will take place on the 28th of April. Have a great day, everybody. Guillaume Faury: Thank you, everyone. Bye-bye. Operator: Thank you. Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.
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.
Anita Addorisio: Good morning, and welcome to Lifestyle Communities investor analyst conference call. My name is Anita Addorisio, Company Secretary of Lifestyle and moderator for this call. This webinar will be recorded for the benefit of those who are unable to attend today, and the webcast will be available upon request. Please be advised our conference call will strictly be limited to 1 hour. Due to the number of attendees, we will endeavor to address as many questions as possible during this time. We encourage you to contact the company via the Investor Center available on the company's website should you have any queries following today's update. Our presenters today are our Chief Executive Officer, Henry Ruiz; and Chief Financial Officer, Angela Farbridge-Currie, who will provide an update on the FY '26 half year results as released to the market this morning. Also joining us today is Clare Lewis, Investor Relations. This will be followed by a Q&A session, for which I'll now outline the procedure as presented on your screen. [Operator Instructions] Please note that questions received function, which are of a similar nature will be grouped and answered at the appropriate time. I now invite our CEO, Henry for his presentation. Over to you, Henry. Henry Ruiz: Thanks very much, Anita, and good morning, everyone. Thank you for joining us for our FY '26 half year results. I'm joined today by Angela Farbridge-Currie, our CFO; and Clare Lewis from Investor Relations. Moving to our purpose. Our company purpose is to reimagine a Way to Live for independent downsizers. We develop and manage architecturally designed low-maintenance homes together with resort style communities that allow downsizers to free up equity from their previous home and live the life they want. Moving to a business snapshot of our results. Our first half results are summarized at a high level on this slide and show we are strongly executing against our plan to get strong to grow stronger when the property cycle turns. The first half reflects a business that is operating with discipline and focus through a challenging market. We delivered statutory profit of $15.8 million, generated positive operating cash flow of $41.2 million and continued to materially strengthen the balance sheet, reducing net debt to $323.6 million, down from a peak of $490 million in May. Importantly, we're seeing early momentum as our refreshed Way to Live strategy embeds. New home sales improved materially, recording double-digit growth in sales with 110 new home sales and 128 new home settlements. Our annuity income stream continues to grow with 4,256 homes under management, recording $25.3 million of gross rental income, up 11.9% and customer satisfaction is trending positively. We have also enhanced our attractiveness to new prospects by introducing choice on when to pay the management fee, upfront or when they sell. And we have a healthy portfolio and pipeline of over 5,700 homes. At the same time, we have remained deliberately cautious, selling through built inventory, rightsizing the land bank, and restructuring our debt facilities to provide longer tenure and flexibility. At the 31st of December, the fair value of our investment properties was $898.1 million. While the Victorian property market remains challenged and the timing of the VCAT appeal decision is uncertain, our focus is clear: Supporting our homeowners, protecting cash flow, and positioning the business to emerge stronger as conditions normalize. With that context, I will walk you through our results before handing to Angela for the financial detail. Moving to our results snapshot. So going a little deeper on our results, you can see we have had a pleasing market response to the launch of our Way to Live brand campaign, which has landed well with new prospects and our existing homeowners. Net sales from new homes improved materially from the prior period, up 12% from the second half of FY '25, 110 versus 98; and a market improvement from this period last year, up 168%, 110 versus 41. New home settlements were lower than the first half of FY '25, 128 versus 137, driven by lower sales rates over the last 18 months and the lapse period between sales and settlement timing, as almost all of our customers need to sell their pre-existing homes before moving in. Annuity revenue from rental income continued to grow to $26.7 million, driven by new home settlements and inflation-linked rental increases. That said, the total annuity revenue was slightly down on the previous period due to the deferred management fee not being collected on contracts impacted by the VCAT decision, which remains under appeal. Following the settlement of planned land sales and ongoing inventory realization, we are pleased to report a further reduction in our net debt balance, down from $460.5 million at June 2025 to $323.6 million at December, as I just highlighted. Our operating profit after tax was $16.1 million, reflecting a period of transition as lower new home settlements from earlier sales cycles flow through. Margins were compressed as we intentionally sold through built inventory and deferred management fee revenue was impacted by the VCAT decision, alongside interest costs associated with the land bank. Closing out this half, we opened 2 new impressive club houses at our Ridgelea and St. Leonards -- The Shores communities. Moving to the property market. The Victorian property market has shown signs of improvement this half, however, still lags national trends and continues to face into some headwinds into the second half. As you can see from the figures on the right, sourced from Cotality, the value of dwellings in Melbourne increased 0.8% over the quarter and 4.8% over the December 12-month period, placing it at the lower end of capital-city growth. The pace of growth in home values lost some staying through the end of 2025 and into the early months of 2026. The slowdown aligns with the dent in consumer confidence in December as inflation tracked higher and given the RBA's posture towards monetary policy. Total listing volumes in Melbourne were down 12.6% from December 2024. And as recently as the past few weekends, option clearance rates are still in the low 60s. Moving to a business update and strategy recap. So with that property market context, as I mentioned at the opening, our company purpose is to reimagine a Way to Live for independent downsizers. It's brought to life through 3 strategic pillars. The first is to be the go-to-choice for downsizers, committed to mastering both sides of the sales process, the inquiry to appointment journey, and supporting homeowners through the process of selling their existing properties. The second pillar is to be renowned for the homeowner experience in our communities by investing prudently in high-quality amenities, digitally enhancing our communication methods, and a consistent experience that empowers homeowners and strengthens referral advocacy across our communities. We refer to our third pillar is powering our growth engine, by embedding capital discipline, market-led product and pricing strategies, refinement of our home designs to ensure product market fit with the aim of agility across cycles and sustainable financial returns. Now translating our operating pillars to value refers to how we create value for shareholders and our homeowners through 4 key operating pillars that work in tandem in a virtuous cycle. We refer to these pillars as Way to Live, Way to Grow, Way to Build, and Way to Operate, and I'll take them one by one. Way to Live refers to our focus on delivering a truly outstanding homeowner experience while doing it more efficiently with the goal of improving our operating margins to drive value to our annuity book. Way to Grow refers to the sales and marketing engine that ultimately drives the company's settlement rate. We are aiming to grow our net sales levels over the coming years as the property market strengthens. Way to Build refers to us reengineering the development process to deliver quality homes and community amenities that help enable efficient capital recycling at a sale price of 80% to 90% of the median of the catchment area with the aim of enabling the company to sustainably grow. And Way to Operate refers to our focus being market and homeowner centered and managing our corporate overheads commensurate with the longer-term growth ambitions of the business. The subsequent updates from this presentation are organized into these operating pillars. Moving to Way to Live, the homeowner experience. As part of our homeowner-centered operating philosophy, we continue to work in closer partnership with our homeowners. We use data-driven insights to inform prioritization, community action plans, and decision-making. We've introduced consistent communication frameworks and elevated our transparency. Key trends, as you can see on the right, indicate we are on the right path with strengthened trust indicators and the shift to more scalable and positive engagement from homeowners. Overall, customer satisfaction continues to improve from each 6-month survey period, improving from 75.7 as at March 2024 to 78 at September 2025. Moving to Way to Grow, the deferred management fee model for existing homeowners. In July 2025, we changed our deferred management fee to be consistent with the findings of the VCAT ruling handed down on the 7th of July 2025. For new homeowners entering into a residential site agreement with Lifestyle Communities, the deferred management fee is now calculated on the homeowners' purchase price. As previously announced, we will offer all existing homeowners the choice to move to a deferred management fee calculated on purchase price once the appeal of the VCAT decision has been determined irrespective of the outcome. The key advantages of offering the new deferred management fee model to all existing homeowners after the VCAT appeal enables homeowners to be in a position to make a fully informed decision. We anticipate this offer will generate substantial goodwill and sentiment amongst the homeowner community. Any goodwill generated is anticipated to contribute to homeowner satisfaction and harmony and protect and strengthen a strong sales referral rate. This approach assists with our continued strengthening of the Lifestyle Communities brand and reputation. Whilst reducing potential litigation and regulatory risk that may be associated with offering the new deferred management fee model prior to the outcome of the appeal. As a reminder, on the VCAT case, Justice Woodward decided on 2 key elements as follows: one, the Residential Tenancies Act does not prohibit a deferred management fee. Two, the deferred management fee must be an amount capable of being accurately calculated as at the date of entry into the residential site agreement. Justice Woodward consider that because the original deferred management fee clause was calculated as a percentage of the homeowners sale price, which is unknown at the time of entry into the agreement, it is therefore unable to be calculated as an exact amount and therefore, void. This is the key point that is under appeal. That said, to reiterate, we will offer all existing homeowners the choice to move to a deferred management fee calculated on purchase price once the appeal of the VCAT decision has been determined, irrespective of the outcome. As set out in our FY '25 results presentation, if 100% of existing homeowners as at the 30th of June 2025 were to move to this new model, the estimated potential adjustment to the carrying value of the deferred management fee component of investment properties would be up to $117 million. Lifestyle Communities also advises it has received a notice of listing from the Court of Appeal, the Supreme Court of Victoria. The applications for leave to appeal and the appeals, if leave is granted relating to the orders made by President Woodward in VCAT will be heard by the Court of Appeal on Tuesday, 23rd of June 2026. The court will then deliver its decision in due course. So just to repeat, the date for the case to be heard will be on Tuesday, the 23rd of June 2026. The court will then deliver its decision in due course. Moving to Way to Grow, the introduction of choice and expanding our market opportunity. To recap, for new homeowners entering into a residential site agreement with Lifestyle Communities, the management fee is now calculated on the homeowners' purchase price. Further to that, new homeowners can now choose when to pay the management fee upfront or when they sell. Lifestyle Communities aims to have a best-in-market model, providing choice to customers to either free up cash now and pay later or buy with no exit fee. Buyers can choose when to pay their management fee either 10% upfront or up to 20% when they sell. Soft launch took place in December 2025, with full rollout now in market. And to date, we have had 5 upfront management fee contracts signed with the first settlement having already taken place. I will hand over to Angela to talk to our Way to Build and development pipeline. Thanks, Angela. Angela Farbridge-Currie: Thank you, Henry, and good morning, everyone. In relation to our development pipeline, during the period, we completed the settlement of the 4 land sales previously announced as part of our strategy to right size the land bank and carry 4 to 5 years of supply. Following the divestments, we retain a well-balanced portfolio that supports the next phase of the development pipeline as existing projects complete. Our portfolio and pipeline now sits at 5,750 homes with around 4,250 currently occupied and a further 1,500 homes remaining in the pipeline. In the graph to the top right-hand side of this page, you can see that 756 of these homes remain in developing communities and a further 738 homes remain to be developed from the retained land bank. As we deliver the pipeline, we will continue to be market-led in our pricing strategy, which will impact development margins in future periods as we follow the cycle and work through the existing projects. However, as we've previously noted, the ongoing drivers of demand for the sector remain and continue to intensify. We have an aging population in need of downsizing solutions against the backdrop of housing undersupply with additional pressure being felt due to lack of affordability. The delivery of our pipeline and future projects plays an important part in addressing each of these issues. Moving to an update on our debt facility restructure. As we previously announced, we've taken proactive steps to restructure our debt facilities, rightsizing down from $571 million to $375 million. The new facilities became effective in January 2026, and simplify the financing structure, following a reduction in the lending syndicate from 4 to 2 lenders, while providing longer tenor with no ICR covenant until the 30 June 2028 reporting period. The new facilities are provided by PGIM Inc., one of the world's largest pension funds and a provider of long-term debt and one of our existing lenders, National Australia Bank. While the balance sheet has delevered since the May 2025 peak, the transaction provides ongoing funding flexibility as the business navigates the recovery in the Victorian property market. Under the revised facilities, during the ICR relief period, a review event will occur if the number of new home settlements at each reporting period fall below certain thresholds, which for FY '26 is 185. The loan-to-value ratio was also varied down to be less than 55% during the covenant relief period and steps back up to less than 65% from the June 2028 reporting period. Due to the longer tenor of the PGIM facility, the weighted average cost of debt is expected to increase. However, this is expected in part to be offset by a reduction in unutilized facility fees due to the lower facility limits. Our new facilities have been supported by 2 high-quality lenders in NAB and PGIM. We value their support and their commitment and thank the exiting financiers for their support in the Lifestyle communities journey. Henry Ruiz: So moving to our business performance in to new home sales. We observed sales volumes continuing to rebuild throughout the first half with 2 quarters of sequential growth, as you can see on the slide. Our recovery in sales has delivered double-digit year-on-year improvement in the first half with total net sales of $110 million for the period. Pleasingly, the conversion rate from face-to-face appointment to sale has also improved from a historical run rate of approximately 22% to now being circa 26%. We have maintained a continued focus on site activations to drive more prospects to visit and experience the communities for themselves. As we look further ahead to the second half, with short-term economic uncertainty, we have observed some consumers are beginning to show some hesitation in committing to listing their current properties for sale, signaling a softening in market sentiment. Moving to resales performance. Our established resales area has observed the strongest level of resales in recent periods with 98 sales. We play an important role in helping our existing homeowners sell their properties when the time comes for them to sell out of one of our communities. Lifestyle Communities resale approach utilizes a dedicated in-house resales team and a unified approach across both new and established sales. It is an empowered sales process where homeowners are in control of the asking price and the home presentation. Notwithstanding that a great bulk of these 98 sales did not create a deferred management fee revenue event following the VCAT decision, it does bring the next turn of the new management fee into play with new homeowners creating value. The number of homes on market has decreased from 56 at the 30th of June 2025 to 50 at 31st of December 2025, which represents approximately 1.2% of the portfolio, consistent with historical run rates. Moving to our inventory optimization. As we highlighted earlier, one of our key strategic initiatives is to reduce excess inventory levels in line with our optimal range. The team has been laser-focused on selling completed homes with some targeted adjustments to our pricing to meet the market. We have also paced our build rates to match sale order rates to minimize further inventory buildup. Since the 30th of June 2025, we are pleased to report we have realized a circa 30% reduction in unsold inventory. As at the 31st of December 2025, we are carrying 180 unsold completed homes, down from 257 reported in June 2025. As at the 31st of December, there are 9 unsold homes currently under construction compared with the 12 that were under construction in June 2025. In addition to the above, $31.2 million of completed homes are sold and awaiting settlement. Looking ahead to the second half of FY '26, the team will continue to drive this strategic initiative. Moving to our annuity income stream. Ultimately, our strategy is to sustainably grow the annuity income generated from the number of homes under management, and these are indexed at the greater of CPI or 3.5% per annum. For the first half of this financial year, total annuity revenue was $26.7 million, which includes gross rental income of $25.3 million, up 11.9% from the first half of FY '25. This growth does not include deferred management fees related to the VCAT impacted contracts, while the appeal is ongoing. As a reminder, for all new customers, the upfront management fee is 10% of the purchase price or a deferred management fee, which increases at 4% per year capped at 20% of the purchase price. Average tenure of established settlements during the first half of FY '26 was circa 7 years. I will now hand over to Angela, to talk through our financial results. Thanks, Angela. Angela Farbridge-Currie: Thanks, Henry. Turning to the income statement. As Henry noted, we reported an underlying profit -- operating profit after tax of $16.1 million prior to statutory accounting adjustments. The operating profit is down by approximately 28% from the prior half year, impacted by lower new home settlements and development margins, which I will touch on shortly. The operating profit has also been impacted by lower DMF revenue following the VCAT decision and a greater portion of interest costs expensed this half year relating to the land bank, which as per accounting standards are not capitalized until the development works commence. The operating business continues to grow with site rental revenue increasing 11.9% from the prior corresponding period, supported by an increase in homes under management and annual rent increases, which were effective 1 July. Development margins were lower this half year at 11% due to targeted price adjustments to meet the market. However, they are tracking in line with the second half of FY '25. Lower margins are expected to continue for a period of time as we work through the inventory position and recovery of the Victorian property market. With regards to costs, you'll note that there's been an increase in sales and marketing costs from the second half of FY '25, which is driven by the launch of our Way to Live brand campaign. Corporate overheads saw modest growth of 2.5% from the prior corresponding period contained to inflationary levels. We'd like to draw your attention to the statutory adjustments at the bottom of the table, which are comprised of fair value adjustments on investment properties and some final adjustments recognized relating to land sales. We've provided a full reconciliation of these items on Page 34. In relation to fair value adjustments to 31 December, we have recorded an operating fair value uplift attributed to settlements and rent increases of $21.3 million. These are shown as Categories 1 and 2 in the table to the left of the page. In relation to Category 2, uplift at settlement, I would like to highlight that the adjustment of $11.2 million was lower than prior periods due to the reduced DMF values per home of $18,000 versus $64,000 in the prior period following the VCAT decision. The reduced DMF value per home reflects the impact of the VCAT decision on existing contracts and each site rolling on to DMF on entry price at the next turnover event. You will note in Category 4 at the bottom section of the table that there have been fair value adjustments relating to VCAT proceedings of $5.2 million. This represents the fair value of contracts that are not impacted by the VCAT decision and the value has been recognized on the basis that these amounts can be charged. And finally, in Category 5, there's been a further $3.3 million of adjustments relating to land sales, in particular, residential lots at the St. Leonards development, which were contracted for sale in the period. Moving to the balance sheet. As Henry mentioned, the focus on selling through built stock has resulted in a 30% reduction in the number of unsold homes in the system from 30 June and in turn, a reduction in the carrying value of inventories on the balance sheet. We expect further reduction in the carrying value of inventories in the coming period. Staying with assets, both assets and investment properties have reduced following the completion of the land sales, noting that the reduction in investment properties is due to the sale of Ocean Grove 2, but is offset by the fair value increases for the period. These land sales in conjunction with working capital realization flow through to a reduction in borrowings with the debt balance decreasing to $353 million at 31 December and net debt of $323 million once cash balances are taken into account. Debt levels are expected to reduce further over the balance of the financial year as inventory continues to reduce. Turning to the cash flow. Despite the lower level of settlements in the period, we are pleased to report positive operating cash flows of $41.2 million, up from negative $12.9 million in the first half of FY '25. The improvement is a result of a reduction in development expenditure, which reflects both disciplined management of build rates and our developments in progress passing the peak development spend phase. More specifically, in the first half of FY '25, infrastructure works by way of clubhouse builds were ongoing at Phillip Island, Riverfield, Ridgelea and St. Leonards - The Shores in addition to civil works at Ocean Grove 2. In comparison, infrastructure works for this half mainly related to the tail end of Ridgelea and St. Leonards - The Shores Clubhouse builds, which welcomed homeowners in October 2025. The bottom section of the cash flow provides a reconciliation from operating cash flows to statutory cash flows. You can see that $102 million of cash flows were received from the land sales in the period with a flow-through to repayment of borrowings, which totaled $110 million for the period. Looking ahead, we anticipate full year positive operating cash flows as projects continue their capital recovery phase, which is expected to flow through to a further reduction in borrowings. I will now hand back to Henry, who will take you through the outlook for the second half of the year. Henry Ruiz: Thanks, Angela. So we continue to execute in FY '26 against a clear plan with the right team in place. We are focused on getting strong and positioning the business for the next development cycle. Disciplined execution is well underway against our refreshed strategy. Our enhanced marketing approach and refreshed brand position has launched and is already bearing fruit. We are maturing our sales approach to focus on both sides of the market, helping prospects purchase a home in one of our communities and assisting them to sell their existing home efficiently. Our balance sheet deleveraging is well progressed, and we have restructured and rightsized our financing arrangements with longer tenor and flexibility. We continue to sell through built stock and have rightsized our land bank. And while the VCAT decision timing remains unknown, we are focused on our homeowners, continuing to drive satisfaction with more work to be done. Just to recap, our new home settlements pipeline status as at the 16th of February 2026, we have completed 163 new home settlements. We have 202 total contracts on hand and of the 202 contracts on hand, 98 relate to homes that are expected to be available for settlement in FY '26. Of these 98 contracts available for settlement in FY '26, 28 customers have unconditional contracts on their current homes and are booked to settle prior to the 30th of June. 49 customers are actively marketing their own homes for sale and have not firmed up a booking date as yet. And 21 customers have placed deposits and are yet to list their homes for sale. In the second half, shareholders can expect to see further deleveraging of the balance sheet and full year positive operating cash flow as we continue to target inventory reduction and knowing that our communities in progress have passed their peak development spend phase. As we highlighted, communities in progress contain sufficient supply. So no new project launches are planned in this financial year, subject to market conditions. We will continue to be market-led in our development and sales approach. Due to the lag between sales and settlements, lower prior period sales rates will flow through to future settlement numbers. Despite some near-term market headwinds, the fundamental drivers of demand for independent downsizer living options remain strong, including an aging population, decreasing affordability and the availability of suitable properties. As we continue to mature our platform as one of the longest-serving land lease operators in this country, we are well positioned to realize the long-standing potential. Thanks for listening, and I will now hand back to Anita for any questions. Anita Addorisio: We now welcome your questions, and we'll commence by addressing verbal questions before taking written questions. [Operator Instructions] So first up, we do have Murray Connellan from Moelis Australia. Murray Connellan: I was hoping you could give us a little bit more color on sales rates at the moment. It looks like if we -- if we look at the update that you guys put out at your AGM on the 19th of November, there have been, if my math is right, about 32 net sales in the last 3 months. That's obviously, going to be affected by the Christmas period, though, so probably not necessarily reflective of a proper sort of monthly sales rate. Could you just give us a little bit more context around level of inquiry at the moment, how that's changed over the course of the last 6 months and where we are today? And then how -- I guess what that pipeline looks like, please? Henry Ruiz: Sure. Thanks, Murray. Look, I think if you reflect on our typical December-January period, there's obviously seasonality in that, and it tends to be a lower inquiry and sales period. I think what we have seen is that's been magnified somewhat with some of the uncertainty around the economy. Inquiry rates are holding up well, like we are still booking appointments, but people making a decision is really the point of inflection. We're also seeing a slight skew towards properties that are established at slightly lower price points. So that's what we can see at the moment. We're trying to control what we can. And so we're continuing to drive hard around, like we said, targeted price adjustments for stock that is on the ground and continuing with our marketing campaign that we know is bearing fruit, but the consumer confidence piece is something that we have a watch on. Murray Connellan: Then just touching on your pricing strategy as well. You've obviously been in a sort of strategic mindset that is quite strongly focused on reducing that working capital balance, reducing those inventory numbers. Do you think you might be in a position to start being a little bit more margin focused again as we look ahead and I guess, noting that the balance sheet is in much better shape? Or would you still be focused on, I guess, getting those inventory numbers lower and closer to targets and I guess, more of a focus on working capital still rather than margin? Angela Farbridge-Currie: Yes. Thanks, Murray. You are right. We will remain focused as we move forward with that strategic initiative of continuing to focus on a reduction in the inventory balance, and that will continue to see us work on meeting the market with regards to the pricing, to continue with that targeted price adjustment strategy to cycle through that inventory and recover the working capital. Henry Ruiz: Then moving a little bit further out as we start to build -- we're going to be data-driven. So I mean we've got very good insights now around what is selling well in terms of property type configuration and price based on location. So you can imagine that is what we will start to build towards that will improve margin. And the other thing we said strategically is that as the market improves, we will follow the market up. So we will, yes, reflect the market both in its down cycle, but we're looking forward to the up cycle as well. Murray Connellan: Has the way that you build and the -- I guess, the cost inputs changed materially in the last year? Angela Farbridge-Currie: Not materially in the last year. Obviously, the bit of a heat has come out of the construction pricing, but we are probably facing into a cycle where, particularly in Victoria for a period of time, our construction costs might outpace the cost of house growth prices. Anita Addorisio: We have a question from Connor Eldridge. Connor, can you please advise who you represent? Connor Eldridge: It's Connor from Bell Potter here. If I'm right, I'll go ahead with my question. I was just curious around the comment you made around the trading conditions down in Victoria, particularly the comment just around that you're seeing recent signs of softening. I was wondering if you can just expand on that a bit more and if that's, I guess, the rate hike causing that or what in particular are you referencing there? Henry Ruiz: Yes. Look, I think it's a confluence of a number of things and not to overstate that comment, but it's really just around our demographic and prospects coming through are probably -- if you look across the market and people considering selling and if this is the right time for them to sell, are probably the most cautious as a demographic. The second part is it's the one opportunity for them to crystallize almost lifetime of work value. So as they look around and see that properties are staying on market for longer and maybe not achieving the prices that they were hoping for, that just gives them a moment for pause. But like I said, the level of interest in moving into the community stays high, the key consideration for them is, can I unlock enough equity as part of the transaction, which we know, and that's why we've got the deferred management fee model is very attractive to prospects coming into our communities. Connor Eldridge: Yes. Great. Maybe just one more for me. Just, I guess, in light of the current environment and conditions on the ground, is there a, I guess, a metric that we should be thinking about in terms of like your, I guess, target level of completed unsold inventory moving forward? Angela Farbridge-Currie: You'll see in the deck, we talk about our optimal inventory levels and seeking to maintain around 15 to 20 homes per site. Now that will obviously vary depending on the stage of a community's life cycle. So -- and you'll also see based on current inventory levels that there is some further work to go. While there's been good progress made to bring those inventory levels down towards our more optimal level, there is further work to go to reach those targets. Anita Addorisio: Next, we have [ Miriam Prichard ] from UBS on the line. Unknown Analyst: Can you quantify the level of discounting that is currently being offered to clear inventory to optimal levels? Angela Farbridge-Currie: Yes. Thanks, Miriam. Ultimately, the level of discounting will vary on a community-by-community basis. And at the moment to date, there has been -- and you'll also -- if you look at the movement in our development margins, you can get a feel for potentially the size of some of those discounts. It does vary, but ultimately, on average, stays within around the single-digit percentages. Unknown Analyst: Perfect. And just on sales and marketing intensity, where do you see that normalizing over time? Angela Farbridge-Currie: So we did take steps. You'll note that our sales and marketing costs are down from 2024 when I think they are around $22 million, and that came down to around $15 million in FY '25, and we are ultimately traveling broadly in line with that this financial year-to-date, noting that there has been some increase in spend from the prior half because of the launch of our brand refresh strategy as well. And we do -- while we don't expect a material change in the second half, probably some slightly lower spend given that spending was more skewed to the first half. Unknown Analyst: Just last one for me. Thanks for providing your customer satisfaction score. How would that be indexing relative to peers? Henry Ruiz: That's a really good question. It's actually very hard to get comparative stats across the peer set. The one thing I would say is our referral rate is a very important part of our sales process, both direct referral as well as a lot of our homeowners almost act like salespeople when people walk through the door and experience the communities. And we typically have spoken about that sitting around that 40% to 50% range. So we can only talk to our data, that would be a question that you would have to ask them. Anita Addorisio: We now have a written question that has come in from [ Carl Tan ]. In consulting existing homeowners, have homeowners ever raised the option of abolishing the DMF altogether? Henry Ruiz: Thank you for the question. Look, all of our homeowners on the way in understand our business model. And one of the key attractive elements of it is their ability to free up more cash as they enter into the community. So it's less about what our existing homeowners have raised. I think what we have learned is that there are some prospects that were discounting us as a potential destination because they were not in favor of having a deferred management fee model. So like we outlined, we have decided to offer choice. And so now we offer people that want to release more cash on their way into the community or some people want to take that off the table for the benefit of their children or other reasons, or they're just in a financial position where that helps them, whether it be with their pension or other financial needs. So really, the key message is we're now catered for both, and we think that expands our market opportunity and attractiveness. Angela Farbridge-Currie: Thank you, Henry. We actually have no further questions at this point in time, either through the live or the Q&A box. So based on that, ladies and gentlemen, we have reached the end of this Q&A session, which brings us to the conclusion of this conference call. We thank you for your attendance today and invite you to contact the company via the Investor Center available on the company's website should you have any questions not addressed here today. Thank you all so much. The webinar will now end.