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Operator: Thank you for standing by, and welcome to the Medibank Half Year Results 2026. [Operator Instructions] I would now like to hand the conference over to Mr. David Koczkar, Chief Executive Officer. Please go ahead. David Koczkar: Thanks, and good morning, everyone. Thanks for joining us today. I'm coming to you from Naarm, the home of the Wurundjeri Woi-wurrung people, and I pay my respects to their Elders, past, present and emerging. I'm joined by our executive leadership team, including our CFO, Mark Rogers. This morning, we'll talk to Medibank's results for half year '26. So first to the highlights on Slide 5. This is another good result for the Medibank Group. Our performance reflects improving customer engagement and our progress in driving the health transition. We've delivered on our growth commitments, with improved momentum in our health insurance business and strong growth in Medibank Health. Medibank Health's continued positive performance is enabling us to reinvest with confidence to support its future growth. And we recently took our next important step in health, finalizing our acquisition of Better Medical, establishing one of the largest primary care networks in the country. So let's turn to Slide 6 for customer highlights. As the cost of living remains challenging for many, we've continued to provide more value to our 4.3 million customers. We saved our customers around $105 million in out-of-pocket costs, another $3.3 million by using our no gap network and $23 million in rewards was earned by Live Better members. And importantly, we're seeing our Medibank and ahm customers accessing more of the health services we deliver through Medibank Health. 55% of Medibank resident policyholders are now engaged with our health and well-being services, which reflects our differentiation, but also how we're able to bring the best of Medibank Group to support our customers' health. Amplar Health delivered 70,000 virtual health interactions to Medibank customers and saved 100,000 hospital bed days through its home care services. And as we meet more health needs of more customers, customer relationships strengthen, which further improves our retention performance and supports our growth in health. So now to Slide 7, which shows an overview of our key financial outcomes. Look, I won't go through all of them, but a particular highlight for me is the resident policyholder growth of 1.9%, with growth in the last half, more than double that of last year, including improving momentum in the Medibank brand. And while we've seen slightly lower policyholder growth rates in our nonresident business for a few years ago, our performance remains better than market, especially in segments where we are focusing our efforts to grow. And it's very pleasing to see Medibank Health having another very strong half of growth. In line with our healthy capital position, we are delivering to shareholders an interim fully franked ordinary dividend of $0.083 per share. So now to Slide 8. As we progress our strategy, we continue to take important steps to deliver our 2030 aspirations. Our improving experiences are really resonating with our customers, patients and our people as we continue localizing services and empowering our teams to better support our customers. We've continued to build momentum in our health insurance business, growing both brands and expanding in our priority segments, including families, mid-tier, covers and those new to the industry. This includes a 67% increase in corporate joins year-on-year and a record number of nonresident workers now as customers. Key to our strategy is to change the way people experience health and wellbeing, like our expansion of our 24/7 Amplar Health Online Doctor service to our resident customers and our Detox at Home program in the community. And having now established a national network of 168 clinics, we've continued to prioritize our expansion in primary care, investing in the experience of GPs to support early intervention and multichannel delivery. And we're improving how we work, embedding AI tools and processes throughout our business. And our adoption is accelerating. For example, in 2025, we had twice the rate of adoption of AI that we had in '24. And next year, it might be more than 5x that amount. We're able to drive value from this space due to our strong customer relationships, our data and our capabilities. And we continue to strengthen our foundations, maturing our risk culture and approach to support our people's decision-making, enhancing security and our technology platforms and improving productivity. Also we can continue to deliver better outcomes for our customers. So now over to Slide 9. We're very conscious that many consumers are doing it tough, including with the recent interest rate increase and recently announced increases to premiums. However, despite the challenging environment, the resident health insurance market remains buoyant, including continued strong growth in younger customers choosing to go private. Recent research showed a continued increase in the number of people who see health insurance as offering value for money. And with increased waiting list for elective surgery in the public system and the benefits of adult dependent reform to continue, we expect resident growth rates to remain well above pre-pandemic levels. Consumers continue to seek greater value and are switching brands and products together, including choosing lower levels of cover. With this changing mix and more people preferring treatment outside traditional settings, growth in private hospital claims utilization is decreasing. And while some of the unsustainable commercial behavior from other funds has eased, pockets of heightened competition remain, including aggregator practices that could drive up the cost of insurance for consumers. In response to all this, our disciplined approach to growth and differentiation across our 2 brands remains unchanged. We are driving momentum by growing in our target segments, prioritizing growth in direct channels and focusing on retention, which for us has improved by 21 basis points year-on-year to September despite industry lapse rates actually going up by 70 basis points. We're continuing to work constructively with hospitals, shaping partnership agreements to incentivize shared outcomes to drive the health transition, which pleasingly is continuing to gain momentum. In FY '25, we gave hospitals around $37 million to support this shift. And in the first half of this financial year, we've already provided around $20 million. The nonresident market has adjusted to recent migration reforms with worker numbers increasing. Student numbers have stabilized, but we expect the market to continue to grow. We're also seeing more students and workers become residents. Transitions, we are well placed to support through our life cycle management investments. And with the strength of the health and well-being support we offer and the extensive university partnerships we have, we remain an insurer of choice in the student market. Now to Slide 10. Australia has never spent more on health care, and yet in some parts, the system is failing the community. As productivity in health care remains sluggish, and health care costs continue to outpace inflation, the call to action for reform could not be more urgent. Out-of-pocket costs are rising, patients are waiting longer for care, clinicians are under pressure and avoidable hospitalizations are around 30% above the OECD average. Not only does this impact the quality of life of millions of people, the recent data also shows it drained around $7.7 billion from the system. Governments, operators, clinicians and patients know the system is under strain. But despite the shared understanding, the pace of reform is far too slow. So we will continue to advocate the change because it is in the national interest. But efficacy alone won't fix a system that is deteriorating faster than many decision makers are responding. International experience shows us that when this happens, the private sector must lead. And in the absence of meaningful system-wide reform, as we have done for several years, we will continue to take the lead in driving the health transition that is needed to sustain our system. And in the last few months, pleasingly, others are recognizing the needs of this action, too. For example, St. Vincent is committed to delivering half its care in homes or through virtual and digital platforms by 2030. Our work with the South Australian government has seen their continued commitment to expand care options for public patients outside traditional hospital settings. And we are seeing many others now embracing the change that's needed. And in the private system, the federal government is supporting this approach given their ask of the sector to design, lead and implement the changes needed through the CEO Forum. So we will keep working with hospitals, health professionals, corporates and other funders to accelerate the change needed. Investing in well-being, in prevention, in primary care and accelerating the shift to virtual community and home-based treatment settings. And as you know, this is not new for us. It's out of this desire to change the system to keep it one of the best in the world, but we are growing our health business. And now Slide 11. Primary care is one of the most critical areas that need change. As the front door to Australia's health system, it needs to adapt to the changing health needs of the country. Patients are waiting longer, paying more and too often entering the system once health problems are already entrenched. These outcomes are the result of a traditional model designed around reactive, episodic care rather than proactive, connected and comprehensive support. The sector is just not set up to support the future health needs of the community. Through our majority interest in Myhealth and recent acquisition of Better Medical, combined with our existing Amplar Health GP nursing and our health offerings, we now bring together one of the largest primary care networks in the country. And working with our partners, we provide the tools, the technology and the time, clinicians need to focus on prevention, reduce low-value activities and better support their patients. We are investing to grow virtual channels to improve access, to support better continuity care and to meet the changing expectations and preferences of patients. And these investments matter for patients and they matter for clinicians. And as we have seen in other countries around the world, a focus on proactive and planned care supported by technology and an integrated care team is a more sustainable business model and one that can better address the challenges of the health system under strain. I'll now turn to Mark to ask him to run through the details of the results. Mark Rogers: Thanks, Dave. Good morning, everyone. This result demonstrates how we're balancing resident policyholder growth and gross margin. It shows continued earnings diversification and includes reinvestment for growth. The key financial highlights include group operating profit up 6% to $381.7 million, with solid growth in resident health insurance an important contribution from nonresident and continued strong momentum in Medibank Health. Investment income was impacted by the lower RBA cash rate and the increase in other income and expenses includes higher M&A costs. Nonrecurring cyber costs were lower, and we expect FY '26 costs to be around $35 million and that the IT security program will largely be embedded. And underlying EPS, which normalizes investment returns was $0.108 per share, which is in line with last year. Slide 14 covers the health insurance results. Despite the challenging economic environment, the business remained resilient, we continue to see benefits from our disciplined approach to running our business, including lower hospital utilization growth and an improved risk equalization outcome. We are also seeing policyholder growth skewed to lower tier products with impacts to revenue and claims largely offsetting. Gross profit was 4.4% higher with 4.3% revenue growth and gross margin stable at 16.2%. Operating profit increased 3.5% to $361.5 million and the operating margin remains at 8.5%. Our expenses were up 5.4% to $329.4 million and the expense ratio was 10 basis points higher at 7.7%. The increase in operating expenses reflects inflation, volume impacts and ongoing investment, partially offset by $3 million of productivity savings. And nonresident commissions were up in line with premium increases with the resident commissions broadly in line with last year despite higher ahm aggregator joins. We expect expenses in FY '26 of between $690 million and $695 million, including $10 million of productivity savings. We continue to target a stable to modestly improving expense ratio, but balances with investing in growth where this makes commercial sense. Moving to Slide 15. The resident health insurance market remains buoyant, with policy shareholder growth in the 12 months to 31 December is expected to be slightly lower than the 2.1% growth we saw in the 12 months to 30 September. Cost of living pressures continue to impact the industry, with switching rates remaining elevated, customer growth skewed to lower tier products and aggregators increasing their share of industry joins. Whilst the unsustainable competitive environment is moderating, pockets of heightened competition remain. Pleasingly, we're seeing increasing momentum in the business. Over the last 12 months, policyholder numbers increased 1.9% with Medibank and ahm growing 0.8% and 4.9%, respectively. This includes 0.9% growth in the last 6 months, which is more than double the growth in the prior period. The acquisition rate of 5.6% is 40 basis points higher, with improvement in the Medibank brand from investing in differentiation and an enhanced digital experience in ahm. Despite the higher industry switching rate, retention improved 10 basis points with the improvement in ahm particularly important. Key areas of focus for the remainder of FY '26 include further improving retention, deepening brand differentiation and increasing focus on acquisition in priority segments and channels. Now turning to Slide 16. Resident claims expense increased at 4.9%, and risk equalization provided a 50 basis point benefit to net claims growth, with some of this benefit expected to be timing related. Resident claims growth per policy unit increased 20 basis points to 2.5%, with the 310 basis point increase in extras, partially offset by 120 basis point decrease in hospital. In hospital, the increase in inflation reflects private hospital indexation investment in product benefits and the increase in New South Wales private room charges. The negative hospital utilization growth reflects prior period claims favorability due to COVID impacts and customer growth due to lower tier products. And the increase in extras includes the ahm limit rollover and utilization and inflation increasing following a period of subdued demand due to economic and COVID impacts. And in the second half, we expect private hospital indexation to remain elevated and negative hospital utilization growth to continue. Whilst the risk equalization timing benefit will unwind, we expect this to be largely offset by higher New South Wales private room charges now being fully embedded. Slide 17 details health insurance performance, which shows continued growth in both resident and nonresident. In resident, our disciplined approach to growth resulted in gross margin being maintained at 15.5% with revenue and claims growth per policy unit of 2.5%. Growth in revenue per policy unit was down 30 basis points, with a high average premium increase offset by higher revenue mix impacts. The revenue mix impact of 150 basis points is similar to 2H '25 and reflects increased investment in Live Better, customer growth skewed to lower tier products and strong growth in ahm policies. And subject to no material change in the economic environment, we expect revenue mix impact for the full year to be better than 1H '26. Solid nonresident revenue growth has continued with average policy units 1.4% higher and revenue per policy increasing 3.1%. Policy unit growth was lower than in the prior period, with lower student visa approvals and modestly higher lapse. However, we expect the recently announced increased student visa approvals and new opportunities in the workers segment support acquisition into the second half. Gross profit increased 6.9% to $55.6 million, and gross margin was up 80 basis points to 35.6%, with an improved worker margin, partially offset by tenure impacts on student margin. Nonresident remains an attractive market and in the second half, we'll build on emerging opportunities in the student and worker segments and continue to invest and differentiate our offering to grow market share. Turning to Slide 18. Medibank Health segment profit increased 28.5% to $48.3 million and operating margin was up 10 basis points to 17.7%. Revenue grew 27.5% with the increase in community and acute, reflecting strong volume growth and increased ownership of Amplar Health Home Hospital and good strong customer growth in wellbeing. Gross profit was up 21.6%, with the reduction in gross margin due to additional investment in Live Better and mix impacts, partially offset by efficiency benefits in community and acute. And whilst expenses increased with growing scale, the expense ratio was 250 basis points lower with improvement across all 3 segments. We continue to see strong organic growth potential in the business with focus areas for the remainder of FY '26, including meeting more health needs at more customers, scaling existing services with a broader set of payers and realizing synergy benefits across our primary care network. We aim to augment this organic growth with further M&A that scales and expand geographic coverage in primary care and adds capability in well-being and virtual care. Now on Slide 19, we've shown a more granular breakdown with the financial results for our 3 Medibank Health segments and the key customer metrics driving performance. In the well-being segment, Live Better members increased 13.6% following investment in the proposition and reward points give back offer. In primary care, consultations increased by 2.8%, with an increased proportion of these being undertaken virtually. And in community and acute home health admissions were supported by strong volume growth in publicly funded programs and increased capacity in our transition care service. Moving to Slide 20. Investment income was down $19.6 million, with a $5.7 million and $5.8 million reduction in the growth and defensive portfolios, respectively. The decrease in the growth portfolio reflects lower income from all asset classes other than property and the lower RBA cash rate was a driver of the reduction in the defensive portfolio. Other investment income was also lower, following the payment of the final customer giveback in September last year. We expect further impact in the second half with lower cash holdings due to funding the Better Medical acquisition, we'll adjust credit, duration, and liquidity settings in the defensive portfolio to help offset this impact. And of course, the recent increase in the RBA cash rate will also be helpful. With lower earnings on cash, underlying net investment income was down $11 million. The underlying net investment return decreased 26 basis points to 2.74%. And the annualized spread to the average RBA cash rate increased to 184 basis points. Moving to Slide 21. The health insurance business continues to be well capitalized. Capital is at 1.9x PCA and the capital ratio is 13.8% of premium revenue. We continue to hold additional capital to offset the $250 million APRA supervisory adjustment, and this is why the capital ratio is above the target range of 10% to 12%. The Better Medical acquisition was the main driver of the change in the capital position in this period. The increase in Medibank Health capital employed includes $163.5 million cost of this acquisition. The acquisition was funded from our unallocated capital, with this partially offset by strong capital generation. We are also well placed to fund further inorganic growth. The unallocated capital position supports our FY '30 Medibank Health earnings aspiration of at least $200 million. And we have capacity to raise Tier 2 debt to support growth above this level if further attractive opportunities arise. And given the strong capital position, the Board has declared an interim dividend of $0.083 per share, which is a 6.4% increase and 76.8% payout of underlying net profit after tax. And to finish, a few comments on our outlook for FY '26. Our resident health insurance outlook is unchanged. We aim to grow resident market share in a disciplined way, including further growth in the Medibank brand. We continue to expect growth in resident claims per policy unit of between 2.6% and 2.9%, and expected our proactive approach to claims management will differentiate us from the rest of the industry. Our nonresident outlook is also unchanged. And finally, we've updated our Medibank Health outlook. We expect FY '26 organic operating profit growth to be similar to 1H '26 plus an additional circa $6 million contribution from Better Medical in the second half. And our M&A pipeline remains strong, and we have both the appetite and financial capacity to pursue further strategic opportunities. I'll pass back to David to make some closing remarks. David Koczkar: Thanks, Mark. Now over to Slide 24, just for us to wrap up. We're a resilient company, and we're a growing company with strong customer relationships, positive momentum and a clear vision for the future. We remain focused on the needs of our customers and patients. This shapes our strategy and drives our performance. As we continue to strengthen our foundations and deliver greater value, choice and control in health. We are seeing this reflected in our growing health insurance momentum and Medibank Health going from strength to strength. Despite the economic challenges, the health insurance market remains buoyant. And through our work across both private and public systems, investing in prevention and delivering more innovative care models, we are driving the health transition. While this change is emerging more broadly, more must be done to accelerate it. So we will continue to champion this and work with governments to advocate for the reform needed to keep health care in Australia affordable, accessible and among the world's best. We are on track to meet our FY '26 outlook and continue delivering value for customers and shareholders. And finally, our achievements are only possible because of the amazing people at Medibank. And I thank them for their ongoing commitment to creating the best health and wellbeing for Australia. So now it's -- over to you for any questions you may have. Operator: [Operator Instructions] Your first question today comes from Nigel Pittaway from Citi. Nigel Pittaway: I just wanted to ask about sort of what you expect for claims inflation maybe a bit beyond second half. I mean, obviously, at face value, the rate increase that was announced this week does seem quite a lot ahead of your sort of 2.6% to 2.9%, you're guiding to in the shorter term. So I was just wondering if we could get maybe a little bit more color as to what was the basis behind that level of rate increase and whether or not that is actually related to what you expect for claims moving beyond this year? Mark Rogers: Yes. Thanks for your question, Nigel. At 10,000 feet view in terms of '26 versus '27 are probably 2 major factors to call out. The first one is we know we'll have a COVID tailwind this period, reflecting the fact that the FY '25 claims were $74.8 million below expectations. So we've had a utilization tailwind in this year. That's worth about 100 basis points on claims. We also know New South Wales private room rate will cost us 20 basis points this year, and that will then be fully embedded in our claims line. So the net of those 2 impacts, Nigel, is about 80 basis points, and that will be the single biggest difference between '27 and '26. Nigel Pittaway: And then I mean, obviously, you're saying the revenue mix, as we're now meant to call it, will improve in second half. I mean is that sort of your ongoing assumption beyond that as well? Or... Mark Rogers: So Nigel, the revenue mix -- the trend in revenue mix is going to depend on how fast we're growing and where we see growth. So provided we don't see any further deterioration in the economic environment or our growth rate doesn't increase significantly and the mix of that growth either, that's a reasonable assumption looking forward. Nigel Pittaway: And then maybe just -- I mean, maybe further to that, I mean, obviously, you've been prepared in this period to pick up some, as you described, the lower-tier products. And I will see most of your growth is still coming through ahm. So I mean, is that sort of what we would expect moving forward? I mean you are still saying you want to grow the Medibank brand, but it seems although that's still reasonably tough to do in the sort of areas that you desire to grow in. Can you make just a few comments about how you're feeling about that sort of revenue growth mix moving forward. Mark Rogers: We actually had a slightly more positive on the policyholder growth trajectory for the half, Nigel, with Medibank growing at 80 basis points, which is well on what we've seen in the prior period. In fact, Nigel, for the full year, I'd probably expect the Medibank growth rate to be slightly higher than the half and ahm to be slightly lower. So actually, we're really happy with the Medibank trajectory. David Koczkar: Yes. I think the notion that Medibank or ahm plays in a certain tiering is not quite correct, both Medibank and ahm support a very, very different set of customers who choose -- yes, slightly different mixes. But in the current environment, people are looking for more value and particularly looking for more value in their health, and that's part and parcel of the Medibank proposition. So that's really what's driving the growth and in particular, our focus on our target segments, which are also growing and we are growing in like corporates like families, those new to the industry. As we know, the second half is always a bigger, new-to-industry in the first half. So actually, with the core brand metrics of Medibank, very strong, I think despite the economic conditions, I think the Medibank brand momentum, we feel very confident about continuing. Nigel Pittaway: And then maybe just finally, I mean, obviously, the government in its sort of PHI premium rate increase announcement is still talking about this hospital benefits ratio climbing to sort of closer to 90%. I mean are you expecting to have to do anything moving forward to sort of encourage that development? David Koczkar: There's a lot of talk about the ratio. We -- our benefit -- our hospital benefit ratio is higher than the industry average and is likely to slightly improve. But look, I think -- the ratio is just -- is one way of looking at health. Actually, the real question we should be asking is the absolute cost of delivering health to the 14-or-so million people that have private health insurance. We still have to ask ourselves the question, why is it 30% more expensive to have a knee replacement in the private system than the public system? Why is it twice as expensive in Australia to have a hip replacement than in Northern Europe? Why is the pacemaker 4x the price in the private system than in the public system? I think they are the questions that probably occupy more of our minds as we think about sustainability system than the ratio itself. Nigel Pittaway: Yes. I mean, obviously, you've made those points for some time and the government is still focusing on it, but yes. Operator: Your next question comes from Julian Braganza from Goldman Sachs. Julian Braganza: Just a further question on downgrading. I just want to be super clear on the composition of the number. Just how material is the investment in Live Better versus growth in lower-tier products, just in that 1.5%? And also, what gives you confidence that, that downgrading will be better in the second half of '26, just given the higher premium rate increase that's coming through? So I just want to understand that a little bit better. Mark Rogers: Julian, I might just rephrase it as revenue mix because it is important because there are 3 components that make up revenue mix. The first component is what you call downgrading, which is existing customers changing the cover. The second component is where we see policyholder growth. So the mix difference between customers that leave us and customers that join us. And the third component is where we invest. And that investment could be in Live Better, it could be in discounts, it could be in offers. If I point you to the second half of '25 and the movement in revenue mix in the second half, you'll see that coincides with us increasing our policyholder growth number, and that was the major driver of that movement. If you go to the first half of '26, revenue mix impact was 150 basis points, and it was 130 in the second half of '25. The majority of that increase was as a result of Live Better investment in offers. So you can see the bigger impact was in the second half and that related to where we saw growth and the less significant impact was relating to investment in Live Better and Offers. Why do we get comfortable? So the investment we've made is now fully embedded in our revenue line. And so unless we look to invest more to grow even more, it's unlikely that will repeat. And the impact we saw on the sales and lapse mix in the second half, again, if we don't increase our growth rate significantly or the market doesn't shift significantly, we're not expecting that number to deteriorate significantly. I would call out, it's important you can't just look at revenue mix. You've got to look at revenue mix and claims mix because those lower-tier products where we're seeing growth, they come with a lower revenue per policy and lower claims per policy. So really, going forward, it's about the jaws in the business, Julian, not just the revenue mix. Julian Braganza: That's super clear. And then just to unpack that hospital inflation number of 4.6%. Just to be super clear, just what component of that is investment in product benefits. Is it the flip of the benefit on utilization from the claims favorability? Or is it less than that? So I just want to be very clear on what is that underlying inflation number ex the product benefits that you're making -- investments you're making. Mark Rogers: I'd probably direct you to the New South Wales private room rate cost because that had a 50 basis point inflation impact in that 4.6%, Julian. The investment and product benefits was less than that. Investment and product benefits is ongoing. Obviously, we can increase it or decrease it given where the claims trajectory is, but the New South Wales private room rate impact was the single biggest uplift that we saw across the 12 months. Julian Braganza: That's clear. And then just the last question on hospital utilization. Even after adjusting from the claims favorability as you sort of flagged utilization is still quite benign and negative. Just want to be clear what's driving that? And how sustainable given it's consistently surprised quite positively. Mark Rogers: Thanks for calling that out, Julian, because it's a really important feature of the result. Utilization growth was 2.8% negative. And you rightfully called out that around half of that is -- reflects the COVID tailwind that we had from the prior year, which is a one-off, but the remaining 50%. So almost 1.4% contraction in utilization is ongoing. And that's linked to a couple of factors in addition to the skew to policyholder growth in lower-tier products. We're also seeing the benefit of our risk selection. So where we grow and how we grow, through which channel at which time I think we're getting favorable selection bias in our claims, and we're seeing that come through in risk equalization. And I wouldn't underestimate the impact that hospital partnership agreements are having. So we're paying higher indexation in exchange for where we've got lower utilization growth with our partners, and that's contributing. So I wouldn't expect anything other than the COVID one-off impact to be significantly varied going into '27. Operator: Your next question comes from Andrei Stadnik from Morgan Stanley. Andrei Stadnik: Can I ask around the comment around resident commissions remaining in line despite the increasing aggregator presence. Can you explain a little bit about how you manage to do that? Mark Rogers: So the commission depend on which aggregator that you're selling through, and it also is dependent on the premium per policy. So as we've seen growth due to lower tier products in bronze and silver, the revenue that we get for that policy is lower and the commission we pay as a consequence is lower, Andrei. Andrei Stadnik: Slightly dry question. But just in terms of the tax rate, should that normalize going forward towards 30%? Mark Rogers: That's not a dry question. I'll leave for questions on tax, Andrei. So thank you. Probably 2 components on the tax rate this half. I think one of those we've mentioned before, so the losses from our joint venture hospitals are actually after tax losses, so we don't get a tax shield on that. And then a number of the M&A expenses are nontax deductible. So you saw an uplift in M&A expenses this year in the first half. And as a consequence of that, that's at a higher nondeductible component expenses. Operator: Your next question comes from Siddharth Parameswaran from JPMorgan. Siddharth Parameswaran: A few questions, if I can. Firstly, Mark, I just wanted to be clear on where you're expecting that revenue mix downgrading figures to come in the second half. I mean you say it should be lower. But the first half was materially higher than my assumption, and I presume consensus as well, whilst the claims inflation was broadly in line with what you had. I was just keen if you could help us understand both those 2 metrics, the claims inflation per policy where you've held the guidance, first half is slightly better than that guidance range. Where do you think you'll end up for the second half and for the full year within that range? And also just the -- same for the revenue mix downgrading impact because it makes quite a difference to the trajectory of margins. Mark Rogers: Yes, sure. I probably won't look to narrow that 2.6% to 2.9% guidance for you, Sid. But what I'd say is where we land in the range will depend on 2 factors from a claims perspective. Firstly, the risk equalization timing benefit that we saw in the first half. How much of that unwinds into the second half. And then secondly, where we see policyholder growth. So if we see policyholder growth toward -- in the higher-tier products, you'd expect claims inflation to be towards the top end of the range and then your revenue mix impact would be lower. And if you see it at the lower -- if you see growth in the lower-tier products and you expect claims to be lower and revenue mix impact to be higher. What we're thinking is provided we don't see any deterioration in revenue mix impacts, which is not our expectation. A flat jaws outcome in the business is very plausible. And to the extent there's any variation in that during the course of the second half, we obviously have opportunity to reinvest if claims are lower than we expect or other contingency options if claims are higher than what we expect. Siddharth Parameswaran: Yes. Sorry. So to be clear, flat jaws is what you're saying is a reasonable possibility in terms of the second half versus the first half? Mark Rogers: Very plausible outcome, Sid. Siddharth Parameswaran: Yes. For the gross margin because there's a step-up in expenses, right? So just want to be clear what we're seeing. Mark Rogers: I didn't make any comment on expenses, but I'm happy to. So... Siddharth Parameswaran: No. Yes. But I mean your guidance second -- yes, I just want to be clear that the jaws comment was on gross margin. Mark Rogers: Yes. The jaws is on revenue claims per policy. Maybe a few comments on expenses movement in a range of $690 million to $695 million. The uncertainty within that range is where nonresident policyholder growth lands and therefore, the commissions we paid. So if it remains at the top end of that range, you'd expect stronger, particularly student joints during the course of the second half and if you at the lower end, then probably a lower growth rate. And the uncertainty is how does the opportunity on visa approval increases actually land in the portfolio in the second half. Siddharth Parameswaran: Great. Okay. Just a second question, just on the claims inflation. I just wanted to make sure, were there any contributions from reserve adjustments or anything from the past? And also, if you can just comment on just the risk equalization benefit and what you are expecting -- what happened in the period, what you're expecting going forward? Mark Rogers: There was a modest release out of reserve for both resident and nonresidents. Some of that's actually been reinvested into the business during the course of the year. So I think outside of the COVID benefit of $43.6 million. The result is effectively a cash claims result. So I'd just add that $43.6 million back to your claims trajectory and that should give you a pretty good view of the cash result. Siddharth Parameswaran: Wasn't there a $19 million reserve release, I mean I thought there was... Mark Rogers: Yes, that's what I just meant. Yes, that's what I just called out. That was spread across resident and nonresident, but we've reinvested some of that during the course of the year. We've also struck our 31 December claims provision. Siddharth Parameswaran: So that will impact second half versus first half on claims inflation. You've reinvested so that will... Mark Rogers: We reinvested during the half. So Siddharth, I've looked through that. And when you consider the accounting versus the cash, you should be focusing on the $43.6 million COVID benefit from the prior period is the difference between cash and accounting. Did you want to comment on -- I think you asked on risk equalization. Siddharth Parameswaran: Yes, yes, yes. Thanks. Mark Rogers: Sure. So really, that's linked to the Medibank brand rather than ahm. What we're seeing is a better net recovery for Medibank. So Medibank received out of the pool. Ahm pays into the pool. So what we're seeing is some of our younger and higher claiming customers being more prone to lapse. So we end up saving the risk equalization charge that accrues to every policyholder, but those customers aren't -- the claims aren't typically risk equalizable because of their age. And so that's driving that positive skew for the Medibank recovery rate. And that's a trend we've seen -- we saw it in the second half of last year and to a lesser extent, the first half of last year as well. Siddharth Parameswaran: And just a final question for me. So if I take your 5.1% rate increase that you've got, and if I'm to look forward, I mean, you're basically saying that you don't think the downgrading should get any worse. And what I'm interpreting as well is that the inflation shouldn't get any worse either. So if I just take that 5.1% subtract let's say, 1.5%. I mean are you basically saying you can tolerate inflation per policy of -- what is that? So yes, 3.5%s that you saying to hold margins the same? Mark Rogers: That's probably not a bad way to look at it, Siddharth. I guess the way I think about it is, we had 2.5% claims growth. We know that the COVID benefit is about 1%. And so that's the difference between cash and accounting is 1%. So that's a cash claims growth. So everything else being which is obviously provided your revenue mix impact is not above 150 basis points, then again, a stable gross margin outcome is very plausible. I think the big question is where do you land in the range for FY '26 because obviously, that sets a foundation for '27. Siddharth Parameswaran: Got it. So yes, COVID benefit plus the -- if the inflation holds at that level, you can hold gross margins, but... Operator: Your next question comes from Andrew Goodsall from MST Marquee. Dan Hurren: Sorry, it's Dan Hurren. Andrew has just been pulled away on another call. Look, I ask questions. I guess it's going back to Nigel's question and the Health Minister comments around the premium increase. And I know you talked about the cost of -- the unit cost of care. But I mean, specifically, the minister wants to stop hospital closures as we understand it. So what do you think is actually -- what can you do to actually keep the minister happy there? David Koczkar: Well, I think the statement of expectations that was published last year was very helpful to guide the market in terms of setting, their settings to meet those expectations. I think we were very happy with that clarity. In fact, I think we met all of those expectations in getting our premium proposal approved. I think through the CEO Forum, which I'm an active member of, we are talking about how do we set up a sustainable system where the system can thrive. What's very important that principle in those discussions is that it's not about any single player, it's about the system. We also know that the shift of care from acute hospitals to more fit-for-purpose settings, both short day in the community, we are far behind other countries and a lot of focus is on how do we encourage that health transition. There's a recognition that, that means that hospitals will need to change. There will need to be some either reconfigurations of current assets or growth in other regions or sectors. A part of our partnership approach that we have led the industry on is to share and incentivize that shift, which we've talked about today with an increasing number of hospitals participating in those partnership agreements. It covers about 80-plus percent of our benefit outlays, and it's an increasing investment that we're making to make that shift. So that was part of the expectations set, and that's what we're delivering against, and that's really the conversations at the CEO Forum. I mean the fact is, right now, we have too many beds in the system in the wrong spot and not enough in some spots. Utilization is too low and the Australian consumer shouldn't be paying for that. So everyone is completely aware that -- this is why it's called a transition. It's not going to happen in one day. It needs to happen more quickly. But I think, as I said before, there are many in the system who have brought fresh thinking and a more longer-term view that are saying and recognizing this change happening and now they're changing their business models to deliver against it. Dan Hurren: David, that's helpful. Can I just ask one follow-up. Sorry, one different question, in fact. Looking at the trend in aggregators, not just in your results today, but right across the industry. And your comment that you can grow the Medibank brand in the second half. Could you just talk about the relative impact of aggregators across your 2 brands? Does it -- is it skewed to one or the other? David Koczkar: Yes, very much so because we don't have Medibank on the aggregator. So it's 100% only applicable to the ahm brand. Medibank, we've been very conscious to focus growth on our direct channels. And in fact, as a total group around 70%, 75% of our joins our -- for those joining are direct. So that's a real strength of ours. And we are continually investing in both retention. We've shown today our improving retention rates versus the market that is deteriorating. So that's the best way to grow is to keep the customers you've got. It's 1/3 cheaper to do that than acquiring in the open market. And the second is to work selectively where it makes sense to grow via aggregators. Aggregators share in the market has slightly increased. So we're always thinking about how we grow in a disciplined way. We'll always work with aggregators, but not where their terms and conditions are unsustainable for the long term for both us and the system. Dan Hurren: So Medibank is more about retention in that second half. Your comments are explained more by retention and growth. David Koczkar: So I mean, Medibank has the best retention rate of the major brands and one of the leading retention rates in the market. But Medibank is also about growing in the segments we've talked about today, those new to the industry, particularly families and particularly corporate. I think I shared our very strong momentum, for example, in the corporate market with a [ 6% to 7% ] growth year-on-year in join. So plenty of headroom for growth for Medibank, but the retention as a company is a very important source of growth that we pay much more attention to perhaps than others. Operator: Your next question comes from Freya Kong from Bank of America. Your next question is from Vanessa Thomson from Jefferies. Vanessa Thomson: I wanted to ask a little bit more about the hospital situation as well. I think you called out that $37 million was paid to hospitals in addition last year and $20 million in the first half, if I heard that correctly. I just wondered what your expectations were for FY '26. David Koczkar: Yes. So just to clarify those comments, and I might maybe hand over to Milosh to also explain sort of how our partnership agreements are working. But we had -- we have 3 elements to our partnership agreements. There's the base indexation. There's the partnership investment, and there has been historically one-off hardship payments that were really designed to support hospitals in need through the COVID period. So the $37 million last year is the amount we're paying in the partnership elements, which are incentives that when we sit down in these agreements, we set objectives jointly with our hospital partners. And if they're achieved, then we pay that at-risk element. And that payment was $20 million in the first half on top of $37 million last year. I think when you look at the total -- that total amount versus the total claims line, it's quite a material part of our claims line. And so we are really putting a lot of emphasis on this transition through these partnerships, and they are working well for us. So I might hand over to Milosh just on the general hospital partnerships and how we're seeing those partnerships evolve. Milosh Milisavljevic: Yes. Thanks, David. Vanessa. The partnerships, as David said, covering over 80% of our benefit outlays and they're growing in number and scale. So the proportion, as you can tell, is going in how much of that indexation and payment to hospitals is coming through funding for partnership initiatives. And we're obviously doing it for a number of years now, and we're starting to see those benefits come through our claims line, but also customer health outcomes. And to give you an idea, they range from shifting care models to lower length of stay and short stay, growing our no-gap network that also addresses cost to customers. It creates a proposition that's very compelling, maximizing prosthesis savings from the more recent prosthesis reform that reduces low-value care utilization in the system and also accelerating new care settings like home care, virtual care that help avoid complications and readmissions. So all of those are part of that $20 million, and it's growing in absolute terms, but also in relative terms compared to the total indexation number. Vanessa Thomson: And just following through then, we've seen the significant challenges for the hospitals, labor availability, wage inflation, clinical care costs. I just wondered what sort of color you're getting from the private hospital ventures that you have. David mentioned before, too many beds in the wrong place. Given that you've been able to be more strategic, I just wondered how that looked from your perspective with respect to your hospitals. David Koczkar: Yes. I think we've probably set a very different sort of relationship paradigm with hospitals over the last well -- the last 10 years. And there are challenges in the system. There's challenges in our business. We've all had to think differently about how we take pressure off premiums and how we drive the transition. So I think our conversations are data-driven. They're looking to the future, and they're all about preserving access now in the future for our customers. So really, it's enabled us to have these more forward-thinking conversations. There are some pressures in the system, and we are paying indexation rates as an industry, the highest we've paid in more than 10 years. So the industry has responded, us included, to pay more to hospitals than indexation, but we're requiring change as well. And so that's a bit of difference. And when we sit down with hospitals, it's a constructive set of conversations based -- driven on data. Operator: Thanks very much. Thank you. Your next question comes from Freya Kong from Bank of America. Freya Kong: I hope this works now. I just wanted to ask about the 2026 price rise again. So your 2025 adjusted cash claims inflation is around 3.5%. How do I bridge this to the 5.1% price rise you're going to get? I guess what I'm trying to ask is if utilization benefits will be shared even more with the private hospitals going forward and the claims inflation outlook is a bit higher. Mark Rogers: Freya, so the bridge between the cash claims number and the premium increase is the revenue mix impact. And so it was 150 basis points for the half. So that's the simple bridge between the cash claims and the headline premium. Freya Kong: Great. That's helpful. And then on growth in nonresidence business, which went backwards in the period. Is there anything that you're concerned about there? Where did the lapses come from? Or has competition picked up? Mark Rogers: Yes. So let me start on the lapse. That was in the student portfolio, and this reflects the fact that we had coming out of COVID, 2 very high origination years. And most student courses are 3 years. So we're just seeing that natural graduation of those students. Probably the focus in the second half is really around the student visa approval numbers and if they increase, we expect the policy unit growth to increase. In fact, I think over the last 12 months, we probably went backwards in student policy somewhere between 3% and 4%, still winning share, but that overall market has been contracting. So we've got opportunities in the workers segment, which is already growing pretty strong. We had double-digit growth in the last 12 months, and then we've got the opportunity to kick off the growth again in the second half of students subject to the visa approvals. Freya Kong: Great. And just finally on your thoughts around medium-term uses of unallocated capital. I think based on your Medibank Health plans, you've got around $140 million additional capital to deploy in the next couple of years. Your unallocated capital is already sitting at around $190 million and likely to keep growing. So I'm just wondering what you think or thoughts are around that? Mark Rogers: We spoke about Medibank Health in the presentation and the focus was on primary care and both scaling and expanding geographic coverage. I think that is the most likely in the short-term use of capital. Obviously, there'll be opportunities in the broader virtual care space and in well-being, but following the success on the Better Medical acquisition, so the probability is that the next investment will be in primary care again. Freya Kong: I guess my question is just beyond what you've allocated for Medibank Health up to 2030. What other uses of capital do you see? Mark Rogers: Well, I'll start with that current aspiration, which is to grow earnings to $200 million. And that would require us, as you said, to invest capital up to that $700 million level. And then that would effectively expand the unallocated capital. Then we've got opportunities to further grow your primary care network or invest in the well-being space as well. And then you can't discount that if there's capital that we can't invest it, we return it to shareholders. David Koczkar: And look, I think in the very long term, but all these 3 segments in health, well-being, primary care, community and acute care, all of those 3 in terms of absolute revenue of the market potential are larger than private health insurance. So when we get there, well, we are already a meaningful share of those markets, but there'll be more headroom for potential growth where it makes sense. Mark Rogers: And the one that Dave and I've been talking about quite a lot with Milosh is what happens to the PHI industry in FY '30. So we've seen one -- a reduction of one player in the PHI market, which is consolidation [indiscernible] in New South Wales and Queensland Teacher Fund consolidation. That's the first we've had since we've come out of COVID. When you -- consolidation would be most [ health funds ] are now who had been running in an environment with low claims and high capital. We know that's starting to unwind. We know we've got the new financial standard of CPS 230 that comes in on 1 July , formalized, 1 July next year. So I think the thing we're discussing is that what does the industry look like in FY '30. How do we play out, what happens to the industry through shifting market share organically versus is there a consolidation opportunity at the right price. And that could be a use of capital longer term, Freya. Operator: [Operator Instructions] Your next question comes from Kieren Chidgey from UBS. Kieren Chidgey: Most of my questions have been covered. But the one was -- can you just circle back on was sort of this view of cash claims inflation, Mark, you're sort of talking around the 3.5% number. But when I look in your financial statements at your cash flow, the payments on a per unit basis seem to be up around 4.8% on PCP. So it seems like we're sort of more trending in that 4% to 5% range on a payment per policy basis. Can you just help me reconcile why that's not a better guide to sort of how claims growth is going to move going forward? Mark Rogers: Cash flow can be heavily impacted by processing speeds on claims, and we've seen a marked speed-up of lodgement of claims, and we -- as the best we can increase the speed in which we pay those claims, Kieren. So I think that's probably a better view to look at the 3.5% and just go through the cash flow. You can look at what the outstanding claims liability is at 31% versus the prior period, and you will see the claims on hand is quite a lot lower. That's a phenomenon we're seeing across the whole. I mean most PHIs have seen that. And if you listen to the [ Ramsay ] call, they will talk about that in their cash flow conversation as well. Kieren Chidgey: Also just on the claims numbers, there seems to be some sort of risk margin sort of release in the period. Can you talk to that? And on the risk equalization, I just want to be clear on the $17 million benefit from first half. When you say that may unwind in the second half, are you talking about a neutral outcome? Or are you talking about sort of a full sort of unwind? Is it a negative 17%, so you're flat over the year? Mark Rogers: Thanks, Kieren. You've gone through the financial statements very quickly, well done. The risk margin point, we haven't changed the probability of efficiency. What's happened is as the claims in hand has dropped and there's a consequential impact to the risk margin in hold. So claims on hand down whatever that reduction is, multiply that by 12.2%, and that's why you've had a reduction. Look, I would still expect to be a modest receiver on risk equalization for the full year. Obviously, it depends on what the other 34 funds do and how much we grow relative to the market, but I'd still expect to be a modest receiver. Operator: Your next question comes from Andrew Buncombe from Macquarie. Andrew Buncombe: Just one for me, dovetailing with that question that was just asked, you've retained your probability of adequacy then, I know I ask this question every half, but all of your peers have unwound that already. What do you need to state to drop that number going forward? Mark Rogers: Yes, it's a great question, Andrew. And look, there's no basis -- there's no need to change it. It's just whether or not the claims experience supports changing it. We are seeing and why we didn't change it this half. We are seeing, I think I mentioned to one of the other questions, I think with Kieren's question, we are seeing slightly more volatility in monthly cash payments in claims because of payment speeds. And whilst that persists, I think we'll take a prudent and conservative approach to maintain the current percentile. Operator: Your next question is a follow-up from Andrei Stadnik from Morgan Stanley. Andrei Stadnik: Can I just ask around the health segment. So some of the bulk billing GP changes came through November last year. How are those going to be impacting the health segment given your focus on GP clinics? Mark Rogers: Good question. So if you think about billing, we're typically receiving a higher payment on MBS and likely charging a customer a lower co-pay. So at a consultation level, don't expect a material impact, and we didn't see a material change in our average fee per contract during the half. It's probably more where you've got clinics that go to total bulk billing, you expect to get a practice incentive, and we should see some benefit of that during the course of the second half. Operator: Thank you. There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Goodman Group FY '26 Half Year Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded [Operator Instructions] Joining us today is CFO, Mr. Nick Vrondas. I would now like to hand the conference over to your speaker today, CEO, Greg Goodman. Gregory Goodman: Thank you very much, and good morning, everybody. Goodman Group has delivered operating profit of $1.2 billion for the first half of FY '26 as we continue to provide essential infrastructure in supply-constrained markets around the world. We're building into strong demand for city locations across both logistics and data centers. Large scale logistics customers are targeting productivity and efficiency gains through increased automation and consolidation. And data center customers require low-latency, high connectivity, which they are committing to with unprecedented levels of CapEx spending forecast across the sector. Goodman is set to benefit from these structural shifts given the quality and location of our sites, our power capacity and our track record of developing complex infrastructure. Power, sites and capital are critical to being able to build into demand and provide delivery certainty for our customers. Our power bank has grown from 5 to 6 gigawatts on sites we own across 16 global cities. The increase is primarily in Australia and Continental Europe. And importantly, we've been advancing planning and preconstruction works on sites around the world to provide speed to market. In the quarter, we commenced 90 megawatts fully fitted project in Sydney and we're on track to have data center projects, providing around 500 megawatts underway by June, taking work in progress to approximately $18 billion. We're also partnering with large investors to fund multiyear development programs. We established a $14 billion data center development partnership in Europe and $2 billion logistics partnership in the U.S. with one on the way in Australia. This is consistent with the capital partnering approach we've taken for over 30 years. Our engagement with data center customers is progressing well across multiple sites, with negotiations well underway to provide a range of deployment options. We expect commitments in 2026 as we commence construction on sites and others get closer to their ready-for-service dates. Enquiry and activity across several logistics markets is also increasing, and we expect this to translate into development activity over the next 12 months. I'll pass on to Nick for a few comments. Nick Vrondas: Thank you, Greg. Let's turn to Slide 18 to run through the numbers in the usual way. We'll first cover the items that relate to our cash-back measure of earnings, which we define as operating profit. As usual, this excludes unrealized fair market value movements on properties, mark-to-market of hedges and the accounting fair value estimate relating to our employee long-term incentive plan. These are the items at the bottom of the table that get us to the statutory profit. Our operating profit for the half of $1.2 billion was a little higher than we had expected when we spoke to you at the September quarterly. We had early timing of development and performance income recognition in the half, which were not expected until the full year. As you analyze these results, please keep in mind that FX movements had a $33 million negative impact on the translation of our foreign-denominated operating income before interest compared to the prior period. This was offset with a commensurate benefit in our borrowing costs. This is the result of realized costs on our debt and derivatives, which is how our hedging strategy is designed. I'll call out the impacts on the line items as we go. Looking specifically now at the movement in investment earnings. These are up by $54 million overall, and that's after a $5 million adverse FX impact. Direct property net rental income was $59 million higher. This was due mostly to the increase in assets held directly on the balance sheet following the reorganization of our investments in the Americas. If you go back to June 2024, we had $1.4 billion of directly owned assets. It got to $5.1 billion by June 2025 with the December '24 reorganization of our U.S. investments. It subsequently reduced to just over $4 billion with the creation of a new industrial JV in North America. So this was a $3 billion increase in the weighted average capital employed in this segment when comparing the 2 periods. The bulk of our investment income, which comes through our co-investments in the partnerships was down $5 million, mainly due to FX. The partnership reorganization and the other capital movements reduced investment income by $10 million, which was nearly totally offset by the $9 million contribution from the like-for-like income growth. Again, if we go back to June 2024, we had $13.7 billion of current investments. This reduced to $13 billion at December '24 following the North American reorganization. It then grew back to $14.7 billion at December '25, mainly due to the creation of the new partnerships. Overall, it's a reduction in weighted average capital employed of around $0.5 billion compared to December 2024 half year. Over time, we want to grow this part of the business as we continue to expand our portfolio of assets under management and our investment in it. The creation of new partnerships and the ongoing growth of the existing ones should support this. The portfolio remains 12% under-rented, and we see this continuing to support NPI growth going forward. There is scope for a significant portion of the directly owned assets to create new partnering opportunities over time. This will reduce our direct investments and NPI, but increase our co-investment income in partnership from partnerships and our management income. At the same time, it will provide cash to fund our expansion. Management income was $137 million lower than the prior corresponding half. Of that, a $5 million FX -- adverse FX impact was the main driver -- but the main driver was the recognition of transactional and performance-based revenues. Following the exceptionally strong prior corresponding period, they were down $160 million to $79 million. We encourage you to look at the annual averages as a proportion of stabilized third-party AUM. Our total portfolio stood at $87.4 billion at the end of December. Of this, $75 billion was in external assets under management. And of that, stabilized third-party AUM averaged $69 billion in the period. That's up over $4 billion from the prior corresponding half year. As a result, base management income was $26 million higher on a constant currency basis. Total fee revenue for the period as a percentage of average stabilized third-party AUM was just over 0.9% this half, which is broadly in line with our expected average over the long term. In terms of the outlook for this segment, we expect our third-party stabilized AUM to grow over time as we complete more developments and make new acquisitions net of divestments and the value of the portfolio grows. Our realized development earnings for the half year were down $36 million on the pcp. FX rates had a $26 million adverse impact. So aside from that, the result was largely in line with the prior period. Several things are moving around, but we're managing activity to maintain our profit and return targets. On the one hand, development volumes have been lower. The average annualized production rate was around $6.3 billion this half compared to $6.6 billion in the pcp. At the same time, a larger portion of activity has been initiated directly on the group's balance sheet. That means a greater portion of the development gains can be reflected in our operating results rather than a share of revaluation gains. Yields on costs on the new projects are also increasing. This is commensurate with the longer-dated periods to stabilization of data centers. Moving forward, we'll be progressing more data center developments and are now on what should be an upward trend in activity levels. These projects will, on average, be in WIP longer than our historic projects, so the impact on production rate will not be linear, but should still be positive. The pause we took also means that there is a resynchronization happening that is resulting in a lower volume of completions in the short term. All other things equal, this should correct over time. Given the increased project duration and the leasing time frames, we also expect higher-than-average margins to compensate. At the same time, we expect to continue to originate a significant volume of work on the group's balance sheet. So we'll have the opportunity to crystallize a greater portion of the gains in operating profit. The expected yield on cost in our WIP has increased to over 8%, which is now more than 70% data centers. These estimates are based on our current expectation of commencing data center projects on a fully fitted basis. These projects are largely uncommitted from a lease perspective. So the expected yields are forward projections based on the fit-out funding and commensurate lease type. The current level of pre-leasing is reflective of the stage we are at in the data center expansion and the long lead times to completion. It also reflects the group's desire to optimize the timing of contracting with prospective customers. We are compensating for this by retaining low financial leverage. We did, however, have $2.5 billion of developments completed this half, 87% of which are already leased. Demand from logistics users for quality buildings in strong locations is also picking up, which we expect to start to contribute to growth in WIP in the future years. The diversion to data centers as a better use of our sites is, however, occupying a greater portion of our opportunity set now and expect it to continue to do so in the near future. So over the course of the full year, rising activity level is expected to result in an increase in income from this segment on a sequential half-over-half basis. We remain enthusiastic about the prospects for development demand overall, which bodes well for future revenue as well as growth in AUM. There's been a moderate increase in our underlying operating expenses but that was offset by a higher capitalization due to the rising activity levels on balance sheet. Capitalized costs are part of the cost basis of the assets when we calculate our operating profit. There was also a slight FX benefit. Net interest income increased by $63 million compared to the pcp. Gross interest paid on our loans was $14 million higher due to rising interest rates and the impact of the refinancing of our bonds, which resulted in a slightly higher WACD than the pcp. There were, however, a range of other items that more than offset this. There was a $33 million benefit on the FX hedge to earnings that I mentioned earlier. We also earned $48 million more interest on the cash and derivatives due to the higher interest rates and cash holdings. Our directly owned development assets have increased, so capitalized interest is up by $31 million. The cost of borrowings on our loans is currently around 4%. But considering our interest rate and currency hedges, the net WACD is around 1%. As far as the nonoperating items are concerned, we had over $250 million of unrealized valuation gains in the half, which represents the group's share of around $900 million of gains across the entire portfolio at the 100% share. That's before the $335 million deduction for the now realized prior period valuation gains. We treated these the same way as previous periods, so I don't propose to repeat that methodology here because I think everyone's across it by now. So after the deduction for the prior period gains, and accrued costs, the net result is a deduction from profits of $112 million, which is what you see in the table that reconciles to OPAT. The weighted average cap rate is currently 5.03% on the stabilized assets in the portfolio, and we are very comfortable with that. Another customary area of difference between operating and statutory profit is the fair value movement of hedges. The currency strength in December gave rise to a $150 million increase in the value of our FX hedges but you can see a $325 million decrease in the FCTR. More than offsetting this was a decline in the value of our interest rate hedges, which came about because we have a large volume of fixed receiver swaps to partly fix the income on cash deposits and FX hedges. That's why we end up with a net loss of $48 million in the reconciling table. As usual, we exclude the LTIP accounting costs, but we include the tested units in the denominator when calculating our operating EPS. That's when they actually impact on securityholders. A few remarks now regarding the balance sheet on Slide 19. Wholly owned stabilized assets have decreased since June 2025 for the reasons discussed earlier. On the other hand, even after accounting for the debt funding portion of the acquisitions by the partnerships, our share of the stabilized assets within them were up on a constant currency basis. Compared to June, our development holdings are up from $5.6 billion to $6.5 billion, which represents our share of the developments in partnerships as well as the wholly owned properties. This is consistent with the higher capital intensity of the new projects as well as the higher portion originated on the balance sheet. The directly owned portion was up by around $100 million to $4.2 billion. This was a result of $200 million of net investment, partly offset by the FX translation. This incorporates the impact of the movement of some of the European data center properties from the group to the new development JV but also demonstrates the amount of investment we're undertaking on the balance sheet. The share of development capital in partnerships was up by $1.4 billion to -- from $1.4 billion, sorry, to $2.2 billion, which was largely influenced by the European DC development JV formation. This is progressing as expected at the time we raised equity last year. Our aim continues to be to initiate more projects to give us an opportunity to have meaningful discussions with both customers and investors alike. We aim to continue to bring partners into the developments at the appropriate time to manage risk, capital and returns. Just looking at the other major movements now. Overall, we generated around $1.2 billion of cash-backed earnings through our operations this half. Nearly $600 million of this is reported through the statutory operating cash flow statement, which is up by around $200 million from the pcp. As usual, however, the statutory statement of operating cash flow includes outflows associated with the expenditures on development inventories. A portion of these of our earnings also arise from transactions that are included in the investing cash flow for statutory reporting purposes. That's either because they are in our investment property under development and not in inventory or they were sold from within our partnerships. This is not unusual for us either. So the combined effect of these development activities accounts for over $200 million of the difference between operating cash flow and operating profit. There's always a difference between the timing of distributions and fees received and income or expenses recognized in the partnerships, and that was around $100 million this half. Capitalized costs and other working capital movements created another $100 million difference. And the usual impact of the incentive payments was $200 million. Over the full year, timing difference can be smoothed out but the issue of the investment back into the business is symptomatic of a growing enterprise. The classification of certain transactions in investing cash flows is also a source of permanent differences. Our retained earnings are designed to contribute to funding such investments, which is consistent with the design of our long-term capital management plans and the distribution policy. That's a good point. Turn to Slide 20. Gearing is 4.1%, which is slightly lower than it was in June, and we have $5.2 billion of liquidity, including cash and undrawn lines. That's after we funded acquisitions and CapEx, and we repaid EUR 300 million on the maturity of one of our corporate bonds. As we said before, we'll operate our gearing within a range of 0% to 25% with the level to be set with reference to the mix of earnings and activity. We're very comfortable with where we stand at this time. In fact, we have capacity to increase gearing and remain within the bounds of our FRM policy objectives. This is consistent with the strategy we laid out a year ago, with the aim to build out more data centers and fund the growth whilst maintaining a strong balance sheet. As we continue to partner with investors, it will enable us to recycle capital to bring forward development capacity more rapidly. Over time, we expect to hover around the midpoint of the gearing range once we get further into the data center construction activity. That's all for me. Thanks, Greg. Gregory Goodman: Thanks, Nick. Demand for digital infrastructure in our markets is expected to materially exceed supply over the foreseeable future. Goodman has a significant opportunity to develop into this demand. given our metropolitan sites in the supply-constrained markets, our power bank and our very strong capital position. The scale and location of our powered land bank is rare. Construction-ready powered sites take many years to acquire plan, secure power, undertake infrastructure works and ultimately deliver. We're putting the infrastructure in place to carry out our program over the next 10 years. Also on the logistics side, we're moving forward with larger deployments for customers as they consolidate and invest in robotics and automation to enhance their productivity. The remainder of FY '26 will see us growing work in progress, supported by Goodman's strong balance sheet and our capital partners and the right structures and opportunities to actively rotate our capital. And in closing, now I'd like to confirm our target to deliver operating EPS growth of 9% for FY '26. Thank you, and Nick and I can now take some questions. Operator: [Operator Instructions] And our first question comes from Lauren Berry with Morgan Stanley. Simon Chan: It's actually Simon Channy. I used dial-in code. First question is just for a bit of housekeeping. At the half year, I think, Vrondas, you alluded to this, I think you were thinking about a 40-60 split of EPS for this year. In your prepared remarks, you talked about how you just got some early timing of development performance income in the first half. Does that mean the 40-60 split is out the window now? Or should we still assume a 40-60 split notwithstanding the $1.2 billion you delivered in the first half? Nick Vrondas: So Channy, so the full year target is still the same number but some has come forward. So yes, 40-60 is now not 40-60, but the end target is unchanged. I hope that's clear. Simon Chan: Yes. Okay. That's good. How much of that early recognition or early timing was to do with the establishment of the European JV? Or has -- or will all the profit for European JV come through in the second half? Nick Vrondas: Look, it's a little bit because we had some fee revenue that we would have earned from the beginning. So there was a little bit of catch-up with the closing of part of the transaction, but it hasn't all come through yet. But remember, I mean, that was all in the guidance. We discussed that in August or maybe in September, I can't remember. So yes, there was a little bit of that, but there were other items as well. Simon Chan: Yes, fair enough. Can you guys walk me through your program of works now going forward? So I guess, 3 parts of my question. One, how much of that 497 megawatts on Slide 14 is actually WIP at the moment and how much of it isn't? And then going forward, say, over the next 12, 18 months, should we expect potentially more establishment of data center development JVs as you activate more of pipeline? Or is it, no, no, we've got the partnerships we need, put the queue back in the rack and it's just more about building? Like how should we think about your program of works? Gregory Goodman: Yes. First one is easy one, around 370 Yes, that's in WIP. Simon Chan: 370 of the 497? Gregory Goodman: Yes, that's about $10 billion of $14.4 billion. It goes to about $18 billion in June. And so there's a pickup in regard to, obviously, about another 100 or so coming in. And that's primarily around the starts in Europe. But we've activated about [ 1.82 megawatts ] of 1,926 megawatts in total, so you've activated those sites. So there's another 1,332 megawatts on that slide. which is important to note because that's obviously the pipeline that will be coming through in other years as we start these other programs. Yes, exactly. So we're going to $18 billion in June, and that's not being heroic on industrial. And on the industrial side, first time I've seen billion-dollar buildings, and we'll be doing some big industrial projects all around automation and robotics. And we're talking 100,000 meters plus sort of buildings with very, very extensive robotics and operations inside them, which is then a consolidation of a number of sites into single sites, and that's happening pretty well in all locations around the world. So don't underestimate as well the industrial pickup. And I think that's running at about $4 billion of work in progress at the moment out of the $14 billion. That could be a surprise on the upside as we go into late '26 into '27. Now the second question, which I've -- could you just repeat that? Simon Chan: Program of works. You've done a lot of partnerships already, Japan, Europe, you reckon you'll get Australia done. But is that it? Or as you roll out the rest of your pipeline, you will be seeking to establish one of these new partnerships every 18 months, et cetera. Is that how we should think about? Gregory Goodman: Yes, we're good. We're good at the moment. And moving forward, there will be long-term holding structures rather than development partnerships. There'll be transfers. Work in progress will go into assets under management, I think, as Nick was talking about. So if you sort of think there's $20 billion of work in progress running through to the end of the year, a lot of that as keepers for us because of the locational quality of it. Those over time we'll roll into longer-term holding partnerships and things like that. So yes, it's been the same, Nick reminded me the other day for 30 years. I had 20, but he reminded me of my age. And we'll effectively be continuing the same thing we've done and making sure though we've got the capital and the strength of the balance sheet around the world because one thing you need when you're developing the size and scale of what we're doing globally, you need a lot of money, right? So we're very conscious of that. We went ahead of it. We want to stay ahead of it. We will stay ahead of it. And that is one of our competitive advantages, particularly in the data center sector, where Goodman has been and is very good at partnering capital around the world and the biggest capital partners in the world. That is extremely important for our program and our strategy over the next 5 to 10 years. And I wouldn't underestimate that, and it's going to get harder, not easier for people. Simon Chan: My last question is just on our customers. You got any got any update for us on that one. I guess the reason for the question is it's actually more question to add. Have you guys taken a view internally on AI. You're talking to a lot of customers but then I guess you also know that some AI proponents may be more successful than others. And I guess the quality of the counterparty is very important given you're in the long-duration asset class. So what I guess what's your view on AI internally? Gregory Goodman: Look, the first point is the big customer negotiations and the big volume sites, it's all hyperscalers, right? So I think that's made that very, very clear. And yes, we're adopting the AI products that are relevant to our business. It's going to drive productivity. And this is a 10-year year game, and it's changing the world. And that's just a fact, right? Now whether it all goes in a linear fashion, and it grows at the same rate. I think that's all very, very debatable. But it's a revolution and an evolution all around the world, and we're all adopting it, some has different paces, but yes, we're adopting it. Operator: Our next question comes from Cody Shield with UBS. Cody Shield: Maybe just to expand on one of Channy's questions here around the partnerships. So if you're set, just with respect to Vernon, how are you thinking about that asset and an approach that you'll take there? Gregory Goodman: I'll talk about that a bit later. We are pretty deep in discussions about that at the moment. So we'll leave that for a couple of months. Cody Shield: Okay, sure. Maybe just turning to the Australian DC partnership. Would this only include assets currently in development? Or would you looking to have a combination of existing developments and other sites with approvals and power and so on? Gregory Goodman: The one we're doing at the moment is Tyman, which is already started. Cody Shield: Okay. Sure. And it would just be Tyman, it wouldn't be any of the other thoughts around Sydney? Gregory Goodman: No. Look, we're dealing with partnerships on reality. So if you sort of map what we did in Europe, we spent a number of years getting all the sites ready. We brought in a partner as we were going vertical, right? So there's no delay in regard to starting them. We're starting them. We bring in the capital. We're ready to start. So we're not waiting 6 months and saying maybe what if. Capital comes in, we're starting and then the clock is ticking on the return. Yes, so short enough, do it. Same approach for the customer. It's being built. We're now in discussion with the customers because we can give them a delivery date of '28 or whatever the day might be for the first data hall. That's the way we're running it. Cody Shield: Okay. Great. That's clear. Maybe just a last one on -- sounding like Tokyo, one of those multibuilding campuses, how would something like that progress? I mean I imagine once you do the preparatory work the second and third building come along a bit quicker than the first. Is that right? Like what would the time line of something like that look like? Gregory Goodman: We'll wait and see, but we're right into our big gig site up there at the moment. It is great side, not a lot of power in Tokyo. This is the biggest one in Tokyo and yes, good demand. Operator: Our next question comes from Mithun Rathakrishnan with CLSA. James Druce: Yes. Greg, you might have James Druce here. And can we -- just on the 0.5 gigawatts that were sort of starting before June, can we just talk to the construction contracts? They've all been locked down now. Have they -- what's the remaining to do there? Gregory Goodman: What's remaining to do there? Well, yes, there's a lot of contracts. You're talking billions and billions of dollars. Some have been locked down, some have been started, and some are just in the final pieces of negotiation, right? So no, we've got contractors. We're down to signing contracts and moving on with the prices locked in. James Druce: Okay. And is there -- I mean the data center industry is going to be more complex in terms of development. How do we think about the right time now to actually bring in a tenant? Is it as fast as possible? Or do you want to kind of get all your ducks lined up, get all the MEP equipment done? Or how do you think about sort of the right timing for that? Gregory Goodman: Yes. Look, it's iterative. It's different on different sites depending on the demand signals. So you play a site maybe in Amsterdam differently than you'll play a site in the U.S. where there might be more supply. So it depends on where you are, right? But you need to be building to a design where you've got flexibility. You need to be building to a design, you can build into the demand so you can shorten up the delivery period. So if people are placing orders for '28, you've got to be able to deliver in '28. If you want to deliver in '29, well, you better wait 12 months and then you're probably taking a deal in '29. So build into it, get your essential infrastructure out of the way, make sure you got your buildings coming out around the slabs and sticks are going up effectively and you're building to a design or a program, which is flexible. Now on some sites right now, as we're starting to build, we are having the negotiations, and we are actually designing it to those customers. And there's some AI inferencing in some of these now where you've got waterloops and then you've also got air. So we're sticking to it right now, but it will depend on where you are and what you're doing in the different countries and the demand signals. So there's no one shoe fits all feet. Some feet are bigger than others. James Druce: Can we just talk to -- I mean on Slide 15, it shows the Japan partnership there for the 1 gigawatt. I mean we sort of known the thing there. But I mean, how does that kind of roll out in terms of fundraising for GJCP. And how much of that is actually covered today? Gregory Goodman: Look, it goes building by building. We've got approvals for our first phases. We're doing from the partnership, the partnership then we'll have assets. Those assets as they're stabilized, we'll be in more of a stabilized Goodman partnership. And that's exactly what we've been doing in Chiba, same MO, right? So look for the same approach. In Japan, we've been doing this for a while. I think the team there is very good at this, and we've been doing -- I think we're just finishing our fourth data center in Chiba right at the moment, quite frankly. They are all '50s and rolls off quickly, but 50s are big, right? Just to be clear. Operator: Our next question comes from Adam Calvetti with Bank of America. Adam Calvetti: Greg and team, I mean is there a timing into the 5 additional ones that you're going to be commencing in the second half? I mean what type of fully fitted data center are there? You've got 3 types, whether it's run by the customer, yourself or an operating partner. Where are these ones going to land? Gregory Goodman: Most of them are fully fitted to a mechanical, electrical and plumbing, the MEP program, that's primarily it. But we'll be operating some. A lot will be self-operated by hyperscalers. And there might be a colo where we may be doing a joint venture as well. So yes, there's going to -- we'll hit all those boxes, I think. Then there's some shells that are probably popping in the second half, we don't have on the page, where we're going to deliver some shells to some hyperscalers as well. So you're going to see the whole topography across the board. And it's really important to emphasize that I think we have been doing for a while, but I'll just reemphasize it again today, our competitive advantage at Goodman is around the infrastructure, right? We don't desire to operate everything in the world, and we won't be. There's a number of hyperscalers that want to operate their own facilities, and we're very happy about that. We want to build them world-class infrastructure that then fits for us for a long-term investment, which is also we've got to be very clear. We're building to own and bring investors in. So we need something at the end of the day that actually is saleable and investable, right? So white elephants, that's not what we're about. And I think you might find that's a discipline that Goodman brings to the long-term ownership that may be very critical as we move forward over the next 10 years with so much capital required for the sector around the world and the rotation of capital, you can only rotate it if you got something investable at the end. So a big discipline on that. Adam Calvetti: Okay. That's very clear. And then, I mean, the power banks increased about 1 gigawatts split between Australia and Europe. Can you just comment maybe on how you're seeing demand in those 2 markets and returns? Gregory Goodman: Returns in Europe are very good. They're in line, I think, with what Nick is talking about. And Europe is short of infrastructure in those major markets we're in. So we're building into a very, very strong demand market. But the discipline around building them and getting the buildings up in the air, we are very well equipped because we've got a very, very good development team around infrastructure in Europe. And where you're going to get caught or stuck is getting out of the ground, right? Once you get out of the ground and you got your orders in for all your equipment, it's then a program and we're very good at running programs. We're very good at building basically complex pieces of infrastructure, and we'll be building multistory buildings around the world for highly automated buildings, big customers of 120,000, 130,000, 150,000 meters, right? We've got disciplines internally at Goodman around building these things, which is world-class, and that is one of our competitive advantages. Adam Calvetti: Greg, maybe just to focus in on Australia with 0.6 gigawatts of increase there. I mean I've been hearing that hyperscaler rents in Melbourne have stagnated. How are you seeing the Australian market? Gregory Goodman: All right. Look, I think let's just see what's real and what's not firstly. There's a lot of promises but let's look at the deliveries. So we're focused now, for example, in Melbourne on '28 deliveries, right? So let's work that through. And I think you'll find there's good demand in Australia, but we're going to be sensible about how big that demand is relative to the U.S., which is 70% plus of the global market, right? So we're building into places like Japan, we're building into places like Europe, where there's big demand signals and we'll -- we've got some great sites in Sydney, Western Sydney, Melbourne effectively and North Sydney. So we're in the best locations. And let's just see where we end up. Yes, because we're playing globally, we've got a lot of options and optionality to push U.S. a little harder, Europe a little harder, back off in some other markets if we think there's a supply issue. But even in Australia, honestly, the infrastructure and the timing is still difficult. And it is difficult everywhere in the world at the moment. Operator: Our next question comes from Ben Brayshaw with Barrenjoey. Benjamin Brayshaw: Could you just talk about Stage 1 in respect to 2 things, please, when you expect the project to reach practical completion and be able to generate income. And secondly, the strategy for the leasing, is the intent to lease all of the capacity to one hyperscaler. Would you expect it to be multi-tenanted as in 2 or 3 or more tenants? Gregory Goodman: Yes. Good question. 2028, we'll be delivering the first power available. And I suspect being a 5-story building, very complex, it will be multi-tenanted. That's my view. But that's not to say we don't have demand for whole buildings over a series of time or a series of years. Bear in mind Macquarie Park is becoming difficult. Most developments on the North Shore are either not occurring or delayed, right? So to have something coming out of the ground, which we do now, we're having serious conversations, but we're very happy to manage and operate it over multi-floors, but we're also happy to do a whole building deal depending on the economics and the deal we do. Benjamin Brayshaw: And perhaps it's a question for Nick. Could you provide some color on how many sites have been sold down into the European partnership to deliver the forecast revenue for the vehicle? And how many are remaining on the balance sheet to be transferred? And will that transaction happen in the second half? Or will it be phased over time? Nick Vrondas: Yes. So the ones that have gone in already were the Frankfurt and Amsterdam properties. And the 2 Paris properties will go in, in this half. So that's all that's contracted at this stage. Benjamin Brayshaw: And just finally, in relation to Stage 1, the site, has the ownership transferred to the balance sheet from out of the partnership? And will the establishment of it has -- would the establishment of a partnership to potentially give rise to a trading profit or an uplift on the carrying value when that is settled? Gregory Goodman: I don't think we're commenting on that, but yes, it has transferred and partners will come into the 50%, I suspect that Google, I think, is the plan and partners will come in to the other 50%. But yes, I don't think we'll make any comments on uplifts or anything like that. Nick Vrondas: No. I mean it's not that big either. It won't be much of a needle mover. Operator: Our next question comes from Richard Jones with JPMorgan. Richard Jones: Just following up on Ben's question. Is it fair to assume that the bulk of the land value uplift in Europe across, frankly, Amsterdam has been booked and the 2 Paris project uplift will come in the second half, Nick? Nick Vrondas: Look, we're not commenting specifically, but yes, generally, that is a fair estimate, yes. Richard Jones: And Greg, just interested in your comments about automation and robotics and industrial projects. Are you looking at funding that for the tenant as well? Gregory Goodman: No. No. I think the same approach as we've taken with a lot of the big sheds we've taken. But once you go gate-to-gate, the $1 billion investments but the buildings and the land and where it's sitting, we would be in $600 million, $700 million, and then there is the fit-out components that might be anywhere between $100 million to $500 million in, it's all going robotics. Warehouses in Slide 5, you won't have anyone in them effectively. And some of our big customers are already planning on that, right? So when they pull the trigger on full robotics, warehouses, probably not today, but they've got the technology now to do it, and that's the way it's heading. Most of our big warehouses, we need 6, 7, 8 megawatts of power. So that's the same power discipline using the data centers actually we're using also and have been using around big industrial buildings. So when I talk about essential infrastructure and the ability to get these things powered up and plan them, the discipline around both actually is very, very linear and very parallel and that's why Goodman as an operator of the sand and development in the sector, there's some big competitive advantages we've got around infrastructure because we've been doing that infrastructure for many, many, many years. So I think we're in a really, really good spot to do both and effectively don't underestimate, as I said before, some of the work in progress on industrial because they are getting bigger. And there are 6 buildings going into 1, and that is going to drive productivity and will drive costs out of business over the long term, and they are big customers with big budgets. Richard Jones: And can you clarify what the returns look like on those big industrial projects? Gregory Goodman: Yes, they're good. So you look at our averages, I think we're throwing out between anywhere between 7s and 9s, it's in there somewhere. Richard Jones: I have one more. A quick one, one more quick one for Nick. Just what would be the capital commitment from a CapEx perspective you'd anticipate for the balance sheet in the second half? Nick Vrondas: I don't have that number at my fingertips. And about $0.5 billion, I think, is broadly where I think it's at but that's based on the kind of current projects. That's excluding sort of any acquisition -- new acquisitions or anything that hasn't been sort of identified yet. That's just what's in the pipeline. Operator: Our next question comes from Callum Bramah with Macquarie. Callum Bramah: Apologies if I've missed it somewhere in the announcement, et cetera. But I just wondered, as I understood it, the 2 near-term completions for the data centers with LAX01 and then Hong Kong, I just wanted to know about the customer commitments on those. And if you could give us an update on progress and when we should expect that to be completed? Gregory Goodman: LAX01 is not on completions, yes. And what else do we have in completions? It's just popping in this month. Nick Vrondas: It's mainly industrial items in the completion. So none of the data centers ones were in the completion. Gregory Goodman: The next one to complete is in Chiba, which will be shortly. Callum Bramah: Apologies, I might have asked clearly, but just in relation to the data center projects, when are you expecting to get a customer commitment for L.A. and so I think, was it Hong Kong 9? Are the 2 that are kind of nearer term in completions that are going out? Gregory Goodman: The Hong Kong, 2 months. Yes. So Texaco, we're going fully fitted, so it's going to be a while away yet. That's the plan. And the other one in Hong Kong is already committed. In regard to LAX, we're in discussions at the moment. Bear in mind, we have our first power bank available sort of running towards the end of this year. So we're in good shape on that one. And our view on that, that's a multi-customer building and a full operational building, right? So that will fill up over a period of time as we deliver the program on that one. But look, there'll be more about that in the next month or 2. Callum Bramah: Okay. And that's on track for powered shell completions still in June? Gregory Goodman: No. We're going to actually have our first data already by -- before the end of the year, right? So we're building full mechanical, electrical and plumbing outcome there. Nick Vrondas: The shell -- I think you got to distinguish between the shell and the fit-out. So yes, on the shell, but we're moving them through to the fit-out of the MEP and having progressive available ready for service for the data halls, which will happen, as Greg said, progressively from the second half. Callum Bramah: And I think maybe based on prior conversations, there was an expectation of maybe getting customer commitments 12 to 18 months in advance. Is there a change in that because of the market dynamic or a strategy or a tactical play for Goodman? Are you able to just give us a bit of color about timing on those customer commitments? Gregory Goodman: Yes, yes. It is topography, right? So the LAX01 is going to be multi-customer. You're talking anywhere between probably 1 meg to 10 meg. So we're talking to a customer at the moment that's the higher number. They might take the first bid to power. We got -- it's an operating asset. So that's very different to doing 100 megawatts or 200 in a different location where the customer will want to go earlier. The one in LAX is ready for service and you're leasing it as you go. Time is going to be very, very similar to that as an operating asset will lease it as we go. And there will be some other assets that are going to be effectively pre-committed. We might be starting some earthworks, there might be some transformers and things like that. But there's some big ones we're actually working on at the moment, which are effectively we're designing for those customers. Even though we might have started a few of the earthworks and getting it ready yes. So you'll see both of those types of deals being done, depending on where they are and what they are. Callum Bramah: And if I can just push my luck with one more. Just in relation to the Paris assets going in, which based, I think, on your earlier comments, Nick have yet to go in. Can you just clarify the drivers of the timing of when they go in and maybe what your current expectations are? Nick Vrondas: Yes. So you might recall there were CPs that related to local municipalities in the main that was the main reason the municipalities have pre-emptive rights. And so there's just a regulatory notice period, Q&A, so they can understand the basis of the terms, and then they notify you. So on one of them, we have subsequently been notified. And so the settlement of that, the process for the settlement of the first one has -- is about to be initiated so that will close within the next month. And then the second one is very, very close behind. So yes, expect well and truly before the end of June to have closed those 2. Callum Bramah: And is that across the entire project site or just the first data center, if you like, of the campus? Nick Vrondas: No, the whole thing. Operator: Our next question comes from Tom Bodor with Jarden. Tom Bodor: Just picking up from one of the comments you made about Callum's question, where you do have multi-tenanted facilities such as L.A.? What do you assume for a time frame to stabilization post completion? And where do you see stabilization from an occupancy perspective? Gregory Goodman: Something like that, you could knock that off in a couple of years effectively on the -- as you build it through. So there will be another 12 months in building out the MEP and during that time, I expect you've got most of it done and then there might be the tail at the end. But yes, over a couple of year period would be more than enough time unless you let it to one customer, of course, and then it will take a pragmatic approach to it and take maybe floor by floor over a period of time as they require it. Tom Bodor: So when you pick PC, what's your sort of broader working assumption for these multi-tenant facilities in terms of occupancy and what time frame post-PC do you sort of say it getting to fully let? Gregory Goodman: Look, I think within 12 months, you'd be you'd be aiming for, but you're going to get -- you're delivering the floor by floor, right? So I think LAX01, we got 6 meg, I think 6 megs available. Shortly, right, so we can deliver that and then just move through it in a pragmatic way. So you're spending capital as you go. It's not all spent at that point and you keep spending it on the way through as you need to do that. Tom Bodor: Yes. That's clear. Just a final one for me. There's obviously a huge amount of capital required to develop these facilities as you've highlighted. So a long away, but how do you think about pricing and capital demand for core data centers? Do you think there will be an ultimate takeout at the end? Or do you think a lot of your partners just want to develop the core and sit into the partnerships long term? Gregory Goodman: They're all approaching it differently depending on their view returns, development returns are obviously a lot higher. So there'll be partners that want to click the development returns and move through. Then there's the whole scenario whether a platform value is more -- is worth more than the sum of the parts, which I've got a bit of a view on, which I won't share here, but I think you'll find that, that's starting to play out as well at the moment. So there's a number of different combinations. We're super focused on making sure we've got something at the end that people want to be in, and it's going to have a good growth profile, and it's a good piece of infrastructure investment. And that's why you won't see us owning and holding assets in faraway locations. We're going to be bull's-eye. I think they call it eyeballs, some of the eyeball locations, some of our U.S. friends effectively. So we want to be where we've got flexibility around the buildings, great locations, low latency type facilities that we think over the next 10 years are going to be the best for residual value and for terminal value. Operator: Our next question comes from [ Claire McHugh with Green Street ]. Unknown Analyst: So just to ask more big picture, given this is a 10-year and beyond story, as you strategize internally regarding, say, music stops or a true bear-case scenario, it's everyone's paradox type events, et cetera, how are you positioning the brownfield data center pipeline? Like what would be the next best alternative use for the land? And how does that profitability profile compare? Gregory Goodman: Yes. The good question. The sites are in industrial sites. So for example, we're in planning in Melbourne, Western Sydney, they're industrial sites at industrial loan values. So if, for example, demand wasn't strong enough, we'd flip it around and build a good to oil shed that might be in demand. So we do have flexibility. We're not over our skis in paying big, big prices to land around the world for data centers and there's no options. We do have optionality around everything we're doing because in the main, the 6 gigawatts of sites and to be clear, we're working on double that as a global portfolio, but the 6 we put on the page, which is in secured and advanced, we own it. And where we have bought it, in the last 12 months, we bought the land and then we've grabbed the power cable, right? So we're not lifting the cost basis on these things to the point where we don't have an alternative use in the main. So that's the off ramp. The other off ramp is, to be quite frank, is capital and that's called equity. The amount of leverage that's being raised around the world is all good until you can't get it. So we're making sure we've just got a lot of equity, what we're doing sensible. We're doing it with some of the biggest partners in the world and we can build through for customers even if the debt climates and things change. What our big customers want to know is that can you build it, can you deliver it and can do it in a way where we're going to get a high-quality product and there's not a financial issue on the way through? Now we've all been around or certainly here a fairly long time, and we know things change. We know capital markets change. We know debt markets change, right? So we're building something that's sustainable, resilient and we can deliver for our customers and we can deliver over a long period of time. So yes, be very pragmatic, sensible about what we do. But what we can do, we can do it in volume, and we can do it globally and that is tremendously attractive to our customers. Unknown Analyst: That's helpful. I would have thought resi might be in there on some of them, but yes, I appreciate industrial's bread and butter. Just another one on the economics of the European partnership. So I appreciate there's a stage path to recognizing development profit and profit share. But just focusing on the land uplift that would have been achieved, is it still fair to think about data center land values at around sort of the $4 million a megawatt of critical IT capacity or sort of that 3x to 4x comparable industrial land based on this deal. Are you seeing values edge higher given the depth of demand? Gregory Goodman: Generally speaking, I won't talk about the land values on this deal because I think people try and run comparatives. And quite frankly, we've looked at a lot of land deals and they're at a certain price, but they actually don't have power even though they do have power. So I think it's the big, big differential so I'd be very careful about quoting land rates and things that have been selling, very different if it's shovel-ready and you can go vertical with your slab and your sticks and you can go up as opposed to something that might be right and it's a very, very, very big difference. But I've got to say generally, power infrastructure is costing more money. It is taking more time and. Affectively, you could expect that the cost of these things is going up, not down. And that applies to land as well. So the infrastructure, the basic infrastructure around the grids around the world is it's getting limit long in many, many places. So everything is costing more money around the infrastructure. And the other point is if you look at the demand that's required globally, I don't think we've got enough production. We don't have enough infrastructure to even supply that ambition. And I think that is a concern that's been voiced by a number of big customers around the world or proponents of AI platforms. But very hard to compare land values because they're all at very, very different stage of readiness, put it that way. Unknown Analyst: Yes, no worries. So this was more around land value of power, ready-to-build land. And it just really stems from, obviously, when we're underwriting the value of Goodman, a lot of the value stems in the value creation from the data center pipeline, which where there's land value, which is transactional, but also intrinsic value or platform value. So I'm just trying to sense check how we're evaluating the value of the land. Gregory Goodman: Yes, I understand. So we're not going to help you too much today, sorry. Operator: Our next question comes from David Grace with Evidentia Group. David Grace: Greg, you've got work in progress of $14.4 billion heading for $18 billion. Current yield on cost of 8.1% and just interested where you see yield on cost trend into as you continue to add long-duration projects to the pipeline? Gregory Goodman: Yes. Look, it moves up effectively. So I think it will be depending on how much industrial we do because that will be a little lower. But you can see it moving up from that 8.1%. I think the -- just on the commencements, I think that was through 9%. So yes, a little move up over time depending on that mix. But look, it's healthy. So I go back to the growth here on cost is one thing. The quality of what you're doing is another thing, right? And we are very conscious of the quality and the location because the billions and billions and billions you require and 6 gigawatts, so then ends up at $140 billion of end value on the sort of mix we're doing at the moment. You need a lot of money, right? So you need to be building stuff that you can partner and own that is a good investment. So our eyes on making sure that we have a residual value. We have a terminal value, we have an investment value that is going to hold up over time. So that means you need good sites, resilience, flexibility, all those things above, so you build some -- you build a piece of infrastructure that's not a 5 years run and done. David Grace: Yes. So can I imply from that then that the $18 billion WIP should actually increase just given the nature of the long duration of these projects? Gregory Goodman: Yes. Look, it will -- look, I don't think it's any surprise if it's $18 billion in June with the duration of the projects that it goes higher, it's going to go through $20 billion. I think that's how far through that will depend on how successful we are in regard to -- around the customer side a bit, I think. So we'd regulate it and monitor it but we've got to make sure and we have -- we've got the capital so think we can work through it. We're dealing with some of the biggest companies in the world, all the biggest companies in the world, not some off. So we've got to make sure that we've got sustainability, we've got resilience, we've got capital, and we can deliver over long-term time frames, multiple countries, multiple languages, but you're dealing with the same customers. So yes, it's going to be pretty interesting. Operator: Our next question comes from Andrew MacFarlane with Bell Potter. Andrew MacFarlane: Just a quick one for me. Just interested in terms of turnkeys and power shell, just how you're thinking about it, one versus the other? And I guess whether there's been any change as you've progressed through data centers in time? And I guess the second leg of that would be kind of what you're seeing in the little rate wise and yield on costs is that factoring in thinking of what product are you doing? Gregory Goodman: Yes. Look, down this part of the world running up Asia Pac, just as a general comment. The customers are wanting a data center ready facilities. So that leads us into the MEP build outs and what have you. And pretty well most of the discussions, if not all, in Asia Pac around fit-outs. We're having the same conversation in the Hong Kong at the moment where we're doing a shell that will go through to a full build out. Japan is the same. And down in Australia will be the same. Europe because hyperscalers are doing less of their own builds. So they expect in Europe full build-out program. So everything we're looking at in Europe is a full build-out with MEP and delivering floor by floor effectively. So that's that. The U.S. is different because you've got a lot bigger build-out programs of the hyperscalers. It's the major -- majority of the market globally. And you'll see us with big shell programs but you'll also see us with operating buildings like the program we have in L.A., that's 150-meg gate-to-gate program, maybe up to 200-meg effectively that you'll see those potentially being all operating buildings because of that location and what we're doing. So you'll see more shells in the U.S. plus some operating. Europe will be very much operating MEP type facilities and down Australia, we'll be filling the buildings up with mechanical and electrical facilities for the customers. A lot of it's going to be heavy on infrastructure, yes. Andrew MacFarlane: And sorry, Greg, are you seeing any change to hurdle rates or yield on cost returns? Gregory Goodman: No. But we're very -- like I said, we're very disciplined in understanding that you don't survive in this industry unless you can deliver a good product for investors long term. You can't rotate your capital unless you do that. And then the Goodman investors for putting out the capital at Goodman Group needed to return on their capital. So unless you get that all right, the machine stops. So I think you can be fairly assured we're doing it with the appropriate margins to make sure that machine keeps on going. Otherwise, we don't have a rotation of capital and Goodman Group shareholders don't get a fair return. Nick Vrondas: Andy, though, I mean, you would expect that if you're just looking at yield on cost on mark-to-market value of land, you would expect that something that's fully fitted would have to -- you'd have to compensate with a higher yield than something that's core shell. If you mark-to-market the value of the land like-for-like, theoretically, that is what you should expect, if that's the nature of your question. Operator: Thank you. I would now like to turn the call back over to Greg Goodman for any closing remarks. Gregory Goodman: Thank you very much, and good morning. Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.
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: Thank you for standing by, and welcome to the Sandfire Resources H1 FY '26 Financial Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Brendan Harris, Chief Executive Officer and Managing Director. Please go ahead. Brendan Harris: Good morning, everyone, and welcome to our financial results for the half year. As always, our executive team is here with me today, and I'll pass to Megan very shortly to walk you through the all-important numbers. But before we start, I'd like to acknowledge the traditional custodians of the land on which we stand, the Whadjuk people of the Noongar nation as well as the First Nations peoples of the lands in which we conduct our business. We pay our respects to their elders and leaders past, present and emerging. Starting with safety. We finished the period with a group TRIF of 1.3, down from 1.7 at the end of FY '25. While this outcome moves a step closer to our goal of having a workplace that is free from injury, the number of high-potential incidents in our business remains a concern and highlights the importance of the work we're doing to further strengthen our internal system of risk management and control. Of course, from a cultural perspective, the regular reporting of these incidents is an important indication that our efforts to build an inclusive environment where every employee and contractor feels safe to stop work and speak up is starting to take hold. More broadly, our 2 high-margin mining operations in Spain and Botswana really proved their worth in the period as the copper market firmed and their valuable byproducts of zinc, lead and silver, further enhanced their competitive cost position. And it was by no means our best half operationally. While MATSA started the year well, building further operational resilience and consistency, it's been somewhat more challenging. As you know, at Motheo, where we brought forward planned maintenance and were impacted by a temporary drop-off in mobile fleet availability to finish the half at a collective 46% of annual production guidance, having delivered 48,600 tonnes of copper, 49,000 tonnes of zinc, 3,500 tonnes of lead and 2.4 million ounces of silver for copper equivalent output of 72,100 tonnes. But of course, that's only part of the story. We've always said we want to be judged on our ability to deliver on all aspects of the mining value equation. And in this regard, we have done well to control costs across an extended period that has been characterized by broad-based industry-wide inflationary pressure. And our track record remains intact as we have retained annual guidance for underlying operating unit costs, production and capital expenditure at both MATSA and Motheo. Quite simply, our focus on the basics and fiscal discipline is keeping our house in order. I'll leave our broader financial highlights and achievements for Megan to summarize, which should also help you gain an even better understanding of our approach to capital management. But before I pass over to Megan, I'd like to formally introduce the formidable partnership we formed with Havilah Resources to advance the Kalkaroo Copper-Gold project and establish an exploration strategic alliance across the highly prospective Curnamona Province in South Australia. Under the terms of these agreements, we now have an exclusive right to earn an 80% controlling interest in what we believe to be one of the best copper and gold greenfield development opportunities in Australia that has the potential to become a large-scale, long-life operation ideally located in a preferred jurisdiction. Kalkaroo is an exciting opportunity for our shareholders that firmly reestablishes our exploration and development footprint in Australia. We expect to commence an extensive infill and extension drilling program at Kalkaroo once we have established camp facilities and received the required approvals, which are expected in the June quarter, if not sooner. Make no mistake, we plan to move prudently but quickly to test the full extent of the Kalkaroo copper and gold deposit and establish the value maximizing pathway for its development. In this regard, we are uniquely positioned. We have the balance sheet, we have the technical teams, and we have a proven and match fit projects team that only recently completed the successful construction and commissioning of Motheo. With that, I'll hand over to Megan. Nicholas Read: Thank you, Brendan, and good morning to everyone on the call. I'm pleased to present our financial results for the first half of FY '26. As Brendan touched on, we have delivered 72,100 tonnes of copper equivalent production for the 6 months to 31 December 2025. This performance, coupled with healthy pricing for our key commodities delivered revenue of $672 million, a record for a 6-month period, which would have been some $23 million higher, if not for the impact of the hedging program associated with the MATSA acquisition, which was fully executed by the end of the period, leaving all future sales fully unhedged and giving the group a pure exposure to commodity prices. The combination of record revenue and good cost control delivered underlying EBITDA of $304 million and an underlying profit of $107 million, which has more than doubled since the last half for a statutory profit of $96 million. Digging deeper, at Motheo, despite the somewhat challenging start to the year, we delivered a robust set of financial results, with underlying operations EBITDA largely unchanged at $161 million for a still healthy operating margin of 57% as strong commodity prices mitigated the impact of lower-than-expected production. Motheo delivered an operating unit cost of $43 per tonne, marginally below our annual guidance of $44 per tonne, impacted by mining contractor and labor costs and the previously advised 50% increase in power tariff. At MATSA, underlying operations EBITDA increased by 37% to $184 million at a 47% margin, primarily driven by higher commodity prices and lower TCRC, which more than offset a 15% increase in underlying operating costs that were impacted by recent strength in the euro to U.S. dollar exchange rate, an increase in costs associated with recovery improvement initiatives and the release of working capital as ROM stocks were consumed for an operating unit cost of $87 per tonne, which is broadly in line with FY '26 guidance. Below the line, our D&A expense of $144 million included $113 million of MATSA and $30 million of Motheo, which decreased by 6% in comparison to the prior corresponding period, primarily as a result of lower mining rates. We expect our D&A expense to rise in the second half to reflect the planned increase in throughput at both MASTA and Motheo. Our overall underlying net finance expense of $11.4 million decreased by 58% compared to the prior half as the group experienced a significant $16.2 million reduction in net interest and facilities fee expenses to $9.3 million in the half reflecting the injection of $301 million into our balance sheet across the prior 12-month period and the lower margins at our corporate revolver facility provides. The rise in the group's profitability led to an increase in our underlying income tax expense to $42 million for an underlying effective tax rate of 28% which continues to be impacted by the limited ability to recognize benefits associated with tax losses in Australia and the U.S.A. On the topic of tax, subsequent to the period end, we paid our inaugural tax installment for Motheo of $11.6 million, following the utilization of carryforward tax losses, a reflection of the operation's strong cash generation and buoyant commodity markets. Looking ahead to the second half of FY '26, we expect cash payments to step up, trending toward our effective tax rate in future years. Total capital expenditure across the group increased by 14% from the prior half to $112 million as the strength of the euro and commencement of activity to construct our new tailings storage facility at MATSA and incremental investment to support the optimized 5.6 million tonne per annum throughput rate and ongoing A1 drilling and PFS costs at Motheo saw an uplift in our level of investment. The group's balance sheet has been fundamentally transformed. Strong operational performance, buoyant commodity markets have delivered a $489 million into our balance sheet over the past 2 years. This is a significant leap forward for the group's financial position when you consider that our balance sheet had peak net debt of $481 million, just 21 months ago, and we are now sitting on a net cash position of $13 million. In accordance with our capital management framework, excess capital will be deployed in a manner that maximizes TSR and our per share metrics. In simple terms, this means that any discretionary investment alternatives will need to compete with shareholder dividends and share buybacks. The agreement that was struck with Havilah Resources are a good example of this framework in practice and has seen an initial AUD 31.5 million cash payment to Havilah subsequent to period end as part of the Stage 1 payment and a further AUD 15 million cash payment has also been made subsequent to period end to fund exploration in the Curnamona province. These additional commitments were an important consideration for the board when contemplating the recommencement of shareholder dividend while balancing preservation of the group's strong financial position ensuring that any distribution doesn't move the group away from its targeted net cash position. With this in mind, no dividend has been declared in respect of half 1 FY '26. As Brendan touched on, we've retained annual guidance for underlying unit costs, production and capital expenditure of both MASTA and Motheo. However, we have incrementally increased group capital expenditure guidance by $10 million to $240 million to capture the planned ramp-up of activity at Kalkaroo and guidance for exploration and evaluation expenditure by $5 million to $51 million to reflect both the planned commencement of regional exploration in the Curnamona Province and additional activity to keep the Black Butte project moving forward following completion of the PFS in December. Turning to future concentrate sales. Our recent tender for Motheo concentrate was well received by the market, and we secured approximately 75% of calendar year '26 and calendar year '27 sales with a select number of customers at TCRC terms, which reflect the prevailing market. The high number of participants and competitiveness of the bids reflect the tightness in the concentrate market and the quality of the Motheo concentrate. We expect these positive outcomes to benefit our C1 unit cost in half 2. Our strong financial position and growing profitability continues to give us confidence for the future, and we will remain financially disciplined. With that, I'll hand back to Brendan. Brendan Harris: Thanks, Megan. Look, as you rightly said, we're in a strong position, and we're not taking our foot off the accelerator with a lot of hard work needed to ensure we make good on the commitments we've made for the remainder of the year. And can I stress that we expect volumes in the second half to be weighted toward the fourth quarter, like last year, with a circa 47-53 production skew, I say that again, 47-53 production skew across the first half -- sorry, third quarter and fourth quarter as access to high-grade ore at both MATSA and Motheo is progressively established across the period. Turning to exploration and evaluation development. We remain on track to declare a maiden reserve at A1 in the fourth quarter. While the initial infill and extension drilling program produced modest results, as I mentioned on our recent quarterly call, we have commenced the second phase of drilling to test for further continuity of mineralization at depth, which is shaping up as an important driver of the economics. We also expect construction of a dedicated 21-megawatt solar facility to commence in the coming months at Motheo, which will provide up to 33% of the operation stationary power requirements from midway through FY '27. Importantly, construction of this solar array is underpinned by sound economics, a robust risk assessment and our commitment to decarbonize. Separately, we expect to complete the review of our 87% shareholding in Sandfire America, which, as you know, owns 100% of the fully permitted Black Butte copper project before we report our results in August. The recent release of the pre-feasibility study outcomes for Johnny Lee and mineral resource estimate for Lowry confirmed the economic case for the project development, and our review is primarily considering the materiality of the project and feasibility study outcomes within the context of the growth we've achieved in the 11 years since our initial investment was made. So as I said, we've got our foot down, and we're building momentum across all 4 pillars of our strategy. We have the right team, we're producing metals, the world needs to electrify. Our global portfolio is becoming increasingly cost competitive. We have the right balance sheet for the time, and we're now very selectively deploying capital to opportunities that have a favorable risk-reward equation and the potential to generate an excess return for our shareholders. Thank you. And with that, let's go to questions. Operator: [Operator Instructions] The first question today comes from Daniel Morgan from Barrenjoey. Daniel Morgan: Brendan and team, so on your remarks, Brendan, you mentioned just a skew for the second half of production. Can I just clarify? I think you said 47-53 split from Q3 and Q4. Is that both assets? And also at MATSA in the mine sequence, is there a copper dominance or zinc -- obviously, you're going to have a lot of movement around the ore sources? Brendan Harris: Yes. Look, good question. So let me deal with the first part. And I know, Jason, you got to talk about MATSA and obviously, the nature of the polymetallic there. So when I talk about that split, I think, Dan, as you work through your numbers, you'll see very quickly that MATSA is much more balanced across the third and fourth quarter to make those numbers work. It's probably somewhere in the order of 48-52, 49-51. It will be in that order. And then obviously, the differential is Motheo. Motheo naturally has a more significant skew because as we open up the A4 ore body, we really get access into that high-grade ore. And because of the fleet availability discussion we had, of course, at the quarterly call you'll be mindful that we progressively start to release more high-grade ore from the T3 pit as well. So hopefully, that gives you a sense as to how that should play out. It's not a perfect sign, but we're just trying to give you a bit of a sense of how that balance will work across the quarter. And maybe, Jason, if you can go to MATSA in terms of the polymetallic. Jason Grace: So if we look at Dan, the split between copper-only ore and also poly ore for the year, we had originally planned around about 1 million tonnes of the 4.6 being copper-only ore. If you look at it half to date, we're sitting around about 550,000 of copper ore mined. So largely, that proportion that we've seen in half 1 will be maintained through the half 2. But if you look at Appendix A from the quarterly there as well, it will give you an indication there around our guided grades for the year and particularly for Q2. We expect to see copper-only ore probably increase slightly in terms of copper grade. And overall, probably a slight increase in zinc grade going into the second half as well. Brendan Harris: Yes. Maybe just to round that out and turning back to Motheo, and Jason, feel free to add. If you think about it, Dan, remember, we brought forward maintenance because of the issues we had in the SAG mill. That was planned for the second half. So not only do we expect to see some of the best grades coming out of Motheo in that fourth quarter, particularly with T3 and A4 providing a benefit. But we are expecting a high throughput rate in that period as well, which will obviously, by definition, be above the average of the year of 5.6 million tonnes. So -- and again, the last thing I would add, as you know, pretty typical in most processing plants as we push higher grade material, we'll get higher recoveries. So all of those things we anticipate it working for us and really provide that kicker in the back end. Daniel Morgan: It would be remiss of me this week to not mention silver. BHP obviously has done a big silver stream. Just wanted to hear your perspectives on your silver revenue highlighting it? And how can you maximize the value of it for shareholders? Brendan Harris: Thanks, Dan. We did anticipate we might get a question or 2 about silver. Topical at the moment for all sorts of very good reasons. Look, I guess the first thing I'd say is I'm certainly not going to comment on BHP and what they have done and the reasons they're in. But I would just make a general observation that a large diversified mining company is very different from a mid-tier emerging global copper producer with primarily 2 high-quality operations, high-margin operations and 1 development option beyond Black Butte being Kalkaroo, that we're going to accelerate with regards to activity on the ground to hopefully move us towards the confidence in time to develop and make an investment decision. I've said many times that I believe in the space that we operate. Our job is to be effective risk managers. And I think it's really important, therefore, this concept that I've talked about, about suppressing beta. Our job is to suppress beta, reduce risk, reduce volatility and be safe, consistent and predictable with a fundamentally simple strategy. And I think ultimately, that's what delivers the rating. Now obviously, we keep all things on the table. And I think one's got to be careful ruling things out in perpetuity. But primarily, what that means in this regard is that a stream for us would increase beta. It would increase the underlying cost structure of our assets, it would make us more vulnerable through the cycle and ultimately, should lead to a higher cost of capital. Now of course, you can realize capital upfront for that. The question is then what you do with that, but you've got to be very careful in the context of knowing you have effectively a liability but you also have much less resilience to commodity prices and macroeconomic volatility. So look, we still stand by the premise that we want to give our investors largely pure exposure to the commodities that we produce. We think that's why they own us. We want to very much do everything we can, well, which is -- has the typical levels of volatility. Our operations have the typical complexity that exists in mining that we do everything we can to enhance our cost position, our byproducts play into that. There are a core difference and point of difference with respect to a number of the large Andean producers, which are not less with byproducts. Typically, some have -- some might have a little bit of gold, but not a lot of byproducts. And it's the silver and in MATSA's case, the additional lead and zinc that really keeps those assets well positioned on the cost curve and we think that will serve us best across time, and we think it will certainly help us with our ultimate rating that the market ascribes over time. Operator: The next question comes from Ben Lyons from Jarden Securities Limited. Ben Lyons: Brendan, Megan and team. Firstly, just a couple of clarification questions up front, please. Brendan, your comments around the solar facility at Motheo, I assume that's being done off Sandfire's balance sheet with a PPA in place, but maybe you can just confirm that firstly, please? Brendan Harris: Yes, it's effectively a third-party lease agreement. And the way it works in the current sort of energy price environment, it really leads to no meaningful impact on our P&L relative to the current status quo with regards to how power prices, et cetera feed through. What I would say, though, is we think it's not only something that's the right thing to do also aligned with our commitment to decarbonize, but it actually plays an important part in mitigating risk against further power tariff pipe, but also any grid instability. Ben Lyons: Awesome. And secondly, Megan, just taking into account your comments around the Motheo concentrate offtake. And I think you said approximately 75% of calendar '26 and '27 sales have been locked away at TCRCs terms, which reflect prevailing market conditions. Could you possibly just elaborate on what you're seeing with regards to prevailing market conditions at present, please? Megan Jansen: Ben, thank you for that question. And you heard that correctly, we've locked in approximately 75% of our concentrate sales for calendar year '26 and '27, and we do refer to having secured prevailing market conditions. As you'd be aware, market pricing has been TCRCs in that negative territory, in recent months, ranging from sort of negative $50 per ton to upwards negative $100 per ton and so it's reasonable to assume within that range is there about where we've landed for calendar year '26. Calendar year '27 is a little bit more kind of intricate, if you like. It's a combination of the market pricing that we've seen in recent months, but then there's also links to benchmark. So I think for calendar year '27, a more conservative approach is probably the best way to think about modeling that TCRC benefit beyond calendar year '26. Ben Lyons: Great. looking forward with the final question, just on Slide 27, great to see some of your plans coming to fruition, so early for the Kalkaroo opportunity. And I can see you've got in place there, a number of proposed drill collars. I guess maybe the first question on that schematic would be just the interplay between the couple of granted mining leases there and then there's an MPL, which I think lots onto a multi-purpose lease down in the Southwest quadrant. And how those drill collars align with historical drilling. Basically, just trying to get a sense of how much confirmation drilling is planned versus extension and infill going forward? Brendan Harris: Yes. Look, thanks, and I'll take that up front and then Jason obviously, Ian Kerr, the master mind behind. Obviously, the construction and development of Motheo, he's basically been moved across onto this permanently now. That's what when I referred to a match-fit team. We're quite blessed to have that capability, it's not just Ian, it's his broader team and all the support around him. If you look at that schematic, a couple of things to note. You'll notice that the grade is in effect the saprolite gold resource and the sulfide mineral resource. You can see a large part of that drilling, Ben, is really to test that extent. So this ore body remains open at depth and along strike in multiple directions, primarily the southwestern edge. Beyond that boundary, obviously, we've got plans to initially test it, but it appears to us that there's at least 2 of open strike. It's currently defined over about 3 kilometers. So what you'll note is that primary objective initially is to really get out there and understand what the true scale of this ore body is. And test I guess our underlying assumption that this ore body has the potential to grow substantially and support a very large-scale operation, low cost, large-scale mining fleet, high productivity ideally located next to already installed infrastructure, highways, rail, available renewable energy in the area, et cetera, et cetera. So that's really the plan. So most of it is really step out. Now of course, over time, if we get the results that we would expect to see, then in time, we will also look to increase drill density. We would think a minimum 50-meter type spacing. And that's currently at around about 100-meter centers on average. So over time, that will also evolve. But again, largely a plan initially to really test our thesis of the scale of opportunity that exists here. Now I would just say that we're also through due diligence, we've been lucky enough to look at some of the work that other third parties did to go and, I guess, assess some of the historical data on a bit of a term, twinning drill holes and they actually saw high correlation and replication of original results. And that's led us to believe the most important thing is to get out and understand the ore body and do new work rather than start off trying to replicate results that seem to us to have been to some extent or seems to have already been done. So Jason, maybe just test anything else on that? Jason Grace: I think you've covered it really well. The only thing I might add there, Ben, is Havilah have drilled and prior involved parties as well have drilled a lot of RC drilling with some diamond drilling. We've also done a lot of work on looking at whether there is an inherent potential bias there between the different drilling techniques. And at this stage, we believe that RC is a good representation of the ore body as we stand at the moment. So as part of our drilling program, we will be doing a mix of RC and diamond drilling. So obviously, with diamond drilling collecting very good structural, lithological, and metallurgical data and then RC being able to step out very quickly and rapidly assess the size and scope and the detail of this deposit as well. Brendan Harris: And then maybe just to round that out, -- and this won't be lost on you, but just maybe for the benefit of others, that this is a sedimentary copper deposit. It's highly metamorphosed and cooked. As we've said before, the mineralized zone, the main sort of prize is it looks like a chair, it's cooked that much. But the key point being is that we have no indication of any discontinuity of the sedimentary layer. That's what we need to test. And that's what that -- particularly that drilling as we move out towards the Southwest is designed to do because that's, again, a big part of the prize for us. It's an ideally dipping portion of the stratigraphy. It's what lends itself to a low strip ratio. And as we mentioned, it also lends itself we believe, to large-scale bulk mining equipment, which will bring with it significant benefits from a productivity and efficiency point of view. Ben Lyons: That's very helpful. And Brendan, just the final part was just the relevance of that MPL versus the ML that I'll hand it on. Brendan Harris: Yes. Look, so a number of these things are a function of the past. There are different configurations that have been considered in terms of where specific infrastructure might replace things like workshops, camp facilities, tailings dams and so on and so forth. As we work through the entirety of this project, I think a lot of those things will evolve. Indeed, we anticipate along with Havilah, but in time, we will seek to add to the, call it, the acreage that the MLs actually cover and/or have additional MPLs because it's likely as we hope that the opportunity grows in scale that we will actually need to look at alternative areas for some of the infrastructure that I've mentioned. There are also off this map. There are borrow pits and things where there are applications in already such that we can get access to aggregate and other forms for building and construction zone. So yes, look, we look forward to at some point in the not-too-distant future once we've got a meaningful presence up there, providing opportunity for analysts and investors to go up and get a feel for the ground and obviously how we think things will evolve over time. Operator: [Operator Instructions] The next question comes from Adam Baker from Macquarie. Adam Baker: Brendan, I was just wondering if you could make a quick comment. Just looking at some of the news in February, Spain had a pretty wet month. Just wondering if there's been any impact to MATSA throughout this period? Brendan Harris: Yes. Unfortunately, that's something we see time and time again. These major weather-related events are becoming more common. And I guess, in some ways, they would say are consistent with a lot of the modeling that was undertaken many, many, many years ago, particularly in the mid-latitude of higher frequency and intensity of these storm events. Jason, I'll just hand it to you. Jason Grace: Firstly, Adam, if we look at it, there's been thousands of people quite heavily impacted by the very heavy rains. And while it wasn't as dramatic as the October 2024 range that we saw last winter, this one is more of a cumulative impact of heavy rains across multiple seasons. So what we've seen, particularly in the Southern Spain area around Andalucia, A lot of the water storage facilities in that region have filled up in the previous winter and not really being drawn down. Now what we've seen is -- then heavy rains come in. We've got a lot of those water storage facilities where they're overflowing straight away. And what we've seen as a result of that is very heavy impacts to communities down close to the coast. So Huelva itself has had thousands of people impacted. And a number of our people and their families are obviously impacted by that given that we draw people as employees and stakeholders for our site at MATSA from that region as well. Now stepping back towards the mine itself. Our MATSA team have managed this event really well. Last year, in between the 2 winter-rainy seasons, we invested in the construction of a south tailing or water storage dam which set us up really well for water management during this period. And the team have managed that very, very well. If you look at overall impact to operations, we've made sure that we've utilized those new facilities well. The only real impact that it has had to us is that we've -- once again, what we see when our ROM area gets very, very wet, the ore gets saturated, and it impacts our crushing and our ability to put the ore up the conveyors during that time and get it through the mill. So we've suffered a reduction in throughput rate in the first half of February, but we're recovering well from that at the moment, and we don't expect that there's any material impact for the full year for MATSA. Brendan Harris: I think the way I put that timing difference, it's more of a frustration, but given the way that the mines configured on the processing facility, as Jason said, we don't expect that to be a permanent impact. But I think the bigger issue is just for our people, and that creates some level of stress in any organization in any region. Good question, though, Adam, thank you. Adam Baker: And just following up on Kalkaroo, maybe Slide 28. Clearly, quite a large array of tenements here, close to 9,000 square meters. Just wondering, it looks like you've done -- it looks like Kalkaroo has done quite a bit of work regards to the JV's perspective and you've kind of got walk-up targets to put drill holes into. Can you just make a quick comment on what you're seeing outside of the main Kalkaroo deposit with regards to mineralization and deposit formation? Is there anything in particular you're looking for? Or should we just assume this is a regional kind of exploration target? Brendan Harris: Look, I'll say something slightly facetious to start with. There's an old exploration geologist. We all know that sometimes the worst thing you can do is put a hole into something. It's the best way to turn something from a target to nothing. But look, the reality is this opportunity is clearly anchored by Kalkaroo. We don't say lightly that we think it's the best undeveloped copper-gold opportunity in the country. That's our view. Now to be tested, others to judge. That's our view. That's what we're doing, what we're doing. We've structured the deal in a way that we think really puts the risk reward in our shareholders' favor. It mitigates risk, provides a lot of opportunity. But it is absolutely right to say that the broader tenement package and the prospectivity of the Curnamona Province has also played significantly into our thinking. If you think about our strategy and you step right back, what do we like about our business? It's that we not only have MATSA, it's that we have a basin opportunity in Iberian Pyrite Belt and have a significant land holding. We like the Kalahari not only because we have Motheo and modern processing hub, but we have a very large land holding just under 10,000 square kilometers or soon to be. That provides an enormous opportunity for future discoveries. What we like about Kalkaroo and Curnamona, one, Havilah has got the most experience in the basin. What they don't know about the Curnamona really is not worth knowing. They have the large land package. It gives us that basin opportunity. And as you said, they've done a lot of work over a long period of time, and there are walk-up targets. Now again, drilling those targets, time will tell. There's a little bit like what we see in the Kalahari. You're looking for a lot of these sedimentary type deposits, which means you will find a lot of copper. What you're trying to find is aggregation of high-grade coupled with continuity. We think that there are some very, very attractive targets and time will tell. But we think this is going to be $30 million over 2 years of money well spent. Operator: At this time, we're showing no further questions. I'll hand the conference back to Brendan for any closing remarks. Brendan Harris: Look, I know I say it a lot, but it's a very busy day. We'll see how many companies have reported this morning. We do appreciate the effort you go to, to understand our company and help others. And of course, we really appreciate everyone who's dialed in today. We are, as obviously, keeping our foot to the floor. We've got a big second half in front of us. We want to be held to account. We are committed to delivering on our guidance, and we look forward to speaking with you again in April, if not before, at either BMO in Miami or on our road show as we move around the country. But thank you again, and have a great day.
Operator: Good morning, and welcome to the Air France-KLM Full Year 2025 Results Presentation. Today's conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Benjamin Smith, CEO; and Steven Zaat, CFO. Please go ahead, sirs. Benjamin Smith: Okay. Thank you very much for your introduction, operator. So good morning, everyone, and thank you for joining us for the presentation of Air France-KLM's Full Year 2025 Results. I'm joined today by Steven Zaat, Group CFO; Anne Rigail, CEO of Air France; and Marjan Rintel, President and CEO of KLM, whose mandate has just been renewed for another 4 years. Congratulations to Marjan. I'll start with the key highlights on the year followed by Steven, who will walk you through our financial performance and outlook for 2026. I'll then wrap up with closing remarks on our 2028 ambitions before opening the floor for Q&A. Okay. Moving on to Slide 3. Let me begin by recalling that we are executing our strategy in a consistent and disciplined manner across all the pillars of our strategy, and this execution is translating into tangible and encouraging results. We are reinforcing our market position, notably through the proposed increase of our state in Scandinavian Airlines System, strengthening our footprint in the Nordics and enhancing connectivity to key North American and Asian markets. We continue to improve profitability with our operating margin reaching 6.1%, reflecting stronger revenue generation and rigorous cost control. Customer satisfaction and brand value remains strong, as reflected by multiple international distinctions across the group, including Air France being named Best Airline in Western Europe by Skytrax for the fifth consecutive year. Employee engagement continues to improve, our Employee Promoter Score up 33%, reflecting the strong commitment and professionalism of our teams, supported by targeted action plans. We are also accelerating technological simplification, retiring more than 200 legacy applications to improve efficiency and agility. Finally, the sustainability stays fully embedded in our strategy, fleet renewal remains a cornerstone of our transition plan with next-generation aircraft now representing over 35% of the fleet alongside SAF blending, significantly above regulatory requirements. Now moving on to Slide 4. Let me now turn to our full year 2025 performance. In a demanding environment, Air France-KLM delivered strong execution translating into positive results on multiple fronts. We carried nearly 103 million passengers, which is up 5% year-over-year and the first time since COVID that we have surpassed the 100 million passenger marks. Group revenues reached EUR 33 billion, up 4.9% year-on-year, an all-time high for our group. We delivered an operating result of EUR 2.0 billion, an improvement of EUR 400 million compared with 2024, marking the highest operating results in our history. At the same time, we generated EUR 1 billion in recurring adjusted operating free cash flow up EUR 800 million year-on-year, reflecting solid cash conversion. Our balance sheet continues to strengthen with net debt to EBITDA stable at 1.7x well within our target range and equity increasing by EUR 1.6 billion to EUR 2.4 billion. Overall, 2025 demonstrates how disciplined execution is translating into structurally stronger financial performance. Yes, beyond the numbers, it was also a year defined by significant commercial achievements. Slide 5. Modernizing our fleet remains a top priority for value creation. The integration of new generation Airbus A320neo family aircraft at Transavia and KLM delivers a superior customer experience while significantly reducing our environmental footprint and operational costs. At the apex of the market, we continue to redefine luxury travel. Air France unveiled its new La Premiere experience, the ultimate expression of comfort and sophisticated service and further enhanced the onboard offering. We strengthened our inflight entertainment through new partnerships between Air France and Canal+ and Apple TV+, bringing premium content to our long-haul customers and enriching the onboard experience. KLM is now among the first European airlines to offer free Internet on flights within Europe and simultaneously both Air France and KLM continue to expand and enhance their high-speed WiFi offering to meet growing customer expectations. Our pursuit of excellence is equally reflected on the ground with the opening of our new Air France Chicago O'Hare lounge and refurbishment of our Boston Logan lounge, we are offering an elegant environment anchored in French hospitality. Collectively, these initiatives demonstrate our unwavering commitment to strengthening the prestige and appeal of our brands at every touch point of the customer journey. Turning on to Slide 6. Last year, Flying Blue, our loyalty program celebrated its 20th anniversary, a milestone that highlights the enduring strength of our loyalty program. Over 2 decades, Flying Blue has evolved into one of Europe's leading airline loyalty platforms, now surpassing 30 million members worldwide. Growth has been particularly strong in recent years with membership doubling since 2022. Today, Flying Blue connects customers across 40 partner airlines, more than 100 commercial partners and over a dozen co-branded credit cards, embedding the program into members everyday lives well beyond travel. This scale translates into both engagement and impact. In 2025 alone, 1.2 billion miles were donated by members to NGOs, representing roughly 2.5% of annual miles issued. Importantly, Flying Blue has been recognized by point.me as the best airline loyalty program for the second consecutive year, a distinction that underscores the strength of our value proposition and the trust of our customers. More than a loyalty program, Flying Blue is a cornerstone of our commercial strategy, driving customer retention, premium engagement and long-term value creation. Moving on now to Slide 7. We continue to advance our premiumization strategy through targeted investments across the entire customer journey. Since 2018, our focus on cabin renewals, high-speed connectivity and upgraded global lounges has significantly strengthened our value proposition. These efforts are now driving a structural shift toward a more premium revenue mix. In 2025, our top-tier cabins La Premiere and Business accounted for 28.1% of total revenue, up from 26.9% the previous year. Meanwhile, our premium economy offerings branded premium at Air France and premium comfort at KLM have surged to reach 8% of revenue, showing significant growth over the last 2 years. Collectively, premium cabins now generate more than 36% of group revenue. This evolution is underpinned by strong commercial momentum. In 2025, La Premiere revenues grew by 17% and business revenues by 9%. Our premium economy segments saw even more dynamic growth with revenue up 18%. Crucially, this expansion was achieved while maintaining stable load factors, demonstrating the robustness of demand for our midterm premium offering. Additionally, our direct online revenue grew by 9%, further enhancing our distribution efficiencies. This continued shift toward a higher value mix remains a key driver of profitability and long-term value creation. Our focus on a more personalized customer experience continues to drive exceptional growth in ancillary revenue across all our airlines. In 2025, ancillary revenue reached EUR 2.1 billion, up 23% year-on-year, following a 26% increase in 2024. Air France and KLM generated EUR 1.2 billion in ancillary revenue, while Transavia contributed EUR 800 million reflecting solid momentum and continued expansion of revenue stream beyond traditional ticket sales across the group. Growth was broad-based across all segments. Seat selection delivered double-digit growth for the second consecutive year supported by more dynamic and personalized options. At the same time, hand luggage performance strengthened further, particularly at Transavia, supporting continued revenue growth. This sustained expansion remains an important contributor to margin improvement and revenue diversification. Moving now to Slide 9. We continue to make significant strides in our sustainability journey underpinned by disciplined investments in fleet renewal and staff. As highlighted earlier, new generation aircraft now represent 35% of our fleet. These aircraft are the primary lever of our decarbonization strategy, more fuel efficient and contribute to reducing both CO2 emissions and noise footprint. In parallel, our SAF blend reached approximately 2.9% total fuel consumption, significantly above current regulatory requirements. Our efforts are also recognized externally. We received a gold medal from EcoVadis, placing the group in the top 98 percentile and our CDP Climate rating improved from a B rating to an A rating. Collectively, these achievements demonstrate measurable progress and reinforce Air France-KLM's position among the leaders in sustainable aviation. Moving on now to Slide 10. In cargo, more than 90% of bookings are now made through digital channels, powered by our myCargo portal, which has evolved into a comprehensive end-to-end service platform. The global rollout of our CRM360 system has been completed across our network, enabling more consistent, efficient and customized customer support while opening the door to AI-enabled services. We were particularly proud to receive the airline of excellence in Europe Award from the World Air Cargo Awards, recognizing the quality of service delivered by our teams. Turning to engineering and maintenance. We secured more than 30 new contracts, bringing our total order book to EUR 10.7 billion. We also continue to advance next-generation technologies, including LEAP industrialization and new test cell capabilities and expanded our industrial footprint with the opening of a new APU facility in Amsterdam, and our expertise was further recognized by the European MRO of the Year Award from Airline Economics. These achievements highlight how innovative and customer centricity are strengthening our long-term competitiveness across both cargo and MRO businesses. With that, I'll now hand it over to Steven, who will walk you through further detailed financial results. Over to Steven. Steven Zaat: Yes. Thank you, Ben, and good morning, everybody. As you can imagine, despite all the rain, which we have the last days, I'm very happy to announce that we have broken the EUR 2 billion ceiling in terms of current operating income. I think getting the margin up by another percent closer to the 8% margin in a very difficult geopolitical context is really an achievement. If we go to Page 12, you see that our revenues are going up by 5%, so growing to EUR 33 billion. That led also to the 6.1% margin, which we currently have. And if you look at the operating result, you see, of course, we had a big tailwind of our fuel price. But at the same time, we could increase our unit revenue by 1% especially by our premiumization strategy on which I come back and which was explained by Ben. And then at the same time, we have really, really, really a strict cost control in the company. We are now at a unit cost of 1.2% year-over-year. That is at the low end of guidance where we started at the beginning of the year, which was between 1% to 3%. So we are very satisfied by getting our efficiency up and also to getting, let's say, all the transformation really finding it back now in our results. On the net result, we have a record here with EUR 1.8 billion. We have to be honest, there's EUR 700 million related to unrealized foreign exchange results, but still EUR 1.1 billion driving net results, driving up our equity and that gives us more leverage also to take out this hybrid equity out of our balance sheet. If we go to Page 13, you see the results per business. So very strong performance on the network. I come back later also on Q4, but we see on the yield. This is driven especially by premiumization and a very strong North Atlantic and South American market. That is on the passenger side. On the cargo, it's a little bit a mixed bag. So it is more or less flattish. But don't forget, in Q1, we had a plus 16% related to, let's say, all the discussions in the U.S. about tariffs and we ended Q4 with a minus 11% because the Q4 in 2024 was up 20% by the election. So there is a lot of impact quarter -- year-over-year. But all in all, despite all the tariffs and all the challenges over there, we were able to keep the unit revenues stable in our cargo segment. Then on Transavia. Transavia, we grew by 15%. We had a size unit decrease of 1.7%. The results are down EUR 52 million, which is split between Transavia Netherlands and Transavia France of 50-50. There are several reasons. First, we take over the slots in Orly. So we grew significantly our capacity and these routes needs to mature before it become, let's say, profitable. Then second, we have a lot of transition costs related to that we move from the 737 to the A320s, which is not an easy transition and may be more difficult than what we expected ourselves. And last but not least, we had a very difficult summer and it was very hot, and there is less appetite to actually fly in to other places where the sun is shining -- if the sun is already shining in your backyard. So all in all, I think it was a complicated year for Transavia, but we keep ongoing. And I think we are -- also, if you look at the Q4 results, we see that we're getting a better momentum in place. And at the end of March, all the slots are transferred to Transavia and Orly and we get to a more stable picture over there. On the maintenance, we are getting closer to the 5.6% margin, which we had in 2019. We grew our revenues externally by more than 10%. This is fully driven by our engine activity. It's really, really, really doing very strong. The communication is still on the components business where we should grow further our margins and there's still an opportunity to go in the coming years. So all in all, the 6.1% I'm pretty happy and also, of course, with the 2004 results on the operating results, it's not 2005, which is my favorite [indiscernible], but we are getting -- we were getting close to that fund. If we then go to the picture between Air France and KLM. So KLM -- sorry Air France benefited from the premiumization. And of course, we had the Olympics impact last year. So we grew our operating result by close to EUR 400 million. On KLM, it is stable. We have more benefits actually from back on track. So it's at least EUR 450 million, but we had a lot of headwinds. We had a Schiphol increase of the tariffs, which costed us EUR 100 million in landings and takeoff charges and around EUR 150 million also on the revenues because we have to charge higher charges towards Schiphol. The whole Schiphol environment profit is EUR 250 million. I don't know if you saw the results of Schiphol, but they should be very happy with it. They have a margin of 26%. But unfortunately, it's over the back of our airline. And then on top, we have, let's say, more connecting passengers on KLM and especially lower connecting traffics from Africa and from Asia. There was a yield pressure in the low-yielding segment, which is bigger at KLM than it is at Air France. If we then go to Flying Blue, I think it grows and it growth, as Ben already explained, the program is very successful. We grew another EUR 18 million despite the fact that the dollar is weaker and that has a significant impact on our Flying Blue profitability, but we grow our volumes over there. So it's good to see that we get more and more positive results from this business segment. And there's more to come in 2026 because then we also fully implemented our P&L, the new American Express deal. If we then move to Page 15. So if you look at the cash flow, we are very happy that we are now having a recurring adjusted operating free cash flow above EUR 1 billion. We still have these exceptionals which are coming in, which cost us around EUR 500 million related to the deferred social charges and the wage tax. But if you take all -- if you take that out and you take all the cash out, which we have, we have EUR 1 billion, which we generate by the business. Then if you look at the net debt, then you see that it's still going up with EUR 1 billion. There's EUR 300 million, which is related to this hybrid convertible. And there is, again, the EUR 500 million of these deferred social charges and the wage tax. So that's EUR 800 million. And then you see that especially the new and modified lease that is quite high that has to do with the introduction of the A320s and the A321s because we needed a lot of direct leases to start up and to transfer quickly the 737 transfer at Transavia and at KLM towards the A320. That has an impact of around EUR 800 million on this net debt. And then on top of it, we renewed our 787-9 operational leases, which had an impact of more than EUR 300 million. So this is an exceptional high number. We know that it will come down in the coming years, and we are more or less, let's say, in the range of the EUR 1.4 billion, EUR 1.5 billion for the years to come. So on Page 16, you see that our strengthening of the balance sheet and also the simplification is working. We have now a cash at hand of EUR 9.4 billion, significant above our targeted liquidity level. We had the lowest credit again with the new issue of the bonds, which we did in January, which was very successful with the coupon below the 4%. And with that, we are continuing the simplification of the balance sheet. So we paid the Apollo bond. We paid the hybrid convertible. We did one issue of a hybrid, and we will pay the next Apollo bond, which is due in July 2026. And then we are simplifying our balance sheet, having less of the hybrid quasi equity in. And at the same time, the strong net result generation, which you have seen over last year will strengthen the balance sheet to do that. So it's good to see that we have now an equity level of EUR 2.4 billion, which is exactly at the pre-COVID level, and we will support that further with our net results. Let's then go to the quarter. So if we go to Page 18, you see that we have, let's say, more or less a stable results. We already indicated the impact on the cargo unit revenue. So we spoke about double-digit decline in cargo unit revenue terms, and we are let's say, at a minus 11%. Don't forget, again, that we had an uptick of 21% in Q4 2024 in the unit revenues of the cargo. So the cargo unit revenues are still very strong. But of course, there is these impacts of these tariffs and these elections in the U.S. So if you take that out, you see that we have improved further our results. First, on the unit revenue, again, I come back that is driven fully by the cargo. On the unit cost, you see that we reached a minus 1.1%, which is very promising, but we had some positive incidentals year-over-year. And then if you look at the net results, EUR 600 million better. Again, there was this unrealized foreign exchange of EUR 300 million. And also we benefit from the tax assets we have on our balance sheet. So we don't pay the full tax to, let's say -- we don't pay the full income tax because we still can use 50% every time of our tax asset. If we then go to Page 19, you see that the network, still the unit revenue going up with 2.2%, excluding currency, and then there is the minus 11% on the cargo. So that stabilized the network result for this quarter. Transavia, despite the fact that they grew with 22% and a unit revenue decrease of 6%, you see that the operating results at least improved, which is not very easy in, let's say, in the winter months of October, November, December. So we are happy with the Transavia result, but we need to improve that further to make sure that we are getting to our profitability target of 8% in 2028. If we then go to maintenance. So I think in Q4 '24, we had a big benefit of delivering a lot of engines in Paris and in Amsterdam. So we are now actually stabilizing the results, but there is still room to improve in the coming quarters because we still have components contracts, which we should make more profitable as we used to before the COVID. Then on Page 20, so Air France, slightly down, mainly driven by a higher fuel price and a high ETS cost. And we should not forget that we had a very high unit revenue last year on the passenger business side over there. On KLM, we see that we improved our results. It's good to see that the unit cost reductions are really coming in now with the Back on Track program and it's promising also to see forward in the years to come to get KLM at a better result in terms of operating margin than they are today. And then on Flying Blue, 24% margin, EUR 40 million, again coming in. So very strong result also in Q4 on our Flying Blue, and it's promising also to see that for the quarters to come. If we then take a step back and we look at the world map, so it becomes a little bit like a broken record, to be honest. But you see the premium, the premium and North America and Latin America are driving up actually this unit revenue. So in the first and business class, you see that the load factor is up close to 1% and the yields are up 4%. On the premium economy, we have 8% growth in capacity. There's a little bit of a mix impact, which drives the load factor down, but still the yield is up 6.8%. So we see a unit revenue increase over there of 4%. And then the economy, that's more and more difficult. You see a 1.4% gap. We see -- if you look at the map, and we come back on it later, you see that it is more difficult with all the traffic towards the U.S. to fill, let's say, the connecting traffic towards the U.S. The point-of-sale U.S. is doing very strong. So there's a lot of passengers coming from North America to Europe. But the other side, it's getting a bit more difficult. But all in all, I think if you look at the North America with a load factor reduction of 0.5% and an increase of yield of 6%, it's still very, very strong. Latin America, 91% load factor, a 10% capacity increase and a yield increase of more than 2%. So also still very, very strong. And then if we move to the East, it's also good to see that the East is doing better. So we grew our capacity with 6%, but we see also that we have strong yields over there. And we see the yields which are strong in China. They are strong in Japan. They are strong in Korea. So everything what's Asia related is very strong. On the Middle East, we took back capacity. So that has an impact, of course, on the yield. So we could also drive up the yield. So Asia is really, let's say, promising if you see where we were in the fourth quarter. And then in the middle of the picture, you see Africa. Africa is getting more difficult. It's more, let's say, less attractive for people from that region to go to North America. And you see that also if you look at the point of sale mix. So Africa is actually not a big part of those flows on the North Atlantic, but they are down year-over-year. And if you look at their percentage with 23%. So all this growth of the U.S. is actually coming from the U.S. point of sale, which is up 3%. Europe, you see down with 2% and also Asia and India are down with 4% to 5%. So this connecting traffic towards U.S. is getting more difficult if you compare it with a year ago. And then last but not least, at Transavia, I already spoke about that the short and the medium haul, still difficult. We have flattish yields, but we know that the costs are going up there. We have the increase of the soft cost. We have the increase of the ETS cost because we are losing ETS rights, and you see also that the load factor is down 1.5%. Then let's go to the unit cost. So you can imagine that we -- after a long, long, long, long period, we had, for the first time, unit cost decrease. So that is that was very good. Let's first start at the left side. You see the productivity brings in 2%. So that is really a strong indicator that our transformation and all the programs we have in our companies are working. You see also that the fleet renewal brings 0.6% in fuel efficiency. And then you see what we call other, 0.6%. And we had a lot of -- and I don't know if you remember, in Q4 '24, our unit cost went up with 4%. We had a lot of incidentals in that period. So I think if you take it all together, it was EUR 60 million. And we have a lot of good news this year actually in our unit cost. So that I think if you take them all together, you talk about a range of EUR 100 million, which is impacting actually this unit cost performance. But all in all, I think the left side shows that we are doing very strong in keeping the transformation going and delivering the unit cost improvements, which we see in our company. And then, of course, there's the premiumization, but that drives also the unit revenue. So that has an impact of 0.6%. And we still have these charges in ATC and airport charges, which are hurting us for 0.7%. Let's then go to the year 2026. So it started not very good. We had a terrible weather in Amsterdam that had an impact of EUR 90 million in the first quarter. If you look at that EUR 90 million, around, let's say, 80% is related to KLM and Transavia and the other part is related to Transavia France and Air France, so especially a high impact on KLM. We -- if you look at the unit revenues, which we have, you see that the unit revenues in the first quarter, excluding ancillaries, et cetera, so it's the NTR is down 0.4%. Air France is still up 1.5%, less impacted also by the snow. But if you take KLM, they had a unit revenue of minus 3.8%. If you take out the snow, you come to plus 0.5%. And if you would apply that also to the total unit revenue, we are up 1.1%. So still, the demand is there. We had a hiccup, let's say, in the operations in Amsterdam, which costed us quite some money. But it's good to see that the, let's say, the underlying trend is still very positive. And if you look at the forward bookings, it's more or less in sync what we have seen in the last quarters, we are below what we were the year before. But on the long haul, you see that we already -- there's only a 1% differential. And there's always for us, let's say, a trade-off between yields and load factor. And we have a very aggressive revenue management manager to driving up the yields in our system. Let's then go to Page 25. So the fuel bill, EUR 6.9 billion in 2025, EUR 6.9 billion in 2026. So nothing is really happening. But the jet fuel price because we grow our capacity, I will come back on that later, is still coming down, and it's good to see that we have already hedged 62% of that volume. And then you see on '26, we are increasing the tenor of our hedges. So instead of hedging 6 quarters ahead, we are hedging 8 quarters ahead if you start at the quarter. And that brings that we are now have a total exposure hedged of close to 90% of a 1-year consumption. I think this is giving us robustness in this very, let's say, dynamic world, you could say, also in terms of fuel price. So we are getting closer to our European competitors, and I think we are very close to the ones which their head office is in London. If we then go to the capacity outlook, you see that we are reducing, I think, compared to what we initially thought during the Investor Day. We are now at 3% to 5%. We still will grow the long haul, which is our, let's say, backbone of our profitability with 4%. The short and the medium haul, we keep that stable. We are not growing there anymore. We are trying actually to improve our results, and we are keeping the capacity stable for the next year. And then Transavia still going up with 10%, mainly coming from upgauging of the fleet. And at the same time, we still have a quarter to transfer the activities in Orly from Air France towards Transavia. So that results in a capacity outlook between 3% to 5%. On Page 28, you see our total outlook. So the unit cost is guided at 0.0% to 2%. So there is the premiumization in which is 0.5%. We still have higher ATC cost, by the way. We still see high cost on Schiphol for another quarter. So that drives us that our unit cost despite the fact that we had a very good unit cost even down in the fourth quarter that we are between 0% to 2% for the year to come. And as we are disciplined as we were this year, we were getting more to the left than to the right side of that picture. But it all depends on the completion factor and of course, all the things which we need to further implement on our transformation because there is still inflation in the system. But it's good to see we have the CLAs actually now in. We closed [indiscernible] for Air France, and we have the CLAs in place for KLM for the majority of the stuff. And then on the net CapEx, you see a EUR 3 billion, which is in line what we had last year. So we are moving and we are still disciplined on our CapEx, although we still want to renew our fleet. And then on our leverage between 1.5 and 2, and we are now at 1.7. So we are quite comfortable with that, which drives me to our outlook. So we keep the same ambition. So we want a margin above 8%. We want a significant positive adjusted operating free cash flow, which you see that we're already realizing in 2025 if you take out this prepayment of the wage tax and the social charges in France. We keep on focusing on reducing our unit cost. It is not easy in this inflationary environment. We will keep on going to reduce that because that will improve our robustness in our business. And we are aiming on our leverage to have an investment grade for Fitch, we already have it, and we are very much in the safe zone over there. And we see that on S&P, we are moving really on the right track towards that investment grade. So we guide for 2028. We never guide in the year where we live because the circumstances are too uncertain to guide for. So that is a nice trajectory from the current 6% towards the 8% in 2028. With that, I give the floor to Ben. Benjamin Smith: Okay. So final slide here. Thank you, Steven. 2025, I'll say again, was a solid performance. We're quite pleased in a very demanding environment, in particular with the unique charges and taxation and airline focus in the Netherlands and in France. But the execution was well disciplined, and we've delivered both revenue growth and improved margins as we've just been outlining. Premiumization is clearly gaining traction. Our robust cash generation reflects improved profitability and strict investment discipline, and we're also delivering on our sustainability commitments via both fleet modernization and increasing SAF adoption. Looking ahead, we will continue to execute our road map with rigor and consistency with priorities on accelerating KLM's transformation, playing an active role in European consolidation and advocating for a level playing field. So these are the 3 main focus areas for us looking forward to 2026. Our ambition is to build a future-proof European champion, one capable of competing globally in a fair and transparent environment. So with these strong foundations and disciplined execution, we're carrying the momentum into 2026 with full confidence. So thank you for your attention, and we're now happy to take any questions you might have. Operator: [Operator Instructions] The next question comes from Harry Gowers from JPMorgan. Harry Gowers: A couple of questions, if I can. First one, Steven, can I just confirm what you said on the unit revenue going in Q1? I think you said to date that Q1 network total unit revenues are down minus 0.4%, but excluding the Schiphol impact it's up plus 1%. Was that correct? And then also, are you talking about network specifically and also ex currency? Second question just on the ex-fuel unit cost guidance for 2026, the range is obviously flat to plus 2%. Maybe you can give us a little bit of color on what scenario you're kind of baking in, which would lead you to being towards low end and flat? And then what sort of scenario would lead you to being at the higher end of plus 2%? Kind of what are you building into your guidance at both ends? And then final question, just on your EBIT margin guidance of over 8% by 2028, I mean anything you can say so in terms of progression to get there? I mean, will it be a linear journey from the 6% that you reported in 2025? Steven Zaat: So first, it was not Q1, what I said it was January, just to make sure. It is indeed the network ex currency and just our net ticket revenue, so excluding ancillaries. And you're right, let's say, if you take the January numbers, it is minus 0.4%. But if you take out the snow you get to plus 1.1% in terms of unit revenue in January. So it's not the full quarter. But to be honest, the first weeks of February were also not too bad. But I don't want to guide on weeks because then we get because then we get -- because there's always a week over week comparison, which is difficult. So I give you the number for January. Then on the unit cost, I think it is fully driven by the operations. So as long as we keep the completion factor and the operations going well, then we get more to the left side of our range. Of course, if we don't make the completion factor and we have a lot of compensation costs due to the fact as we have seen also in January, then of course, it drives up our unit cost. So I think it's all about execution. I think on the transformation, we have the programs in place. That is a journey which is not a one-day journey. So we -- it's just an ongoing procedure or operation, but the real unit cost difference comes from the execution in our operation. And for the long-term guidance, I'll give the floor to Ben. Benjamin Smith: So look, in 2018, where we were -- if I go back to 2018, where we were with Air France sitting at 1%, 2% margin and the very difficult transformation we went through with a clear strategy, and we're quite happy to see the results and how that's been panning out, and that was a linear sort of straight line. And KLM was starting the transformation or a new transformation effort from a much higher position. I'm not sure how close you are following, what's going on specifically in the Netherlands, but we've had an enormous increase in cost of operating at Schiphol. There's been a sharp increase in taxes related to transportation that have been imposed by the Dutch State and with a relatively high level of inflation, the pressure on cost with our staff has also gone up. So we've got some very good plans in place. We have to relocate the -- how the network is set up to make sure it's sized correctly for the new environment, which we're operating in. But I'm confident that we can get the margins up at KLM to ensure that, that contributes to our ambition of at least an 8% margin in the near term. Operator: The next question comes from Alex Irving from Bernstein. Alexander Irving: Two for me, please. The first is on the Air France medium-haul fleet. Now you've still got A220 deliveries for the next 2 and a bit years, then those are done. By when do you need to place the next order given the aging Seals you have? Is the main trigger for that an A220-500 program? Or if not, then what are you looking for to make that decision? The second question is on distribution and specifically how you're approaching the decision about whether and how to sell through large language models. Are you planning to engage directly with LLMs using an API or to rely on GDSs and travel agents continuing to pay commissions? When do you think you'll sell your first trip through a large language model? Benjamin Smith: Okay. Alex, so on the fleet front, we've decided to go exclusively with the Airbus A220s for -- to fly the entire medium-haul mainline fleet at Air France. We hope to have between 90, 95 examples in place before the end of the decade, replacing the entire Airbus Seal fleet. We are going to also look probably sooner rather than later at a replacement for our long-haul Boeing 777-300ER aircraft when you look out at how the order book looks at both Airbus and Boeing. So there's -- there are 2 options there. So on the fleet side, that's what we're looking at. At KLM, the decisions have been made and the 777-300ERs are much newer. And as you know, Transavia, we've made the decision. On distribution, we're still not 100% clear on which way we're going to go. We have some very unique markets in Africa, which don't fall into the categories that a lot of North American airlines deal with and some of our European competitors. We have a big exposure to Western Africa. And these are -- this requires a specific type of distribution, which we need to fit into our overall distribution strategy. Operator: The next question comes from Stephen Furlong from Davy. Stephen Furlong: It's more of an overview question to Ben. I mean I would have thought my view is that 2026 is a very important year for the group to get you -- set you up for the greater than 8% margins in 2028. I think, Ben, you called it in New York earlier in the -- in January, a pivotal year. You might just go through if we look to the end of the year, what would be your wish list at the end of the year, both organically or inorganically in terms of the group? And then what would be the biggest challenge you think this year or anything that would worry you in terms of operationally or anything else, restructuring, et cetera? Benjamin Smith: Okay. Thanks, Stephen. The strategic plan that we started out in 2019 at Air France has not changed. We've done the bulk of the domestic overhaul, which will be -- the plan will be completed in the next month. So that looks like we're in good shape to complete that. Of course, this was the biggest money-losing region of our network in 2019. So that is panning out as we'd hoped. The introduction of the replacement of the slots at Orly from being used by our regional operator HOP! and Air France by Transavia activity that takes some time to adjust. We were flying on average smaller gauge airplanes and we're replacing those with high-capacity or higher-capacity densified A320, A321 aircraft. So that adjustment and transition hoping goes as quickly as possible so that we're able to take advantage of the slot-constrained Orly airport and the cost structure we have at Transavia. So on that side, if I look at domestic France and the Orly operation and the ability to take some of those slots that we're operating today at Orly and move those to more of a European focused network and have something more comprehensive at Orly that we can offer to customers, that would be a big win for us. So we've got a time line over the next 2 or 3 years from a profitability perspective on what our ambitions are for Transavia. But as I've said many times before, the Transavia results, particularly in France, have to be looked at in context with what we've been able to restructure at Air France. So we are saving a couple of hundred million by pulling Air France out. Of course, it's Transavia that has to cover those flights, simultaneously reducing capacity in France and redeploying the use of those slots to European destinations and then going up against some very tough low-cost competitors. However, with the cost structure of Transavia being pretty much in line with our main low-cost competitors at Orly and with the advantage of the 50% slot portfolio and the Flying Blue affiliation, we've got a very good customer offering. So that's the -- that's on the Orly front. At CDG, continued simplification and -- both from an operational and maintenance perspective with reducing the types of fleets. We'll have the last of the Airbus A330-200s out of the fleet. The standardization of the cabins and the modernization of the existing fleet will almost be complete, so we can continue to drive pricing premiums, which we're seeing are working quite well. And that's why you're seeing the increased performance in the revenue -- on the revenue side at Air France. And if we can continue to improve the relationship with Aeroports de Paris, the airport operator that handles the -- or is responsible for both CDG and Orly Airport, which is much, much better now. So we're aligning our CapEx -- or their CapEx plan with our needs. So the operating environment at CDG should bring down cost significantly because it is a very difficult airport to operate a hub from. So that's at the -- on the airport front, and we can maintain the competitive cost structure of that airport and the taxes that the French state imposes on the airline industry, which we've been able to do so far despite the unstable government environment here. So on France, there's quite a few difficult items or elements that we've got to navigate through. But so far in 2025, the team under Anne Rigail have been able to do so and the result is, as you've seen, has been above expectations. So for 2026, it's pretty much the same. At KLM, we have a few more headwinds with also an unstable government, which has put in place a lot of incremental taxes that we were not expecting. So Marjan Rintel and her team are doing their best to temper those and even reduce these taxes. We're lucky that we have a new Minister of Finance and the Minister of Infrastructure, which is much more friendly to aviation. So we're reasonably optimistic that we can get some improvements. And the Schiphol Airport charges, this is our #1 objective at KLM to help reduce costs. If we're not able to significantly do that, we're going to have to seriously look at the operation and the hub that we operate there and what we're able to do profitably with the assets and the network that we have. So it'd be very -- I'd be very happy if through 2026, we could get some more clarity on what we can and can't do at Schiphol and that we've got more, I'd say, more assurance that our situation at Paris remains as it is today. And then also last point here is with SAS that we're pretty much completed our transaction and the takeover by the end of the year. So long answer there, but those are the 3 elements we're looking at amongst our carriers. Operator: The next question comes from Jarrod Castle from UBS. Jarrod Castle: Three as well. Are there any negotiations which are worth highlighting during the next 12 months for any of the airlines? And any concerns around that? Secondly, just coming back to AI. You signed an agreement with Accenture. I wonder, Ben or Steven, if you could just go through the buckets of where you see the use cases internally. I'm not necessarily talking distribution, but what makes it exciting for you? And then -- okay, I guess thirdly, the ETS price of carbon has been very volatile. So just an update on hedging. And then just related an update on how you see CORSIA developing, and all these environmental headwinds coming your way? Benjamin Smith: Okay. On the on the CLA labor agreement front, at Air France, there are no significant negotiations that are planned to take place in France. However, things do come up. But as we see today, things are relatively stable in France. And as I said, we don't have anything scheduled next year. There are some big agents that do come up in 2027, which we're laying the groundwork. And hopefully, we can get those agreed to earlier rather than towards the deadline. At KLM, we have constant CLA negotiations that are continuing. But with the situation at Schiphol and with the cost structure that we have at KLM today relative to the unit revenue, we've got to work with the union there to come up with a model that can get us back to the profitability levels that we need at KLM. So there's -- I would say they're not necessarily scheduled, but they must have -- they must -- these are new negotiations that are part of the transformation model that needs to take place. Steven Zaat: And then on the AI. I think AI is everywhere. So we will use it in our administrative process. We will use it in revenue management where we have a big project running. So it is not to say that we have only one part where we will use AI. So it is -- we have an approach where we have a discussion on, let's say, at the total group level, where we are going to invest in AI, but it is very also decentralized in all the executions within the operations. So it is -- I could say it is in every domain where you can talk to if you talk about customer management, if you talk operations, if you talk about commercial. I think it's not one domain, and therefore, we explore with Accenture further where we can implement further our AI. On ETS, we are, let's say, rebuying the ETS rights 1.5 years ahead. So we are fully hedged on that fund for 1.5 years. And then if you talk about CORSIA, CORSIA is a little bit -- it's a very difficult, how can I say, system. There are not a lot of projects. So we are just looking which projects where we can invest the money, but there are not that many. So we are a little bit skeptical about the execution, but it is there. I don't know what will happen in the U.S. So that is also important to see. But all in all, we have the, let's say, the provisions for it to invest in it. And we need more projects actually which are really helping this planet. All in all, the cost levels are not that high at the moment, it is not the same as putting sustainable aviation fuel in, which is, let's say, the first trigger together with the fleet, how we decarbonize let's say, our operation. But it should be there at a certain moment coming, but we need to have the projects where we have full confidence in that it is helping our planet. Operator: The next question comes from James Hollins from BNP Paribas. James Hollins: Two for me, please. Just picking up on your comments there, Steven, on U.S. outbound, U.S. inbound, is it a case that U.S. outbound from Europe is getting worse? I think you were talking about some softness there. Is it just a late bit difficult? And maybe a comment also on U.S. inbound. Is that potentially getting stronger as we head into or heading through 2026? And a slightly annoying question, but do you expect to reduce your Q1 losses year-on-year even with that weather issue costing you EUR 90 million? Steven Zaat: James, let's first start at the -- your last question. So I don't guide on anything. But of course, we are -- the ambition is to go to 8%. So that also means that we are trying to reduce our losses in the Q1, but don't forget that the seasonality is getting bigger in our industry. So -- but of course, it is not that on itself, we have an ambition to grow our losses in the first quarter. The situation in the U.S., let's say, if I look at the point of sale and I come back on what has happened in Q4. So the total revenues in the U.S. were up 9%. Then there was a 12% growth from the point-of-sale USA. So really, really strong and only 7% in Europe. So you see that Europe and especially Northern Europe. So if you look at Scandinavia, Germany and also the Netherlands, I think you see, if you look at the how popular the U.S. is currently in those countries, it is at a very, very low level. And that impacts, of course, also the appetite to go to the U.S. But there's another element on the U.S. It's extremely expensive to go there. So the inflation is very high over there despite the fact that the dollar is coming down, it's still much cheaper to get in a hotel in Europe than if you go to a hotel in the U.S. for the same quality. Then on Africa, so if you look at the -- 9% up, we are in revenues and Africa point of sale is down 16%. So you see really a significant impact over there, but we should also be modest on it. The share of, let's say, the point of sale of Africa on our U.S. is only 1.8%. It's not very big. And then we see, indeed, also India and Asia a little bit in the same way, so only 4% up in terms of sales, but with the growth of 9%. So that's a little bit of mixed bag. So we still see a stronger point of sale U.S. both in corporate and both in leisure, and we see a declining demand in Europe. But as you can see, at the end of the day, our unit revenue is up 6% year-over-year -- or sorry, the yields are up 6% year-over-year. So it is still very strong. And we all know that the point of sale of USA has the strongest price. So by definition, it's more favorable to move to the U.S. point of sale than the point of sale in Europe or elsewhere. And then the -- yes, I think that's it. Yes. So I hope you're happy with my answer, James. More I cannot say. James Hollins: No worries. Just given you mentioned it, maybe just some general trends on corporate travel, if you could, please? Steven Zaat: Corporate travel is just holding like it was. So it is not getting stronger year-over-year, but it still is the same share of percentage. So corporate travel is doing well, in line with all the other revenues, but not stronger than leisure. Operator: The next question comes from Andrew Lobbenberg from Barclays. Andrew Lobbenberg: Can I ask -- you gave us in the deck, the advanced loads for Q1, I know it's obviously early days, but how does it look for the summer for Q2 and Q3? Is that level of lag, obviously, on lower numbers? Is that stable? Or is there a bigger gap this year? Second question might come to SAS. Is there any information you can give us on the progress through the competition policy process to take SAS on? And also, whilst I see you don't want to give us guidance on what it would cost. But can you just remind us of how that process works and also whether your leverage guidance that you gave us, is that inclusive potentially of having SAS on the books at the end of the year? And the third question, with Dutch airport policy, I think I read that there are plans to open a reliever airport for Amsterdam. Petrus Elbers always used to laugh at me because I couldn't pronounce it probably, but it's Lelystad or something like that, isn't it? Do you think that's going to happen? And is that good or bad for you guys? Steven Zaat: Yes. The summer Andrew is very far away, especially for French people and Dutch people. They are just thinking about their skiing holidays so not so much in into, let's say, the holidays of the summer. But if I look at the summer period and I look at the booking load factor, let's say, July, for instance, is close to where we were last year. So that's not even a gap, but we talk about numbers of what is it, just 20% of our planes, which is filled so it is very low. We are late bookers in our home countries due to, let's say, our relative good schedule in terms of holidays. Then on SAS. So we had the first discussions with the EU so it's going on, and we are still aiming to get it done at the end of 2026. So we had more than 100 questions. We are very nicely answering them, and we are discussing with the EU. It's more an information session at the moment that is any other discussion. They need to get a full picture what is the competitive landscape in Europe? And specifically, what is the competitive landscape in Scandinavia together with Air France and KLM. Then what is the cost? So what we have a formula, which is actually that we pay for the shares what is actually the EBITDA multiple in the market. So that is our EBITDA multiple, the one of IAG, the one of Lufthansa and the one of Finnair. And then we have an EBITDA, which we multiply and then we deduct the net debt, the same as you do in your modeling actually. And indeed, if you look at the leverage, we take into account also as it will not have a big impact on the leverage because the results of SAS are not that bad at all. I cannot disclose them, but in total, it will not have a significant impact on our leverage. And then the question on Lelystad, I give to... Benjamin Smith: Andrew. So as you know, in 2019, Schiphol was saturated in net capacity and Lelystad was planned to open, and there were discussions of even raising the cap at Schiphol. So Schiphol was at 500,000 movements and there was a discussion to go to 525,000 movements, and discussions about opening Lelystad airport, which was built and laid. So now we're sitting at 478,000 cap movement at Schiphol. We'd like that pretty much locked in stone so we have some visibility. We have much higher cost at Schiphol than we had in 2019. We do believe that Lelystad will open with 10,000 movements so we're not looking at a lot of movements today at a lower cost operation. So to answer your question, is it good or is it bad for us? I think when you look at the whole picture, we want visibility on both the number of slots at Schiphol will be available in the short to medium term? And what is it going to cost us to operate at Schiphol in the short to medium term. I think once we have that, we'll be able to take a position on Lelystad whether it's good or bad. Operator: The next question comes from Marc Zeck from Kepler Cheuvreux. Marc Zeck: I try to get answers to 2 questions. First is really on Airbus. Airbus today said they will scale back deliveries somewhat due to engine issues, and at least judging by Airbus share price reaction that came as a surprise to the market. So what do you currently factor into your unit cost guidance for 2026 and the margin guidance for 2028. In terms of Airbus deliveries, do you kind of already have today's Airbus announcement in that? Or might there be a bit of headwind if there's less planes deliver and there's maybe more what type of sedation in the engine market? And the second question really would be on the EU point-of-sale Atlantic traffic, you kind of said you already answered or said everything you could say. But I was looking for any signs maybe of improvement from the very depressed levels of EU point of sale. I believe Q4 last year, there was not yet really an impact from U.S. politics that only kind of emerged in Q1 2025, really. So if you are now looking at bookings, EU point of sale into the U.S. especially from France and Netherlands. Do you see an improvement compared to the depressed level we see in -- we saw in 2025? Or is it still very much unchanged or even a deterioration on that one? That's my 2 questions. Benjamin Smith: Okay. Marc, so a couple of things. We were lucky that we have quite a number of unencumbered planes, older generation airplanes, which gives us some flexibility for delays that we may incur from Airbus or Boeing. We took a very lengthy delay with the deliveries of our last Boeing 787 aircraft. We just received our last 787-10 at KLM a couple of years late. So we're pleased that we've now got the entire 787, both -9-10 order book now completed for Air France and KLM. For the -- on the Airbus side, Airbus A320s, we ordered the airplane with the CFM LEAP motor, CFM LEAP engine, the Pratt GTF. So that is one of the big road blocks for Airbus to deliver. Here again, we have 737s at KLM and A320ceos at Air France that are either owned or unencumbered that we can continue to fly should we encounter any delivery delays on the 320neos powered by CFM LEAP engines. We have taken some delays over the last 2, 3 years. So we have been managing. So it's not new. We have to take a few extra months. It's not the end of the world for us. We have been on a big fleet renewal for the last 5 years and so we've got some good experience in managing either engine delays or the airframe delays and also difficulties in integrating new technologies such as -- we've got some challenges on the Airbus A220 fleet and how that impacts the operation and how we can handle it. So I think -- so far, we don't see any change in our assumptions for 2026 on the fleet front. And then point of sale Europe on the transatlantic, our position on that. And what we've seen has not evolved in the recent weeks. It is -- we do see some softness, but it is being offset by stronger point-of-sale U.S. Operator: The next question comes from Axel Stasse from Morgan Stanley. Axel Stasse: So I want to come back on this, but how much is your U.S. point of sales for the transatlantic routes? Is it fair to assume it's close to 50%, asking this just to make sure we understand how much of the headwinds Europe represents for the group right now? And maybe a follow-up on this is what are the yield differences for the U.S. and the European point of sale for the transatlantic routes? That's my first question. And then my second question is about the cost benefits can you quantify how much of the KLM cost benefits you guys benefit in 2026 versus 2025? And should we see more of this cost benefits in the first part of the year or in the second part of the year? Steven Zaat: So let's say, the point of sale U.S. is around 56%, already, really a strong foothold. The yield difference, I don't know by heart. So I don't want to mislead you by that, but I know from the past, it was quite significant. And we have also seen that the U.S. pricing has gone up. So I don't have the answer on that one, to be honest. And on the cost benefits, we will see that, let's say, it will gradually go -- you have seen in this year we have -- it started actually more in Q3 and Q4, but we also expect that the cost benefits will probably more. I think it will be more evenly spread as what we have seen last year. But we have a [ triple ] specifically, which is still charging again an increase year-over-year in the first quarter, which we will not have in Q2 to Q4. So there is maybe more the difference than what we have seen this year. Operator: The next question comes from Ruairi Cullinane from RBC Capital Markets. Ruairi Cullinane: Yes. I found the comments on the level playing field for airlines globally, pushing that. Interesting given you are using more tax mandates. Is that something we should expect you to continue to do? And then secondly, just because it is such a substantial impact on the quarter. Is the tax impact purely a function of the DTAs that were mentioned in the prepared remarks? Steven Zaat: Ruairi, welcome to our group of analysts. We are very happy that you follow us from now. So thanks for that. Yes, RBC, yes. Yes, we are very happy with you, Ruairi. Just one quick, can you repeat your last question, please, because we could not fully understand the question. Ruairi Cullinane: Yes. Yes, it was just on the EUR 354 million sort of income tax impact in the quarter. Is that -- I mean you mentioned the DTAs in your prepared remarks, but I wondered if there's anything else notable there? Steven Zaat: Okay. So first on the SAF, let's say, we have a mandate. So we -- of course, we fulfill our mandate because that is automatically more or less done. Then on top of it, we will sell SAF to the markets to our corporate customers and to our, let's say, directly to the passengers. And then, of course, also on the cargo, we sell our SAF. We consumed, especially in the Q4, a high level of SAF in the Netherlands, because there were HBE credits. So jet fuel was more or less the same price as SAF. So that is why we had a very high volume at KLM in the fourth quarter on sustainable aviation fuel. If you look at the income tax, so it is driven actually by the fact that we are making more profits in France so we can make more use of the tax asset. And at the same time, we revalue the tax asset based on our, let's say, profitability trajectory, which we have agreed with the Board. So those 2 elements, which is driving up that tax. We still have, let's say, every time we have to pay tax there is a 50% credit, then you know that there is an additional tax in France, which they say it's temporary, but it has now been extended again, but that has a very marginal impact at around EUR 11 million impact in 2025, but it will grow because our profitability will grow, and they also take 2 years into account so we have more profitable years to take into account. But it is mainly coming from revaluating the tax asset and the use, of course, in the year 2025. Operator: [Operator Instructions] The next question comes from Jack Rayburn from Bank of America. Unknown Analyst: Standing in for Muneeba this morning. A couple of questions, please. Maybe picking up on the U.S. point of consumer or point of sale again. What gives you confidence on the strength of the U.S. consumer continuing in 2026? And how are you viewing transatlantic industry capacity and potential yield implications? And maybe touching on TAP Portugal, if there's any late developments on that? And if you have any issue with the minority stake. Thank you. Steven Zaat: Yes, why are we confident? Let's say, I don't say that we are confident or anything, but still every time we are surprised by the strong foothold of the point of sale of U.S. Of course, it's a very dynamic market. There's a lot of things happening over there. Of course, some people are worried about recession, et cetera. But still, the prices are much different in Europe than over there. And as already said, probably the lower dollar at a certain moment will also help a bit of traffic towards the U.S. especially in countries like the Netherlands, where they look very carefully at pricing and to make use of that. So all in all, I think, let's say, the booming on the North Atlantic even exceeding our own expectations, and we still see very strong bookings coming in out of the U.S. Then on TAP, now you know that there were 3 parties qualified for the process, one of them is us. And we are working on a nonbinding offer, which we will bring in before the deadline, which is at the beginning of April. So that is where we are, not any further, and it takes time to, let's say, get a real offer on the table. Operator: There are no more questions at this time. So I hand the conference back to the speakers for closing remarks. Benjamin Smith: Thank you, operator. And thank you, everyone, for your questions, and we look forward to speaking to you at the end of Q1. Operator: Thank you for your participation. The call is now over. You may now disconnect.
Rachel Arellano: Okay. A very warm welcome to everyone both here in the room and for those of us joining us remotely. I want to begin by acknowledging the traditional owners and First Nations peoples who host our operations around the world and pay my respects to their elders, past and present. We are pleased to be here today with our CEO, Simon; and our CFO, Peter Cunningham, to present to you our 2025 full year results and this will be followed by a Q&A session. There are no planned fire evacuations today. So if you hear the alarm, please follow instructions from the fire wardens here at the London Stock Exchange. With that, I'd like to ask Simon to the stage. Simon Trott: Good morning all to those here in London. And of course, also those joining us online. So I'll start with safety. And this evening, I'll fly to Guinea to spend some time with the team at Simandou. As you'll no doubt be aware, last Saturday, one of our colleagues died at the mine site. We've achieved a great deal at Simandou, but this tragedy underlines that we have more work to do to ensure that everyone goes home safely at the end of every shift. Safety is the foundation of our business and nothing is more important than the people that work around us. And we must be able to safely operate in different jurisdictions around the world like Guinea. The leadership team and I are determined to learn from this tragedy, and we're taking some immediate actions. We've stopped all site works and construction activities. We started an independent investigation with both internal and external experts. And in addition, we will appoint an independent safety advisory panel. This will consist of leading safety practitioners from both industry and academia together with experience Rio Tinto Alumni. It will provide additional guidance and support to our team as we complete construction and then move Simandou into operations. As we put in place these actions, we will reflect further on the lessons from our colleague's death. With these thoughts in mind, I'll turn now to our financial results. We're making clear progress towards our mission of being the world's most valued metals and mining business. The results today are underpinned by a stronger, sharper and simpler way of working, which will lift productivity as well as lower cost, enabling us to cut complexity and focus on the right opportunities. Our operational performance was strong in 2025, and we delivered an industry-leading 8% equivalent increase in copper equivalent production, setting annual records for both copper and bauxite. Our Pilbara mines rebounded strongly from the cyclones at the start of the year and set production records from April. And while volumes increased, our copper equivalent unit costs reduced by 5%. These results also show the value of diversification. Underlying EBITDA increased by 9% to $25.4 billion. The increases from both copper and aluminum were a particular highlight. Self-help was also a feature as we unlocked a $650 million run rate in annualized productivity benefits. And I'll talk more about this shortly. Finally, the dividend. We achieved stable underlying earnings of $10.9 billion, and we will return 60% of this to shareholders equating to $6.5 billion. Now stepping back. We've got the right assets in the right commodities and we're well positioned to deliver growth in the years ahead. Over the next decade, we expect strong growth from aluminum, lithium and copper with steel demand remaining resilient. At the same time, across the board, supply is constrained, with sector CapEx 50% lower than its 2013 peak. Now Rio has got the people, the capability and the projects to meet this demand. And we're achieving this through operational excellence. This is driving our strong production performance, putting us on track to deliver our ambition of 3% CAGR for copper equivalent production through to the end of this decade. As part of our stronger, sharper, simpler way of working, we're also driving operational outcomes and structurally reducing costs. We will achieve the $650 million annual run rate in productivity by the end of this quarter. And with this strong start in 2026, we will deliver cash improvements materially above this Q1 run rate in 2026. Of course, to drive the growth that creates value for our shareholders, we need to deliver on our projects safely, reliably and at scale. And in 2025, with Oyu Tolgoi, Simandou and our in-flight lithium projects, we executed some of the most technically challenging mining projects on the planet. That underground development at OT is now complete, fully invested and the growth is ramping up. And we're on track to deliver, on average, around 500,000 tonnes of copper per year between 2028 and 2036. In December, we also achieved our first shipment of high-quality iron ore from Simandou, and we will deliver 60 million tonnes per annum of iron ore as we fully ramp up. And in lithium, we're progressing our in-flight projects, targeting capacity, 200,000 tonnes per annum by 2028. We're delivering tangible outcomes today. And we have the project pipeline to extend growth well into the 2030s with copper at its core. That includes projects like La Granja in Peru, Resolution in Arizona, Nuevo Cobre in Chile, which I'll visit shortly. And I've asked our exploration team to narrow their scope and put copper front and center. And so we're now directing 85% of our exploration budget towards copper. But we are clear-eyed about the task. No matter how amazing the geology, this effort must translate into value-accretive projects. And finally, capital discipline, the bedrock of strong and consistent shareholder returns. Rigorous capital allocation guides every investment decision we make. All projects must compete for capital and every dollar we invest must create shareholder value. The same standards apply to how we manage our portfolio. As we said at Capital Markets, we will deliver $5 billion to $10 billion in cash proceeds from our asset base. And we're now actively testing the market for RTIT and the Borates businesses. To sum up, we're achieving both returns and growth. Returning cash to shareholders and at the same time delivering the largest number of greenfield projects of any of the diversified miners, whilst retaining the industry's best growth options. That same discipline underlines how we approach any major portfolio decision. So let me touch briefly on the discussions we had with Glencore. We went under the hood with a singular focus on whether we could create value for shareholders. We considered what we could bring to the table and the extent to which we can generate incremental value across a combined portfolio. We had constructive discussions between the two teams. Ultimately, we concluded that we could not reach an agreement that would deliver value for Rio Tinto shareholders. Now as you might recall at Capital Markets Day, I said we would look at M&A opportunities that are disciplined lens, and that's exactly what we've done. And the same focus on value will continue to guide us. With that, I'll hand over to Peter, who will take you through the financials in more detail. Peter Cunningham: Thanks, Simon. At our Capital Markets Day, we set out a clear pathway to increase volumes, reduce costs and release cash from our asset base, all of which will strengthen our balance sheet and drive future returns. In 2025, the improvement in our financials was largely driven by volume growth, a function of our ongoing drive towards operational excellence and higher copper volumes from OT. Today, we are reporting nearly $3 billion of volume improvement year-on-year. Cost discipline was also good and we started to deliver substantial reductions late in 2025. These will flow into our results in 2026 and will be enhanced as we implement systemic improvements across our business. More on that later. Our net debt increased to $14.4 billion as we absorbed the Arcadium acquisition, and falling slightly in the second half of the year due to our strong operating cash flow. The balance sheet remains in good shape, and gearing is modest at 18% with future capital release initiatives set to further strengthen our position. Once again, we're paying out 60% of our underlying earnings as dividends. Let's now take a closer look at our markets. Now there are two key messages here. Firstly, the resilience of iron ore; and secondly, the positive correlation of our other products with the energy transition. Iron ore remains supported by Chinese steel export growth and a structurally balanced market. As Vivek outlined at our Capital Markets Day, the cost curve remains steep and is supported at the top end by over 100 price-sensitive producers from more than 20 countries. Copper and aluminum prices both rose 9%, but average prices don't tell the whole story. Copper ended the year 44% higher than 12 months earlier; and aluminum, 17% higher. The demand growth picture is not uniformly strong. Traditional areas, such as construction, remain weak. But the backbone of growth is the energy transition, particularly around power systems and electrification. The energy transition, combined with supply constraints and reinforced by investment inflows, is driving the market strength. Lithium also ended the year with strong momentum as markets came back into balance earlier than expected. Battery storage demand is emerging as a fast-growing pillar of the energy transition with growth now outpacing EVs as renewable scale and grid firming becomes critical. It continues to surprise many market commentators to the upside. Turning now to our EBITDA composition over the last 2 years. Iron ore EBITDA was down 11%, but the copper and aluminum more than offset this. Our portfolio gives us the ability to allocate capital to shareholder returns and to grow with confidence, recognizing our best returns come from improving our existing assets and reducing our cost base. At the CMD, we announced $650 million of near-term productivity benefits, driven by stronger operational discipline, a streamlined organization and a sharper focus on the portfolio. For the past few months, we've reshaped our organization, rescoped and stopped work. By the end of Q1, we will be into our next phase of the program, which is larger in scale, multiyear and steps us towards full potential. In the Pilbara, we're looking at different ways to operate our system, focusing on contingency stockpiles and optimization of our asset shut sequencing. This will enable increased asset throughput and smarter use of spend across the mines. For copper, we're driving productivity of underground equipment and operations in both development and production areas while improving metal recoveries in the concentrators. In aluminum, we're focused on sharpening day-to-day operational discipline, strengthening smelter stability, improving maintenance quality and raising contractor performance to ensure operational consistency year-after-year. And centrally, we're reorganizing our operating model to clarify accountabilities and streamline workflows. We've already redefined our closure operating model, optimizing R&D spend and are driving further improvements in sustaining capital projects. Now we expect the value uplift to be materially more than the first phase with programs advancing in 2026, as we scale up to deliver further in 2027 and 2028. Let's now unpack EBITDA through our standard waterfall. For the first time in many years, we experienced minimal net impact from commodity prices with lower iron ore fully compensated by higher prices for aluminum and in particular, copper. As I said earlier, the big driver of earnings growth was volumes with higher sales delivering a $2.9 billion uplift. This is mostly from copper and gold with the ramp-up of OT and improved output from Escondida. Higher iron ore sales from the Pilbara were also an important contributor. Volumes were also a major driver of the $800 million improvement in unit costs due to fixed cost efficiencies. Now in copper equivalent unit cost terms, this represented a 5% reduction. There were a few offsets. Kennecott is on track to deliver production increase by 40% to 50% over the next few years, as we outlined at CMD. Its operating performance is much improved, but the financials were impacted by the base effect of refining high intermediate product inventories in 2024. Secondly, our Pilbara business recovered impressively from the four cyclones with record production rates since April. However, there was a $700 million EBITDA impact. Looking forward to 2026, volume growth will be more muted at around 3% across our managed operations, which will be offset by closures at Arvida, Diavik and the midyear curtailment at Yarwun, and an expected grade decline at Escondida. Now nothing has changed from the parameters that we set out at the CMD. We are pushing very hard on productivity improvements and cost reductions building on the initial $650 million already identified and secured. I would, therefore, expect the aggregate volume and cost improvements, net of headwinds, to be a material uplift on that number in 2026. On to the product groups. Iron ore delivered $15.2 billion of EBITDA. The product strategy has been successfully introduced to the market, aligning sales to our system, and we've seen strong cost control reflected in unit costs, in line with guidance at $23.50 per tonne. For 2026, we're guiding to $23.50 to $25 per tonne, reflecting in part the impact of a stronger Australian dollar. Copper was the standout, with EBITDA more than doubling to $7.4 billion, driven by higher prices and rising volumes. Shipments were up 60% at OT, where the underground development project is now complete. Unit costs were down 53% and 2026 guidance is comparable to 2025. Aluminum sustained its impressive record of stability, in particular, for smelting and bauxite where we set a new production record. And we took advantage of stronger markets, leading to a step-change in financial performance with EBITDA up 20%. Now our commercial team continues to proactively optimize our vertically integrated position in the changing tariff environment. It was the first year for our new lithium business, which is clearly not yet a significant contributor, but as set out at the December deep-dive, we'll focus on delivering the in-flight projects, which will bring us to a meaningful capacity of around 200,000 tonnes by 2028. CapEx in 2025 was at the high end of our guidance range of around $11 billion, as we hit peak spend on growth with an outlay of $1.6 billion at Simandou and just over $1 billion on lithium growth projects. Now this is a crucial period of CapEx spend, which will underpin future earnings. Our growth commitments will ease over the next few years with Simandou nearly 2/3 complete. We do continue to strengthen our Pilbara system through replacement mine investments and also Weipa, where later this year, we will consider a final decision on the expansion of the Amrun mine. Given this context, we see no change to our guidance of up to $11 billion for the next 2 years before stepping down to $10 billion thereafter. Turning to the balance sheet. Net debt has risen to $14.4 billion following completion of the Arcadium transaction, a level comfortably in a range consistent with our commitment to a single A credit rating. All our credit metrics are in a solid place. This remains a strong balance sheet. We're committed to our capital framework and shareholder returns policy of paying 40% to 60% of underlying earnings. We know that distributions to shareholders are incredibly important. And once again, we're paying out at 60%, and now have a 10-year track record of paying at the top of the range. So to summarize, we have the right assets and the right commodities. 2025 was a solid year of delivery with sustainable volume uplift. And over the next few years, our focus turns to a powerful combination of self-help and growth as we build on the productivity improvements, and we see the first results from the capital release. The balance sheet remains strong, and we're generating very stable operating cash flow from our diversified portfolio. And with that, I'll turn it back to Simon. Simon Trott: Thanks, Peter. We've talked about what we're achieving and stronger, sharper, simpler is how we're doing it. It's the operating discipline that underpins the way we think about value creation across the group. Over 2026, we will focus on structurally improving the cost base and achieving a meaningful step-up in underlying performance. This work cannot succeed without our leadership team's full engagement and I'll be impressed by the way we've come together. Peter has updated you on our program and three words on this slide: Simplify, deliver and release, reflect our priorities for the year ahead. So to sum up, returns and growth. We grew by 8% in copper equivalent terms. Our strong operating performance, combined with our focus on cost and capital discipline translates into the financial results you see today as we returned $6.5 billion to you, our shareholders. And I'm confident that there's even more to come. Thank you for your time. And with that, we'll open up to questions. Rachel Arellano: Give me 1 minute -- 30 seconds. So we are going to open up to Q&A. We've got a bit over 30 minutes. We will start here in the room, and then we'll go to those on the line. And let's start here at the front. Myles Allsop: Myles Allsop, UBS. Maybe start with the elephant and the Glencore talks. Maybe could you just say what you've.... Simon Trott: I was running a book as [indiscernible] You've made me happy. Peter Cunningham: I think we all [indiscernible] Myles Allsop: So, do you feel comfortable owning coal? That would be your first question. What do you think you've learned from the discussions? What sort of synergies did you see from that sort of combination? Obviously, the value didn't work, but any other issues that kind of stopped the deal from happening? Simon Trott: So you always learn through these processes. The constructive discussions, you learn, I guess, about your own business, you learn about others as well. And as I said in my presentation, we went deep, we went under the hood. We look rigorously and clinically and ultimately didn't get there on value. The discussions were for the full perimeter. And the way that we think about that is really through the lens of the underlying asset quality and whether together, in a combined portfolio, we could incrementally add value compared to the case we laid out at Capital Markets, and it's through that lens that we assess the transaction. Really comfortable with the plans that we put out at capital markets, and as you can see today, that's the full focus of the team. Myles Allsop: And owing coal, was that ever a concern from the management team? Simon Trott: As I said, so it was for the full perimeter of the business, including coal and really through that lens of what's the underlying asset quality and can we add value through the combination. Rachel Arellano: Okay. Alain. Alain Gabriel: This is Alain Gabriel at Morgan Stanley. A couple of questions. One is on streaming, which appears to be quite invoked now. You have a fairly good chunky gold component at OT. Do you see an opportunity there or are the current discussions with the government around taxation, an impediment around going ahead with any streaming agreement? That's the first one. Peter Cunningham: Yes. I mean I suppose all of this comes down to the fact that we've got lots of options across our portfolio to release capital, and that's our focus. I mean, we've talked about the strategic reviews of borates and our RTIT, we're testing the market. We've got options around infrastructure. We do have options around streaming. But we're just going to work through these systematically and say what's the best option that we can undertake. So I mean, those options exist right across the portfolio, but it's all about value and what we can sensibly sort of prioritize to deliver. Alain Gabriel: And the second question is on cost cutting. You've put out a slide there, looking at the cost-cutting opportunities beyond the $650 million program. The Pilbara seems to be at the heart of it. Can you help us frame a little bit the opportunity there to quantify how much can be taken out of the business in terms of costs? Simon Trott: So on the $650 million, so that was a run rate that we announced at Capital Markets that we'd said we'd hit by the end of Q1. So what we're saying today is that our 2026 cash delivery will be materially above the $650 million, which was a run rate. And so that sizes it for 2026. I think the main point here, and Pete talked about it, we've gone systematically asset-by-asset looking at full potential with clear plans then around delivery, and it will be a multiyear program. And so we've sized it for 2026, but clearly, there's more to come in '27 and '28. And I should say it's across all businesses. So yes, iron ore, but it's across each of our businesses in the portfolio. Alain Gabriel: When should we expect that? Peter Cunningham: Just on the unit cost, I mean remember guidance is $23.50 to $25, but it is at a higher exchange rate. So the exchange rate would take you up more to the midpoint of that. So the business is making pretty sizable sort of improvements because as Matt went to its CMD, there's a lot of headwinds in the Pilbara still, but we're offsetting that through productivity. Rachel Arellano: Okay. We'll go to some of the people on the line, if we could. Operator, would you mind to give the first speaker, the microphone. Operator: [Operator Instructions]. Our first phone question comes from Paul Young of Goldman Sachs. Paul Young: Simon, firstly, on Glencore. I mean, well done for sticking to your guidance of being disciplined and being focused on value. Look, I think a simple merger would have changed your strategy from one of simplification to complication. And it does appear that the true operating synergies were pretty limited. So was the main attraction the copper growth? And when Mark and the project team reviewed that pipeline, were there major differences on the CapEx and the timing? Simon Trott: Thanks, Paul. It was obviously -- as I said at the outset, it was for the full perimeter. And so they've got a diversified business. And so we looked across all assets, including, as you say, copper. We did go through forensically. And so I think there was really constructive engagements with the team. We obviously look deeply at their pipeline, their existing assets as they did with us, and it was that combination that we were really asking ourselves the question, can we add incremental value through the combination. And that took into account all aspects of their business and ours. I guess if I step back and setting aside those discussions, as we've outlined in the slides today, the nice thing about the results today is we're growing now, the ramp-up at OT, 8% copper equivalent growth. And then we have the project pipeline to really extend that beyond the 3% CAGR through the 2030 -- options to extend that into the 2030s. And clearly, copper is a particular focus, both in terms of the projects we have, but also through our exploration and other activities. And so that's a singular focus for the team. But we've got to convert what is a really good set of options into value-accretive projects. Paul Young: Okay. And then second question is on the Brazil aluminum deal with CBA and Chinalco. Not much mention of this. I know the deal was only recently announced. But can you just talk to the high-level rationale? Can you expand the refinery in the smelter? What it means for your Atlantic strategy more broadly? And obviously, great for the Chinalco relationship. What does this mean for potential further deals going forward with Chinalco? Simon Trott: Yes. We've learned a tremendous amount through the Simandou project, obviously, working with our partners in the consortium there. And I guess taking that same mindset, we looked at that for the CBA transaction as well, an opportunity to involve ourselves in the Brazilian aluminum sector, an opportunity to add value and growth to our aluminum business and as well as the point you make, which is around securing our supply lines. And so obviously, the potential for bauxite down the track. And so that was the, I guess, the strategic rationale. And as we got into it, we could see a clear value opportunity for our aluminum business and hence, progressing that transaction. Rachel Arellano: We'll take one more from the line, please. Operator: Next question comes from Glyn Lawcock from Barrenjoey. Glyn Lawcock: It's Glyn. Just quickly, just on Glencore, again. You talked about there was a valuation gap. Just how did you measure the value? I mean, what are you actually seeing? What was -- how did you measure the gap? And what metrics do you think the gap was -- the gap emerged? Simon Trott: So ultimately, Glyn, it's a focus on the underlying value. So we worked our way through their full portfolio. We come to a view as to underlying value. Clearly then, there's also the synergies that you can add on to that and then what any transaction would look like. And it's -- so it's those data points that then go into a view about the potential transaction and whether it's going to be accretive to Rio Tinto shareholders. And as you would imagine, there's lots of data points that sit behind that, but that's the core principles that we looked at. Glyn Lawcock: So when you say value, Simon, just to clarify, are you saying -- so when you do like a discounted cash flow, you value each individual asset and you get a sharing of the two entities. That's -- you did that much of a deep-dive bottom up under the hood and basically realized that the equity relationship 60-40, 2/3-1/3, that's -- the gap was just way too large. Simon Trott: Yes. So that's the core tenet of the valuation, as you articulate, Glyn. Obviously, we look at all data points as well, those in the market, what others' views are and fold that into our thinking, but that's what underpins the valuation. Rachel Arellano: Thanks, Glyn. Jason. Jason Fairclough: Jason Fairclough, Bank of America. So Simon, just to take you back to iron ore. Obviously, still a major project -- product for you. And it's kind of a funny year because you've got the change in the benchmark. We've got BHP having a bit of a dispute with the Chinese and we've got Simandou coming online, which has kind of been this thing that everyone's been talking about for a long time. So how do you see the dynamic emerging from here? Are you changing your approach to selling the iron ore to producing it even? Simon Trott: I think we're changing our approach the way we think about portfolio because Simandou having been something that's coming is something that's arrived. And so, as we did the work last year on product strategy, we obviously had a pretty clear view around what the future mix would look like in terms of our own portfolio. Having IOC, the Pilbara asset and Simandou obviously gives us real options across high grade, mid grade and low grade. And so thinking about how we best present those iron units to the market and also working with our customers around what their forward projection looks like. The iron ore industry continues to mature and so working with our customers around it, about what the best mix for that is as well. As you and I have talked about before, Jason, we obviously got a long-term business, and so we've got to look beyond the sort of next few months or into what the future looks like as well for that business and make sure that we're really well positioned regardless of which way the future steel industry goes. Jason Fairclough: So just a bit of a long-term follow-up. India, how do you see the India's place in the market evolving over the next 5, 10 years? Simon Trott: So, I mean growth rates are really high. The central question in India is what portion of their iron ore demand is met domestically. And so we've been doing, our people work on, on looking at that and understanding it. I think inevitably, as we see those sort of growth rates, there will be periods of time when India is a really strong market for us. They do have relatively more domestic suppliers compared to, say, China through their growth phase. And so it will be a different market for us, but there will be some opportunities as well. Ephrem Ravi: Ephrem Ravi from Citigroup. Two questions. Firstly, on Simandou. It seems to have a high rate of fatalities for the time period. And obviously, you haven't changed your guidance for this year. But looking forward, like do you see a risk to kind of hitting that 60 million tonnes in a reasonable period of time unless the safety culture improves quite dramatically? If not, would you consider like portfolio adjustments, i.e., potential disposals of Simandou to your partners? Simon Trott: So the events of the weekend are obviously incredibly sobering and the impact on colleagues, family and friends and looking forward to being on the ground there with the team tomorrow. As I said in my introduction, we've got to be able to safely operate and construct wherever in the world that is. And I think the team at Simandou have made enormous strides and the events of the weekend show we've got further to go. And so that's our real focus at the moment. And I think the work that they have done, we know we can get there. We've just got to put in place the blocks to make sure that we really can. It is a different jurisdiction in a different environment, and we need to adjust our operating practices to that, but we're confident of the 60 million tonnes that we've announced. Ephrem Ravi: And just a question on lithium. Obviously, prices have gone up 100% since the site visit about 2 months ago. And some of the peers like Pilbara is restarting operations, et cetera. So is there any change in thinking in terms of just doing your in-flight projects? Or is something more than in-flight projects going to be approved within a reasonable time frame? Simon Trott: I'll probably borrow the answer I was getting -- giving Jason. I mean, we've got a long-term business. And so we look through at our underlying fundamentals. And the lithium, just given the size of the industry and the rate of growth, we fully expect prices in lithium to be volatile, and we've certainly seen that over the last little while. But we've got to look through that at the long-term pricing because those assets, once we bring them into production, they are going to be in production for decades. And so it's not so much about next week, next month. It's about the years that follow. The nice thing, and I hope you saw that for those that were on the site tour. The nice thing about that business is that it's got options. And it's got really good options in that industry. And so there's a high bar for capital allocation. Our focus is the in-flight, but clearly, there's other options in that portfolio as we look a bit longer term. Peter Cunningham: It was a well-timed side. Simon Trott: Brilliant. Rachel Arellano: Great. Look, we will go back to the line for two more questions. Over to you, operator, please. Operator: Next question comes from Rahul Anand of Morgan Stanley. Rahul Anand: I've got two questions, both on iron ore. The first one is around, I guess, your cost-out targets. Obviously, $650 million outlined at the group level and then you've got a medium-term target in 2023 for the iron ore business around that $20 a tonne mark. My question is around sort of what the targets are for your competitors in the Pilbara? And I kind of think about BHP guiding below $17.50 and they seem to be strongly guiding towards being significantly lower and then Fortescue sub-19. Now I understand, obviously, your mine systems are quite different to theirs. But today, in terms of the next phase examples, you've talked about the Pilbara. So I guess, how can you better that $20 a tonne? And what level of betterment do you think we can expect? And sort of where can you end up in terms of where you sit versus your competitors? I'll come back with the second. Simon Trott: And Pete, I'll get you a comment as well. Probably the first point I'd make is you've got to look at it on apples-to-apples. And people can flip between full unit costs and C1 costs. But the numbers that you're referring to for us anyway is about full unit cost, and so got to compare the same. I think as you've seen today, we finished last year at $23.50; guidance for this year, $23.50 to $25 at a higher exchange rate, probably points to the work that Matt Holcz and the team are doing to really drive efficiencies and effectiveness in the Pilbara. Obviously, different businesses, as you say, in terms of the particular phase of investment they are and the material that we need to move. But I think the numbers today probably point to a fair bit of the work that the team there is doing. Peter Cunningham: And Rahul, I mean, I think the key thing is that we've got all the replacement projects. We've always said they're critical to the performance of the system. So they're now being executed. That is absolutely critical to us. And I think what you saw in the 9 months of 2025 post Q2 to Q4 was just how the business could perform when it had the volume going through it. And that is, I think, critical for the future. And at the same time, I mean, it's the same for all of our businesses. What we have done over the last 6 months is put together really clear actions to drive productivity and costs throughout our whole system. And that is what's going to underpin then real productivity improvement over the next few years. And when we talk about working through the system, and removing bottlenecks and really driving performance, it's going to be really, really driven very, very hard over the next few years to drive productivity at the same time as those new sort of replacement mines come in. That's at the heart of our -- where we will get to that $20 in '23 terms going forward. Rahul Anand: No, absolutely, I mean, I acknowledge the business has already improved significantly in terms of, I guess, reliance and productivity, especially the last quarter. Look, the second question is around the iron ore negotiations. Now, obviously, there's been a lot of press with BHP and the CMRG Group. I just wanted to kind of take the conversation to perhaps a wider industry question. Would I be right to kind of deduce that these types of conversations are perhaps going to happen, not just with BHP, but I guess all iron ore suppliers into China as these contracts come up for renewal? And if you've had any conversations so far, how have those conversations been? And I guess, if you have some sort of time line or something in terms of which contracts are coming due for renegotiations, I guess, in the next year or 2 years? Simon Trott: So we have had conversations, we're having regular conversations with CMRG and all market participants across our business, whether that's in China or in some of our other markets. And so those conversations are what I would describe as continual and ongoing. Look, if I was to characterize them, they're exactly the sort of conversations you'd expect between us and customers. We're obviously focused on their business, securing supply prices as we are. And so it's coming together and really understanding each other's business and trying to create value together, and that's what we do with customers, that's what we're doing with CMRG. And so in that sense, it's a continuation of where we've been. The market continues to evolve. We've obviously been talking for some time about the maturing iron ore market in China. You'll see more than 1 billion tonnes of steel in China this year again. And so it remains a large and really solid market for us as we think about folding in Simandou into the mix. And so all those things are on continual discussions with CMRG. Rachel Arellano: We'll take the second question from the line, please. Operator: Next question comes from Rob Stein of Macquarie. Robert Stein: Just a couple of quick ones for me. The copper unit cost guidance you provided. Can you give us an indication is the byproduct -- magnitude of byproduct credits there? I think The Street was expecting a lower number that you might be providing a conservative estimate of byproduct credits there. And I'll follow-up with the second. Peter Cunningham: I mean, I think the gold volumes are kind of a bit higher in '26 and '25. And Rob, we've used pretty much, I think, just a bit higher than the average price of '25 in those calculations. Robert Stein: Okay. And then just speaking about copper and longer-term growth. I mean, your -- one of your competitors came out the other day and provided quite a comprehensive list of growth projects organically that they're pursuing that takes their growth profile out across next decade, and it's quite transformative in terms of their own portfolio. How are you guys thinking about those longer-duration copper growth options that you may have in your portfolio, noting resolution currently is still in the ground and not being mined. And I'm sure you would like to have a project there. But can you give us a bit of a flavor as to how the copper JV is going as well with Codelco and how quickly that's progressing? Simon Trott: Sure. So -- and I talked to, Rob, the copper pipeline in my introduction today because we do have some really good options, but we need to translate options into value-accretive projects. I'll visit Nuevo Cobre in Chile in the next month or 2 months and our projects in the U.S. I guess the nice thing about today's results is we're growing today. And then we've got the 3% copper equivalent growth through to 2030. And so that's why we've tended to focus on the here and now because our growth is through this period. And we have the options then to extend that growth out into the 2030s. And so we'll come to market and update as those projects commence -- progress. And in terms of Chile, as I said, I'll be there shortly. Relationship with Codelco is really good. Looking forward to seeing them next week. And so Chile, Argentina, South America, in general, remains a real focus for our copper efforts. I do think, as I talked about capital markets, partnering is a real super power for Rio Tinto and we certainly look forward to progressing those JVs with Codelco and with our other partners in that region. Peter Cunningham: So Rob, it's really nice progress now, which is what we've got in our numbers today. I mean, in the next few years is really good. Robert Stein: And is there anything through DD with Glencore that identified potentially opportunities for JV at a project level there? Simon Trott: Well, I'll probably set aside the -- if I pull it back to an industry level, as I said, partnering has delivered enormous value to this organization over time in almost all -- in all of the commodities in the portfolio. And so that's an area we are really focused on. Certainly, exploration is one way, partnering with others where we bring something to the table, project execution capabilities, operating capabilities, technical know-how, and partners bring something to the table as well. And I would just make that general comment whether that's with Glencore or with others. Rachel Arellano: Great. Thank you. Chris? Christopher LaFemina: It's Chris LaFemina from Jefferies. I just want to ask about geopolitical risk profile and how that's changing at Rio? So your growth is in Mongolia, in Guinea, you consider doing a deal with Glencore who is in the DRC and Kazakhstan and Glencore is marketing businesses in many regions in the world where you guys don't operate. Rio has spent the last 5 years restoring a culture and which -- and the culture historically has been in relatively low-risk regions. How do you think about geopolitical risk in terms of -- so I'm not only thinking about the Glencore deal, but even going forward, would you consider buying into assets in very high-risk regions where historically you might not have gone? Like would you look at a pure play DRC copper miner, for example? And what would give you comfort in going into regions where you've never been before, for example, Kazakhstan? I mean, how do you think about that? So when you're valuing Glencore in that situation, how do you -- is it a much higher discount rate that you're using? How do you get comfort around assets in those types of regions? Simon Trott: Look, it's an excellent question, and it's one that we spend a lot of time grappling with and thinking about it, and I'm not sure there's a perfect answer. You're right in the sense of, ultimately, it's got to come back to value. And so a higher discount rates, the way you think about the opportunity could clearly, in more challenging projects, whether they're more challenging because of the jurisdiction or more challenging because of technical aspects. The size of the prize has to be there to really step in and take on some of those challenges. And so we have a number of different tool sets, discount rates is one, putting a high bar in terms of the returns that we expect, thinking deeply about how you could mitigate and share some of that risk might be another one. But ultimately, it's a bit hard in the hypothetical because it comes back to the opportunity and what we think about that specific opportunity, whether we take some of those risks. But it's certainly one we spend a lot of time thinking about historically and probably for the reasons you articulate more time now given some of the changes in the world. Tell you what, so the other point I would make just to tag on the back of that. I think in the numbers today, you can see the real value of the diversified model, and it goes a little bit to your question as well, whilst iron ore prices were down, EBITDA has gone up because of greater contribution from copper as we ramp up and obviously, a strong contribution from aluminum as well. And so as we think about risk, as we think about some of the geopolitical tensions, clearly, having that diversified model is also helps you mitigate and manage some of that between jurisdictions. Alan Spence: Alan Spence from BNP Paribas. On the dividend, 10 years paying out the top end of the range. Looking forward, costs are coming out of the business, CapEx is starting to come down. There's no big M&A for now. Is it still the appropriate range? Or how do you think about recalibrating it potentially higher? Peter Cunningham: Alan, I think, very comfortable with the policy we've got. We've always said in our capital allocation framework of the priorities we'll have, investing in the existing business, the sort of ordinary shareholder returns policy and then looking at growth, the balance sheet and returns. If we have excess capital, we will look to sort of return more to shareholders. That framework is still absolutely applicable as to how we think about that right now. Alan Spence: If I can push back a little bit. What's the point of having the low end of the range of 40%, if over the last 10 years, not every year has been an easy year, but you've never paid 40%. Peter Cunningham: Well, I mean, I think I'd sort of push back as well and say that the business has kind of performed at a level to have the 60% payout range. I mean, that's what we've had. I think that's sort of just reflective of the cash flows, quality of assets. And the reality is now we're growing the business. That pie will grow. And so the absolute number in line with the growth of the earnings would increase as well. I think that's a pretty good place to be. It's growth and its returns. Alan Spence: So a minimum 60%? Peter Cunningham: All I'd say is our policy. Rachel Arellano: Okay. We've got one more on the line. Please? Operator: Next question comes from Ian Rossouw of Barclays. Ian Rossouw: Just a follow-up on the Glencore sort of discussions. Yesterday at the Glencore presentation, Gary talked about sort of meaningful potential synergies on sort of overhead, procurement cost savings, line optimization on the marketing side. And I guess he was referring to the point that not a lot of the synergies would have come from sort of operational synergies with mining next to each other as we've seen with some of the other mergers in the industry. I mean, that all suggests that the synergies potential between Rio and Glencore could have been much bigger than what the market was estimating. Just wanted to hear your views on that. Simon Trott: So there were synergies -- and I'll probably go back to what I said. I think the discussions with Gary and the team were constructive and the teams work well together, looking at and really thinking about what those synergies could be. But it's one data point that falls into the valuation and there are many others. And so there was synergies, it's only one data point, though, as well. And the other point I would say is you've got to look at it rigorously compared to the base case, which is what we laid out at Capital Markets Day and what you can do and what you can do yourself. And so it's got to be a really robust methodology of truly value that you can only derive from the combination rather than the value you can chase through other means. Ian Rossouw: And then maybe a follow-up in sort of on the back of Myles was asking about sort of learnings from this process. I mean, would you approach the marketing side slightly differently within the Pilbara or other parts of the business? Simon Trott: Again, if I lift it up to a more general industry statement, I think that marketing front end is something that we are spending quite a bit of time thinking about. We, obviously, established commercial a few years ago, a little bit to the question that was made before in terms of geopolitical tensions and volatility in the world. I think, around our physical flows there are ways we can generate greater value around those flows. And certainly, that's top of mind for Bold and the commercial team. Rachel Arellano: Okay. I think we have time for one more. So, Liam? Liam Fitzpatrick: Liam Fitzpatrick from Deutsche Bank. I'll just ask one. On Chinalco. There was talk last year from you and your predecessor about discussions over the stake in Rio plc. Has that gone anywhere? Are discussions live? Any color you can give. Simon Trott: Continue to engage with Chinalco. Nothing to announce today, obviously. But the relationship is in a good place. Obviously, the CBA deal is with Chinalco as well, and so we're continuing to engage. Matthew Greene: It's Matt Greene at Goldman Sachs. Simon, if I could just come back to Glencore, we talk a lot about valuation today and you touched on discount risk profile. What about where you could see value tomorrow and where -- more importantly, where the market will value your company tomorrow? So in terms of a potential re-rate either being a combined entity being a leader in all these commodities or potential future simplification of demerge got, how much weighting was put on in terms of your view on valuation? How much emphasis did you put on that? Simon Trott: So valuation by its very definition is forward-looking. And so it completely flowed into our view of value. But strategic rationales don't pay the grocery bills. It's got to come back to cash accretion for Rio shareholders, and that's the lens we talk. Rachel Arellano: Okay. Any last question? We're good. Ben? Benjamin Davis: Ben Davis, RBC. Just a question on the mineral sands. Obviously, you've got these asset sales that you're looking at and you're not forced sellers. I'm just wondering if there's anything sort of -- clearly, the cycle is not great in mineral sands. So just curious what sort of minimum valuation you'd be looking for these type of assets? And how surely wouldn't be a better time to wait for another 3 years for it to start again? Simon Trott: We're going to do it patiently, yes. As I've said earlier, we are a long-term business. And similarly, I think the people that are interested in that or the borates business is going to look through the market as it stands. But we're going to be patient, as you say, we're not under any pressure. And so if we don't get the sort of value that we see in the business, we won't progress them. But anything to add? Peter Cunningham: No, I think that's exactly right. Benjamin Davis: And then just quickly on Yarwun, how much are we looking at care and maintenance costs? And again, what's the longer-term plan for that asset, which is sitting there? Simon Trott: We're currently moving that as we announced low single digits, I would say, in terms of spend. Rachel Arellano: Okay. Many, many thanks for joining us today. For those online, we will conclude our time now. And for those here in London, I welcome you to join us for a light refreshment before, for the analysts here, we move into an analyst roundtable. So thank you again. And with that, I conclude today's presentation. Thank you.
Operator: Good day, and welcome to the Carvana Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Meg Kehan with Investor Relations. Please go ahead. Margaret Kehan: Thank you, Nick. Good afternoon, ladies and gentlemen, and thank you for joining us on Carvana's Fourth Quarter and Full Year 2025 Earnings Conference Call. Please note that this call will be simultaneously webcast on the Investor Relations section of the company's corporate website at investors.carvana.com. The fourth quarter shareholder letter is also posted on the IR website. Additionally, we posted a set of supplemental financial tables for Q4, which can be found on the Events and Presentations page of our IR website. Joining me on the call today are Ernie Garcia, Chief Executive Officer; and Mark Jenkins, Chief Financial Officer. Before we start, I would like to remind you that the following discussion contains forward-looking statements within the meanings of federal securities laws, including, but not limited to, Carvana's market opportunities and future financial results that involve risks and uncertainties that may cause actual results to differ materially from those discussed here. A detailed discussion of the material factors that cause actual results to differ materially from forward-looking statements can be found in the Risk Factors section of Carvana's most recent Form 10-K. The forward-looking statements and risks in this conference call are based on current expectations as of today, and Carvana assumes no obligation to update or revise them, whether as a result of new developments or otherwise. Our commentary today will include non-GAAP financial metrics. Unless otherwise specified, all references to GPU and SG&A will be to the non-GAAP metrics, and all references to EBITDA will be to adjusted EBITDA. Reconciliations between GAAP and non-GAAP metrics for our reported results can be found in our shareholder letter issued today. And with that said, I'd like to turn the call over to Ernie Garcia. Ernie? Ernest Garcia: Thanks, Meg, and thanks, everyone, for joining the call. 2025 is another incredible year for Carvana. There are many useful ways to describe the progress that we've made, but one approach I return to each year starting with the graph at the beginning of our shareholder letter. I find that useful because they provide a simple visual view of the big picture. And the big picture story is clear and meaningful. The first observation from the graph is that both volume and financial performance are moving up and to the right rapidly. This is only possible if you offer customers something that is sufficiently different and desirable that it cause them to break habit and if the business model itself is sufficiently different and efficient that enables qualitatively different results. When we went public, we wrote that our mission was to change the way people buy and sell cars. And the graphs show that we have built a customer value proposition and a business model with the power to do it. Having a great customer offering is the single most important thing. We have it, and we're making it better every year. Looking at the year in our current position, there are 3 key takeaways in our minds. One, we are getting better and more differentiated as we get bigger. In the last 12 months, we increased customer selection by 20,000 cars, 20,000. We are delivering cars to our customers a full day faster. We have put more cars closer to our customers, leading to $60 average savings on shipping fees for our customers. We have reduced the interest rates our customers pay on their loans by about 1% relative to benchmark on average. We have made the transaction simple and straightforward enough that many of our customers can confidently make it all the way to the vehicle handoffs without ever speaking to a person at Carvana. And customers are telling us they love it with NPS at multiyear highs. That's a lot of progress we made in a year where we also improved our EBITDA margin by 100 basis points. Lots of good things have to be true to make all that possible and those things are hard to replicate. Two, we are making rapid progress toward our goals. With every step, our path to our current goal of 3 million retail units a year and 13.5% adjusted EBITDA margin becomes clear, and this year was a big step. We estimate that fixed cost leverage alone will be worth about 2 points of adjusted EBITDA margin over time. We're making rapid progress in fundamental gains that is lowering variable costs and increasing the efficiency of variable monetization, which gives us more fuel to hit our financial goals and to keep providing additional value to our customers over time. On units, we grew by 43% in 2025, meaning that the compounding annual growth rates necessary to hit our 2030 to 2035 retail unit goal are now 38% and 18%, respectively. With the quality of our customer offering and the positive feedback in our business, we believe there is plenty of fuel to get us to our 3 million unit goal and beyond. But we have a lot of work to do and to keep scaling our operational machine to handle all that volume. And that brings us to point number three. We have the infrastructure to scale and we just need to execute. The most operationally intensive part of our business is vehicle reconditioning. Continuing to scale reconditioning quickly, cost efficiently and at high quality has been, currently is, and for the foreseeable future, will be a central focus. We have a better foundation to scale reconditioning effectively than we have ever had in the past. We already own the real estate for 3 million units per year. We have already made the investments in the facilities to produce 1.5 million cars per year. Our systems that manage the entire process flow through our reconditioning centers are more capable and robust than they have ever been. And we have more locations that are capable of reconditioning cars, 34 as of today than we have ever had meaning we can scale hiring and production faster because of access to more people and more geographies. But it's still hard work and we still have significant room to continue to push more of the complexity of managing cars through these locations into systems with the goals of continually improving consistency across locations and of making scaling easier. The team is up to the challenge. The Carvana future is bright. The experience we deliver to our customers are exceptional and getting better all the time. The scale of our opportunity is enormous and the financial opportunity is clear to see. And we have a team that has proven that we can tackle the difficult technology and operational challenges that are in front of us and turn them into most that are behind us. The march continues. Mark? Mark Jenkins: Thank you, Ernie, and thank you all for joining us today. Unless otherwise noted, all comparisons will be on a year-over-year basis. 2025 was an exceptional year for Carvana. We entered the year focused on 3 key objectives: one, delivering significant growth in retail units sold and adjusted EBITDA; two, driving fundamental gains in unit economics and customer experience; and three, developing foundational capabilities. By these measures, 2025 was a resounding success. In full year 2025, we grew retail units sold by 43% to a record 596,641. We integrated 10 additional ADESA locations, we expanded our digital auction capabilities nationwide, we reached multiyear highs on customer Net Promoter Score, and we increased adjusted EBITDA margin to a record 11%, again, making us the fastest-growing and most profitable company in our industry. Moving to the fourth quarter. Retail units sold totaled 163,522 in Q4, an increase of 43% and a new company record. Revenue was $5.603 billion, an increase of 58%. Revenue growth exceeded retail units sold growth primarily due to traditional gross revenue treatment for certain vehicles acquired from a large retail marketplace partner. Consistent with past quarters, our growth in the fourth quarter was driven by our 3 long-term drivers of growth: a continuously improving customer offering, increasing awareness, understanding and trust and increasing inventory selection and other benefits of scale. The fourth quarter marked our eighth consecutive quarter of industry-leading retail unit growth and unit economics. Non-GAAP retail GPU decreased by $255 primarily driven by higher non-vehicle costs, lower shipping distances flowing through to customers in the form of lower shipping fees and higher retail depreciation rates. Non-GAAP wholesale GPU decreased by $148 primarily driven by faster growth in retail units sold than wholesale marketplace units. Non-GAAP other GPU increased by $49 primarily driven by improvements in cost of funds and higher finance and VSC attach rates, partially offset by our decision to give back to customers in the form of lower interest rates. Since our last reporting, we again expanded our loan sale platform by entering into a fourth loan purchase agreement with a long-standing loan partner for up to $4 billion of loan purchases through December 2027. This brings the total of our new partner loan purchase agreements to $12 billion over the next 2 years in addition to $6 billion with Ally through October 2026. Q4 was another strong quarter for levering SG&A expenses. Our 43% growth in retail units sold led to a $340 reduction in non-GAAP SG&A expense for retail units sold, including a $57 reduction in operations expenses and a $344 reduction in overhead expenses. Advertising expense increased by $83 per retail unit sold as we continue to invest in building awareness, understanding and trust of our customer offering. With approximately 1.6% market share of the used vehicle retail market compared to approximately 20% e-commerce adoption in nonautomotive retail verticals, we believe we are in the early days of customer awareness and adoption of our model. We continue to see opportunities for significant SG&A expense leverage over time and as we scale driven by both continued improvements in operational expenses as well as leverage in the fixed components of our cost structure. Net income was $951 million, an increase of $792 million. Net income was positively impacted by a noncash benefit of $618 million, including a net noncash tax benefit of $685 million partially offset by a $67 million reduction in the fair value of warrants. Net income margin was 17.0%, an increase from 4.5%. Adjusted EBITDA was $511 million, an increase of $152 million and a new Q4 record. Adjusted EBITDA margin was 9.1%, a decrease from 10.1% primarily driven by increased retail revenue per unit resulting from the traditional gross revenue treatment mentioned previously. GAAP operating income was $424 million or 83% of adjusted EBITDA, an increase of $164 million and a new Q4 record. 2025 was a strong year for our balance sheet. We ended 2025 with $2.3 billion of cash and equivalents, retired $709 million of corporate notes, and reduced our net debt to trailing 12-month adjusted EBITDA ratio to 1.3x, our strongest financial position ever. As discussed in prior quarters, we remain committed to driving toward investment-grade quality credit ratios over time. In 2026, we plan to maintain our 3 key objectives from 2025, while placing additional weight on driving significant profitable growth at scale. Looking forward, assuming the environment remains stable, we expect significant growth in both retail units sold and adjusted EBITDA in full year 2026, including a sequential increase in both retail units sold and adjusted EBITDA in Q1 2026. In conclusion, Q4 represented another strong quarter, closing out our best year in company history. We remain excited about progressing toward our goals of becoming the largest and most profitable auto retailer and buying and selling millions of cars. Thanks for your attention. We'll now take questions. Operator: [Operator Instructions] And the first question will come from Sharon Zackfia with William Blair. Sharon Zackfia: I guess I wanted to kind of double-click on the reconditioning dynamics. So if you could maybe talk about kind of the challenges you're facing as you're growing at this rapid pace, which is certainly hard to keep up with. And I think in the shareholder letter, you mentioned something like if you got all of the locations to the top quartile, you'd get a $220 benefit per car. What is a reasonable time line to kind of move that bell curve to the right? And do you see the opportunity for GPU to be flatter up for the full year? Ernest Garcia: So first, I would say, I think that team has done an incredible job for a long time, and we've been obviously working hard to scale that part of the business. I think as we've said before, as a general matter, I think for any operational business, oftentimes the most difficult parts are the parts where you're moving the most people and things and for us, that's reconditioning centers. And so that tends to be the most difficult area to scale. I think in addition to growing at 43%, supporting unit growth of 43% and also growing our inventory last year, that team also has been hard at work opening these additional integration sites which is great because it lays the foundation for additional growth in the future. And then I think in Q4, I think there's no question that our expenses were a little higher than we would have liked there. And I think that is partially the result of these additional sites kind of having a single line instead of multiple lines and there being some extra costs that flow through there as a result. I think it's also partially a result of as we kind of spread out, we had some newer managers. And I think a trend that we've seen is locations that have managers that have been around for longer tend to perform a bit better. And so I think those are addressable issues. I think you've -- many of you have been to many tours inside of our inspection centers and seen all the work we've done in Carli to make that process as automated as possible. I think we've got some opportunities to also make the management of those processes more automated. And I think that those capabilities are kind of focused more on lifting the floor of performance instead of raising the ceiling. I think a lot of what we've done so far has been about raising the ceiling. So I think we've got opportunities. I think we've got a very clear plan. I think this is one of those things where I think sometimes if you take a little step backwards, it kind of fires you up, and my strong guess is we'll be in a better spot in 3 to 6 months than we would have been otherwise. I think that team is fired up and ready to go and even no one's excited about taking a little backward step there. So we're focused on it. I do not think it will have long-term implications. I think we'll react to it very positively as we have to many other similar things in the past, and I think we'll get right back at it. Sharon Zackfia: I guess as a follow-up, I know you have your AI brand, I think, as well in the shareholder letter, and it seems to me you would be maybe the most uniquely poised to benefit from what's happening in an AI. Can you talk about what the early kind of nascent uses are that you're implementing AI to do? And then if you're seeing anything in the competitive set or if it's just business as usual there? Ernest Garcia: Sure. Well, I think if we start with things that are visible to investors, I think we put some stats in there. We have 30% of our retail customers now go through the entire process without talking to a person until they get the car. We have 60% of our customers that are selling cars to us who go through the process without talking to anyone until they drop off their car. That's only possible because of the systems that we've built and those systems being intuitive and automated and straightforward. And I think a major set of tools that contributes to that is Sebastian and other tools that emerge from that AI brain. So I think that that's a very clear place where we're getting more scalable, where we're reducing costs. And I think very importantly, where we're improving customer experience. Those customers who go through the experience in that way have a higher NPS than customers that call us. And I think that, that also speaks to the power of those systems. So I think that's an area where it's very apparent, I think, even from the outside looking in. And we've been focused on that for several years, and I think you'll continue to get better all the time. I think -- if you look at other parts of the business, including just the speed at which we're developing new products, that continues to get better all the time. I think there's been a couple of material step changes up in the quality of these different tools. And we're seeing internally those step changes start to flow through the business, and we're getting things done faster. I think that is still relatively early. I think the last -- I mean the last year has been a massive step-up in the quality of these tools. And I think the last 3 to 6 months has been another very large step-up in the quality of these tools. But we do believe that we're fundamentally extremely well positioned to benefit from these things because we have a big deterministic system that's vertically integrated that has access to all the information and that brain has every system feeding it so we can give customers very simple answers to any questions they've got in really any software interface that we choose to put on top of it. So we think that's very powerful. And then I think importantly, to try to discuss a relative negative as something that I think is a long-term positive. I think even that -- a discussion today is what does AI mean for different companies in the long term? And I think we're sitting here talking about the realities of our business, including financing and logistics and reconditioning and these difficult operational things. I think that those are other areas of the business that are very important to deliver a great customer experience and those are areas that are not subject to AI disruption in the immediate term. So we think that we're positioned to benefit in a major way. We think that competitively, we're incredibly well positioned compared to the rest of our industry. And we think that our business itself is also positioned to be an AI winner and not something that is disrupted by AI. So our view is that sum of all that is very positive, and we remain excited. Operator: The next question will come from Jeff Lick with Stephens. Jeffrey Lick: Congrats on a nice quarter and a great year. I was just wondering, Ernie and Mark, can you talk about the environment -- at least the depreciation environment has actually kind of reversed a little bit in Q1 so far. So I was wondering if you could just talk about -- you highlighted in the letter that you expect a sequential improvement, but maybe if you can just talk about the puts and takes and the path of travel for GPU, not only in Q1 but for 2026. Mark Jenkins: Sure. Yes. I could take that one. So Ernie hit pretty well on some of the cost dynamics of Q4. We do expect those cost dynamics to play out in Q1 as well and do expect our non-vehicle costs to be up on a year-over-year basis in Q1. Despite that, we expect a sequential increase in retail GPU in Q1. So we expect to overcome those cost headwinds and demonstrate a sequential increase. Beyond that, I don't have too much commentary to give. I think we'll see how the year progresses. Obviously, we've had a lot of success driving strong retail GPUs for a long period of time. And that's just one of the many places where we've demonstrated a lot of success over time, including obviously, the significant growth. But in addition to that, very significant growth throughout the income statement, including adjusted EBITDA, operating income and net income. So our goal in 2026 is to have another great year, to have another year we drive very significant top and bottom line growth, and that's what we're going to be focused on. Operator: The next question will come from Daniela Haigian with Morgan Stanley. Daniela Haigian: First one, you might have addressed a bit with the retail GPU commentary. But overall, on EBITDA, the variable adjusted EBITDA margin decelerated down to 7% this quarter. Is this a one-off decline? How should investors be thinking about this metric longer term? And is the pace of growth needed to reach that longer-term target, the 18% to 38% CAGR like you mentioned, Ernie, is that supportive of incremental margin expansion? Ernest Garcia: Sure. So I think maybe the first thing I would say on the beginning point is I think revenue changes play a very big role in that calculation. I think if you look year-over-year, we moved away from marketplace units, and that meant we moved to more traditional kind of gross revenue accounting on a number of units. If you look at EBITDA dollars per unit instead in Q4, I believe they were down by about $14 year-over-year, which is first order flat. So I think calcs kind of on EBITDA dollars, I think, would look significantly different. I think looking forward, we feel like we gave you a little bit of a walk, I think you can see where our margins are today. We clearly have significant fixed cost to leverage. We clearly have significant fundamental gains throughout the business. You can see those showing up in our expense line items, I think we remain very excited by the progress that we're seeing in operational expense despite the fact that we're passing value back to customers in faster delivery times and other ways that they do have some costs. So I think we still got a lot of room for that. So we feel like the path to 13.5% is very straightforward. And not only is it straightforward, we think that there's clearly significant additional gains that can be made and handed back to customers along the way. I think our goal has been, remains and always will be to try to make progress across all areas of the business rapidly and simultaneously. So we're going to try to always push all those numbers up, our EBITDA margin, our EBITDA dollars, our growth, our customer experience. And I think that that's where our priorities come in. We got to then try to figure out what are our priorities, and we got to pick projects that push us in the right direction. And so we try to communicate that clearly to investors as well in the same way that we communicate it internally. But the opportunity is clearly there. I think in terms of the opportunity, the way we're thinking about the business, nothing has changed. I mean, really, since we started the business. It's just a function of how well we execute at any point in time, the opportunities there. And if we execute well, we'll go get it, and we'll get it all simultaneously. Daniela Haigian: That's helpful color. My follow-up is I guess the question on everyone's minds here. I just want to give you an opportunity to clarify some concerns around the related party transactions, does Carvana loan to related parties? Do the related parties originate loans for cars sold on Carvana? I think if you look at the 10-K you might have some answers there, but just any messages for investors on that topic here. Mark Jenkins: Sure. The answer there is very simple. All of our related party transactions are disclosed in our financial statements. As a specific matter, we do not sell loans to related parties and have not done so for all of the years from 2017 through 2025. Recent short reports that suggest otherwise, are inaccurate. We have checked every single detail of those short reports to ensure that all of our reporting is entirely accurate and definitively say that those reports are 100% inaccurate. So I think that we feel very strongly about that. We don't sell loans to related parties. We disclose our related party transactions, and there's no ambiguity about that. Ernest Garcia: And then maybe friendly request to investors out there. If we have another short report during a quiet period at the end of the year, just maybe think back the last couple of years to recognize the pattern. Operator: The next question will come from Brian Nagel with Oppenheimer. Brian Nagel: So my first question, and I think this goes back to Sharon's question at the beginning of the Q&A session. But if you're looking at the reconditioning costs dynamic here in the fourth quarter, so I guess what I want to ask , that was more of a challenge for Carvana in the fourth quarter. What changed? Why did that become a more challenging year in Q4 than it had been in Q3 or prior quarters? Ernest Garcia: Sure. I mean, what I would say is I think that, that -- the most important answer, honestly, there's no unique dynamic that instantaneously changed. I think the execution of that team has been exceptional for a very long time, and we haven't spoken about this much, but I think we've been continually over time discussing the fact that if you look back over the last 10 years, the areas where we've run into more issues over time tend to be in reconditioning because it is fundamentally a very hard operational problem. And so I think we try to set people up for that possibility because I think it -- wherever there's operational complexity, there's room for variation. And I think that will remain true forever. Like I said, I think that team is going to -- I really do believe that in 6 months, we're going to be in a better spot than we would have been if we didn't have a fourth quarter miss. I think the dynamics are straightforward. I think they're as described. We've opened a lot of facilities. We've grown quickly. We were growing inventory quickly in the fourth quarter. We're hiring new managers and kind of moving around some management layers to put us in a position to continue to grow quickly. And so I think there are moving pieces and sometimes that leads to a little backsliding, but they're fired up. I mean just small anecdote, one of the corporate team members who runs that team, I was on a phone with this morning at 6:00 when he was driving out to [indiscernible] to go work on it. They're very aware that we had a little miss and they don't like it, and my strong guess is we're going to end up in a good spot quickly. Brian Nagel: That's helpful. My second part, second is also on the retail GPU. You called out as you're positioning inventories better you're seeing as you indicated that your shipping fees now are declining. So I mean clearly, that's a positive for the business. It's very much a positive for the consumer dynamic. But as we're looking at the financials, how should we think about that? Because I guess that, to some extent, undermines the one driver of GPU, but there should be benefits either in sales or your SG&A, correct? Ernest Garcia: Sure. Yes. So I think the simplest way to think about that is year-over-year by positioning cars closer to customers, our logistics expenses were reduced by about $60 and our shipping fees were reduced by about $60, basically making it kind of a breakeven from our perspective, but making it $60 better for our customers. I think we talk about fundamental gains, and I think that that's a fundamental gain that emerges from basically scaling, where there's just kind of cost savings in the system. And then I think the question is, if we want to keep the menu of options of equivalent economic quality as the previous year to our customers, then we would basically have the ability to raise shipping costs for any given distance. We would keep shipping costs flat year-over-year on average, and we would see lower cost and the same revenue. If we choose to leave the shipping cost menu the same then we effectively pass through those costs savings straight to our customers, and that's the election that we made. We think over time, there's a lot of value to sharing that value with our customers and just continuing to separate the offering that we have. I think today, you can see in our financial performance and our growth in our NPS, we are dramatically separated from the outside industry offering, but we want to continue to separate. And we think that the more that we separate the louder customer support becomes and the more quickly we can take over more of the market, which is absolutely our aim. So I think we try to be thoughtful about where that money goes. But that's an area where we got better as a business and customers benefited. Operator: The next question will come from Rajat Gupta with JPMorgan. Rajat Gupta: Just one clarification. When you're saying profitable growth for 2026, is it fair to assume that the EBITDA per unit should expand in '26 versus '25? I just want to clarify if that is the message. And then I have a follow-up. Ernest Garcia: Sure. I mean I think what we're trying to communicate there is subtle, and I think we're trying to communicate is kind of similar to the way that we're discussing internally. So in the letter, we talked about doing full build-outs of ADESA locations, for example. I think in market ops, we're making subtle choices to operate at slightly lower utilization, which happened in Q3 and in Q4 of 2025, but results in faster delivery times because we think the math of that is good. And so those are some areas where we're making some subtle changes either in CapEx or in kind of transitioning away from fundamental gains and towards supporting growth at higher scale. Those are not big moves. So I think what we're trying to communicate is we had those 3 priorities from last year. This year, we're leading a touch into growth. The other 2 priorities remain the same. Our goal is always going to be to make as much progress we simultaneously can across all parts of the transaction. We don't think there -- these are necessarily trade-offs. The trade-off is in our focus and where our priority is more than anything else. We think that there's room to get better at everything all the time, and we'll work hard to do it. And of course, it will be hard like everything that matters is. Rajat Gupta: Understood. Maybe a little more of a high-level question. I mean, you've tried to be as vertically integrated as possible on everything that occurs pre-sale. Is it -- when is the right time to start getting more vertically integrated on the post-sale side, maybe around loan servicing? I mean I'm sure at some point, servicing cars with some of the franchise acquisitions you're doing comes on board. Just curious around your thoughts on that and the timing. Ernest Garcia: Sure. I think you can see from the sum of our choices over a long period of time that we're big believers in vertical integration, both because of the economic benefits and because of the customer experience simplification. So I think as a general matter, we are believers in that and I think that, that belief is deep. And so it will probably show up in lots of choice over a long period of time. I think in the immediate moment, we're now at a place where our contribution margins are very, very high. And I think we've also put some data in the shareholder letter that talks about 70% of our customers referenced a recommendation from a friend or family member mattering when they buy a car from us. And the majority of our customers, 3/4 are recommending us to multiple people after buying from us. I think those are the sorts of things that tell us that there's a lot of value not just kind of in the math from scaling. The math is very clear because the contribution margins are very high, so that just shows up immediately, but also in just kind of laying the foundations for long-term secular growth in our market share because we're delivering great experiences to people that they're going to tell their friends and family about for a long time. I think those survey results are very consistent with individual conversations. If you talk to a customer, you obviously you get lots of stories, but the standard story that I feel like I hear is, yes, I kind of knew what Carvana was. I knew about your vending machines. I know you guys were innovative. I didn't really know what that meant. I went to your website, checked it out. Before I knew it, I bought a car and then I was almost nervous that I messed up and it got delivered and the advocate delivered it, it was great. And then I felt so much better, and I was super excited and I told my friends about it. And to me, that's like a very simple story, but that's just the way that actual growth happens. And so we're going to focus on trying to take the machine that we've got right now, growing it, delivering more experiences like that, that cause people to talk and we think that, that's going to pay us back, and we will always be looking at foundational capabilities would kind of be like the broad bucket that we use, that we discuss additional vertical integration. I think the opportunities there are straightforward. I think you can see many of them as you listed. I'm sure you can think of more if you sat here and thought about it for a second. We see them too, but we're trying to be focused on what's most important at any given point in time because we think prioritization matters a lot. And right now, it's the priorities we outlined for you. Operator: The next question will come from Joe Spak with UBS. Joseph Spak: I'm curious if you could comment on your feelings about what your customers are saying about affordability. I know you invested a little bit into rates and financing to sort of help this quarter. Curious to sort of see what the reaction to that was? And if maybe more is needed or is there anything as you could do, whether it's longer terms or whatnot? And somewhat related there's a lot of EVs coming back at some -- I think, going to some attractive rates at auction. And I'm curious whether you think that, that's an opportunity to plug the hole, so to speak, at the lower end of the market? Ernest Garcia: Sure. I think that's a big question. I think -- there's no question affordability is always an issue, and we would always love for cars to be less expensive. And I think it's always helpful when we can find pockets where we can give customers an offering that's better. I think we're in a market that I think in aggregate is -- has relatively low elasticities. And what I mean by that is if you look at kind of aggregate used car sales across a long period of time, you tend to see used car sales that are relatively flat over a very long period of time across different economic environments and affordability environments and everything else. So we think the thing that we can most impact is the quality of our offering relative to the rest of the market. And to do that, that's kind of that term fundamental gain that we throw around a lot. It's how do we lower our cost to give customers the same experience or get more efficient with our revenues. I think you brought up lowering rates by 1 point. That's -- I mean that's a big move. And I think if you look at other GPU year-over-year, you're going to see that approximately flat. That's pretty impressive, right? So how does that happen? How do we lower rates for our customers by about 1 point, have other GPU that's flat, we built better systems and processes that led to higher attach, and we lowered our underlying cost of funds by bringing on additional partners and getting more efficient in the way that we're structuring transactions and then that meant value for our customers. So I think when we can get fundamentally better and when we're in the position that we're in, where we're already performing so well relative to the industry economically, we're in a position to share with customers. And then the benefit of that is that, that creates affordability for them and separates us further from the economic quality of the outside offering and drive long-term growth. So I think that's what we're going to be really focused on is just trying to continually get better ourselves. And as it relates to EVs or any other segment that would allow us to try to plug some affordability gaps. We're always paying very close attention to all those things. But as a general matter, things that are easy, we'll get very quickly competed away. So if EV prices drop to a place where they're sufficiently desirable to many customers they're solving the affordability problem my at least expectation would be that many dealers will realize that and want to buy those EVs at the same time. I think we are probably a little bit better positioned because we've got a customer base that is more likely to desire an EV. But the hard thing that we can do is make the business better and more efficient. And when the business is better and more efficient, we have money to share with our customers that other people don't have to share, and that makes us different. And so that's generally what we're focused on. Joseph Spak: Super helpful. Second question is really a housekeeping one. And I apologize if I missed this in any of the prepared remarks, but can you just briefly touch on what happened with tax? It looks like there was some release and now there's a large deferred tax asset and a related tax receivable liability on the balance sheet. Mark Jenkins: Sure, I can hit that, and then there will be more details available on the IR website as well, that hopefully will be helpful. But the key facts there are -- we have an UP-C corporate structure, the UP-C corporate structure generates significant tax assets when LLC units are exchanged into common shares, and we've had those changes happening over a number of years. So we've generated very significant tax assets as a result of that. Up until the fourth quarter, we've had a full valuation allowance against those tax assets. But with the realization of sustained profitability, we've now released that valuation allowance leading to the significant deferred tax benefit in Q4. The other thing I should note is the tax benefits from the UP-C structure are shared between pre-IPO LLC unitholders and Carvana common shareholders. And so the tax liability release is -- effectively reflects the portion of the tax benefit that are shared with LLC unitholders. The remainder of that benefit then flows through to Carvana common shareholders, that was more than $600 million. So a nice win for shareholders in Q4 with those tax assets now being reflected in net income. Operator: The next question will come from Chris Pierce with Needham. Christopher Pierce: Sorry. Just -- I hate to go back to this again because I know adjusted EBITDA per unit is sort of what really matters. But can you just walk through a non-vehicle cost in an IRC? Because I'm thinking maybe you're less-efficient car takes longer to get on the website, depreciates more, but then you might head, I think that's a vehicle cost. So like is there like an example you can give to sort of kind of talk about what might happen here and how kind of way you're going to move past it? Mark Jenkins: Sure. Yes. Let me hit that. So by non-vehicle costs, we mean not the acquisition cost of the vehicle, which is the largest portion of cost of sales. But then there's a number of other non vehicle costs like reconditioning and inbound transport being primary examples. And so then just to go back, I think Ernie hit this earlier in the call, but recon costs in Q4 were elevated. We expect it to be elevated in Q1. I think a lot of that is driven by the success that we've had, adding new locations, Ernie touched on these points, but I think our reconditioning team had an exceptional year in 2025, growing locations more than 40%, growing total production more than 40%. I think our total production growth in 2025 is one of the biggest years, I think in the history of our industry in terms of increasing overall production. So I think that, that team had an exceptional year this year. In Q4 with all the sites that we rolled out over the course of the year, costs were elevated, but we have a number of initiatives in place and are placing an increased focus on ensuring that as we continue to scale production capacity at very high rates that we're doing so efficiently and using software and technology as effectively as possible to make that process of scaling as efficient as we possibly can. Christopher Pierce: Okay. Perfect. And then I hate to call it topical because it's something haven't heard about for years but it came up this morning. Can you just walk through title issues, different titling registrations across 48 states? Maybe touch on the restart program sort of -- I know that this affects a lot of deals, not just you guys, but maybe we hear about it more with you guys. I just kind of like to hear about just broadly what you can do there? And sort of what your restraints are because you've got 48 states with 48 different systems. Ernest Garcia: Sure. I'll try to hit on that briefly. And if you were listening out there yesterday, I passed the gentleman on the elevator that asked me to say Ratatouille. So this is, I think, my shot. But I think we've made tremendous progress in title registration. I think the reality is, as a bigger automotive retailer with more attention, I think that in the post-COVID period, we probably got more negative attention for that than was warranted by the performance. I think our performance at that time was very similar to the performance of many other automotive retailers. But regardless, I think that was one of those moments where you kind of get slapped around with a concept a little bit, and I think it made us much better. And I think today, we're in a place where approximately 99% of our packets are completed by deadline, which means that we're in a spot to get customers their title and registration work done quickly and on time. And from all accounts, unfortunately, there's not like super simple to find benchmarking data out there, but from all accounts that makes us very likely best-in-class despite the fact that we have a fundamentally harder problem because we're moving cars across state lines from many locations to give customers the selection that they benefit from our website. So I think this has turned from an area that I think was complex and was maybe a relative area of weakness because we are taking on a more complex problem to an area that I think is now another area where we shine and outperform in the market. So I think that's something that we're proud of. I think the teams that have worked on that, they just heard your project called out, I think you have a lot to be proud of, and we have a lot to be grateful for. So I think that's another kind of great bright spot in the Carvana story over the last couple of years. Operator: The next question will come from Ron Josey with Citi. Ronald Josey: Two-parter here. Maybe, Ernie, we'll start bigger picture on conversion rates. And we're seeing inventory grow, and you heard about passing on fundamental gains to customers with lower ATRs and faster shipping or delivery time down by a day. Talk to us about just how conversion rates are trending here, the progress as you're working as you -- I know you entered earlier on affordability, but just as you balance affordability with units sold and margins. So first is on conversion rates. And then maybe, Mark, on guidance overall. Wondering when you think about 4Q, I think we talked about at least 150,000 units, we came in high single digits, maybe 9% better. Wondering what drove the upside in 4Q here as we think about 1Q and the demand with tax refunds and seasonality? Ernest Garcia: Sure. I'll hit briefly on conversion. I think conversion rates are something that we definitely kind of define what's the top and the bottom of the funnel. But I think regardless of what we're talking about, I think that we've tended to see over a multiyear period, just continual improvement there. I think we're at a place now where we have a lot of website traffic if we use that at the very top of the funnel, if we want to go even higher than that if we say like aided awareness, I think we're in a place where there's quite a bit of aided awareness. I think our opportunity remains in kind of understanding and trust. And that's why I think we spoke about some of those anecdotes earlier. I think as we pass value back to customers, I think we have very clear understandings because we run very clear tests to make sure that we do understand those things. We know what speed means in terms of conversion. We know what price means or what rate means in terms of the conversion and so that's math that we feel pretty good that we understand and that does flow through instantly. I think -- a lot of the bigger opportunity, though, I think, is more about creating an offering that is different by more that causes customers to tell one another about it more dramatically. And I think that, that's a payoff that's much, much harder to calculate. But I think part of the kind of math that sits underneath the idea that giving value back to customers makes sense is that you have a long tail that pays you off over a very long period of time by just having an offering that is superior to the outside market offering. And so I think we do all the math and try to make very smart decisions as it relates to elasticities and conversion. But I think we also sort of from a principle and from a brand perspective, try to make sure that we're giving customers an offering that's clearly different. Mark Jenkins: Sure. Yes. And then on the guidance front, our most important goal is significant growth in retail units sold and adjusted EBITDA in 2026. That's where we're going to be focused. We talked a little bit in the letter about, 2025 was a year where we had 3 key objectives. Significant growth in units and adjusted EBITDA, driving fundamental gains and also developing foundational capabilities. We plan to maintain those 3 key objectives in 2026 but to increase our weighting on really focusing on the things we need to do to continue to drive very strong growth in units and EBITDA I think we feel great about where the business is positioned today. Our year end 2025 we think was exceptional. We think we're -- our growth in 2025 is in the top couple of percentage points of companies within the S&P 500, which is a stat we feel great about. I think we're starting to see now very strong returns on investments. For example, our operating ROA, operating income divided by operating assets for the year-end 2025 exceeded 20%, which we think puts us in line with very strong long-term compounders. And by the way, those financial metrics are paired with the fact that we only have a 1.6% market share in our core market. And so I think we see a really big opportunity in front of us to build a very meaningful and significant company. And so we just want to make sure that we're doing the things to continue to grow retail units sold and top line significantly and then also continuing to grow on the bottom line as well. So that's where we're going to be focused in 2026. Operator: The next question will come from Marvin Fong with BTIG. Marvin Fong: Two, if I may. I think you referenced it slightly in the last answer, Ernie, but the passing along the lower APR about a percentage point you referenced. In retrospect, did that have the desired impact that you anticipated in terms of driving unit growth? And longer term, what sort of the end state there. Do you have a goal of actually being sort of best in class and offering the lowest APRs to supplying customers? And then my second question, just on advertising, I noted on a per unit basis, it was down. And I was just wondering, you're obviously investing also in the business to drive great word of mouth, which is arguably your best form of advertising. So just are we at sort of a peak on a per unit basis with your formal advertising expense on a per unit basis? Or how would you kind of describe how we should think about that? Ernest Garcia: Sure. I mean, I think as it relates to kind of like the immediate term elasticity as we are passing some of that rate back to customers over the last couple of quarters. I think, yes, generally, we believe that we saw the impacts that we would have expected. And I think that's generally been true, like I said, across time, and we've shared value with customers, and we feel like we understand those elasticities pretty well. I think longer term, maybe I'll answer that slightly differently. I would say in the period between now and hitting our 3 million, 13.5% adjusted EBITDA margin goal, the goal is to make as much fundamental gain as we possibly can, of which we think there is lots of room. We think there's big opportunity in every GPU line item and every expense line item and all the teams are focused on those things and trying to prioritize and figure out where they can get the biggest yield the fastest, and we want to go get that. And then we want to give value back to customers. The more fundamental gains we get, the more value we can give back to customers. And we think the path to 13.5% is very straightforward, and it comes from scaling and kind of new markets acting more like old markets and just the benefits of levering fixed costs. So it's a straightforward path. So I think that's kind of the 2030 to 2035 plan. And I think from there, we'll kind of reevaluate and I'm sure along the way, we'll be giving you updates as well. But I think that's what we're focused on. And so it's just about getting a little better all the time. On AdX, I think we brought up over the last couple of quarters that given the large contribution margins and given the desire to lean into growth and all of the obvious benefits that you get from growth because of the contribution margin and then because of the feedback in the system and because it creates more customers that can tell your story that AdX is a good place for us to invest. We continue to believe that, that is the case. And we've also made some other investments in other parts of the transaction as we discussed. I think we will try to be efficient with those investments and thoughtful about where those investments go there's obviously many different places where we can spend money with a similar goal there. So we try to be thoughtful and optimize as best we can, but I would say no major changes in any of our kind of general thoughts there. Operator: The next question will come from Lee Horowitz with Deutsche Bank. Lee Horowitz: I guess as we look out to '26, the production growth algorithm looks quite strong as capacity comes online and throughput continues to improve. I guess how are you thinking about how that supply growth may be met via demand? And do you see any reason why the relationship you have seen in terms of selection growth and unit growth changing in any way relative to what you've seen historically? Ernest Garcia: I think we started the prepared remarks with something that we think is really useful is looking at the multiyear graphs and just trying to take away those big themes. I think we did have a similar kind of conversation here. I think if we look over the last 13 years of Carvana's life, I think as a general matter, the story has been that as long as we build the operational chain to support volume, there's demand for that volume. And I think generally speaking, that's been a pretty predictive, simple reduction of what's going on. So I think we've got to keep building out that operational chain. It's a lot of work. Our foundation is good. We've got the real estate. We've got the people. We've got the team. We've got the systems. We're making the investments now as we speak, and we're building a system that scales better, but that's constant hard work. And I think that we would expect the future to look like the past on that because we still think we're a tiny portion of this market. Yes, as discussed earlier, we're 1.6% of the used car market and 1% of the car market overall. So effectively, we still have first order of the entire market to grow into. So we think it remains very early in the game, and we think that making sure that we execute well and build out the supply chain is central to predicting where our growth is going to go. Lee Horowitz: Makes sense. And then I guess your competition has clearly talked about pushing on some price in the 4Q. Did reaction to that in any way impact retail GPU? I know you give us the walk, but any color there? And maybe how are some of the actions taken by your competitors changing, if at all, the way you think about price competitiveness in 2026? Ernest Garcia: I think we gave you the walk. I think the story in retail GPU, I think, really is about a transfer to customers of shipping costs and then a little variation in depreciation that I think is going to happen quarter-to-quarter and is natural. And then I think most importantly and most controllably, it's about reconditioning costs. So I think that's the story there. I think we'll always pay attention to what's going on in the market, but as we've said before, I think one of the properties of this market that we think is very beneficial is that it's a market that is massively fragmented that has literally tens of thousands of players in it that share a cost structure and share a way of doing business. And as a result, the way that, that market reacts in aggregate is pretty predictable because they're highly constrained by what their costs are, and it makes kind of the market very consistent and very predictable, and that's been true for our entire life and we'd expect to be true in the future. So with that being the case, we think that our focal point has to just be on us and delivering great customers and making our system more efficient. And if we do that, we think we'll keep getting better. Operator: The final question today will come from John Babcock with Barclays. John Babcock: I guess my question is really revolving around volumes. I mean you're guiding to sequential growth in 1Q, which seems to imply at least 22% growth, maybe a little above that. And generally, I think that's at least below where the Street was. Just kind of curious, I mean are you seeing anything in the market that's giving you caution at this point in time? And this also couples a little bit with your prior comment about shifting more to growth. So I just want a little more clarity there in terms of how you're thinking about that. Ernest Garcia: No, I guess would be the simplest answer. I think things look the same to us, and we're going to continue to run as fast as we can and just try to get a little better every day. I don't think there's any changes to what we're seeing or feeling. John Babcock: Okay. That's clear. And then as far as -- I mean, you're expanding free at-home delivery, free pickup should we think about that over time as potentially impacting GPUs, I mean we've clearly seen the impact this quarter at least of the shipping cost as more people are buying vehicles closer to where they're located. So just kind of curious if you might be able to go through that a little bit. Ernest Garcia: I think ideally, we're making fundamental gains at the same speed that we're passing them back. So that's -- or faster, frankly. So I think that's the general goal. I think in things like shipping fees, I think as we get cars closer to customers, what we're doing today is we're passing that benefit to customers. And I think as we scale that kind of naturally occurs, we have many of these inventory pools that are relatively new that have relatively small pools of cars in them. As those pools grow, that will bring our average car closer to our average customer, and we'll naturally cause a little bit more of that same impact, which we think is net positive. I think that we've made some choices like we discussed earlier, in market ops, for example, to run at slightly lower utilization rates and the benefit of that is that means the delivery times are faster for customers, and we think the math of that is very good. That would mean all else constant, that would take a little pressure on Carvana ops expense. But we generally are making gains in other places that are offsetting that or more than offsetting that. And so that remains the goal. So I think we hope to continue passing value back to customers and to make gains that are of similar size, so -- or better. So we're not moving backwards. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Ernie Garcia for any closing remarks. Ernest Garcia: Great. Well, thanks everyone for joining the call. Really appreciate it. Team Carvana, great job again. I think the year 2025 is a tremendous, tremendous year, and I think it's something that was very hard to foresee ahead of time and something that we should all be very proud of. I think Q4 is also an exceptional quarter. I think there were a couple of little line items where we all know that we could have done a little bit better. And I think in many ways, that's great. That's a good reminder for us. Let's use that and let's go do better tomorrow. But great job. We have a ton to be proud of, and we're going to keep rolling down this hill. So let's keep it up. Thanks, everyone. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, and thank you for standing by. Welcome to Integer Holdings Corporation’s fourth quarter 2025 earnings call. My name is Adra, and I will be your conference operator today. After the prepared remarks, there will be a question and answer session. Please note this call is being recorded. I would now like to turn the conference over to Kristen Stewart, Director of Investor Relations. Please go ahead. Good morning, everyone. Thank you for joining us, and welcome to Integer Holdings Corporation’s fourth quarter 2025 earnings conference call. With me today are Peyman Khales, President and Chief Executive Officer, and Diron Smith, Executive Vice President and Chief Financial Officer. This morning, we issued a press release announcing our fourth quarter and full-year 2025 results. We have posted a presentation to accompany today’s call on the Investor Relations page on our website at integer.net. On today’s call, we will provide an update on our strategy, review our adjusted financial results for the fourth quarter and full year 2025, and discuss our financial outlook. After our prepared remarks, we will open the line for your questions. As a reminder, the results and data we discuss today reflect the consolidated results of Integer Holdings Corporation for the periods indicated. During our call, we will discuss some non-GAAP financial measures. For reconciliations of non-GAAP financial measures, please refer to the appendix of today’s presentation, today’s earnings press release, and the trending schedules, which are available on our website at integer.net. Please note that today’s presentation includes forward-looking statements. Please refer to the company’s SEC filings for a discussion of the risk factors that could cause our results to differ materially. With that, I will turn the call over to Peyman. Peyman Khales: Thank you, Kristen. Thank you to everyone for joining the call today. This morning, we announced our fourth quarter and full-year 2025 financial results. Through diligent execution, the Integer team delivered sales and adjusted EPS towards the high end of the outlook range we provided in October. For the full year, sales increased 8% on a reported basis and over 6% organically, and adjusted operating income increased 13%. Adjusted EPS increased 21%, reflecting the higher sales, improved profitability, and effective capital management. In the fourth quarter, we repurchased $50,000,000 of our common stock. In addition, this morning, we announced our intention to initiate an accelerated share repurchase program to repurchase approximately $50,000,000 under our existing share repurchase authorization. Our share repurchase program reflects the confidence of the board and management in our strategy, financial position, and ability to generate strong free cash flows. We also issued our 2026 financial outlook. We are maintaining the midpoint of the reported sales range that we shared in October and narrowing the range. We expect reported sales to be down 1% to up 1%, and organic sales to be flat to up 3%. This outlook continues to include a 3% to 4% headwind from three new products due to lower than expected market adoption. Excluding the three new products, our underlying business is expected to grow 4% to 6%, in line with the market, underscoring the durability and the strength of our core portfolio. We continue to invest in our key growth initiatives and capabilities that support our long-term strategy, while being disciplined with our near-term expense management. For 2026, we expect adjusted operating income to be down 5% to up 1%, and adjusted EPS to be down 2% to up 6%. The fundamentals of our business are strong, and we remain focused on executing our disciplined growth strategy. We have a robust and diversified pipeline, and when combined with the strength and durability of our underlying business, we remain confident in our ability to return to 200 basis points above market organic growth in 2027. Before Diron reviews our financial results, I would like to provide an overview of our business and an update on our strategy as we typically do on our fourth quarter call, and discuss why I remain confident in our ability to deliver value creation for our customers and shareholders. Integer Holdings Corporation is a leading medical device contract design and manufacturing organization serving the largest global medical device original equipment manufacturers and emerging innovators. Our vision is to improve patients’ lives around the globe one device at a time. We accomplish this by advancing the goals of our medical device customers through industry-leading engineering and manufacturing with a relentless commitment to quality, service, and innovation. Our global scale manufacturing and R&D footprint allows us to serve our customers effectively and efficiently around the world. We offer one of the industry’s broadest and deepest portfolios of capabilities and product offerings across the cardiovascular, neuromodulation, and cardiac rhythm management markets. With this, we can meet a wide range of our customer needs throughout the product life cycle, help them bring products to market faster, and simplify their supply chain. Integer Holdings Corporation is well positioned to create long-term value for shareholders. We have a proven track record of financial performance, delivering strong results through the execution of our disciplined growth strategy. The medical device industry is an attractive end market supported by durable growth drivers, and we continue to focus on several high-growth markets where we have a strong competitive advantage. We are highly differentiated in the industry with deep expertise, broad capabilities, innovative technologies, and scalable global manufacturing. We have a robust and diversified product development pipeline oriented to high-growth markets with the world’s top global medical device companies and many emerging innovators. Our high-performance culture is a competitive advantage, centered on customer centricity, innovation, and operational excellence. In addition, we are disciplined with our capital management. We are investing to support our growth while maintaining a strong balance sheet and prioritizing long-term shareholder value creation. While select new product headwinds are expected to impact our 2026 outlook, we remain confident in our ability to return to above market organic sales growth and margin expansion in 2027. Now let us take a closer look at each of these areas. The medical device market remains highly attractive, underpinned by long-term growth drivers. Within this landscape, we are focused on the cardiovascular, neuromodulation, and cardiac rhythm management markets, which are expected to grow in the mid-single digits. Our strategy centers on investing to continuously expand our differentiated capabilities and partnering with our customers early in the design and development stage of new products. We are focused on new products in targeted high-growth markets, including electrophysiology, neurovascular, structural heart, and neuromodulation. By engaging early in the development process, we help our customers accelerate innovation and drive successful product launches. We have dedicated growth teams responsible for leading product line strategies in highest priority markets. These cross-functional teams bring deep expertise in our key markets, including customer needs, therapies, products, global trends, and competitive landscape. They continuously refine our strategies to address evolving market dynamics and ensure our success. In addition, the growth teams guide and prioritize investments in capabilities and capacity to support long-term sustainable growth. In recent years, we have invested both organically and inorganically to expand our capabilities in our targeted high-growth markets. These investments are designed to enhance the value we deliver to our customers to support their long-term success, which includes speed to market, a reliable and global supply chain, and the highest quality products. We have made many capability investments in recent years, and some examples include advanced automation, laser processing, extrusion, complex assemblies, miniaturization, and catheter process platforming. We have also invested to expand our rapid prototyping capabilities, which allows us to help our customers bring their products to market faster. As we have shared in the past, we have expanded a number of our manufacturing and R&D facilities to support our growth. For example, we have expanded our Salem, Virginia facility where we perform laser processing and micromachining, and plan to further expand our Alden, New York facility which supports the CRM and neuromodulation implantable device. In addition to physical capacity expansions, we have ongoing continuous improvement initiatives to optimize our existing footprint. In parallel, we have executed several strategic tuck-in acquisitions that have strengthened Integer Holdings Corporation’s position in high-growth markets and added specialized high-value capability. For example, InNeuroQo significantly enhanced our capabilities in neurovascular. Pulse Technologies deepened our capabilities in micromachining and strengthened our pipeline across several high-growth markets such as electrophysiology, leadless pacing, neuromodulation, and structural heart. And our 2025 acquisitions greatly enhanced coating capabilities and furthered our vertical integration strategy. Integer Holdings Corporation is a partner of choice because we are differentiated by our technical expertise, broad capabilities, innovative technologies, scalable manufacturing, and exceptional customer service. We support our customer success throughout the product life cycle, from concept to commercialization, enabling innovation, accelerating speed to market, and simplifying our customer supply chain. We have unparalleled subject matter expertise across a broad range of technical disciplines. We are leaders in design for manufacturability, and we have deep product design and regulatory expertise. We are known for our capability breadth and end-to-end solutions. We have a comprehensive portfolio of engineered components, complex subassemblies, and finished devices. Our innovative technologies include an extensive set of proprietary materials and processing capabilities as well as in-house advanced manufacturing and automation. We also offer innovative market-ready access and delivery products. We have robust manufacturing and quality systems across our global footprint. Our customers recognize our ability to seamlessly transition their critical products from the development stage to scale production to support their growth. Product development sales are the compensation we receive from customers as we partner with them to design and develop new or next-generation products. Generally, an increase in product development sales means we are working on more programs, larger programs, more complex programs, or a combination of the three. We believe product development sales are a good indicator for the size of our development pipeline, and they are a leading indicator of the contribution from new products to future growth. Since 2017, product development sales have increased more than 300%, and approximately 80% of our development sales are for products in higher growth markets. This momentum highlights both the strength of our customer relationships and the strategic focus of our portfolio. Our deep and broad pipeline includes many exciting programs that are focused on targeted high-growth markets. To highlight a few, our pipeline includes participation in devices used in electrophysiology procedures, including pulsed field ablation, structural heart delivery systems and components for structural heart implants, neurovascular therapies to treat both hemorrhagic and ischemic stroke, renal denervation, and neuromodulation devices designed to address a wide range of conditions. A robust and diverse pipeline supports our expected return to above market growth in 2027. Within CRM and neuromodulation, our pipeline of emerging customers with PMA products, primarily within the neuromodulation market, continues to be robust. We are engaged with 40 customers across development phases. As these life-saving and life-enhancing products move through regulatory approval and into the manufacturing ramp phase, Integer Holdings Corporation benefits from accelerated sales growth. Sales from customers in the product introduction and launch phases have grown from $10,000,000 in 2018 to approximately $125,000,000 in 2024. Looking ahead, we expect this category to grow at a 15% to 20% compound annual growth rate over the next three to five years, contributing to our ability to grow above market. Our people and our culture are central to our success. Integer Holdings Corporation has a high-performance culture that focuses on delivering value to our customers and shareholders. We recently refined our operational focus areas to customer success, operational excellence, and leadership impact. Customer success recognizes that Integer Holdings Corporation’s success depends upon our ability to enable our customers to achieve their goals and objectives. Operational excellence reflects our focus on continuous improvement at all levels of our organization, to ensure we meet our customer needs effectively and efficiently while creating value for our shareholders. Leadership impact reflects our ongoing investments in developing strong leaders to continuously raise the bar on performance. As part of our operational excellence focus, we continue to advance the Integer Production System, our lean-driven operational framework that integrates advanced engineering and manufacturing and continuous improvement practices to deliver consistent high-quality medical device manufacturing that drives customer success. To further enhance effectiveness and efficiency, as part of our Integer Operating System, we are launching a multiyear program to modernize our ERP platform. This investment is expected to strengthen our operational capabilities, improve productivity, enhance working capital management, accelerate commercial time to market, and position Integer Holdings Corporation for long-term scalable growth. We have dedicated a cross-functional team of top talent to execute a measured and phased implementation over the next several years. We continue to be disciplined with our capital management to drive sustainable long-term value creation for our shareholders. Our capital allocation framework includes organic investments, including capital expenditures to enhance our technology capabilities, automation, and capacity; tuck-in acquisitions to expand our capabilities and presence in high-growth markets; and opportunistic share repurchases. We have maintained a disciplined approach to capital management for many years now. Since 2021, we have invested 5.8% of sales in capital investments and over $700,000,000 in tuck-in acquisitions. In November, our board authorized a share repurchase program of up to $200,000,000. In the fourth quarter, we repurchased $50,000,000 of our common stock. And today, we announced our intention to commence a $50,000,000 accelerated share repurchase program. Looking ahead, we expect to continue investing both organically and inorganically to support our growth objectives and reinforce our competitive position. Our strategy of being positioned in the right markets, investing in differentiated capabilities, getting designed in early in new products and high-growth markets, creating a high-performance culture, and remaining disciplined in our capital management has delivered strong financial results. Since 2022, we have grown sales at a 12% CAGR, well above our market, while expanding our margins by nearly 400 basis points and maintaining our leverage ratio within the 2.5x to 3.5x range. While 2026 is expected to be impacted by temporary headwinds, we are laser focused on executing our strategy to achieve our long-term strategic financial objectives. These objectives are growing sales 200 basis points above market, growing adjusted operating income twice as fast as sales, and maintaining a net debt leverage ratio of 2.5x to 3.5x. I will now turn the call over to Diron to review our financial results and our outlook. Thank you, Peyman. Good morning, everyone, and thank you again for joining today’s call. Our fourth quarter sales and adjusted EPS were at the high end of our outlook ranges that we communicated in October, reflecting strong execution by our global team. Fourth quarter sales totaled $472,000,000, reflecting 5% growth on a reported basis and 2% growth on an organic basis. Organic sales growth removes the impact of acquisitions, the strategic exit of the portable medical market, and foreign currency fluctuations. We delivered $106,000,000 of adjusted EBITDA, up $11,000,000 compared to the prior year, or an increase of 11%. Adjusted operating income grew 10% versus last year, as we continue to make progress on our margin expansion initiatives. Our adjusted operating margin expanded by 74 basis points to 17.6% driven primarily by improvement in gross margin. Adjusted net income for the fourth quarter 2025 was $2,000,000, up 22% year over year, while adjusted earnings per share totaled $1.76, up 23% from the same period last year. Diron Smith: Both reflecting interest expense savings from the convertible note offering in March 2025. For the full year 2025, we delivered strong financial results. Sales totaled $1,854,000,000, reflecting 8% growth on a reported basis and 6% growth on an organic basis. We delivered $402,000,000 of adjusted EBITDA, an increase of 12% versus the prior year. Adjusted operating income grew 13% versus 2024, and our adjusted operating margin was 17.3%. Adjusted operating margin expanded 76 basis points, reflecting gross margin improvement and disciplined expense management. Adjusted net income for the full year was $226,000,000, up 23% year over year, while adjusted earnings per share totaled $6.40, up 21% from the same period last year. Turning to our sales performance by product line, Cardio & Vascular sales increased 11% to $284,000,000 in the fourth quarter 2025, driven by the Precision Coatings and VSI Parylene acquisitions and strong demand in neurovascular. On a trailing four-quarter basis, C&V sales increased 17% to $1,107,000,000 with strong growth from new product ramps in electrophysiology, contribution from acquisitions, and strong demand in neurovascular. Cardiac Rhythm Management and Neuromodulation decreased 2% to $167,000,000 in the fourth quarter 2025, as cardiac rhythm management growth was offset by a decline in neuromodulation, primarily driven by lower demand from select emerging customers with PMA products. On a trailing four-quarter basis, CRM&N sales increased 1% to $669,000,000 with CRM and neuromodulation growing at market, offset by the planned decline of an early SCS neuromodulation finished implantable pulse generator customer which was announced in 2020. Product line detail for other markets is included in the appendix of the presentation, which can be found on our website at integer.net. For the full year 2025, we delivered strong adjusted net income and adjusted earnings per share performance. Adjusted net income increased by $42,000,000, or 23%, and adjusted earnings per share increased by $1.10, or 21%, both growing much faster than our 8% sales growth. Operational improvements accounted for $30,000,000, or $0.86 per share, and reflected the benefits of higher sales volume, manufacturing efficiencies, operating expense management, and acquisition performance. Interest expense was $14,000,000 lower than the prior year, which contributed $11,000,000 after tax, or $0.33 per share, reflecting the savings from the convertible debt offering completed in March 2025. Our adjusted effective tax rate for the full year was 17.2%, down from 18.3% in the prior year, primarily reflecting tax benefits from R&D investment, lower interest expense, and stock-based compensation. These improvements were slightly offset by higher foreign exchange pressure, which reduced adjusted net income by $2,000,000, or $0.07 per share, and an increase in adjusted weighted average shares outstanding, which reduced our adjusted EPS by $0.11. In the fourth quarter 2025, we generated $55,000,000 of cash flow from operations. Our CapEx spend was $27,000,000. Free cash flow was $28,000,000 in the fourth quarter. For the full year 2025, our cash flow from operations totaled $196,000,000, a $9,000,000 decrease from the prior year. Our CapEx spend was $91,000,000, or approximately 5% of sales. This resulted in free cash flows of $105,000,000, an increase of $5,000,000 versus the prior year. At the end of the fourth quarter 2025, net total debt was $1,190,000,000. Our net total debt leverage at the end of the fourth quarter was 3.0x trailing four-quarter adjusted EBITDA, which is at the midpoint of our strategic target range of 2.5x to 3.5x. Turning to our financial outlook. The 2026 outlook we are sharing today is tightened from our preliminary outlook shared in October. We are holding the midpoint of our sales growth and the high end of adjusted EPS growth from our October preliminary outlook. For the full year 2026, we expect reported sales to be in the range of $1,826,000,000 to $1,876,000,000, down 1% to up 1% on a reported basis. On an organic basis, we expect sales to be flat to up 3%. Peyman Khales: We have proactively aligned our cost structure with Diron Smith: expected manufacturing volumes. As we expect the three new product headwinds to be short term and we continue to support our growth initiatives, we are not making structural changes in our organization. We expect our adjusted EBITDA to be in the range of $391,000,000 to $415,000,000, down 3% to up 3% versus the prior year. We expect adjusted operating income to be in the range of $304,000,000 to $324,000,000, down 5% to up 1%. We expect adjusted net income to be in the range between $216,000,000 and $232,000,000, down 4% to up 3%. This range incorporates an expected adjusted effective tax rate of 16% to 18% for the full year, with the first quarter slightly above the full-year rate. Lastly, we expect adjusted earnings per share of between $6.29 and $6.78, down 2% to up 6% versus the prior year. Our outlook reflects the reduction in outstanding shares from our fourth quarter share repurchase and an estimated impact from the $50,000,000 accelerated share repurchase that we announced today. Taking a closer look at our sales performance, as I mentioned, we expect sales to be down 1% to up 1% on a reported basis and flat to up 3% on an organic basis. We expect continued growth across the vast majority of our portfolio. However, as we communicated in October, our organic outlook is being impacted by lower sales of three new products: two in electrophysiology and one in neuromodulation. We continue to be our customers’ supplier of these products, but market adoption has been lower than anticipated. These products represented nearly 6% of total sales in 2025, resulting in an approximate 3% to 4% headwind, and we expect the sales of these three products to be significantly lower in 2026. Excluding these three new products, we expect our underlying sales to grow approximately 4% to 6%, which is in line with the market. We also expect an inorganic decline of approximately 1.3%, which reflects the now completed portable medical exit, slightly offset by contribution from acquisitions and foreign exchange. Our product line outlooks remain consistent with our October preliminary outlook. We expect C&V sales to be flat to up low single digits, reflecting the impact of new products in electrophysiology. We expect CRM&N sales to be flat to up low single digits, reflecting the impact of the new product in neuromodulation. In other markets, we continue to expect a decline of approximately $30,000,000 to $35,000,000, primarily due to the portable medical exit. Peyman Khales: We expect organic Diron Smith: sales to be down low single digits in the first half and return to market growth during the second half, consistent with the October preliminary outlook. The first half performance primarily reflects the significant reduction in sales related to three new products, which were ramping during 2025 and are expected to be at a lower run rate in 2026. For the first quarter, we expect reported sales to be flat to down low single digits. We expect nominal sales to then ramp sequentially throughout the remaining quarters. The quarterly sales cadence reflects a 5% tailwind in first quarter and a 5% headwind in fourth quarter due to year-over-year differences in production days. For the first quarter, we expect our adjusted operating income margin to decline 200 to 250 basis points versus the prior year. We expect our adjusted operating income margin rate to improve throughout 2026 and expect to return to margin expansion during the second half of the year. We expect cash flow from operations to be between $200,000,000 to $220,000,000, an increase of 7% at the midpoint of the outlook. We expect capital expenditures of between $95,000,000 and $105,000,000, or approximately 5% to 6% of sales. As a result, we expect to generate free cash flow between $100,000,000 and $120,000,000, which represents a 5% increase at the midpoint. We expect our 2026 year-end net total debt to be between $1,170,000,000 and $1,190,000,000. This reflects the estimated impact of the accelerated share repurchase program announced this morning. We expect our leverage ratio to be within the targeted range of 2.5x to 3.5x times trailing four-quarter adjusted EBITDA in 2026. I will now turn it back to Peyman. Thank you, Diron. Peyman Khales: In summary, the Integer team delivered a strong performance in 2025 with sales up 8% and adjusted earnings per share up 21%. While 2026 is expected to be impacted by temporary headwinds from three new products, the fundamentals of our business remain strong. Our pipeline is robust and diversified, and when combined with the strength of our underlying business, we are well positioned to return to growth. We remain confident in our ability to deliver 200 basis points above market organic sales growth in 2027. We will now open for questions. Thank you. Operator: We will now begin the question and answer session. As a reminder, if you would like to ask a question, in order to take as many questions as possible, please limit yourself to one question and a related follow-up if necessary. Our first question comes from Brett Adam Fishbin at KeyBanc Capital Markets. Brett Adam Fishbin: Hey, guys. Good morning. Thanks very much for taking the questions. Peyman Khales: Just wanted to start with the guidance top line. Think, you know, most people will be encouraged to see a pretty stable outlook relative to last quarter. But we just wanted to touch on the decision to lower the high end of the preliminary range. I think last quarter, you were at 0% to 4% organic. Now 0% to 3%, so just a slight change. But just curious what the incremental reason for that was and if it has something to do specifically with what you saw in January or more about just the pace of the improvement the second half of the year? Brett Adam Fishbin: Alright. Super helpful. And then, just thinking about margins, and really more of a 2027 question. So the 2026 outlook still implies some pressure, I think, you know, given that sales are expected to be subdued. But, you know, you kind of noted the expected recovery to above-market sales growth in 2027 and then a return to operating margin expansion. So maybe just a little bit more on what drives the return to operating income growth above sales growth in 2027. Peyman Khales: Yeah. Sure. I think for 2026, as Diron mentioned in the prepared remarks, we are not making any structural changes to our business because we have expectations to get to above-market growth in 2027. So as we progress throughout 2026, we expect to get to margin expansion in 2027. When we get back to 200 basis points over market performance, we will continue to deliver margin expansion as we have as part of our strategy and as part of our Integer Production System. Our long-term strategy has not changed: deliver 200 basis points over market and 2x margin expansion. Brett Adam Fishbin: Alright. Great. And then last one for me. You know, I always enjoy this strategic update and some of the updates around the portfolio and PMA products. I think, compared to last year, the total number of PMA products is up by one. Just wanted to maybe ask about overall contribution from the new products that have been coming through and how you kind of expect those to perform this year. A little bit, like, just more long term. It kind of seems like more of the future activity is in the development and clinical phase rather than regulatory. So whether you would kind of expect any of those to progress this year and reach the market by 2027 or if there is kind of a little bit gap in some of the development product actually reaching commercialization. Thank you very much for taking the questions. Peyman Khales: Yeah. No problem. The model that we have, what we have talked about, that we expect this portfolio of products to grow 15% to 20% in a three- to five-year period, takes into account all the dynamics that you talked about. We have a good pipeline that we will be working on. We have about 40 customers in this grouping, if you will. And we have really good visibility to the products that we are working on. Number one, the products that are already in the market: we have expectations of what the growth of those products will be. And then we have good visibility to the launch dates and the expected revenues that, on a risk-adjusted basis, give us confidence that we can grow at 15% to 20% in a three- to five-year period. So what you are seeing here in terms of adding one more customer in the launch phase is in full alignment with our expectations. It has already been modeled in our projections. Operator: We will move next to Matthew Oliver O’Brien at Piper Sandler. Diron Smith: Good morning. Thanks for taking the— Brett Adam Fishbin: Maybe just to follow up on the first question there on the reduction to the high end of the guide. I do not want to over— Diron Smith: focus on this too much. But— Peyman Khales: the organic number is down 100 basis points from flat to up 4% to flat to up— Diron Smith: three. And if I just look at the math on that, you know, it is like $9,000,000 you are taking out— Brett Adam Fishbin: like, at the midpoint by taking it down by 100 bps. So what I am really trying to get at is there is nothing— Diron Smith: from a new customer perspective or existing customer perspective that is making you think, okay, you know what, we are going to get a little less revenue from somebody than we initially expected. And that is why we are taking the high end of the guidance range down. Peyman Khales: Good morning, Matt. No. There are no specific changes, as you were pointing out, to customer forecasts and whatnot. And the guidance that we have is in full alignment with our expectations and in alignment with what we had communicated back in October. We have tightened the range around the midpoint that we had communicated. And again, the individual pieces and the top end are probably more rounding than anything else. Okay. Brett Adam Fishbin: Alright. Fair enough. And then as a follow-up,— Diron Smith: I just noticed that DSOs— Peyman Khales: are kind of meaningfully at the end of Q4. Diron Smith: Any real reason for that? And how do we think about that metric progressing over the course of this year? Thank you. Brett Adam Fishbin: Yeah, Matt. Certainly. Yeah. On the DSO,— Diron Smith: we made a decision to limit the amount of accounts receivable factoring that we did in the fourth quarter. And that is really looking at maintaining our financial flexibility. As you can tell, our revolver is paid down, and any incremental cash that we would have generated through the factoring would have gone to further prepay on our Term Loan A. So we thought there was a better use of cash to limit our factoring in the fourth quarter, which— Brett Adam Fishbin: effectively raised the DSO from what you had typically seen. Diron Smith: Okay. Makes sense. Peyman Khales: Thank you. Yep. Operator: We will take our next question from Richard Samuel Newitter at Truist Securities. Peyman Khales: Hi. Thanks a lot. Two from me. Maybe the first, it looks like— Brett Adam Fishbin: in addition to the organic guide getting narrowed— Diron Smith: towards, you know, a little bit at the— Brett Adam Fishbin: top end, operating margin, or the implied operating profit margin, is also a little bit— Diron Smith: below where the implied level was before, and there is a really, really steep— Peyman Khales: year-over-year 1Q decline, or bigger than what we were projecting. So if you could just maybe talk a little bit about the 1Q, kind of the steep 1Q falloff— Richard Samuel Newitter: there, especially if you have extra selling days helping the 1Q. And then within the context of margin, if you could also— I think you had mentioned on the third quarter call that you expected gross margin to improve year over year. Can you maybe just break down the operating margin comments within the context of OpEx and gross margin? Thank you. Diron Smith: Richard, this is Diron. I will jump in here. Yeah. As you look at our operating margin, we have talked before, and Peyman just mentioned a moment ago, about not making structural changes in the business because we want to make sure we are well positioned to deliver on the return to market growth in the second half and the 200 basis points above market in 2027. So as you look at that structurally, there is a level of fixed cost to absorb. And on the lower sales numbers, particularly in first quarter, there is a little bit more of a challenge in terms of absorbing those fixed costs in the business in the quarter. So as we look at the model and we look at what our structure is on the sales guidance for first quarter, that is where we see the 200 to 250 basis points of margin pressure— Richard Samuel Newitter: there. And then as our sales kind of nominally grow— Diron Smith: throughout the remaining quarters of the year, we expect to see that operating margin rate grow as well. So I think those are a couple of other critical pieces driving that— Richard Samuel Newitter: overall kind of margin outlook for the year. Diron Smith: You know, as you know, we do not necessarily give guidance on our gross margins. But I think what we had said in the past was that with the Integer Production System, we expect to fully continue driving variable margin expansion—so, managing our direct material and direct labor and seeing margin expansion there— Richard Samuel Newitter: while we still will see pressure, depending on where we are able— Diron Smith: to land in the sales outlook on the fixed cost that sits in gross margin and overhead. So it is going to be a little bit of a mixed story within gross margins. Richard Samuel Newitter: Okay. That is helpful. And then just on the discrete products that you are calling out, I appreciate the full-year 300 to 400 basis point impact, and it continues to be. I guess we are a quarter in since you last provided your preliminary outlook. We have seen results for the fourth quarter, especially in the all-important electrophysiology segment. Any characterization you can provide on your discussions with your customers on their views of the end markets that kind of took you by surprise in their specific products? And what can you tell us about your visibility today versus three and four months ago, with respect to how they are approaching their forecasting so that we can get confidence that 300 and 400 basis point impact is the right one even beyond the quarter ahead? Thank you. Peyman Khales: Yeah. No problem. So we finished the fourth quarter in full alignment with our expectations, how we had modeled things. And the discussions that we have had since October with our customers and continue to have are in full alignment with how we modeled things. Just to step back a little bit, Rich, when we provided our guidance in October, we had done a lot of homework, if you will, working with our customers and using our own intelligence to try to come up with a different view of the forecast. And at that time, we talked about that we provided a wider range in our preliminary guidance that took into account different possibilities. And as we have worked with our customers, what is transpiring and what we expect for 2026 is in full alignment with what we had modeled and what our customers are telling us. So the forecasting patterns, the ordering patterns, are in alignment with the projections and what we are guiding. Okay. Thank you. Operator: We will go to our next question from Travis Steed at Bank of America. Richard Samuel Newitter: I wanted to ask on the Q1 revenue kind of flat to down low single digits reported. There are 5% selling days, kind of five to seven extra days, but I know there is an inorganic impact. So make sure I understand the actual organic Q1 to Q2 kind of bridge and anything you would call out on how you would think about what is the kind of the one-time impacts and some of the recovery in your different business in Q1 versus later in the year? Peyman Khales: So we had, in October, guided to a first half of the year being down in the low single digits and that we would grow to market growth throughout the second half of the year in 2026. That view has not changed. Let me just start with that. And we still expect the same growth profile. Now, talking about the first quarter, as you mentioned, the impact of inorganic, yes, there is a little bit of an impact there. But the impact of acquisitions is minimal, really. But as you look at the first quarter and the fourth quarter, we just wanted to highlight that there is a 5% tailwind in the 1Q numbers and there is a 5% headwind in the fourth quarter. So when you look at that, when you adjust for that, the quarterly profiling is exactly as we had expected—that we would start the year a little bit lower and then grow to market growth throughout the course of 2026. Okay. Thank you. And then maybe— Richard Samuel Newitter: another kind of bigger picture question. You know, as a new CEO, just thinking about how you are thinking about shareholder value creation and the pros and cons of balancing more shorter-term value creation, maybe a partnership route versus more longer term, independent shareholder value creation? Brett Adam Fishbin: Yeah. Peyman Khales: It is a good question. And I think, really, the only way we can create value for our shareholders in a sustainable fashion is to have a long-term view of our strategy and how we execute. I think we—let me start with—I am a strong believer in our strategy. I was there in 2018 when we started looking at creating our new strategy and refining and executing it. As we have done over the past many years, we will continue to refine our strategy and execute on it. We believe that we can be successful if we can position ourselves to deliver value to our customers and make them successful. That is the only way that we can be successful in a sustainable fashion. So if your question is both in terms of short term and long term, we believe—I believe—that the only way we can create value is by continuing to execute our strategy, have a long-term view of what we need to do to deliver value for our customers, which is the only way that we can deliver value for our shareholders. Great. Richard Samuel Newitter: Thank you. Operator: We will take our next question from Andrew Harris Cooper at Raymond James. Hey, everybody. Thanks for the questions. Richard Samuel Newitter: Maybe just first, kind of diving into a little bit of the trajectory— Brett Adam Fishbin: heading into 2027. You guided to the sort of ex those challenging products— Richard Samuel Newitter: being with the end market for the year. What happens through the course of 2026 to get you from we are going to be kind of aligned with the market to stepping back up— Brett Adam Fishbin: above in 2027? What has to happen, and maybe what changes throughout the year to get you— Peyman Khales: So I think the first thing to consider is that our core business is very strong. We are saying that our core business is expected to grow in alignment with the market. And by core business, I mean our business excluding the impact of the three products that we have talked about. So the rest of the business is strong; we expect that it will continue to be strong as we enter 2027. In addition to that, we have new products that are expected to launch in the second half of this year and during the course of 2027. So when we look at the combination of these things—and by the way, we no longer will have the headwinds associated with these three products. So when we consider all these elements together, and considering the strength of the pipeline that we have, this is what gives us confidence to get back to 200 basis points over— Richard Samuel Newitter: Okay. Helpful. And then— Peyman Khales: following up on one from earlier as well. Brett Adam Fishbin: On the PMA products and the 15% to 20% goal, historically, you have normally given an update to that number on kind of a biannual basis. But— Peyman Khales: can you share— Brett Adam Fishbin: what those new products generated in 2025? And I ask that just with, in the back of my head, the thought of this one PMA product likely being a headwind there. So how do we think about making up for that in that three- to five-year relative to maybe a little bit of a challenge here with at least one product? Peyman Khales: Yeah. These products, as we had mentioned, had strong growth in 2025. And then we had a slowdown, particularly in the fourth quarter, as we expected. Let me just also remind you that we had exceptionally strong growth from these products in 2024. So we also had some challenging comps. So net-net, I would say that these products grew in alignment—with the fourth quarter headwinds—these products grew within alignment of the market in 2025. Okay. Brett Adam Fishbin: I will stop there and chat more in follow-up. Thank you. Peyman Khales: Great. Thank you. Operator: Next, we will go to Nathan Treybeck at Wells Fargo. Peyman Khales: Hey, guys. Thanks for taking the question. You know, I just wanted to touch on 2027 again. You know, just assuming the product revisions are really just contained in the three products,— Diron Smith: and you lap those headwinds in the second half of this year,— Brett Adam Fishbin: and you obviously said you are not making structural changes to the company,— Diron Smith: I am trying to understand, like, why would the comps— Richard Samuel Newitter: not result in 2027 growth kind of above your, you know, formula of 200 basis points above market. Peyman Khales: Well, our long-term strategic objective is to grow 200 basis points above market. That is the reason why we are providing earlier than usual guidance for 2027, because we want to convey the confidence that we have in our future growth prospects. So we are conveying that we have visibility and we expect to get back to 200 basis points over market. As we get to this time next year, we will be able to provide a more specific guidance on 2027 growth. Diron Smith: Okay. Thanks. And, you know, I noticed— Peyman Khales: the end market, the table in your presentation. So to— Diron Smith: clarify, is that the entire end market or just the areas that you are exposed to? Because, you know, I see electrophysiology; you have mid-teens. I think some market estimates still have the market growing high teens for that time period of 2025 to 2029. So I am just trying to understand if there is anything kind of, you know, anything specific— Peyman Khales: to Integer Holdings Corporation in that— Diron Smith: table. Thanks. Peyman Khales: Yeah. The end market—we expect the end market to grow in the high teens, as you pointed out. In 2025, we expect the end market for EP to be in the high-teens to 20% range. And we expect that in 2026 to be kind of in the mid-teens. Okay. Brett Adam Fishbin: But, you know, as far as— Peyman Khales: the broad end markets, are you referring to just the broad end markets or the areas that we play in? The broad end market. Diron Smith: Okay. Operator: We will go next to Joanne Karen Wuensch at Citigroup. Good morning, and thank you so much for taking the question. Our questions—I will put them upfront. Since the third quarter, what has changed internally in how you think about running your business and communicating goals, etc., with the Street? And it is sort of in the public domain of activist involvement, and I am curious if that has had impact on how you think about goals and running the business. Thank you so much for taking the question. Peyman Khales: Yes. Good morning, Joanne. Thank you for the question. So let me answer your question holistically. Because we believe in our strategy, we believe in how we run the business, our execution, the processes that we have, how we look after our customers, and how we have been able to deliver value for our shareholders—our confidence to be able to deliver value in a sustainable fashion for shareholders—we are not changing anything in our business because we believe in our strategy, and we believe in what we are doing. I think part of your question was about how we establish goals and expectations. How we issue guidance and come up with those forecasts, as we have mentioned before, has a very balanced view of what we believe we can deliver. And then, of course, we look at the downside and the upside of that, and then collectively, we come up with what we think the expectations are. You are pointing out—I think what is implied in your question, Joanne—is the impact of the three new products that gives us some short-term headwinds. As we have mentioned before, that is unusual and that has to do with market adoption that really our customers were not expecting either. So that is an unusual event that we do not expect to continue. I think, just to go back to your second part of the question, we listen and talk to all of our shareholders. And we take their view into account, of course. But we are—and I am—a strong believer of our strategy and how we can deliver value for our shareholders. Operator: Thank you very much. We will move next to Suraj Kalia at Oppenheimer. Diron Smith: Damon—Diron. Can you hear me alright? Peyman Khales: Yes. Good morning, Suraj. Gentlemen, thank you for all the comments on navigating these temporary headwinds— Diron Smith: Darren, one question for you and Peyman one for you. I will pose them both upfront. So, Darren, I want to go back to your comments about— Peyman Khales: not being able to— Diron Smith: absorb fixed costs in Q1. Maybe you could give us some additional clarity on that, Darren. I presume you will have visibility six to nine months in advance. So the specific attribute about fixed cost not being absorbed— Peyman Khales: kind of confused me. Any additional color would be great there. Diron Smith: Peyman, for you, if I could pose this question—and I know this is a hypothetical, but I am just trying to connect some dots here. So let us say you have an ENT customer, Suraj Incorporated, that pulls their demand on a certain product.— Andrew Harris Cooper: Right? You have to lower your manufacture—stop your— Peyman Khales: manufacturing. Your sales go down. So on and so forth. Right? Diron Smith: But for whatever reason, the end customer comes back and says, oops,— Peyman Khales: I need to ramp back production of this new product. Does it require a new contract? Do you all have to switch manufacturing? Do you all keep spare inventory? I am just trying to connect some dots vis-à-vis, specifically, an ENT customer. Any color there would be great. Gentlemen, thank you for taking my questions. Well, thank you, Suraj, for the questions. Why do we not start with the question that you had for me, and then I will ask Diron to get back to your first question. So in terms of how it works, let me start with, just philosophically, Suraj. We work very closely with our customers. In recognition that, you know, we have talked about that the majority of our business is sole source and ultimately we see what the end market demand is. So our customers work with us to give us a forecast based on their production plans. So whatever they have planned for their manufacturing facilities, we get some of those forecasts and orders months in advance because that is what they are planning. If something were to change, we, of course, work with them. So, you know, if they ask us to bring their forecast down, we work with them to do this in an orderly fashion. And what I mean by that is our customers recognize—because they also manufacture themselves—that you cannot stop a production. You cannot have a cliff. So they usually give us a ramp down, and we work with them collaboratively to see what makes sense so that, in the event—the hypothetical event—that you mentioned, that there would need to be a ramp down, we do this in an orderly fashion so that we do not cause a lot of inefficiencies. And conversely, if you have to ramp back up, we do the same thing. Obviously, if you have to ramp back up quickly, there could be costs associated with that, and then we work with our customers. Again, we have a great partnership and relationship with our customers. We work with them. To your specific question about whether there is a new contract—no. We have general contracts with the majority, all of our large customers. We have mentioned before that approximately 70% of our business is under a long-term contract. And all the provisions are spelled out in that. We move with the speed of business. Every time something changes, we do not go and renegotiate a contract. Those things are already done. It is just a question of how we work with each other on a daily basis to make sure that both we, Integer Holdings Corporation, can meet the needs of our customers and our customers work with us so that we can make sure we run our businesses efficiently. Diron Smith: Yeah. And, Suraj, just to maybe cover off on your question related to the fixed cost leverage. I think what you have to understand is that, as a manufacturing company, we have a certain level of capacity and case built out to deliver on our sales performance. So as you look at our sales level in fourth quarter and the sequential movement from 2025 to 2026, you will see a lower sales number, and that still has to absorb the full fixed cost used to deliver on the higher sales number. So this is one of the reasons that we always talk about Integer Holdings Corporation as a company that needs to be looked at on more of a rolling four-quarter basis because you do have that inter-quarter variability that you may have with sales, with a little bit more fixed cost leverage at times, a little bit less in other quarters. And so when you think about our guidance for the year, that is where you will see that the operating margin is not as impacted on the full-year basis in our guidance as, let us say, one quarter is, where we have the lowest sales for the quarter. Thank you. Andrew Harris Cooper: Mhmm. Operator: Thank you again for joining us today. You can access the replay of this call as well as the presentation on Integer Holdings Corporation’s investor website at integer.net. This concludes today’s conference call. You may now disconnect.
Christel Bories: Good morning, everyone, and welcome to Eramet's annual results presentation. I know most of you from my past as Chair and CEO of Eramet in the last 8 years. And as you know, I have resumed the role of CEO on an interim basis at the request of the Board. It was not part of my personal plan. One year ago, I decided to not to seek a third mandate for personal reason, and I have not changed my mind. However, when the Board asked me to step in, I felt the responsibility towards the group, towards its stakeholders and above all, towards its teams. I know this company extremely well. I know its strengths, and I know what it takes to navigate a difficult cycle. And I want to see the group succeed. So, this is a temporary mission. A search for the new CEO is underway. But I will stay as long as needed to ensure continuity and stability for the group, and I will hand over once a successor will be appointed. In the meantime, I'm fully engaged and fully accountable. And as you will see today, I have a strong team with me. So, operational and financial continuity is fully ensured at Eramet. So, the agenda of today is the following. I will do an introduction. Then we will go through our 2025 financial results, and it will be presented by our acting CFO, Simon Henochsberg has been in Eramet for a few years now. He is our Head of Strategy. He is coming with a strong financial background and experience in banking. And he is today in charge of Treasury, Financing and Investor Relations. Then, we will focus on our operating and financial performance by activity and on the group performance improvement plan. And this will be presented by Charles Nouel. Charles Nouel is our COO. He has been in Eramet for 20 years. He has been in the COO position for 3 years now. And Charles is also in charge of the implementation of the ReSolution program. And then, we will move to our funding plan. And you have seen in the communique that we have announced today a comprehensive funding plan. And so, Simon will present it, and I will come back for the conclusion. So, let's start with introduction. Clearly, 2025 was a very difficult year that stretched our balance sheet. We faced strong external headwinds with cyclical lows almost across most of our commodities, combined with a weakening dollar, which is a rare and particularly adverse combination in our industry. We also encountered permit restriction in Indonesia and operational challenges in our manganese logistics in Gabon. We emerged from this period with a stretched balance sheet, and this required decisive actions that we have decided, with the full support of our Board, to restore a sustainable capital structure and provide solid foundations for the future. We will obviously come back to that in a minute in the presentation. At the same time, we have also achieved major milestones in our strategic road map. And we are particularly proud of the ramp-up of our Centenario plant in Argentina, which progressed successfully and which is really a great achievement and position us very favorably for the future. And in Grande Cote in Senegal, we are also very proud to have achieved the IRMA 50 certification. As you know, IRMA is a very demanding international standard in terms of sustainable mining. And we are one of the few mines in the world being able to achieve this level of certification. So, despite the big difficulties of the cycle, we progressed strategically on our road map, and I think it is a very important point. So, let's start now with safety. As you know, safety remains an unconditional priority at Eramet. Our incident rate stands at 0.8, which is a good standard in the world, and it is below our target of 1. As you remember, 9 years ago, when I joined the group, the safety performance was at a totally different level, and I think that the progress that we achieved over the past years is something that we can collectively be proud of. However, the situation at Weda Bay Nickel is deeply concerning. We recorded 3 fatal contractor accidents in 2025, and we had an additional one in January also with contractors. This is totally unacceptable, and corrective measures have been implemented. The contractor management has been strengthened. We have taken measures on road safety and operational controls have been reinforced. And we are also taking measure on lightning prevention and protection measures because we have had issues with lightning strikes. Safety is a fundamental priority of Eramet, and this is the first pillar of our ReSolution plan. And our target is clear. It's 0 injuries and 0 high potential incidents. So, let me now come to the broader macroeconomic environment. 2025 was marked by historically low commodity prices and unfavorable FX evolution. The macroeconomic environment and particularly the slowdown in China has weighted heavily on industrial demand. For our basket of commodities, and this is what you see on the right side, the pricing environment was comparable to 2015, which is the lowest level in the decade. And that has been compounded with a strong adverse dollar effect, which, as I said, is a particularly rare combination in the industry. So, these sharp declines had a significant negative impact on our results, which amounted to nearly EUR 300 million in 2025. These external headwinds, combined with the permit restriction in Indonesia led to a very deteriorated adjusted EBITDA, which reached EUR 372 million in 2025. It is down 54% year-over-year. You remember that we were over EUR 800 million in 2024. The intrinsic performance is also below expectation, notably in manganese logistics and because of the cost of the lithium ramp-up phase. So, you see that basically out of the -- I mean, the huge decrease of the adjusted EBITDA, 80%, roughly speaking, was coming from the external factors and 20% from disappointing operating performance within Eramet. As a result of this much lower EBITDA and tails off CapEx, notably in lithium and Gabon, the adjusted free cash flow was negative at EUR 481 million. And the net debt reached EUR 1.9 billion, and the adjusted leverage stood at 5.5x. The gearing reached 125% under the covenant definition, but we obtained a waiver for the December '25 covenant test date. So given the context, no dividend will be proposed for this year, and you will see also for next year. So, clearly, the balance sheet is stretched, but liquidity has been preserved and as we will see, remains solid at the end of December and access to financing remains secure. So, in response to this difficult situation, we have implemented a comprehensive funding and performance plan approved by the Board. It relies on 3 pillars that you can see here on the slide. The first one is, of course, the performance improvement and cash generation at the level of Eramet, driven by the ReSolution program. It covers more than 50 initiatives already underway, and Charles will detail these initiatives later on. The second pillar is a strategic asset review, exploring partial monetization options with the objectives of generating cash in 2026. The third pillar is equity strengthening, with a planned capital increase of around EUR 500 million in 2026, the [ principle ] of which has been agreed with our reference shareholders. The priority of this plan is clearly deleveraging, in order to secure a stronger and more sustainable future for the group. Simon will give you more details later on, but I think it's a very important step going forward to reinforce the balance sheet of the group. With the strengthened balance sheet, we will be in a position in the future to fully leverage the quality of our asset base. Just 2 examples here. We operate the largest and one of the highest-grade manganese ore mine in the world, as you know. The debottlenecking of the logistics and the rail infrastructure in Gabon is starting to deliver results. And so, this is positioning us very well for the future. In lithium, Centenario, as I said, is successfully ramping up. We are several years ahead of most competitors in direct lithium extraction at industrial scale. The asset is first quartile, scalable and long life in a structurally attractive industry. We think that our first quartile low-cost asset base will secure profitability and support cash generation as the commodity prices emerge from the low point of the cycle. Let me now zoom 1 minute on this first-class lithium asset. The plant, as you know, has started beginning of 2025; in fact, very end of 2024. Our plant has reached close to 75% of nameplate capacity in December last year after overcoming the problem caused by a faulty equipment, the fourth evaporator that was delivered by one of our supplier in the first half that has delayed the start of the plant for about 4 months. But the ramp-up trajectory in the second half was very good, was steep, benchmark in the industry and in line with our revised plan. Our proprietary Direct Lithium Extraction technology is now operating at industrial scale, and we have demonstrated that it's working. In 2026, as you have seen in our guidance, we target a production between 17,000 and 20,000 tonnes of lithium carbonate, reaching close to 100% capacity by year-end. And at the same time, we are focusing on cash cost optimization, particularly through improved reagent consumption and process efficiency. Longer term, the salar, as you know has a great potential of exceeding 75,000 tonnes of lithium carbonate per year with options for low capital intensity expansion short term. But we will do this expansion in a very disciplined manner and involving partnership. And just to finish this introduction, I would like to talk about CSR. As you know, I put CSR as a central pillar of our strategy 8 years ago. CSR remains central to our model and our act for positive mining road map continues to structure all our actions and we progress on it as planned. Achieving the IRMA 50 at Grande Cote in Senegal is a significant milestone. It positions us among the most advanced mining group globally in terms of responsible mining and transparency. And we continue to see top-tier recognition of our commitments from different CSR rating agencies. And we put here the example of our CDP rates on water that moved from B to A-, which is a very, very good level in our industry and the recognition of this continuous improvement journey towards excellence in CSR. So now, I will hand over to Simon for the financial results. Unknown Executive: Good morning to everyone. Thank you, Christel, for the introduction. I will start by commenting our 2025 financial results, and I will comment later on the funding plan that was announced yesterday. So, regarding our financial results. First, as Christel mentioned, we need to come back to the market situation that we experienced in 2025. Across all of our commodities, we had lower prices combined with a U.S. weakening, which is quite rare for us, which had a double impact on our financials. Regarding prices, the impact on manganese ore was minus 18% in 2025 compared to 2024. This is due to excess supply coming from South Africa, and it's also due to an Australian high-grade ore producer that came back on the market during the year. Regarding demand, steel production remains stable. On nickel, we also experienced a downgrade -- a decrease in prices by 10%. We managed to keep the prices of nickel ore stable in Indonesia, thanks to the premium we were able to get because of the permitting tension that we saw during 2025. But overall, on a global scale, we were in an oversupply situation, both on Class I and Class II nickel. In mineral sands, we've seen a structurally oversupplied situation emerging. This has been putting pressure on prices, and I will come back to that. This explains the impairment that we had to pass on our asset in Senegal. On lithium, the prices were low in 2025. We've seen the prices recover recently in the past few weeks. We had indeed a temporarily oversupplied market in '25 despite the very sustained demand that comes from both EV and ESS. But again, we are starting to see a rebalancing on that market in recent weeks. Coming to our financials. Our turnover for the year decreased to EUR 3.2 billion. So this is 7% below what we had in 2024. So this is mainly due to price impacts, and we did have some extra volumes with the start of our production of lithium in Argentina. Regarding adjusted EBITDA, as you know, we adjust our EBITDA with the share of Weda Bay Nickel. We also retreat the losses of SLN as this operation is fully funded by the French state and does not impact economically Eramet. So, on adjusted EBITDA, it decreased from EUR 814 million last year in 2024 to EUR 372 million in 2025. This is a decrease of minus 54%. This decrease in EBITDA translated into a lower net income for the year at minus EUR 370 million. This is also due to the impairment that we had to pass on our assets in Senegal, an impairment of EUR 171 million. This is the reflection of this persistent oversupply that we are seeing in this market and the downward pressure on prices. The adjusted free cash flow for the year landed at minus EUR 481 million, so lower than what we had in 2024. The impact on free cash flow is less important than what we see on EBITDA, first of all, because we were able to reduce CapEx in '25 and because we implemented a cash boost plan during the year. Due to this cash consumption, we saw our net debt increase from EUR 1.3 billion to EUR 1.9 billion. Our shareholder equity decreased as well. I'd like to mention on shareholder equity that there is the impact of the net income, but there is also the impact of the FX rate, which is very adverse as we have a lot of assets that are denominated in dollars. As a result, our credit ratios landed at 5.5% for the net leverage and gearing at 125%. As Christel mentioned, we asked for a waiver from our banks for the test date of December 2025 that was granted unanimously. Regarding the usual EBITDA bridge, I think the picture is quite clear. The external impact on our EBITDA was substantial in 2025 by minus EUR 359 million. This is 80% of the decrease in EBITDA came from external factors. In those factors, the 3 main drivers, again, are quite clear on this graph. The price impact was nearly EUR 200 million. The FX impact was nearly EUR 100 million. Taken together, you have nearly EUR 300 million that are linked to price and FX. And we had the permitting situation in Weda Bay with a new permitting constraint during the year that forced us to revise our mining plan with a higher cash cost, lower grades and a product mixed with more limonite on which we have lower margins. We also had CO2 quota sales on manganese alloys that brought EUR 46 million. And on the intrinsic, we had some positive impact on grades mainly in Senegal, and we had in 2025, the cost linked to the ramp-up of lithium. Regarding CapEx, we were able to reduce CapEx in '25 compared to '24, in line with the guidance we had provided to the market. Sustaining CapEx remained constant year-over-year. But with now the new addition of sustaining CapEx from Centenario as now we have this plant is in operation, which led to a sustaining CapEx of EUR 26 million. On non-sustaining CapEx, we kept investing in Comilog. This is to debottleneck the loading in Moanda and the ship loading at the port. We kept investing in Setrag to revamp the railway to allow for organic growth. And we kept investing in Senegal, where we are debottlenecking our plants and where we are also investing into a decarbonization project. We had some remaining greenfield CapEx linked to our plant in Argentina with the end of the construction. This amounted to EUR 96 million for the year, leading to a total CapEx of EUR 412 million. Regarding net debt, this is the result of what we described. The net debt increased from EUR 1.4 billion to EUR 2 billion. This is the result of a low EBITDA, still high CapEx as we were still investing. Taxes paid, with EUR 137 million of taxes paid, of which EUR 80 million in Gabon, which includes a settlement of a tax audit which is a one-off payment. We distributed some dividends, including EUR 56 million to minorities, which is mainly in Gabon. Regarding our liquidity position, our group financial liquidity stands at EUR 1.5 billion at year-end 2025. This includes our RCF. In January this year, this RCF was fully drawn for precautionary reasons. It provides the group with ample liquidity, especially as we have very manageable debt maturities in '26 and '28. The decision to draw this RCF in full was made by the previous management. We are currently evaluating the adequate level of cash we want to maintain going forward. Regarding our debt maturity profile, the bulk of our maturities are in '28 and '29 with the 2 bonds that are due that year. With that, we have an average maturity of our debt that stands at 2.8 years. With that, I will hand over to Charles to describe the operations. Charles Nouel: Thank you, Simon. Hello, everyone. So, 2025 operating performance and financials. In terms of operating performance, we've had mixed results. Disappointing in manganese ore. We had a low base on the -- in 2024, and we didn't manage to do more. I'll come back to that. Basically, it's around the logistics challenge being on the railway, but also on the terminal operations. In terms of manganese alloys, we were constrained by the market, by the ability to sell our products. We have a production capacity that is a lot higher than what you see there and what we actually produced. On the positive side, 42 million at Weda Bay when we received in July the additional RKAB when we managed, in the last part of the year, to produce so much is a very positive operational performance. Again, I'll come back to that because it has some negative impacts as well. Mineral sands, it's a record production. Mineral sands used to be around 600,000 or 700,000 tonnes. We gradually increased to 800,000 and now nearly 1 million tonnes. And the lithium started with difficulties with the Forced Evaporator. But in the second part of the year, the ramp-up that we achieved going to 75% in December and it's continuing currently to increase is extremely positive and is a real success. Now, commenting the manganese performance, the main driver to explain the difference between '24 and '25 is around the price and the exchange rate. On the -- that's for the manganese ore. On manganese alloys, it's about the prices, yet we have been able to compensate that through CO2 quota sales. Regarding the free cash flow, we have, of course, the EBITDA. But on top of that, we continue to invest in Gabon on the train line, but also on the infrastructure of the mine. This is coming to an end, that part. And we paid heavy taxes, as Simon has mentioned. On the positive side, it's the free cash flow of the manganese alloys that is much higher than the previous years. And again, this business delivered some significant free cash flow. In Weda Bay, the main difference is about the grade and the quality of the material that we sold compared to the previous years. This was heavily impacted by the permitting. Permitting is about the famous RKAB permit, which is the permit to produce and to sell, but also the forestry permit. And both these permits were delivered extremely late, and we had to redo our mine plan continuously through the year. And in the end, we had a very unoptimized mining plan. This is why the grade went down because we had to sell some low-grade saprolite. We had to sell a lot of limonite as well because the second part of the RKAB that we received was exclusively limonite. And that had a very big impact on our operation and our sales. The second part also is that, when you have a suboptimal mining plan, you have increased haulage distances as well as increased strip ratio, and that impacts our productivity. Regarding mineral sands, it's a record production, as I explained, yet the prices dropped to very low levels, and that impacted our EBITDA. And on the free cash flow side, we still have CapEx, CapEx of expansion, CapEx of decarbonation. And those will finish in Q1 with start-up in early Q2 this year. So, expect some small amount of -- smaller amount of CapEx last year and finishing end of Q1, beginning of Q2. Lithium, we started. The first semester issues with the Forced Evaporator impacted our cost. Our cost of ramp-up were higher than anticipated. We also had the end of the CapEx for the construction and also some VAT losses due to foreign exchange. So, that's it for our operations. The teams have fought hard through the year to compensate all the difficulties that we had. I'm actually quite proud of the teams, especially in lithium, and I'll come back to it also on the railway. GCO in Senegal delivered excellent production. So, although it's mixed results, we are seeing some real improvements in terms of operational performance. And this will be -- is what we will build on, on the operational performance plan. We have 3 pillars. The first one was explained by Christel largely. Our goal is to get to 0 injuries and 0 high potential incidents. We are launching some coaching of our first-line managers on site. We are -- we have reviewed all our production system to embed safety deeper into the routines of our personnel. In terms of operational and commercial improvement, we are targeting EUR 130 million to EUR 170 million EBITDA. I'll come back to that. This improvement is the uplift that we must deliver within 2 years. CapEx, as Simon showed you, the amount of CapEx that we've spent in previous years, EUR 496 million in 2024, EUR 412 million in 2025. We are now going to spend between EUR 250 million and EUR 290 million. That's a very significant drop. This drop is due to some growth CapEx that are now finalized, but also a much more disciplined approach regarding sustaining CapEx. Overall, this is a 30% to 40% reduction in the amount of CapEx that we will spend. The operational improvement plan is spanning on all our businesses, manganese ore, manganese alloys, mineral sands, lithium, Weda Bay as well and also commercial. We're looking at volumes and the volume part is the majority part of this EBITDA uplift, but we're also looking at productivity and especially in mature businesses like manganese alloys as well as costs in manganese alloys and mineral sands. We're also, of course, looking at cost in lithium to reduce our specific reagent consumption. That is the #1 driver for our cash cost. Looking into more details regarding manganese ore. As I said, we've had disappointing results in 2025, not managing to produce more than the previous year. But in late 2024, we started a comprehensive plan to work on the basics, on the fundamentals in Gabon. We started early 2025 with a mindset and behavior plan on both operations in Comilog and in Setrag, and we are seeing the improvements. We are seeing, for example, a sharp drop in the number of accidents, showing more discipline, more drive of the managers. The second part that is absolutely key over there is asset management. We've had issues in all parts of our assets in terms of maintenance and reliability. We've launched programs, and we talk usually a lot about the track maintenance, the track renewal. But what we are seeing late Q3, early Q4 is an inflection in some of the leading indicators. We had less rain breaks. We had better reliability of our rolling stock. And last year, we did a record replacement of the track, 84 kilometers for sleepers, 58 kilometers for rail. So that's -- these are the leading indicators that we follow. The lagging indicators are -- have started to improve late Q4 last year and are continuing to improve. This is the kilometers, the running distance of all our trains that is slowly but surely improving. These are all the things that we're working on, the track renewal, the track maintenance, the traffic management, the rolling stock reliability, the reliability also of our terminal operations. This is what we're working on. This is why we are confident because we have this inflection on the leading indicators and this improvement of the lagging indicators, we are confident that we will deliver 6.4 million to 6.8 million tonnes this year. Regarding lithium, we've talked about it several times already. 75% is what we delivered in December. We are continuing to improve. And with this improvement, that should lead to 100% capacity, close to 100% capacity by the end of the year. We are reducing our cash cost mechanically. But on top of that, we are reducing our specific reagent consumption. And the target for our cash cost is now at 5.4 to 5.8 in 2025 terms. Remember that the 5,000 was in 2024 terms. PT Weda Bay Nickel, this is a bit of a complicated slide. Basically, the message is IWIP has 73 RKEF production lines and 12 MHP production lines. The percentage of ore that was delivered by Weda Bay Nickel mine to the IWIP Industrial Park was around 40%. With the current permit, we only have 10%. Remember that last year, we got an improvement in our RKAB, and we will request an increase as soon as possible. Longer term, our AMDAL and feasibility study is still valid. It's still at 60 million tonnes, and this is our target to deliver 60 million tonnes. And now, I will give the floor -- leave the floor back to Simon for the funding plan. Thank you very much. Unknown Executive: Thank you, Charles. I will now comment the funding plan that we have announced. So, we have built, with the support of our Board, a 3-pillar comprehensive funding plan to strengthen our balance sheet. This plan is based on 3 pillars. The first one is the performance improvement plans that Charles just described. This includes the ReSolution initiatives, and this is already underway. The second pillar is a strategic review of assets. We are targeting a sizable asset monetization in 2026, and various options are being considered. The third pillar is the equity base strengthening. The project is to launch a capital increase of around EUR 500 million in 2026. While we implement this plan, we are adapting our capital allocation policy. The priority is given to deleveraging. We are limiting investments, as you've seen on CapEx for 2026, and we are suspending dividends for the next 2 years. Regarding liquidity, while we implement our plan, we will preserve liquidity and maintain our RCF. We have obtained, in that regard, a waiver from banks in December '25. We will be seeking to obtain another waiver from banks to cover 2026 as we implement our plan. In that regard, we have had very constructive discussion with our banks in the recent weeks and are confident about this process. A bit more detail on the third pillar, the equity base strengthening. This plan was approved by the Board of Directors of Eramet yesterday. Reference shareholders have approved the principle of a capital increase of around EUR 500 million in '26. The appropriate resolutions will be proposed to the May 2026 AGM and reference shareholders are committing to voting these resolutions. Overall, with this funding plan, this will enable Eramet to normalize credit ratios, both the gearing and the net leverage and improve our financial liquidity. Regarding the implementation time line, the first pillar, the performance improvement plan is something that is already underway and is fully embedded in the budget for 2026. The second pillar, asset monetization requires some preparatory work while we evaluate all the options. The targeted execution window is to the back end of the year around Q4. Regarding capital base strengthening, the resolution will be published end of March or beginning of April for an AGM taking place in May. This will enable an execution during the second part of the year. I will now cover the outlook and guidance. In 2026, we are seeing a more favorable environment. We've seen prices increase recently. All the spot prices are much higher in January than where it were in 2025. This is already reflected in the consensus price for the year. We are seeing in manganese ore an increase in price. This is confirmed in the sales we have done in January, and this is also consistent with the low level of inventory of high-grade ore we are seeing in China today. On nickel, we have also seen an increase in prices. This is in part due to the permitting situation in Indonesia, which is creating a supply gap and putting pressure on the ore price. On lithium, the market is rebalancing, and we have continued to see extraordinary growth in both EV and ESS applications that keeps pulling demand and that contributed to an increase in prices. And the spot prices we are seeing today are above the consensus that we show here. Regarding the FX rates, we are using $1.20. This is the consensus, but this is also the rate at which we have conducted the hedging operation in January. We have decided to hedge 2/3 of our exposure on the dollar, and this was conducted end of January. Regarding our guidance for 2026. On manganese ore transported volumes, we are seeing -- expecting an uplift from 6.1 Mt last year to 6.4 Mt to 6.8 Mt. This is not translated into lower cash cost, unfortunately, because the FX rate impacts negatively the cash cost. For nickel ore, the RKAB is on 12 million tonnes, but we will request an upward revision as early as possible. Regarding mineral sands, we are expecting a stable production. This is the reflection of the increased throughput that we have with the investment that we've made, but also lower grades that are expected in 2026. For lithium, we are targeting a ramp-up to the nameplate capacity during the year. This will allow us to increase the volumes to something between 17,000 and 20,000 tonnes of lithium carbonate equivalent. For CapEx, we target a sharp decrease to between EUR 250 million to EUR 290 million. This is mostly sustaining CapEx and -- but we still have in 2026, some debottlenecking CapEx, EUR 70 million in Gabon to debottleneck the logistics and EUR 30 million in Senegal, which is the end of the investments that we have already started. Thank you. I will hand over to Christel for the conclusion. Christel Bories: Thank you, Simon. Just a quick conclusion before we move to the Q&A. Clearly, 2026 will be a pivotal year. It's all about execution. It's execution in safety, reinforcing the safety standards with a specific focus on Weda Bay; it's execution on the group operational improvement plan that Charles has presented, delivering, I mean, all the initiatives with, as you have understood, a specific focus on the full ramp-up of lithium, which will generate a lot of value and the debottlenecking of the logistic chain in Gabon; it's execution on the funding plan and especially protecting the cash flow, strengthening the balance sheet and so advancing the asset monetization in 2026 and preparing the capital increase. Above all, it's about restoring the financial flexibility of the group and rebuilding the value creation capacity for the next cycle. I'm convinced that we will be successful. We have great assets. We have a very committed team, and I can tell you that I have found back a team that is very committed to deliver for the future. And we have, as you have seen, the full support of our Board. So, I trust that altogether, we will be successful on this plan. So, thank you very much. And now we will move to the Q&A session. Christel Bories: For this Q&A session, so the team will be here to help me answering your question. So the one who have presented already, so Simon Henochsberg and Charles Nouel, but also Maria Lodkina. And Maria is the Head of the Controlling department. She is co-managing today the finance department covering controlling and accounting. Maria, if you can join and team is here for -- so Sandrine, please, on the question. Sandrine Nourry-Dabi: Okay. So, we will start with the questions from the audience, and then we will take the questions from the webcast. So, okay, first question? Christel Bories: So, I can't see you with the spot, but... Sandrine Nourry-Dabi: If you could introduce yourself as well, so [ Auguste ]? Maxime Kogge: It's Maxime Kogge from ODDO BHF. So, I have a first question on the capital increase. So, am I right to assume that the full capital increase will be at the Eramet level? Or could it also involve some disposals of minority shares in the subsidiaries? I'm thinking about lithium, for example. And related to that, if I do the math, so you have 5.5x of net leverage right now with EUR 500 million of capital increase that leads us to, on my calculation, around 2.5x net leverage by the end of next year. And we are still quite far away from the 1x net leverage long-term target. So, can you give us a sense here of when you could achieve that long-term target? Christel Bories: So, I will answer the first question and let Simon answer the second one. Just on the capital increase that we have shown in the third pillar of the funding plan is at the group level. So, the EUR 500 million is at a group level. And as we have said, there will be resolutions proposed to the general assembly and our reference shareholders have committed to vote those resolutions to be able to deliver this capital increase by the end of the year. On -- it does not mean that we could not sell a minority shareholding in our subsidiaries, and it is part exactly of what we call the asset monetization, I mean, process that we are -- we have launched, in fact, because we have already selected some -- have selected some assets, have some ideas, started some discussions so that we could be able to deliver this also in 2026. So -- but this will be in the second pillar, which is part of the -- what we call the asset monetization in 2026. Maxime Kogge: And regarding the pathway to the 1x of net leverage, that is your long-term target? Unknown Executive: On that question, so, indeed, our capital allocation policy for the coming 2 years has been adapted to -- as we face the situation, we've have a net leverage of 5.5x at the end of 2025. The way we have sized our funding plan is, first, this improvement program, which is designed to generate cash and increase the EBITDA level, which is a big component of a decrease in the net leverage. The second part, the asset monetization, which is not necessarily the biggest lever to decrease leverage and the third pillar, which is the equity increase. Coming back to 1x in 1 year is not feasible in our view, depending, again, on prices, EBITDA may increase to a level that allows to go back straight to that level. It would be interesting to -- if you remember what happened in 2015 and 2017, where Eramet leverage went up very fast. It also came back very fast in the year afterwards as prices were increasing. But in any case, to answer your question, the capital policy allocation has been adapted for the next 2 years to face this special situation and the target of 1x can only be resumed after we pass that period. Maxime Kogge: Okay. I have a second question and last one, I have to leave the floor to my colleagues. It's about lithium. So, lithium prices are currently quite high and remain to stay so for long, given the strong tailwinds. You have an operation that is running now quite smoothly. So, now it could be the perfect time to launch the Phase 2 of this project. It could have been perhaps the case already in '23, '24 when you had plans already to launch it because you would have benefited now from these very high prices. So how should we think about this expansion there? You have huge potential, but it seems that you're very much constrained. So, could the capital increase perhaps include a path to fund this project? Or is it something that will come a lot later? Christel Bories: It's a very good question. As I said in the presentation earlier, we have huge potential. And the first one is a very low capital intensity expansion of the existing plant. We have some debottlenecking potential within the existing plant, which can increase, quite significantly, the production with a relatively low CapEx intensity. So, this will be the first step before we build a second plant which is also part of the long-term growth plan for lithium in Argentina. On this first one, as I said, we will be very disciplined. And part -- it can be done with partnership, bringing a partner that could allow us, without stretching further our balance sheet and spending too much CapEx to accelerate this expansion phase, bringing a partner in this assets, in the joint venture. It's part of the things that we are considering in order to leverage the growth potential of these assets at the right time in the market. Auguste Deryckx Lienart: Auguste Deryckx, Kepler Cheuvreux. I have 2 questions. The first one is on the capital increase because reference shareholders supports this operation. Should we assume that they will participate at least to the extent of their stake in Eramet? And the second question is on divestments. Is it fair to say that the easiest asset to sell are a minority stake in the lithium mine and mineral sands? Christel Bories: Again, on the second question, I will not comment on the assets. We don't want to sell at discounted value. That's why we are considering several options that are all in line with our strategy. We don't want to sell things that would, I mean, endanger our long-term strategy in critical raw materials, and we don't want to sell at a low value. So, we are taking all this in consideration. But we think that with all these constraints, we still have options and will not comment further as you can -- and you can understand why at this stage on which asset is targeted. On your first question, I cannot comment for my shareholders. The only thing I can tell you is that both shareholders have approved the funding plan in the Board, and it was -- this funding plan was approved unanimously at the Board level that they have committed, as we said, to vote the resolution in the AGM that will allow the Board to execute this capital increase, so -- which means that they are supportive of this concept and project of capital increase. Now the modalities of the capital increase and who is participating to what will be detailed later on, and I cannot comment further at this stage. Unknown Analyst: [indiscernible] It's a pleasure to see you back, but that was not the plan. Can you comment on what happened? It was really -- it came as a surprise to us all. So that's my first question. A couple of years back, that's my second question. You mentioned that of all the things that would hamper your operations would be a naval blockade. Does the present level of geopolitical tension seems to you as moving towards this kind of risk for the group? Or do you think we're really cool for the coming, at least for 2026 as far as you can see? Christel Bories: Just so, I think we have already commented, I mean, through our communique and in the press, I mean, the reason for the dismissal of the previous CEO. It was really a question of divergence in the way decisions were made, the level of transparency, the way of working, especially with the Board. So -- but also with the teams. So, I think it's nothing to do with financial issues, nothing -- no fraud, no ethical issues. It's really the way decisions were made, lack of transparency, lack of alignment, divergence in the way of functioning. So, at this level, we need -- and it's also the culture and the values at Eramet, we need collaboration. We need consultation. We need transparency. And when those things are happening at this level, we have to make decisions. So, I'm back, as I said at the beginning, for an interim period. But in that period that will take the time it will take. I'm fully committed and accountable to lead the group. And of course, I will step down as soon as we'll have found a new CEO. The plan remains the same mid-term. On your second question, I'm not sure I got exactly what you meant, but I think that it's -- again, in terms of strategy, and maybe you can precise the question, but on strategy for Eramet, we continue to have a good momentum, and it's also part of the answer to other questions. Eramet is really a strategic company exposed to critical metals necessary to secure the Western value chain and enable the energy transition. And we think that with all what has happened in the world in the past months, we are even more critical for Europe and for the Western world in terms of producers of critical raw materials. Unknown Analyst: Well, very specifically, what happens in the Middle East with this buildup between Iran on one side, the U.S. on the other side and their respective allies, you think what everybody is saying, it's going to be okay. But if it's not okay and if these people start fighting, what happens to your relationship with China and whatever you have to deliver there? That's my point, especially from Indonesia. Christel Bories: Yes. And again, as you know, in the world of today, it's difficult, I mean, to navigate. We have to be agile. We have to be flexible. Today, that's true that we do quite a lot of our sales in China because China is a big consumer of raw materials and metals in the world. But we have developed, as a contingency, I would say, in the last months and years, we have developed ourselves elsewhere, especially we have grown a lot in India, for example. So, today, we need to be agile. We need to continue to observe what's going on in the world. But -- and that's why I said that I think we are well positioned in countries today that are remaining quite independent from those blocks. And I think that in Indonesia, that's true that what we see in Indonesia and what we see in many countries in the world today is the increase of nationalism and more and more political decisions, and we have to deal with those change in our countries. So, I cannot comment more than that today. Jean-Luc Romain: Jean-Luc Romain, CIC. I have a question regarding your RKAB, which was allowed by the Indonesian government, which is much lower than last year and probably much lower than you expected. Given the ability and what you mentioned in your press release to ask for higher RKAB, what kind of level do you think you could achieve? That's a difficult question. And -- well, should we expect a big drop in volumes this year compared to last year? Christel Bories: It's really very difficult to answer this question. Obviously, as we are -- we have been surprised by this level of cut. You may remember that part of the national -- I mean, strategy of Indonesia was to rationalize the level of allocation of RKAB in order to decrease the potential oversupply of nickel on the market and have the price increase in the coming months and years. What they have announced is that they would like to cut the RKAB overall by, let's say, 20%, they say, 20% to 30%. We have been cut by 70%. So, I'm not saying that we will come back to 20%, I don't know, but it's obvious that the level we are today is much lower than the average volume they want to decrease in terms of production. So just as -- we will resubmit, of course, request, I mean, to be in line with what we had last year, and we will see. Last year, just as a reference, we got EUR 10 million additional -- I mean, RKAB during the year. So, I don't see why we should not get at least this, this year, but we hope that it could be more. because we had RKAB of EUR 42 million last year. So, EUR 42 million, minus 20% to 30% is not EUR 12 million. Any other questions in the room? If there is no other -- there is one. Unknown Analyst: [ Bernard Vatier ] from [indiscernible]. Can I ask a follow-up question on Weda Bay. Considering current permitting you got, should we assume that you will hardly receive any dividend from Weda Bay in your free cash flow forecast for FY '26? And second question, maybe on the asset disposal plan or monetizing of assets. So, we've mentioned various optionalities. What about Weda Bay? Can you give us more color about your partnership with Tsingshan because you bought back their share in Centenario. Could you consider selling them the stake in Weda Bay or given current circumstances, it's difficult? Christel Bories: So, on the dividends, I will let Simon precise that, but we are not expecting no dividends because the consequence of having such a low RKAB, if it were staying at the same level, would be a significant increase in price. Already last year, when they started to cut the RKAB, you have seen that the premiums on nickel ore in Indonesia over the formula that is official in Indonesia have increased significantly. And at some stage, the premium were higher even than the price -- the formula price itself. So, we have a kind of -- of course, it does not offset everything, but we have kind of offsets coming from the prices. So, the impact on the cash and on the EBITDA is not as big as it could look like when you look at the absolute number. That being said, we will have a negative impact. So, on dividends, of course, it will depend on what we get at the end. And one thing that is for sure is that we don't expect to have dividends in the first half of the year. It will be more on the second half of the year once we have a better view of what will be the RKAB for the full year in Weda Bay. Simon, do you want to add something or Maria? Unknown Executive: Yes. Just a small precision on the dividend amount. We cannot give the very exact number. But in any case, we expect a significant increase versus '25. First, December was a brilliant performance of Weda Bay team, meaning that the big cash is in the second half of 2026, which will convert in dividend distribution. The amount will be, of course, dependent on the RKAB situation. But as can be seen from our financial statements, the 2025 level was very low, and it will be compensated in '26. And as Christel mentioned, the very significant part of the compensation is coming from the high premiums, and it's already clear from what we can see now in the market. Christel Bories: Just on Weda Bay, again, I will not answer directly your question. What we are seeing is that, we are reviewing different options on different assets. So, it's not the same setup and on the different assets. So, we -- I won't tell you more at this stage, but we look at different options, obviously. Are there some other questions? Nicolas Delmas: Yes, please. Nicolas Delmas, Portzamparc. Just 2 questions on my side, maybe. One, could you quickly comment on the ongoing negotiations in Gabon regarding local ore transformation? And second one, could you also give some more information regarding asset impairments in Senegal? Christel Bories: Maybe you want to comment on the second question. Asset impairment, Maria? Unknown Executive: Yes, impairment in Senegal, as Simon presented before, most of the effect is due to the depressed market and the price assumptions used in the evaluation. It has been done in accordance with the IFRS rules and purely linked to the current projections for the long-term prices. Unknown Executive: And to add a comment on the prices, we are seeing this market change structurally. There's a lot of HMC imports in China from new sources from Southern Africa notably. So, this is -- there's a lot of new supply that is coming on the market, and we see a high level of stock. This has already been reflected in the prices, which have decreased quite significantly. And we are seeing this as a structurally oversupplied market, which is the reason why we have taken this impairment. By the way, our competitors in mineral sands, Kenmare and Iluka took impairments as well this year for the same reasons. Christel Bories: Maybe one word on Gabon. As you know, on the -- I mean, the request of Gabon to transform locally the ore. It was a highly political decision. So, I mean, it's -- we respect the decision of the state. We are -- of course, we have been discussing with them since then, and we continue the discussion. We have been partners, as you know, with the state of Gabon for now more than 20 years. They are -- they have a significant share in Comilog, our subsidiary in Gabon because they have close to 30% and 29% share in Gabon. And it's a significant part today of the revenue of the states in terms of tax, dividends, et cetera. So, we are discussing on the best way, I mean, to answer this political request without, I mean, impacting the economics neither of Eramet or Gabon overall as we are altogether, I mean, really relying on the success of the present model in Gabon. So, discussion is ongoing. And of course, it will take -- still take some time, and we will keep you, obviously, informed if there is any, I mean, further decisions on this side. So, yes, Jean-Luc Romain? Jean-Luc Romain: Jean-Luc Romain, Sorry, I have another question regarding the grade of the ores you were able to sell from Weda Bay. You mentioned, Charles, that this was saprolites and other less rich ores. In your concession, do you have higher grade ores that you could sell in the future, which would improve the economics? Or should we expect, over the long term, a reduction of the grade of ores? Charles Nouel: We do have many different deposits. It's a very large concession. And of course, we have deposits that are richer than others. A good mine plan is a mine plan where you start with the higher grades. So, over the life of a deposit, you always see if it's well managed, the grade going down. Now, what happened last year was a bit of this, but also, as I explained, a suboptimal mining plan due to the permits received late. So, what we're trying to do every year is to compensate the lower grade of geological grade by a better mining plan. That's what I can say. Every year is -- you have to fight, you have to improve your productivity, you have to improve also the dilution that you have on the mine and you have to improve your product mix between the different types of material that you mine, i.e., some -- the high-grade saprolite, low-grade saprolite, limonite. The #1 effect at Weda Bay is the split between saprolite and limonite. And last year, we had 42. The extra 10 was 100% limonite. Limonite is around 1.1 in grade, where saprolite is, say, around 1.5, 1.6. This is what we have in the deposit. So, the average is 2/3, 1/3. That's what the deposit gives you. And then, you have to work on this. When the RKAB goes down, we try to reduce the amount of limonite and increase the amount of saprolite that we sell. And when it's going down as low as 12 million, we try to do 100% high-grade saprolite, yet the geology is what it is. And to get to the high-grade saprolite, sometimes you have to move some limonite and sometimes it makes sense to sell this limonite. It's an economic decision every time. It's not geology or mining. It's about optimizing with the set of geology and mining that you have, how do you maximize your revenue -- sorry, your EBITDA. Christel Bories: Other questions from the room? No. We will move to the... Unknown Executive: Yes, we'll take question from the webcast. Many have already been answered, but I will take the additional ones. Can you give us an update on the situation of your CFO? And regarding the search of a new CEO, can you give also an update as well as the progress for this search? Christel Bories: On the CEO, I mean, the -- as you know, the dismissal happened on the 1st of February. So, we are at the very beginning. So, it's -- we are starting. So, I cannot give you any specific details -- further details. We are just starting. The situation of the CFO, I think we -- it's clear. We have made a communique on that. We had an internal alert coming from several people within the organization, especially on the management of the finance department. And serious enough so that we have decided to suspend, I mean, its activities. So, for the time being, for the time for an investigation, an external investigation that will take place in the coming weeks. So, as these investigations are taking some time and it takes several weeks, we will take the time for a proper investigation and then see what really the reality is and make the appropriate decisions afterwards. Unknown Executive: Coming back to the asset monetization, do you have already identified some candidate or some possible partner? How much amount do you expect from this monetization? And do you consider only minority stake? Or could you consider selling a majority stake or even a full asset? Christel Bories: We are considering minority stakes. That being said, Weda Bay was mentioned, we are already in a minority position in Weda Bay. So, it can be a lower minority stake. So, it's -- but today, there has been no decision to exit -- to fully exit one of our key critical metals. It's a way of answering this question. Maybe on the size, Simon, you want to -- you will not give any number, as you can imagine. It's -- we said sizable, it means several hundred millions. Unknown Executive: Coming back to the capital increase, why don't you organize an extraordinary general meeting to be able to have the authorization earlier and do the operation earlier? And is it already fully underwritten? Christel Bories: I think I already answered the second question, second part of the question. On the first part, we have the Board that will vote on the resolution of the general assembly mid-March. So, it's coming very soon now. We need to work on the modalities of this capital increase. We will propose to the Board the resolution. Then the resolution will be proposed to the AGM that will take place in May. So, we thought the time it takes, I mean, to prepare also such an operation, we think that, I mean, having the resolution voted and so all the authorization ready in May is an appropriate calendar for the time being. Unknown Executive: Regarding financing, can you explain why you draw all the RCF beginning of the year? What was the rationale behind this decision? Christel Bories: Simon, do you want to answer this one? Unknown Executive: Yes. So, indeed, the RCF was fully drawn end of January. This decision was made by the previous management. We are -- as you've seen, the amount of liquidity that we had at the end of the year is EUR 1.5 billion, which gives ample room to maneuver in the coming years, especially as the debt repayments in 2026 are quite manageable. And -- but on the same time, on the free cash flow, as you've seen with our guidance and our outlook, we have a consensus price that is improving. We are guiding on an increase in volumes. We are stopping -- the investments in lithium are done now, and we have free cash flow that will be generated from that operation. So, all of that is positive for the free cash flow generation of the group. All in all, we are evaluating -- we are also in a business that is quite volatile. So we have to have enough precaution. That being said, having the entirety of the RCF drawn is not necessary in our view. We will refine the analysis in the coming weeks, and we have already engaged discussion with banks in that regard. Unknown Executive: A small final question regarding the dividend to make sure we understood correctly. When you mentioned the 2-year suspension, it's a dividend for 2025, which would have been paid in 2026 and the dividend for 2026? Christel Bories: Yes, that's the case. Unknown Executive: Okay. Thank you very much. Christel Bories: So, if there is no other question, again, thank you very much for your attention, for your attendance today. Again, it has been a challenging year, a very challenging year for Eramet. But I think we are really taking the necessary and decisive actions to bring it back to a sustainable capital structure and to be ready with solid foundations for the future. So, thank you for your support. Thanks.
Operator: Welcome to the Mondi Full Year Results 2025. [Operator Instructions] I'm now going to hand you over to Andrew King. Andrew, please go ahead. Andrew King: Good morning, everyone, and welcome to Mondi's 2025 Full Year Results Presentation. I'm Andrew King, your Group CEO, and I'm joined this morning by our CFO, Mike Powell. As usual, I'll begin with some highlights for the year. Mike will then take you through the financial performance in more detail. I will then return to provide an update on our business units, discussing at the same time the current trading environment and then take you through why we believe Mondi is strongly positioned to capture the upside as markets improve. After that, Mike and I look forward to taking your questions. So as you'll see on the first slide, in terms of our full year performance, I believe we did deliver a resilient outcome, EUR 1 billion of underlying EBITDA, marginally down on the prior year. Pleasingly, cash generated from operations of EUR 1.07 billion was up on the prior year. As Mike will explain in more detail, we were also able to reduce CapEx below previously guided levels, which further supported our cash flow and balance sheet. As I mentioned, this is a resilient performance in the context of what remain challenging market conditions and reflects both the strength of our integrated asset base, the value of our unique product offering, and the impact of the self-help measures we have taken. While we remain confident in the structural drivers underpinning through-cycle growth in our sustainable packaging solutions, we're equally cognizant of the impact of the current downturn and the impact it's having on our near-term performance. In response, we have taken deliberate and decisive actions across the group, intensifying our focus on cost discipline, on operational excellence, on proactively optimizing our production footprint and on cash generation, while at the same time, continuing to focus on delivering a great value proposition to our customers. These actions together with the significant competitive advantages we continue to enjoy as a business, ensure that Mondi is strongly positioned to capture the upside as market conditions improve. With that, I'll hand you over to Mike for more color on the 2025 financial performance. Michael Powell: Thanks, Andrew. Good morning, everybody. Thank you for joining. On to our 2025 results, which demonstrate a resilient performance against a backdrop of the prolonged cyclical downturn that our industry continues to face. Underlying EBITDA of EUR 1 billion saw continued margin pressure associated with the challenging trading conditions, the makeup of which I'll come on to on the next slide. During the year, we successfully completed the build and start-up phase of a number of major capacity expansion projects into our core markets. These investments, together with the Schumacher acquisition, position us strongly to capture the upside as market conditions improve. They have, however, led to a higher capital base. And as a result, you see an increase in depreciation and finance costs, which reduces the group's basic underlying EPS and return on capital in the year. And on the right-hand side, I'm pleased with the stronger cash generation from operations increasing to EUR 1.072 billion through strong working capital management. So let me take you through the main movements in underlying EBITDA when compared to the prior year of EUR 1,049 million that you can see on the left-hand side of the chart. As you can see, the performance was resilient in an environment of macroeconomic uncertainty and geopolitical tensions with only small movements year-on-year, which is a testament to the strength of the cost advantaged and integrated assets, the quality product offering and the targeted actions taken. Sales volumes were up on the prior year, which included additional volumes from ramping up the new capacity. With respect to selling prices, this is mostly comprised of higher containerboard selling prices, which were more than offset by significantly lower uncoated fine paper and pulp selling prices, and Andrew will provide a little more color on that in a couple of minutes. The cost increase is mainly in relation to labor inflation with other costs well controlled. Input costs were overall flat year-on-year against a muted economic backdrop. In the first quarter of 2026, we are seeing overall input costs remaining flat on 2025 despite some sizable headwinds related to lower energy-related income and emission credits. And lastly, the forestry fair value gain, EUR 32 million higher in the year when compared to prior year, all that adding up to the results of an underlying EBITDA of over EUR 1 million for the year. As Andrew said, we're cognizant of the impact from the current downturn and its effect on our near-term performance. So I wanted to spend some time outlining the actions we're taking to proactively manage the fixed cost base. Andrew will touch on operational excellence and productivity later. We execute targeted cost-out initiatives to drive efficiency, eliminate nonessential activities and strengthen the core revenue-generating areas of the business. It is what we continuously do to improve. Whilst we do have targeted incremental costs in growth areas, whether that's due to new capacity or customer demand, we have reduced headcount over the last 12 months elsewhere by approximately 1,000 heads, driven from greater efficiency in our operations, plant closures and about a 13% reduction in our group services offices. We've also recently announced 3 further plant closures, which will reduce headcount by approximately another 200 in the coming year. We combined our Corrugated Packaging and Uncoated Fine Paper businesses into a single business unit, and that facilitates a more streamlined organization, supporting faster decision-making, cost takeout and delivery of operational synergies across our pulp and paper mills whilst retaining our customer-focused value chain orientation. And therefore, for the 2026 year, I expect these actions to offset labor and other cost inflation. Let me now take you through the movement in net debt. We started the year with EUR 1.7 billion. You can see the EBITDA contribution I've taken you through of the EUR 1 billion. In terms of working capital, I'm really pleased with our delivery since the half year. As you'll remember, at the half, we outflowed about EUR 100 million in the first 6 months, which tells you we drove around a EUR 200 million inflow in the second half of the year to leave the total inflow that you see on the chart of EUR 83 million. Including interest, tax and other items, the net result of these 3 items was cash delivered of EUR 767 million, and you see that highlighted in the box on the slide. The next 3 columns shows how we've allocated capital in the year. We invested EUR 673 million in property, plant and equipment, lower than the previously guided EUR 750 million to EUR 850 million, driven by our ongoing focus on cash management. Dividends paid totaled EUR 352 million. And lastly, we completed the acquisition of Schumacher, which expands our geographic reach, drives greater optimization across our plant footprint and unlocks efficiencies that support long-term growth. Integration remains on track. We're confident in the delivery of the EUR 32 million cost synergies over the 3 years from completion, and that's an increase from the EUR 22 million that we initially envisaged. So to conclude, all of that leaves the group with a net debt balance at the end of the year, EUR 2.6 billion, which is 2.6x levered. I also want to set out our robust financial position. We have investment-grade credit ratings. Our available liquidity totals around EUR 1.3 billion and places us strongly to protect value in the short term and capture opportunities in the long term as they arise. We've refinanced short-term debt maturities in the year and have no further debt maturities until 2028. And as a reminder, we have no financial covenants. Let me now take you through some capital allocation points, starting on Slide 9. So the group has a well-invested and cost-advantaged asset base in structurally growing packaging markets. Over the past few years, we've invested in a number of major capacity expansion projects, and we're very proud of the teams for completing the build and start-up phase of these projects on time and on budget. Our focus is now on delivering full productivity ramp-up, executing our commercial strategy, driving cash generation and delivering strong returns. In addition to these growth projects, we invest through the cycle in our asset base to maintain competitive advantage. And you can see here in the gray bars that exclude those growth projects that this has averaged 107% of depreciation over the past 5 years. Our cash capital expenditure for 2026 is expected to be approximately EUR 550 million, lower than the EUR 650 million previously guided. Within the EUR 550 million is approximately EUR 50 million of cash still to flow for the growth projects, leaving a base of around EUR 500 million. This spend will focus on maintenance and targeted cost optimization opportunities, including enhancing energy efficiency, improving productivity and strengthening the resilience of our asset base. On to dividend, the Board does recognize the importance of dividends to our shareholders. Over the last 2 years, we have consciously recommended dividends in excess of our policy on each occasion carefully reviewing expectations for the coming period. Notwithstanding our continued confidence in the resilience and competitiveness of our business, consistent with our objective of retaining financial flexibility, the Board has recommended a total ordinary dividend of EUR 0.2825 per share for 2025, reflecting a return to the group's stated dividend cover policy of 2 to 3x underlying earnings on average through cycle. And lastly, the technical guidance slide for 2026, hopefully, all relatively self-intuitive. With that, let me hand back to Andrew. Thank you. Andrew King: Many thanks, Mike. I'll now take you through the review of the business unit performance and some thoughts on the current market dynamics before coming back to our competitive positioning. Before we get into the segmental review, I remind you that in Q4 2025, we combined the Corrugated Packaging and Uncoated Fine Paper businesses to form an enlarged Corrugated Packaging business unit. So the segmental numbers are all based on the new reporting structure. But to help comparability in the appendix to these slides, we have provided unaudited numbers on the old basis of segmental reporting. So coming first to Corrugated Packaging. A highlight was very much the good volume development achieved across all segments. Containerboard volumes were up around 15% year-on-year against the backdrop of a flat European market demand, supported by increased export sales and the ramp-up of completed expansion projects in our Swiecie, Kuopio and Duino mills. In Corrugated Solutions, we achieved like-for-like volume growth, excluding the Schumacher acquisition of around 2%, in line with overall European market growth. In UFP, we were able to hold volumes stable despite market demand declines of around 5% in each of our key regional markets of Europe and Southern Africa, testament to our cost competitiveness and the quality and reliability of our products and services. The margin squeeze you see came through price. In containerboard, average prices were moderately higher than the prior year, although this does mask a tale of 2 halves, where prices were moving up through the first half, followed by declines through the second half. In Corrugated Solutions, margins were squeezed as higher input costs were not fully passed on to customers due to intense competition in all key markets. In Uncoated Fine Paper markets, prices came under significant pressure through the year as industry moves to reduce capacity were not sufficient to mitigate the impact of significant demand side weakness. This was exacerbated by lower pulp prices, which gave some breathing room to the higher cost unintegrated producers. Our South African business, which I remind you is a net seller of pulp was further impacted by the unusually strong rand, which negatively impacted the rand price achieved for export pulp sales. It is nevertheless encouraging to see some modest pickup in pulp prices over recent months, and we are currently implementing price increases in certain uncoated fine paper grades in Europe on stronger order books and ongoing cost support. If I look back at where we are today in the corrugated packaging markets, margins remain under pressure due to the lingering supply-demand imbalance. Demand has clearly been impacted by the prolonged economic downturn seen in our core markets, lasting now the better part of 3.5 years. That said, it is encouraging to see that even against a soft macroeconomic backdrop, box demand in Europe was still up around 2% last year. And in fact, if you look at the size of the European box market, it has still grown by around 7% since 2019, the year before COVID for a compound annual growth -- average growth rate slightly above 1%. While clearly below historic growth rates of nearer 2% per annum, it is nonetheless still growing and I believe reflects the structural support we see from demand drivers such as e-commerce and sustainability. With a healthier macroeconomic backdrop, one would certainly expect these markets to return to trend growth rates of around 2% per annum. What has clearly been a major contributor to the overhang is the supply side response. Containerboard capacity over the same period since 2019 has expanded by around 15%. In the short term, this overhang will continue to hold back margins in the industry in the absence of meaningful capacity rationalization and/or stronger demand side recovery. In this regard, there's clearly ample incentive for capacity closures with a significant portion of the industry cost curve currently loss-making. As for ourselves, we'll continue to focus on the controllables that we know will serve to strengthen and reinforce our advantaged competitive positioning in these markets, leveraging our market leadership positions, cost advantaged asset base and integration strengths, and I'll come on to more of that a bit later. If we move then to the Flexible Packaging business, I'm very encouraged by the strong volume growth we achieved in our global paper bags business with good contributions from all key markets that we serve. Pleasingly, in addition to the steady performance from traditional industrial end users, we are seeing an acceleration in demand growth for e-commerce solutions in both Europe and the U.S. We continue to invest behind these important growth markets that we are very well positioned to serve. Similarly, our Consumer Flexibles and Functional Paper and Film segments continue to display their defensive qualities as we drive product mix improvements, supported by recent investments and ongoing innovation centered around sustainable packaging solutions. As noted on the slide, volumes in kraft paper were moderately down year-on-year as we responded to a generally softer demand environment with production downtime, particularly in the second half. While there is seemingly something of a disconnect between the strong volume growth in our bags business and the relatively softer kraft paper markets, our analysis suggests this is due to a combination of industry stocking and destocking effects and product mix impacts. On the back of the softer demand, kraft paper prices came under pressure over the second half of the year and into early 2026, following modest increases through the first half of 2025. With the ongoing good demand picture in bags now seemingly translating into better order intake for our key sack kraft grades, we are currently implementing price increases across our range of sack kraft grades, reversing the declines we saw in late 2025 and early '26. Again, if I step back briefly to understand how our industry dynamics are playing out in the context of the current challenging macroeconomic environment. Unlike in the corrugated markets, we see the current margin pressure in this segment as being very much a cyclical demand side story. I remind you that sales in flexibles are split roughly 50-50 between more cyclically impacted industrial end users and the more defensive consumer end markets. On the industrial side, if I take, for example, European industrial bag demand from 2019 until today, it is off around 7%, heavily impacted by the slowdown in cyclically sensitive markets like cement and building materials. Over the same period, European sack kraft capacity has actually remained relatively flat. This is clearly a cyclical demand side challenge. As already mentioned, encouragingly, industry demand is improving, albeit modestly from the lows seen in 2023. European industrial bag demand was up around 2% in 2024 and a further 2.5% in 2025. This also excludes new applications for our bags in nonindustrial applications like retail and e-commerce and consumer markets, which are also adding to demand sources and contributed to the 5% growth we achieved in our bags business. With this backdrop, we will continue to support the growth of our global leading paper bags franchise, supported by our strong backward integration into kraft paper and our complementary offering in functional papers. We are not waiting for the cyclical recovery, but rather continuing to develop new markets for our products while also driving our operational excellence and cost optimization programs to enhance our competitiveness. Coming then to our competitive advantages, I just want to discuss briefly how we see Mondi positioned in these markets and reminding you of the significant advantage we have to deliver resilience in the most challenging of market conditions and similarly capture the upside as market conditions improve. I'll talk to each of these points over the next few slides. Our scale and market positions are a major strategic advantage. In corrugated, we enjoy market leadership positions in the niche virgin grades where we also enjoy significant cost advantage. In emerging Europe, which typically enjoys higher growth rates, we are the leading integrated box producer. As you know, through the Schumacher acquisition last year, we have now extended our geographic reach across Northern Europe, so that we can be a genuine option for regional key account customers, while at the same time, leveraging our paper integration strengths. In Fine Paper, we are the #2 player across Europe with real strength in our core regional market of Central Europe, while we are the clear market leader in our other core market of Southern Africa. In flexibles, we are the clear global market leader in both upstream kraft paper and downstream paper bags with an unmatched global reach and integration strength. Similarly, we enjoy real strength in niche consumer flexibles markets in Europe with, for example, the leading position in the high-growth and highly demanding pet food market. These positions matter. They underpin our customer relationships, supply chain relevance and cost competitiveness. As I've already mentioned, packaging demand is heavily influenced by macroeconomic growth in the short term. While there are many defensive end markets such as food and beverage and other consumer nondurables, there's always an element of cyclicality in demand, even in the most defensive of markets. This is accentuated in our industrial exposures, as already noted, most notably in construction and related markets like cement and building materials. This has clearly been the dominant theme over the past 3 years as the fallout from COVID, wars in Ukraine and the Middle East and the more recent trade wars have all served to undermine consumer confidence, particularly in our core European markets. However, as I've already mentioned, it is pleasing to see that despite this very difficult macroeconomic backdrop, we are starting to see some growth coming back into these markets, albeit off a low base. Most importantly, we remain confident that the structural growth drivers in packaging are very much intact. Key among these are the increasing importance of e-commerce and the drive for sustainable packaging solutions. We are extremely well positioned to leverage these trends. As I'll show you shortly, we offer a one-stop shop for all paper-based e-commerce solutions, while I firmly believe our expertise across different flexible packaging substrates and our vertical integration strengths gives real advantage when developing sustainable packaging solutions for our customers. You'll see on the right-hand side of the slide, we show an example of how new applications, largely driven by sustainability requirements are driving demand for our specialty kraft paper products with a significant increase in applications across e-commerce, nonfood and industrial. A trend we expect to see continue and likely accelerate driven by both regulation and consumer preferences. We continue to seek ways to bring this differentiated product offering to our customers in a way that delivers the best value proposition for them. Last year, we combined our e-commerce sales team from across corrugated and flexible packaging to provide a single point of entry for customers. Similarly, we continue to drive innovation across our broad portfolio of packaging solutions. I was delighted that we recently won Nine WorldStar Packaging awards for innovation, following a long tradition of success in developing innovative packaging solutions in partnership with our customers. This is, of course, all underpinned by our ongoing focus on operational excellence, which focuses on delivering right first-time performance, reducing lead times and providing customers with the agility and flexibility that they expect from us. You'll see on the right-hand side of the slide how our product breadth supports 2 of the most important end-use segments, FMCG and e-commerce, which together make up about half of our packaging portfolio. For each, we offer a full suite of corrugated and flexible solutions that are genuinely complementary and designed around our customer needs. This is what customers value, One Mondi, comprehensive solutions and consistent quality. Our integrated model is a fundamental competitive strength. And here, we need to differentiate between what I refer to as our bulk and niche packaging grades. We firmly believe that in the bulk grades, strength in integration is key. From the paper perspective, it provides security of offtake, allowing us to run our mills as efficiently as possible while also allowing us to optimize logistics into our converting operations. Similarly, from the converters perspective, it offers security of supply, logistics benefits and innovation opportunities using the combined knowledge and expertise of the whole value chain. As you can see from the charts on the left-hand side of the slide, we are highly integrated in these grades. By contrast, in the niche virgin containerboard and specialty kraft grades, we are very comfortable with our strong open market positions. These products are sold on a global basis to a wide number of different customers, many of whom are other integrated producers who do not have these products in their portfolios. Key here is cost competitiveness, quality, reliability and innovation, where we are again very well placed to outperform. Coming to our cost competitiveness, which is particularly important in our upstream paper businesses. This chart illustrates that around 3/4 of our production is in the lower half of the relevant cost curves, a key determinant of long-term outperformance in these markets. We have achieved this by having the right assets in the right places to secure access to cost competitive raw materials. We have then built on this natural cost advantage through judicious investment in the assets on a through-cycle basis. In addition to the scale benefits that come with the capacity expansion, these investments also deliver efficiency and cost optimization through increased energy self sufficiency and raw material efficiencies. A culture of continuous improvement, delivering operational excellence is then key to extracting the full value from these privileged assets. On the topic of operational excellence, as Mike says, this is a continuous program and embedded in our culture. We are very proud of our long track record of continuous improvement, as you can see from the example of what has been achieved at one of our flagship operations, Swiecie in Poland over the past 10 years on the right-hand side of the slide. However, we are always striving for more. And in early 2025, we initiated a multiyear program, aimed at taking us to the next level of operational excellence through a zero loss mindset, embedding standardized processes and ensuring the sharing of best practice, facilitated by empowering our people and strengthening our leadership teams. While I'm being constantly reminded by colleagues that this is a long-term program, and I shouldn't be expecting significant quick wins, I am nevertheless delighted by the initial results from the pilot projects. In Swiecie, for example, this has already led to strong efficiency gains and reduced downtime on the machines. We are very excited by what this program can do for all of our operations as we systematically roll it out across the group. Our converting operations also have a proud track record of driving efficiency gains. Over the past 10 years, we have closed 22 plants while at the same time growing volumes. As our larger plants get increasingly efficient, we are able to successfully transfer volumes from smaller operations, which in turn drives further efficiencies. The chart on the right-hand side of the slide illustrates the track record of productivity gains over the past 10 years in our Corrugated Solutions and paper bags plants, respectively. After a short period of slower rates of improvement, I'm delighted by the significant productivity gains achieved in the last 12 months of 4% to 5%, reflecting a renewed focus on driving this key performance indicator. The Schumacher acquisition has further strengthened our Corrugated Solutions network, enabling further optimization across our footprint and unlocking efficiencies that support our long-term growth. As Mike mentioned, we recently announced 3 further plant closures, again, with the intention of transferring the volumes to other nearby plants in our network. While we fully acknowledge the challenges for those valued colleagues directly impacted by these decisions, we also recognize the critical importance of driving the ongoing optimization of our plant network. We will not hesitate to take the tough decisions on plant or mill closures when required. So let me then finish where I started. In the context of a prolonged cyclical downturn, we have delivered a resilient performance. We have taken and will continue to take decisive actions to drive value. We remain strongly positioned to deliver in the short term and capture the upside as markets improve. Our conviction is driven by our belief in the structural growth drivers underpinning growth in our packaging businesses, our leading market positions, our well-invested and highly cost competitive assets, our compelling customer value proposition and most importantly, our committed and highly capable people who live and drive our culture of excellence and continuous improvement. In this context, I'd like to finish by extending my sincere thanks to all our people for their great commitment and energy in navigating the current challenging market conditions and remaining steadfast in pursuing our goal of delivering sustainable long-term value for all our stakeholders. With that, I thank you very much for your attention, and Mike and I are now delighted to take your questions. Operator: [Operator Instructions] Our first question comes from Reinhardt of Bank of America. Reinhardt van der Walt: I just want to go to one of your comments. You mentioned that you won't hesitate to take tough decisions on plant closures. I think you mentioned that a lot of your assets are in the bottom half of the cost curve, but some of them are obviously not. So if we think about rationalizing supply here on the Mondi side, where do you think that incremental closure could potentially come from? Andrew King: Yes. I think, Reinhardt, -- I mean, as I said, we've got a track record of taking those decisions in order to continue to facilitate the drive for more efficiency. Now typically, historically, a lot of that has been facilitated by our existing plants getting increasingly efficient. And so we are able to continue to serve our customer with a smaller fixed cost base. And that's something we've continued to do, and we won't hesitate to where the opportunity arises. And as I mentioned, we've just recently announced and are in the process of closing a further 3 plants that are plants in Hungary, Germany and Turkey. And if the opportunity arises to drive further efficiencies while making sure we look after our customers, is something we'll continue to do. So the plant network is obviously extensive and it lends itself to those. I think your reference is specifically to the paper mills. Clearly, the most important value driver in the paper mills is your cost position, that's why you see us -- talk so much about the relative cost positioning. Now those cost curves are not precise. It's -- we take the industry cost curves from the various consultants to get a sense of where we are in that space. Quite a lot of -- because people always point to the 25%, as you, I think, have alluded to that is not in this lower half of the cost curve. Some of that one has to acknowledge is pretty much in the sort of specialty camp, which in some ways, it's not appropriate to look at it on the simple cost curve analysis. And certainly the margins that we see in those businesses are not necessarily the case. Clearly, the one asset of ours, which is currently loss-making is the Duino mill in Italy for 2 reasons. One is it hasn't been optimized yet. It only started this year. So we are not yet in a fully optimized position because, of course, as you grow -- as the capacity ramps up, so the unit costs go down and also your input costs get optimized. So we are in the process of doing that. But undoubtedly, there's also the market dynamic that's at play there. And as I mentioned, swaves of industry capacity are currently loss-making. The big challenge in that regard is, of course, you would logically see that the more marginal assets should go first. That's at the moment happening to some degree, but one expects more to happen, frankly, if the current paradigm continues. Duino is a mid-cost producer by the time we are fully optimized on it. And importantly, we also require the security of supply that comes with having some recycled containerboard in our portfolio. As I pointed out in that slide on the integrated system, we actually remain short of recycled containerboard as a business. While it might not feel like it at the moment, given the oversupply in the recycled containerboard market over -- through the cycle, it is important to have some of your own recycled capacity for security of supply reasons into your box business. So there's always that strategic element as well. But suffice to say that all the rest of our paper mills are extremely well placed and extremely cost competitive. Reinhardt van der Walt: That's very clear, Andrew. Maybe if I just flip that question on its head and ask about your capacity at the box level, the box plants. You're driving efficiency, that seems to be a focus right now. But how do you think about maybe some countercyclical consolidation investments? I mean, dividend is down now, CapEx you're pulling back. So there seems to be some balance sheet capacity in the next few years. How are you thinking about countercyclical investments at the box plant level? Andrew King: Yes. I won't even ask Mike to comment on the balance sheet capacity because I know his answer at 2.6x leverage. I think we're very conscious that we're at the top of where we were comfortable in terms of leverage. And so our focus is very much on driving those self-help actions that we spoke about and being as well placed as we can to serve our customers in the current dynamic. And we've invested heavily in the business. We know that. And we have the capacity now. We have all the weapons in our armory to compete very effectively in the markets. That's the job to do right now with the assets that we invested in and the portfolio that we have. That is the focus. Operator: Our next question comes from Detlef of JP Morgan. Detlef Winckelmann: Just a quick one on your CapEx. If I look at 2025 coming in roughly good EUR 130 million below midpoint of guide, putting down '26 by EUR 100 million. Can you run us through kind of what you've paid back, any specific projects? And has anything kind of been kicked to 2027? Or is this kind of EUR 550-ish roughly okay, ex any growth projects? Andrew King: Short answer is, yes, we're very comfortable with that number. Clearly, in the current low growth market environment, one, it's not a difficult trade-off to cut back on anything of a significant expansionary nature. That said, there are some pockets of growth that we are still continuing to support, but they're very small and they're within that overall number. The primary focus at the moment is on in terms of the CapEx program going forward is investing and to make sure the asset integrity is not impeded and, of course, that we do retain the exposure to the upside. But having invested significantly over the last few years, we're very confident that we can pull back on the CapEx spend without prejudicing the asset integrity and similarly, without prejudicing the exposure to the upside. In terms of what we might have prioritized or deprioritized, that is always that constant work being done to prioritize your CapEx programs and the like. But we are very confident that there's nothing we're doing now that, as I say, either prejudices asset integrity or indeed limits our exposure to the upside in the near term. Clearly, if we see markets starting to show real recovery in terms of -- from the demand side, there might be some other opportunities. And we have a great asset base that we continue to leverage if the opportunities are there, but we're very comfortable operating in this sort of envelope for an extended period of time. We've always said maintenance CapEx, and that's not just -- not just sort of holding on to what we got, but adding some opportunity is in the sort of 100% to 110% of depreciation. So that's what we're operating with this year. Michael Powell: Yes, Detlef, just to be explicit on your 2027 question, we're not stoking an issue for 2027. As Andrew said, we can operate at this 110%. We've got capacity that we've put on the ground that isn't yet full. And in this environment, I think we're very comfortable. We've got well-invested assets and now we need to generate the cash and fill those assets. Operator: Our next question comes from Lars of Stifel. Lars Kjellberg: I'll just start with the big question in terms of where your margins are today, they're obviously down quite a bit on the cyclical pressures and of course, you reinvested in your business with headwinds from starting up, et cetera, et cetera. Where do you think considering what seems to be somewhat structurally higher wood costs that your margins could -- where they should be in some sort of normalized environment? And just on the short-term comments, you did say kraft paper order books are starting to improve and you're reversing the sort of couple of quarters on price declines. What are you seeing containerboard when it comes to demand trends? And of course, you have spoken to and many others, of course, and it's reality there's been a distress here for a long time. Are you seeing any real signs of this cracking? Andrew King: I think on the first question, I'm not going to -- I know it's flavor of the month, but I'm not going to give long-term forecasts. But I think Lars, yes, European wood costs are structurally higher than they were pre-Ukraine for obvious reasons because of the restriction or the prohibition of supply out of Russia and Belarus, which, of course, caused prices to go up -- and yes, they've come down to some extent from the peak levels in 2022, but they're still above pre-Ukraine levels. So I think that is a structural change. At the same time, it clearly affects all players in Europe to a greater or lesser degree, but clearly, everyone is impacted. So the whole cost -- industry cost base has gone up. That's particularly relevant for, for example, the sack kraft grades, which are primarily made, as you well know, in Northern and Central Europe. And so the relative positioning hasn't materially changed on that. Clearly, where it has changed on a global basis is in, for example, pulp, where as a globally traded commodity, you are competing with other continents where maybe you haven't seen that same level of input cost pressure. From our perspective, we are -- we are not a pulp player. I mean the only place we make open market pulp of any significance is in South Africa. And of course, there, the wood cost situation is actually relatively improved versus the European cost base. Clearly, that was the other reason that attracted us to Canada, where, again, in our Hinton mill, the wood costs are extremely favorable compared to Europe. So I think it's in that sort of market where you might have seen a relatively less competitive dynamic. In the kraft liner market, which is the other big grade of virgin product that we make, again all the European competitors have seen similar input cost inflation. I guess, on a relative basis, people like the LatAm producers have enjoyed a relative advantage. But as you know, they produce their kraftliner out of virgin hardwood grades. You can't add things like recycled content into those grades, which the Europeans and ourselves, in particular, are able to benefit from. So we can offset some of those cost disadvantages on the wood front with the PFR content and the like. So I think to your point, Lars, it is a relevant consideration on a global basis, but then you have to look grade by grade where you are -- have to compete on a global basis versus what are more regional markets. The question on containerboard, I think you mentioned it was basically twin question on pricing and sort of where is the supply-demand picture, which, of course, are linked. Yes, I mean, right now, margins across the industry are heavily squeezed. Clearly, the big capacity problem is in recycled containerboard. It's not on the virgin grades. But at the same time, we're the first to acknowledge that the overhang in the recycled grades is putting a cap on the ability to push pricing on the virgin grades because on the margin, there is substitution. So the question is how fast -- how quickly this overcapacity can be -- can be absorbed into the market. I firmly believe it has to come through a combination of factors. Clearly, the demand side, albeit we're starting to see some okay demand last year, bag, I think the box -- Europe -- box volumes were up around 2 percentage points. If you look at the industry statistics, that's okay in a normal environment. Of course, it's off a low base because we saw a sharp decline in sort of 2023 into '24, and now it's only rebuilding now. So you have seen on a trend basis, a low trend growth for the last 5 years. At the same time, the capacity has been coming in on historic trend rates, if you look at it. So that has caused this oversupply. I do believe it will require further capacity closures to balance. I don't think we can assume that demand in itself is going to do all the heavy lifting here. But as I said in my opening remarks, there's every incentive for that. Now we are starting to see some movement on that front. It's not these big ticket sort of headline grabbing moves, but you are starting to see closures take place. I firmly believe, as I say, there's every incentive for more closures. There must be huge pain at the high end of the cost curve. And simply put, the current margins are not sustainable. So if you believe in a structurally growing market, which we do, the current incentive price is not there certainly for new capacity and the incentive is for closures and you've got to believe something is going to -- something is going to change on that front. I hope that answers your questions, Lars. Lars Kjellberg: It does. Operator: Our next question comes from Cole of Jefferies. Cole Hathorn: I appreciate the actions taken on the cost front, and Mondi has never, like many of your peers, announced separate kind of cost initiatives, but 1,000 headcount, group services pulled back, that's all ultimately helpful for 2026. I'd just like a little bit more color on the message on costs. You're talking about stable costs '26 versus '25. I'd just like some moving parts there. And then after the input costs, can you give any color on what would be the potential contribution from the Schumacher acquisition and the EUR 32 million synergies that you're trying to achieve in 2026? And also a difficult one is the contributions from the CapEx projects. I know prices are low and the market is still challenging, but the contribution from the major CapEx projects would be helpful. Michael Powell: Sure. Let me start, Cole, and with the first couple, and then the last one sort of relates to wider market issues, which Andrew can comment on. Just in terms of costs, just so we're clear, if I take what some would call overheads, we call them fixed costs, we have taken those actions. We continue to take actions on overheads. Large part for us is people costs, some maintenance of equipment, but clearly, that's around assets. Those people actions that we have taken, plus those other efficiencies that will drive through our overhead base will offset, as I said in my words, will offset any inflationary pressures. So we still have -- we like to pay our workforce that are precious to us, inflation increases, the work we have done will offset that. So I'd expect our fixed cost overhead base to be flat given the actions that we've taken. I think you also touched on input costs, so above the line direct materials, others might call it. Again, within that, it's early in the year. I would guide to flat if I was sat here today. Clearly, that will change as the year goes on. But as of today, we're seeing it flat on 2025. Why is that? We're seeing some headwinds. There's less energy emission credits in various forms from governments. I think you've heard the rest of the peer group talk about those. For us, that's about EUR 60 million headwind on energy. We'll work hard to offset that. We've got some other cost categories coming down still, which I think reflects sort of a pretty lackluster economy, things like chemicals are still coming down. And then within wood, we've got some ups and downs. We've got Scandi Wood coming down, Central Eastern European wood going up. I would say the ups and downs are much smaller than they've been. I know we're in a much more volatile world. So I don't want to diminish a sort of 20% up and 30% down, but those movements are much smaller ups and downs than they were 2 years ago or frankly, that they would be if economies recover. So I think what the puts and takes to give me confidence to guide to flat is the puts and takes are probably a bit either way, and we're working hard internally to offset those energy grants from governments in various forms. So best guidance is flat on input costs [ goal ]. I hope that's a bit of color within the categories that you're after. And Andrew, in terms of markets and volumes. Andrew King: Yes. So I think just adding to the cost story, I frankly prefer our procurement guys to be struggling a bit more because it generally means an economic pickup, which puts more pressure also on input costs, but that's a far more favorable environment than sadly the one we continue to struggle with the geopolitical and macroeconomic backdrop that we see. But still -- but coming back to, call it, the self-help [ goal ], which is very much also linked to the CapEx program. I guess it can be divided into 2 parts. The one is what is within our control and the other, which is clearly the market dynamic that we're selling into. And of course, the 2 are somewhat interlinked. But if I look at it in broad terms, on the big upstream capacity expansion, we've probably got another 300,000 tonnes to come this year from ramping up the projects. Now about half of that is Duino, which I think I've already explained to you. Clearly, in the current paradigm with the current recycled containerboard price, you're not seeing a big contribution on those extra tonnes at the moment. But as I said, it's -- the focus there is very much driving the productivity improvement. And of course, that also has benefits on cost optimization and the like. For the rest, it's obviously very valuable tonnes even in the current difficult environment because it's expanding both the virgin capacity out of Swiecie and Kuopio and also the sack kraft production out of the PM10 in Steti. And I remind you, last year, we took down the Stambolijski mill. So this incremental capacity for the market is really absorbable. And again, we're excited by the underlying growth we see in our bags and other applications for our kraft paper. So very confident that, that can be placed into good markets. So that's where a lot of it comes from. In terms of the absolute contribution, the big challenge here is what is your pricing assumption, particularly on the paper grades, which is what we're saying is this is going to support our volume growth in 2026. We think we can for all of those reasons grow above market. The absolute pricing will obviously determine exactly what the contribution is from that. But this is good low-cost tonnage that we are bringing into the market. And similarly in the converting businesses, again, there is always a much closer interplay with the market dynamics and the capacity -- putting up the capacity is the easy, but getting it into the market at the right price is something which obviously is also a function of the overall market conditions. Again, though, I think we've got all the tools to be able to grow above market in the key markets where we've increased capacity, and that includes the Schumacher acquisition, which as we said at the time, also comes with effectively some latent capacity, which it's incumbent on us to grow into the market, and we're very confident we can continue to do that. I think a very exciting area for us is that e-commerce area where, as I said in my opening remarks, we do have a fantastic and unparalleled breadth of portfolio there that is genuinely what our e-commerce customers are buying from us across the platform. I think I've got an example of the protective mailer behind us and the like. These are all products which are combining expertise in our Corrugated and our Flexibles business, which is fantastic. And that's why we brought together the sales team that can talk as one voice for all our offering across our Flexibles and Corrugated business. Cole Hathorn: And then just as a follow-up, bringing the CapEx down to EUR 550 million is -- it's a strong effort considering you had commitments for the major projects as well as the recovery boilers. Could you just break down that EUR 550 million CapEx number because reducing it to that level, I know must have involved a lot of work. Andrew King: Yes. I mean just to be clear, we're not making any -- we're not investing in a new recovery boiler at the moment. Those things are properly expensive. We've got a few -- I think you're referring to just biomass boilers. Firstly, just to be very clear, those are all in the numbers. So there's nothing on top or anything like that. No, I mean, as I said earlier, we feel confident we can do this. Yes, I mean as you rightly say, when you work across the organization, it's always a challenge because everyone's got essential CapEx, et cetera, and great -- growth opportunities and the like. But we are extremely confident that we are managing this CapEx at a level which doesn't impair the integrity of the asset base, it doesn't store up a problem for later because we're not believers in that. We believers in building a long-term sustainable business. But at the same end similarly doesn't prejudice the upside as and when it happens. So yes, in short, we are very confident. It does still allow us to make those important investments in, for example, these biomass boilers, which are very important, both in terms of -- because there is a stand business element, some of these -- the existing capacity is end of life. But as importantly as that, it also gives us upside in terms of cost opportunity and importantly, CO2 reductions and things, which are very important for our customers. Our Scope 1 and 2 emissions is our customer Scope 3. They are very focused on that. It is a genuine selling point and a very important value for them. So these are very important steps and -- but that's all included in the numbers we guide to. Operator: Our next question comes from Andrew of UBS. Andrew Jones: So yes. You have some relatively encouraging comments about the kraft paper market. Can you just point to like which pockets of demand are sort of starting to come up at the moment? Are you seeing more growth in export markets? Is it specific customer segments within Europe? Like what's the moving parts? And how much do you put down to kind of a restocking dynamic after last year's destock versus like a fundamental underlying improvement in trend? And how do you see the rest of the year, given we've obviously got some infrastructure investments coming through on the cement side and things like that? Can you just talk through that dynamic, if that's okay? Andrew King: Yes. As I said in my remarks, it is a bit confusing this seeming disconnect between bag growth because bags use sack kraft and relatively soft picture in the kraft paper markets in 2025. Actually, if you recall, 2024, it was a bit of a reverse. It was the other way around as the kraft paper markets were stronger relative to the underlying bags. But to me, first and foremost, you look at the end users, which is the bag demand, and it is encouraging that last year, as I said, we grew 5%. If you look just at the European market, the industry numbers tell us that it was about a 2.5% growth market in Europe. North America seems to have starting to show some growth as well now, which is encouraging. Again, we were growing strongly in North America or the Americas, but it's mainly North America for us, it's Mexico and the U.S. And then, of course, important markets for us are also Middle East, North Africa, which always some volatility in those markets in individual pockets of that, but if you take it as a whole, again, some good growth. So, when I look at last year's contribution to the bags growth, it was everywhere contributed. On top of that, we obviously, as I mentioned, got these new sources of demand for the likes of -- I mentioned again, the e-commerce mailer bags and things like that, a nice extra area of growth. I mean, the core of that business remains in the industrial space, but these sort of applications are coming through which both support the growth of our converting business, but also, of course, demand for the paper grades. So that is -- that has been a picture of 2025, and it's certainly continued into '26 in terms of a decent looking demand environment for our bags. It seems as though having, as I say, having been a bit softer into the second half of the year with the kraft paper volumes. We did see that in our order books into the Q4. I think we cautioned about that in Q3 numbers. And certainly, that did continue into January, we shouldn't -- we generally not saying it's sort of 1st of January, suddenly, things changed. But certainly now, we are starting to see that good position in bags, translating into a certainly stronger order position in the kraft paper business. Yes. And on the back of that, we're in currently in the market for price increases. I hesitate to say -- remind you that this is very much recovering the pricing erosion we saw Q4 into early Q1 this year. Andrew Jones: Yes. That's clear. And just a second question on the ramp-up of projects. I mean, I remember when you acquired Schumacher, it was running at roughly 50% utilization after a large plant came on. Can you give an update as to sort of broadly where that is and maybe also where Duino is running at just so we can understand how that kind of movement in board versus sort of board demand internally sort of evolves as we go through this year? Andrew King: Yes. Duino is easy because it's much easier to measure capacity in the paper machines. I think I said earlier, we could expect another 150-odd tonnes production -- incremental production this year out of Duino if we run full. In terms of the Schumacher market capacity, I mean, again, it is also a function of the overall market. So clearly, we are confident we can grow above market because I say we've got a very strong base on which to believe that in terms of the asset base that we have, we've obviously invested now in growing the commercial infrastructure to support the growth of that business in that Northern European region. But we have to also acknowledge, when I mentioned that box demand growth across Europe was 2-ish percent. That does mask quite different regional growth rates. Clearly, Southern Europe, Spain was the a star performer, where unfortunately, we don't have direct box exposure. We do obviously sell containerboard into that, so that's helpful, but it's not direct exposure. Our direct exposure in the box business from a European perspective is very much Northern Europe -- and Northern and Central Europe. Clearly, Germany, I think box demand was probably 0.5 percentage points or something growth last year. The overall market remains slow and we are working in that context. So we have to be realistic about what we can do in the short term because what we don't want to do is chase volume at the expense of margin that would be stupid in a very short term -- shortsighted because we're here for the long term, so we must do it in a structured and systematic way, but we're very confident in the capability we have there to continue to grow above market. So that is the primary focus in terms of how we grow out and fully utilize, as you say, the underutilized capacity we acquired as part of that acquisition. I think we've got time for one more, and we're probably over time, but I'm happy to take one more. Operator: Yes, we'll take our final question from Kevin of Deutsche. Unknown Analyst: If I could sneak in 2, if I could. The first was on your guidance for downtime and the impact on EBITDA this year. I just presumably, that's weighted very much towards the Corrugated Packaging segment, but I just wondered if you could sort of help us think about the sort of weighting by segment and cadence we might expect during the year? And just if I could sneak in a second quick one. There's clearly a number of elements in the numbers today addressing capital allocation decisions. And I think you signaled in your piece earlier, Mike, that it's your leverage is sort of the higher end of where you're comfortable with, I guess. I just wondered what you're trying to signal today in terms of the time frame you might get that leverage to a bit more of a comfortable -- a more comfortable position for you guys. So any color on those 2 would be great. Michael Powell: Sure. On maintenance, to keep it simple, it's about the same as last year. We've guided to about EUR 100 million, EUR 20 million first half, EUR 80 million, 2nd half. I think you should assume the same split. Yes, on leverage, listen, I don't think you should use the phrase uncomfortable with where we are. I think it's at the top end of where we'd like to be to have that financial flexibility. And you've seen a number of measures that we continue to take through last year and into this year around working capital, around cash generation of the assets, around spend on CapEx. I think that's just prudent financial management in the current economic environment. How quick we delever. It depends on 2 things. One is the net debt. I don't want to be sort of flippant. That's the one that we can control to an extent in terms of the cash that we consume and the cash that we choose to spend as a business. And then the other one is EBITDA, which actually on a math basis is much more powerful in reducing your leverage that, as Andrew has said, will be a function of both the actions we take, but also how the market operates, over the coming period. Clearly, if price moves, you deleverage very, very quickly. We're not waiting for the markets to move. We're taking control of our own actions there. And I think you've seen that today. I think you'll continue to see it, as I said earlier, it is what Mondi does. Hopefully, that answers your question. Unknown Analyst: Yes. That's really helpful. Apologies for the difference in wording, I guess, but you get that. Michael Powell: No, no, not at all. I just want you to understand. Andrew King: Very good. And with that, we've taken up more than, more than -- a lot of time. So I really appreciate the interest, as always, Fiona and team are available for any follow-up questions. And for those of you we look forward to seeing you in -- on the road shows over the next few weeks. So again, really appreciate the interest. I think in summary, we know the world is difficult out there. We are not standing still in that environment. We are seeing good growth in some of our core businesses. We're supporting that with the right actions to make sure we're extremely competitive in any environment and was really good positioning for the upside when it comes. So I really appreciate your interest, and thank you very much for your attention today, and goodbye from us. Michael Powell: Thank you.
Operator: At this time, all participants are in listen only mode. I will now turn the conference over to Stephanie Wissink, Senior Vice President, Investor Relations. Thank you, Stephanie. You may begin. Welcome, everyone. Stephanie Wissink: Joining me today from our home office in Bentonville are CEO, John Furner and CFO, John David Rainey. We'll begin with highlights of the fourth quarter and full year. Then we'll open the line for your questions. During the question and answer portion, we've invited segment leadership to join. Dave Gagina from Walmart US, Chris Nicholas from Walmart International, and Latrice Watkins from Sam's Club US. So we can address as many of your questions as possible, please limit yourself to one question. For additional detail on our results, including highlights by segment, please see our earnings release. And supplemental presentation on our website. Today's call is being recorded and management may make forward looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from these statements. These risks and uncertainties include but are not limited to, the factors identified in our filings with the SEC. Please review our press release and slide presentation for a cautionary statement regarding forward looking statements. As well as our entire Safe Harbor statement and non GAAP reconciliations on our website at investors.walmart.com. That concludes my introduction. John, over to you. Operator: Good morning, everyone, and thanks for joining us. John Furner: I'd like to start by saying thank you to our associates around the world in helping us deliver another year of strong growth. Across markets, our teams continue to demonstrate the power of omnichannel model Since the year began, I've visited great stores and clubs in The US, Canada, and Mexico. The automation of our supply chain is on track, We're gaining market share. And we have momentum in growth areas like marketplace, advertising, and membership. Looking at our results for the quarter, revenue was up 4.9% in constant currency, including growth in e commerce of 24%. Adjusted operating income grew even faster at 10.5%. All three segments grew profits faster than sales for the quarter. And we're doing a great job of managing inventory that's so important in running our business day to day. We ended the quarter with inventory up 2.6% or about half the rate of sales growth. Sales were strong across each segment of the business. And this includes sales of general merchandise, which grew on a global base and was up low single digits for Walmart US led by fashion. Fashion was a bright spot for us both in store and online. Driving a healthier mix of sales growth in our business is important to the strategy overall so I'm pleased with the trends we're seeing. Across our customer base, spending continues to be resilient. In The US, we see the customer as choiceful in their spending, Again, this quarter, the majority of our share gains came from households making more than $100,000. For households earning below $50,000, we continue to see that wallets are stretched. And in some cases, people are managing spending paycheck to paycheck. That said, even these households are emphasizing convenience nearly as much as price. Stepping back, when I look at the enterprise today, it's a portfolio of businesses anchored in growth. Especially our digital channels, with an emphasis on having inventory close to the customer to maximize our delivery speed. Our associates have made this vision a reality and I couldn't be prouder of them. They've been open to change, learn new skills, and they pushed us to keep the customer and the member at the center of everything we do. Ultimately, what matters is how we show up for our customers and members. Did we serve their needs better today than we did yesterday? If so, we did our job. And how we approach getting better every day is what's important to me. We do that by living our purpose and values. That won't change. Our mission help people save money and live better is as true today as it's ever been. It guides the strategy we've outlined, and that strategy is clear. We're executing on it at a high level. And this includes the allocation of capital, which remains consistent with how we've described it as a percentage of sales. We look at capital spending through the lens of return on investment. Every dollar we spend has to compete for the highest return. Walmart Inc. is widely known for value on a broad assortment of items and for being a company that people trust. And thanks to how we leverage our assets for a truly omnichannel experience we're now known for ultra fast delivery times and providing convenience. The investments we've made in technology and supply chain help us deliver items even faster. They're paying off. Here in The US, customers using fast delivery, that's delivery in under three hours, grew more than 60% for the year. We know that customers and members from around the world are more alike than they are different. They love great quality products, value for their money, and more often, they're turning to Walmart Inc. for speed of delivery on a broad assortment. And being people led and tech powered helps our associates to find better ways to serve customers and members with our growing assortment faster delivery speeds, and experiences they love. The way we're using technology and AI is helping us create great customer solutions reduce friction, simplify decision making, and pinpoint where our inventory is. All while maintaining the trust we've earned from our customers and members. And we aren't just embracing the tools that are changing the way people shop, We're creating them. We're enhancing our shopping assistance like Sparky and building new experiences with partners like OpenAI and Alphabet. That are shaping the future of AgenTek commerce. Looking more closely at Sparky, we're seeing good momentum. Customer engagement is up, and the customers who use Sparky have an average order value that's about 35% higher than non Sparky customers. And I love how Sparky perfectly fits within our omnichannel strategy. It connects digital intent to fulfillment through forward deployed inventory and 1,500,000 associates here in The US. When Sparky builds a basket, we execute it through fast delivery, pickup, or in store, turning AI engagement into immediate physical outcomes. in store, And as we expand Sparky across experiences like voice, and through services. We expect continued acceleration in customer adoption and the impact on commerce. We've started with Sparky here in The US, but we know that winning in a connected world means we need to deliver consistent experiences across markets. And to do that, need to focus on technology platforms that are built for a global business. The idea of build once scale globally makes us faster, lowers cost, and ensures consistency. And we'll use AI to layer on top of existing platforms getting better leverage out of the assets we already own. This platform centric approach helps us scale innovation consistently and reduce capital intensity. As I close, I'll say the pace of change in retail is accelerating. It's exciting. For Walmart Inc., the future is fast, convenient, and personalized. And I'm challenging our teams to move even faster as the opportunities with AI become broader and deeper. I feel great about our future. Over the past several weeks, I've talked with associates in Mexico, Canada, and across a number of cities here in The US, and I love what I'm seeing. The enthusiasm, the passion, the execution, all the things that make Walmart Inc. a great place to shop and a great place to build a career they've been on display. And I can't wait to get out to more markets in the coming weeks. I'm so grateful for the opportunity to lead a business that has momentum built on a strong foundation and with a deeply experienced leadership team. And mostly, I'm excited about what's to come and the plans we have to grow the business as we look ahead. And, John David, I'll turn it over to you. Operator: Thanks, John. John David Rainey: I also want to thank all of our associates for helping us deliver these results. If there's one thing I want you to take away from this call, it's that our teams are executing well, and our business model is delivering strong growth incremental profits. Even in the context of the highly dynamic operating conditions we and the rest of the retail industry are experiencing. We finished the year strong with a quarter of broad based share gains continued e commerce momentum, and adjusted operating income growing at 10 and a half percent in constant currency. Which is over twice the rate of sales growth. The advantages of our omnichannel model and diversified profit streams are increasingly clear. For the full year, we grew the top line by approximately 5% in constant currency. Adding $35,000,000,000 in revenue. With sales exceeding $700,000,000,000 for the first time. And we grew adjusted operating income 5.4%. Even with a 300 basis point headwind from increased claims expenses and navigating a bumpy tariff environment. This was the third consecutive year that we grew profits at a faster rate than sales growth. We're playing offense by reinforcing our customer and member value proposition evolving our model, and delivering on our financial framework. Our strategy is working. And we're excited about the opportunities ahead. For the fourth quarter, consolidated revenue in constant currency increased nearly 5%. With Walmart U. S. Comp sales up 4.6%. E commerce sales were strong across markets. With growth up 24%. We're using our unique assets, stores and clubs, DCs and FCs, and last mile delivery networks to get orders to customers faster and more efficiently. Remove friction from the experience, and accelerate our sales momentum. In Walmart US, ecommerce sales grew 27%, with 35% of store fulfilled orders delivered in under three hours. In China, e commerce grew 28% and represented more than 50% of the sales mix in that market. Flipkart is delivering orders in less than fifteen minutes across more than 30 cities in India. And Sam's Club US doubled their growth in club fulfilled delivery sales. The increase in fourth quarter operating income was led by more than 26% growth in international reflecting improved e commerce economics as well as lapping last year's strategic investments. And nearly 7% growth in Walmart US. Several factors contributed to our operating profit growth. First, business mix. As e commerce drives the majority of our sales growth, we're improving e commerce economics with increased contributions from business mix most notably in higher margin areas like advertising and membership fees. Our advertising businesses globally increased 37%, including an acceleration in Walmart Connect in The US up 41%. Importantly, we lapped the acquisition of Visio in December, so their performance will now be in our base. Consolidated membership income increased more than 15% reflecting strength in Sam's Club in China which grew over 35%. In The US, Walmart Plus membership income was strong, up double digits, as our core offering as well as newer benefits like our One Pay Cash Rewards credit card continue to resonate with members. Sam's Club U. S. Membership income grew more than 6% as members gravitate toward the omnichannel capabilities Sam's offers. Notably the combination of advertising income and membership fees represented nearly one third of our operating income this quarter. Second is inventory management. Inventory increased 2.6% in constant currency. Or approximately half the rate of sales growth for the full year. With our growing 3P marketplace, we can better balance owned and third party assortment, minimize markdowns, and improve our working capital. Inventory efficiency is also enabled by the tech AI and automation in our stores, clubs, and supply chain. In Walmart US, approximately 60% of stores are receiving some freight from automated distribution and approximately 50% of e commerce fulfillment center volume is automated. This enables better visibility into what inventory we own and inventory we can access, and also improved our labor productivity. we're increasingly leveraging stores, With the proximity so close to customers, as digital fulfillment nodes to move inventory faster and more efficiently than ever before. When you simplify our model, inventory and labor, are our two largest costs. Technology enabled productivity benefits are critical to our ability to grow our core omni business at lower marginal cost. We're extending these platform benefits from the Walmart US to Sam's US and we're at the early stages of deploying automation across our supply chain in select international markets. And third, merchandise category mix. This is an exciting one to call out as it's been many years in the making, particularly in Walmart US. As we lean into lower prices through rollbacks in EDLP and grocery categories, we're helping customers unlock purchasing power for general merchandise. We've worked hard to mitigate grocery inflation. As tariff related costs lifted prices across many categories. We're seeing share gains in GM and in fashion We've had several quarters in a row of mid single digit sales growth. Importantly, the strategies that drove our results throughout FY '26 are consistent with what we expect to support our financial framework in FY '27. First, we have strong momentum across our businesses. Most notably in digital. E commerce sales grew nearly 25% this year, and exceeded a $150,000,000,000 for the first time. With Q4 representing 23% of sales mix. This is up 550 basis points from just two years ago. This sets us up uniquely well to serve customers however they want to shop with us. Particularly as they adopt Agintic Commerce solutions. Second we've demonstrated the durability of our model especially in complex operating conditions. We're realizing the benefits of our diversified growth oriented global portfolio. This has enabled us to grow underlying profits meaningfully faster than sales for each of the past three years. Our advertising businesses globally were up 46% this year to $6,400,000,000 And membership fees exceeded $4,300,000,000 And many of these initiatives are early in their maturity curve. We have a combination of profit drivers, including automation related inventory and labor productivity, favorable business mix, and continued expense discipline. To support continued investment and to drive faster operating income growth. And third, to orient us to move faster at lower cost, we're now aligned globally to leverage common platforms in tech, AI and digital businesses. We believe this will result in our growth continuing to come at a much lower marginal cost than what it has historically. Now I'll discuss guidance. Full year constant currency sales are expected to grow between 3.54.5%. And operating income is expected to grow between 68%. With EPS in the range of $2.75 to $2.85. Sales guidance reflects a continuation of underlying business drivers and share gains, It considers our efforts to mitigate food price inflation and the headwinds on sales growth from maximum fair pricing legislation in pharmacy. And we expect e commerce will continue to be the primary driver of growth with modest increases from store and club sales across the enterprise. Operating income guidance reflects a higher level of confidence relative to prior year's original guidance that we can deliver growth in the upper half of the range depicted in our framework. Our goal is to outperform this guidance. But we believe it's prudent to start the year with a level of conservatism given the backdrop is still somewhat unstable. We're assuming continued margin expansion driven by favorable business mix, automation benefits and productivity, and less headwinds from merchandise category mix. The business continues to generate strong cash flow. With operating cash flow of $42,000,000,000 and growth in free cash flow of 18% in FY 2026. This provides flexibility to reinvest in the business while at the same time returning significant capital to shareholders. Given our confidence in the ability to continue to generate strong cash flows, and consistency in our multiyear capital investment plans, our board authorized a $30,000,000,000 share repurchase program our largest to date. For f y '27, we expect capital expenditure levels to be approximately three and a half percent of sales. We're hitting the peak of annual spending levels on supply chain automation and store remodels. We're moving quickly on these projects as we see benefits to customer experience, business performance, and financial returns from these investments. Investments in AI are incorporated into our assumptions for capital spend. And as you've seen from the announcements we've made, we're approaching AI development through partnerships. This lets tech companies do what they do best, develop innovative technology. And it provides us clarity to do what we do best: to translate the best of tech to retail experiences that create value for our customers and members and our enterprise. In Q1 we expect constant currency growth in sales of 3.5% to 4.5%. And operating income of 4% to 6%. With EPS of $0.63 to $0.65 Q1 operating income growth is expected to be lower than any other quarter in FY 'twenty seven. Due in part to timing of expenses, and the year over year tariff impacts that started in last year's second quarter. Importantly, our first half results are expected to be in the range of our full year guide. Recall also that we guide on a constant currency basis. If current exchange rates were to stay where they are now, we would expect an approximate 150 basis point benefit to reported sales growth. And an approximate 200 basis point benefit to operating income growth in Q1. For the full year, we would expect an approximate 70 basis point benefit to sales and an approximate 120 basis point benefit to OI. With that, we're ready to take your questions. Thank you. Operator: Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question, please press 1 on your telephone keypad. You may press 2 if you like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Thank you. And our first question comes from the line of Simeon Gutman with Morgan Stanley. Please proceed with your question. Hey, good morning, everyone. Hey, John. I want to ask you, John, on AgenTeCommerce. You mentioned it. Simeon Gutman: And it's rapidly reshaping e commerce as we speak. Realize a lot is still, to be determined. I wanna ask how you're thinking about first customer traffic flows and loyalty. Related to AgenTic, and second, advertising and monetization. John Furner: Yeah. Good morning, Simeon. Thanks for the question. So first, I just want to say thanks to our associates for a great quarter. They've been executing at a very consistent level with a clear strategy that's omni And as it relates to your question, AgenTic is definitely a part of the omni strategy. I mean, our omni strategy, what we've been saying for a long time and building to is the ability to deliver what customers want, when they want it, and how they want it. And flexibility that we've built on the backside of this, which includes our fulfillment centers, our distribution centers, our stores, forward deployed inventory, are all parts of the solution to deliver. What AgenTic is is doing for us, and and we can talk about this in a couple ways, But I'll talk about Sparky first with our own agentic agent Sparky is going to be and is and is vastly becoming as it learns new skills. A way that we can understand customer intent better than when they've been able to understand it before. Generate solutions for them, and then deliver with speed. You heard earlier that our fast delivery was up 60% year on year. Walmart's getting faster. Sam's Club is getting faster. We're able to scale these platforms to international markets. So our ability to understand consumer customer intent generate them solutions and deliver quickly is really exciting. It's been the quarter what we saw is that customers who engage with Sparky, we saw an average order volume order value, I should say, about 35% higher than the customers who weren't using it. What's also exciting is we had a really high number of customers who are now engaging with Sparky quarter over quarter, but a lot to come here. AgenTek Commerce is gonna be great for our customers. It's also gonna be great Agentic AI will be great for our associates because it helps them focus on the things that are most important. And, Dave, do you want anything on on Sparky in the quarter? Simeon Gutman: Absolutely. Thanks, John. And good morning, Simeon. Dave Gagina: As John noted, AI is increasingly embedded across Walmart. It's strengthening our operations. It's improving associate productivity. And it's enhancing the customer experience. And that's really coming to life with Sparky. Sparky is essentially helping us evolve from traditional search to intent driven commerce. And as John noted, we're seeing strong engagement, roughly half of our app users have used Sparky. And when they use Sparky, it drives them to build bigger baskets. And John mentioned the 35% higher average order value. And what that's telling us is that it's it's helping customers convert with greater confidence. And I want to note that it is still early in this space and we're continuing to add capabilities. More personalization, deeper contextual understanding, We're building execution capabilities. And I'm excited about the future for Sparky. And then for for this group in particular, from an economic standpoint, better discovery and higher conversion translates into bigger baskets and greater frequency. So simply put, Sparky is helping customers find the things they need, they want, and they love. And it it's strengthening our digital unit economics as it scales. John Furner: So Simeon, second part of your question then, you asked about advertising as well. We had a really good quarter in advertising, up 37% around the world, while Walmart Connect in The United States was up 41%, which is a very strong quarter. So how this will work with Agenda Commerce, I think we're all learning as we go, and we'll figure that out. But what we do know and and is clearly happened in the quarter, is our ability to connect suppliers and sellers with a group of customers groups of customers who are interested in their products is working, and our capability to do that is getting stronger. Operator: Our next question is from the line of Michael Lasser with UBS. Please proceed with your question. Good morning. Thank you so much for taking my question. Last year was obviously marked by a number of unanticipated costs that impacted Walmart's profitability, such as tariffs, the liability expense, and others, how did you factor that there could be other unknowns into your outlook this year, what could those be? And if they do not occur, how would you frame or quantify the potential upside of reinvestment And along those lines, how would you quantify the degree that you've embedded in your outlook for this year. Thank you so much. Michael, this is John David. I'll I'll take that. John David Rainey: Let me let me give a little bit of context to our full year guidance, which I think will will speak to your question. If you if you rewind and you look back over the last three years, prior to this one, we've increased our guidance effectively increased our guidance if you adjust for the Visio acquisition each of those three years. And each of those years, we've outperformed that guidance. In some cases, with operating income by several 100 basis points. And in fact, if you were to adjust for claims being somewhat anomalous last year, have the same performance in in this most recent year. So as we sit here one month into this new fiscal year, very much like in past years, we're taking a measured approach with the outlook. There's nothing that we've seen among consumer behavior or KPIs, macroeconomic KPIs, that would make us be any more cautious than what we have been, but I think it's prudent to be somewhat balanced. We are know, I think overall constructive on the economy, but there are certainly indicators out there, whether it be a hiring recession or maybe subdued consumer sentiment, student loan delinquencies, things like that, that make you wanna be more balanced as you sit here at this point in time. And we've been very fortunate to be able to take a very long term perspective with the way that we manage this business. To do things that are best for customers. And I would argue that translated into what's best for shareholders as well. So said maybe slightly differently, we want to maintain maximum flexibility as we sit here at this point in the year. And it's it's no different than the posture that we took in prior years. So the guidance that we've given, which at the upper end of operating income is 8% on a currency neutral basis, over 9% on a reported basis. We're excited about it. We see the momentum in our business. Each year has gotten better than the last, and we've outperformed that. And we would certainly expect to do that this year as well. But I think given that we are as large as we are and so tied to consumer health and the economy, we want to maintain maximum and and not get out ahead of ourselves at this point in the year. Operator: Our next question is from the line of Greg Melich with Evercore ISI. Please proceed with your question. Hi, thanks. I wanted to Greg Melich: get a little deeper into disinflation. I think it was up a little over 1% this quarter and maybe that was down a little bit sequentially. Can you just help us understand in your guide what you're expecting from inflation or particularly inflation especially with drug prices coming down? John David Rainey: Sure, Greg. This is John David again. I'm happy to take that. The most recent quarter, we had like for like inflation that was trending a little bit above 1%. That breaks down into food inflation being a little bit less than that. GM inflation being a little bit more than that. That's generally what our outlook is for the the next quarter and the balance of the year. There there are some pressures. You mentioned one. The maximum fair pricing, legislation around drugs we expect to contribute to about a 100 basis point headwind for the full year. Within the most recent quarter, having only one month of that is about 30 basis points. So the health and wellness business continues to do really well and have strong comps, but that's a that's a headwind that it will face for the year. Generally speaking, we would expect the price levels to, you know, somewhat be in the range that they are right now. We're excited about the some of the commentaries that we've heard from suppliers focusing on lower prices, but that that plays to our value proposition. Everyday low prices is what we stand for. We've seen as we've leaned into these lower prices that consumers have responded. And we've continued to gain share among all income demographics, I might point out. Notably probably skewed more towards the the higher income demographic but we're gonna continue to play offense. Operator: The next question is from the line of Kate McShane with Goldman Sachs. Please proceed with your question. Stephanie Wissink: Good morning. Thanks for taking our question. Operator: I wondered if you could focus on your outlook for gross margin for 2026. Can you maybe talk Katharine McShane: to what you're expecting to be that contribution from mix And also, can you go into a little bit more detail about the inventory management enhancements you need? Is it all from automation, or are there other initiatives here? And how does this get going across? The regions? Hey, Kate. It's John. Let let me start with inventory. John Furner: And and then I'll turn it over to John David. We'll talk about mix together. On on inventory, I I would say there are a number of factors that have helped us manage inventory the way we're managing. I'm really proud that the team this is a great team who who dealt with a lot of uncertainty the last twelve months and really the last few years to manage inventory. Half the rate of sales growth is an impressive number. There are a number of technologies we're using to manage inventory, more effectively today than we were in years past. Part of that is automation. We have a number of locations now that are receiving the majority of their goods. From automated facilities. We have a couple thousand that are getting some kind of automation and make expect that to grow over the course of the year. We had a couple of our regional distribution centers, and I believe you've been in the in one of these before. That retired the old conveyor belt system that we ran on top of for about twenty years. Some of those buildings up to thirty years. So the conversion is underway. We're really pleased with the capital investments and the returns we're getting on those. In the supply chain, those investments probably peak this year and next year. So automation is a part of it, but also in store. Our associates are over a million associates just in The US alone have handheld devices, and they're using computer vision. To map our inventory to know what we have, to know exactly where it is, and know how it's deployable. So that when a customer places an order, shops at the counter, wants pickup, the inventory, we can believe, confidently is there and it's available. So there's really a system from end to end that the entire team has been working on to get to the point where we are today. The third thing I'd say is the team's done a a really nice job managing seasonal inventory buys. Fashion has been stronger. Sell throughs have been stronger. We've done a great job in last few quarters with holiday. If anything, I'd say in the fourth quarter, we may have bought a bit light in certain categories. We had a strong quarter, as we mentioned, in general merchandise and fashion, but there were categories that if if you could rewind the tape, we probably would have bought even more aggressive. But the good thing about that is we enter this first quarter, we're We have momentum. And so I think we're in a good spot in terms of mix. And and I'll turn it over to John David to talk about overall business mix. John David Rainey: Yeah. Kate, let me before I talk about the coming year, I think it's important to talk about some of the improvement that we had in the fourth quarter. A lot of what John talked about in terms of the improvements we've made in our supply chain translate into improved operational benefits like fewer fresh throwaways, better inventory management, things like that, fewer markdowns. And so we saw a benefit of that. In the fourth quarter. We'd expect a continued benefit of that going into the next year. If I if I break down the the p and l, generally speaking, we're expecting gross profit to improve next year. We're also expecting some leverage in s g and a. And I I should pause here for a second. We leveraged in s g and a for the fourth quarter this fourth quarter, and that's the first time in a while. We're excited about that because you all are starting to see some of the benefits of this supply chain automation and productivity benefits that we've been implementing for years, and that's translating into improved financial performance. But to the the heart of your question about business mix, we would continue to expect an improvement to gross profit related to business mix going into next year. I noted, in my prepared remarks, fully a third of our profit in the most recent quarter was related to advertising and membership income. And so what we're excited about that. We expect a continuation of of those types of benefits. And you overlay on that the other parts of the business that we don't talk quite as much about, but fulfillment services, marketplace, which are all doing really well, translates into the improved economics that we're expecting in the coming year. Operator: Our next question is from the line of Chris Horvers with JPMorgan. Please proceed with your question. Christopher Horvers: So a Operator: a follow-up question on that. Can you talk about the progression of marketplace growth and fulfillment services how are you expecting the profitability of this alternate profit pool to progress from last year? And then as we look forward over the next couple of years, And then more of a near term question, there's a lot of hope that The U. S. Consumer will benefit from significant tax stimulus this year. Your stores tend to be on the leading edge because you see those consumers cashing those checks Curious if you if you've seen anything so far and and how those funds are being spent. Thanks so much. John David Rainey: Chris, I'll start with that, and and others may wanna jump in after my comments. Marketplace, I would characterize as an area of ongoing investment. We haven't talked about when we expect that by itself to achieve profitability. This is something that as you think about the the two legs of growth or profitability, we wanna lean a lot more into growth right right right now. We think that's what's best for our business. If you just look at the most recent quarter, there are many categories, cook and dine, fashion, home decor. That all grew north of 40%. On our marketplace. That's exactly what we wanna see. And we don't wanna overly fixate on one aspect of our of our ecosystem of of services that we provide to try to achieve profitability there. So we think investment is the the best opportunity there. Walmart fulfillment services today has 52% of our sellers. Take advantage of that. And I've you've heard me say this before, Chris, but I think if you're selling on Walmart and not using Walmart fulfillment services, you're almost using us in the wrong way. It is too good of a service. We continue to see that penetration increase and and continue to see the teams perform in that area for our sellers. So, you know, those would be a couple areas that I I think are we'd highlight for the coming year. As it pertains to the increase in tax refunds, We certainly have some of that in our guidance. We have to make assumptions about how much of that will be saved versus spent. And of what is spent, how much goes into the first quarter versus later quarters in the year. You know, it remains to be seen. You you are correct in in to suggest that we tend to be very levered to that when when we see those move up or down, it impacts our business. But we we our guidance does assume an increase in tax refunds this year. Operator: Our next question is from the line of Oliver Chen with TD Cowen. Please proceed with your question. John, it's John David. E commerce profitability has been really encouraging and impressive. What do you see ahead in terms of how the business model Continues to evolve and densification. And as we think more broadly about retail on the topic of personalization and moving from predictive to prescriptive with with the aid of AI, what are your thoughts for what will happen with personalization, particularly as you see so much interaction with Sparky and have a lot of Oliver Chen: veracity, volume, and velocity of data. Thank you. John Furner: Hey, Oliver. Great great question that John David was just alluding to many parts of what we built to try to serve customers any way they want to be served, where they want to be served, how they want to be served. And that's really the the center of what we'd call the omni strategy. This would include our stores, our e commerce business that's pure fulfillment. We have our stores that are delivering. We have a mix of all the above. It's really all designed about channel flexibility. What we've been saying for a few years is that channel flexibility has been, and again in this quarter, has helped us meet new customers, serve new customers, grow with customers that we haven't been transacting with in the past. So it's really encouraging. But all these pieces have to work together in order for this all to come to the point that we can have results like we had in the quarter. So the best way to say it is if if you look at Walmart on the top line, and you look at Walmart on the bottom line, those are those are where I would encourage you to just hold us accountable, because we have a great team here with a lot of experience that can manage the pieces in the middle, ultimately driving it faster delivery speeds and more intuitive experiences so that customers trust us to be a great place for a great assortment and great prices. Delivered the way that they want it to be delivered. And what we're seeing with Sparky and again, it's early days, with agent of commerce being live in the site. But the quarter was really encouraging. We had a lot of growth from Q4 over Q3. A lot of engagement. Dave mentioned earlier about half of our customers did engage with Sparky. And when they do engage with Sparky, we see better order value We had a 27% growth rate in ecommerce in the fourth quarter, which is a big quarter for Walmart US, 24% globally. Sparky is only live in The US, but we have hope and ambition that quickly we can expand these platforms into other markets, and I think that will be accretive in those markets. But what Sparky can do is it can help understand really clearly what it is that you're trying to accomplish in your life, whether that's a birthday party or camping trip or planning meals for the week or just planning dinner for this evening, and then we can generate you great, unique solutions real time if we need to. Or by knowing you a bit better than we did in the past, we can help suggest things to you are more in line with your own personal preferences. So all this put together we believe, is a great way for customers to build a trust that Walmart will save them time while shopping save them time in the transaction, but also save them time in delivery. A large number of our orders now we're really proud of are now happening in less than half an hour. We're We're averaging under an hour. Our express delivery when customers choose that. Then as we mentioned earlier, for our express delivery or total fast delivery, which under three hours grew 60% year on year. So when you put it all together, we're confident in the strategy. We like the assets that we have in place. Continue to invest our capital in a disciplined way. That provides returns but ultimately drives great customer experiences over the long term. Kelly Bania: The next question is from the line of Kelly Bania with BMO Capital Markets. Operator: Please proceed with your question. Katharine McShane: Good morning, and congrats to the promotions across the segment leaders as well. Wanted to talk a little bit about about advertising. 6,400,000,000.0 now. I was wondering if you could share with us just any color on what kind of growth you are planning for here. It's it's been very strong. Should we expect that to moderate a little bit? I know The US really accelerated this quarter too, and maybe you can talk a little bit about Kelly Bania: what drove that? What what are the types of advertisers or categories that are accelerating there? And where where do you feel your know, still kind of underpenetrated or overpenetrated and just trying to think about where that could go from here. John David Rainey: Kelly, this is John David. I'll I'll make an attempt at that. In terms of what to expect on advertising, you know, the you're right in terms of what you're applying. You get to a law of large number where it gets more challenging to enjoy those same growth rates. But in terms of overall progress, that we're making with advertising, I don't I really don't see that slowing down. Some of the areas that we've really expanded in are areas like our marketplace business where we folk we're we're seeing more of the growth come from that part of the business versus some of the first party brands The other thing I'll point out is the Visio acquisition. We saw triple digit growth in advertising with our Visio business in the quarter. We've talked a lot about this. This is exciting because it gives us yet another channel to, to market to our customers. And I feel like that's really just getting started. Obviously, the base there is not as large as the overall US business, but has a whole lot of runway. As we've talked about in the past, and I know you're very familiar with, Kelly, you know, if you if you measure us advertising as a percent of, like, the addressable market or our GMV, We we we still have a long ways to go here to get in the neighborhood of some of the best in class competitors here. And so we feel like we we can improve our own advertising capabilities while doing it on a growing base, which gives us a lot of runway into the future. John Furner: Kelly, you mentioned the team. I'm really proud of the promotions here. At Walmart. Dave Gagina, who spent what most of his career in ecommerce and logistics, Chris in businesses all around the world, and Latrice Watkins, twenty seven years, and majority of that in merchandising. They're going to do a great job, and they have a lot of experience. There was a structure change that we made in January, which is also really important. And I think that signals confidence that the capabilities we have built in The US are exportable to other markets, and we can work with our other markets to accelerate these platforms to grow. And so that that change was set to layer included the marketplace, Visio, advertisements, our data services, and Walmart plus being moved from inside Walmart U. To an enterprise role where we can build once build these platforms once, scale them globally. So we're optimistic that that what Seth has done here in The US with his team can accelerate growth in other markets additionally. So John David said it well. This is a big business that's growing, but our share is relatively low. Compared to what it could be in terms of the addressable market. And we are really excited about the opportunity for Seth and his team to work across the entire enterprise. Operator: The next question comes from the line of Corey Tarlowe with Jefferies. Please proceed with your question. Great. Thanks and good morning. I wanted to ask about stores versus ecommerce, and how you expect store comps to trend going forward? And what the impact to margins will be as a result, given we know that the margins are better in stores versus e commerce? Thanks so much. John Furner: Hey, Corey. It's John, and, Dave Dave, and I'll I'll take this one together. You know, as you step back and just think about this the omni strategy the role of stores, the role of the app and how they work together, it's just important to remember that stores are a huge part of the solution to deliver the customer experiences that the customers are looking for. Having inventory, and I'll talk about The US and globally just here in a second, Having The US with 5,200 locations between Walmart and Sam's where inventory is forward deployed is really helpful. And that's great for a customer who wants to shop in a store, pick up at the curb, or have delivery and do it in a very fast way. We have strength in international markets as well, places like like China has had record deliveries from the clouds in Sam's Club for the season in Chinese New Year. That's also true in other markets in Mexican Canada where I visited in the last few months. So stores are a really important part of it. How a customer wants to shop, that is completely up to the customer. It's pretty typical that you'd see in in the holiday front type frame people leaning on delivery more. We had really great experiences and great results in November with Thanksgiving. More and more customers chose to have their Thanksgiving meal delivered. And then this recent ice storm we had in The United States, we also saw a significant number of customers looking for delivery services much higher than the year before. So whether people are shopping at the counter, shopping at the curb, they're shopping in in the store, we wanna be there for all of them. In terms of the mix and the impact of the p and l, getting to where we were last year with ecommerce moving to profitability, the growth of advertisement, the growth of the other services, We like the way our P and L is set up in terms of providing mix over time. Again, we'll manage that really well. We have a great team of people who do that. So again, excited about the top line growth. Excited that that our our operating income grew faster than our than our sales in all three segments. And I'm also very confident in the guidance that John David talked about. So do you wanna talk about remodels and investments in stores? Dave Gagina: Yeah. Absolutely. As John mentioned, you know, we're focused on serving customers how, where, and when they wanna shop across stores, pickup, and delivery. And our ecommerce growth of 27% you know, is leveraging our physical footprint. So this is an interconnected system. So we are making further investments in our store network as a result in that physical footprint. Over the past twelve months, we've opened 12 new stores, and we've remodeled 674 stores. Our investments in both of those areas are outperforming plan, and I think that just reinforces the strength in the omnichannel model. Operator: The next question is from the line of Edward Kelly with Wells Fargo. Please proceed with your question. Oliver Chen: Impressive progress in in ecommerce again. I was hoping that you could Edward Kelly: maybe update us on current profitability and how you're thinking about 2026. And then as it pertains to all this, you mentioned, you know, pace of change accelerating Competition in e com, you know, certainly seems to be intense. You maybe just touch on, you know, what Walmart needs to be vigilant on, to sustain share momentum. And does this impact at all the the near term profit path for the business? John David Rainey: This is John David. I'll start with the e comm profitability. Ed, we've reached a point where we don't even really talk about this internally anymore. We've far surpassed surpassed the breakeven level. We were profitable in each of the four quarters in The US segment, and the momentum is is only up from here. We we've been enjoying roughly double digit incremental margins in ecommerce. We don't expect that to change. Feel really good about the plan going forward. And as you know, the nature of this business is you build a large digital platform. And the the marginal cost of growth is very low. You don't have to continue to build that platform to achieve the next percentage point of growth. And so we're enjoying the scale economics that come from a digital business. That's not going to change. And getting to the second part of your question, we're seeing that that is resonating with our customer member base. We, we continue to gain share. And I think a big part of that is convenience. It is the fact that we can serve 95% of America in three hours. There are very few people that can do that. And as John and Dave noted, in some cases, less than minutes. But it's not just convenience. I I'll I'll I'll point you to fashion as an example. Like, we've had several consecutive quarters now of fashion growth in the mid single digits. I'd argue fashion is not really a convenience item. It shows that our broader assortment is appealing to a much larger customer base And they're and they're coming to Walmart in many cases, some of them for the first time. And they're they're enjoying an experience that makes them want to come back. John Furner: Yeah. These platforms that that we've put together, they work at Walmart US. They work in other businesses. Sam's Club is an example. Obviously, a category or a channel that's focused on curation and quality. But, Latrice, maybe you comment on the experience your members are having with the delivery platform as we have scaled the platform for Walmart US exams? Kelly Bania: Sure. Good morning. Thank you, John. Latrice Watkins: I am a merchant, so Latrice Watkins: this is what I love. I love to talk about how we give members access to products, and you've said it however they want to shop with us. So a couple of things are happening at Sam's Club. We are leveraging the platform that is what we've created as part of Walmart. And what we're seeing from members who choose to shop with us from home on our app is that 60% of our members can get delivery in three hours. So we're growing that. We're we won't stop there at the 60%. We are growing our ability to give members their items quickly. For members who want to come in club, they love Scan and Go. So scan and go is an is a seamless way for members to get the items they want, get checked out, use our exit arches, have a frictionless experience fast. So in the spirit of what members want, and what they need, they want items, and they wanna get through our, clubs quickly. And Scan and Go gives them the opportunity to do that. And delivery from club gives them the speed that they want. Operator: The next question comes from the line of Chuck Grom with Gordon Haskett. Please proceed with your question. Edward Kelly: Good morning, everyone, and good luck, John, as you embark here. Charles Grom: Could you talk about the health of The U. S. Consumer across income cohorts at this point in time? Any surprises this past holiday season? And looking ahead, when you look at the baskets of GLP one users, how is their shopping behavior changed in terms of frequency and and basket size? And I guess how does that influence your planning of inventory in the coming coming quarters and years? John Furner: Hey, Chuck. In the earlier comments, we talked about the consumer in The US. We had a lot of growth with with customers who are income bracket of 100,000 or above. That's pretty consistent with the last few quarters and the way we've talked about it. So I don't think there's any big change. I think with the way we describe our customers is is very thoughtful. They're choiceful. And the lower income segment, 50,000 and below, we did see, of course, Leslie mentioned, some stress In many cases, we see people living paycheck to paycheck. In the fourth quarter specifically, there was some sales impact early on that was driven by benefits during the government shutdown that affected Walmart US in The United States. The most part, Walmart US, that recovered as the quarter went on. There seems to be some impact to Sam's over time. On the pharmacy business, the biggest change that'd be notable would be the NFP MFP pricing changes on branded drugs. The the the remaining categories have been pretty consistent over time, and we did provide some comments and guidance about what kind of impact we think that MFP will affect us by. As far as categories around the store, digitally and physically, We are always watching changes in subcategories, what's growing. Our team starts every Monday talking about customer experiences and unit growth in particular. So as we enter or potentially enter a period where inflation is lower or higher, it doesn't really matter to us. We'll manage the commodities as they come through. We'll focus on the lowest prices we can focus on. We had 6,200 rollbacks in Walmart US this quarter. Up about 23% from a year ago. So we'll just continue to focus on low prices, but as category shift, categories grow, or they slow, our team will be very reactive in terms of being able to be ready for customers wherever they're looking. John David Rainey: Yeah. And on GLP one, I just some of the impacts that you would that we see to our business are as you would expect. So as an example, we see that fresh is a big driver, one of the big things in in baskets. The the the unique thing about fresh is that it's a basket driver. When someone buys fresh items, the baskets tend to be larger by a double digit percentage. So when you take all of the puts and takes related to that, it you know, it's kind of a wash. It doesn't really isn't a big driver of our growth one way or the other. Operator: The next question comes from the line of Joe Feldman with Telsey Advisory Group. Please proceed with your question. Edward Kelly: Yes. Thanks, guys, for taking the question. Congrats to all the new business leaders. Actually, it's it's more for you guys. I I was just curious. I know there's three of you, but you're Operator: maybe brief thoughts as you take over your new role what you guys see with fresh eyes as you kinda enter each of the divisions you've taken over? Seth Sigman: Thanks. John Furner: Chris, you wanna start with international? Sure. Yeah. Hey, Joe. So Chris Nicholas: I'm thrilled to be in international. It's kind of a homecoming for me because I started out in international when I joined. And there's lots of words you could use to describe international, but if I was to choose one it would be growth, I think growth is the top line, growth in the bottom line, the so much opportunity globally. And as we think about all of the words we've used today, build one scale globally, AI helping accelerate that, a platform centric approach, the ability to take the magic of the culture, great assets that we've got internationally, and leverage platforms, gives us the opportunity to do something we haven't been able to do before. Latrice Watkins: Good morning. It's Latrice. I am thrilled also a homecoming to be back at Sam's Club. And what I've felt in the time there is the energy and the momentum of the business both with our associates and with our members. So, being in clubs with members and associates has been a thrill We can see how they love items. We can see how they love to shop. And I'm excited about the opportunity to serve them. The way they wanna be served with great merchandise at great value. As as fast as they want it, either from our clubs or as they use the mechanisms we have in the club. Dave Gagina: Thanks for the question, Joe. Know, first, I wanna take the opportunity to thank the Walmart US associates in our stores, our supply chain, our home office, for delivering a fantastic quarter. US achieved 4.6% comp sales with with profits growing faster than sales. As as John mentioned earlier, I've spent the majority of my career in ecommerce and logistics. And one feeling I've had the last few weeks is I'm humbled. I'm humbled to learn from and serve 1,500,000 associates across Walmart US, and I am energized by what I've seen in my first few weeks. I've been in stores in California, Texas, Florida, visited a distribution center in Florida that is delivering fully palletized loads to all of the over 120 stores that it serves. And then last week, I was with the Walmart US leadership team at the year beginning meeting. And and what's clear to me is that we are operating from a position of strength and the opportunity ahead of us is significant. We're investing with confidence in automation, new stores, remodels, our marketplace, membership, advertising, and all of this. Will strengthen the customer experience, It's going to drive productivity. It's going to improve our economics over time. And I am excited about the runway ahead. Operator: Thank you. The next question is from the line of Rupesh Parikh with Oppenheimer. Please proceed with your question. Good morning and thanks for taking my question. Edward Kelly: I just wanted to go back to membership income. So we saw another quarter of strong double digit membership income growth. Operator: So just curious as you look towards this fiscal year, just overall confidence in sustained momentum Charles Grom: I recall last quarter, you guys were very happy with Walmart's plus sign ups, including some on credit card side. Edward Kelly: So just curious, just overall on Walmart plus whether any additional Operator: surprises as that program continues to ramp? Thank you. John Furner: No surprises, Rupesh. In fact, I'm really pleased with the fourth quarter. John David mentioned the credit card offer. You asked about that. That's been strong. Really pleased with the number of sign ups. The The usage rate of the benefits has been fantastic. One of the fastest growing benefits, obviously, with free shipping is is the express delivery and fast delivery services. That was up 60% year on year. And we just we are really excited about the proposition. Having Walmart Plus with Seth DeLayer move move to an enterprise level, we see room to expand this into more markets in The United States, and we're working on those plans. But overall, membership in Walmart has been strong. Sam's Club also had great results with membership in the quarter. We see continued momentum there, which should include Sam's Club in The United States and and Sam's Club in China. We talked about that earlier. So really strength across all these areas. The other thing I'd say about membership is it does give us a chance to serve customers really frequently. Again, when you combine membership with the work we're doing with Agenda Commerce, whether that's with Sparky, or partnerships with Alphabet or OpenAI, it just gives us more ways be able to understand the best way that our customers and our members wanna be served. Operator: Thank you. This now concludes our question and answer session. I'd like to turn the floor back over to John Furner for closing comments. John Furner: Yeah. Thanks, everyone, for the time and the investment and time in Walmart today. Great to have you on the call. I just wanna close by saying we we have a clear strategy, and that's an omni strategy. It's working in The United States, it's working around the world. It's working in The United States, it's working around the world. We see a lot of opportunity to expand what we've built to serve customers better, both both here in this country and around the world. We have a great team. This is a real experienced leadership team. You heard from a number of those people today. And while they're new in new in their roles, I can tell you each and every one of them care about our associates. They care about our culture. They wanna grow, and they're really experienced at the things they do. So I have a lot of confidence in this team as we look ahead. Our capital strategy I'm also really pleased with investments that we've made. We'll continue to remain disciplined. How we invest capital. John David said it earlier, every dollar will compete for the best returns. That is true and will remain true. And then finally, I just wanna thank our associates all around the world, over 2,000,000 people who are really hard each and every day to serve our customers. They're the ones that make all this happen. Our people really do make the difference. And I'm looking forward to a great year in getting out to the markets and meeting more of our people. Kelly Bania: Thank you. Ladies and gentlemen, thank you for your Operator: This does conclude today's conference. You may now disconnect your lines at this time.
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.
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: Thank you for standing by, and welcome to the Medibank Half Year Results 2026. [Operator Instructions] I would now like to hand the conference over to Mr. David Koczkar, Chief Executive Officer. Please go ahead. David Koczkar: Thanks, and good morning, everyone. Thanks for joining us today. I'm coming to you from Naarm, the home of the Wurundjeri Woi-wurrung people, and I pay my respects to their Elders, past, present and emerging. I'm joined by our executive leadership team, including our CFO, Mark Rogers. This morning, we'll talk to Medibank's results for half year '26. So first to the highlights on Slide 5. This is another good result for the Medibank Group. Our performance reflects improving customer engagement and our progress in driving the health transition. We've delivered on our growth commitments, with improved momentum in our health insurance business and strong growth in Medibank Health. Medibank Health's continued positive performance is enabling us to reinvest with confidence to support its future growth. And we recently took our next important step in health, finalizing our acquisition of Better Medical, establishing one of the largest primary care networks in the country. So let's turn to Slide 6 for customer highlights. As the cost of living remains challenging for many, we've continued to provide more value to our 4.3 million customers. We saved our customers around $105 million in out-of-pocket costs, another $3.3 million by using our no gap network and $23 million in rewards was earned by Live Better members. And importantly, we're seeing our Medibank and ahm customers accessing more of the health services we deliver through Medibank Health. 55% of Medibank resident policyholders are now engaged with our health and well-being services, which reflects our differentiation, but also how we're able to bring the best of Medibank Group to support our customers' health. Amplar Health delivered 70,000 virtual health interactions to Medibank customers and saved 100,000 hospital bed days through its home care services. And as we meet more health needs of more customers, customer relationships strengthen, which further improves our retention performance and supports our growth in health. So now to Slide 7, which shows an overview of our key financial outcomes. Look, I won't go through all of them, but a particular highlight for me is the resident policyholder growth of 1.9%, with growth in the last half, more than double that of last year, including improving momentum in the Medibank brand. And while we've seen slightly lower policyholder growth rates in our nonresident business for a few years ago, our performance remains better than market, especially in segments where we are focusing our efforts to grow. And it's very pleasing to see Medibank Health having another very strong half of growth. In line with our healthy capital position, we are delivering to shareholders an interim fully franked ordinary dividend of $0.083 per share. So now to Slide 8. As we progress our strategy, we continue to take important steps to deliver our 2030 aspirations. Our improving experiences are really resonating with our customers, patients and our people as we continue localizing services and empowering our teams to better support our customers. We've continued to build momentum in our health insurance business, growing both brands and expanding in our priority segments, including families, mid-tier, covers and those new to the industry. This includes a 67% increase in corporate joins year-on-year and a record number of nonresident workers now as customers. Key to our strategy is to change the way people experience health and wellbeing, like our expansion of our 24/7 Amplar Health Online Doctor service to our resident customers and our Detox at Home program in the community. And having now established a national network of 168 clinics, we've continued to prioritize our expansion in primary care, investing in the experience of GPs to support early intervention and multichannel delivery. And we're improving how we work, embedding AI tools and processes throughout our business. And our adoption is accelerating. For example, in 2025, we had twice the rate of adoption of AI that we had in '24. And next year, it might be more than 5x that amount. We're able to drive value from this space due to our strong customer relationships, our data and our capabilities. And we continue to strengthen our foundations, maturing our risk culture and approach to support our people's decision-making, enhancing security and our technology platforms and improving productivity. Also we can continue to deliver better outcomes for our customers. So now over to Slide 9. We're very conscious that many consumers are doing it tough, including with the recent interest rate increase and recently announced increases to premiums. However, despite the challenging environment, the resident health insurance market remains buoyant, including continued strong growth in younger customers choosing to go private. Recent research showed a continued increase in the number of people who see health insurance as offering value for money. And with increased waiting list for elective surgery in the public system and the benefits of adult dependent reform to continue, we expect resident growth rates to remain well above pre-pandemic levels. Consumers continue to seek greater value and are switching brands and products together, including choosing lower levels of cover. With this changing mix and more people preferring treatment outside traditional settings, growth in private hospital claims utilization is decreasing. And while some of the unsustainable commercial behavior from other funds has eased, pockets of heightened competition remain, including aggregator practices that could drive up the cost of insurance for consumers. In response to all this, our disciplined approach to growth and differentiation across our 2 brands remains unchanged. We are driving momentum by growing in our target segments, prioritizing growth in direct channels and focusing on retention, which for us has improved by 21 basis points year-on-year to September despite industry lapse rates actually going up by 70 basis points. We're continuing to work constructively with hospitals, shaping partnership agreements to incentivize shared outcomes to drive the health transition, which pleasingly is continuing to gain momentum. In FY '25, we gave hospitals around $37 million to support this shift. And in the first half of this financial year, we've already provided around $20 million. The nonresident market has adjusted to recent migration reforms with worker numbers increasing. Student numbers have stabilized, but we expect the market to continue to grow. We're also seeing more students and workers become residents. Transitions, we are well placed to support through our life cycle management investments. And with the strength of the health and well-being support we offer and the extensive university partnerships we have, we remain an insurer of choice in the student market. Now to Slide 10. Australia has never spent more on health care, and yet in some parts, the system is failing the community. As productivity in health care remains sluggish, and health care costs continue to outpace inflation, the call to action for reform could not be more urgent. Out-of-pocket costs are rising, patients are waiting longer for care, clinicians are under pressure and avoidable hospitalizations are around 30% above the OECD average. Not only does this impact the quality of life of millions of people, the recent data also shows it drained around $7.7 billion from the system. Governments, operators, clinicians and patients know the system is under strain. But despite the shared understanding, the pace of reform is far too slow. So we will continue to advocate the change because it is in the national interest. But efficacy alone won't fix a system that is deteriorating faster than many decision makers are responding. International experience shows us that when this happens, the private sector must lead. And in the absence of meaningful system-wide reform, as we have done for several years, we will continue to take the lead in driving the health transition that is needed to sustain our system. And in the last few months, pleasingly, others are recognizing the needs of this action, too. For example, St. Vincent is committed to delivering half its care in homes or through virtual and digital platforms by 2030. Our work with the South Australian government has seen their continued commitment to expand care options for public patients outside traditional hospital settings. And we are seeing many others now embracing the change that's needed. And in the private system, the federal government is supporting this approach given their ask of the sector to design, lead and implement the changes needed through the CEO Forum. So we will keep working with hospitals, health professionals, corporates and other funders to accelerate the change needed. Investing in well-being, in prevention, in primary care and accelerating the shift to virtual community and home-based treatment settings. And as you know, this is not new for us. It's out of this desire to change the system to keep it one of the best in the world, but we are growing our health business. And now Slide 11. Primary care is one of the most critical areas that need change. As the front door to Australia's health system, it needs to adapt to the changing health needs of the country. Patients are waiting longer, paying more and too often entering the system once health problems are already entrenched. These outcomes are the result of a traditional model designed around reactive, episodic care rather than proactive, connected and comprehensive support. The sector is just not set up to support the future health needs of the community. Through our majority interest in Myhealth and recent acquisition of Better Medical, combined with our existing Amplar Health GP nursing and our health offerings, we now bring together one of the largest primary care networks in the country. And working with our partners, we provide the tools, the technology and the time, clinicians need to focus on prevention, reduce low-value activities and better support their patients. We are investing to grow virtual channels to improve access, to support better continuity care and to meet the changing expectations and preferences of patients. And these investments matter for patients and they matter for clinicians. And as we have seen in other countries around the world, a focus on proactive and planned care supported by technology and an integrated care team is a more sustainable business model and one that can better address the challenges of the health system under strain. I'll now turn to Mark to ask him to run through the details of the results. Mark Rogers: Thanks, Dave. Good morning, everyone. This result demonstrates how we're balancing resident policyholder growth and gross margin. It shows continued earnings diversification and includes reinvestment for growth. The key financial highlights include group operating profit up 6% to $381.7 million, with solid growth in resident health insurance an important contribution from nonresident and continued strong momentum in Medibank Health. Investment income was impacted by the lower RBA cash rate and the increase in other income and expenses includes higher M&A costs. Nonrecurring cyber costs were lower, and we expect FY '26 costs to be around $35 million and that the IT security program will largely be embedded. And underlying EPS, which normalizes investment returns was $0.108 per share, which is in line with last year. Slide 14 covers the health insurance results. Despite the challenging economic environment, the business remained resilient, we continue to see benefits from our disciplined approach to running our business, including lower hospital utilization growth and an improved risk equalization outcome. We are also seeing policyholder growth skewed to lower tier products with impacts to revenue and claims largely offsetting. Gross profit was 4.4% higher with 4.3% revenue growth and gross margin stable at 16.2%. Operating profit increased 3.5% to $361.5 million and the operating margin remains at 8.5%. Our expenses were up 5.4% to $329.4 million and the expense ratio was 10 basis points higher at 7.7%. The increase in operating expenses reflects inflation, volume impacts and ongoing investment, partially offset by $3 million of productivity savings. And nonresident commissions were up in line with premium increases with the resident commissions broadly in line with last year despite higher ahm aggregator joins. We expect expenses in FY '26 of between $690 million and $695 million, including $10 million of productivity savings. We continue to target a stable to modestly improving expense ratio, but balances with investing in growth where this makes commercial sense. Moving to Slide 15. The resident health insurance market remains buoyant, with policy shareholder growth in the 12 months to 31 December is expected to be slightly lower than the 2.1% growth we saw in the 12 months to 30 September. Cost of living pressures continue to impact the industry, with switching rates remaining elevated, customer growth skewed to lower tier products and aggregators increasing their share of industry joins. Whilst the unsustainable competitive environment is moderating, pockets of heightened competition remain. Pleasingly, we're seeing increasing momentum in the business. Over the last 12 months, policyholder numbers increased 1.9% with Medibank and ahm growing 0.8% and 4.9%, respectively. This includes 0.9% growth in the last 6 months, which is more than double the growth in the prior period. The acquisition rate of 5.6% is 40 basis points higher, with improvement in the Medibank brand from investing in differentiation and an enhanced digital experience in ahm. Despite the higher industry switching rate, retention improved 10 basis points with the improvement in ahm particularly important. Key areas of focus for the remainder of FY '26 include further improving retention, deepening brand differentiation and increasing focus on acquisition in priority segments and channels. Now turning to Slide 16. Resident claims expense increased at 4.9%, and risk equalization provided a 50 basis point benefit to net claims growth, with some of this benefit expected to be timing related. Resident claims growth per policy unit increased 20 basis points to 2.5%, with the 310 basis point increase in extras, partially offset by 120 basis point decrease in hospital. In hospital, the increase in inflation reflects private hospital indexation investment in product benefits and the increase in New South Wales private room charges. The negative hospital utilization growth reflects prior period claims favorability due to COVID impacts and customer growth due to lower tier products. And the increase in extras includes the ahm limit rollover and utilization and inflation increasing following a period of subdued demand due to economic and COVID impacts. And in the second half, we expect private hospital indexation to remain elevated and negative hospital utilization growth to continue. Whilst the risk equalization timing benefit will unwind, we expect this to be largely offset by higher New South Wales private room charges now being fully embedded. Slide 17 details health insurance performance, which shows continued growth in both resident and nonresident. In resident, our disciplined approach to growth resulted in gross margin being maintained at 15.5% with revenue and claims growth per policy unit of 2.5%. Growth in revenue per policy unit was down 30 basis points, with a high average premium increase offset by higher revenue mix impacts. The revenue mix impact of 150 basis points is similar to 2H '25 and reflects increased investment in Live Better, customer growth skewed to lower tier products and strong growth in ahm policies. And subject to no material change in the economic environment, we expect revenue mix impact for the full year to be better than 1H '26. Solid nonresident revenue growth has continued with average policy units 1.4% higher and revenue per policy increasing 3.1%. Policy unit growth was lower than in the prior period, with lower student visa approvals and modestly higher lapse. However, we expect the recently announced increased student visa approvals and new opportunities in the workers segment support acquisition into the second half. Gross profit increased 6.9% to $55.6 million, and gross margin was up 80 basis points to 35.6%, with an improved worker margin, partially offset by tenure impacts on student margin. Nonresident remains an attractive market and in the second half, we'll build on emerging opportunities in the student and worker segments and continue to invest and differentiate our offering to grow market share. Turning to Slide 18. Medibank Health segment profit increased 28.5% to $48.3 million and operating margin was up 10 basis points to 17.7%. Revenue grew 27.5% with the increase in community and acute, reflecting strong volume growth and increased ownership of Amplar Health Home Hospital and good strong customer growth in wellbeing. Gross profit was up 21.6%, with the reduction in gross margin due to additional investment in Live Better and mix impacts, partially offset by efficiency benefits in community and acute. And whilst expenses increased with growing scale, the expense ratio was 250 basis points lower with improvement across all 3 segments. We continue to see strong organic growth potential in the business with focus areas for the remainder of FY '26, including meeting more health needs at more customers, scaling existing services with a broader set of payers and realizing synergy benefits across our primary care network. We aim to augment this organic growth with further M&A that scales and expand geographic coverage in primary care and adds capability in well-being and virtual care. Now on Slide 19, we've shown a more granular breakdown with the financial results for our 3 Medibank Health segments and the key customer metrics driving performance. In the well-being segment, Live Better members increased 13.6% following investment in the proposition and reward points give back offer. In primary care, consultations increased by 2.8%, with an increased proportion of these being undertaken virtually. And in community and acute home health admissions were supported by strong volume growth in publicly funded programs and increased capacity in our transition care service. Moving to Slide 20. Investment income was down $19.6 million, with a $5.7 million and $5.8 million reduction in the growth and defensive portfolios, respectively. The decrease in the growth portfolio reflects lower income from all asset classes other than property and the lower RBA cash rate was a driver of the reduction in the defensive portfolio. Other investment income was also lower, following the payment of the final customer giveback in September last year. We expect further impact in the second half with lower cash holdings due to funding the Better Medical acquisition, we'll adjust credit, duration, and liquidity settings in the defensive portfolio to help offset this impact. And of course, the recent increase in the RBA cash rate will also be helpful. With lower earnings on cash, underlying net investment income was down $11 million. The underlying net investment return decreased 26 basis points to 2.74%. And the annualized spread to the average RBA cash rate increased to 184 basis points. Moving to Slide 21. The health insurance business continues to be well capitalized. Capital is at 1.9x PCA and the capital ratio is 13.8% of premium revenue. We continue to hold additional capital to offset the $250 million APRA supervisory adjustment, and this is why the capital ratio is above the target range of 10% to 12%. The Better Medical acquisition was the main driver of the change in the capital position in this period. The increase in Medibank Health capital employed includes $163.5 million cost of this acquisition. The acquisition was funded from our unallocated capital, with this partially offset by strong capital generation. We are also well placed to fund further inorganic growth. The unallocated capital position supports our FY '30 Medibank Health earnings aspiration of at least $200 million. And we have capacity to raise Tier 2 debt to support growth above this level if further attractive opportunities arise. And given the strong capital position, the Board has declared an interim dividend of $0.083 per share, which is a 6.4% increase and 76.8% payout of underlying net profit after tax. And to finish, a few comments on our outlook for FY '26. Our resident health insurance outlook is unchanged. We aim to grow resident market share in a disciplined way, including further growth in the Medibank brand. We continue to expect growth in resident claims per policy unit of between 2.6% and 2.9%, and expected our proactive approach to claims management will differentiate us from the rest of the industry. Our nonresident outlook is also unchanged. And finally, we've updated our Medibank Health outlook. We expect FY '26 organic operating profit growth to be similar to 1H '26 plus an additional circa $6 million contribution from Better Medical in the second half. And our M&A pipeline remains strong, and we have both the appetite and financial capacity to pursue further strategic opportunities. I'll pass back to David to make some closing remarks. David Koczkar: Thanks, Mark. Now over to Slide 24, just for us to wrap up. We're a resilient company, and we're a growing company with strong customer relationships, positive momentum and a clear vision for the future. We remain focused on the needs of our customers and patients. This shapes our strategy and drives our performance. As we continue to strengthen our foundations and deliver greater value, choice and control in health. We are seeing this reflected in our growing health insurance momentum and Medibank Health going from strength to strength. Despite the economic challenges, the health insurance market remains buoyant. And through our work across both private and public systems, investing in prevention and delivering more innovative care models, we are driving the health transition. While this change is emerging more broadly, more must be done to accelerate it. So we will continue to champion this and work with governments to advocate for the reform needed to keep health care in Australia affordable, accessible and among the world's best. We are on track to meet our FY '26 outlook and continue delivering value for customers and shareholders. And finally, our achievements are only possible because of the amazing people at Medibank. And I thank them for their ongoing commitment to creating the best health and wellbeing for Australia. So now it's -- over to you for any questions you may have. Operator: [Operator Instructions] Your first question today comes from Nigel Pittaway from Citi. Nigel Pittaway: I just wanted to ask about sort of what you expect for claims inflation maybe a bit beyond second half. I mean, obviously, at face value, the rate increase that was announced this week does seem quite a lot ahead of your sort of 2.6% to 2.9%, you're guiding to in the shorter term. So I was just wondering if we could get maybe a little bit more color as to what was the basis behind that level of rate increase and whether or not that is actually related to what you expect for claims moving beyond this year? Mark Rogers: Yes. Thanks for your question, Nigel. At 10,000 feet view in terms of '26 versus '27 are probably 2 major factors to call out. The first one is we know we'll have a COVID tailwind this period, reflecting the fact that the FY '25 claims were $74.8 million below expectations. So we've had a utilization tailwind in this year. That's worth about 100 basis points on claims. We also know New South Wales private room rate will cost us 20 basis points this year, and that will then be fully embedded in our claims line. So the net of those 2 impacts, Nigel, is about 80 basis points, and that will be the single biggest difference between '27 and '26. Nigel Pittaway: And then I mean, obviously, you're saying the revenue mix, as we're now meant to call it, will improve in second half. I mean is that sort of your ongoing assumption beyond that as well? Or... Mark Rogers: So Nigel, the revenue mix -- the trend in revenue mix is going to depend on how fast we're growing and where we see growth. So provided we don't see any further deterioration in the economic environment or our growth rate doesn't increase significantly and the mix of that growth either, that's a reasonable assumption looking forward. Nigel Pittaway: And then maybe just -- I mean, maybe further to that, I mean, obviously, you've been prepared in this period to pick up some, as you described, the lower-tier products. And I will see most of your growth is still coming through ahm. So I mean, is that sort of what we would expect moving forward? I mean you are still saying you want to grow the Medibank brand, but it seems although that's still reasonably tough to do in the sort of areas that you desire to grow in. Can you make just a few comments about how you're feeling about that sort of revenue growth mix moving forward. Mark Rogers: We actually had a slightly more positive on the policyholder growth trajectory for the half, Nigel, with Medibank growing at 80 basis points, which is well on what we've seen in the prior period. In fact, Nigel, for the full year, I'd probably expect the Medibank growth rate to be slightly higher than the half and ahm to be slightly lower. So actually, we're really happy with the Medibank trajectory. David Koczkar: Yes. I think the notion that Medibank or ahm plays in a certain tiering is not quite correct, both Medibank and ahm support a very, very different set of customers who choose -- yes, slightly different mixes. But in the current environment, people are looking for more value and particularly looking for more value in their health, and that's part and parcel of the Medibank proposition. So that's really what's driving the growth and in particular, our focus on our target segments, which are also growing and we are growing in like corporates like families, those new to the industry. As we know, the second half is always a bigger, new-to-industry in the first half. So actually, with the core brand metrics of Medibank, very strong, I think despite the economic conditions, I think the Medibank brand momentum, we feel very confident about continuing. Nigel Pittaway: And then maybe just finally, I mean, obviously, the government in its sort of PHI premium rate increase announcement is still talking about this hospital benefits ratio climbing to sort of closer to 90%. I mean are you expecting to have to do anything moving forward to sort of encourage that development? David Koczkar: There's a lot of talk about the ratio. We -- our benefit -- our hospital benefit ratio is higher than the industry average and is likely to slightly improve. But look, I think -- the ratio is just -- is one way of looking at health. Actually, the real question we should be asking is the absolute cost of delivering health to the 14-or-so million people that have private health insurance. We still have to ask ourselves the question, why is it 30% more expensive to have a knee replacement in the private system than the public system? Why is it twice as expensive in Australia to have a hip replacement than in Northern Europe? Why is the pacemaker 4x the price in the private system than in the public system? I think they are the questions that probably occupy more of our minds as we think about sustainability system than the ratio itself. Nigel Pittaway: Yes. I mean, obviously, you've made those points for some time and the government is still focusing on it, but yes. Operator: Your next question comes from Julian Braganza from Goldman Sachs. Julian Braganza: Just a further question on downgrading. I just want to be super clear on the composition of the number. Just how material is the investment in Live Better versus growth in lower-tier products, just in that 1.5%? And also, what gives you confidence that, that downgrading will be better in the second half of '26, just given the higher premium rate increase that's coming through? So I just want to understand that a little bit better. Mark Rogers: Julian, I might just rephrase it as revenue mix because it is important because there are 3 components that make up revenue mix. The first component is what you call downgrading, which is existing customers changing the cover. The second component is where we see policyholder growth. So the mix difference between customers that leave us and customers that join us. And the third component is where we invest. And that investment could be in Live Better, it could be in discounts, it could be in offers. If I point you to the second half of '25 and the movement in revenue mix in the second half, you'll see that coincides with us increasing our policyholder growth number, and that was the major driver of that movement. If you go to the first half of '26, revenue mix impact was 150 basis points, and it was 130 in the second half of '25. The majority of that increase was as a result of Live Better investment in offers. So you can see the bigger impact was in the second half and that related to where we saw growth and the less significant impact was relating to investment in Live Better and Offers. Why do we get comfortable? So the investment we've made is now fully embedded in our revenue line. And so unless we look to invest more to grow even more, it's unlikely that will repeat. And the impact we saw on the sales and lapse mix in the second half, again, if we don't increase our growth rate significantly or the market doesn't shift significantly, we're not expecting that number to deteriorate significantly. I would call out, it's important you can't just look at revenue mix. You've got to look at revenue mix and claims mix because those lower-tier products where we're seeing growth, they come with a lower revenue per policy and lower claims per policy. So really, going forward, it's about the jaws in the business, Julian, not just the revenue mix. Julian Braganza: That's super clear. And then just to unpack that hospital inflation number of 4.6%. Just to be super clear, just what component of that is investment in product benefits. Is it the flip of the benefit on utilization from the claims favorability? Or is it less than that? So I just want to be very clear on what is that underlying inflation number ex the product benefits that you're making -- investments you're making. Mark Rogers: I'd probably direct you to the New South Wales private room rate cost because that had a 50 basis point inflation impact in that 4.6%, Julian. The investment and product benefits was less than that. Investment and product benefits is ongoing. Obviously, we can increase it or decrease it given where the claims trajectory is, but the New South Wales private room rate impact was the single biggest uplift that we saw across the 12 months. Julian Braganza: That's clear. And then just the last question on hospital utilization. Even after adjusting from the claims favorability as you sort of flagged utilization is still quite benign and negative. Just want to be clear what's driving that? And how sustainable given it's consistently surprised quite positively. Mark Rogers: Thanks for calling that out, Julian, because it's a really important feature of the result. Utilization growth was 2.8% negative. And you rightfully called out that around half of that is -- reflects the COVID tailwind that we had from the prior year, which is a one-off, but the remaining 50%. So almost 1.4% contraction in utilization is ongoing. And that's linked to a couple of factors in addition to the skew to policyholder growth in lower-tier products. We're also seeing the benefit of our risk selection. So where we grow and how we grow, through which channel at which time I think we're getting favorable selection bias in our claims, and we're seeing that come through in risk equalization. And I wouldn't underestimate the impact that hospital partnership agreements are having. So we're paying higher indexation in exchange for where we've got lower utilization growth with our partners, and that's contributing. So I wouldn't expect anything other than the COVID one-off impact to be significantly varied going into '27. Operator: Your next question comes from Andrei Stadnik from Morgan Stanley. Andrei Stadnik: Can I ask around the comment around resident commissions remaining in line despite the increasing aggregator presence. Can you explain a little bit about how you manage to do that? Mark Rogers: So the commission depend on which aggregator that you're selling through, and it also is dependent on the premium per policy. So as we've seen growth due to lower tier products in bronze and silver, the revenue that we get for that policy is lower and the commission we pay as a consequence is lower, Andrei. Andrei Stadnik: Slightly dry question. But just in terms of the tax rate, should that normalize going forward towards 30%? Mark Rogers: That's not a dry question. I'll leave for questions on tax, Andrei. So thank you. Probably 2 components on the tax rate this half. I think one of those we've mentioned before, so the losses from our joint venture hospitals are actually after tax losses, so we don't get a tax shield on that. And then a number of the M&A expenses are nontax deductible. So you saw an uplift in M&A expenses this year in the first half. And as a consequence of that, that's at a higher nondeductible component expenses. Operator: Your next question comes from Siddharth Parameswaran from JPMorgan. Siddharth Parameswaran: A few questions, if I can. Firstly, Mark, I just wanted to be clear on where you're expecting that revenue mix downgrading figures to come in the second half. I mean you say it should be lower. But the first half was materially higher than my assumption, and I presume consensus as well, whilst the claims inflation was broadly in line with what you had. I was just keen if you could help us understand both those 2 metrics, the claims inflation per policy where you've held the guidance, first half is slightly better than that guidance range. Where do you think you'll end up for the second half and for the full year within that range? And also just the -- same for the revenue mix downgrading impact because it makes quite a difference to the trajectory of margins. Mark Rogers: Yes, sure. I probably won't look to narrow that 2.6% to 2.9% guidance for you, Sid. But what I'd say is where we land in the range will depend on 2 factors from a claims perspective. Firstly, the risk equalization timing benefit that we saw in the first half. How much of that unwinds into the second half. And then secondly, where we see policyholder growth. So if we see policyholder growth toward -- in the higher-tier products, you'd expect claims inflation to be towards the top end of the range and then your revenue mix impact would be lower. And if you see it at the lower -- if you see growth in the lower-tier products and you expect claims to be lower and revenue mix impact to be higher. What we're thinking is provided we don't see any deterioration in revenue mix impacts, which is not our expectation. A flat jaws outcome in the business is very plausible. And to the extent there's any variation in that during the course of the second half, we obviously have opportunity to reinvest if claims are lower than we expect or other contingency options if claims are higher than what we expect. Siddharth Parameswaran: Yes. Sorry. So to be clear, flat jaws is what you're saying is a reasonable possibility in terms of the second half versus the first half? Mark Rogers: Very plausible outcome, Sid. Siddharth Parameswaran: Yes. For the gross margin because there's a step-up in expenses, right? So just want to be clear what we're seeing. Mark Rogers: I didn't make any comment on expenses, but I'm happy to. So... Siddharth Parameswaran: No. Yes. But I mean your guidance second -- yes, I just want to be clear that the jaws comment was on gross margin. Mark Rogers: Yes. The jaws is on revenue claims per policy. Maybe a few comments on expenses movement in a range of $690 million to $695 million. The uncertainty within that range is where nonresident policyholder growth lands and therefore, the commissions we paid. So if it remains at the top end of that range, you'd expect stronger, particularly student joints during the course of the second half and if you at the lower end, then probably a lower growth rate. And the uncertainty is how does the opportunity on visa approval increases actually land in the portfolio in the second half. Siddharth Parameswaran: Great. Okay. Just a second question, just on the claims inflation. I just wanted to make sure, were there any contributions from reserve adjustments or anything from the past? And also, if you can just comment on just the risk equalization benefit and what you are expecting -- what happened in the period, what you're expecting going forward? Mark Rogers: There was a modest release out of reserve for both resident and nonresidents. Some of that's actually been reinvested into the business during the course of the year. So I think outside of the COVID benefit of $43.6 million. The result is effectively a cash claims result. So I'd just add that $43.6 million back to your claims trajectory and that should give you a pretty good view of the cash result. Siddharth Parameswaran: Wasn't there a $19 million reserve release, I mean I thought there was... Mark Rogers: Yes, that's what I just meant. Yes, that's what I just called out. That was spread across resident and nonresident, but we've reinvested some of that during the course of the year. We've also struck our 31 December claims provision. Siddharth Parameswaran: So that will impact second half versus first half on claims inflation. You've reinvested so that will... Mark Rogers: We reinvested during the half. So Siddharth, I've looked through that. And when you consider the accounting versus the cash, you should be focusing on the $43.6 million COVID benefit from the prior period is the difference between cash and accounting. Did you want to comment on -- I think you asked on risk equalization. Siddharth Parameswaran: Yes, yes, yes. Thanks. Mark Rogers: Sure. So really, that's linked to the Medibank brand rather than ahm. What we're seeing is a better net recovery for Medibank. So Medibank received out of the pool. Ahm pays into the pool. So what we're seeing is some of our younger and higher claiming customers being more prone to lapse. So we end up saving the risk equalization charge that accrues to every policyholder, but those customers aren't -- the claims aren't typically risk equalizable because of their age. And so that's driving that positive skew for the Medibank recovery rate. And that's a trend we've seen -- we saw it in the second half of last year and to a lesser extent, the first half of last year as well. Siddharth Parameswaran: And just a final question for me. So if I take your 5.1% rate increase that you've got, and if I'm to look forward, I mean, you're basically saying that you don't think the downgrading should get any worse. And what I'm interpreting as well is that the inflation shouldn't get any worse either. So if I just take that 5.1% subtract let's say, 1.5%. I mean are you basically saying you can tolerate inflation per policy of -- what is that? So yes, 3.5%s that you saying to hold margins the same? Mark Rogers: That's probably not a bad way to look at it, Siddharth. I guess the way I think about it is, we had 2.5% claims growth. We know that the COVID benefit is about 1%. And so that's the difference between cash and accounting is 1%. So that's a cash claims growth. So everything else being which is obviously provided your revenue mix impact is not above 150 basis points, then again, a stable gross margin outcome is very plausible. I think the big question is where do you land in the range for FY '26 because obviously, that sets a foundation for '27. Siddharth Parameswaran: Got it. So yes, COVID benefit plus the -- if the inflation holds at that level, you can hold gross margins, but... Operator: Your next question comes from Andrew Goodsall from MST Marquee. Dan Hurren: Sorry, it's Dan Hurren. Andrew has just been pulled away on another call. Look, I ask questions. I guess it's going back to Nigel's question and the Health Minister comments around the premium increase. And I know you talked about the cost of -- the unit cost of care. But I mean, specifically, the minister wants to stop hospital closures as we understand it. So what do you think is actually -- what can you do to actually keep the minister happy there? David Koczkar: Well, I think the statement of expectations that was published last year was very helpful to guide the market in terms of setting, their settings to meet those expectations. I think we were very happy with that clarity. In fact, I think we met all of those expectations in getting our premium proposal approved. I think through the CEO Forum, which I'm an active member of, we are talking about how do we set up a sustainable system where the system can thrive. What's very important that principle in those discussions is that it's not about any single player, it's about the system. We also know that the shift of care from acute hospitals to more fit-for-purpose settings, both short day in the community, we are far behind other countries and a lot of focus is on how do we encourage that health transition. There's a recognition that, that means that hospitals will need to change. There will need to be some either reconfigurations of current assets or growth in other regions or sectors. A part of our partnership approach that we have led the industry on is to share and incentivize that shift, which we've talked about today with an increasing number of hospitals participating in those partnership agreements. It covers about 80-plus percent of our benefit outlays, and it's an increasing investment that we're making to make that shift. So that was part of the expectations set, and that's what we're delivering against, and that's really the conversations at the CEO Forum. I mean the fact is, right now, we have too many beds in the system in the wrong spot and not enough in some spots. Utilization is too low and the Australian consumer shouldn't be paying for that. So everyone is completely aware that -- this is why it's called a transition. It's not going to happen in one day. It needs to happen more quickly. But I think, as I said before, there are many in the system who have brought fresh thinking and a more longer-term view that are saying and recognizing this change happening and now they're changing their business models to deliver against it. Dan Hurren: David, that's helpful. Can I just ask one follow-up. Sorry, one different question, in fact. Looking at the trend in aggregators, not just in your results today, but right across the industry. And your comment that you can grow the Medibank brand in the second half. Could you just talk about the relative impact of aggregators across your 2 brands? Does it -- is it skewed to one or the other? David Koczkar: Yes, very much so because we don't have Medibank on the aggregator. So it's 100% only applicable to the ahm brand. Medibank, we've been very conscious to focus growth on our direct channels. And in fact, as a total group around 70%, 75% of our joins our -- for those joining are direct. So that's a real strength of ours. And we are continually investing in both retention. We've shown today our improving retention rates versus the market that is deteriorating. So that's the best way to grow is to keep the customers you've got. It's 1/3 cheaper to do that than acquiring in the open market. And the second is to work selectively where it makes sense to grow via aggregators. Aggregators share in the market has slightly increased. So we're always thinking about how we grow in a disciplined way. We'll always work with aggregators, but not where their terms and conditions are unsustainable for the long term for both us and the system. Dan Hurren: So Medibank is more about retention in that second half. Your comments are explained more by retention and growth. David Koczkar: So I mean, Medibank has the best retention rate of the major brands and one of the leading retention rates in the market. But Medibank is also about growing in the segments we've talked about today, those new to the industry, particularly families and particularly corporate. I think I shared our very strong momentum, for example, in the corporate market with a [ 6% to 7% ] growth year-on-year in join. So plenty of headroom for growth for Medibank, but the retention as a company is a very important source of growth that we pay much more attention to perhaps than others. Operator: Your next question comes from Freya Kong from Bank of America. Your next question is from Vanessa Thomson from Jefferies. Vanessa Thomson: I wanted to ask a little bit more about the hospital situation as well. I think you called out that $37 million was paid to hospitals in addition last year and $20 million in the first half, if I heard that correctly. I just wondered what your expectations were for FY '26. David Koczkar: Yes. So just to clarify those comments, and I might maybe hand over to Milosh to also explain sort of how our partnership agreements are working. But we had -- we have 3 elements to our partnership agreements. There's the base indexation. There's the partnership investment, and there has been historically one-off hardship payments that were really designed to support hospitals in need through the COVID period. So the $37 million last year is the amount we're paying in the partnership elements, which are incentives that when we sit down in these agreements, we set objectives jointly with our hospital partners. And if they're achieved, then we pay that at-risk element. And that payment was $20 million in the first half on top of $37 million last year. I think when you look at the total -- that total amount versus the total claims line, it's quite a material part of our claims line. And so we are really putting a lot of emphasis on this transition through these partnerships, and they are working well for us. So I might hand over to Milosh just on the general hospital partnerships and how we're seeing those partnerships evolve. Milosh Milisavljevic: Yes. Thanks, David. Vanessa. The partnerships, as David said, covering over 80% of our benefit outlays and they're growing in number and scale. So the proportion, as you can tell, is going in how much of that indexation and payment to hospitals is coming through funding for partnership initiatives. And we're obviously doing it for a number of years now, and we're starting to see those benefits come through our claims line, but also customer health outcomes. And to give you an idea, they range from shifting care models to lower length of stay and short stay, growing our no-gap network that also addresses cost to customers. It creates a proposition that's very compelling, maximizing prosthesis savings from the more recent prosthesis reform that reduces low-value care utilization in the system and also accelerating new care settings like home care, virtual care that help avoid complications and readmissions. So all of those are part of that $20 million, and it's growing in absolute terms, but also in relative terms compared to the total indexation number. Vanessa Thomson: And just following through then, we've seen the significant challenges for the hospitals, labor availability, wage inflation, clinical care costs. I just wondered what sort of color you're getting from the private hospital ventures that you have. David mentioned before, too many beds in the wrong place. Given that you've been able to be more strategic, I just wondered how that looked from your perspective with respect to your hospitals. David Koczkar: Yes. I think we've probably set a very different sort of relationship paradigm with hospitals over the last well -- the last 10 years. And there are challenges in the system. There's challenges in our business. We've all had to think differently about how we take pressure off premiums and how we drive the transition. So I think our conversations are data-driven. They're looking to the future, and they're all about preserving access now in the future for our customers. So really, it's enabled us to have these more forward-thinking conversations. There are some pressures in the system, and we are paying indexation rates as an industry, the highest we've paid in more than 10 years. So the industry has responded, us included, to pay more to hospitals than indexation, but we're requiring change as well. And so that's a bit of difference. And when we sit down with hospitals, it's a constructive set of conversations based -- driven on data. Operator: Thanks very much. Thank you. Your next question comes from Freya Kong from Bank of America. Freya Kong: I hope this works now. I just wanted to ask about the 2026 price rise again. So your 2025 adjusted cash claims inflation is around 3.5%. How do I bridge this to the 5.1% price rise you're going to get? I guess what I'm trying to ask is if utilization benefits will be shared even more with the private hospitals going forward and the claims inflation outlook is a bit higher. Mark Rogers: Freya, so the bridge between the cash claims number and the premium increase is the revenue mix impact. And so it was 150 basis points for the half. So that's the simple bridge between the cash claims and the headline premium. Freya Kong: Great. That's helpful. And then on growth in nonresidence business, which went backwards in the period. Is there anything that you're concerned about there? Where did the lapses come from? Or has competition picked up? Mark Rogers: Yes. So let me start on the lapse. That was in the student portfolio, and this reflects the fact that we had coming out of COVID, 2 very high origination years. And most student courses are 3 years. So we're just seeing that natural graduation of those students. Probably the focus in the second half is really around the student visa approval numbers and if they increase, we expect the policy unit growth to increase. In fact, I think over the last 12 months, we probably went backwards in student policy somewhere between 3% and 4%, still winning share, but that overall market has been contracting. So we've got opportunities in the workers segment, which is already growing pretty strong. We had double-digit growth in the last 12 months, and then we've got the opportunity to kick off the growth again in the second half of students subject to the visa approvals. Freya Kong: Great. And just finally on your thoughts around medium-term uses of unallocated capital. I think based on your Medibank Health plans, you've got around $140 million additional capital to deploy in the next couple of years. Your unallocated capital is already sitting at around $190 million and likely to keep growing. So I'm just wondering what you think or thoughts are around that? Mark Rogers: We spoke about Medibank Health in the presentation and the focus was on primary care and both scaling and expanding geographic coverage. I think that is the most likely in the short-term use of capital. Obviously, there'll be opportunities in the broader virtual care space and in well-being, but following the success on the Better Medical acquisition, so the probability is that the next investment will be in primary care again. Freya Kong: I guess my question is just beyond what you've allocated for Medibank Health up to 2030. What other uses of capital do you see? Mark Rogers: Well, I'll start with that current aspiration, which is to grow earnings to $200 million. And that would require us, as you said, to invest capital up to that $700 million level. And then that would effectively expand the unallocated capital. Then we've got opportunities to further grow your primary care network or invest in the well-being space as well. And then you can't discount that if there's capital that we can't invest it, we return it to shareholders. David Koczkar: And look, I think in the very long term, but all these 3 segments in health, well-being, primary care, community and acute care, all of those 3 in terms of absolute revenue of the market potential are larger than private health insurance. So when we get there, well, we are already a meaningful share of those markets, but there'll be more headroom for potential growth where it makes sense. Mark Rogers: And the one that Dave and I've been talking about quite a lot with Milosh is what happens to the PHI industry in FY '30. So we've seen one -- a reduction of one player in the PHI market, which is consolidation [indiscernible] in New South Wales and Queensland Teacher Fund consolidation. That's the first we've had since we've come out of COVID. When you -- consolidation would be most [ health funds ] are now who had been running in an environment with low claims and high capital. We know that's starting to unwind. We know we've got the new financial standard of CPS 230 that comes in on 1 July , formalized, 1 July next year. So I think the thing we're discussing is that what does the industry look like in FY '30. How do we play out, what happens to the industry through shifting market share organically versus is there a consolidation opportunity at the right price. And that could be a use of capital longer term, Freya. Operator: [Operator Instructions] Your next question comes from Kieren Chidgey from UBS. Kieren Chidgey: Most of my questions have been covered. But the one was -- can you just circle back on was sort of this view of cash claims inflation, Mark, you're sort of talking around the 3.5% number. But when I look in your financial statements at your cash flow, the payments on a per unit basis seem to be up around 4.8% on PCP. So it seems like we're sort of more trending in that 4% to 5% range on a payment per policy basis. Can you just help me reconcile why that's not a better guide to sort of how claims growth is going to move going forward? Mark Rogers: Cash flow can be heavily impacted by processing speeds on claims, and we've seen a marked speed-up of lodgement of claims, and we -- as the best we can increase the speed in which we pay those claims, Kieren. So I think that's probably a better view to look at the 3.5% and just go through the cash flow. You can look at what the outstanding claims liability is at 31% versus the prior period, and you will see the claims on hand is quite a lot lower. That's a phenomenon we're seeing across the whole. I mean most PHIs have seen that. And if you listen to the [ Ramsay ] call, they will talk about that in their cash flow conversation as well. Kieren Chidgey: Also just on the claims numbers, there seems to be some sort of risk margin sort of release in the period. Can you talk to that? And on the risk equalization, I just want to be clear on the $17 million benefit from first half. When you say that may unwind in the second half, are you talking about a neutral outcome? Or are you talking about sort of a full sort of unwind? Is it a negative 17%, so you're flat over the year? Mark Rogers: Thanks, Kieren. You've gone through the financial statements very quickly, well done. The risk margin point, we haven't changed the probability of efficiency. What's happened is as the claims in hand has dropped and there's a consequential impact to the risk margin in hold. So claims on hand down whatever that reduction is, multiply that by 12.2%, and that's why you've had a reduction. Look, I would still expect to be a modest receiver on risk equalization for the full year. Obviously, it depends on what the other 34 funds do and how much we grow relative to the market, but I'd still expect to be a modest receiver. Operator: Your next question comes from Andrew Buncombe from Macquarie. Andrew Buncombe: Just one for me, dovetailing with that question that was just asked, you've retained your probability of adequacy then, I know I ask this question every half, but all of your peers have unwound that already. What do you need to state to drop that number going forward? Mark Rogers: Yes, it's a great question, Andrew. And look, there's no basis -- there's no need to change it. It's just whether or not the claims experience supports changing it. We are seeing and why we didn't change it this half. We are seeing, I think I mentioned to one of the other questions, I think with Kieren's question, we are seeing slightly more volatility in monthly cash payments in claims because of payment speeds. And whilst that persists, I think we'll take a prudent and conservative approach to maintain the current percentile. Operator: Your next question is a follow-up from Andrei Stadnik from Morgan Stanley. Andrei Stadnik: Can I just ask around the health segment. So some of the bulk billing GP changes came through November last year. How are those going to be impacting the health segment given your focus on GP clinics? Mark Rogers: Good question. So if you think about billing, we're typically receiving a higher payment on MBS and likely charging a customer a lower co-pay. So at a consultation level, don't expect a material impact, and we didn't see a material change in our average fee per contract during the half. It's probably more where you've got clinics that go to total bulk billing, you expect to get a practice incentive, and we should see some benefit of that during the course of the second half. Operator: Thank you. There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.
Unknown Executive: Hello, everyone. Welcome to Renault Group's 2025 Financial Results Conference Call. I remind you that this call is recorded and will be made available in replay on our website after the call. During today's call, we will outline the 2025 strong performance from our group, and we'll discuss the 2026 and medium-term outlook. This presentation will be made by Francois Provost, CEO of Renault Group; and Duncan Minto, CFO of Renault Group. Francois, the floor is yours. Francois Provost: Thank you, Florent. Hello, everyone. Thank you for joining the call. It's a pleasure to be here with you for this important moment, not only to present, as mentioned by Florent, our 2025 full year results, but also to share our '26 outlook and medium-term financial ambitions. But first, I would like to start with our strong momentum since July 2025. One month after my nomination, I could release our new leadership team. And with this team, we already took several important decisions to simplify, streamline our organization. Fabrice Cambolive as a Chief Growth Officer, enhance complementarity between Renault and Dacia, and this start to deliver results. Our CTO, Philippe Brunet set one unified engineering organization, and the team was capable to reorganize this within 4 months. We released our Ampere 2.0 project in order to extend the mindset of Ampere to all our Renault Group operation. I decided to stop Mobilize Beyond Automotive, focusing more on customer experience for our EV customers. On India side, we appointed a CEO in charge of the full-fledged operation in India in order to prepare our next midterm plan in India. And last but not least, we reshuffled our light commercial vehicle operation in order to put this important operation back on track. On the partnership side, we also grant important milestone with the closing of our agreement with Geely in Brazil. So today, Renault do Brazil or I should say Renault Geely do Brazil is selling Geely cars and the localization of the Geely platform, both for Geely and Renault products is on a good track. And we also, as you well know, released our partnership with Ford in Europe. Let's move now to our financial results. We got the job done. July guidance has been delivered with operating margin 6.3%, which means EUR 3.6 billion; free cash flow, EUR 1.5 billion; and record high automotive net cash position at EUR 7.4 billion. All our brands delivered strong performance in 2025. We recorded 2.3 million units overall in total with third consecutive years of growth for Renault Group. Renault brand, first, also third consecutive year of growth, plus 10% growth in passenger cars, second brand in Europe for PC and LCV, first French brand worldwide. Dacia also delivered good results with plus 3.1% growth. We have more than 10 million vehicles sold with Dacia brand since 2004. Dacia is second brand in retail passenger cars in Europe, and Sandero is the best model sold in passenger cars in Europe. But also Alpine, because with Alpine, we have triple-digit growth. First time ever, we achieved 10,000 sales in a year for Alpine. A290 now is gaining a good momentum, and we launched -- just launched A390 in the European markets. Our so-called 2-leg strategy is working well. We continue to push on EV and software, plus 72% sales growth for Renault brand EVs in Europe, plus 77% for the group in Europe. The mix of full EV for Renault brand is 20%, 14% for Renault Group. But we have also very good results on hybrid. Our hybrid E-Tech full hybrid is second best in Europe. We grew plus 35% sales growth in hybrid in Europe. And the mix of hybrid for the Renault brand is 38%, but also overall 30% mix of full hybrid for Renault Group in Europe. All of this is due to the successful launches of our new product. I start with Europe, and I start, of course, by Renault 5 with over 100,000 units sold in 2025, and leader in EV B-segment in Europe. Symbioz, successful launch as well with 89,000 units sold since the launch. It's Renault's best-selling full hybrid model, and it is a C-segment growth for Renault brand in Europe. On Dacia side, Bigster was a big hit in terms of launching last year. We already sold 67,600 cells. It is the best-selling C-SUV to retail customers in Europe in H2 2025. Outside Europe -- our push outside Europe started. As you know, we launched Grand Koleos in South Korea, about 44,000 units sold in 2025. It is a top 3 D-SUV HEV in South Korea. Kardian is also a success with about 50,000 cells sold in 2025, both in South America, but also very successful launch in Morocco. And the Duster, over 27,000 cells sold outside Europe in new markets like Colombia, Australia and Saudi Arabia. All of this is based on strong fundamentals supporting the performance. We keep healthy inventories, 539,000 total inventories. As you know, we have high utilization rates, over 85% for our manufacturing footprint. We have solid order intake fueling order book, plus 3%. We continue to value -- to focus on value over volume, plus 17 points above market average on retail channel mix for our brands. All of this leading to increase of the residual value from 5 to 12 points above peers in Europe. We have, also on cost side, a very strong performance with over EUR 400 COGS reduction per vehicle in average worldwide in 2025. Duncan, please detail the results. Duncan Minto: Thank you, Francois. Good morning, everyone. Thanks for joining the call with us this morning. Without ado, let's go straight into the zoom on the financial results. Starting with group revenue, Renault Group enjoyed a 3% revenue growth at EUR 57.9 billion in 2025. As you've just seen, the result has been achieved while staying true to our value over volume credo. At constant exchange rates, revenue was up 4.5%. Automotive revenue stood at EUR 51.4 billion, up 1.8%. The Mobility Services contribution amounted to EUR 91 million, up EUR 22 million versus last year. And last but not least, Mobilize Financial Services revenue increased 13.2% to EUR 6.4 billion, mainly driven by higher interest rates of the portfolio and the increase in average performing assets. Drilling into Automotive revenue, it included in the first bucket, negative 1.6 points of exchange rate, mainly related to the devaluation of the Turkish lira and Argentinian peso. Constant exchange rates, revenues increased 3.4%. The volume effect was positive at 0.7 points, driven by an increase in registrations, which was partly offset by a lower restocking within the dealership network in 2025 compared to 2024. As mentioned by Francois, group registrations rose by 3.2% this year, totaling 2.3 million units, marking the third consecutive year of growth, driven by 3 distinct brands. Each brand surpassed market performance, aided by the deployment of the international game plan and the expansion of our electrified lineup. The 3.2% increase in registrations was partially offset by a lower restocking within the network in 2025 compared to 2024. As you can see on the graph, the stock rose 5,000 units in the year compared to 62,000 in the previous period. As of December 31, total inventories of new vehicles stood at a healthy level to operate and represented 539,000 units, of which 442,000 at independent dealers and 97,000 at group level. This level of inventories is supported by a 3% growth of the order intake, resulting in an order book of 1.5 months of forward sales at year-end 2025. Order trend continued to be positive also at the beginning of the year with a double-digit increase over the year in both PC and LCV. The sales to partners, which was the next bucket effect was slightly negative, mainly due to the positive R&D billing one-off in the first half of 2024 and the deconsolidation of Horse Powertrain revenues from the end of May. These were partly offset by gains from partner programs, particularly Nissan Micra and several models for Mitsubishi. Additionally, our Indian activities, RNAIPL, inclusion in the consolidation perimeter has happened since 1st of August, which contributed positively. Let's review price, product mix and geographical mix effects. The price effect was slightly negative at 0.2 points, mainly due to the ongoing commercial pressure, especially in Europe. Price increases helped partially offset negative currency impacts. The group continues to prioritize residual values as part of its value over volume strategy, as mentioned earlier. Product mix had a positive effect of plus 3.2 points, driven by the recent launches, notably Dacia Bigster, Renault Symbioz, Renault 5, the A290 from Alpine, the Renault 4 and the Renault Koleos. This trend will continue to support results in 2026. Geographical mix was negative at minus 0.5 points attributed to increased sales outside of Europe. The international mix rose to 30.4% in 2025, up from 28.6% in 2024. Finally, the other impact resulted in a 0.3 point increase, primarily due to the performance of parts and accessories and distribution activities. So let's turn now to analyze the operating margin. This year, we posted an operating profit at EUR 3.63 billion, representing 6.3% of revenue. The Automotive segment operating margin stood at EUR 2.18 billion or 4.2% of auto revenue. Mobilize Financial Services operating profit reached EUR 1.47 billion. So looking at the evolution of the group operating margin. On the first point, currencies had a negative impact of EUR 282 million, mainly due to the Argentinian peso. The Turkish lira positive impact on production costs was offset by the increase of the group sales in Turkey. Volume effects contributed a positive EUR 186 million, thanks to the increase of our invoicing and increased sales to partners in H2. Price, mix and enrichment and cost factors together had a negative impact of EUR 341 million, that's the sum of the 733 and the 391, reflecting strong commercial pressure, especially in Europe, a higher EV mix, higher international sales and fewer high-margin LCV sales. Efficient cost management helped partially offset these impacts. When it comes to costs, we achieved our target of reducing the cost of goods sold by EUR 400 per vehicle in 2025, mainly due to our strong purchasing performance and the initial benefits we're seeing from the powertrain synergies delivered by Horse. That said, even with these positive results on COGS, our overall costs were affected by higher warranty expenses in the second half of the year, largely due to a recall campaign on powertrain. Also, despite a strong performance, industrial and logistics costs were impacted by higher amortization related to recent launches. R&D posted a negative impact of EUR 87 million, primarily due to an unfavorable comparison base with nonrecurring R&D billings to partners in the first half of the previous year. SG&A improved by EUR 59 million, thanks to strict control of expenses and others effect was negative by EUR 59 million. Mobilize Financial Services posted a record operating profit. I'll just comment that in a minute. But the last bucket highlights the impact of Horse deconsolidation. It represented a negative impact of EUR 279 million in 2025 compared to 2024, explaining a significant part of our operating margin decrease. From now on, there will be no more impact of Horse deconsolidation on the bridge. Competitiveness from Horse will be tracked in the cost bucket. As I said, Mobilize Financial Services generated a record result, recording EUR 22.3 billion of new financing, up 3.3%, thanks to growth in both registrations and in the average financed amount. Average performing assets hit EUR 59.3 billion, up EUR 3.3 billion versus 2024, driven mainly by strong commercial activity on the customer financing business over the last years, following the end of the electronic component shortage. Net banking income as a percentage of average performing assets improved by 19 basis points, highlighting a robust margin policy. Cost of risk at 0.36% remained in line with our historical levels. Operating costs in absolute value improved by 4 basis points as a percentage of average performing assets and remained stable in absolute value, excluding positive one-offs in 2024. Overall, Mobilize Financial Services posted a record operating profit of EUR 1.468 billion, up EUR 173 million year-on-year. Moving to key items from our group P&L below the operating margin line, other operating income and expenses were negative at EUR 11.5 billion, mainly included the noncash loss linked to the change of the accounting treatment of Renault Group's stake in Nissan for EUR 9.3 billion that was recorded in the first half of the year. It also included impairments for EUR 0.9 billion, restructuring costs for EUR 0.4 billion. These restructuring costs notably embedded an early retirement scheme. Other items included here the FCA penalty provision at MFS. Indeed, we took, this year, an additional provision of EUR 222 million to address potential risks related to the U.K. Motor Commission matter. Other items are also included with the EU CAFE LCV provision for a total of around EUR 100 million at the end of 2025. Moving down to net financial income and expenses. This amounted to EUR 208 million compared to EUR 517 million in 2024. Hyperinflation in Argentina had a lower negative impact in '25 compared to the previous year. The contribution of associated companies amounted to negative EUR 2.2 billion compared to a negative EUR 521 million in 2024, included Nissan's contribution for negative EUR 2.3 billion in the first half, while the contribution of Horse Powertrain amounted to a positive EUR 245 million this year. I remind you, Nissan no longer impacts the net result since the change of accounting method end of June. Current and deferred taxes represented a charge of EUR 522 million, including EUR 24 million related to the French exceptional surtax. All in all, and excluding Nissan's impacts, net income group share reached EUR 715 million. Let's now move to free cash flow generation, starting from the top line. The cash flow reached EUR 4.7 billion in 2025 compared to EUR 5.2 billion last year. The year-on-year decrease was meaningfully lower than the decrease we experienced in our operating profit, highlighting the resilience of our performance. Worth highlighting as well is that 2025 cash flow included EUR 300 million dividend from MFS versus a EUR 600 million dividend in 2024. The EUR 300 million was EUR 150 million of dividend for the year 2024 paid in the first half of '25 and EUR 150 million anticipated for the year 2025 paid in H2 2025. Tangible and intangible investments cash outflow included asset sales -- including asset sales, amounted to EUR 2.8 billion, rather stable compared to 2024. Including the part of R&D expenses accounted for in the P&L and excluding the impact of asset disposals, the total amount of group's net CapEx and R&D stood at EUR 4 billion, relating to 6.9% of revenue compared to 7.2% of revenue in 2024. The change in working capital requirement was a headwind of EUR 190 million. This underscores the group's willingness to have a healthy and sustainable working capital requirement management. In this context, the group aims to unwind, in '25 and '26, the significantly positive EUR 844 million change in working capital recorded in 2024. Finally, restructuring charges had a EUR 300 million cash impact. All in all, Renault Group generated EUR 1.5 billion of Automotive free cash flow in 2025, demonstrating a resilient profile. The Automotive net cash financial position stood at EUR 7.4 billion on December 31, 2025, compared to EUR 7.1 billion a year before. This evolution was mainly driven by the strong free cash flow generated, dividends paid to shareholders for EUR 697 million and the impact of foreign exchange, IFRS 16 and others, which resulted in a negative EUR 392 million, partly due to the employee share plan. Liquidity reserves stood at a comfortable level of EUR 17.7 billion. I'll end this presentation of our '25 results with the dividend that we will submit for the approval of the general assembly on April 30, 2026. The proposed dividend for the financial year 2025 is EUR 2.20 per share. This dividend, I think, is a clear signal of confidence in the future of our company and confirms our intention to remain attractive in terms of return. I'll now hand back over to Francois for the '26 and midterm financial outlook. Francois Provost: Thank you. Thank you, Duncan. Before we look at the midterm perspective, let me start with 2026 full year financial outlook. As you can see, we aim to deliver, again, a strong and resilient results in complex environment with operating margin circa 5.5% and free cash flow circa EUR 1 billion. Our key assumption is same pace in terms of global markets, stable Europe, South Korea growth, India, South America and also a high level of market in Turkey and Morocco. As you can see, we have a slight decrease in operating margin ratio. This is due to expansion of our business, especially in India, South America, South Korea, strong increase in terms of sales to partner and of course, also keeping a strong momentum in terms of battery EV in Europe. I remind you that in 2026, we have consolidation of RNAIPL, our plant in India. In this outlook, we embedded to keep a very strong cost reduction activities as well as a negative change in working capital. We also expect EUR 350 million dividend from Mobilize Financial Services. In 2026, we will keep intensive product offensive, both in Europe and outside Europe. Let me start with Europe. On passenger cars, we will have the full impact of our new Renault Clio and the start is super strong. The new Twingo E-Tech Electric will be launched in H1. For Dacia, we'll have a new A-segment EV, a new C-segment ICE and full hybrid version. On LCV side, we will launch this year our new Trafic van E-Tech at the end of the year. But in parallel, we'll have the full benefit of the full set of version of Master now available. We will have also the benefit of the Alpine A390 in Europe. Outside Europe, we will push strongly our growth, notably with Renault Boreal in South America and in Turkey, the launch of the Renault Duster in India, Renault Filante just released also in South Korea. And I would like also to mention the launch of our new pickup in South America in H2 2026. This is for 2026 overall financial outlook. Next March 10, we will release our new strategy, our new strategic road map for Renault Group. This will be based on 4 convictions. The first one is that we have and we will continue to give top priority to our product to deliver a second successful lineup in a row in Europe and to be a contender in high potential markets outside Europe like India and South America. We will also release a strong ambition in terms of customer experience. We will release detailed technology road maps for all key technologies, especially regarding EV and software. Third, we will deliver top operational excellence because in this tough competitive market with a lot of uncertainties, we need for each function to target the best-in-class performance. And last but not least, our conviction is clear. We will not win alone. We will build sustainable, trusted, transparent relationship with our key stakeholders, of course, our employees, but also our suppliers, our dealers and our partners. Our next midterm plan as Renault Group is a stand-alone midterm plan, and we will use our partnership to boost our competitiveness and strengthen our position, especially in key international markets. In terms of midterm financial outlook with this strategy, with this midterm plan, we are happy to share with you today our midterm financial outlook, which is about robustness, regular and resilient financial results. In a very challenging environment, we will create value with consistency, predictability, discipline and realistic approach. As you can see, we aim to deliver regular 5% to 7% operating margin as well as over EUR 1.5 billion per year on average free cash flow. We will do this, and I will now detail a bit more those items. In terms of operating margin, as you can see, our industry is very cyclical. Over the past 20 years, our average COP was 3.9%. And what we disclose today is that we aim, in the next year, to deliver between 5% to 7% with a steady mid-single-digit revenue growth over the midterm, supported both by the Automotive business and MFS. This will be also delivered through a steady improvement in variable costs as well as a fixed cost discipline with a strong focus on productivity. If we move now to cost reduction, we will deliver every year EUR 400 cost reduction in average per vehicle. We will continue to improve our efficiency in terms of development of new products. We will deliver in the coming years up to minus 40% reduction in new projects entry ticket, means R&D CapEx and supplier entry ticket. Our SG&A expenses will remain stable over the midterm. With all of this, we will keep a cautious breakeven point, and we'll keep stable our cash fixed cost base over the midterm. Let me move now to free cash flow. With all of this and enhanced performance, revenues, focus on costs will enhance our profitability. As a consequence, we will improve and deliver strong free cash flow, R&D CapEx and supplier entry ticket below 8% of group revenues. MFS dividends will come back to historical high level, circa EUR 500 million a year on average. But also, I would like to mention that in the next years, we will start to have high level of dividends from Horse Powertrain to start from 2027 onwards. In terms of capital allocation, we will have a very strict discipline and balanced capital allocation. Of course, the top priority will be to invest into our products, as I mentioned, with R&D CapEx and supplier entry ticket below 8%. In terms of financial investment, we'll have very high ROCE request. We will, with all of this, preserve a strong balance sheet to maintain strong liquidity reserve to protect our investment-grade profile. We will also return value to our stakeholders, to our employees with profit share mechanism. But today, I also confirm our long-term objective to have 10% of our share capital owned by employees. And of course, to shareholders, we will have a progressive increase in dividend per value (sic) [ share ] in absolute value. It is what I will present now in the next page regarding dividends. For this as well, you see that over the past 20 years, we had EUR 1.65 per share dividend, but circa EUR 0.4 per share if we exclude Nissan dividends pass-through. And now we aim to deliver EUR 2.2 per share this year, next year, explained by Duncan, but also progressive increase in dividend per share in absolute value. As you can see, and this is my conclusion, in a cyclical industry, now Renault after 5 years of Renaulution, clearly a success story. We are capable and we will deliver a success system. And it means in terms of financial outlook, sticky, robust, resilient financial performance. Thank you. Unknown Executive: Thank you, Francois. Thank you, Duncan. With this, we will now open the Q&A session. And the first question will come from Thomas Besson, Kepler Cheuvreux. Thomas Besson: First question, I'd like to talk about your recent momentum. I mean, November, December, January in Europe have seen clearly a sharp deceleration of your commercial dynamic. Can you talk about this, explain if there's something unusual or if it's partly driven by the sharp increase in Chinese automakers' share or your geographic mix or the momentum in LCVs? That's the first question. Second, could you say a few words if you can already or eventually postpone that to March 10 about capital allocation? Talk about the Nissan stake, whether you still plan to reduce that over time, what you plan to do with FlexEVan or whether there are eventually some other investments that might require some capital or whether we could hope to see eventually higher capital returns in the future, given the strong net cash position you've reported? And finally, a question on the financial services operation that reported very strong results again in '25. Could you explain why the dividend is not rising faster in '26? I think we thought it would be a bit more. I've seen you raised the equity of the business in '25. Could you detail the evolution of the cost of risk and remind us what was your residual value exposure at the end of 2025 directly carried by the financial services operations? Francois Provost: Thank you, Thomas. A lot of questions, so I will try to organize this. In terms of commercial performance in Europe, we delivered a good performance in 2025, and we'll continue to do so next year. And maybe, Fabrice, you can give the overall overview of your strategy in Europe in 2026. Fabrice Cambolive: Yes. I don't know, we'll check with you what you mean with deceleration in November, December. But our results in Europe are not only robust, but I would say, consistent in the time. Our growth is based on growth on PC retail market in Europe in 2025, and it was the case for Renault and for Dacia, 3 years in a row. And I would say this year in 2026, we will benefit from many positive factors. First of all, a good recovery on LCV. You know that we had this phase-in, phase-out of Master with the launch of the new Master and now we have the full diversity and this should -- and this will already help us to increase our volumes on the LCV side, which is a very good point. The second point is that we are -- we will have a robust and we will consolidate our strong position on the A and B segment with the renewal of Clio on one side, but the arrival also and the extension of our market coverage on the A segment with the new Twingo and a new A electrified -- segment A electrified model for Dacia. Next point, we have a stable position on the C-segment, and we will add on this segment a new car from Dacia side. And of course, we'll count on our 2-leg strategy between hybrid and EV to fulfill the consumer needs market by market. On top of that, as you saw also last year, we have an increase of our international volumes, double-digit increase last year, which should continue through the number of model launches you saw and presented before by Francois. It means, for me, no alert from the commercial side, a good position in terms of CO2 in Europe, which allow us to play between volumes, pricing, profitability and CO2. And this always structured value-oriented commercial policy, I think we are working far above pure pricing power. We are working in value. What does it mean? A good channel mix, good residual value, good capacity to increase our model mix. It means on this side, we are working on the safe -- on a very safe dynamic. Francois Provost: Thank you, Fabrice. Regarding Nissan, I think the priority for Nissan is the success of the Re:Nissan plan. And I share very often with Ivan, and I'm confident Ivan and Nissan team are capable to deliver this plan. I think they just released encouraging results a few days ago. My personal opinion is that once Nissan will be somehow stabilized, we will see more opportunities than today between Renault and Nissan because both groups, we have to concentrate on priority in terms of resources. It means that each time one partner can help each other to share resources and our geographical footprint is very complementary. I personally think that you will see in coming years even more opportunities between Renault and Nissan that what we are successfully doing today, especially in Europe and in India. And for Nissan shares, as you know, everything is open, and we will consider any decision with the unique interest of our shareholders. Regarding FlexEVan, Flexis, I'm happy to share that, with our partners, Volvo Group, Volvo Trucks, CMA CGM, we are about to reshuffle the business model, which is unfortunately needed because the pace of electrification for light commercial vehicle is much below what we expected. But the product is good. The product is really good. The product is now almost fully invested. It means, Thomas, that our SDV now is invested and everything will be launched, I mean, Trafic E-Tech included SDV this year, and this is -- and this will be a strong asset already invested for the next midterm plan. And regarding the 2 last questions, MFS and dividends, maybe Duncan. Duncan Minto: Yes. Thank you. Thomas, so yes, so we did do a Tier 1 equity or Tier 1 raise last year. But I mean, the capital situation at MFS is really strengthened. It was building for the future. Cost of risk, you asked, I think I called it out in the slide, so 0.36%, we're pretty much in line with historical levels, things are under control. In terms of total exposure for residual values compared to average performing assets of close to EUR 60 billion, we have a EUR 4.9 billion exposure to residual values, around EUR 700 million of that is EV alone. And in terms of dividend, yes, so it probably wasn't well known, but we received EUR 150 million in the first half, which we published in June. We got a pre-dividend of EUR 150 million in the second half. The outlook is therefore EUR 350 million for 2026. And obviously, as we move on through the midterm, back up to EUR 500 million per year. Unknown Executive: And the next question will come from Jos Asumendi. Jose Asumendi: A few questions, please. Duncan, can you help us a bit with the expectations for 2026 on the bucket of raw materials, purchasing, warranty and industrial costs? And if you could comment there also on the cost savings that we're expecting from Horse to be booked in 2026. That will be question one. There's probably 3 questions there. But question one -- but that will be the first one. And then two, Francois, can you comment on -- and I'm happy to leave it also for the CMD, but you're mentioning some very big numbers like 40% reduction in entry tickets. Does this mean that some of the vehicles that you're planning to develop going forward will be coming from Shanghai? Is there an additional opportunity to work with Chinese suppliers or with Shanghai R&D development center to continue to develop some vehicles from that region, which could allow you to reduce further entry ticket by that proportion, which is very large? And then also happy to leave it for the CMD, but I was wondering if you could just comment briefly on your market share assumptions in Europe for '26 and '27 in the light of the competition that we have, obviously, Chinese OEMs entering the European market? Duncan Minto: Thanks for the questions. I'll start in terms of the 2026 outlook bucket by bucket. So for FX, the impact on the operating margin will be more negative in '26 than '25. We're still seeing Argentinian peso, Turkish lira, it's the same kind of exposure that we have this year, but it will be a stronger impact. Obviously, as you call out, and maybe Francois or Fabrice will come on to the market share questions afterwards, but not just a market share in Europe, but growth in volumes, obviously, in line with our mid-single-digit sales growth assumption, both from internal plus also partner businesses. We do continue to see commercial pressure remains strong, and so therefore, weighing negatively on the price mix element for the activity. Enrichment will be a big part of that due to the regulatory costs. We had the Euro 6e base, which is impacting powertrains, which came into force on Jan 26 is impacting a lot of our B segment, B+ segment [indiscernible] negative. But I mean in terms of dilutive, we have growth in EV, we have growth in international, but that's been well called out. As you say, we do have a strong dynamic on the cost reduction. That remains very key in terms of priority. So that will be positive. Variable costs, the fact that we're doing EUR 400 per vehicle will impact us very positively. And also, we won't have the warranty recall provision that we had in the second half of the year. And as fixed costs will be managed stable, the only thing that's coming through is slightly higher amortization. Fixed cost and cash are stable. And I think MFS will be able to produce as well, if not slightly better than this year in terms of outlook. So that's bucket by bucket. You asked for the 3 of the main ones, but that's the full walk down. Francois Provost: Okay. Jos , regarding your 2 next questions, yes, we think we are capable up to minus 40% entry ticket reduction for the new model project development compared with previous generation. And yes, this is especially because we could assess in detail the way Chinese ecosystem is doing, thanks to our ACDC development center in Shanghai. I remind you that our proof of concept was Twingo. And as a matter of fact, we are launching Twingo within 21 months, showing that we are capable to do. In the next midterm plan, our challenge is to put this as a standard and to demonstrate that Renault is European OEM capable in techno center with our supplier to develop within 2 years our new model as a standard, and this is a strong part of the next midterm plan. And this is indeed for this main reason that we are capable to release such a performance for entry ticket. And regarding market share in Europe, as you know, we do not disclose market share. What I can repeat is that, together with Fabrice, Katrin, Philippe, [ Krief ], we will continue to give priority to value versus volume. And thanks to this, we deliver steady growth, we improve the value for our customer, we improve the residual value, we improve the loyalty of our customer. You mentioned Chinese competition. If I take the example of Spain, which is probably where the Chinese growth is the strongest one, you can see that our brands, both brands are growing and gaining market share. So it's why I do not underestimate the strong Chinese push because I know very well the strength of Chinese industry. But I think that, with our strategy, with our recipe, which is about clear brand positioning, strong product, value versus volume, we will be capable to sustain the growth in Europe in the next years. Unknown Executive: And the next question will come from Horst. Horst Schneider: I hope you can hear me. Unknown Executive: Loud and clear. Horst Schneider: That's great. My first question is just a quick one. When you talk about midterm guidance, could you specify you talk about which year? Is that now a 2028 guidance? Then the second one is, again, I want to come back on the 2026 guidance. I missed, Duncan, your comments on raw materials. So what is baked now into the guidance? And maybe you can split that up, what's the impact also then from the rising chip prices? Then I want to follow up also on the question that was raised by Thomas on the late development. I mean we have seen in January that the Chinese OEMs, they increased their sales in Europe by something like 100%. So there seems to be a renewed push by Chinese OEMs into Europe. At the same time, I think Stellantis also said that they want to do more volume over value. So they also put the prices down. And at the same time, we see that [ Dutch ] share was very weak in January, which I think you say was due to logistical issues. But my impression is that the overall competitive environment worsened again in January. So therefore, my question is, to what extent is already baked into your guidance? You talk about around 5.5% margin guidance for '26. Should we work now with a range of kind of 5.3% to 5.7%? And since the market got worse, we should rather go than for something like 5.3% for '26. And the last one is a brief one on dividends. So you say dividends increase in absolute terms. My takeaway from that is, it's not that important what the earnings going to do. If it's now 5.3% or 5.7% margin, doesn't matter that much. It's more really that you want to increase the dividend step by step, and we do not have a kind of payout ratio that we need to keep in mind. Thank you. Duncan Minto: Horst, thanks for the questions. So midterm is for the years to come. We're not talking about something for 2035, so it's shorter than that. But with the volatility of our industry, we want to give you the corridor that we're working in for the years to come. In terms of the second question on raw materials, yes, we had a tailwind of raw materials in 2025. That would be the opposite and probably more like double the amount opposite. So we've got that on our radar and built into the guidance. In terms of chips, I guess you're talking about memory. So we've been, like all sourcing topics, we're covering them -- covering this, and we have working groups making sure that we're fully on top of it. So we are seeing pressure across the sector in that area, but no disturbance at this point in time to call out. In terms of the guidance range, so 5.5% -- circa 5.5%, mathematically, that's between 5.3% and 5.7%. I mean, we're announcing today the guidance for 2026, Horst. So I don't think I'd say I've got anything particular to say whether it's the lower or the upper end of that. It's circa 5.5%. And the last point in terms of dividend stable, yes, so we had in the past talked about payout, and we want to move away from that sort of cyclicality and we want to be able to produce a steady and robust result. So the idea is to de-link the percentage payout for free cash flow. And so we are proposing a EUR 2.20 dividend and a policy which should progressively grow over time. I think there was a third question in the middle of those five, which was on Chinese competition, Stellantis. Do you want to take? Francois Provost: No, I will not add much. Horst Schneider: [indiscernible] January as well. Why that was so weak in January? Francois Provost: You should not pinpoint 1 month. I think we have to see the trend. And I repeat, last year, several competitors pushed a lot in terms of price. This is short term. This is short-term strategy. It is not our strategy. And despite this, we showed in 2025 that thanks to clear brand positioning, strong product lineup and value versus volume, we can do better. So we will not be short term in 2026 and following years, and it is because of this that steadily we are growing our performance. And I remind you that residual value is key in the European market because we sell most of the car with financial and leasing products, for which the residual value is absolutely key. So it's why our sustainable value versus volume policy for our brands, our focus on retail for our brands, those are the good solution to have a steady growth in Europe and this is what we will continue to do. We know what Chinese competition is and we are ready to fight and to grow in Europe. Horst Schneider: But your impression is not that it got worse lately, right? Unknown Executive: No, Horst, I think I made the comment to you guys asking the question in Jan. In Jan, we had some specifics, indeed, as you referred to, regarding logistics, notably for the Dacia brand, but this will be caught up during Feb and March. So this is something that is not depicting a trend or whatever. And as mentioned by Fabrice as well, the order trend is good in Jan. And the order book, as reinforced, it was at 1.7 months at the end of Jan. So again, on these, the perspectives that we have are good. Thank you, Horst. We now give the floor to Philippe Houchois, he is on the phone. Philippe, can you unmute your microphone, please? Philippe Houchois: I've got 2 questions, please. The first one is on the investment ratio, the 6.9% is very, very low. Want to keep it below 8%, average industry, probably 10%. I guess the market will have an issue with the sustainability of that investment ratio. And so it would be helpful if you could maybe comment on what kind of benchmarking you've made. I know you're breaking new ground working with the Chinese, on development, but also maybe to make that ratio look more sustainable, how much of that is the fact that you are probably more disintegrated vertically than most of your peers, having deconsolidated the horse. So in the context of that sub-8% investment ratio, how much do you think is an edge from your vertical disintegration? That's my first question. And my second question, maybe for you, Francois, is more on the -- we hear noise about EU local content rules coming through, hopefully next week. What we heard is 70% ex battery seems to be like music to your ears, I think, in terms of what you were kind of looking at. And I'm just wondering if you can kind of tell us your latest thoughts on would that be kind of a positive for you? What's happening on the LCV CO2 rules to make them workable? And then any thoughts on what does the EU have in mind when they allow the price undertaking offers for the Chinese OEMs? Francois Provost: Regarding the first question, indeed, what we target is best performance for entry ticket and supplier entry ticket. We know how to do. This does not mean that we reduce the pace and the ambition in terms of new products, but also in terms of technology roadmap. And you will see during our Strategy Day, March 10, and our CTO will explain this in detail, that we set very detailed tech roadmap to catch up Chinese trend on all what is important in terms of future of automotive. And it is true as well that -- and we will show this also March 10, that we will streamline our platform. We set in our engineering organization, a cross-car line organization, in order to streamline diversity and develop top-notch level of module and technology, very much standardized, and then the three brands can use it. So this is also a strong lever in order to be better than competitors. So yes, we aim to be better than competitors in terms of R&D CapEx ratio, but not reducing the pace of investment. Regarding EU, I have been very talkative. It's true, last year, in order to raise the urgency to do some changes, I think EU and governments now understand the urgency, but so far, we have no concrete project. I nevertheless remain confident that we will get the necessary realism and flexibility as far as CAFE 2035, technology neutrality, and also tsunami of regulation are concerned. Regarding Chinese competition, you know Renault opinion? We do not think that to close boundaries is good. It's not good for Europe, it's not good for China. What we recommend, and I will repeat this now, is to apply in Europe what China successfully applied 20 years ago. Means that Chinese OEM are welcome in Europe, but they should partner with us. They should produce, develop, use our suppliers, invest in Europe. And this is, we call it -- we can call it local content, but for me, this is the most important. So now, I will wait for the decision. But what I can share with you is, again, as Renault today, we have the agility to move quicker than our competitor in order to adjust ourselves to what EU will decide sooner or later. Unknown Executive: Thank you, Philippe. The next question will come from Michael Foundoukidis from ODDO BHF. Michael, the floor is yours. Michael Foundoukidis: 3 questions on my side. First, on the order book, order was 1.5 at the end of last year. I think you said 1.7 at the end of January, so it's definitely improving a bit. There's probably some seasonality here as well, but what's your take on how it should develop throughout 2026? That's the first question. Second question, a follow-up. Duncan, I think you said earlier that -- or maybe it was Francois, that LCV sales should improve in 2026, meaning should grow. Is that versus, I would say, H1, which was very tough last year or overall we should expect absolute LCV sales to increase in 2026 versus 2025? And maybe third question and follow-up from others on shareholder returns and free cash flow. So you're guiding for free cash flow above EUR 1.5 billion per year. Dividend is, even if it increased, it's probably a payout, which is something like, EUR 1 billion max, I would say, so there are still some available free cash flow. And your financial situation has been highlighted as already significantly improved and is very strong. So could you help us navigate into that? Meaning that what should we expect as a target for net cash position and how should we see shareholder returns in the context of free cash flow? Is it possible that all free cash flow should be returned to shareholders at some point or there's other ideas in mind? Francois Provost: Thank you, Michael. Fabrice will start with the 2 first question and then Duncan. Fabrice Cambolive: Yes, Florent said that order book increased at the end of January by 0.2 months, which is reflecting what we said before. It means a good dynamic in terms of orders. We are monitoring that carefully, and frankly speaking, the trajectory until now is good. We don't see any reason why we shouldn't confirm that in the next months, due to the success of our 2-day lineup and the next launches, which will increase our market coverage. We are entering once again in A segment, in C segment with Dacia. It means we should increase naturally our market coverage and our orders due to this news in terms of product. Of course, we're putting, as Francois said, value first. We want to increase on the right channels, at the right residual value at the right pace, and we will monitor that carefully. Regarding LCV, the comeback is already demonstrated in the numbers you see since the beginning of the year. I think that if you check LCV sales in January, they are increasing. The level of orders is also increasing. It means, yes, we should have a global increase on LCV volumes this year in Europe. Duncan Minto: Michael, on the capital allocation, so yes, free cash flow guidance is for over EUR 1.5 billion on average per year. Currently, we pay a little bit less than EUR 700 million when we look at a dividend per share of EUR 2.20. So in terms of capital allocation, I repeat again, what Francois said. So first priority is product and investments in the company. Yes, mathematically, if you take 1.5, minus the dividend, there's more left over. We will continue to strengthen the balance sheet, but we will also make investments in product and extended businesses. So if we were to change the scope of Flexis, for example, that would be an impact on utilization of cash, because we believe in the product, and we have some excellent opportunities in those types of areas. So first of all, product, and then steady growth over time. We want to move away from the cyclicality. I'll manage to say the word of the sector, and prove to you that we have a robust financial outlook in this corridor of 5% to 7% group operating margin, and a very significant improvement compared to historical trends, both on margin and on cash. Unknown Executive: Thank you, Michael. The next question will come from Pushkar Tendolkar. Pushkar, the floor is yours. Pushkar Tendolkar: My first question is, again, I want to come back to the Dacia commercial performance in Europe. Second half of last year versus first half, it's still gone down in terms of absolute volumes, despite having the Bigster ramp up. Also within the last few months of the year, it was down month-over-month. So is there any specific reason for that? And just to give us more comfort from a '26 point of view, if you can break up the sort of the mid-single-digit into Renault, Dacia and LCVs in terms of the volume growth. The second one on cost versus price mix enrichment. Historically, the objective has always been to make -- to keep this sort of neutral or positive. Unlikely that it happens for '26. If you can share what the negative magnitude could be, ballpark, but also, when could this bucket then again go back to neutral in terms of your medium-term planning? Francois Provost: Okay. So for the first question, regarding Dacia track record, I will ask Katrin to answer, please. Katrin Adt: So we are very satisfied with '25. We had a solid increase and volume increase. We are a brand which is not chasing volume, but value, and we did that also last year. We had the entrance in the C segment, as Francois said, and it was very successful. We managed to be the #1 on the C segment SUV for retail customers in the second half. We had record sales also when it comes to our electric car, the Spring. So we are very confident also to move into that or to continue that trajectory also in 2026. At the end of last year, we had a change of model years and also engines, so we might have a slight slowdown, which is more due to logistics and changes in production than we see it in orders. And we are very confident also that we started the year well off and that we will continue to do so. Duncan Minto: Yes. Pushkar, on the cost, the mix price enrichment and cost, we had said in the past that those buckets should be able to compensate each other in previous periods as well due to you know, electronic component crisis and the ability for the industry to have more demand than supply was possible. That was a positive in the previous years. Certainly, as we came through this year and we saw in the second half, and we'd called out, the sum of the 2 can no longer compensate at this point in time. We've not taken an assumption in '26 that they can compensate either. I'd like to remind you, as we are growing, obviously, Katrin just talked about the changeovers of engines at Dacia, so we have additional headwinds in those sectors. So Euro 6e-BIS is calling us to put additional equipment and cost into the car that, frankly, the customer is not willing to pay for. So this is a negative overall. And in terms of growth, we had 10% growth internationally for the group in 2025. As you know, Pushkar, the margins outside Europe aren't necessarily the same as inside Europe, so that growth is slightly dilutive. We called out in the guidance that EV is shifting very positively for the group as well. 14% mix for the group in 2025, and obviously, that's going to continue to grow. And partner business, so even if I was to come back and link to one of the questions earlier from Philippe Houchois, we're seeing growth in revenues, where we have no fixed cost from these partners coming in. So that also impacts our ratio of CapEx to group revenues. But your question was, do we have an assumption in 2026 that the 2 are positive? No. I came, I think it was, I don't know if it was Horst or Jose earlier that asked about raw materials, but that's a headwind as well in 2026. And the second part of your question was, at what point can it come back in time? Obviously, our international expansion, the idea is as we grow, that we also improve profitability. Pushkar, we'll be delighted to see you on March 10 to look at our Strategy Day and see what we have in terms of excellence, in terms of efficiency and performance across functions, the products that we're bringing out, the technology that we're bringing out, and how we plan to improve profitability internationally over time, improve EV over time as well. So I won't call out a specific year in which we would say that that would be fully balanced, but that's, I guess, the low point for us in 2026. Pushkar Tendolkar: Just if I can ask one follow-up or a housekeeping rather question. In terms of 2026, are you looking at more provisions related to the LCV on the CO2 side? Duncan Minto: On the LCV, the European CAFE for LCV, it was just over EUR 100 million provisioned in '25 in the other operating income and expenses line. All things being equal, at that same mix with no change in regulations further than today, that would be a further headwind in '26, yes. Unknown Executive: Thank you, Pushkar. The next question will come from Renato Gargiulo. Renato, the floor is yours. Renato Gargiulo: Thank you for taking my questions. Most of them have been already answered, but 2 quick ones. The first one, if you can give us an update on the synergies on powertrains with Horse. The second one, if you have any further comment on the recently announced partnership with Ford in European market, and if we can expect any potential expansion of the partnership, going forward. Francois Provost: Yes. Regarding the Horse Powertrain, I'm very, very confident with this project. In 2026, this will deliver more cost reductions than what was planned already, and much more to come. I start to see also a lot of synergies created inside the company, which will go on top of the cost reduction roadmap for the European cluster, let's say. So yes, indeed, Horse Powertrain is strong lever to sustain our cost performance in the midterm. And on top of this, Horse Powertrain will be also contributor in terms of dividends in the next midterm. So indeed, a strong lever for our next years to come. And regarding Ford, progressing very smoothly. I have nothing new to disclose today, but I can confirm that the first projects, namely, 2 Ford cars based on human technologies, production in France, are proceeding smoothly and operationally very smoothly between the 2 teams. Unknown Executive: Thank you, Renato. The next question will come from Stephen Reitman. Stephen Reitman: I have 2 questions as well. First of all, could you talk about your BEV mix in vans in 2025? And what was it -- and what is the average you require over '25 to '27 in order to be compliant? And can you quantify the potential fine if your BEV share stayed at the 2025 level? My second question is about international. Clearly, you already indicated that the growth you expect in international is dilutive to your margin, and that's obviously included in your guidance. To what extent is international required to reach European levels of profitability for you to be up -- to be at the up end of your guidance range over in the medium term? And maybe give some idea of what the lag is at the moment. And also, can you comment on some of your BEVs, the Renault 5 volume potential in 2026, especially with the availability of LFP, in terms of what that you can do with positioning on price-wise on that vehicle? Francois Provost: Regarding the first question, if I understood well, it's a battery EV van situation. Unfortunately, the trend in Europe is much lower what EU expected. It is why we have the problem with CAFE. But I consider Renault Group is better than the average of the competitors, slightly better. Regarding penalty... Duncan Minto: The theoretical penalty if no mix was to change. So I mean, it's a very theoretical question. I mean, based on the mix we had in 2025, that the provision for the fine is EUR 105 million relating to our 2025 volumes. I mean, it was heavier in the first half and lower in the second half because our mix actually improved in the second half in terms of the CAFE, LCV. So if all things being equal and we do the same volume over the three years, you can multiply that trend by 3. But obviously, we have a product portfolio plus Flexis, the full availability of Master, which you called out earlier in terms of EV as well. So once again, it depends. We have the product offer, it's how the demand follows. Francois Provost: Yes. Regarding the last question, you spoke about LFP and R5. I would like to highlight that as planned, we are capable to introduce, within less than 18 months, a second battery technology in our existing cars. LFP, including the cell to pack, no more modules. So this is I think the proof that Renault is capable to catch up the speed, the innovation of our Chinese OEM competitors. The way we use this opportunity of double battery, I leave it to Fabrice. Fabrice Cambolive: I mean, we saw that regarding the -- because your question was also the volumes of R5 and the commercial results. Last year, we sold almost 90,000 R5 all over the world. We are not pushing the car. It means the car is very good on retail market. By the way, in the top 3 on BEV retail in Europe. We expect this year another growth due to the potential of the car, our order bank, which is good, and also the increase of the EV mix market in Europe. t means no change until now for R5 and additional levers to grow in the coming months. Unknown Executive: Stephen, just to give you some order of magnitude in terms of cost performance, we intend, as mentioned by both Duncan and Francois, to continue to reduce our variable costs, notably in 2026. Through the implementation of LFP and cell to pack on the existing cars, that enables to reduce the battery cost by about 20%. This is the type of improvement, technological improvement that will support the cost, hence the competitiveness of our vehicles on the market against European players, but also against Chinese competitors. Stephen Reitman: On international. Duncan Minto: On the international I did confirm that it was dilutive, as we said, compared to the average profitability of the group. I won't go into calling out the percentage lag nor at what point it catches up to Europe. But certainly, you can assume that it contributes positively to moving us upward in the corridor from 5% to 7%. That's all I'll say. Unknown Executive: Thank you, Stephen. We'll take the next question from Christian Frenes. Christian, the floor is yours. Please open your mic. Christian Frenes: Most of my questions have been asked, but maybe 2 more from me. First of all, regarding your 2026 outlook, could you add some qualitative commentary regarding European pricing, what you're assuming within the 2026 outlook and also the contributions perhaps from Turkey and also from Brazil to that number? And then my second question is just on free cash flow. It's going from EUR 1.5 billion to a guide of EUR 1 billion next year. Could you just give us the walk -- the bridge for that? Duncan Minto: So thanks, Christian. We got those clear. So I'll maybe answer the second one first, on the free cash flow walk. So you have obviously, in terms of the cash flow generation, you'll be able to make your estimations from our mid-single growth, plus the operating margin guidance, but there's not a huge move there. CapEx and R&D, we will have a slight increase, but the main one I'd like to call out, is the working capital assumption. So it was EUR 190 million negative in 2025, coming off the EUR 844 million positive impact in 2024. And so, we've built into our assumption for 2026 that we will further unwind, working capital. So you can consider that amount will be somewhere between the 2025 number and the total gap we had to catch up to 2024. So that was on the free cash flow. On the Turkey? Francois Provost: Yes. For Turkey, so you are lucky because I was with Fabrice in Turkey early this week, so I can give you up-to-date information. I'm very confident, very confident what I shared with the team in Turkey. I don't think we had such lineup for Turkey for a very, very long time. Clio 6, the new Clio, its start is super good, and we met with Fabrice dealer, salesman. The Boreal, I tested the Boreal. It will be a great, great car for Turkey. And also for Dacia, the C segment car we launch in Europe and produce in Turkey will be a fantastic car for Dacia in Turkey. So I'm very confident about Turkey, not only, as you understood for 2026. Very, very confident. I think that what we put in 2026, in our midterm plan. This is really a baseline, and we decided with the team locally to set extra miles, extra targets. So I'm very confident. And for Brazil, Fabrice, you were in Brazil a few days or weeks ago, so maybe you can share the situation and your views. Fabrice Cambolive: Now, Brazil is benefiting for the first effects of our joint venture with a common sharing of our industrial assets and our lineup now, which is on 2 legs with Renault on one end, Geely on the other end. What we can see is that the models which have been launched from both brands are doing their job. Kardian and Boreal for Brazil, for Renault and we expect to catch the growth of the market in an environment where the exchange rate remains until now at a good level for us. Christian Frenes: That's very helpful. And on European pricing? Fabrice Cambolive: Okay. But European pricing, you saw the evolution in the last years. You see also the different announcements which are made by our competitors. I would say that, if you look at our pricing policy in the last years, frankly speaking, we've been always very stable. No erratic movements, but a consistency in our pricing strategy. Focused once again on a reduction of distribution cost, because this is very important for us. Narrowing tariff price with transaction price to give even more transparency, and for that, Dacia is a benchmark. It means for us, what we aim is a stability on that to avoid any erratic movements in terms of residual value, all stock and so on, and we are sticking to that. That's the priority. And of course, our way to respond or to answer to the pressure of the context is the product once again. Don't forget that the products we are launching now, if I take the example of a Twingo, less than EUR 20,000, is at the same time value and a good answer to the need of affordability in the market. It means our answer is pricing stable. We stick to our strategy, we give transparency, we are not erratic, we preserve our residual value, but we cover even better the market with the complementarity of both brands and the entry on the A segment, which is coming very soon with the launch of Twingo and then the launch of the Dacia. Christian Frenes: Okay. So just to reiterate and make sure I understood this correctly. Given your refreshed product range, your '26 assumptions assume a sort of stable environment regarding your pricing, given the value proposition your products have. And then, but they also -- the guide also assumes positive contributions from Turkey and Brazil. That's how I understood you. Duncan Minto: Christian, so we gave positive dynamic in Turkey and Brazil. In terms of pricing, I mean, I think you, you asked specifically about the pricing environment in Europe, and Fabrice gave a comprehensive answer to the approach, the stability, the longer term view, the focus on value. Just that, in your model, I know when you look at the price bucket, you look at the price mix and enrichment together. And so, don't forget that, we've factored in a negative factor for the total, because, once again, regulations mean that we have to put content in the vehicles that we can't necessarily price off. Christian Frenes: Yes, that's clear. Duncan Minto: Outside Europe, also, keep in mind that we will still have a strong negative Forex impact on international sales and revenue and this will not be entirely offset by price increases. So this is a key for you to put into your model. Unknown Executive: The next question will come from Henning Cosman from Barclays. Henning, the floor is yours. Henning Cosman: Francois, Duncan and team, perhaps I can, if you allow me, just ask a little bit higher level about your midterm guidance, right? At the floor, 5% obviously implying downside to your 5.5%, around 5.5% for 2026. So if we could just talk a little bit high level, if there's anything specific that you're expecting that would make things perhaps a bit worse before it gets better in terms of phasing? You're looking at a sort of a back-end loaded improvement or is it really that you're looking for progress in terms of profitability, but in the context of the volatile environment, you just have to give yourself that range of margin of safety? That's the first question. If you could just, talk us through your thinking there a little bit again. Second question, to come back to Horse. Francois, I appreciate your very constructive wording around Horse. Can I just ask if that EUR 2 billion net saving figure over 5 years that your predecessors had shared previously, is that still a relevant number? And how does that reflect into the obviously now cost bucket rather than a specific Horse reporting line itself? And also on the dividend you're referencing from Horse, could you share an order of magnitude, and to what extent that is reflecting into the average of the EUR 1.5 billion midterm free cash flow guidance? And then finally, third question on this defense project, the drone project from the French government. Is this more of a one-off in your mind, or is that something that you would allow the market to get a little bit excited about, that there's potential for you to expand into this area proactively, look for more projects in this defense direction? How do you want us to think about this? Duncan Minto: Henning, thanks for the questions, and good we managed to get you in, especially to finish on some high-level questions. So yes, I think we should employ you. I think the way you worded the answer to the question on midterm guidance was perfect. I don't see anything that we're looking to say when we say circa 5.5 in 26% and the range 5% to 7%. It is that we're targeting to steadily grow up in that range. We're not looking at a hockey stick plan, but as you say, we just don't want to lock ourselves in for a couple of basis points difference. So just wanted to be nice and prudent in that corridor. On Horse, I know you and I have just talked about this in the past in terms of the dynamic is the same, as called out in the initial plan, so very strong. You need to look at Horse, both sides of the business as well, both in terms of European and on the Chinese side, which gives us the internal benchmark to challenge on that. We've got back to the point where we're now costs Renault Group less than it to buy engines and powertrain units from Horse than it was in the past. And so we're seeing that dynamic, and that's part of the EUR 400 per unit variable cost reduction coming through. We've already seen some of that and that's key for us going forward. Remind you of the EUR 245 million positive impact on equity associated earnings for our 45% holding at Horse. From that, I'll let you estimate your dividend assumptions, but we're not talking EUR 10 million a year, so it's obviously a good upside for us, but not as of '26. That could start from 2027 onwards. Maybe, Francois, I think the defense... Francois Provost: Regarding defense, no change. We do not intend to become a major player or part of the defense industry in Europe. At the same time, we accepted the request of French Minister of Defense to help to cope with all the disruptions they are facing. We will do this with defense industry players in partnership, and we bring our specific value in terms of technologies, adaptability, both product, process development, and of course, scale. We got a big first contract together with [indiscernible] and the project is ongoing. There is several other opportunities. But for me, it's an opportunity and not core for our next midterm plan. And of course, just for the sake of clarity, we do not reduce the necessary allocation of capital to our core business due to defenses. So this is opportunity. Unknown Executive: Thank you, Henning. And the last questions will come from Stuart Pearson from Oxcap Analytics. Stuart, the floor is yours. Stuart Pearson: Just feel free to finish quickly. On the midterm guidance of 5% to 7%, obviously, that's group. Normally, that would mean a 3% to 5% auto margin. Is that still the right equation going forward? I just wonder, given the finance company seems to have particularly strong momentum. And given the work you've done on residual values over the last few years, what kind of expectations do you have for that finance business and the mix of that profit, I guess, between auto and I think going forward? And then on that 5% to 7% guide, I guess that's a standalone, almost organic business plan that you have today. Presumably, the Ford BEV agreement is in there, but just to confirm, nothing on the OCV side yet, as that's not set in stone just yet. And I also think another part of the IA we're expecting next week is possibly a requirement for foreign players of certain countries to invest via JVs in Europe. Is that -- obviously, you do that with Horse on the engine side, would you consider an assembly JV with a Chinese partner just on that? And then finally, Duncan, on the working capital, thanks for the clarity on '26. Very clear on that. But you seem to be suggesting you want it to kind of neutralize the volatility in the free cash flow. That's something that Stellantis has been trying to do over the past by bringing that working capital position down. You've still got a few billion negative working capital overall, though. So over the next five years, is that going to be a constant drain on the cash flow? Obviously, you're putting that into your EUR 1.5 billion guide, but is that after a constant drain of working capital as you try and reduce that volatility? Duncan Minto: Yes, midterm guidance, 5% to 7% corridor would, I agree with you in terms of the estimation of the auto alone, that's 3% to 5%, because of the MFS profitability. We do see growth. I mean, you're seeing a stellar performance of MFS today, and we will look to expand the coverage of the different types of offers internally in-house through organic growth with MFS as well. So that's also you can underline -- you can read the underlying performance as well as we're saying EUR 350 million of dividends in 2026, expected rising to the normalized EUR 500 million going forward. So good news on that. Yes, the plan is an organic plan and includes the Ford 2 vehicle opportunity that Francois discussed earlier, but nothing else on top of that. So it's an organic plan, and anything -- I think the comment you said, Francois, was it boosts, other opportunities may boost that going forward. I'll maybe finish on the working capital to let you comment on Europe, assembly, JV, Chinese. Just on the working capital, yes, we will unwind in 2026. And we have assumed a slight negative in the years going forward as well, even if naturally, in the auto sector with the structure of our working capital growth would actually generate cash from working capital. But it's not something that we want to focus on, and we want to have a more robust profile and avoid the volatility. So we've built in a negative each year going forward within the over EUR 1.5 billion free cash flow generation per year. Francois Provost: Regarding the last question, if I understood well, your question was Horse Powertrain doing some JVs locally with Chinese OEM in Europe or some third-party sales. Is it correct or... Stuart Pearson: Not quite. It's kind of the -- Geely doesn't have any -- If I'm getting to the point, doesn't have any local assembly capacity of its own in Europe. But obviously, the IA might make that, increase its motivation to have that, and obviously, you're one of their key partners. Obviously, you have an engine joint venture, but if they wanted to do something in assembly or any Chinese partner, it... Francois Provost: Yes. Okay, sorry, I did not catch your question. We have no such project for time being. In Europe, we have -- we develop and we'll continue to develop our own technologies in order to prove that in Europe, European OEM is capable to develop, to produce, at the same performance as the best Chinese OEMs in terms of cost, innovation, speed. This is the ambition for the next midterm plan. So our ecosystem is open to partners. We receive a lot of requests, and we cannot say yes to all requests. But for time being, we have no such project with Chinese OEM. Unknown Executive: Good. Thank you, Stuart. Thank you all for your attendance to this call. So we remind you to get to the team to register for March 10 Strategy Day, which is fast approaching. Have a good day and speak soon. Thank you. Francois Provost: Thank you. Bye-bye.
Operator: Thank you for standing by, and welcome to the APA Group 2026 Half Year Results. [Operator Instructions] I would now like to hand the conference over to Mr. Adam Watson, Managing Director and CEO. Please go ahead. Adam Watson: Thank you, and good morning, everyone. Thank you for joining us for today's first half FY '26 results presentation. I'm joined by Garrick Rollason, our CFO, as well as our Investor Relations team. Let me start by acknowledging the Gadigal people of the Eora Nation, traditional custodians of the land on which I'm speaking. First Nations people have taken care of our lands and waterways for the past 60,000 years. We acknowledge and pay our respects to their elders, past and present. As always, I'll start today's presentation with a safety share on Slide 4. To prepare for extreme weather conditions, we conduct a summer readiness program, including activities such as site clearing and weed prevention. I'm pleased to say that we haven't had any weather-related customer impact so far this summer. I'd like to thank the APA operations team for the fantastic work they do to keep our people and our assets safe and to keep our customers' operations going 24/7. Suffice to say, we are very pleased with today's results. I'll highlight 3 key takeaways to Slide 5. First, we've delivered a strong financial result. We're continuing to deliver against our commitments. Underlying EBITDA is up 7.6%, and our EBITDA margins have expanded by 280 basis points. Much of this has been driven by our cost reduction initiatives, which included a 13.6% reduction in corporate costs. Looking forward, we expect to see our FY '26 EBITDA above our guided midpoint. Second, we have a compelling growth outlook. The ongoing role of gas in the energy transition is now well understood. And this has been reinforced by outcomes of the federal government's recent Gas Market Review and the move to establish a domestic gas reservation. These thematics, together with strong customer demand, give us confidence to move ahead with the next phase of our East Coast Gas Grid expansion plan. We've completed the first stage of our Beetaloo development. We've announced an agreement with CS Energy to deliver the Brigalow Peaking Power Plant, and our organic growth pipeline has increased from $2.1 billion to $3 billion, reflecting the strong growth we see in our target markets. The third highlight is that we have ample capacity available to fund our growth. The S&P threshold modification announced in December 2025 has provided an additional $1 billion of capacity to fund new growth. This threshold modification reflects our disciplined focus on our core growth markets of gas transmission and storage and contracted power generation. By focusing on our core markets and applying our competitive advantages, we have delivered returns well above our cost of capital, creating value for our security holders. Slide 6 sets out our financial highlights. The strength of our business is demonstrated by our 7.6% growth in underlying EBITDA for the half. And we have the confidence to say we can expect to exceed the midpoint of guidance for the full year. It's worth noting that the midpoint of guidance would represent growth of more than 7% in on FY '25, which would be another very strong result. Our EBITDA margins are now at 77.3%. The great progress we've made with our cost reductions, coupled with strong contributions from our recently commissioned assets and our inflation-linked revenues puts the business in a strong position. Free cash flow is higher, in line with expectations, noting we had a one-off working capital timing impact relating to the divestment of our Networks business. Our distribution of $0.275 per security is up 1.9%, and our distribution guidance for FY '26 is reaffirmed at $0.58 per security, which will be our 23rd consecutive year of distribution growth. Let's move to Slide 8 to cover our strategy. The key point to note is that our strategy remains unchanged. We remain extremely confident in our ability to create long-term value. And while it's easy to think about our business in terms of markets, our strategy is about creating value by developing energy infrastructure assets with inflation-linked revenues under long-term contracts with Tier 1 counterparties. Underpinning this is our focus on core assets and projects that deliver returns well above our cost of capital. We remain focused on growth markets where APA has a clear competitive advantage. Examples of what we're focused on are set out on Slide 9. APA has [indiscernible] businesses. The first has been the foundation of our growth for the past 25 years, and that's our gas transmission and storage business. The growth here is centered on our East Coast Gas Grid expansion, supporting new basin developments such as the Beetaloo and Taroom Trough and building laterals to support growing customer demand for GPG on Australia's East and West Coasts. Our other focus is on contracted power generation. This includes growth coming from new gas power generation projects across the country. AEMO forecast the need for 13 gigawatts of new GPG investment in the NEM alone. More recent analysis from Griffith University suggests up to around 20 gigawatts may be required. And this is all largely before factoring in the likely growth in energy demand to support new data center developments. Demand for remote contracted power generation presents similar growth opportunities. Slide 10 demonstrates the strong long-term demand for gas in Australia and the significant domestic supply available to service it. And this supports the investment case for expanding our East Coast Gas Grid. The chart on the right shows the significant volumes of domestic gas reserves and resources available to meet domestic demand. These reserves will also continue to supply Australia's critically important LNG export market. Over 68,000 petajoules of 2P reserves and 2C resources are available in Eastern Australia to serve an East Coast domestic market that consumes around 500 petajoules of natural gas each year. Domestic gas supply is simply not a constraint. And taking steps to unlock this supply, including expansion of our East Coast Gas Grid and the proposed domestic reservation for the East Coast is in Australia's national interest. Moving to Slide 11. Given our announcement today of our East Coast Gas Grid expansion plans, I want to ensure we address the debate regarding LNG import terminals relative to the transportation of domestic gas. As we've said at APA, we're somewhat agnostic as to whether we transport domestic gas or imported LNG. Most of these molecules will end up flowing through our network in any event. What we advocate for, however, is the delivery of the lowest cost, lowest emissions and most reliable energy source to service gas demand. And that, without question, comes from domestic gas supply. Now some of the arguments used to advocate for LNG import terminals don't withstand closer scrutiny. And the main argument is that imported LNG can be cost competitive. The truth is multiple data points confirm that in the short and long terms, LNG imports will continue to present a higher cost option than pipeline infrastructure expansion and domestic gas. Asian LNG spot prices have rarely been lower than domestic wholesale gas prices. And modeling from Rystad forecasts long-term pricing somewhere between USD 8 and USD 12 per gigajoule to spot LNG arriving into Asia. This is before you factor in transport and regasification costs and foreign exchange, which take the forecast delivered cost into Australia to be an average of over AUD 20 per gigajoule. Australian manufacturers and consumers generally cannot afford such high prices. Another argument for import terminals is the domestic supply to meet southern market demand is entirely dependent on the Beetaloo. While opening the Beetaloo will no doubt benefit Australia's gas market, domestic gas demand on our East Coast can be met from multiple existing basins, including the Surat and Bowen basins in Queensland. Quite simply, domestic gas is the clear solution for the Australian market. Slide 12 provides detail about Stage 3 of our East Coast Gas Grid expansion plan, which would increase the capacity of the East Coast network by around 30%. Final investment decision has been reached on Stage 3A with an investment of $260 million to deliver 3 new compressors. This will increase North to South capacity by 11%, including a 20% increase in capacity for Northern gas into Victoria, and it will be ready by winter 2028. We're also investing $220 million in Stage 3B to enable continued early works and procurement of long lead items for the Bulloo Interlink, including the purchase of 342 kilometers of 28-inch line pipe. It's worth acknowledging that the favorable regulatory outcomes for the Bulloo development, along with the federal government support to implement a domestic gas reservation on the East Coast, builds confidence to make these investments. Strong interest from customers is also driving our progress on the Bulloo. The demand for Stage 3 is clear and domestic gas supply is not a constraint. This expansion plan is a timely and cost competitive solution to our predicted southern market supply shortfalls. In short, APA's expansion plan will deliver the capacity that ensures certainty of supply into Victoria and the East Coast more broadly. Gas supply, whether it be molecules or transport, is no longer a constraint. And it's now up to our federal government to bring this to life. Moving to Slide 13. We're also continuing to support new basin developments in Australia, including the Beetaloo, which is showing particularly strong near-term momentum. We've completed construction of the Sturt Plateau Pipeline with gas to flow to Darwin from mid-2026. We're now working on plans to expand the **SPP with additional compression that would increase capacity to around 100 terajoules a day. In December, we announced that the Northern Territory government granted APA a pipeline permit to survey a potential route for the North to East Australian pipeline. The NEAP, as we call it, has the potential to connect to APA's East Coast Gas Grid, utilizing our existing **Carpentaria corridor. We're also planning work for a new pipeline to go north to Darwin with one option being to utilize the same existing corridor as our Amadeus pipeline. The key point is that we're well prepared to support our Beetaloo customers with either a northern or eastern transport route as developments in the basin continue to progress. Moving to Slide 14. We were pleased to announce late last year that we're partnering with CS Energy in Queensland to develop the 400-megawatt Brigalow Peaking Power Plant. The project expands APA's footprint in GPG and deepens our partnership with CS Energy. The [ Pekka ] will connect into APA's Roma Brisbane pipeline via a new transport and storage lateral, which is currently being developed separately by APA. There's a strong list of opportunities for similar GPG developments that we're currently investigating across the country. Moving to Slide 15. Our Pilbara business continues to perform strongly and in line with our acquisition business case. It's worth noting that the vast majority of the value ascribed to the Pilbara acquisition was allocated to existing assets, not to growth. These assets are generating a lot of cash, about $140 million of EBITDA last year, representing a yield of around 10%, which is obviously very strong. And while demand for new power generation developments by our customers in the Pilbara is a little slower than anticipated, the development pipeline is now larger, supported by new opportunities such as the Burrup transmission line. We remain confident about the opportunities ahead in the Pilbara and other remote regions such as Kalgoorlie and Mount Isa. With that, I'll now hand to Garrick for a deeper dive into our financial performance. Garrick Rollason: Thanks, Adam, and good morning, everyone. I'll start with our headline financials on Slide 17. In the first half, we have delivered strong growth in underlying EBITDA, up 7.6% for the half year as the benefits of inflation-linked tariffs, earnings from new assets and cost reductions were realized. Pleasingly, underlying EBITDA margin increased to 77.3%. Free cash flow was up slightly as the benefits of higher earnings were offset by increased funding costs and cash tax payments as well as movements in working capital and SIB CapEx. I'll have more to say on this on a subsequent slide. Moving to Slide 18, where I'll step through the drivers of our 7.6% uplift in underlying EBITDA. 1H '26 represents a strong clean result, and I'll call out some of the key period-on-period movements. We delivered new earnings from the Kurri Kurri lateral and Atlas to Ready Creek pipelines as well as the Port Hedland Solar and Battery, alongside inflation-linked tariff escalations and savings from cost reduction initiatives. Offsetting this was the nonrecurring $13 million in insurance proceeds relating to the Moomba Sydney ethane pipeline that was received and disclosed in the corresponding period. Corporate costs of $70 million decreased by 13.6% in the half compared with 1H '25. We are making strong progress with our enterprise-wide cost reduction initiatives, and I'll touch on this further later in the presentation. Slide 19 summarizes the drivers of free cash flow, which was up slightly half-on-half to $556 million. Consistent with our previous statements, the uplift in underlying EBITDA was partially offset by higher interest and cash tax paid. Higher interest costs reflects increases in net debt to fund growth and a marginally higher average cost of debt. Higher cash tax reflects the continuation of tax installment payments, which recommenced in the second half of last year. The change in working capital in the first half is primarily related to one-off timing impacts arising from the divested Networks business. This will unwind upon the conclusion of this service under the TSA, which is expected in the first half of FY '27. Stay-in-business CapEx was lower due to timing of expenditure in the first half of last financial year. Looking forward to the full year, we continue to expect broadly flat free cash flow. Beyond this year, we expect to see free cash flow growing as earnings continue to increase and tax begins to normalize. Moving to Slide 20, which outlines our statutory results. Net profit after tax of $95 million was higher than the corresponding period, noting that higher reported EBITDA and lower net finance costs were offset by higher depreciation due to the inclusion of new assets. Within nonoperating items, aside from the noncash hedge and technology transformation-related items that you've seen before, there were 2 one-off items in the first half. First, a $15 million noncash loss on the sale of the Networks business, primarily due to the write-off of historical goodwill. and secondly, a $14 million payment for the settlement of a legacy revenue-related legal claim that has been in dispute since 2015. Moving to Slide 21 and an overview of CapEx. We continue to invest in projects to support long-term growth, strengthen our foundations and maintain safe and reliable asset operations. We invested in growth capital expenditure through early works on the East Coast Gas Grid expansion, the Sturt Plateau and Brigalow Pipelines and the proposed Brigalow Peaking Power Plant. We are maintaining our full year guidance for foundational and stay-in-business CapEx. And as Adam said previously, we have increased our organic growth CapEx pipeline from $2.1 billion to approximately $3 billion over the next 3 years. All of this capital expenditure is consistent with our capital allocation framework, which is outlined in the appendix and is expected to achieve returns over our hurdle rate of 150 basis points above post-tax WACC. The framework is designed to ensure we allocate our free cash flow to those initiatives that can create the most value for our security holders. To that point, I'll cover funding on the next slide. We have existing balance sheet capacity to fund in excess of our $3 billion organic growth pipeline over FY '26 to FY '28. Apart from the DRP, APA does not need to issue ordinary equity to fund this identified growth pipeline. The $3 billion organic growth pipeline includes in-flight and probable growth projects across gas transmission and storage, GPG, remote grid and other on-grid contracted power generation projects. This strong balance sheet position, combined with active capital management and the predictable capacity-based inflation-linked revenues leaves us well positioned to deliver on our organic growth opportunities. In short, we are very confident we have the funding flexibility required to deliver the attractive growth opportunities available to us. More detail on our key balance sheet metrics, near-term maturities and capital management activities are provided in the appendix. Finally, I'll cover our progress on our cost reduction target on Slide 23. The key message is, we are making strong progress towards our $50 million cost reduction target in FY '26. We are achieving this by leveraging the foundational investments made into the business over the past 3 years. These included investments in technology, business resilience, climate and community and capability uplift. These investments have enabled the initiatives, which are reducing costs and driving margin expansion across the business. We now have the business set up to drive ongoing, enduring and sustainable cost improvements. We will provide a further update at the full year results, along with our target for FY '27. And with that, I'll hand back to Adam. Adam Watson: Thank you, Garrick. As you can see on Slide 25, we believe we have APA in a strong position. We've simplified our business. Our core business is performing well, and we continue to drive a lean and efficient cost base. There's good momentum in our growth markets, and we remain disciplined in capital allocation, prioritizing projects with the highest returns. Our balance sheet is strong, and we have ample capacity to fund growth, which takes us to the wrap up on Slide 26. We've delivered another strong half year result with underlying EBITDA up 7.6%. The outlook for the full year is also strong. We're well placed to capitalize on emerging opportunities with a $100 billion-plus addressable market and a $3 billion organic growth pipeline for FY '26 to '28, which we can fund from our existing balance sheet. Thank you for your time. Let's now move to Q&A. Operator: [Operator Instructions] Today's first question comes from Dale Koenders with Barrenjoey. Dale Koenders: Just wondering first around the reduced downgrade trigger with the S&P. Could you maybe provide some color about how you're able to negotiate that and if you had to give anything away by getting the more favorable balance sheet settings? Garrick Rollason: Thanks, Dale. It's Garrick. I'll respond to that. As you'll be aware, we speak to the rating agencies often and frequently and provide them with a lot of detail around our operations and our forecast. We've been talking to S&P specifically around the downward threshold for some time. And I suppose really pushing them relatively hard on the underlying basis of our earnings and the strength of the contracted inflation-linked revenues and both today and going forward and the nature of the assets and the contracts we have. So through those discussions, S&P obviously continually review the business metrics and what's appropriate for our rating and came out with a threshold that we think makes a lot of sense. Certainly, there was no -- nothing that we were required to give up in order to achieve that. It's just consistent with the nature of our earnings and nature of our business. Dale Koenders: When we think about Slide 22 then, and we think about this increased growth CapEx outlook, it looks like it really has been facilitated by the increased balance sheet capacity, the generation and uses of cash looks like you've only got kind of $100 million spare balance sheet capacity over the next 3 years even with the DRP running. Can you talk a little bit about what balance sheet capacity you have left over the next 3 years? Adam Watson: Yes, Dale, I might just take the first part of that question, and then I'll hand it over to Garrick in terms of what additional capacity. But strategically, there's no shortage of opportunities, and we're conscious of that. And we're very focused on making sure we're working on projects that are customer-led and in our core markets where we can deliver returns above our cost of capital. And effectively, we have the organization fighting for capital, which is where you want it to be. So we always look at that also in the context of the balance sheet and making sure we're not taking on too much. And obviously, the capacity provided through S&P has been helpful to be able to continue to progress the opportunities ahead of us. But I just want to make sure that people are left with the understanding that it's really a disciplined approach to how we allocate capital, of which the balance sheet is just one part of that. Garrick Rollason: And then I'll address the question around balance sheet capacity. So the S&P downward threshold did create about $1 billion of additional debt capacity at the time. And I think we announced that when we went to the market and told them about the downward threshold. That's obviously pleasing from our perspective because it means that we have the capacity to fund more accretive organic growth on balance sheet. So as we stand here today and clearly, balance sheet capacity increases as our operational cash flow also increases. But sitting here today, we're certainly not capital constrained. And when I look on Page 22, we actually have capacity in excess of the $3 billion of growth opportunities that we've talked about in the presentation today. I'd actually say well in excess of that $3 billion. But it's also worth reminding you, and I might sound like a broken record here, but we have many levers available to us to deliver balance sheet capacity. So that includes the existing balance sheet capacity we have. It includes things like issuance of hybrid instruments, which are efficient use of balance sheet. There's partnering, there's asset recycling, there's structured equity. So we have a number of levers available to us to manage that accretive organic growth that we see ahead of us. Dale Koenders: And then just finally, is the $3 billion the new run rate you'll look to sort of hold or grow from going forward? Adam Watson: We're going to assess that as the projects come forward. And as you know, that $3 billion is a portfolio of projects. And there are projects in there that are probability weighted, some more certain than others, which tells you that the opportunities there ahead of us are more than $3 billion, but you don't necessarily win every one of them. And ultimately, with the right projects come along that are highly accretive to our security holders, make sense for our customers, all those things that we hold ourselves accountable to, then we'll always consider those opportunities. And again, then we'll look at it from the lens of the funding, and Garrick's already commented on the different levers we've got to be able to address the funding of any opportunities that are before us. Operator: And our next question comes from Tom Allen at UBS. Tom Allen: Congratulations on committing to Stage 3A of the East Coast grid expansion today. But I'd like to ask about Stage 3B, please. So APA has committed $220 million to order long lead items. I assume that, that's the compressors for the Bulloo Interlink. You've outlined the total project cost of about $800 million. So can you confirm the level of customer underwriting that you have for Stage B given the commitment for that today? Adam Watson: So just to be clear, we break Stage 3 into 2 components. 3A is compressors. So that's 3 new compressors. We've already got them ordered and then we'll continue to deliver those now in line with our project plans, which get that delivered by winter 2028. They're no different to what we've delivered in Stages 1 and 2. And we -- as you know, we don't underwrite those projects. They're incremental to our existing capacity. But obviously, we do that off the back of the demand and the inquiries and the process that we go through with our customers to ensure that the demand is going to be there. Stage 3B is not compression. It's pipeline. It's the Bulloo interlink. And what we've ordered there is the line pipe, the 28-inch line pipe, 342 kilometers of that. We're well progressed with landholder consultation and engagement planning and approvals. And we wanted to get ready for our ability to be able to hit go on the next stage, which is what we've done today around ordering those long lead items, but also give ourselves enough capacity and flexibility to be able to sit here and monitor how the National Gas Review would play out. Now the National Gas Review in draft that came out just prior to Christmas from the federal government was positive for domestic gas supply. It sent the right signals around the need. The demand is not an issue, right? Everyone understands industrial demand is incredibly strong. And as you see demand for GPG for other sources of intermittent capacity being required or supply being requiring capacity, there was no question around the demand. It was making sure that we had the supply capacity available. And quite frankly, the biggest constraint or almost the only constraint there was pipeline capacity. So we've addressed that today. We're now sending a strong signal to our customers, to the industry, to government that capacity is not a constraint now, and we're just waiting for the federal government to finalize the policies that they've drafted. From a customer perspective, as you'd expect, we've had deep engagement with our customers. There's a lot of interest there. But they too are sitting there waiting for the National Gas Review to play out. I can get into the details behind that, but you know very well what the implications are there that it's pretty hard to sign up to long-term contracts when the producers aren't able to do that because they're not sure about how the National Gas Review is going to play out. So I think we've made really good steps in the last couple of months with the federal government's announcement and with our announcement today, I think that's really positive. And obviously, we'll continue to work forward with our customers over the coming months. Tom Allen: If the customers are waiting for the National Gas Review to play out and you comment then that they're finding it hard to sign long-term commitments to transport, why is -- why won't the Board also wait for underwriting before making such a material commitment to Stage 3B because it's effectively lifting the risk profile of the business by taking such a merchant risk position on that asset. Or why not wait if the demand is so strong? Adam Watson: So it's a chicken and egg issue, Tom. If we don't come out and provide the capacity and the transport that's required to move that gas North to South, then the government is sitting there saying, well, you've got a constraint in the market, so I need to look at potentially other options. So what we're doing is allowing industry, allowing our customers and allowing the federal government to be able to have comfort that we are committed to moving forward to ensure that capacity is not a constraint, which then allows the government to be able to put the right policy in place, which again, in draft is very encouraging to be able to make that happen. I know it's a big financial commitment. But again, we've spent well north of $500 million over the last couple of years, which was uncontracted. And you've got to have comfort that the demand for our product is there, which we have deep comfort from and that you can continue to recontract that capacity, and we've been incredibly successful at recontracting that capacity. In fact, we haven't had any negativity there at all. And again, when you get comfort around the demand thematics and the supply thematics, and obviously, we've got a gas market model that takes into consideration all the potential risks, we are incredibly confident to move forward. But again, we just want to ensure that we don't make that final decision until we've got the parameters laid out with the National Gas Review. Tom Allen: I guess the challenge, obviously, being on such a long-life infrastructure is that the demand outlook can change. And I don't mean to draw a negative tone to it, but I mean, APA's internal demand estimates also expected that the Northern gas interconnect over -- so the Northern Goldfields Interconnect over in Western Australia, when that was committed in November 2020, would also be contracted by the time the asset was commissioned. So it was commissioned 2 years ago. And looking today on the bulletin board, it still looks like the asset is roughly only 20% contracted. And so there's obviously commercial risks out there and there's some good information in the pack on how APA see those around import terminals. But I note the analysis on import terminals is using a current North Asian spot LNG price at over USD 12 MMBtu. When this Bulloo Interconnect would be commissioned is winter 2028, which independent forecasts and even the current futures curve have at USD 8 MMBtu, which on our analysis using the [ ACCC ] approach would have landed gas in Australian dollars a gigajoule leaving Port Kembla at comfortably below $15 a gigajoule, which would make it look like very in the money competitive cost gas for southern flexible demand. So are you able to confirm that if an import terminal were built and in winter '28 gas prices were USD 8 MMBtu that you'd still be comfortable that long term, you're going to make a return on and of equity on these investments? Adam Watson: So I'll address your first part of that, Tom, around contracting risk and demand and supply. And again, I'm repeating myself, but I do want to ensure that I answer the question that you've got to look at the demand for gas and the supply of gas and the gas market model that supports that on the East Coast Gas Grid, and we remain very confident about that. So the customer inquiries are there. The customer demand is going to be there. And you got to remember that we continue to build out the East Coast Gas Grid in an incremental way, principally through compression. Now the Bulloo interlink is obviously not compression, and that is a bigger link of capital than an individual compressor. But it does -- it has been built in a way that addresses the shortfalls out to the early 2030s, but we're not trying to overcapitalize on that beyond that time period because we know beyond the early 2030s, we can continue to build out the East Coast Gas Grid through further compression. So we're trying to do it in a way that's cost competitive and price competitive for our customers, which we're very confident about. Look, the NGI, you're right, it's been slow to ramp up, but it's a very similar ramp-up to what we had with the Goldfields pipeline a number of years ago. We said that, that's going to take around 5 years to ramp up, and it's going to be dependent on a number of customers in the region, the Goldfields as an example, to procure into that. And it's a very different market to the East Coast Gas Grid. It's much more individual contracts in the East Coast Gas Group being with customers who run portfolios in terms of their gas movement. But again, we remain confident around the long-term value of the NGI as well, and it's consistent with our expectations. If you go to LNG import terminals, it's a really interesting argument. And look, the most recent credible long-term forecast that came out was Rystad. It's actually in the pack, I think it's Slide 44. And that has long-term average U.S. dollar LNG spot prices into Asia of somewhere between $8 and $12. There will be days where it goes below that. I understand that. And LNG producers, importers, if they want to sell into the market on particular days that are below the domestic price, then that's great. They can be free to do that. But from a sustainable perspective, it doesn't make any sense to think that LNG imports can be price competitive. You know that you've got to take into account regasification, you've got to take into account transportation against the Asian spot price. And the counterfactual argument is that if prices -- LNG global prices were getting to those lower numbers that you were talking about, those $5, a couple of things happen. One is if prices are so low, then Australia's LNG exporters will be selling into the domestic market because it will be more attractive to sell domestically than for an LNG import. So we don't need LNG imports and under that scenario. And the second one, the only other scenario where LNG imports make sense is when a government agency or the government directly subsidizes principally the regasification of that, which means that either the consumers will end up paying for that higher cost directly or you'll be -- every taxpayer will be paying for that through higher taxes. I don't think politically that's going to be something that anyone is going to put their name to. So not saying that LNG doesn't -- LNG imports won't exist in Australia. We just don't have any confidence at all that it's sustainably going to make sense. Operator: And our next question today comes from Henry Meyer at Goldman Sachs. Henry Meyer: Over in the Pilbara, we've seen GIP acquiring a share of BHP's network. Could you just share how you're expecting that would influence competition and the pipeline you see for your position in the Pilbara? Adam Watson: So look, the Pilbara, first thing we remind everyone, and we get a lot of questions on this. So we wanted to be upfront about this is that the Pilbara business is performing really well. The vast majority of the value that we ascribed to the business when we acquired it was to existing assets, and they're performing bang on line with expectations. And the business case, which we monitor and do post investment reviews on is doing really well. From a growth perspective, the growth opportunities are still there. There's nothing in our pipeline that we announced at the time of acquisition that doesn't exist today. It's just that they have been pushed to the right from a timing perspective, which is effectively customers, you know who they are, have pushed out their ambitions somewhat to the right. But we are confident that the ones that we're bringing to market, which are closest to the customer, lowest levelized cost of energy, all of those sorts of important elements from a customer perspective will be absorbed at the right time. But the size, as I said in my intro, the size of the opportunity is now bigger in terms of there are more projects that are available. And the Burrup Peninsula is one of them. There's reasonably good progress there in terms -- certainly good progress in terms of planning and approvals and the work that we're doing with customers and government there. But we've always said that, that will be a bit of a longer game for us. So we're comfortable with how it's progressing in the Pilbara. We are seeing good interest in other areas outside of the Pilbara, Mount Isa, Kalgoorlie, which we see good opportunities where we can deploy capital and create value. And again, we run a portfolio. So we continue to monitor those and look at them relative to the other opportunities in the other markets. Henry Meyer: Yes. Diving into the asset results, we've seen a bit of a pullback in earnings on the Southwest Queensland Pipeline MSP versus this time last year. Can you maybe just step through what's driving some of that and expectations if that continues or reverses? Is this potentially lower Northern haul contracting that could be reversed going forward? Adam Watson: Garrick and I might tag team this one. I'll just provide some highlights and if I've missed anything, Garrick, jump in. But look, Southwest Queensland Pipeline and Roma Brisbane, firstly, they're fully contracted out to 2027. So that's important. So -- but you do get swings and roundabouts in our portfolio every year, which is understandable. We are capacity constrained on some of those assets. So you don't -- there's limited upside, which is part of the reason why we've announced our East Coast Gas Grid expansion today to alleviate those bottlenecks. From a contracting perspective, we've got lots of interest there, and we want customers to recontract over the longer term. But again, as I've said before, a lot of them are waiting for the National Gas Review and understanding how that plays out, which is, again, why we feel encouraged about what we expect to be happening over the coming months with the completion of that review. Look, RBP has been an interesting one because there's been less gas flow principally to the West as the LNG exporters have reduced their supply because of the price cap effectively that was introduced a couple of years ago. They're not big volumes at all, but in the periods prior, there was a bit more supply coming from them. SWQP has been impacted a little bit by Blacktip up in the Northern Territory. When Blacktip wasn't flowing, there was more supply going through the Southwest Queensland pipeline. Blacktip is now -- well, when it was flowing, it's now not flowing to the degree that it should be. And as a result, it's the flows east along the NGP and SWQP, -- it's really -- it's not going there anymore. It's only going north to Darwin. So there's small swings and roundabouts, but the point is that there's been nothing material that's driven any of that movement. Garrick Rollason: Thanks, Adam, and Henry, welcome on board. I won't add a lot to what Adam said. Maybe the only other thing to note is just on MSP, bear in mind that in the prior period, we had the nonrecurring insurance recoveries relating to MSEP, that was $13 million. So if you take that out, you actually see good growth on MSP. Adam touched on the fact that it's a portfolio of long-term core infrastructure assets. So we will see some small fluctuations in the margin. And what's interesting for me this period is we've obviously seen really strong performance across our contracted power generation even after you normalize for the impact of the Port Hedland Solar and BESS new earnings as well. So there's a lot of good stuff in the asset-by-asset performance as well and then some assets have just had particularly good prior periods. Operator: And our next question today comes from Nik Burns at Jarden Australia. Nik Burns: Just a question on your $3 billion organic growth pipeline. As you can appreciate, we don't get a lot of visibility on the composition of the projects in there. On my numbers, the combination of Brigalow and East Coast Gas Grid Stage 3 announced today gets us around 2/3 of the way there on that $3 billion number. Can you just talk about what's driven the increase from $2.1 billion to $3 billion today? Is it primarily derisking of those 2 projects? Or have you increased the risk weighting on other projects in your portfolio of opportunities? Or have you added new projects in there? Adam Watson: Thanks, Nik. Look, short answer to the second part of your question, going from $2.1 billion to $3 billion, that's principally the East Coast Gas Grid. So we had small components of it in there at the $2.1 billion. And again, it's portfolio weighted. So you're right, getting further along the journey with the East Coast Gas Grid takes the overall portfolio to $3 billion. Just to give you some color and again, it's portfolio weighted, and I won't get into some of the specific customer projects for reasons, which I trust you can appreciate. But it includes the overall $3 billion, includes the East Coast Gas Grid. As you said, it includes the Brigalow Peaking Power Plant and the Brigalow Pipeline that we're also building. There's some laterals that we're working on at the moment, and we hope to bring those to market in terms of announcing them shortly. The work that we're doing in the Beetaloo, it includes the Sturt Plateau Pipeline. I know we can finish construction of that, but that was included in there. And then you've got some probability weighting around other potential opportunities there. And then we've got some opportunities in the remote grid. So again, I can look -- Garrick and I look at a long list of projects and how that all plays out and how we probability -- we don't probability weight every single one of them, but how we probability weight those. But I hope that gives you color of what's included in there. Nik Burns: It probably makes the next question a bit more [ repartee ] just focusing on your, I guess, contracted power generation opportunities beyond Brigalow. I mean that seems to be a really good space you can be hope to be active in. But can you talk about how many other opportunities are out there that you think APA could participate in and when you think they may come through? You probably can't name names at this point but just interested in the pipeline of opportunities in that space there. Adam Watson: It's an important question and probably the full year, we will come out with a little bit more clarity on the first part of my response, which is around the fact that we've got a number of our own sites, [ LM ] sites. And I'm not suggesting that we're necessarily self-developing. We -- our strategy, as you know, to partner with customers. But one of the important things as part of the recipe to be able to partner with the customer is to have the site. And the secret sauce there is to be on a site that traverses the electricity transmission link as well as the gas pipeline transmission link. So we've got a number of sites that are earmarked, and that's been really positive for us because it enables us to have rich conversations with customers around meeting their needs. And then we're also working with a number of customers who have their own sites, and we would play a different role, which is similar to what we've done with the Brigalow Peaking Power Plant, where CS Energy had its site. They wanted a development partner, not only to develop it, but from an ownership perspective as well. And we're obviously their preferred partner in that regard. So it's a long list actually. Timing will be interesting. And getting equipment is a question that I'll get asked at some point, but we work really hard at making sure we can try and get it in front of the queue as much as we can in terms of getting equipment supplies. We've built the capability and we had existing capability, but we've really strengthened our bench in terms of capability to be able to deliver and operate those GPG projects. And we think we've got a really strong competitive advantage. So we're just working closely with a number of customers, and we'll continue, hopefully, to announce good progress with that strategy over the coming months and years. Operator: And our next question today comes from Gordon Ramsay at RBC Capital Markets. Gordon Ramsay: Adam, I'm going to ask about the Beetaloo and what we heard yesterday from Kevin Gallagher were some very encouraging and positive commentary about the potential of the area. And he made the comment that he felt that the gas pipeline was a critical path item. Just kind of wondering how that fits in with the work that you're doing right now with Tamboran. And I guess, particularly, I'm referring this to Phase 3 because Kevin did make the comment that the Bulloo gas could support Darwin LNG expansion and GNG backfill for what looks like decades. So can you just comment on how, I guess, APA Group has positioned to get involved potentially with not just Tamboran, but also Santos down the road? Or are they doing their own work separately? Adam Watson: Yes. Thanks, Gordon. And it's a really interesting one because I'm sure many of you have seen it. But when you look at the flow rates, when you look at the rocks and you look at -- it's a significant acreage. There's no debate about that, and people will tell you that the acreage is bigger than the Permian Basin in the U.S. and Marcellus basins. It's a big, big acreage, but that's great until such time as you find the gas. So -- but the flow rates have been really, really positive. It's dry gas. It's incredibly low emissions relative to other markets. And with those flow rates, it looks like it's going to be very cost competitive as well. Our strategy has been to partner with all of the active participants in that market. Tamboran, obviously, with the Sturt Plateau pipeline and Daly Waters, who have also been part of that acreage connection there are people that we're working closely with. And then from a -- our strategy is to be positioned really well, not only works for us because we want to use that as a competitive advantage, but it works really well for our customers and for the basin development breadth generally, we've been getting on with the planning approvals. So what's one of the, I guess, really positive things around our position is that we have 2 really important existing corridors along the Carpentaria, which would facilitate going east, obviously, going south for the domestic market. But given the size of the acreage, there's no question that Beetaloo is principally going to be an LNG export play. So there's obviously opportunity to send that gas east. We've done an enormous amount of work on planning and approvals, pipeline permits, et cetera, to be able to take that pipeline, connect it down and allow that gas to flow out of Gladstone. And the strategy there clearly is for -- you would imagine some existing LNG exporters in that region whose facilities are effectively coming to their end of their gas flow life, would be able to utilize that gas to keep their sunk infrastructure going. But equally, we're doing work going north as well. So going north to Darwin. There's principally 2 routes that are being looked at there. One, the Northern Territory government has put a proposed route in play for some time, and we're working with the NT government and our customers on exploring that route. But equally, we're also doing our planning and approvals work to move along our existing pipeline corridor there, which is obviously incredibly efficient because you're dealing with the same landholders and the same traditional owners. So we think we're really well positioned, and we're doing the heavy lifting to ensure that we're ready. And Kevin is right, you can't bring it to life without the pipeline. So we don't want to be the constraint there. We want to make it happen. Gordon Ramsay: And a question just for Garrick on the cost base. In your guidance, you're saying you're targeting further efficiencies in FY '27. What would they be? Can you give us a hint on where you can see further cost gains? Garrick Rollason: Thanks for the question, Gordon. Are you asking for hints on what they -- the nature of the savings or the dollar amount associated with them? Gordon Ramsay: Not the dollar amount, just where you see them coming from and if you relate it back to dollar amount, great, but where do you see opportunities to reduce costs further? Garrick Rollason: Yes, definitely. So I won't relate it to a dollar amount. We'll announce that at year-end when we provide guidance for the full year. On Page 23 of the presentation, we obviously set out some of the savings that we've delivered in the way in which we've done that. And that's through simplification that's enabled us to look at our organizational structure and drive improvements through that. In terms of frontline efficiencies, we've really looked at how we work and what we do. And that's things like integrating works planning, it's things like planned maintenance. And fundamentally, it means that we reduce our reliance on external contractors. So we're doing more work more efficiently in-house. When we look forward, a big focus continues to be on the operational side of the business, but it's how we work smarter. So using the data we have to drive things such as predictive maintenance to look at strategic sourcing. We've got approximately $350 million to $400 million external spend per annum across both OpEx and CapEx. And if you can drive some efficiencies in the way in which you spend that, so this is external spend, then that obviously delivers significant value to the business. So there's some of the opportunities that we see available to us. So it's really how do we work smarter and how do we reduce our external spend. Gordon Ramsay: Congratulations on expanding the EBITDA margin again. Operator: And our next question today comes from Rob Koh at MS. Robert Koh: Just want to ask a question around Slide 42, which is where you're kind of tweaking your guidance to be, to be above the midpoint. Possibly a silly question, why not just raise the lower band of the guidance? Or maybe if you could think of -- give us some color on what are the pluses and minuses that could happen in this half? Adam Watson: Yes. Thanks, Mr. Koh, and nice to hear from you. It's -- look, from our perspective, there are -- well, there's still a number of months to go. And you can see the key assumptions on the right-hand side of that chart, consistent with the key assumptions that were there when we put forward that forecast. So we're just being conservative and prudent, we believe, to make sure that we don't get over our skis in terms of changing the guidance. And quite simply, what we can give you with a level of confidence is a view that we think will be above the midpoint and principally because of the strong progress that we've made with the cost reduction target that Garrick spoke to before. So we're just trying to be prudent. Robert Koh: Yes. Okay. Can I also ask where in that bridge we should be putting the currency impact from the Wallumbilla Gladstone and U.S. dollar net revenues because it's my recollection, I might have this wrong, that we were at 72 in FY '25, and we should be using something like 67 for this year. Garrick Rollason: Yes. Thanks, Rob. It's Garrick. I'll address that. So it is a simplified bridge on Page 42. So there are buckets that where there's ups and downs. Principally, when we look at the inflation-linked tariff that will include the inflation associated with WGP. If we think to explicitly around the exchange rate, we lock in revenue, and we discussed this previously, we lock in the exchange rate around the U.S. dollar revenue associated with WGP. We do that on effectively a rolling 5-year basis. So looking forward from today, we are fully hedged out for the next 3 years and then that decreases over the 2 years that follow. So effectively, when we approached our guidance for FY '26, we looked at that revenue as relatively fixed within those buckets of what we've shown. Robert Koh: And then can I ask a little bit about -- I think it's the slide on your capital framework, which you said very clearly is unchanged, but you're now telling us that your threshold return is WACC plus 150 bps, and that 150 bps minimum is new information. Have you changed your WACC or anything with the availability of debt? Or am I reading too much into it? Adam Watson: You're reading too much into it, Rob. Look, we've been -- you might be right that it hasn't been -- may not have been put in print, I can't remember. It has been in print. I'm getting nods from the team. So that is not new information. And we take a long-term view as we look at our WACC. As you'd expect, we look at it every 6 months and our Board signs off on that as well. But we try and look -- we use assumptions that try and look through the cycle. And really, that's just us we get a lot of questions, as you can imagine, on the growth pipeline, in particular, about how we're deploying capital and what returns we're getting. And obviously, it's all very sensitive, and I feel for everyone on the call because we'd love to give you what those numbers are, but then it makes us hard for us to run our business. So the best we're trying to provide you is with a guide and a minimum threshold, same with the cash flow, and we try and get cash payback within the first half of the contract life or an asset life. Just to give you the framework that we look at. And then obviously, we look at each individual project on a cost and risk relative basis and come up with an outcome for our customer that we think works for both of us. Robert Koh: And then maybe just a slightly more detailed question on East Coast Grid expansion Stage 3B with some pre-FID expenditure on pipes. Can you talk to us about, heaven forbid that, that project doesn't happen, what can you use those pipes elsewhere in the business? Is there some kind of element of hedge to that? Adam Watson: Yes. We've obviously looked closely at that, Rob, and it's a good observation. And of course, I have to say we don't expect to get to that position because of the confidence we've got with our customers and because of the way that the National Gas Review is currently drafted. So we're very confident. But of course, you would expect us to have done the diligence around what you would do. And quite simply, you would redeploy that line pipe. It's going to go offshore, obviously, if it's not going to be used domestically by us, then it's going to go offshore. And we've made sure that there is sufficient market demand for that. But hopefully, that's all academic. Robert Koh: Yes. Yes, absolutely. That makes sense. Yes, I guess there'll be someone will need a gas pipeline somewhere. And should we be -- for the Beetaloo pipeline, which is a much more distant proposition, should we be thinking that there will be a similar kind of pattern for long lead item expenditure? Or is that different? Adam Watson: Yes. And it is a bit different to the East Coast Gas Grid, which -- and Tom made the good observation before around contracting. And it's -- as you know, the East Coast gas market for us is multiple customers who have multiple portfolios of gas flows and different customers and suppliers. Whereas the Beetaloo, as you'd expect, because it's a big basin with some developers, the contracting will be different there. And just given the size of the CapEx involved relative to Bulloo Interlink, they're big leads of capital. So we would have to have a very different approach to how we would develop that. And you'd be wanting to partner with somebody and have that confidence [ partnering ] with the customer to be ordering those long lead items. What we are doing though, so that's the line pipe. But what we are doing is spending time and money on planning and approvals and all of those sorts of things at our cost. We are backing ourselves in that regard, and we've been doing that for some period of time. Robert Koh: Maybe one last question, if you'll indulge me. For your Pilbara assets, and you've said a number of times about how the clients are pushing right to their aspiration. And so that's why there hasn't been growth announcements just yet. Can you talk to -- I think at the time of the deal, there was like a 4-year weighted average contract life. I presume that the contracts just move to an evergreen type basis. Are there any actual physical constraints if you don't have repowerings or extensions? Adam Watson: No. From a -- so we will have recontracting. And the way the customers will always look at it is, do I recontract with APA's existing asset, existing infrastructure? Or do I pay for somebody else to build a new piece of equipment? Which has got a time issue with it. It's got a cost issue with it. And quite frankly, our sites are very close to their operations. So you'd have to assume with cost escalations and transmission line costs that the next best alternative is going to be more expensive than ours. So that gives us a level of confidence around recontracting. And when we look at assets like that in the mining regions, the thing that we're looking closely at is mine life. And what we're seeing from a mine life perspective in and around the Pilbara is that there's plenty left there. So we've got a high degree of confidence there in terms of recontracting, and we've got to be very smart in how we work with our customers to give us the solution they need there. So it's -- in terms of new projects, it's really about additional demand from our customers rather than aging assets or anything like that. It's new demand. Operator: And our next question comes from Ian Myles at Macquarie. Ian Myles: Just a couple of simple ones. What do you see the risk of slippage and decisions around 3B if [indiscernible] may come out and say the shortfalls are being pushed further to the right gas markets? Adam Watson: Look, we've staged it and designed it so that we address the most pressing constraint from a -- it's obviously from a timing perspective, 2028, but Stage 3A addresses that and addresses the bulk of that. 3B is more around bringing Northern gas down to southern markets. And as you know, Ian, there is a bit of swings and roundabouts and [indiscernible] now gas market model plays out all these scenarios around additional BESS straight gas, for example. We're not saying that it's going to be [indiscernible] into the 2030s, but if there's more molecules coming from southern supply, then that could relieve some of the pressure. But again, it's hard to time it precisely, but what we've done is staged it in a way that within, call it, 24 months of when it's needed. And the other way to look at it is we're not expecting 3B to go to 100% capacity on day 1. We're expecting it to ramp up over time. So if it comes in a little earlier than it's required, it just means that there's a bit of a longer ramp-up in that regard. And that's okay. Our return thresholds are conservative and accommodate that. Again, we're confident that it will be delivered on time to address any shortfalls. Ian Myles: The other one is Taroom Trough. And you've mentioned it. I think a few other people have mentioned it. Just sort of interested, does that have implications for Beetaloo development? If the Taroom Trough actually proves viable, do we see Beetaloo get pushed to the right and those projects sort of move up through the agenda? Adam Watson: I don't think so. Look, what we're seeing early days in the Taroom is it's wet gas, more wet gas than it is Beetaloo is very dry gas. And obviously, when you think about the gas that's flowing out of Gladstone, for example, then that's very dry gas and the processing facilities there and the gasification facilities there are set up to take dry gas. So it will be interesting to see whether or not Taroom is a strong export product? Or is it better off being used as a domestic product? And the other thing I'd say is that Beetaloo -- the really good thing about Beetaloo where it's positioned and the size and the way that the checkerboard, the farm -- the acreage has been structured is that it's got as much viability going north as it has going east. And you might find that it goes north first and east second or it could go east first and north second. And again, we're not trying to back any particular horse in that regard. We're just trying to get prepared with all the planning and approvals to be able to accommodate that. Same with Taroom Trough, where, as you can imagine, we're working with all the producers who have acreage in the Taroom and doing work and because we know that pipeline capacity is critical for them to be able to commercialize their operations. Ian Myles: And one final one. Did you guys -- in the generation side, did you guys bid in the South Australian firm option? Or have you passed on that opportunity? Adam Watson: No, we did not. Operator: And our next question comes from Nathan Leed at Morgans. Nathan Lead: Just a couple for me, please. Just in terms of the growth pipeline, obviously, upside from $2.1 billion to $3 billion. It might be a particularly easy thing to do, but can you give us an idea of the projects that are in that pipeline, how much spend is required beyond FY '28 to bring those projects into operation? And then if you can sort of give us a steer in terms of when you think the earnings from those projects will be fully ramped up? Adam Watson: I'll try my best, Nathan, not because I don't have it in front of me, but just obviously, I can't provide any information that's not already out there. So look, if you think about the list that I went through before East Coast Gas Grid some of that will fall out of the FY '28 because the Bulloo is -- we said is going to be available by the end of calendar '28. So there will be some additional flow on there. And again, I'll just sort of subject to answered your question around when we start generating cash flows there. We've been clear in our announcement today that we're targeting a winter '28 for Stage 3A and a end of calendar '28 for 3B. With the Brigalow Peaking power plant, you're stretching my memory, but we would have to -- I think we're able to provide you with some guidance around the timing of that, but that principally falls into this period. From memory, there's a little bit that stages beyond the FY '28 period. And the pipeline would obviously be there before the power plant is commissioned, which is important. Some of the laterals that we're working on fall within -- obviously, we've got a -- pardon but we've got a pipeline of opportunities in laterals, both to service GPG and other gas fields that fall outside of '28. Beetaloo, some of those big developments are in the $3 billion. They all fall outside of that. We've obviously got the SPP within, but those bigger ones would fall principally outside of that. And remote grid, again, portfolio weighted -- we've got some in the $3 billion. But when you look at the opportunities that we've outlined before in places like the Pilbara, most of that falls outside of that $3 billion in FY '28 period. So one of the things that we look at is how we stage all of that and how we fund it and the teams have got models after models, as you can expect, to be able to ensure that we can create value in the way that we deliver those. But that's easy to say on a spreadsheet, it's -- the team do an enormous amount of work having to work with our customers to try and time it to perfection, which is not always the case. Nathan Lead: Second one, probably more for Garrick, but the increased debt capacity, I mean, that's with a reference to the S&P downgrade trigger being reduced. Can you just talk through the Moody's credit rating and whether that's a constraint on debt capacity or there's an opportunity there for you? Garrick Rollason: The constraint has always been S&P. Moody's is the downward threshold is 8% debt. So there is slightly different calculation between the 2 rating agencies, but there is more debt capacity when we look at Moody's relative to S&P. Again, we have great discussions with both rating agencies, and they're really comfortable with nature of the revenues and nature of the growth we've got ahead of us. So that's really exciting that we can sit here, have confidence in our debt capacity and confidence in delivering that accretive growth. Operator: There are no further questions at this time. I'll now hand back to Mr. Adam Watson for closing remarks. Adam Watson: Thank you very much. And look, thanks, everyone. I know it's a super busy day. So thanks for taking the time, and thanks for your questions. If I can just leave you with the key takeaways from today's results. First, we've delivered a strong financial and operating result, which we're really pleased with. And we've provided what we believe is a strong outlook for FY '26. Our growth outlook more broadly is compelling and the returns that we can generate from those projects are really positive. And thirdly, our balance sheet is strong. So again, I do appreciate your support, and thank you for taking the time, and we'll speak to you soon. Operator: Thank you. That does conclude our conference for today. Thank you for your participation. You may now disconnect your lines.
Operator: Good day, and thank you for standing by. Welcome to the Remitly Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, David Beckel, Vice President of Investor Relations. Please go ahead. David Beckel: Good afternoon, and thank you for joining us for Remitly's Fourth Quarter and Full Year 2025 Earnings Call. Joining me on the call today are Matt Oppenheimer, Co-Founder and Chief Executive Officer of Remitly; Sebastian Gunningham, incoming CEO of Remitly; and Vikas Mehta, Chief Financial Officer. Results and additional management commentary are available in the earnings release and presentation slides, which can be found at ir.remitly.com. Please note that this call will be simultaneously webcast on the Investor Relations website. Before we start, I would like to remind you that we will be making forward-looking statements within the meaning of the federal securities laws, including, but not limited to, statements regarding Remitly's future financial results and management's expectations and plans. These statements are neither promises nor guarantees and involve risks and uncertainties that may cause actual results to vary materially from those presented here. You should not place undue reliance on any forward-looking statements. Please refer to the earnings release and SEC filings for more information regarding the risk factors that may affect results. Any forward-looking statements made in this conference call, including responses to your questions, are based on current expectations as of today, and Remitly assumes no obligation to update or revise them, whether as a result of new developments or otherwise, except as required by law. The following presentation contains non-GAAP financial measures. We will reference non-GAAP operating expenses, adjusted EBITDA and free cash flow in this call. These metrics exclude items such as stock-based compensation, payroll taxes related to stock-based compensation, pledge 1% contribution, integration, restructuring and other costs and other income and expense. For a reconciliation of non-GAAP financial measures to the most directly comparable GAAP metric, please see the earnings press release and the appendix to the earnings presentation, which are available on the IR section of our website. Now I will turn the call over to Matt to begin. Matthew Oppenheimer: Thank you, David, and thank you, everyone, for joining us today for our fourth quarter earnings call. Today's call is an important and especially exciting one for me as we announced the appointment of and welcome Sebastian Gunningham as Remitly's new CEO. He could have not timed joining Remitly any better. We ended this strategically important year with incredible results, growing revenue by 29% and reaching adjusted EBITDA of $272 million in 2025, exceeding our guidance for both. This very strong finish to the year and our outlook for next year reflect the strength of our product platform, team and strategy and is the result of 15 years of hard work guided by a simple vision that sending money and receiving money across borders should be reliable, fast and fair. Prior to founding Remitly, I lived and worked on 3 continents and saw how painful and uncertain basic financial flows could be for people who move money across borders. That experience was the seed for our now broader vision, transform lives with trusted financial services that transcend borders. I'm reminded of the importance of that vision every time I connect with customers like Sanjana, a customer since 2019, who joined Remitly through word of mouth during graduate school. She used Remitly initially to support her parents. Since then, she has lived in multiple countries, sending larger and larger amounts over time and recently used Remitly to transfer $60,000 in one transaction to meet tax obligations. She is what we call a high amount sender, a customer category that grew send volumes more than 40% year-over-year in 2025. She says she prefers Remitly relative to banks and other competitors because of our competitive exchange rates and the speed of transfers. That vision, our unrelenting commitment to delivering positive and trusted customer outcomes and the power of our scaled platform have resulted in substantial growth over the years. Since just 2020, quarterly active users have grown by nearly 5x and revenue has expanded more than sixfold. I'd like you to think about that for a moment. Just 5 years ago, Remitly was around $250 million in revenue, serving close to 2 million customers. We are now over $1.6 billion in revenue, serving more than 9 million customers. That momentum in our core money movement business continues. And with less than 4% share of the consumer TAM alone, there is significant headroom to expand further. Beyond money movement, our portfolio of new products provides an opportunity to grow and diversify revenue by creating stronger relationships with customers we serve. In my comments, I will share 3 key updates. First, I'll reflect on our achievements in 2025. Second, I'll share how this past year's accomplishments inform our strategic priorities for 2026. And finally, I will provide additional color on my decision to transition to the Chairman role, how I will stay engaged in that capacity and explain why Sebastian is the right leader for the company going forward. I will then turn the call over to Sebastian to more formally introduce himself. Starting with a reflection on the past year. 2025, put simply, was a phenomenal year for Remitly. Strategically and financially, it was one of the most pivotal years in Remitly's history, culminating in an Investor Day and the issuance of our medium-term outlook in which we expect to generate up to $3 billion of revenue and $600 million of adjusted EBITDA by 2028. Equally importantly, it created the right moment to accelerate execution with a new leader. Our exceptional performance in 2025 was underpinned by 3 things: first, strength in our core money movement product; second, early contributions from new products, which enable our long-term vision of becoming a leading and trusted provider of financial services that transcend borders; and third, efficiency gains and operating leverage, which drove record levels of adjusted EBITDA, GAAP profits and free cash flow. Starting with core money movement. 2025 marked another year of rapid customer growth. We ended the year with more than 9 million quarterly active users, close to $75 billion of annual send volume and more than $1.6 billion of revenue, growth of 29% year-over-year, continuing our track record of significant share gains amid one of the more challenging political and macroeconomic environments in recent memories. This growth was driven by an expansion of our reach with new customer categories like high amount senders, the strength of our platform, which allowed us to test, iterate, gather market intelligence and leverage learnings faster than ever and our continued focus on improving the customer experience. Our relentless attention to trust, reliability, speed and simplicity and delight drove further increases in retention rates and customer lifetime value. Our platform also enabled meaningful progress in the launch and adoption of new products. This past year, we launched our Send Now, Pay Later product, Flex. Flex is our first product outside of global money movement to surpass 100,000 users, reflecting its strong appeal with a large portion of our customers as it bridges timing mismatches between earnings and the transfer needs among our customer population. We ended the year with around 120,000 total Flex users and saw solid double-digit quarter-on-quarter growth in users each quarter throughout the year. We also launched a product focused on businesses, Remitly Business, a global money movement product that allows small- and medium-sized businesses to pay international contractors, vendors and employees. The focus for Remitly Business this past year was on developing and testing features that appeal first to micro businesses, while at the same time, managing a product road map that enables us to scale quickly to address the roughly $20 trillion global money movement opportunity for small- and medium-sized business customers. Early traction for Remitly Business is strong as we ended the year with more than 15,000 business customers on the platform. The third major new product launch last year was our membership program, Remitly One, which ties all our new product offerings, liquidity, Wallet and Card into a unified experience that rewards engagement and builds daily habits. Early adopters have shown strong demand for the Send Now, Pay Later feature as we continue to extend the availability and features of our Wallet and Card and refine other rewards and benefits. In 2025, we also delivered record levels of efficiency, profitability and cash generation, significantly outperforming our expectations. Just 1 year ago, the business had a negative net income of $37 million and today had net income of $68 million with $41 million of that coming in the fourth quarter alone. Momentum and profitability is being driven by several reinforcing forces. First, AI-enabled operating enhancements are fundamentally improving both efficiency and velocity. For example, a recently upgraded fraud model, leveraging AI and integrated data across our platform helped drive record low transaction losses as a percentage of send volume and lower sideline rates in Q4, contributing roughly $10 million of incremental RLTE dollars versus our forecast. And in product development, we have reduced developer time for product enhancements by combining processes that involve many data sources and human judgments into agent automated workflows, bringing up developer and engineering time for more strategic, higher-impact projects. Second, scale continues to strengthen our flywheel, driving improved unit economics across transaction expenses and other major expense categories. Third, optimization in treasury operations aided by AI models and stablecoin have driven continuous improvements to our FX costs. These factors, together with a disciplined approach to hiring contributed to an expansion of adjusted EBITDA margin of more than 500 basis points year-over-year, enabled full year GAAP profitability for the first time in our history and drove a tripling of free cash flow. We will carry this momentum from 2025 into 2026 as we progress towards the 3-year financial goals we laid out at Investor Day of up to $3 billion in revenue and $600 million in adjusted EBITDA. Slide 6 presented at our Investor Day is the strategic blueprint we will use to drive improvements in our platform and products while ensuring that we remain laser-focused on meeting the most critical cross-border financial needs of a growing group of customer categories. I'll touch on key priorities for each, starting with our platform. At Remitly, we see AI as a tremendous tailwind for improving our platform and an enabler of our strategic and financial goals. In 2026, we will further expand the use of agentic and AI systems company-wide to amplify productivity, streamline operations, lower fraud risk, improve customer satisfaction and speed product development and decision-making. We will expand our use of stablecoins by enabling broader access to USDC and further embedding stablecoin and treasury operations to generate incremental working capital efficiencies and lower transaction costs. Moving to products and specifically, our new products, credit and liquidity, wallet, membership and our money movement products targeting businesses. In 2026, we will continue to test and optimize while moving to full-scale launch for a number of our new products in key geographies. We expect in total to more than double revenue from new products this year. Vikas will provide more detail about specific growth initiatives for the upcoming year in his commentary. Finally, I'll discuss our priorities for growing the customer categories we outlined at Investor Day. In 2026, we will continue to expand our presence with high amount senders or those that send more than $1,000 per transaction, a large, important and underserved customer category. Our unit economics optimized for lower transaction amounts give us a huge competitive advantage as we extend to higher send threshold. In 2025, we saw volumes from high amount senders grow 15 percentage points faster than low amount senders, and we expect another year of strong growth in high amount send volumes as we further extend send limits. 2026 is also expected to be an important year for geographical expansion. We continue to scale in the UAE, launched outbound service in Japan early in Q1 and plan to enable sending from the Kingdom of Saudi Arabia and potentially Brazil, subject to regulatory approvals. I could not be more excited about Remitly's prospects in 2026 and beyond. Our growth today reflects the cumulative benefits of core strengths developed over the last 15 years. Trust, a proprietary global money movement network and the compounding advantages of scale. We built a digital-first platform that dramatically lowers the cost and friction of cross-border transfers, helping to significantly reduce the industry cost of sending a transfer and saving customers billions of dollars as a result. We turned a largely cash-based, slow remittance process into a near instant experience for millions of people, resulting in real tangible improvements in people's lives. Looking ahead, the work to drive positive business outcomes and the achievement of our medium-term financial target is clear and interdependent. We will further accelerate product velocity so we can convert product proofs into broad adoption. We will continue to institutionalize operational excellence with tighter cadences, repeatable playbooks and a relentless focus on execution quality. We will manage costs thoughtfully as we have done by strategically reducing headcount and reallocating resources to high-impact growth areas. And we will treat AI as a structural lever using models to speed product delivery, improve underwriting and risk controls, reduce fraud risk, automate audit and compliance and make marketing measurably more effective. Doing these things together at scale and with continued focus on capital discipline is what moves us from a global payments company to a company that offers a wider range of financial services that transcends borders, one capable of transforming lives for individuals and businesses with cross-border financial services needs. And with the foundation and plans in place, I am excited to hand the reins over to a new leader who will dramatically accelerate the delivery of new products and the realization of our vision. The transition has been and will continue to be done with a lot of intentionality. I went to the Board a while back to start discussing succession planning. I didn't know if it would take a quarter or several years to find my successor, but I had the conviction that now was the time to find an incredible successor. The company is doing exceptionally well. The vision is clear. And with the right leader, we can meaningfully accelerate delivery while I continue as Chairman. The Board and I ran a deliberate exhaustive process to identify that leader, defining a success profile, completing thorough interviews and running independent pre-hire diligence and assessments. Sebastian Gunningham emerged as the leader who is an exceptional fit for what we need in our next phase. Originally from Argentina and with extensive professional experience in Latin America, he appreciates better than most the need for timely and reliable cross-border payment solutions and a stable currency. He also has great exposure to founder-led companies and cultures at the most senior levels, reporting directly to Larry Ellison at Oracle and Jeff Bezos at Amazon. With this experience, he brings a rare combination of product rigor and operational discipline. He grew Amazon's marketplace business to a multi-hundred billion GMV business, and he's led growth companies as CEO at various stages. Finally, he has broad experience in financial services, running Amazon payments during his tenure in Amazon and more recently, Chair of Santander Consumer Finance . Simply put, he is uniquely suited for Remitly as a product-led technology executive and strong operator with incredibly unique experience at both very large and growth stage technology and financial services companies. As I have gotten to know Sebastian, it became clear that he is exactly what Remitly needs right now, and I am so excited for you to get to know him going forward. I will remain an active adviser for Sebastian and the Chairman of Remitly. My top priority is to work with Sebastian on an organized and thoughtful transition as he ramps up as CEO in the coming months. Sebastian and I are highly complementary. He will relentlessly drive product velocity and operational cadence. I will provide a founder's perspective, support strategic external relationships and ensure continuity of our long-term vision. We will operate in a tight partnership. On a personal note, I see this more as stepping up than stepping away. I will continue to be the largest individual shareholder with no plans to sell for the foreseeable future, and I will remain deeply engaged as Chairman, not as an operator of the business where I will defer to Sebastian. I also plan to devote more time to systematic problems where Remitly's experience and scale can help. For example, remittance policies that support safe digital adoption and regional work in fast-changing sending hubs like the Middle East, where an onshore presence, policy engagement and other macro issues are important to our customers. These are longer-term cross-industry initiatives that I will pursue from a strategic vantage point and where our platform and AI capabilities provide practical levers to affect change. Let me close by reaffirming the one sentence that guides everything we do and that remains unchanged, transform lives with trusted financial services that transcend borders. That is the North Star for every product decision and every operational choice. The platform, the products and the team are now in place to deliver that ambition at a much larger scale. The work ahead is to increase velocity and execution quality, so more customers benefit faster. With that, I will now hand it over to Sebastian for a short introduction. Sebastian Gunningham: Thank you, Matt. First, I want to congratulate Matt and the entire Remitly team on an exceptional 2025. Ending the year with 29% revenue growth and $272 million in adjusted EBITDA is a testament to the strength of the platform we've built over the last 15 years. It's a privilege to join a company executing with such consistency and discipline of results. Second, I've been asked what attracted me to Remitly. The answer is a combination of mission, opportunity and time. Let me start with the mission. Remitly serves a global community that has been historically underserved and overcharged. After getting to know Matt, it became clear that this mission is an authentic reflection of the founder. This makes the work of serving this community meaningful and it makes the impact real. Next, the opportunity. Global remittances is a monster category with room for multiple strong players. Remitly has around 4% of the consumer payments segment alone. There is plenty of space for growth as money movement around the world is only going to get bigger and more important. Then the product. Customers love the Remitly product. High trust and repeat usage prove that Remitly is a product value story. That trust built across more than 5,300 global corridors is a moat that doesn't reset overnight. The unit economics also work as you are seeing in these latest results. This is a business with scale advantages that will continue to accrue into the future. And finally, timing. AI is a big tailwind for this business. For me personally, the timing is very good. I have a data and science background and have been deep in the evolution of AI. I believe AI will be transformative, and I also believe incumbents with established business models and happy customers are going to be huge beneficiaries of AI. I'm going to aggressively lead that journey at Remitly. Putting all these points together, it became a very compelling reason to say yes to leading Remitly. I've also been asked how I would brand myself as I step into this role. My career has been defined by building and launching products at some of the best companies in the world, leading large-scale engineering and business teams and operating within complex organizations. I have also spent the last 5 years working deep in banking and payments. Paired with my data science background, I'm deeply attuned to the ways AI is transforming the space. I'm a product-first operator, someone who believes in combining rigorous operational discipline with the speed of technological innovation. Let me close with this reflection. Remitly operates in a fast-growing, ever-evolving and over $22 trillion annual TAM. In this environment, in my opinion, there is only one durable advantage that matters, build the best product. In digital financial services, the product is the business. That will be my focus and the way we keep growing our customer base, delivering a great service and driving our revenue growth. I look forward to interacting with all our analysts and shareholders and to working closely with Matt and the Board to deliver on the ambitious long-term vision we have laid out for Remitly. Matthew Oppenheimer: Thank you so much, Sebastian. I am so incredibly excited that you are here. Your focus on building the best product, combined with disciplined execution is going to result in really exciting results for our company and customers. And it reinforces the strategy we laid out at Investor Day and strengthens our confidence in delivering on our ambition of $3 billion in revenue and $600 million in adjusted EBITDA by 2028. With that, I'll now turn the call over to Vikas to walk through our financial and operating highlights from the quarter. Vikas Mehta: Matt, thank you for your leadership. Sebastian, welcome to Remitly. Good afternoon, everyone. As we shared at Investor Day, we are focused on profitable growth, strong free cash flow and managed dilution to drive long-term shareholder value. Q4 and full year results clearly demonstrated our ability to do that. We delivered a very strong quarter and full year with record revenue and adjusted EBITDA. Fourth quarter was $442 million revenue, up 26% year-over-year. Adjusted EBITDA was $89 million, resulting in an adjusted EBITDA margin of 20%, our highest quarterly adjusted EBITDA margin ever. Our performance this quarter was driven by 3 primary factors: revenue growth, aided by a strong December holiday period with efficiently managed marketing spend, lower-than-expected transaction losses, reflecting the benefits of our new AI-driven fraud detection and prevention model and rigorous management of operating expenses. For the full year, we once again delivered profitable growth. Revenue was $1.635 billion, up 29% and adjusted EBITDA was $272 million, resulting in an adjusted EBITDA margin of nearly 17%, an increase of more than 500 basis points year-over-year, as you can see on Slide 12. Importantly, we delivered our first full year of GAAP profitability with $68 million of net income. We delivered these results by carefully managing both top line and bottom line throughout the year with revenue ending up more than $60 million above and adjusted EBITDA more than $80 million above the midpoint of our initial 2025 guidance. I'll begin with an overview of our fourth quarter results and then share our outlook for the full year and first quarter of 2026. Let me first unpack revenue growth drivers for Q4. Send volume grew 35% to $21 billion, consistent with the prior quarter's pace. Supporting the strong volume growth, send volume per active customer increased to over $2,200 or 13% year-over-year growth to reach its highest level, both on an absolute and percentage growth basis. This was driven by growth in both transactions per active customer and record growth in average transaction size as we continue to win share and gain traction with high among spenders and business customers. Quarterly active customers increased 19% year-over-year to nearly 9.3 million, in line with expectations. Our retention remains strong, reflecting the benefits of investments in the core product to improve speed, reliability and the overall customer experience. As expected, volume and revenue exceeded QAU growth as we saw a greater mix of send volume from high amount senders. Before I dive into our performance, let me define our 3 customer tiers by send volume. Low amount senders are those that send under $1,000 per transaction. High amount senders are customers that spend between $1,000 and $10,000 per transaction and very high amount senders are customers that spend over $10,000 per transaction. In Q4, we saw a continued shift in mix towards volumes from high amount senders and very high amount senders. High amount sender volume grew 14% year-over-year and very high amount sender volume grew 105% year-over-year, as shown on Slide 14. Growth in volume from high amount senders and very high amount senders accelerated in Q4, increasing our mix of spend volume from these tiers by over 350 basis points year-over-year. These 2 customer tiers are a strategic focus for us. And as we noted at Investor Day, now they comprise nearly 50% of spend volume. This quarter, our take rate was 2.13%, in line with expectations. Growth in volumes from high amount senders was one of the main contributors to year-over-year changes in take rate, both for the quarter and the fiscal year. Since take rate is heavily influenced by mix, it is not a great metric for analyzing our underlying business performance. We believe that RLTE dollar growth or RLTE per active customer, which I will highlight shortly, are more indicative of results than take rate for analyzing our performance. Now let me dive deeper into our revenue performance from a geographic and new product perspective. From a spend perspective, U.S. revenue grew 28%, driven by continued share gains. Rest of World revenue grew 26% year-over-year, accelerating sequentially and showcasing the geographic diversification of our business. Notably, in Q4, we saw strong adoption of our product in UAE with more than 150% quarter-over-quarter growth in new customers. On the receive side, revenue from transactions to regions outside of India, the Philippines and Mexico grew faster than overall revenue growth and now comprises over half of our revenue mix. Before moving to a review of profitability, I'll discuss progress made with new product areas, focusing on Remitly Business, Send Now, Pay Later, Wallet and Card and our membership program. As Matt noted, we are seeing strong indications of product market fit for each. Our goal over the next 3 years is to scale these products to drive adoption within our existing customer base and leverage new products as a means of attracting first-time users to the Remitly platform. As noted at our Investor Day, we expect these new products to contribute 5% to 10% of total revenue by 2028. In 2025, new products contributed a little more than 1% to our revenue, and we expect new products revenue contribution to more than double in 2026. Revenue from new products include Flex, Remitly Business, Wallet and Card and Remitly ONE. With that overview, let me share a few highlights as it pertains to our new products, starting with Remitly Business. Remitly Business is our global money movement product tailored to the 80 million small and medium businesses with cross-border financial needs. Remitly Business addresses an opportunity more than 10x the size of our core consumer payments business. As Matt noted, our early focus with this product has been micro businesses. This subcomponent of the $20 trillion business TAM wants a low-friction repeatable payment workflow that can be easily integrated into the systems small businesses use, all with the same level of trust our core consumers enjoy. We have seen strong traction for Remitly Business in the 6 months it has been offered with over 15,000 businesses on the platform. Average transaction sizes for business customers are roughly twice those of our core customer category. Remitly Business is currently available to businesses in the U.S., Canada and the U.K. with plans to expand in the EU in 2026. In 2026, we also plan to add features that appeal to larger businesses with more advanced cross-border payment means like recurring and bundled payments. Moving on to Send Now, Pay Later. We continue to see strong product market fit for Flex with active users reaching around 120,000 and revenue nearly doubling sequentially in Q4. Unit economics for Flex in Q4 are encouraging and in line with expectations. Our data reviews that Flex customers spend more than non-Flex members and loss rates are trending in line with expectations. In 2026, we'll leverage key learnings from early cohorts to continue to expand. As we have shared at Investor Day, this spring, we will also launch Remitly credit, a recourse line of credit that will offer customers access to higher funding limits and provide customers a means of establishing a credit history. Finally, Wallet and Card are foundational elements of our broader financial services offering and are expected to be a key enabler of the adoption and utility for our new products, allowing customers and businesses to store, save and spend money. We have seen encouraging early traction with over 60,000 wallets created to date despite a controlled product rollout. Flex Advance, Wallet and Card and upcoming Remitly credit comprise the core set of features for Remitly One, our flagship membership product. While members have shown a strong interest in Flex benefits, we expect to unlock wallet and cards global availability, launch Remitly Card Credit and grow other benefits and rewards as we expand penetration of Remitly One among our customer base throughout 2026. Turning to our focus on driving profitable growth on Slide 16. As I noted earlier, the Revenue Less Transaction Expenses or RLTE, is a useful indicator of our business model's long-term success. RLTE dollars grew 30% to $305 million, reflecting strong customer activity, improved partner economics, routing optimization and economies of scale. RLTE as a percentage of revenue this quarter was 69%, a record high, improving 252 basis points year-over-year. We remain focused on long-term RLTE dollar growth as we continue to attract new customers, innovate with new use cases and scale. Transaction expenses this quarter were $138 million and as a percentage of revenue was 31%, excluding provision for transaction losses, other transaction expenses were $123 million, improving 200 basis points year-over-year as a percentage of revenue as we continue to benefit from the improved network economics. The mix of digital received transactions increased year-over-year by more than 300 basis points, continuing a trend that has been positive for our business and customers. Provision for transaction losses was $15 million or 7.3 basis points as a percentage of spend volume, a record low and better than our expectations. As noted, improved performance this quarter is due in part to a recently deployed AI-driven fraud prevention and detection model. With that, let me walk you through the specific non-GAAP expense categories. Notably, we delivered leverage across all expense categories in Q4. Marketing investments remain disciplined and growth focused. We spent $88 million on marketing in Q4, up 11.5% year-over-year. As a percentage of revenue, marketing expense was 19.9%, improving more than 250 basis points year-over-year. Marketing spend per active customer was $9.49, down 6.5% year-over-year. This outcome was driven by a more focused and intentional approach to investing in customer acquisition around peak holiday periods, aided by ongoing incrementality testing, which allowed us to more efficiently meet our targets by optimizing spend across geographies. We were able to deliver these marketing efficiencies while supporting growth in high amount senders and business customers. Notable campaigns in Q4 included a focus in the U.S. on capturing and driving offline to online conversions through our WhatsApp send product and campaigns featuring awareness of the 1% remittance tax on cash remittances. Our lifetime value to customer acquisition cost ratio was about 6x, while our payback period remained under 12 months. As a reminder, our marketing investments drive returns for many years beyond our initial investment given our growing base of repeat users. Customer support and operations expense was $27 million and as a percentage of revenue was 6.1%, improving 12 basis points year-over-year and continuing a trend that we have seen over the past couple of years. AI-based assistance are driving lower agent contact rates with early customer satisfaction scores indicating AI-led interactions can perform as well or better than human agents. Technology and development expense was $56 million and as a percentage of revenue was 12.7%, improving by 83 basis points year-over-year. Technology and development expense grew 18% year-over-year, reflecting our ability to more efficiently manage technology spend while delivering robust product innovation. Across product and engineering, agentic AI is accelerating development velocity to generation and testing, enabling rapid design lockups, enhancing customer service, supporting transaction completion, streamlining document verification and empowering natural language planning. In Q4, we further increased our leading metrics across speed and reliability. Over 65% of transactions were dispersed in under 20 seconds, increasing 7 points since Q3. More than 97% of transactions were completed without customer support contact and our platform delivered 99.9% uptime. G&A expense was $45 million, an improvement of 130 basis points as a percentage of revenue year-over-year, reflecting continued leverage across the business. Overall, we continue to maintain rigorous discipline on hiring and non-headcount spend while investing in compliance, geographic expansion and AI tools. As Matt noted, we are investing in AI across the organization with AI now an important element of performance objectives company-wide. We expect to generate operational efficiencies and top line benefits from these investments through increased productivity and more targeted efficient customer acquisition. Strong revenue growth, combined with efficiency and discipline led to record adjusted EBITDA of $89 million. We also delivered a record GAAP net income quarter with $41 million of GAAP net income, a significant improvement compared to a $6 million net loss in the fourth quarter of 2024. As we noted at Investor Day, our North Star is to drive free cash flow while managing dilution. 2025 showcased our ability to drive meaningful growth in free cash flow while prudently managing dilution. Free cash flow was $283 million in 2025, which more than tripled from the prior year. Outstanding shares grew only 5% year-over-year, resulting in substantial growth in free cash flow related to growth in our share count. This quarter, we adjusted our presentation of cash flows, making it simpler for investors to calculate and model by removing the impact of pass-through customer funding activity. I'll now discuss dilution management on Slide 18. In 2025, we made progress across each of the metrics we track. Stock-based compensation as a percentage of revenue was 9.5% for the full year, approximately 250 basis points lower than in 2024. In Q4, stock-based compensation was $41.3 million, 0.8% lower year-over-year, the first year-over-year decline in quarterly stock-based compensation in the company's history. Dilution declined to 5%, 140 basis point year-over-year improvement, supported in part by the $23.9 million worth of share repurchase in 2025 under our $200 million authorization. And the net burn rate fell to 2.9% in 2025, improving 200 basis points year-over-year. With that, I'll move to our outlook. For the first quarter of 2026, we expect revenue of $436 million to $438 million or 21% growth. First quarter revenue guidance reflects a strong start to the year, continuing the momentum we have observed exiting 2025, favorable seasonality as well as early customer acquisition benefits associated with the recent 1% tax on cash remittances. Breaking down our revenue growth expectations. Consistent with recent trends, we anticipate send volume growth to exceed revenue growth and revenue growth to outpace quarterly active customer growth, driven by continued momentum among high amount senders and businesses. Send volume per active customer is expected to grow in the mid- to high single-digit range, supported by the shift in mix towards high amount senders and businesses as we continue to make strategic investments and expand engagement with these customer categories. For the full year, we expect revenue between $1.94 billion and $1.96 billion, reflecting a growth rate of 19% to 20%. I'll provide more context on our outlook for the year. The majority of our revenue in 2026 comes from prior year cohorts, giving us strong visibility into the following year. As noted, we expect revenue from new products to more than double in 2026. New products growth will be driven primarily by flat remittance volume, membership fees and growth in business remittance volumes. Now let us pivot to profitability and expense guidance, starting with RLTE. We expect Q1 and full year RLTE margin to be broadly in line with 2025 levels, adjusting for normalized transaction loss rate. As always, transaction loss rates may fluctuate quarter-to-quarter, and we remain disciplined about optimizing customer lifetime value while rigorously managing risk across our platform. Shifting to marketing. We expect continued marketing efficiencies in 2026 as we prioritize high ROI marketing opportunities in our core relevance business while continuing to invest in marketing for new products and customer categories. For Q1, we expect marketing spend for QAU to be roughly flat year-over-year. Putting this all together, we expect Q1 adjusted EBITDA to be between $82 million and $84 million, translating to an adjusted EBITDA margin of around 19%. For the full year, we expect adjusted EBITDA to be between $340 million and $360 million, representing an adjusted EBITDA margin of around 18% as product and marketing investments supporting new products are expected to build throughout the year. The improvement in adjusted EBITDA margin year-over-year reflects continued operating leverage supported by the prudent use of AI to improve operating efficiency and actions taken this quarter to better align global resources with our most significant growth opportunities. We expect to generate positive GAAP net income each quarter this year and strong year-over-year growth in GAAP net income and free cash flow. In terms of cash flow priorities, after organic investments, our top priority will remain the repurchase of shares. At current stock prices, we believe the repurchase of shares provide a strong return on capital, and we expect to increase the quarterly pacing of our buyback activity in 2026. To summarize, in Q4, we delivered very strong results across our key financial metrics, achieving 26% revenue growth and 20% adjusted EBITDA margins. We also delivered record GAAP profitability and strong free cash flow, underscoring the power and scalability of our business model. Thank you, Matt, for your inspiring leadership all these years with very strong momentum exiting 2025 and Sebastian's leadership going forward, we are excited about the future. With that, Matt, Sebastian and I will open up the call for your questions. Operator: [Operator Instructions] Our first question comes from Tien-Tsin Huang with JPMorgan. Tien-Tsin Huang: Great. Yes, I just want to add my thanks to Matt as well. I learned a lot from you, Matt, and what you built. So hopefully, we'll be able to stay connected here. My question, maybe just for Sebastian since we have you, and I'm sure we'll learn more and I appreciate your intro and yourself. But just given your background, what's really interesting, I would love to hear a little bit more on how your prior experience prepares or informs your decision to join and lead Remitly given that it is a smaller consumer platform, different than some of the larger enterprise businesses that you led. So just love to hear your thoughts on that. Sebastian Gunningham: Thank you for the question. Some of my prior experiences include leading product organizations and engineering organizations in some of the best companies in the world. Some of those were big, some of those were smaller. I've run large complex businesses in many continents. I've been a CEO a number of times. And specific to payments and the Remitly Business, I did run the payments business at Amazon, as I mentioned, both on the consumer side and on the merchant side. Those were not always big, but they did scale. And this included all the money in and the money out channels for the Amazon business. And then finally, over the last few years, I've played both a Board role and a product role at Santander, helping its very successful global digital transformations in its core business and its payments business. So I think the sum of all these experiences positions me well to lead Remitly in this next chapter of scaling. Matthew Oppenheimer: Great. Yes. And the only thing that I will add, Tien-Tsin, is a huge thank you to you. I've known you for a decade. You're an amazing analyst and appreciate all the thoughtful questions and coverage. I am incredibly excited for Sebastian to be here. And I wish you could see me because I have a huge smile on my face sitting next to him here in Seattle. I lost my voice as you can potentially hear. So I'm speaking a bit more slowly and calmly. But the feeling I have is he's calm, optimism about this change. And you'll hear more from Sebastian and Vikas today, which is great and just super excited about what's to come. Operator: Our next question comes from Ramsey El-Assal with Cantor Fitzgerald. Ramsey El-Assal: I'll also add, Matt, it's been terrific interacting with you all these years, and welcome to you, Sebastian. Matt, I'm going to spare your voice and actually ask Vikas a question. What are you seeing out there in terms of kind of macro impacts to the business? I'm thinking things like FX or immigration policy or any other external factors. I guess the more nuanced question is, did you grow through any headwinds? Or are these macro factors that are in the headlines just not impacting your business? Vikas Mehta: Ramsey, thank you for the question. And I'd start with the fact that we had an exceptional year and a quarter as we ended the year with record revenue, record EBITDA and EBITDA margin. And a lot of that was because of really strong execution, especially the December holiday period, we saw significant outperformance even compared to our internal expectations. And as we noted, it was along with driving marketing efficiencies at the same time. So a lot of it was really strong execution, understanding the customer needs and really having a product and a marketing message that has resonated with our customers. As we look forward, we shared our guide and the drivers of the guide. I'd say, first of all, building on a strong FY '25 gives us a lot of predictability coming into the year. We see that our customer is very resilient even in sort of geopolitical volatile background, which again strengthens our confidence with regards to the guidance. One additional factor, which is a good tailwind, at least in the beginning of the year is the 1% remittance tax that's applicable for cash remittances. So we definitely see a strong start to the year because of that. But overall, the diversification that we have across geographies, customer and new products, the new product momentum we have seen thus far, all of us gives us a great confidence in the guidance we have put forward. Operator: Our next question comes from Aditya Buddhavarapu with Bank of America. Aditya Buddhavarapu: Just wanted to say, Matt, congratulations on the successful run at Remitly; and Sebastian, welcome. I have a couple of questions actually for Vikas as well. When I look at the 2026 guidance, you talked about the 19% to 20% growth on revenues for the full year with Q1 actually being at 21%. So could you just talk a bit more about the cadence of revenues through the year? Is Q1 faster than the full year outlook because of the 1% remittance tax giving some tailwind given you have actually easier comps in H2, should actually there may be some degree of conservatism there given maybe macro uncertainty. So just some color on the quarterly cadence. And then also related to the outlook for '26, when you exited Q4 with 20% adjusted EBITDA margin. For '26, the implied margin is close to about 18%, 19%. So could you just talk about what's driving maybe that sort of margin for the full year being lower than Q4? Vikas Mehta: Yes. Aditya, first of all, thank you for the question, and thank you for initiating coverage on Remitly. I'll start with your second part of the question, and then I'll go to the first part. So as you noted, we exited 2024 with a very strong Q4 and a record EBITDA margin of 20%. There were a few reasons for that outperformance. And I'd say the 3 key ones being a strong holiday period, along with marketing efficiencies, which pretty much drove 1/3 of that, call it, beat to guidance. The second important factor was a record low transaction loss. It was at 7.3 basis points, which, again, was very, very strong, especially given the new AI model that we have been able to deploy. And the final one was disciplined expense management. So as we look at 2026, we think about, for example, the transaction loss tends to be volatile. And we -- in our guidance and our forecast, we look at the normal range, historical range, which is 9 to 13 bps, and we take that as, call it, the baseline. Outside of that, we really feel that with strong execution, again, we are going to continue to drive margin expansion compared to the full year FY '25. At the same time, we feel the organic opportunity ahead of us is huge. And as we have spoken about it earlier, the new product momentum has been good. So we want to invest behind that trend that we are seeing. So overall, we feel it's a very balanced profitability plus growth equation we are striking here. Shifting to your question on the revenue drivers and the seasonality thereof, the first point I'd make is that H1 versus H2, it's a similar thing that we saw last year, where the growth rates moderate in the second half. It's a little bit of the larger the business gets, it tends to follow that curve. The second thing I would say is, as you noted, Q1, we benefit from the remittance tax, and there's a little bit of a shift in the Ramadan timing also moving a few weeks ahead compared to last year. And both those give us stronger confidence with regards to Q1. So overall, really looking forward to an exciting 2026. And as I said, a strong foundation from 2025 gives us a great momentum going in. Operator: Our next question comes from Will Nance with Goldman Sachs. William Nance: Matt, it's been a pleasure working with you. I guess one maybe for Sebastian. I think in the prepared remarks, Matt called out the ability to accelerate product innovation and execution and some operational benefits given your history. When you look at the business kind of exiting the year in the mid-20s on revenue, margins expanding nicely, where do you feel like you can have the most impact in some of those things that Matt mentioned at the top of the script? What do you expect to be your main areas of focus as Matt kind of hands over the reins? Sebastian Gunningham: Yes. Thanks for the question. I start as CEO tomorrow, so I don't want to get ahead of myself here. I think I'll make a couple of comments. I think these are very large markets. We are -- we've got a lot of traction in the consumer market. We see, as Vikas and Matt have said, an opportunity in the business market. And even within the business market, there are many, many subsegments. I think product -- having the right product for each of these segments is super important. So I think that overall, any velocity in product development is going to give us all kinds of opportunities in these large markets that we have to address. So a little bit early for me to have a strong opinion, but very excited about what we can do in these markets. Operator: Our next question comes from Cris Kennedy with William Blair. Cristopher Kennedy: Congratulations to both Matt and Sebastian. Just a follow-up, Sebastian. You mentioned your history with data science and your enthusiasm around AI. Can you just provide more color as to kind of what the opportunity is at Remitly? Sebastian Gunningham: So maybe I'll stay away from -- I'll make just a few general comments. I think there are a number of buckets of AI. There's the customer-facing part of AI. There's the internal efficiencies facing part of AI. There's the software product, the software factory part of AI. So -- and we've all been following this. I think the -- as I said, for an incumbent like Remitly with a very strong business model, the right unit economics and the customer that loves the product, and probably doesn't only apply for Remitly. I think that the right AI adoption just gives us a lot of tailwinds into the next few years. So that would be my general statement. I'm very optimistic with what I've seen so far. I think it's going to be a very strong multiplier for the company over time. Operator: Our next question comes from Alex Markgraff with KBCM. Alexander Markgraff: Matt, Sebastian, congrats to both of you. I guess just -- I don't know if these are for Matt or Vikas, but just a couple of questions on new products. I'd be curious to understand sort of what sort of observable benefits you've seen from Flex and One on wallet share. And then just sort of curious on willingness to pay. Anything you've learned in these early days around willingness to pay for those from customers? Vikas Mehta: Thanks, Alex. I'll take this one. We have been very impressed with what we have seen thus far from Flex. First of all, it opens up a whole new category with the Send Now, Pay Later. And as we talked at Investor Day, if you look at our customers and segment them or categorize them, you will have the low amount senders, high amount senders, businesses and receivers. And as you look at low amount senders, there's a clear mismatch between the timing of earnings and when they need to make payments. In addition to that, specifically for our customers, sometimes there's also a mismatch between their credit history versus the creditworthiness. And this is where we feel we can fill that gap and void in a meaningful way for the customer, along with driving really positive unit economics and creating shareholder value. And what we have seen thus far is pretty promising, 120,000 users, revenue almost doubling quarter-over-quarter. And along with that, clearly maintaining strong unit economics as well as having provisions very much in line with our expectations. The last point I'll make on that is we've also seen very interesting insight that the Flex users, especially members tend to send more than the non-Flex users/members. And that clearly shows that not only are we creating a new category, we are actually creating a path where higher volumes are sent and we are reducing some of the friction that was existing earlier. So overall, excited about Flex as well as Send Now, Pay Later in general. Operator: And our final question comes from Darrin Peller with Wolfe Research. Darrin Peller: Matt and Sebastian, congrats to both of you guys. I just want to touch back a quarter ago. But if you look at, it was obviously a very strong upside surprise. And so when we think about the opportunity you're seeing in terms of the higher spenders and maybe just reminding us what other scenarios, what other results drove -- I love to hear what you're seeing in terms of strategy around higher spenders and what's really driving that and maybe other factors all that you see in the quarter driving the upside. Vikas Mehta: Thanks, Darrin. Clearly, the trend that we are seeing is that the high amount spenders are spending more and the product improvements that we are doing, raising the send limits, having the right marketing campaigns are resonating as well. And this shows in the numbers. We had in record send per QAU, both from a dollar perspective, about $2,200 as well as growth at 13%. And if you fuel that further, in fact, we provided a slide that breaks out low amount senders, high amount senders, and we added one more tier to call out very high amount senders, which is people who spend or send more than $10,000 per transaction. And we are seeing really high growth rates with north of 40% on the high amount senders and north of 100% send volume growth for the very high amount senders. And again, as we say, we are just getting started there and with more product innovations and a more front-footed marketing campaign in that space, we will continue to drive higher market share gains, and we feel very excited about that in 2026 and beyond. Matthew Oppenheimer: Great. And I'll just wrap with a couple of thoughts. Our ambitions at Remitly have never been higher. And if you look at our vision of transform lives with trusted financial services that transcends borders, that is our anchor. And as we think about this transition, as we think about Sebastian coming on, as we think about its product-led leadership, operational excellence, that is going to be a huge, huge accelerant to help us accomplish the vision and financials that we laid out at Investor Day. And to wrap, as my last earnings call as CEO, I just want to say an enormous thanks to our investors, to our analysts, to all of our thousands of team members and to our millions of customers around the globe. This business is already making an enormous impact, and it is because of you, and we are very much more than ever just getting started. Operator: Thank you. This concludes the question-and-answer session and today's conference call. Thanks for participating. You may now disconnect.
Conversation: Operator: Welcome to Surgical Science Q4 Report 2025 Presentation. [Operator Instructions] Now, I will hand over to the speakers, CEO, Tom Englund; and CFO, Anna Ahlberg. Please go ahead. Tom Englund: Welcome to this earnings call for Surgical Science for the fourth quarter of 2025. My name is Tom Englund, CEO. And with me today, I have our CFO, Anna Ahlberg. We will first present a summary of quarter 4 and our results, and then we will have the Q&A session. We are pleased that like quarter 3, quarter 4 was a clear step in the right direction for Surgical Science. We had sales of SEK 269 million and grew by 15% adjusted for currency effects. And our license revenues almost exclusively from robotics companies were the highest ever reported at SEK 92 million, which was an increase of 21%. The adjusted EBIT amounted to SEK 46 million or 17%. On December 8, last year, we presented our new financial targets of annual sales growth of 10% to 15% with profitability of more than 15%. And it's gratifying to see that we're now delivering fourth quarter results in line with these targets. So if we move over to Educational Products. Performance in Educational Products was mixed with growth of 4%. North and South America showed strong growth of 43% with a good distribution between the different countries. And we are seeing a clear recovery now in this region compared with previous quarters with a higher customer activity and bigger sales pipelines. And we're also cautiously optimistic about the future. Asia, on the other hand, saw sales decline by 21%, driven by a continued challenging market situation in China with generally lower activity and demand. One of our strategic goals is to increase the profitability in all segments outside of robotics. For our high-volume products, we are now beginning to see the impact of this strategic initiative. During quarter 4, our average sales prices increased by around 9% compared with quarter 4 2024 at fixed exchange rates without us experiencing any significant effect on volumes. The impact is most felt in direct sales and indirect channels usually show a delay, but we expect further positive price effects to be seen during this year. Also during the quarter, our new PartnerPath distributor program was introduced on a broad scale, and this program aims to improve cooperation, sales and efficiency between us and our partners, which, among other things, will contribute to increased profitability. Highlighting the Ultrasound segment, the Ultrasound segment experienced a very high level of activity, both within hospitals but also in industrial customers. Although ultrasound sales increased by 48% compared to quarter 4 '24, the segment did not meet our growth expectations as pro forma sales, including the acquisition of Intelligent Ultrasound declined. The main reason for this decline we consider to be structural challenges within our own direct sales force, something that we've already addressed during the past quarter. For ultrasound, and you can see the picture of an ultrasound simulation product to the right, 3 new simulation modules were launched during quarter 4 and in January. One of these is targeted towards the diagnosis of endometriosis, which is a major health problem affecting 1 in 10 women. The module supports one of our focus areas, women's health, an area that is neglected in health care and where we have identified that our unique products and solution can create significant value and contribute to earlier diagnosis. This is one clear example of how Surgical Science fulfills our purpose of unlocking the full potential of every medical professional to improve health care outcomes and save lives. During quarter 1, you can expect the first products, which are based on the joint technology platform from Surgical Science and Intelligent Ultrasound to be launched. We are not yet done with the integration and still have a lot of work to do to realize the full synergies from the acquisition of Intelligent Ultrasound. Now moving over to Industry. The Robotics segment had a strong quarter. License revenue grew by 21% to SEK 92 million, which was an all-time high for the company. We saw strong license revenues from our largest customer, Intuitive as well as several other players in the U.S. and China. These other players are now beginning to install robots in significant numbers, which is in turn driving our license revenues. The collaboration with our largest customer, Intuitive, continued during the quarter. And in January '26, Intuitive announced that its system had been used on more than 20 million patients to date. This, together with the 18% growth in procedures during the quarter is clear evidence of the strong demand and broad adoption of robotic surgery. Both Intuitive and Surgical Science agree on the critical role that simulation plays in training robotic surgeons. Digital offerings are becoming increasingly important for robotics companies and Surgical Science is playing a central role in the development of these offerings. During the quarter, our customer, Johnson & Johnson, applied for a so-called De Novo classification in order to start marketing its Ottava robot for gastrointestinal procedures. Another customer, Medtronic, received FDA approval for the use of its Hugo robot in urological procedures in the U.S. And 2 days ago, Medtronic announced the first commercial surgery with Hugo robotic surgery system at the Cleveland Clinic in the U.S. There are now several hundred robot models that are either actively being sold or about to hit the market. Surgical Science is developing simulation solutions for most of the 20 largest robotics companies, and we feel very confident in the value and uniqueness of our offering in robotic surgery. We have a big and growing pipeline of robotics projects, and we see opportunities for deeper integration into our customers' digital offerings and our ability to create value for many years to come, in line with the recently presented strategy. The introduction of our latest simulator, RobotiX Express has been successful and sales and deliveries have started to pick up speed. 14 simulation exercises have been launched on the simulator so far, and the portfolio will be expanded on an ongoing basis. At the International Meeting on Simulation in Healthcare, IMSH in San Antonio in January, we showcased our products that are making use of AI technologies for the first time ever. In these products, AI is helping to analyze the instrument handling of laparoscopic surgeons and then recommend steps or skills for the surgeons to practice and improve. At the same time, within our core offering of real-time simulation of surgical procedures, we today see major limitations in the power and scalability of AI to handle and calculate models that could generate the complex real-time surgical simulation that our customers require. Therefore, Surgical Science's simulation technologies will continue to be the ultimate solution for high-quality real-time surgical simulation for the foreseeable future and Surgical Science's product experience will be improved significantly with the use of AI. Moving over to Medical Device Simulation. During quarter 4, continued progress was also made in strengthening the company's position within the medical device industry with a focus on endovascular applications. At the end of the year, the pipeline of ongoing development projects was 15% larger than at the same point in 2024. Our development revenue is project-based and may fluctuate between quarters and not fully reflect the underlying level of activity. At the end of '25, the proportion of repeat customers for development projects exceeded 70%, demonstrating that Surgical Science is making progress toward becoming an even more integrated and long-term partner to these customers. During the quarter, several important solutions were delivered to our customers, including the areas of peripheral artery disease and pulmonary thrombectomy. At the same time, sales of simulators to medical device companies for product-specific training fell to SEK 21 million compared with a very strong comparative quarter of SEK 43 million. So over to the strategy and the work going forward. Surgical Science's new strategy was presented at the Capital Markets Day in December last year. The aim is to continue growing the company profitably and establish a market-leading position within our 5 different market segments, all of which currently have low to very low penetration. We are now pursuing active internal efforts to deliver on the strategy and are seeing progress across all initiatives. And we feel very confident that this is the right strategy that will lead to increased shareholder value. Surgical Science is currently a world leader in medical simulation with a very strong brand. Our position is unique with market-leading products, strong and effective direct and indirect sales channels and an extensive medical expertise that our customers rely on for their training and development. Our global reach and support, which ensure reliability and presence are critical factors for our customers. 2025 has been a challenging year in many ways, particularly in relation to the news surrounding our largest customer, Intuitive and the development of our share price. At the same time, Surgical Science has made great strides forward in many respects and is now, in many ways, a significantly stronger company than it was a year ago. Demand for our product is growing steadily, driven by a greater need for training, increased digitalization and a more complex health care. I'm optimistic about the future where our solutions will become a central part of health care training and our ability to generate profitable growth over time. And with that, I would like to hand over to Anna to present the financials in more detail. Anna Ahlberg: Thank you, Tom, and welcome, everyone. We start with sales. For the quarter then we had sales of SEK 269 million, up 7%. SEK 14 million came from Intelligent Ultrasound. And I should just mention, Intelligent Ultrasound is today renamed to Surgical Science UK, but we will still use IU when we talk about this acquired business throughout the presentation. And all IU sales are attributable to the Edu Products business area and the ultrasound product group. In local currencies, sales were up 15%. And we have, after Q1 of last year, since then seen a significant negative effect from currencies on our overall sales. And also on our result, that I will come back to that later. We are just below 80% of revenues in U.S. dollars. We are mitigating this as best we can, except for raising prices that Tom also talked about. We also now quote more countries in euros instead of in U.S. dollars, for example. However, this will not mean a very large change in the ratio between different currencies since a lot of our revenues originate from the U.S. Looking at the business areas, the split was 48% for Edu and 52% for Indu for the quarter, where then Edu was up 4%, but down 8% if we exclude IU. And as Tom mentioned, the Asia region declined 21% compared with the same quarter last year, and that was attributable to China having a weaker quarter, while countries such as Japan and the Philippines showed good sales. Sales in Europe was weaker than last quarter, meaning Q3, but still remained strong and increased by 4%. France and Poland did particularly well in this quarter. And then the comparative figure also includes a major order to Romania. But mentioning Poland, Poland, this market has been really strong for us during these last quarters. It was at an all-time high for last year as a total, and it is also our largest market in Europe. The North and South America region increased by 43% compared with the corresponding quarter last year. And this is attributable to the U.S., which is really nice to see since we have had some tougher quarters there. And this is even when excluding sales from Intelligent Ultrasound that is also -- that part of the business is our largest market. But even if we excluded it, the increase is attributable to the U.S. Indu, up 10%. We had, as mentioned, all-time high license revenues of SEK 92 million. Development revenues were also very strong, while simulator sales within the business area was weaker. I will come back to this when we look at the revenue streams on the next slide. But for the full year, then this means that sales were SEK 992 million. This is an increase of 12% or 19% in local currencies. And in that number, IU is included with SEK 75 million. Their sales for the full year was SEK 80 million. They are in our books and consolidated as of February 18, 2025. And that meant that in SEK, sales were down approximately 30%. This is largely attributable to the U.K. and lower sales to NHS. We've talked about that before, and it's something that we are, of course, not at all satisfied with. The U.K. market was also a market where we saw that sales should be coming from the full product range, also the other Surgical Science products as it then moved to being a direct market. However, and as Tom talked about, we do see a lot of positive signs for our ultrasound product group, where we are now merging our technologies, and we have really exciting products in the pipeline. Edu for the full year 2025 was up 13% and Indu 11%, where license revenues were up 11% for the year. And looking then at the revenue streams, license revenues for the quarter were 34% of our total revenues compared to 30% last year. We saw really good sales, both from Intuitive, and that was then both from dV5 as well as from the older generations, as well as a larger batch revenue order from one of our other robotic companies, customers. So as I think you're all aware of them, we did during the fourth quarter on November 25, received a cancellation from Intuitive on the memorandum of understanding that was signed in January. And this memorandum of understanding implied that all dV5s would be equipped with simulation from us. The cancellation meant that we now, as of January 1 this year, go back to the previous existing agreement between the companies and advanced simulation from us will only be offered to a minority of the customers. For the older generations such as Xi, for example, the agreement has not been changed. It was always an optional feature. And our estimate for this was and still is that it will impact license revenues negatively by SEK 60 million to SEK 90 million for this year. However, as we have also emphasized and Tom talked about it, we still have significant revenues from Intuitive, and we continue to work very closely together on a road map for future simulation. Moving on then to the next revenue stream, simulator sales that was as a whole down 12% compared to Q4 2024. This is due to the industry business area. This is more lumpy than for sales within Edu since it's usually tied to larger projects where development is also involved. And it sometimes also has to be seen together with development revenues. And as an example, the project that we have in Southeast Asian country, that is still in the development revenue phase. This will then during this year and towards the end of this project, move from being pure development revenues to pure simulator sales. So it is usually a mix of the 2 and the simulator sales also usually comes towards the end of the different projects. Development revenues then up a lot also for this quarter and the project that I just mentioned, here, we had revenues of USD 0.7 million, and we estimate the same for this quarter, Q1. So this is, of course, a factor for the increase, but not at all entirely. We had very good development revenues also for other customers. Our gross margin for the quarter was 66% versus 68% in Q4 2024. The fact that license revenue made up a higher share of total sales than in the corresponding period had a positive effect. However, currency effects have a large negative impact on the margin, approximately 2.3 percentage points. And unfortunately, the lower USD exchange rate has less impact on the cost of goods sold than on other cost items because our input goods are primarily purchased in other currencies than in dollars and also production and the associated wage costs, they are also not in U.S. dollars. Then another factor impacting the gross margin negatively that we have seen throughout the year and commented on is that we do have lower gross margin on the IU products. But then also on the positive side, we see that our price increases are starting to have an effect. And that is, as mentioned, something we will continue to pursue. Regarding OpEx, sales costs, they were 17% of sales for the quarter, 20% in the corresponding quarter. And here, we see that the reductions in the sales force following the acquisition of IU have now reached their full effect. And then for the quarter, we also had some lower costs of a more nonrecurring nature due to lower agency fees. This is attributable to sales in certain countries. So it depends on if we sell more or less to these countries. So that means that the cost level was maybe a bit on the low side because of this. But as I said, we have definitely lowered our level for the sales costs. And we have, during the year, also worked a lot with operational efficiency, and we have done reorganizations in line with this. Administration costs, 9% of sales, the same as Q4 last year and R&D costs, 22% of sales. We activated slightly less, SEK 9 million instead of SEK 10 million. And then we had, in this quarter, restructuring costs on this line of approximately SEK 3 million. And this is related to the termination of development personnel in Seattle. During Q4, we restructured our U.S. operations, and this resulted in us closing our Seattle office. We consolidated our operations to our office in Cleveland, and that is then our hub for all commercial activities and services and customer interaction. In Seattle, we had primarily development personnel. And so in connection with this restructuring, these employments were terminated. We still have a few other roles working remotely, and we have the lease for the Seattle office until October 2027. So as I mentioned, the quarter then saw the full impact of the cost reductions we've done after the acquisition of Intelligent Ultrasound. We have done more than we said we would do. We said between GBP 1.5 million and GBP 2 million. On an annual basis, we have done GBP 2.5 million and that then meant approximately SEK 8 million in the fourth quarter. Still then because of the lower sales that we discussed and lower than expected, primarily in the U.S. -- in the U.K., sorry, the operating result for IU was a loss for the quarter of approximately SEK 5 million. Other operating income and operating costs, that is then mainly costs for the company's option programs as well as the revaluation of operating assets and liabilities in foreign currencies. We had a negative impact on this line and on profits in the amount of approximately SEK 7 million during the quarter. And during Q4, we did an internal dividend from Israel. We are taking, as I mentioned also before, certain actions to reduce the effect of the weakening U.S. dollar. So we're both reducing intercompany items, and we also have as little cash as possible in USDs. So that's something we're working actively with. Following this then, our operating profit for the fourth quarter was SEK 40 million, corresponding to a margin of 15%. And for the full year, the FX effects that I mentioned before on the line other, that was a negative SEK 38 million then for the year. And if we exclude these and we also recalculate our revenues and costs with last year's exchange rates and also then exclude acquisition and restructuring costs for the year, and that was in an amount of SEK 30 million, then we reached an EBIT of SEK 177 million for the year or 17%. Organization-wise, we were 313 people at the end of the period, and that is 15 less than going out of Q3. The majority of the change then attributable to the closing of the Seattle office. With the IU acquisition, we added 48 people. And today, we have 11 less here. Adjusted EBIT for the quarter, the result was SEK 46 million. And as mentioned, we had some restructuring costs due to the closure of the Seattle office. Excluding those, we had an adjusted EBIT margin of 18%, same as last year. For the full year, then the adjusted EBIT margin was 12% compared to 19% in 2024. Finance net and taxes. no loan financing meant that net financial items that mainly consist of interest income on bank deposits and then also revaluation of some loan liabilities to subsidiaries, effect of IFRS is also impacting the finance net. Then regarding taxes for the year, the expense here is consists of estimated tax on profit for the year and the change in deferred tax assets. This year's tax expense includes U.S. taxes attributable to the previous year and also taxes that are not linked to taxable income. And combined with the effect of the loss in Intelligent Ultrasound, this means that the effective tax rate increased. And then also for the year, our profit includes the acquisition costs of approximately SEK 23 million. And those are not tax deductible. That is then also impacting the rate. And then cash flow. Cash flow from operating activities was SEK 73 million for the quarter compared to SEK 57 million for Q4 in 2024. Changes in working capital was really small, a small negative of SEK 3 million. Inventories were pretty much unchanged and accounts receivable decreased. Accrued income increased, and this is primarily due to higher license revenues, and they are then paid in the coming quarter, meaning now in Q1, and they have already been paid. So that basically means that the last day of the quarter is when this amount is at its highest. Investing activities, we invested approximately SEK 3 million in the quarter in our ongoing construction of new production facilities in Tel Aviv. We -- they are expected to be commissioned in the second quarter of this year. And then for financing activities, the larger amount underlying for lease liabilities is actually an adjustment in the quarter, so nothing to mention here for the year. And cash flow then was a positive of SEK 32 million for the quarter before FX adjustments. And we ended the year with SEK 616 million in our bank accounts. And with that, I hand back to you, Tom. Tom Englund: Thank you, Anna. So to summarize, we believe that quarter 4 was a solid quarterly result and that Surgical Science is moving in the right direction. We see a continued rapid development of the company in a dynamic market where we can see positive signals both in our external work with our customers and in our internal efforts to create a stronger, more efficient and more profitable company. Our new strategy, which we also now execute on will make us a company with several more revenue streams and a company which addresses a significantly larger market than today. And with that, I would like to open the floor for questions. Operator: [Operator Instructions] The next question comes from Simon Larsson from Danske Bank. Simon Larsson: My first question is related to the strong growth for licenses here in the quarter. Is it possible to quantify the number of robotic customers that bought licenses here in Q4 and how that has developed versus, for example, let's say, a year ago? I'm just trying to understand the underlying strength given the expected negative Intuitive effect we will see from Q1. So any color on the strength or sort of the breadth of the license growth here would be helpful. Tom Englund: Simon, Tom here. So we have said that we have 20 robotics companies as customers right now. And last quarter, it was around 5 of them who bought licenses from us. Simon Larsson: Sorry, it was 20 active customers during Q4 or that's the total scope? Tom Englund: That's the total number of customers that we have, robotics companies that we have, significant robotics companies that we have and about 5 of them had revenue streams this last quarter. Anna Ahlberg: And as you know, Simon, that can vary between the quarters since most customers with the batch sales, it can vary between the quarters. That's what we commented on also throughout last year. Simon Larsson: Yes. Understood. Understood. And then I guess my second and final question for this time at least. I noticed on the balance sheet, accrued income item has increased quite a lot if we look at both year-over-year and quarter-over-quarter. Is there any sort of special customer -- specific customer group that's sort of driving this increase in accrued income? Or yes, any help to understand the dynamic behind that figure would be also helpful. Anna Ahlberg: Yes. That is what I just mentioned before on the cash flow that is due to -- primarily due to increased license revenues and it is being paid in the quarter after and for Q4, it has been paid. So that's the number I referred to as being sort of always at its highest at the last day of the quarter. So there's no like increased risk or that we accrue more in a different way than we've done before or anything like that. So it's really positive in a way. And again, they have been paid and are always paid in the quarter after. Simon Larsson: Okay. So it should come down sequentially already in Q1 then unless it's a very big quarter again for licenses. Anna Ahlberg: It varies a lot with the license revenues. Yes. Operator: The next question comes from Ulrik Trattner from DNB Carnegie. Ulrik Trattner: A few questions on my side, and I will limit it to 2, of course. But can you talk about the sales growth momentum in licenses for Intuitive if we were to exclude the dV5, given that this is the last quarter where it will be included as sort of basic skill simulation. Essentially, are you seeing growth outside of the dV5? And for '26, if we were to exclude the effects that you already quantified, would you expect that Intuitive would grow in 2026? Tom Englund: In terms of in terms of attach rates, we see for the other products, not the dV5 that we have sort of the same attach rates that we've had before with the license sales. And so that means that the customers are actively using simulation within those products as well. And then regarding this news that Intuitive will only supply Surgical Science simulation to a subset of the dV5s, that we believe then will have a negative effect of SEK 60 million to SEK 90 million during the entire 2026 compared to 2025. And we have very sort of low visibility on the attach rate for our simulation solutions in the dV5 offerings here for the coming year, both when it comes to the full year and also the quarterly distribution and the quarterly attach rates. Ulrik Trattner: Sure. But I was kind of aiming for here if we were to completely exclude the dV5 and just look at sort of the legacy platforms from Intuitive, the SP, the Xi, et cetera, et cetera. And I know it's a little transparency in terms of attach rate. But would you assume that there would still be any type of growth for those products? Tom Englund: We will not go into more detail regarding the exact growth within the different product lines for our customer. And it also becomes very complex because, of course, Intuitive also has an exchange program where they exchange dV4s or [ dVXs ] to dV5 and so in certain geographies and in certain geographies, they do not. And that entire kind of dynamics is very difficult for us to get into. So we report this kind of overall general revenue impact that we think that it will have for 2026. And once again, we have limited visibility into exactly how this will play out. Ulrik Trattner: Yes, I understand. And second question before getting back into the queue, and that would be on the cash flow side. And you reiterated that there will be some growth and some profit expected, not that sort of your targeted level. Is there anything that suggests that the cash flow for 2026 should not follow, i.e., are there sort of investments needed on your end? Or do you need to beef up working capital? Or are we to expect roughly sort of cash flow growing in the same extent as profits? Anna Ahlberg: There are no structural changes when it comes to cash flow as it has looked before and going forward. No, we have no -- I mean, the investments we do is primarily in staff and in development personnel. I mentioned that we are investing now in a new production facility in Israel, but it's not -- I mean, it's not major amounts. Operator: The next question comes from Christian Lee from Pareto Securities. Christian Lee: Would it be possible to quantify the larger package order received from one of your robotics customers in Q4? And excluding this package, would license revenues still have shown year-on-year growth in Q4? Tom Englund: Christian, we would not actually want to give that detail away when -- about these package orders, they become lumpy. I think that the main point here is that the robotics market is developing rapidly. And there's more and more players that are coming to market or are about -- or are already in the market. And many of these players are also customers to us. And that drives the demand for simulation and training on these robotic platforms in general. And that is kind of an accelerating trend that it's a long-term trend, and it's also kind of a revolution within health care right now. So overall, that will drive the need for simulation from Surgical Science. And then it will be lumpy, both because of the packages, as you say, certain quarters will have revenues when customers buy a large amount of packages or license packages from us. And it will also be driven by how quickly these robotics players will get their market acceptance and our customers. So you should think of this as an inherently attractive market to be in, in the long term with some fluctuations quarter-to-quarter. Christian Lee: Okay. Understood. And my second question then is regarding the cancellation of the memorandum of understanding with Intuitive. Could you please elaborate on why the impact of this is having the magnitude of this -- magnitude if it relates solely to dV5? And could you also please elaborate on the key variables that determine whether the impact lands closer to SEK 60 million or SEK 90 million? Tom Englund: So the dV5 is obviously the flagship product of Intuitive, and they will continue to sell the other products, the dVX and Xi as well alongside the dV5. And the sales focus right now is, of course, on the dV5 very much for the markets where dV5 has been launched. And for the markets where dV5 has not been launched, Intuitive continues to sell dVX and Xi. So the drop here in revenue, the SEK 60 million to SEK 90 million has, of course, to do with the delta of being available in all the different dV5 units that are shipped versus just a subset of it. When it comes to the factors that determine kind of where you land on the SEK 60 million or the SEK 90 million, it is very much related to the attach rate, which has been the same mechanics as with the previous models when we have sold simulation exercises in the X and Xi, we have spoken a lot about the attach rate. And it's then difficult for us to understand exactly how the attach rate will be on the dV5 given that there are so many factors at play here. So in terms of the rate at which dV5 grows in the market and so on, I mean, you can look at the Intuitive reports, it's around 18% procedural growth, and they have -- they also state the numbers of dV5 that they ship and so on. But I think that, that's pretty stable. It also has to do with how quickly their organization can actually install and get these systems active. So the main factor from our perspective is the attach rate. Operator: The next question comes from Ulrik Trattner from DNB Carnegie. Ulrik Trattner: And then another focus area, medical simulation outside of robotics. You enjoyed a very strong growth in 2024. We have seen quite a big decline in 2025, and now you talk about 15% increase in projects end of the year versus sort of end of the year last year. So what is to be expected from sort of these numbers and then what to be expected in 2026? And given the fact that there is a big fluctuations between the years in terms of both revenue and projects, one would assume that these are short-cycle projects, and that would assume that it's short-cycle revenue as well. So you should have a little bit higher visibility, right? Tom Englund: Again. So regarding the growth here in the number of projects, the reason why we state this clearly in the report here about 15% is that it's a lead indicator for the simulator sales later on, right? So the development revenues, if we are successful with the development project, it will lead to simulator sales. And that simulator sales can either happen immediately where the customer buys a bulk orders of simulators can be spread out over several quarters or even several years. So the largest medical device order that we ever got, which we announced a few quarters back here, that will be a simulator sale that will go on for 3 to 4 years. So it's a lot dependent on kind of the size of the customer, the importance that our -- that the simulation that we sell into the importance of the product for that customer and how quickly they in turn can both educate and sell -- educate their organization and then sell their product in the market. So I think that the way you should look at it is that the more projects that we have, especially with big customers like Medtronic and Johnson & Johnson and Gore and so on, the higher the potential simulator sales should be over time. And it's, of course, very difficult then when you're a small P&L or a small revenue because then it gets lumpy, right, which is what we see here now. But then it's, of course, important to track the lead indicators, which is the number of returning customers and the growth in the number of development projects that you have. And I think that we can fairly say that now we have a quite healthy mix of the number of projects we have. We have a quite healthy mix towards larger players and larger potential projects and smaller players and quicker turnaround projects, both within development revenue and simulators. Ulrik Trattner: Okay. That's great. Is it possible for you to quantify how many of your sort of medical device customers that are currently utilizing your simulation in sort of a commercial product rather in development? Tom Englund: Yes, it's -- if you look back all years, I mean, it's going to be -- for all products, it's going to be somewhere around 30 or more, I would assume. Ulrik Trattner: And these, in general, should generate recurring revenue, right? Tom Englund: That's the idea. They are not all doing that today, but that's one part of the strategy and also one part of the profitability increase that we want to see in other parts than the license business and robotics. So that's something that we're working towards. You're absolutely right. Ulrik Trattner: Sorry for being a stickler ballpark, out of the 30 or so that are on the market, how many of those are essentially today recurring products? Tom Englund: A minority, a low percentage. Anna Ahlberg: And then just... Ulrik Trattner: Again, why would that be? Tom Englund: Because usually they buy a solution today that consists of both hardware and software, the entire product packaging, right? They want to develop a medical device and they want to make a simulation for that. So they bring a part of the hardware and we build a simulator around and also develop the software, and that's sort of sold in a package. In the future, where we want to go is we want to create the hardware as a platform on which you can sell multiple software modules on. And we can also then have a more continuous value delivery where we can charge on these on a recurring revenue basis. Right now, we have taken the first step where we sell more software onto the same platform, but it's still not on a recurring basis. It's on a perpetual basis. So that's then the next step in the strategy. Ulrik Trattner: So just I understand it correctly, the [indiscernible] that has been launched on to the market, they have essentially fulfilled their demand out there? Tom Englund: Sorry... Ulrik Trattner: In terms of installation -- in terms of devices, given that there are no sort of recurring revenue on these type of products of the [indiscernible] that has been launched, that implies that, I guess, they're used for training purposes, but that would assume that these products or sort of the number of devices placed have sort of fully supplied the market's demand and there is sort of... Tom Englund: Sorry, you can't really look at it like that. If you take Medtronic, which is one of our absolutely biggest customers and where we provide a simulator for one of their key critical products, they are going to have an increasing demand of simulation as the revenue for their product increases, right? So there's going to be more sales and education staff that needs to be trained. It's also going to be more countries that are onboarded onto this product that also need to be educated. And that's -- it's almost like it's a product SKU for a specific company, but the company is so big, so it becomes like a marketing itself, right? So you can think of it as a recurring business also to continue to sell the hardware and the solution for several years to come. It's not like they place one bulk order and then it's over with. That's the 4 years that I spoke about before. So... Ulrik Trattner: And then my second question would be on Intelligent Ultrasound. And just also going back to if I understood one of your comments correctly there, Anna, because I do note that the losses that IU brings is significantly lower here in the fourth quarter, whereas sales volumes are down sequentially as well from Q3. And did you talk about lower agency fees related to IU affect this result... Anna Ahlberg: Sorry if that was unclear. No, it's not related to IU. That was more a general comment that the sales costs can go up and down depending on what countries we sell to or what structure we have and how they are paid, if it's more a rebate or if it's sort of commission and that can affect the sales cost line, and that's what happened in this quarter. So no, it was not... Ulrik Trattner: Yes. Understood. And then the natural follow-up question would be, it looks like at least the losses are declining and it's becoming more manageable. Do you have any more levers to pull? Or is this more a game of hoping for volumes to increase in NHS funding coming back? Tom Englund: In U.K. specifically, I mean? Ulrik Trattner: I mean in IU specifically. Tom Englund: We have many more levers to pull. They are 3 of them, it's sales and sales efficiency and the way we sell and market the product. It's product related, how we develop and package the products. That's why I spoke about in the CEO message that in this quarter and in the coming quarters, we will start releasing the ultrasound simulation products that carry the combined technical base of both Intelligent Ultrasound and Surgical Science, and that can actually also drive profitability. And then, of course, we can work on production improvements and COGS improvements to drive profitability. So there are several different angles you can improve, and we are working on all of them. Ulrik Trattner: Perfect. And just sort of to be fully clear here, obviously, you don't want to guide, and I guess IU will not be disclosed as sort of separate EBIT contribution for 2026. But it would be fair to assume that given everything that you've done in terms of cost savings and the 3 points that you alluded to here that losses for IU would be lower compared to 2025, right? Anna Ahlberg: Yes, because they have gone down sort of sequentially as we have done these restructurings and benefiting from the cost savings there. So yes, since they have the full effect in Q4, that's correct. Tom Englund: Thank you. We have a question from the feed here from [ Austin Groves Family Office ]. Are you currently tracking with other major robotics players such as Medtronic or J&J to have similar penetration install rates as you do with Intuitive? In your discussions with non-Intuitive customers so far, are you competing with other customers for that business? What would you say is the main limiting factor holding that business back? And when, how will it be resolved? So are you currently tracking with other major robotics players such as Medtronic and J&J with penetration install rates? It's depending on the customers' requirements and the customers' wishes about how this customer wants to package the simulation, either as a mandatory piece, digital part of the full robotic experience or as an accessory that we sell on. So it depends a little bit from customer to customer. Some customers will have 100% attach rate of our simulation into their digital ecosystem and some customers will have a lower attach rate. It also depends a little bit on the different product models that these robotic companies have. We are -- we feel that we have a very high market share within robotic simulation for these robotic companies and that there is not that much other competition out there. And actually, frankly, it's not the competition holding us back. The main limiting factor holding us back is our capacity to create compelling simulations for our customers and tying this closely into the digital ecosystems of our customers. And the other limiting factor is how the robotic companies want to train the surgeons on the robotic consoles, meaning the integration of simulation into the training curriculum and training ecosystem of those robotic manufacturers and making sure that, that is smooth and easy from a surgeon's point of view. Those 2 things are holding us back. And then a third structural thing that is holding us back that we have addressed with this RobotiX Express is still that the training usually takes place in the operating room on the console itself. And that's a constraining factor, meaning because that console is also used for clinical procedures. And that we're solving them with our RobotiX Express, which is a generic robotic training that you can use outside of the operating room. So I hope that answers your question, Austin. Anna Ahlberg: And then we have one more written question in the feed. If there are any one-off effects from switching from subscription to license model with the dV5. It is fully and will continue to be a full subscription model? So that is not the difference than the difference is, as Tom discussed before, the attach rate for the dV5. So that is the change, so to speak. And for the older generation, there is no change because that was also before offered as an option. Tom Englund: So we have no further questions in the feed, and we have a few minutes left. Do we have any other questions, Anna? Anna Ahlberg: I don't think so. No. Tom Englund: Okay. But then thank you all for listening to this quarterly report, and I see you again soon. Take care. Bye-bye. Anna Ahlberg: Thank you. Bye-bye. Operator: Welcome to Surgical Science Q4 Report 2025 Presentation. [Operator Instructions] Now, I will hand over to the speakers, CEO, Tom Englund; and CFO, Anna Ahlberg. Please go ahead. Tom Englund: Welcome to this earnings call for Surgical Science for the fourth quarter of 2025. My name is Tom Englund, CEO. And with me today, I have our CFO, Anna Ahlberg. We will first present a summary of quarter 4 and our results, and then we will have the Q&A session. We are pleased that like quarter 3, quarter 4 was a clear step in the right direction for Surgical Science. We had sales of SEK 269 million and grew by 15% adjusted for currency effects. And our license revenues almost exclusively from robotics companies were the highest ever reported at SEK 92 million, which was an increase of 21%. The adjusted EBIT amounted to SEK 46 million or 17%. On December 8, last year, we presented our new financial targets of annual sales growth of 10% to 15% with profitability of more than 15%. And it's gratifying to see that we're now delivering fourth quarter results in line with these targets. So if we move over to Educational Products. Performance in Educational Products was mixed with growth of 4%. North and South America showed strong growth of 43% with a good distribution between the different countries. And we are seeing a clear recovery now in this region compared with previous quarters with a higher customer activity and bigger sales pipelines. And we're also cautiously optimistic about the future. Asia, on the other hand, saw sales decline by 21%, driven by a continued challenging market situation in China with generally lower activity and demand. One of our strategic goals is to increase the profitability in all segments outside of robotics. For our high-volume products, we are now beginning to see the impact of this strategic initiative. During quarter 4, our average sales prices increased by around 9% compared with quarter 4 2024 at fixed exchange rates without us experiencing any significant effect on volumes. The impact is most felt in direct sales and indirect channels usually show a delay, but we expect further positive price effects to be seen during this year. Also during the quarter, our new PartnerPath distributor program was introduced on a broad scale, and this program aims to improve cooperation, sales and efficiency between us and our partners, which, among other things, will contribute to increased profitability. Highlighting the Ultrasound segment, the Ultrasound segment experienced a very high level of activity, both within hospitals but also in industrial customers. Although ultrasound sales increased by 48% compared to quarter 4 '24, the segment did not meet our growth expectations as pro forma sales, including the acquisition of Intelligent Ultrasound declined. The main reason for this decline we consider to be structural challenges within our own direct sales force, something that we've already addressed during the past quarter. For ultrasound, and you can see the picture of an ultrasound simulation product to the right, 3 new simulation modules were launched during quarter 4 and in January. One of these is targeted towards the diagnosis of endometriosis, which is a major health problem affecting 1 in 10 women. The module supports one of our focus areas, women's health, an area that is neglected in health care and where we have identified that our unique products and solution can create significant value and contribute to earlier diagnosis. This is one clear example of how Surgical Science fulfills our purpose of unlocking the full potential of every medical professional to improve health care outcomes and save lives. During quarter 1, you can expect the first products, which are based on the joint technology platform from Surgical Science and Intelligent Ultrasound to be launched. We are not yet done with the integration and still have a lot of work to do to realize the full synergies from the acquisition of Intelligent Ultrasound. Now moving over to Industry. The Robotics segment had a strong quarter. License revenue grew by 21% to SEK 92 million, which was an all-time high for the company. We saw strong license revenues from our largest customer, Intuitive as well as several other players in the U.S. and China. These other players are now beginning to install robots in significant numbers, which is in turn driving our license revenues. The collaboration with our largest customer, Intuitive, continued during the quarter. And in January '26, Intuitive announced that its system had been used on more than 20 million patients to date. This, together with the 18% growth in procedures during the quarter is clear evidence of the strong demand and broad adoption of robotic surgery. Both Intuitive and Surgical Science agree on the critical role that simulation plays in training robotic surgeons. Digital offerings are becoming increasingly important for robotics companies and Surgical Science is playing a central role in the development of these offerings. During the quarter, our customer, Johnson & Johnson, applied for a so-called De Novo classification in order to start marketing its Ottava robot for gastrointestinal procedures. Another customer, Medtronic, received FDA approval for the use of its Hugo robot in urological procedures in the U.S. And 2 days ago, Medtronic announced the first commercial surgery with Hugo robotic surgery system at the Cleveland Clinic in the U.S. There are now several hundred robot models that are either actively being sold or about to hit the market. Surgical Science is developing simulation solutions for most of the 20 largest robotics companies, and we feel very confident in the value and uniqueness of our offering in robotic surgery. We have a big and growing pipeline of robotics projects, and we see opportunities for deeper integration into our customers' digital offerings and our ability to create value for many years to come, in line with the recently presented strategy. The introduction of our latest simulator, RobotiX Express has been successful and sales and deliveries have started to pick up speed. 14 simulation exercises have been launched on the simulator so far, and the portfolio will be expanded on an ongoing basis. At the International Meeting on Simulation in Healthcare, IMSH in San Antonio in January, we showcased our products that are making use of AI technologies for the first time ever. In these products, AI is helping to analyze the instrument handling of laparoscopic surgeons and then recommend steps or skills for the surgeons to practice and improve. At the same time, within our core offering of real-time simulation of surgical procedures, we today see major limitations in the power and scalability of AI to handle and calculate models that could generate the complex real-time surgical simulation that our customers require. Therefore, Surgical Science's simulation technologies will continue to be the ultimate solution for high-quality real-time surgical simulation for the foreseeable future and Surgical Science's product experience will be improved significantly with the use of AI. Moving over to Medical Device Simulation. During quarter 4, continued progress was also made in strengthening the company's position within the medical device industry with a focus on endovascular applications. At the end of the year, the pipeline of ongoing development projects was 15% larger than at the same point in 2024. Our development revenue is project-based and may fluctuate between quarters and not fully reflect the underlying level of activity. At the end of '25, the proportion of repeat customers for development projects exceeded 70%, demonstrating that Surgical Science is making progress toward becoming an even more integrated and long-term partner to these customers. During the quarter, several important solutions were delivered to our customers, including the areas of peripheral artery disease and pulmonary thrombectomy. At the same time, sales of simulators to medical device companies for product-specific training fell to SEK 21 million compared with a very strong comparative quarter of SEK 43 million. So over to the strategy and the work going forward. Surgical Science's new strategy was presented at the Capital Markets Day in December last year. The aim is to continue growing the company profitably and establish a market-leading position within our 5 different market segments, all of which currently have low to very low penetration. We are now pursuing active internal efforts to deliver on the strategy and are seeing progress across all initiatives. And we feel very confident that this is the right strategy that will lead to increased shareholder value. Surgical Science is currently a world leader in medical simulation with a very strong brand. Our position is unique with market-leading products, strong and effective direct and indirect sales channels and an extensive medical expertise that our customers rely on for their training and development. Our global reach and support, which ensure reliability and presence are critical factors for our customers. 2025 has been a challenging year in many ways, particularly in relation to the news surrounding our largest customer, Intuitive and the development of our share price. At the same time, Surgical Science has made great strides forward in many respects and is now, in many ways, a significantly stronger company than it was a year ago. Demand for our product is growing steadily, driven by a greater need for training, increased digitalization and a more complex health care. I'm optimistic about the future where our solutions will become a central part of health care training and our ability to generate profitable growth over time. And with that, I would like to hand over to Anna to present the financials in more detail. Anna Ahlberg: Thank you, Tom, and welcome, everyone. We start with sales. For the quarter then we had sales of SEK 269 million, up 7%. SEK 14 million came from Intelligent Ultrasound. And I should just mention, Intelligent Ultrasound is today renamed to Surgical Science UK, but we will still use IU when we talk about this acquired business throughout the presentation. And all IU sales are attributable to the Edu Products business area and the ultrasound product group. In local currencies, sales were up 15%. And we have, after Q1 of last year, since then seen a significant negative effect from currencies on our overall sales. And also on our result, that I will come back to that later. We are just below 80% of revenues in U.S. dollars. We are mitigating this as best we can, except for raising prices that Tom also talked about. We also now quote more countries in euros instead of in U.S. dollars, for example. However, this will not mean a very large change in the ratio between different currencies since a lot of our revenues originate from the U.S. Looking at the business areas, the split was 48% for Edu and 52% for Indu for the quarter, where then Edu was up 4%, but down 8% if we exclude IU. And as Tom mentioned, the Asia region declined 21% compared with the same quarter last year, and that was attributable to China having a weaker quarter, while countries such as Japan and the Philippines showed good sales. Sales in Europe was weaker than last quarter, meaning Q3, but still remained strong and increased by 4%. France and Poland did particularly well in this quarter. And then the comparative figure also includes a major order to Romania. But mentioning Poland, Poland, this market has been really strong for us during these last quarters. It was at an all-time high for last year as a total, and it is also our largest market in Europe. The North and South America region increased by 43% compared with the corresponding quarter last year. And this is attributable to the U.S., which is really nice to see since we have had some tougher quarters there. And this is even when excluding sales from Intelligent Ultrasound that is also -- that part of the business is our largest market. But even if we excluded it, the increase is attributable to the U.S. Indu, up 10%. We had, as mentioned, all-time high license revenues of SEK 92 million. Development revenues were also very strong, while simulator sales within the business area was weaker. I will come back to this when we look at the revenue streams on the next slide. But for the full year, then this means that sales were SEK 992 million. This is an increase of 12% or 19% in local currencies. And in that number, IU is included with SEK 75 million. Their sales for the full year was SEK 80 million. They are in our books and consolidated as of February 18, 2025. And that meant that in SEK, sales were down approximately 30%. This is largely attributable to the U.K. and lower sales to NHS. We've talked about that before, and it's something that we are, of course, not at all satisfied with. The U.K. market was also a market where we saw that sales should be coming from the full product range, also the other Surgical Science products as it then moved to being a direct market. However, and as Tom talked about, we do see a lot of positive signs for our ultrasound product group, where we are now merging our technologies, and we have really exciting products in the pipeline. Edu for the full year 2025 was up 13% and Indu 11%, where license revenues were up 11% for the year. And looking then at the revenue streams, license revenues for the quarter were 34% of our total revenues compared to 30% last year. We saw really good sales, both from Intuitive, and that was then both from dV5 as well as from the older generations, as well as a larger batch revenue order from one of our other robotic companies, customers. So as I think you're all aware of them, we did during the fourth quarter on November 25, received a cancellation from Intuitive on the memorandum of understanding that was signed in January. And this memorandum of understanding implied that all dV5s would be equipped with simulation from us. The cancellation meant that we now, as of January 1 this year, go back to the previous existing agreement between the companies and advanced simulation from us will only be offered to a minority of the customers. For the older generations such as Xi, for example, the agreement has not been changed. It was always an optional feature. And our estimate for this was and still is that it will impact license revenues negatively by SEK 60 million to SEK 90 million for this year. However, as we have also emphasized and Tom talked about it, we still have significant revenues from Intuitive, and we continue to work very closely together on a road map for future simulation. Moving on then to the next revenue stream, simulator sales that was as a whole down 12% compared to Q4 2024. This is due to the industry business area. This is more lumpy than for sales within Edu since it's usually tied to larger projects where development is also involved. And it sometimes also has to be seen together with development revenues. And as an example, the project that we have in Southeast Asian country, that is still in the development revenue phase. This will then during this year and towards the end of this project, move from being pure development revenues to pure simulator sales. So it is usually a mix of the 2 and the simulator sales also usually comes towards the end of the different projects. Development revenues then up a lot also for this quarter and the project that I just mentioned, here, we had revenues of USD 0.7 million, and we estimate the same for this quarter, Q1. So this is, of course, a factor for the increase, but not at all entirely. We had very good development revenues also for other customers. Our gross margin for the quarter was 66% versus 68% in Q4 2024. The fact that license revenue made up a higher share of total sales than in the corresponding period had a positive effect. However, currency effects have a large negative impact on the margin, approximately 2.3 percentage points. And unfortunately, the lower USD exchange rate has less impact on the cost of goods sold than on other cost items because our input goods are primarily purchased in other currencies than in dollars and also production and the associated wage costs, they are also not in U.S. dollars. Then another factor impacting the gross margin negatively that we have seen throughout the year and commented on is that we do have lower gross margin on the IU products. But then also on the positive side, we see that our price increases are starting to have an effect. And that is, as mentioned, something we will continue to pursue. Regarding OpEx, sales costs, they were 17% of sales for the quarter, 20% in the corresponding quarter. And here, we see that the reductions in the sales force following the acquisition of IU have now reached their full effect. And then for the quarter, we also had some lower costs of a more nonrecurring nature due to lower agency fees. This is attributable to sales in certain countries. So it depends on if we sell more or less to these countries. So that means that the cost level was maybe a bit on the low side because of this. But as I said, we have definitely lowered our level for the sales costs. And we have, during the year, also worked a lot with operational efficiency, and we have done reorganizations in line with this. Administration costs, 9% of sales, the same as Q4 last year and R&D costs, 22% of sales. We activated slightly less, SEK 9 million instead of SEK 10 million. And then we had, in this quarter, restructuring costs on this line of approximately SEK 3 million. And this is related to the termination of development personnel in Seattle. During Q4, we restructured our U.S. operations, and this resulted in us closing our Seattle office. We consolidated our operations to our office in Cleveland, and that is then our hub for all commercial activities and services and customer interaction. In Seattle, we had primarily development personnel. And so in connection with this restructuring, these employments were terminated. We still have a few other roles working remotely, and we have the lease for the Seattle office until October 2027. So as I mentioned, the quarter then saw the full impact of the cost reductions we've done after the acquisition of Intelligent Ultrasound. We have done more than we said we would do. We said between GBP 1.5 million and GBP 2 million. On an annual basis, we have done GBP 2.5 million and that then meant approximately SEK 8 million in the fourth quarter. Still then because of the lower sales that we discussed and lower than expected, primarily in the U.S. -- in the U.K., sorry, the operating result for IU was a loss for the quarter of approximately SEK 5 million. Other operating income and operating costs, that is then mainly costs for the company's option programs as well as the revaluation of operating assets and liabilities in foreign currencies. We had a negative impact on this line and on profits in the amount of approximately SEK 7 million during the quarter. And during Q4, we did an internal dividend from Israel. We are taking, as I mentioned also before, certain actions to reduce the effect of the weakening U.S. dollar. So we're both reducing intercompany items, and we also have as little cash as possible in USDs. So that's something we're working actively with. Following this then, our operating profit for the fourth quarter was SEK 40 million, corresponding to a margin of 15%. And for the full year, the FX effects that I mentioned before on the line other, that was a negative SEK 38 million then for the year. And if we exclude these and we also recalculate our revenues and costs with last year's exchange rates and also then exclude acquisition and restructuring costs for the year, and that was in an amount of SEK 30 million, then we reached an EBIT of SEK 177 million for the year or 17%. Organization-wise, we were 313 people at the end of the period, and that is 15 less than going out of Q3. The majority of the change then attributable to the closing of the Seattle office. With the IU acquisition, we added 48 people. And today, we have 11 less here. Adjusted EBIT for the quarter, the result was SEK 46 million. And as mentioned, we had some restructuring costs due to the closure of the Seattle office. Excluding those, we had an adjusted EBIT margin of 18%, same as last year. For the full year, then the adjusted EBIT margin was 12% compared to 19% in 2024. Finance net and taxes. no loan financing meant that net financial items that mainly consist of interest income on bank deposits and then also revaluation of some loan liabilities to subsidiaries, effect of IFRS is also impacting the finance net. Then regarding taxes for the year, the expense here is consists of estimated tax on profit for the year and the change in deferred tax assets. This year's tax expense includes U.S. taxes attributable to the previous year and also taxes that are not linked to taxable income. And combined with the effect of the loss in Intelligent Ultrasound, this means that the effective tax rate increased. And then also for the year, our profit includes the acquisition costs of approximately SEK 23 million. And those are not tax deductible. That is then also impacting the rate. And then cash flow. Cash flow from operating activities was SEK 73 million for the quarter compared to SEK 57 million for Q4 in 2024. Changes in working capital was really small, a small negative of SEK 3 million. Inventories were pretty much unchanged and accounts receivable decreased. Accrued income increased, and this is primarily due to higher license revenues, and they are then paid in the coming quarter, meaning now in Q1, and they have already been paid. So that basically means that the last day of the quarter is when this amount is at its highest. Investing activities, we invested approximately SEK 3 million in the quarter in our ongoing construction of new production facilities in Tel Aviv. We -- they are expected to be commissioned in the second quarter of this year. And then for financing activities, the larger amount underlying for lease liabilities is actually an adjustment in the quarter, so nothing to mention here for the year. And cash flow then was a positive of SEK 32 million for the quarter before FX adjustments. And we ended the year with SEK 616 million in our bank accounts. And with that, I hand back to you, Tom. Tom Englund: Thank you, Anna. So to summarize, we believe that quarter 4 was a solid quarterly result and that Surgical Science is moving in the right direction. We see a continued rapid development of the company in a dynamic market where we can see positive signals both in our external work with our customers and in our internal efforts to create a stronger, more efficient and more profitable company. Our new strategy, which we also now execute on will make us a company with several more revenue streams and a company which addresses a significantly larger market than today. And with that, I would like to open the floor for questions. Operator: [Operator Instructions] The next question comes from Simon Larsson from Danske Bank. Simon Larsson: My first question is related to the strong growth for licenses here in the quarter. Is it possible to quantify the number of robotic customers that bought licenses here in Q4 and how that has developed versus, for example, let's say, a year ago? I'm just trying to understand the underlying strength given the expected negative Intuitive effect we will see from Q1. So any color on the strength or sort of the breadth of the license growth here would be helpful. Tom Englund: Simon, Tom here. So we have said that we have 20 robotics companies as customers right now. And last quarter, it was around 5 of them who bought licenses from us. Simon Larsson: Sorry, it was 20 active customers during Q4 or that's the total scope? Tom Englund: That's the total number of customers that we have, robotics companies that we have, significant robotics companies that we have and about 5 of them had revenue streams this last quarter. Anna Ahlberg: And as you know, Simon, that can vary between the quarters since most customers with the batch sales, it can vary between the quarters. That's what we commented on also throughout last year. Simon Larsson: Yes. Understood. Understood. And then I guess my second and final question for this time at least. I noticed on the balance sheet, accrued income item has increased quite a lot if we look at both year-over-year and quarter-over-quarter. Is there any sort of special customer -- specific customer group that's sort of driving this increase in accrued income? Or yes, any help to understand the dynamic behind that figure would be also helpful. Anna Ahlberg: Yes. That is what I just mentioned before on the cash flow that is due to -- primarily due to increased license revenues and it is being paid in the quarter after and for Q4, it has been paid. So that's the number I referred to as being sort of always at its highest at the last day of the quarter. So there's no like increased risk or that we accrue more in a different way than we've done before or anything like that. So it's really positive in a way. And again, they have been paid and are always paid in the quarter after. Simon Larsson: Okay. So it should come down sequentially already in Q1 then unless it's a very big quarter again for licenses. Anna Ahlberg: It varies a lot with the license revenues. Yes. Operator: The next question comes from Ulrik Trattner from DNB Carnegie. Ulrik Trattner: A few questions on my side, and I will limit it to 2, of course. But can you talk about the sales growth momentum in licenses for Intuitive if we were to exclude the dV5, given that this is the last quarter where it will be included as sort of basic skill simulation. Essentially, are you seeing growth outside of the dV5? And for '26, if we were to exclude the effects that you already quantified, would you expect that Intuitive would grow in 2026? Tom Englund: In terms of in terms of attach rates, we see for the other products, not the dV5 that we have sort of the same attach rates that we've had before with the license sales. And so that means that the customers are actively using simulation within those products as well. And then regarding this news that Intuitive will only supply Surgical Science simulation to a subset of the dV5s, that we believe then will have a negative effect of SEK 60 million to SEK 90 million during the entire 2026 compared to 2025. And we have very sort of low visibility on the attach rate for our simulation solutions in the dV5 offerings here for the coming year, both when it comes to the full year and also the quarterly distribution and the quarterly attach rates. Ulrik Trattner: Sure. But I was kind of aiming for here if we were to completely exclude the dV5 and just look at sort of the legacy platforms from Intuitive, the SP, the Xi, et cetera, et cetera. And I know it's a little transparency in terms of attach rate. But would you assume that there would still be any type of growth for those products? Tom Englund: We will not go into more detail regarding the exact growth within the different product lines for our customer. And it also becomes very complex because, of course, Intuitive also has an exchange program where they exchange dV4s or [ dVXs ] to dV5 and so in certain geographies and in certain geographies, they do not. And that entire kind of dynamics is very difficult for us to get into. So we report this kind of overall general revenue impact that we think that it will have for 2026. And once again, we have limited visibility into exactly how this will play out. Ulrik Trattner: Yes, I understand. And second question before getting back into the queue, and that would be on the cash flow side. And you reiterated that there will be some growth and some profit expected, not that sort of your targeted level. Is there anything that suggests that the cash flow for 2026 should not follow, i.e., are there sort of investments needed on your end? Or do you need to beef up working capital? Or are we to expect roughly sort of cash flow growing in the same extent as profits? Anna Ahlberg: There are no structural changes when it comes to cash flow as it has looked before and going forward. No, we have no -- I mean, the investments we do is primarily in staff and in development personnel. I mentioned that we are investing now in a new production facility in Israel, but it's not -- I mean, it's not major amounts. Operator: The next question comes from Christian Lee from Pareto Securities. Christian Lee: Would it be possible to quantify the larger package order received from one of your robotics customers in Q4? And excluding this package, would license revenues still have shown year-on-year growth in Q4? Tom Englund: Christian, we would not actually want to give that detail away when -- about these package orders, they become lumpy. I think that the main point here is that the robotics market is developing rapidly. And there's more and more players that are coming to market or are about -- or are already in the market. And many of these players are also customers to us. And that drives the demand for simulation and training on these robotic platforms in general. And that is kind of an accelerating trend that it's a long-term trend, and it's also kind of a revolution within health care right now. So overall, that will drive the need for simulation from Surgical Science. And then it will be lumpy, both because of the packages, as you say, certain quarters will have revenues when customers buy a large amount of packages or license packages from us. And it will also be driven by how quickly these robotics players will get their market acceptance and our customers. So you should think of this as an inherently attractive market to be in, in the long term with some fluctuations quarter-to-quarter. Christian Lee: Okay. Understood. And my second question then is regarding the cancellation of the memorandum of understanding with Intuitive. Could you please elaborate on why the impact of this is having the magnitude of this -- magnitude if it relates solely to dV5? And could you also please elaborate on the key variables that determine whether the impact lands closer to SEK 60 million or SEK 90 million? Tom Englund: So the dV5 is obviously the flagship product of Intuitive, and they will continue to sell the other products, the dVX and Xi as well alongside the dV5. And the sales focus right now is, of course, on the dV5 very much for the markets where dV5 has been launched. And for the markets where dV5 has not been launched, Intuitive continues to sell dVX and Xi. So the drop here in revenue, the SEK 60 million to SEK 90 million has, of course, to do with the delta of being available in all the different dV5 units that are shipped versus just a subset of it. When it comes to the factors that determine kind of where you land on the SEK 60 million or the SEK 90 million, it is very much related to the attach rate, which has been the same mechanics as with the previous models when we have sold simulation exercises in the X and Xi, we have spoken a lot about the attach rate. And it's then difficult for us to understand exactly how the attach rate will be on the dV5 given that there are so many factors at play here. So in terms of the rate at which dV5 grows in the market and so on, I mean, you can look at the Intuitive reports, it's around 18% procedural growth, and they have -- they also state the numbers of dV5 that they ship and so on. But I think that, that's pretty stable. It also has to do with how quickly their organization can actually install and get these systems active. So the main factor from our perspective is the attach rate. Operator: The next question comes from Ulrik Trattner from DNB Carnegie. Ulrik Trattner: And then another focus area, medical simulation outside of robotics. You enjoyed a very strong growth in 2024. We have seen quite a big decline in 2025, and now you talk about 15% increase in projects end of the year versus sort of end of the year last year. So what is to be expected from sort of these numbers and then what to be expected in 2026? And given the fact that there is a big fluctuations between the years in terms of both revenue and projects, one would assume that these are short-cycle projects, and that would assume that it's short-cycle revenue as well. So you should have a little bit higher visibility, right? Tom Englund: Again. So regarding the growth here in the number of projects, the reason why we state this clearly in the report here about 15% is that it's a lead indicator for the simulator sales later on, right? So the development revenues, if we are successful with the development project, it will lead to simulator sales. And that simulator sales can either happen immediately where the customer buys a bulk orders of simulators can be spread out over several quarters or even several years. So the largest medical device order that we ever got, which we announced a few quarters back here, that will be a simulator sale that will go on for 3 to 4 years. So it's a lot dependent on kind of the size of the customer, the importance that our -- that the simulation that we sell into the importance of the product for that customer and how quickly they in turn can both educate and sell -- educate their organization and then sell their product in the market. So I think that the way you should look at it is that the more projects that we have, especially with big customers like Medtronic and Johnson & Johnson and Gore and so on, the higher the potential simulator sales should be over time. And it's, of course, very difficult then when you're a small P&L or a small revenue because then it gets lumpy, right, which is what we see here now. But then it's, of course, important to track the lead indicators, which is the number of returning customers and the growth in the number of development projects that you have. And I think that we can fairly say that now we have a quite healthy mix of the number of projects we have. We have a quite healthy mix towards larger players and larger potential projects and smaller players and quicker turnaround projects, both within development revenue and simulators. Ulrik Trattner: Okay. That's great. Is it possible for you to quantify how many of your sort of medical device customers that are currently utilizing your simulation in sort of a commercial product rather in development? Tom Englund: Yes, it's -- if you look back all years, I mean, it's going to be -- for all products, it's going to be somewhere around 30 or more, I would assume. Ulrik Trattner: And these, in general, should generate recurring revenue, right? Tom Englund: That's the idea. They are not all doing that today, but that's one part of the strategy and also one part of the profitability increase that we want to see in other parts than the license business and robotics. So that's something that we're working towards. You're absolutely right. Ulrik Trattner: Sorry for being a stickler ballpark, out of the 30 or so that are on the market, how many of those are essentially today recurring products? Tom Englund: A minority, a low percentage. Anna Ahlberg: And then just... Ulrik Trattner: Again, why would that be? Tom Englund: Because usually they buy a solution today that consists of both hardware and software, the entire product packaging, right? They want to develop a medical device and they want to make a simulation for that. So they bring a part of the hardware and we build a simulator around and also develop the software, and that's sort of sold in a package. In the future, where we want to go is we want to create the hardware as a platform on which you can sell multiple software modules on. And we can also then have a more continuous value delivery where we can charge on these on a recurring revenue basis. Right now, we have taken the first step where we sell more software onto the same platform, but it's still not on a recurring basis. It's on a perpetual basis. So that's then the next step in the strategy. Ulrik Trattner: So just I understand it correctly, the [indiscernible] that has been launched on to the market, they have essentially fulfilled their demand out there? Tom Englund: Sorry... Ulrik Trattner: In terms of installation -- in terms of devices, given that there are no sort of recurring revenue on these type of products of the [indiscernible] that has been launched, that implies that, I guess, they're used for training purposes, but that would assume that these products or sort of the number of devices placed have sort of fully supplied the market's demand and there is sort of... Tom Englund: Sorry, you can't really look at it like that. If you take Medtronic, which is one of our absolutely biggest customers and where we provide a simulator for one of their key critical products, they are going to have an increasing demand of simulation as the revenue for their product increases, right? So there's going to be more sales and education staff that needs to be trained. It's also going to be more countries that are onboarded onto this product that also need to be educated. And that's -- it's almost like it's a product SKU for a specific company, but the company is so big, so it becomes like a marketing itself, right? So you can think of it as a recurring business also to continue to sell the hardware and the solution for several years to come. It's not like they place one bulk order and then it's over with. That's the 4 years that I spoke about before. So... Ulrik Trattner: And then my second question would be on Intelligent Ultrasound. And just also going back to if I understood one of your comments correctly there, Anna, because I do note that the losses that IU brings is significantly lower here in the fourth quarter, whereas sales volumes are down sequentially as well from Q3. And did you talk about lower agency fees related to IU affect this result... Anna Ahlberg: Sorry if that was unclear. No, it's not related to IU. That was more a general comment that the sales costs can go up and down depending on what countries we sell to or what structure we have and how they are paid, if it's more a rebate or if it's sort of commission and that can affect the sales cost line, and that's what happened in this quarter. So no, it was not... Ulrik Trattner: Yes. Understood. And then the natural follow-up question would be, it looks like at least the losses are declining and it's becoming more manageable. Do you have any more levers to pull? Or is this more a game of hoping for volumes to increase in NHS funding coming back? Tom Englund: In U.K. specifically, I mean? Ulrik Trattner: I mean in IU specifically. Tom Englund: We have many more levers to pull. They are 3 of them, it's sales and sales efficiency and the way we sell and market the product. It's product related, how we develop and package the products. That's why I spoke about in the CEO message that in this quarter and in the coming quarters, we will start releasing the ultrasound simulation products that carry the combined technical base of both Intelligent Ultrasound and Surgical Science, and that can actually also drive profitability. And then, of course, we can work on production improvements and COGS improvements to drive profitability. So there are several different angles you can improve, and we are working on all of them. Ulrik Trattner: Perfect. And just sort of to be fully clear here, obviously, you don't want to guide, and I guess IU will not be disclosed as sort of separate EBIT contribution for 2026. But it would be fair to assume that given everything that you've done in terms of cost savings and the 3 points that you alluded to here that losses for IU would be lower compared to 2025, right? Anna Ahlberg: Yes, because they have gone down sort of sequentially as we have done these restructurings and benefiting from the cost savings there. So yes, since they have the full effect in Q4, that's correct. Tom Englund: Thank you. We have a question from the feed here from [ Austin Groves Family Office ]. Are you currently tracking with other major robotics players such as Medtronic or J&J to have similar penetration install rates as you do with Intuitive? In your discussions with non-Intuitive customers so far, are you competing with other customers for that business? What would you say is the main limiting factor holding that business back? And when, how will it be resolved? So are you currently tracking with other major robotics players such as Medtronic and J&J with penetration install rates? It's depending on the customers' requirements and the customers' wishes about how this customer wants to package the simulation, either as a mandatory piece, digital part of the full robotic experience or as an accessory that we sell on. So it depends a little bit from customer to customer. Some customers will have 100% attach rate of our simulation into their digital ecosystem and some customers will have a lower attach rate. It also depends a little bit on the different product models that these robotic companies have. We are -- we feel that we have a very high market share within robotic simulation for these robotic companies and that there is not that much other competition out there. And actually, frankly, it's not the competition holding us back. The main limiting factor holding us back is our capacity to create compelling simulations for our customers and tying this closely into the digital ecosystems of our customers. And the other limiting factor is how the robotic companies want to train the surgeons on the robotic consoles, meaning the integration of simulation into the training curriculum and training ecosystem of those robotic manufacturers and making sure that, that is smooth and easy from a surgeon's point of view. Those 2 things are holding us back. And then a third structural thing that is holding us back that we have addressed with this RobotiX Express is still that the training usually takes place in the operating room on the console itself. And that's a constraining factor, meaning because that console is also used for clinical procedures. And that we're solving them with our RobotiX Express, which is a generic robotic training that you can use outside of the operating room. So I hope that answers your question, Austin. Anna Ahlberg: And then we have one more written question in the feed. If there are any one-off effects from switching from subscription to license model with the dV5. It is fully and will continue to be a full subscription model? So that is not the difference than the difference is, as Tom discussed before, the attach rate for the dV5. So that is the change, so to speak. And for the older generation, there is no change because that was also before offered as an option. Tom Englund: So we have no further questions in the feed, and we have a few minutes left. Do we have any other questions, Anna? Anna Ahlberg: I don't think so. No. Tom Englund: Okay. But then thank you all for listening to this quarterly report, and I see you again soon. Take care. Bye-bye. Anna Ahlberg: Thank you. Bye-bye.
Operator: Hello, and welcome to the Euronext Full Year 2025 Results Conference Call. On today's call, we have Stéphane Boujnah, CEO and Chairman of the Managing Board; and Giorgio Modica, CFO. Please note, this conference is being recorded. [Operator Instructions] I will now hand you over to your host, Stéphane Boujnah, to begin today's conference. Please go ahead, sir. Stéphane Boujnah: Good morning, everybody, and thank you for joining us for the Euronext Fourth Quarter and Full Year 2025 Results Call. I am Stéphane Boujnah, CEO and Chairman of the Managing Board of Euronext. And I will start with the highlights of this record year, and I will provide you with an update on our progress with the Innovate for Growth 2027 strategic plan. Then Giorgio Modica, the Euronext CFO, will cover the main business and financial highlights of the fourth quarter. I'm now on Slide 4, and I will start with the overview of the full year 2025 highlights. I'm extremely pleased to share that Euronext delivered double-digit growth in revenue, double-digit growth in EBITDA and double-digit growth in earnings per share. First, in '25, Euronext delivered another year of double-digit growth in underlying revenue and income that grew by 12.1% to more than EUR 1.8 billion. Our adjusted EBITDA margin increased by 0.8 points compared to '24 to 62.7%. It is worth noting that Q4 2025 was also the seventh consecutive quarter of double-digit top line growth. This remarkable performance proves the resilience of the diversified business mix that we have built over the past few years. Nonvolume-related revenue made up 59% of total revenue and income and posted a plus 10.9% increase compared to last year. This strong performance of nonvolume-related revenue was driven by sustainable growth in custody and settlement and the contribution of Admincontrol. But volume-related revenue also grew and it was up plus 13.9%, fueled by double-digit growth in fixed income and commodities trading and clearing. Euronext also continues to record robust volumes and revenue capture in cash equity trading and clearing, driven revenue up plus 11.5% year-on-year. When it comes to our cost base, our underlying expenses, including G&A, were at EUR 680.1 million, up plus 9.6% compared to 2024. The increase reflects our consistent growth in investments in innovation and in human capital and obviously, the impact of the acquisitions of Admincontrol and Athex Group in Greece that joined the group in 2025. Our adjusted EBITDA grew by 13.6% compared to last year, reaching EUR 1.1 billion. This was another year of double-digit growth in EBITDA. Adjusted net income was plus -- was EUR 736.5 million, up plus 7.9%. Adjusted EPS was EUR 7.27 per share, up plus 10.3%, another year of double-digit growth of the EPS. Net debt to last 12 months adjusted EBITDA was at 1.5x at the end of December 2025. This leverage is in line with our target range of 1 to 2x. So robust performance, robust balance sheet management. At the Annual General Meeting, we proposed a dividend for a total amount of EUR 321.5 million, and this represents an increase of almost plus 10% compared to last year. Let's move to Slide 5, which is a great illustration of how we delivered solid growth in all business segments. Securities and Services revenue increased by plus 6.9% compared to 2024, boosted by sustainable growth in custody and settlement. And this growth is continuing into 2026. We reached a new record level of EUR 7.9 trillion in assets under custody in January 2026. Capital Markets and Data Solutions underlying revenue increased by plus 12.1%, boosted by the acquisition of Admincontrol. Our volume-related revenue also grew at an equally fast pace with great performance, especially within fixed income, power trading and cash equity trading. Overall, we saw double-digit growth in almost every area in almost every segment of our businesses, even before the delivery of the key milestones of our Innovate for Growth 2027 strategic plan. In 2025, as you may have seen, we have started the implementation of our strategic plan with a very strong execution discipline. Over the course of the year, we have onboarded talents that will allow us to sustainably transform our growth profile. We have invested in the technology platforms that are required to deliver the objective of our strategy plan. So in May 2025, we completed the acquisition of Admincontrol, a European SaaS provider. Admincontrol is focused on European sovereignty, security, simplicity and local expertise. In January this year, just 7 months after the acquisition of Admincontrol, we expanded the offering of Admincontrol to France, and we have started to onboard the first clients in France. In September 2025, we successfully launched the first integrated ETF market in Europe to address strong demand from large clients and global clients in the Europe sector. This strategic initiative allows us to benefit from the rapid growth of this asset class across the value chain. But Euronext will accelerate the execution of the strategic plan in 2026. In March 2026, just a few weeks from now, we will expand our commodities business with the addition of power future. We already saw market confidence building ahead of the expansion in this new segment with significant volume growth across our trading, especially in intraday trading. Our CSD expansion project is also proceeding extremely well with significant support from clients. In December 2025, we announced partnerships with the leading issuing agents in Belgium, in France and in the Netherlands. These partnerships are absolutely essential to shift issuance and custody to the European CSD solution of Euronext. Thanks to those partnerships, the first issuers have already committed to transfer their issuance to Euronext Securities. And in September 2026, later this year, Euronext Securities will become the CSD of reference for 4 major European markets, France, Italy, Belgium and the Netherlands, both for equities and ETFs. By June 2026, we will offer our clients also a fully integrated, truly European repo solution. We have invested in growth, and we have maintained a very strong financial position and a very strong EBITDA margin. At the end of 2025, our cash position exceeded EUR 1.5 billion. Our leverage ratio was within our target range of 1.5x net debt to EBITDA. We secured refinancing until 2028 with a tender offer and partial early payment of the Euro 2026 bonds and the successful issuance of a EUR 600 million bonds under favorable conditions. In November 2025, we launched a share repurchase program of EUR 250 million, which we completed in January '26. In November 2025, we announced the successful outcome of the voluntary exchange offer for Athex Group, the Hellenic Exchange in Athens. This is a new milestone to proceed towards the consolidation of capital markets in Europe to build the backbone of the Savings and Investments Union for real. The new Board of Directors was appointed in January, and the integration has now truly started. We expect to deliver EUR 12 billion of annual cash synergies by the end of '28 through the migration of Greek trading to Optiq trading platforms and the harmonization of central functions, but also through the expansion of various top line initiatives. Athex Group delivered a very strong '25. We continue to see the dynamic growth in Greece of both Athex as a company and the Greek economy at large, with average daily volume within Athex -- with average daily trading volumes twice larger in January '26 compared to January '25 to 412 million of average daily volumes. And as I was very pleased to announce the opening of the support science and technology centre in Athens from 2026. This is an important initiative similar to the type of ambition we deployed back in the days in Porto when we started with the development of our technology center in Portugal in 2016. This new platform will develop in the upcoming months and years to support the expansion of the Euronext Group. I will now hand over to Giorgio for the business and financial review of the Q4 2025. Giorgio Modica: Thank you, Stéphane, and good morning, everyone. Let's now turn to the strong financial performance on the fourth quarter of 2025. I am now on Slide 9. This slide is an excellent demonstration on how well diversified our business is today. In the fourth quarter of 2025, our volume-related and nonvolume-related revenue both grew double-digits. Total revenue and income in Q4 2025 reached EUR 460.8 million, up 10.8% compared to last year. 60% of our revenue is today nonvolume-related. This part of our revenue covers 157% of underlying operating expenses, excluding D&A. Let's take a closer look at the key drivers behind this performance, beginning with nonvolume-related revenue and income on Slide 10. Starting with Security Services. Revenue was at EUR 83.9 million, marking a solid 8.1% increase compared to the Q4 2024. Custody and settlement revenue reached EUR 76.7 million, a 9.6% increase compared to the fourth quarter of 2024. This strong performance was driven by continued growth in assets under custody, which reached EUR 7.6 trillion in December 2025. This sustained growth was also supported by a resilient settlement activity and double-digit growth of value-added services. Other post trade revenue declined 6.3% compared to the fourth quarter of 2024 to EUR 7.2 million. This follows the migration of Italian markets to a harmonized clearing framework. Net treasury income was down 19.4% compared to Q4 2024. This decrease reflects lower average collateral posted to the CCP, one-off interest adjustments, and the migration of Italian markets for a more efficient clearing framework as of the end of June 2025. Turning to Capital Market and Data Solutions on Slide 11. Revenue reached EUR 178.2 million, reflecting a 15.8% increase compared to Q4 2024. Primary market generated EUR 48.1 million of revenue, up 6.2% compared to the same quarter last year. The performance is supported by dynamic listing activity, Euronext's growing ETF business, and the contribution of Athex. Euronext sustained its leading position for equity listing with 16 new listings in the fourth quarter of 2025. Advanced Data Solution revenue grew to EUR 67 million, up 8.1% compared to the fourth quarter of 2024. This strong performance reflects growing client demand for diversified datasets and increased interest from retail clients. It also reflects the catch-up in audit and compliance fees. I would like to take this opportunity to remind you that our data revenue is mostly coming from the monetization of raw proprietary data and analytics based on those data. Client interaction on Euronext technology creates a unique order book data. This data is unique to Euronext. It is used in real time to make trading decisions and it is time-critical and mandated for regulatory compliance such as best execution, surveillance and reporting. This data cannot be replaced by AI. This is an important message. Corporate and Investor Solutions and Technology Services reported EUR 63 million of revenues -- of underlying revenue in the Q4 2025, up 35.2%. This outstanding performance reflects the integration of Admincontrol, continued expansion of Euronext colocation services, and the contribution of the Athex Group. In this part of our business, we see an increasing interest for clients who seek secure and sovereign European solutions. Moving to our volume-related activities now on Slide 12. Revenue from FICC markets reached EUR 82.6 million, marking a 9% increase compared to Q4 2024. Fixed income trading and clearing grew by 11% to EUR 46.3 million, driven by strong volumes. MTS Cash average daily volume traded was up 26.3% year-on-year to EUR 49.8 billion. MTS repo term adjusted average daily trading volume reached EUR 531.3 billion, up 2.9%. These results are also supported by the expansion of the dealer-to-client segment and international growth. Commodity trading and clearing revenue increased by 12.8% to EUR 28.8 million in the fourth quarter of 2025. This reflects a strong performance of power trading supported by continued double-digit growth, as Stéphane said, in intraday volumes. FX trading revenue reached EUR 7.4 million, down 12.7% compared to the fourth quarter of 2024, reflecting lower volatility and the negative currency impact from the U.S. dollar. Like-for-like at constant currencies, revenue decreased only by 4.7% despite the 9.3% decrease in volumes. Continuing with our volume-related revenue on Slide 13. Equity market revenue saw double-digit growth with 12.8% increase compared to the fourth quarter of 2024, reaching EUR 101.6 million. Cash equity trading and clearing revenue grew by 15.7% compared to the fourth quarter of 2024, reaching EUR 89.4 million. This growth reflects a 15% increase in average daily volume traded on Euronext market to EUR 12 billion. This quarter, Euronext reached average revenue capture on cash trading of 0.52 basis points. Euronext market share on cash equity averaged 64.2%. I would like to highlight that those business KPIs do not include the Athex Group. In addition, this performance is also supported by a EUR 3.7 million contribution from the Athex Group. As Stéphane mentioned, the volumes of the Greek market continue to show a very strong dynamic. Athex Group volume will be included in our monthly statistics starting from next month. Lastly, financial derivative trading and clearing revenue was at EUR 12.3 million, a 5% decline compared to the same quarter last year. This decrease mostly reflects the continued low volatility environment from these asset class. Moving on with the EBITDA bridge on Slide 15. Euronext reported EBITDA for the quarter grew 8.1% to EUR 260.8 million, thanks both to organic and external growth. In particular, in the fourth quarter of 2025, we reported EUR 26.6 million of additional revenue and EUR 12.7 million of additional cost at constant perimeter. In addition, the acquisition of Admincontrol and the Athex Group contributed EUR 19.6 million of additional revenue and EUR 10.9 million of additional costs. I would like to share with you some consideration on the revenues and costs from acquisitions. With respect to revenues, I would like to highlight that the growth of our EBITDA was impacted by EUR 4.4 million of non-underlying revenue from Admincontrol. As a part of the purchase price allocation of Admincontrol finalized during Q4 2025, we adjusted the value of the fair revenue with a noncash and one-off impact in the P&L. This resulted into a reduction of EUR 4.4 million in reported revenue this quarter, and we expect an additional EUR 2.6 million reduction until mid-May 2026. No further impact is expected beyond 12 months after the closing of the acquisition. I would like to stress that these IFRS 3 adjustments do not affect cash or cash flow. With respect to the cost, it is important to note that the cost of the Athex Group for the last 5 weeks of 2025 do not represent the run rate for 2026. While at Admincontrol, we've been investing to scale the business across Europe in line with our acquisition ambitions. In total, non-underlying revenue expenses, excluding D&A accounted for EUR 14.2 million. Euronext adjusted EBITDA for the quarter grew 8.9% to EUR 275 million with an adjusted margin of 59.7%, down 1 point compared to the same quarter last year. Moving to net income on Slide 16. Adjusted net income this quarter reached EUR 179.6 million. We have already commented on EBITDA growth in the previous slide. The result from equity investment increased EUR 0.8 million Euronext received EUR 10.9 million of results from equity investments in the fourth quarter of 2025, reflecting mostly the dividend from Sicovam. Depreciation and amortization increased EUR 4.6 million in the fourth quarter of 2025, a 9.3% more than in the same quarter last year. This increase is mostly explained by the inclusion of the PPA related to Admincontrol from this quarter. Net financing expenses decreased EUR 10.8 million. The variation reflects decreasing interest rate and the completion of the financing program for the 2025 and 2026 maturities. No more refinancing will be needed until the end of the strategic plan in 2027. Income tax increased EUR 1.3 million. This translated into a stable effective tax rate of 26.7% for the quarter compared to 26.6% in the fourth quarter of 2024. Share of non-controlling interest increased to EUR 3.5 million as a result of the strong performance of MTS and Nord Pool. As a result, the reported net income share of the parent company shareholders reached EUR 144.7 million. Moreover, adjusted EPS was at EUR 1.77 per share this quarter compared to EUR 1.66 per share in the same quarter last year. Reported EPS was at EUR 1.42 per share. Now I move to the next slide for the outlook of cost for 2026. In 2025, Euronext reported underlying expenses, excluding D&A in line with the revised guidance of EUR 660 million. This is EUR 10 million less than the initial guidelines of EUR 670 million, thanks to our continued cost discipline. In addition, Admincontrol and Athex contributed for EUR 20 million of operating expenses in 2025, bringing the total underlying expense, excluding D&A, for 2025 to EUR 680 million. In 2026, we expect the total underlying expenses, excluding D&A, to be around EUR 770 million. We expect 2026 underlying expenses, excluding D&A, to be stable at around EUR 720 million compared to the fourth quarter 2025 annualized expenses, excluding the contribution from Athex Group. In addition, we expect around EUR 35 million of operating expenses from the Athex Group, and we plan to invest around EUR 15 million of underlying expenses to deliver strategic growth projects. I continue with cash flow generation, and I move now to Slide 18. In the fourth quarter of 2025, Euronext reported a net cash flow from operating activity of EUR 85.5 million compared to EUR 175 million in the fourth quarter of 2024. This decrease mostly reflects the negative impact of working capital from Euronext clearing and Nord Pool CCP activities in the fourth quarter of 2025. Excluding this impact from working capital, net cash flow from operating activity accounted from -- for 60.3% of EBITDA in the fourth quarter of 2025. In November 2025, we took advantage of the positive condition to anticipate the refinancing until 2028. We successfully issued EUR 600 million new bonds rated A- with a maturity of 3 years. In parallel, we performed a tender offer on our existing EUR 600 million bond maturing in May 2026. As a result of this transaction, only EUR 385.5 million of our existing 2026 bonds remain outstanding and will be redeemed at maturity. Net debt to adjusted EBITDA ratio was at 1.5x at the end of the quarter in the middle of our targeted range. This is despite the completion of the majority of our EUR 250 million share repurchase program still in the fourth quarter of 2025. And with this, I conclude my presentation, and I give the floor back to Stéphane. Stéphane Boujnah: Thank you, Giorgio. As you've seen, we demonstrated in 2025 that we are able to deliver record results and invest in the future of our company. You can see in the presentation of Giorgio that we are delivering and we are going to continue to deliver strong top line growth, strong EBITDA growth, strong EBITDA margin, strong free cash flow generation, strong EPS and dividend distribution, strong balance sheet and strong liquidity position and a strong start of the year, both in volume-related businesses where we can share the information every day with all of you, but also a strong start of the year in the delivery of key projects to transform Euronext. In 2026, we will accelerate the delivery of all of our strategic initiatives, supported by, as I said, very favorable market conditions that you can observe every day and a solid financial position. In January, we have welcomed the world's largest IPO of a defense company in history and all markets, and we do see a real momentum in the aerospace and defense sector. And the first weeks of '26 are very promising, as I said earlier, when it comes to volume-related revenues. Our vision of a united competitive European capital market has become more relevant than ever and is being endorsed now at the European level more than ever before. This is why we welcome the proposals of the European Commission to speed up the creation of a true Savings and Investment Union. For the first time for many years, there is a sort of parallel development of the Euronext corporate project and the European policymaking agenda. And this is all good news for Euronext for the years to come. Thank you for your attention. We are now ready to take your questions. Operator: [Operator Instructions] The first question comes from Michael Werner of UBS. Michael Werner: Congrats on the results. I have 2 questions, please. First, thank you for the updates on the issuer activity within the CSD opportunity. I'm just wondering if you can offer an update as to where you sit with the custodians. I know you guys were signing up and looking to sign up custodians. And I was just wondering if there's any update on progress there or any other kind of guideposts that you can provide. And then, second, just a real quick question. In terms of Athex, I believe you acquired 75% of the business through the tender. With regards to the remaining 25% of the shares, I was just curious as to what your strategy there was. Thank you. Stéphane Boujnah: So I will take the question on the developments of Athex as a listed company. And Pierre Davoust, who is the head of our CSD expansion program will answer the question about the strategy update of the onboarding of custodians. On Athex, we own now close to 76% of the shares in the company. The objective is to take the company private to accelerate the integration. We are pursuing 2 parallel tracks. One track would be to organize a new offer and squeeze or -- and organize a technical squeeze out of minority shareholders when we pass over 90% of the ownership of the company. And the second track is to proceed towards a merger of Athex within the Euronext group. But in both cases, the objective is to delist the company, and we are just looking at the 2 options. As for the custodians, Pierre Davoust will answer your question within the limit of what we can share without disclosing segment numbers. Pierre Davoust: Good morning, and thank you for the question. Let me first highlight the importance of the breakthrough that we announced on issuance. We all know that CSDs are very sticky business, and what's most difficult is to generate first movers. And what we shared with you earlier today is that now we have issuers who have decided to be the first movers and to switch from where they are today to Euronext Securities. So it's a breakthrough in the dynamic of the project because now all other issuers will be able to follow these first movers. And today, we have the first listing on Euronext Amsterdam, where the shares of the new listed company will be issued in Euronext Securities. Let me now move to the custodian side of the market. So where we are with custodians is that we're working now with the largest settlement agents and custodians for them to be ready to offer the model to their clients, starting in September 2026. They are very engaged in building the clients' heavy lifting project that will allow them to load their own clients, whether it's trading firms by themselves [indiscernible] Euronext Securities, starting September 2026, when Euronext Securities will be appointed as the CSD of reference for Euronext Paris, Euronext Amsterdam, Euronext Brussels across equities and ETFs. Operator: The next question comes from Benjamin Goy from Deutsche Bank. Benjamin Goy: Maybe, I mean, you can shed a bit more light on your cost guidance because annualizing Q4 historically was typically too conservative for you. Maybe explain why this is different in '26. And then, Stéphane, I think after your titanic comments on data, I don't ask on M&A here, but given you have that Admincontrol and wondering about more software deals as the multiples come down here, will you have more appetite? Stéphane Boujnah: Okay. I'll take the question on data and Admincontrol. Admincontrol is a SaaS provider. Nothing in what they do is affected by the current noise and impact of the AI debate. Clearly, the core of the debate is around undifferentiated or derivative data distributors or aggregators that are being replaced by AI and through SaaS developers of codes that can be replaced by AI solutions. So we don't see any impact. As I said in an earlier conversation, there is a huge difference -- Giorgio made the point very eloquently, I believe. There is a huge difference between data businesses that do process information that already exists because the fundamental underlying assumption behind any AI is that it processes very efficiently things that already exist. But the data we produce are data that do not exist, and we create them. The data we produce are the output of the matching of a bid and ask. And until the bid and ask are matched on our platform in a very demanding latency environment, these data do not exist, which is very, very, very different from what AI does, which is to process better than human beings things that already exist. So that's why what used to be perceived as raw data or robust or primitive data, it happens to be primary data, which cannot be replaced by AI. So for the moment, we do not see for sure in our data business and for sure in our SaaS business, any of the threats that affect some of our peers. And as you know, in the past, we did not buy data because we just felt that we could not justify the valuations that were in the markets. So on many occasions, we did bid for data assets at the valuation that we felt was reasonable in the surrounding circumstances at that time, and we lost those options because other people had the more bullish view of those assets. Clearly, the valuation multiples of Euronext over the past few years have been lower than the valuation multiples of the other peers -- of peers who were more exposed to the data trend. For years, I was told Euronext is missing the data revolution. Data is the new oil. You are missing the data boat. As I said earlier, all of us are finding out that maybe we missed the data boat, that maybe this data boat was a Titanic boat, that we missed the Titanic boat. So this is what it is again. Companies that were engaged in the data theme over the past few years had valuation multiples higher than Euronext. We are just at the moment of truth where this theme is being dislocated and we are back to the fundamentals of business, which is generating real top line growth, generating real EBITDA, generating real free cash flow generation, generating real balance sheet position, generating real sustained growth, and we are delivering numbers even if we are not part of the data/new oil revolution. On the cost guidance, Giorgio? Giorgio Modica: Yes. I wanted as well, Stéphane, to complement your question on data, especially on the SaaS business. What I wanted to highlight is the following. It is true that AI can help to develop faster SaaS solutions, but our clients are actually searching for something else, something which is safe, secure and is stored in Europe and is completely safe. And this is something that cannot be developed off the shelf by AI. This is absolutely fundamental. So if AI might be an interruption to the lower end of the market, then still there is a very relevant market for the one who really consider valuable their information. The other element that I wanted to add is today, in many of our SaaS software, AI is actually an opportunity because our clients are adding to strengthen the value proposition, adding an AI layer on top of our existing solution. Now moving to cost, I wanted to make a few comments. The first comment is that I believe that you should really take into consideration how this beginning of the year is starting, which is quite exceptional. If I look at the volumes year-to-date, we are 17% up on our largest trading business, which is the equity one, 17%, 1-7. Stéphane mentioned that if we look at the volumes in Greece, we moved from around 220 million, 230 million per day to in excess of 400 million, so we are with a growth of 100%. Our derivative franchise is trading 10% up with respect to the average of last year. And if I look even at our fixed income business, we are above last year average. So when it comes to revenue generation, we are really in a very strong position, and we have already delivered more than 50% of the first quarter. This is something that I believe should be really considered. Then coming to your question, why are we annualizing Q4 costs? First, as you can understand, this is not exactly how it works. Our target comes from a bottom-up assessment and then we try to make it palatable using easier KPIs. So what you need to consider is that the cost base that we have today does not include all the revenue streams. And Stéphane alluded to some of those -- power derivatives, the clearing expansion, and those activities prove that our cost base is largely fixed, but it's not completely and entirely fixed. There are as well some costs coming from sales -- cost of sales that we include among our OpEx that you should consider as well. This is one consideration. The second consideration is that I believe you have not missed that we did not include inflation in the target for 2026. But even in the Euronext countries, we have some inflation that we need to offset through cost discipline. Then I take the opportunity to take a few comments as well on the additional elements for the cost of 2026. So EUR 35 million is today the budget of Athex, and we started working with the team, with Camille, with the rest to clearly deliver and do as much as we can. But as you can understand, those are very early days into the integration. And finally, EUR 15 million what I wanted to highlight is that first, we have a strong financial position, 1.5x net debt to EBITDA. Second, last year, we have delivered to shareholders EUR 700 million in total if you include the 2 share buybacks plus the dividend. And what we're envisaging is to invest EUR 15 million because we see an unprecedented environment to deliver further growth and this represents only a week of cash flow of Euronext. So if this is not the right time to do it, then my question is when is the right time to invest for growth? Our ambition is to maximize EBITDA in 2027. This is the end of the plan, and this is what we are working to do. Operator: The next question comes from Grace Dargan of Barclays. Grace Dargan: So the first one, maybe on medium-term targets. I mean, since the CMD, you've made really good progress. I mean you're highlighting another quarter of double-digit growth. You've obviously got Athex. But you haven't revisited your medium-term targets. So I just really like to hear your thoughts on what you might think are more realistic revenue and EBITDA CAGRs now? And then, secondly, just on a slightly different theme around digitalization and tokenization of markets. I mean, it hasn't been a big feature of your plans. So I just wanted to ask whether your thinking on this theme has evolved or changed at all, and is there a risk of you perhaps being left behind if you don't prioritize investment in this area? Stéphane Boujnah: Okay, thank you for your questions, and let me be very clear. We have announced in November '24 a set of initiatives and -- with a target to deliver by the end of '27 top line growth CAGR of above 5% compared to where the situation was in December '23. We are committed to deliver above 5% CAGR growth on EBITDA by the end of '27 as well. When you look at the numbers that we have achieved so far, you can see that in terms of delivering financial performance, we are already within those targets or close to those targets. So the ambition is to deliver above 5%, and as I said in November '24, above is as important in the phrase as 5%. So there is no cap to the ambition, and we want to deliver significantly above 5% on top line expansion and significantly above 5% on EBITDA expansion, and that's what we are working toward. Now the question as to whether or not there will be a revised guidance is hard to predict true, because the plan is not only financial performance. The financial performance of the company in terms of top line and in terms of EBITDA is a blended financial concept. What matters as much as financial performance is the transformation of the organization and the transformation of the organization to build a machine that will generate resilient growth and resilient profitability requires the delivery of some industrial projects that are heavy-lifting transformation projects. One of them will be delivered in a few weeks' time when we become a player in power derivatives. We were not a player in power derivatives. We were a player in spot electricity markets. We are going to disrupt the market environment and the market structure by becoming a challenger of some incumbents and to -- and by creating a new business. This is an industrial project, which is as important as delivering the financial targets. In June, we'll be a player of repo clearing in asset classes where we were not present before. We will disrupt the market structure and what the other incumbents are doing for years. This is a project which is as important as delivering on the target numbers that were part of the November '24 guidance. In September '26, we are going to deliver the new CSD platform that will offer to custodians, issuers, all the market participants, a solution integrated within Euronext Securities that will be fit for the future and that will be more competitive than the incumbent solutions. This is a very important project, and there are many -- there is a lot of hard work of heavy-lifting operational and commercial work to be done to transform the organization. So for me, the plan will be over, or the plan will deserve to be updated, or guidance will -- time will come for changing the guidance only when, number one, we have delivered significantly above 5% on those 2 metrics, CAGR growth since '23 for top line and CAGR growth since '23 for EBITDA and when we have delivered the transformation of the organization. When it comes to tokenization of assets, you have to distinguish the guidance and the projects that we launch and the internal developments within the company. There are many things we do that we don't share with investors because we believe that the downside of creating expectations is bigger than the flexibility of pivoting, innovating, and inventing new things. So it's not because we don't do growth by press release, it's not because we don't follow themes, or it's not because we don't feed those discussions with you or PowerPoints with buzzwords. It's not because we don't put -- it's not because I don't show up with a black T-shirt with the PowerPoint presentations entitled change of paradigm. It's not because we don't position ourselves in that way that we do not do the hard meticulous work of trying to assess where is the right legitimate role for Euronext. So we are exploring several initiatives in the tokenization world. We are really entering into a phase now where blockchain that exists for almost 15 years and what was for years just a land of solid, profitable use cases for crypto players is now becoming available through the tokenization trend across the financial food chain. And we are going to be part of that, and we are working on it. When will we come out with a plan and when will we create expectation in this domain is related to the moment where we'll be confident enough that we will deliver. And -- because the best asset of Euronext with my lips is credibility. We always, always, always, for the past 10 years, under-promise, over-deliver. For the past 10 years, everyone is telling us, yes, you are too shy, but we always over-deliver. So on tokenization, we will apply the same credibility things. We will not do growth by press release. We will not proclaim intents. We will deliver real projects, we will make them happen for real, and we will make money out of them to address the needs of our clients and the requirements of our shareholders. Operator: The next question comes from Thomas Mills from Jefferies. Thomas Mills: I just had 3 questions, please. Firstly, on revenues, it's clear that volumes are off to a strong start for the year, well ahead of consensus on the cash equity side. Volumes at Athex are positively booming. Giorgio, am I right in thinking consensus does not yet fully reflect the incorporation of Athex? So that could be a positive on the revenue side as people revise estimates. Then on the Savings and Investment Union, Euronext is extremely well-positioned to benefit from this and particularly from a shift to a single supervisor model. I saw last week there's a new sense of urgency around making progress on that by June, and if it doesn't happen on an EU-27 basis, it can proceed via enhanced cooperation with a minimum of 9 states. Stéphane, can we get your take on how you're seeing things as likely to develop there? And then finally, Stéphane, it's clear from recent and not-so-recent interviews that you're itching to get a decent-sized deal done before the end of your tenure. Is there a point though where if that's not forthcoming, you determine that it's time to up the ante on share buybacks? The U.S. capital market exchanges are now the most favored subsector across all of diversified financials. And the fact that your multiple is increasingly lagging makes little sense. I think this is your Euronext's time to shine. So just intrigued to hear your thoughts on that. Stéphane Boujnah: Okay. I will answer your question on Savings and Investment Union for real, your question on basically the share buyback and capital allocation in M&A, and Giorgio will answer your questions on volumes as part of the consensus. On the Savings and Investment Union, things are very simple. For the first time, we have a massive acceleration of the momentum. The Capital Markets Union was invented 10 years ago by Jonathan Hill when he was the U.K. commissioner and when there was a total coherence and consistency between what was good for Europe and what was good for London, which at that time was the largest financial center of the European Union. The U.K. left the European Union. London has become now the largest financial center of the United Kingdom. And the project was relatively a slow-motion project for almost 10 years. With this new Commission, with Mrs. Maria Luis Albuquerque, who is the former Minister of Finance of Portugal, in charge, the level of ambition and the level of speed has changed big time. A very robust paper was produced in December by the Commission, so we have a framework. One of the main ambitions -- and I don't want to go into all the details, but one of the main ambitions, because you mentioned it is the single supervision. There will be a single supervision one way or the other, in one form or the other. That's now quite clear that there is a consensus to believe that the sort of fragmented supervision, fragmented interpretation of rules, similar rules that are different because when the rules are similar, they are different, is not helping to create speed and scale. So there is a consensus to say, okay, for the ones who want to remain very local, let it be. They have the right to remain very local. And so the ones who have a pan-European ambition, they need to have a single rule-of-law-driven, integration-focused, efficiency-driven interface with the right supervisors at the European level. When will it happen? How wide will it be? It's being discussed. And as you rightly pointing out, the sort of ultimate signal that resignation and low and slow motion is not accepted is the clear determination of leaders of countries that, by the way, happen to be large finance makers, like Italy, France, Germany, Spain, Netherlands to get aligned to say, okay, if it is too slow at '27, we'll make it work among the countries that represent most of the finance industry in Europe. So we are extremely excited because it's going to accelerate and simplify the development of Euronext. There will be a transition period. Things are not going to -- we need to produce a lot of bottom-up ideas with partners to bridge the gap between where we are today and where we will be in a few years' time. But this is going to make the life of Euronext and the prospects of growth of Euronext much, much more exciting. When it comes to share buyback and valuations, we are industrialists, we are shopkeepers, we are merchants. And we try to grow the top line to be disciplined in execution of our integration projects, to be disciplined in cost management, not to miss innovation, heavy-lifting transition projects to maximize the EBITDA margin, to create capital, to allocate capital in projects that provide a return for shareholders which is above the WACC of the company. We are not in the business of valuing Euronext vis-a-vis peers or vis-a-vis other sectors or vis-a-vis. This is your job. This is the job of our investors. We just make the company a cash machine and a growing and robust machine and a relevant machine to clients by increasing the competition by proposing new fit-for-the-future solutions. Whether other projects are more profitable than ours, it's not up to us to make a view. Whether data is the new oil, I don't know. I mean, for years I told everyone, we don't want to overpay data assets. And when everyone was telling me you are missing the data revolution, okay. We missed it and we are where we are today. So my job is not to compare the performance of Euronext vis-a-vis the performance of our peers. What I can tell you, though, is very clear. Share buyback is an output of a capital allocation set of decisions. The way we see things is extremely clear. Just like M&A is a tool, it's not an objective. What we want to do is to continue building a resilient, solid, robust, relevant, fit-for-the-future organization with a superior financial performance when it comes to top line expansion and to cost management with the right flexibility to jump on innovative trends and in order to do that to create resilience of the performance of the company and to diversify the top line of the company to allocate capital wherever we believe that we are legitimate owners of assets. Last year was a clinically pure example of what I'm saying. We started to invest in cash to buy Admincontrol to diversify our top line. Then we expanded our infrastructure business with the acquisition of Athex and then we did it in shares. And then we found out that we didn't need the cash available, and we created a share buyback. So share buyback will be an output of the way we will deploy our cash in the course of '26. Over to you, Giorgio, for volumes. Giorgio Modica: Thank you very much, Stéphane. So one thing, it's difficult for me to comment as to whether the consensus is right or wrong or complete. But what I can assure you that we're -- we have been giving you and we will give you all the elements that you need to make sure that the consensus gets right. It's always difficult to do the first consolidation of a new acquisition, but what you have now is the following. We've provided you a Q4 excluding the Athex Group, which means that you can extrapolate line by line what is the contribution of Athex. So you have 5 weeks of Athex consolidation. You have the volumes and the average market cap that you can use as a driver to derive what Q1 would look like. And if I look at where things are today, what I can share with you, as we said, that the volumes are roughly speaking, if you look at the -- or you can do differently; you can take the yearly P&L and make an assumption of a monthly contribution and then adjust. But you have several ways, and we can help you at -- with Judith and Investor Relations to have a fair sense of the level of revenues that is legitimate to anticipate based on those values. The element that is important for you is that, on average, in 2025, Athex traded slightly more than 200 million per day and now we are in excess of 400 million. Last year, on average, the market cap was around EUR 130 billion, and now we are in excess of EUR 150 billion. And then my take is that the consensus does not fully incorporate the full potential of Athex, because this growth that is partially linked as well to the developed market status of the Greek market was very difficult to anticipate. So yes, I believe that there is upside there. Operator: The next question comes from Enrico Bolzoni from JPMorgan. Enrico Bolzoni: Hi, can you hear me? Stéphane Boujnah: Yes, we can. Enrico Bolzoni: I have a couple, please. So one on your CSD ambitions. It's been a few months now that you've clearly been working at this project. Migration is expected to occur later this year. Can you -- would you be able to give us an update in terms of what proportion of, for example, settlement that is currently happening on third-party CSDs you think reasonably to internalize already by the end of the year? And perhaps what is your expectation for 2027 in terms of volumes? And then my second question relates to the market integration package that was released by the European Commission last year -- quite ambitious with various proposals. I would like to hear your thoughts on 2 in particular. So one, the Commission said that basically the tape, so the consolidated tape needs to be improved, so increase the transparency, the amount of information provided. So that's one. And the other one is that they want to interlink basically various CSDs across all the exchanges that are, let's say, systemically important like definitely you are. So I wanted to hear your thoughts on whether you think that these measures have come with the risk of increasing transparency for competition and perhaps being price deflationary. Stéphane Boujnah: So I'll answer your second question and Pierre Davoust will answer your first question on CSD ambitions, bearing in mind that we do not disclose specific operational numbers or specific financial numbers by per segment at this stage. So we'll provide you roughly correct answer to your question. On the Commission's package, among the issues that are being debated and where there is no consensus, there is clearly this consolidated tape review. I mean, clearly, member states are not supporting it for one very simple reason, which is consolidated tape season one is not even finished. It has actually not even started. So the commission or, sorry, ESMA has selected a provider. They are working on building what will be a consolidated tape a European way. So some member states, many member states actually are saying, whoa, whoa, whoa, before we start to undo and reshuffle things. And as we are still at the level of PowerPoint projects, maybe let's see how the market dynamics develop around CTP. So we do not anticipate any progress or any changes on the consolidated tape beyond what is on the table and what has been decided in the previous round. When it comes to CSD's interconnectivity, it's a very broad concept that when you move to making it happen for real, gets to extreme complexity. And that's why as of now, we believe that the prospects of the full, that deciding just universal peace and love interconnectivity is not going to be a trend that will affect our plan at least for the years to come. So maybe Pierre Davoust can be a bit more specific when he answers your question about CSD ambition, but you should not consider that those 2 debatable items are going to have a negative impact on the top line. Actually, we do not see any justification to revise or blend in the guidance in any way whatsoever because of those 2 debates. Pierre Davoust: I will address your question on the European expansion project. So as mentioned by Stéphane, we don't intend to give a precise guidance on the proportion of settlement volumes or the revenues coming from settlement volumes that will come through the project. What I can tell you is that, one, we believe we have a very strong value proposition for market participants both on pricing and on the simplicity of the model that we offer, especially with the perspective of the T+1 migration that will make it even more important for market participants to dispose over a simplified settlement infrastructure. Two, I want to insist on the fact that the progress we've shared with you on issuers is not only a positive development for other issuers to move, but it's making our value proposition towards market participants even more attractive. Every time we move issuers from where they are today to your Euronext Securities, we make the value proposition of Euronext Securities or market participants more attractive because the number of issuers, the market cap of issuers that is directly accessible in Euronext Securities at an even cheaper price is increasing. So you should consider that the breakthrough announced on the issuer migration is making our value proposition stronger on the settlement and on the custody, and this makes us confident that we'll deliver success on the project. Operator: Our next question comes from Hubert Lam from Bank of America. Hubert Lam: I've got 2 questions. Again, sorry, on the question on the CSD expansion, particularly on the custody side. I know it's still early stages, but can you talk about the feedback you've received from custodians in your discussion on the CSD project? Are they open to the project? And how did they view your value proposition? Second question is on M&A. Do you see more M&A opportunities out there either in the volume type of businesses or maybe there's more opportunity now in the non-volume types of businesses, just given where maybe valuations have gone down to? Stéphane Boujnah: So let me take the M&A question, which is a very open-ended question, and Pierre will be more specific on the interactions with custodians and what it means needs for the delivery of the project. As I said, I'm sorry for repeating, but your question was very open-ended. M&A is not an objective, but it is a tool. The objective is growth, performance -- to growth and performance, so profitability and resilient growth and resilient performance. We are going to use M&A as a tool to accelerate the diversification of the top line of the group. And clearly in an environment where interest rates have increased, private equity owners are more under pressure, not all of them, but not everyone is under pressure to exit, but with quarters after quarters, more and more PE players under pressure of their LPs to return capital and to consider exits, we are in a market that is slightly changing. Clearly, things have to be nuanced because very large Godzilla funds are not under pressure and can sustain holding for a while. But we are seeing changes in the market. We are seeing also contamination in the private markets of what is happening in public markets in the field of data. I mean as I said a few years ago, the reason why we didn't buy data assets is that we did not believe that it was the right thing to do to pay 30, 35, 40x earnings for these data assets. Now, some of those assets, not all of them have a strong residual value because they are embedded in the workflow of clients and they have some form of pricing power. And they have -- they are AI-proofed. Others are not. Clearly, in the field of post-trade, in the field of data, in the field of energy, in the field of commodities, in the field of value-added services to our CSD business, we believe that there might be opportunities and partners who would be more willing to consider an exit than before. The reason -- M&A is a consenting other game. For M&A, you need a willing buyer and we are a willing buyer, and we are a buyer with strong cash position, et cetera. But you need also a willing seller. And in parallel to diversification, as I've described it, we have always the fear of consolidation of equity markets in Europe, which is probably the business that is the most profitable within all our businesses because that's where we create more synergies in terms of plugging more volumes to a very powerful and efficient infrastructure. So for the infrastructure part of our business, which is all about volumes, we are open house and whoever wants to connect the local market to a pan-European ambition to fix the problems or the shortfalls of the local market which is subscale when it comes to equity and to be part of a pan-European single integrated liquidity pool, single integrated order book, single integrated technology platform, we are open. Now these deals happen when we have a willing seller. In the case of Greece, we started the year '25 without any clue about the fact that over the summer we'd be discussing with the Greek system the acquisition of Athex. So I do not know when and how other sellers will be available. So we will remain very disciplined. We are not going to burn cash. We will miss more opportunities than others, but we will make much fewer mistakes than others as well because we have this steel rule of not deploying capital if the return on capital employed is not above the WACC of the company between year 3 and 5. And if we find deals that help us to diversify the top line or to grow the infrastructure business within this financial discipline framework, we'll do those deals. And if we don't find, then we'll do a share buyback. That's as simple as that. Pierre Davoust, on the custodians? Pierre Davoust: Yes. So maybe 3 points on the custodians. First, custodians for decades have seen a European CSD landscape which is, A, fragmented, and, B, non-competitive. When we come with a value proposition where we tell them we'll increase the competition in the CSD landscape in Europe and we offer you the ability to overcome the fragmentation and to consolidate, we receive positive feedback. They are telling us eventually someone is doing the job of getting rid of the fragmentation and bringing competition in Europe. Then to be more specific, second point, we've spent hours and hours and hours with all large custodians to make sure that the service we deliver is fit for their needs. And the feedback we get is that the service we will deliver by September 2026 in Euronext Securities matches the needs of large custodians. And this is why -- and that's my third point, this is why now we have some of the largest custodians in the world who are actually doing developments in their platforms, in their operating models, to become able to offer the service to their clients by September. And the reason they do it is that they believe there is value. The proof is in the pudding. They would not invest in their platforms; they will not invest in the change of their operating models to accommodate for a model if they thought that the model would not bring value to them and to their clients. Operator: The next question comes from Andrew Lowe from Citi. Andrew Lowe: You've been very clear that your data cannot be replaced by AI. I was wondering if you could provide a bit more detail on what exactly the sort of mix of data is and how the clients are using it. Who the client end users of this data are, the share of data revenue that's linked to headcount? And then finally, how much of the growth in your data revenues has been driven by pricing versus volume over time? Stéphane Boujnah: Okay. So within the same limitations of not disclosing specific numbers or specific metrics by segment, I'll leave the floor to Nicolas Rivard, who is the head of this business and who will tell you how, why, and more specifically, all that are different and how the pricing positioning is being deployed. Nicolas Rivard: Thank you for your question. So in term of replicability of the data, I think Stéphane answered previously this question. Our data is coming from our technology, our order book and is fundamentally unique. And so if you ask the first question, which is, can the data be replaced by AI building this data, the answer is no. The second point of your question is then who are the users that can be replaced. So you need to understand that we are agnostic of who is using the data. We are agnostic of the tools using the data. We have a commercial model which is basically linked to display usages and non-display usages. Whether the tool is from one vendor or another, for us, is irrelevant, and the commercial model is resilient to this type of usage. And we have made sure of that. Then, to answer a bit more precisely on the users, the users are, you would imagine, all the investment communities, traders, investors, asset managers, so you can name them, retail investors, which is a growing part of our business. With regard to pricing and volume, we don't share the details with regard to -- which I can tell you that both are positively oriented, both in terms of volume and pricing within the framework of which we can share. So now in term of non-real-time versus real-time, what is -- we are growing the business in term of non-real-time. This is an important development for us. It has been very successful over the last years across the group. We did not only the acquisition of -- the expansion of Euronext and diversification, we have been able to build data around those new asset classes. But what you need to understand is that even those new businesses, even those new data projects are built on proprietary data. So it's not as if we take public data and we build analytics on it. We take our own proprietary data and we build analytics on it. So once again, to the comments of Stéphane before, this is data which is not replicable. So in both cases, we are very confident that the data is unique. Maybe one clarification on the price. You can roughly estimate that this is linked to inflation, so if you want to build a model which is a bit more precise, you take inflation as the value. Stéphane Boujnah: [indiscernible] Operator: The next question comes from Arnaud Giblat from BNP Paribas. Arnaud Giblat: I've got 2 quick questions, please. Firstly, on -- back to Euronext Securities. You mentioned that you had some issuers that were moving. As far as I'm aware, it's Euronext and Exor who have moved so far their issuance to Italy. Are there any others? Could you name them, please? And my second question is on the EUR 15 million of underlying expenses to deliver your strategic growth projects in 2026. You made the parallel during your comments that, that was 1 week's worth of cash flow. And that, I mean, confused me a bit. I thought the incremental EUR 15 million of OpEx were there to stay. So it was part of your recurring OpEx base. And the parallel does suggest to me that it's a one-time expense in 2026. So which one is it? Could you clarify that for me, please? And maybe if you could itemize it as well, that'd be interesting, just so I can draw parallels between the OpEx and the prospective revenue growth attached. Stéphane Boujnah: Okay. So Pierre Davoust is going to clarify the Euronext Securities developments and to be sure -- I don't know whether we are authorized by them to mention who they are, but if we are, he will share that with will do. If we are not, he will not. And then that's just wish words, that you don't want to expect a relationship issue. And then Giorgio will clarify the question, your question on cost. Pierre Davoust: So to take your question on the issuers, what we mean when we say that a couple of issuers have decided to move to Euronext Italy, we mean beyond the ones who were already announced, i.e., beyond Euronext, beyond Stellantis, beyond Exor. So this morning we published a press release announcing that a company called SWI Capital listed on Euronext Amsterdam and will issue the shares or has issued the shares in Euronext Securities. So that's one new listing where EUR 1.6 billion market cap, we have 2 issuance of shares happens in Euronext Securities, and that's public. We made the press release this morning. In addition to this company, we have a number of issuers who are already listed today on Euronext Markets who have confirmed to us that they want to move their shares. So we still have to execute the migration, but we have their confirmation, their commitment to move their shares, their existing shares, from where they are today to Euronext Securities. So this is all on top of what was already known, i.e., your Euronext, Stellantis, and Exor. Stéphane Boujnah: Giorgio? Giorgio Modica: Yes, absolutely. And sorry for being potentially misleading. My point was to highlight the fact that it's a very, very small proportion. I could say it's 2% of our cost. One week of cash flow is just to say that it's a very, very small amount related to the possibility to invest. So usually even very, very minor changes in our cost base trigger very detailed question that I believe that do not really serve the purpose. So my intention was not really to define whether it was one-off or recurring was more to say it's a very minor investment. Then with respect whether it's one-off or recurring, this is going to be recurring because we want to build a new capacity to deliver new projects. And this includes the delivery of existing Euronext projects together with the development of new ideas. And then Stéphane named a few. So again, the objective of my comment was to highlight how small and is this pocket for investment that we're giving to ourselves. Stéphane Boujnah: Although, I'm celebrating with you my 40th conversation because we speak for 10 years now 4 times a year, and this is my 40th, 4-0, quarterly result announcement. And for the past 10 years, you have demonstrated a very meticulous interest for Euronext with the consistent level of skepticism. So what I'm trying to say and what Giorgio is trying to say is the following. The focus on cost is absolutely legitimate. Maybe, maybe it makes sense to have this discussion on cost with the starting point, which is a 62.7% EBITDA margin. So we are talking about a very marginal expansion of cost in a year where we invest a lot on things you've seen and on things you don't see, because there was a question from a young lady about the tokenization ambitions. So we are not going to disclose any specific guidance or we are not going to create any specific expectations on tokenization until we believe it's the right time to do it. But believe me, we spend time, money, and on this new technological development. So we do that starting from 62.7% EBITDA margin, which I believe without comparing with our peers -- this is your job to benchmark us against our peers -- is not bad compared to the peers which have a higher valuation multiples. And we are doing those cost developments in an environment where we want to deliver new projects. And compared to our peers, we don't have a bad track record of delivering above expectations that we have created. So that's why it's absolutely fair and legitimate to discuss all cost-based development. And I fully understand that, as it is one of the few guidance we provide on a yearly basis, it's absolutely legitimate to discuss it. I'm just trying to put things in perspective about the fact that it's small and it's on the basis of a company that is extremely profitable and it's growing and that has consistently had an EBITDA expansion above the top line expansion, in both cases, double digit. And actually, for next year -- for last year, we had a single-digit cost base expansion. So things might be different, but when you pile up acquisitions and when you neutralize the impact of acquisitions, when you focus on really what is the real new money spent, you get something which, in my view, is much less problematic than what can be perceived sometimes. Operator: Next question comes from Tobias Lukesch from Kepler Cheuvreux. Tobias Lukesch: Also 2 questions from my side, please. Stéphane, I have to touch on costs again. I mean that was very explicit, thank you. But just to get a feeling a bit, I mean, last year you talked about the investments and also FTE investments. I was just wondering, is that really now more into systems? You mentioned projects like tokenization, but it's like if you were to split costs and what might come, it's like how much would be to really increase revenue generation potentially also via AI applications? How much could be on AI cost-saving side? And also in terms of the spending horizon, I mean, are we talking more about Q1, H1? Or is it more a linear approach you're taking that might even go into next year? And then secondly, on the MTS business, maybe you can just remind us, like, of the geographic split of the assets and revenues you're generating there and how this is, like potentially shifting towards some other countries' contributions you see this year, maybe in the medium term would be very helpful. Stéphane Boujnah: Can you -- sorry, can you repeat your second question because I got lost with the second question. Can you repeat it? Tobias Lukesch: Sure. Stéphane Boujnah: The first one was very clear. Tobias Lukesch: Yes. On the MTS question, the question around did you get geographic split of the assets, of the revenues attached to that and how this is moving into additional countries, additional European countries and how you do see the development in '26 and potentially also going into '27 to further grow that business? Stéphane Boujnah: Okay. So I'll take the question -- both questions. So on MTS, the performance of MTS is impressive. It's a business that has grown extensively, since we acquired it as part of the Borsa Italiana acquisition. Since then, the growth of MTS was a combination of organic growth in relation to the core business of MTS, which is Italian govies, and the development of the efforts we have done together with the MTS management and the Euronext management to pitch and convince the European Union to organize the secondary trading of next-generation EU bonds within MTS. We are expanding businesses in other jurisdictions. We have constructive dialogues with countries that are already part of the MTS program and solutions but not necessarily with the full incentives to deploy them. And each debt management office takes things at the level of priority and gets to the right level of concerns about liquidity of their debt at a different pace. So recently, we have announced that we are becoming a player of a scale with the Greek debt. It was announced a few weeks ago, I think just before Christmas. We are working in the same directions with all the other European players. I'm not in a position to make any announcement. And the discussions are very different. The perception of MTS as a solution is different everywhere. So we remain very active from a marketing point of view. I'm personally involved in many of those discussions because many of those discussions take place both at the level of the debt management office and at the level of the Minister of Finance, and we'll see. We'll announce the outcome when they are positive. For the moment, it's still work in progress. I mean, because countries don't change easily the way they manage liquidity or the other. Talking about where do we spend the money, I'm going to suggest -- to offer you a framework to be roughly correct rather than precisely wrong. So the way you have to look at the cost that we deploy is that if you want to deliver something for real, you need to have in your organization people who know what they are talking about. Then you need to have systems that are flexible, robust, reliable and fit for the future. And then you need to make supervisors neutral about those projects and you need to have clients enthusiastic. To make supervisors neutral and to appease them, that's relatively easy and not extremely expensive. But to make clients enthusiastic about the new solutions that you're offering, you need to talk to them and you need to have salespeople or business development people creating intimacy to anticipate their needs and to manage competitors. So you recruit people for developing new systems and new ideas and inventing new solutions that are not necessarily with skills that are necessarily available someday in your nation. You recruit new people to do sales and to do business development, and in the middle, you build new platforms, which is a combination of technology developments, which may need people, but also with some CapEx. So that's how we deploy the money because at the end of the day, these are the 3 areas. So it all ends up in headcounts, but headcounts of a different nature if they are here to invent new things and fill skill gaps in your organization, headcounts to deploy or develop new technologies, headcounts to sell stuff and to be time to market ahead of the competitors. So I have some difficulties to describe you the Rubik's Cube between these 3 categories of people. Then why I'm using the Rubik's Cube metaphor is that clearly the allocation of these teams is very different if we talk about power trading -- or power derivatives, sorry, if we talk about repo clearing, if we talk about CSD expansion, the allocation [indiscernible] so the breakdown in my view would be very artificial even if I were comfortable disclosing those numbers that are really granular management accounting numbers. Operator: The last question comes from Ian White from Autonomous. Ian White: Two from my side, please. Firstly, we're hearing a lot of political support now for the idea of a single European stock exchange. From your perspective, are you open to innovative structures or partnership to achieve that? Or in your mind, is it simply that the Euronext itself is the consolidator? That's question one. And question two, can you talk a little bit about the competitive outlook in Italian government debt markets? In recent months, 2 competitors have announced settlement offerings in Italian government debt. What makes you sanguine on the risks to your next market share, please? Stéphane Boujnah: So on the second question, I'll give the floor to Giorgio Modica, who is familiar with the recent dynamic of the Italian debt market, and he will provide you his perspective. And maybe also Pierre Davoust can complement because it's more a question on settlement than on the fundamental underlying debt market. So both Giorgio and Pierre can elaborate. On the first question, let me be very crystal clear. Yes, leaders in Europe want to have a single pan-European stock exchange. But the reality of the drivers of these goals are very different. There was a quote from Chancellor Merz in particular that was very vocal and Chancellor Merz, as a person is very knowledgeable when it comes to finance because of his personal background. And clearly, he tried to say -- he tried to highlight, if I may say so the sort of anomaly between the size of the German GDP, the anomaly between the dynamism and the strength of German technology players on the one hand, and the fact that in Germany, the equity market, for all sorts of historical reasons, is relatively small. And the GDP of Germany is about EUR 4.3 trillion approximately, and the total aggregate market capitalization of Frankfurt Exchange is approximately EUR 2 trillion. The Euronext single liquidity pool of the book is about EUR 6.8 trillion. It's more than 3 times larger than the Frankfurt exchange. So Chancellor Merz was addressing a sort of specific situation in Germany and that has again nothing to do with the quality of Deutsche Boerse, which is a great company, an amazing company. The transformation that has been implemented by Theodor Weimer over the past years has been amazing. And this is a great company. But when it comes to equity -- to equity only, it's true that the exchange part of Deutsche Boerse is much, much smaller than it used to be and much, much smaller than the equity part within Euronext. So we do not have the problems within Euronext countries that other countries have, because since we have EUR 12 billion of average daily volumes, and since we have EUR 6.8 trillion of aggregate market capitalizations on Euronext and since we have approximately 25% of the equity market -- of the equities traded on Euronext, we have built a liquid market. And again, it's not a judgmental comment. The valuation multiples of our peers are stronger because they have less equity trading. But there is a tension between policymakers who do want a large equity market and corporates who operate those markets who believe that they create more value by walking away from equity. And that's okay. That's what happened in the U.K. where the London Stock Exchange became a smaller part much more than it used to be of the London Stock Exchange Group, just like the Frankfurt Exchange is a much smaller part of Deutsche Boerse, especially, that's fine. They have bigger, better valuation because of those choices. But it's true that from a policymaker point of view, there is an aspiration to have stronger exchanges as what we've built within Euronext. What does it mean in practice? One thing is clear. Liquidity cannot be fragmented. Liquidity must be consolidated. In any business, in any trading venture, what everyone is looking for is to consolidate liquidity because that's -- with consolidation of liquidity, you have to create the best spreads. Therefore, you create the most value for your clients because you create an environment that produces better prices. So any idea that would be, let's create a new platform out of the blue, which eventually will have no issuers, no investors, no research, is a bad idea. So what makes sense is to consolidate liquidity. I do believe -- I do believe that Euronext is in advance in this ambition because our purpose was to build a consolidated equity market, and I do believe that we have to invent ways to work together to consolidate equity markets around what already exists, rather than to fragment liquidity. So I believe that it's the right ambition, but it's the right ambition with consolidation of liquidity, not fragmentation of liquidity. Pierre? Pierre Davoust: Yes. So I will address the question on the Italian settlement. So indeed, our competitors have made steps to provide direct settlement services on Italian debt. What I want to highlight is, one, this is not new. This is not new. We are the issuer of CSD. Euronext Securities Milan is the issuer CSD for Italian bodies. And Euroclear Bank, Clearstream Banking Luxembourg, all those custodians are all connected to Euronext Securities Milan to perform settlement on Italian ventures. Our competitors are, in fact, our clients for this particular business, and they already do and perform settlement activity. With what they've announced, they are taking an extra step, bringing their clients to directly settle with them, trades cleared at LCH SA. Will that allow them to win more settlements over some of our other clients who are today channeling settlements through Euronext Securities Milan? Maybe. But it's more a stretch for some of our clients than for Euronext Securities Milan itself. Third point, settlement in govies business is a very small part of the business, because a big part of the business is custody, and that stays with us because we're the issuer of CSD. And last point, I think you need to realize that these steps are taking place in a context which is a total range of settlement, which is about creating fixed income value chain. And Euroclear and Clearstream have announced that they will partner with NCH SA, and we are working in Euronext across the value chain with MTS with Euronext Clearing and Euronext Securities to develop and scale a value proposition and fixed income across Europe. And we believe we have very strong selling points for clients to use the Euronext value chain across MTS, Euronext Clearing, and Euronext Securities Milan on Italian bodies and on non-Italian bodies. Operator: There are no more questions at this time. I will now hand the call back to our speakers for their closing remarks. Stéphane Boujnah: Thank you very much for your time. I wish you a very good day. And if you have any questions, please do not hesitate to reach out to the dream team when it comes to Investor Relations with Judith and all our colleagues. Thank you very much. Have a good day.
Operator: Good morning. Chris Doyle: I am Chris Doyle, Vice President of Investor Relations and FP&A. Welcome to our earnings call for 2025. Before we begin this morning's call, I would like to remind you that today's presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and are subject to various risks, uncertainties, and assumptions that could cause actual results to differ materially from those expressed. Please refer to the page titled “Forward-Looking Information” in our earnings material for more detail. Presentation materials for today's call were posted this morning on the Investors section of Visteon Corporation’s website. You can download them at investors.visteon.com if you have not already done so. Joining us today are Sachin S. Lawande, President and Chief Executive Officer, and Jerome J. Rouquet, Senior Vice President and Chief Financial Officer. We scheduled the call for one hour, and we will open the lines for questions after Sachin’s and Jerome’s prepared remarks. Please limit your participation to one question and one follow-up. Thank you again for joining us. I will now turn the call over to Sachin. Sachin S. Lawande: Thank you, Chris, and good morning, everyone. Overall, we delivered a strong performance in 2025, several industry challenges. Net sales for the year were $3,768 million, coming in largely as we expected at the beginning of the year. From a product perspective, displays will stand out with sales growing approximately 20% year over year, reflecting strong customer demand for larger and advanced displays as well as our execution capabilities. Growth over market was muted in 2025 because of two well understood factors we have discussed throughout the year. First, battery management systems continued to be a headwind as EV demand in the US was softer than originally anticipated. And second, in China, our results were impacted by ongoing shift in market dynamics, including the continued loss of share by global OEMs. These two factors negatively impacted GOM by about seven percentage points. From a profitability standpoint, 2025 was a record year, Adjusted EBITDA reached $492,000,000 or 13.1% of sales, representing the highest level in the company's history. We also generated very strong adjusted free cash flow reflecting disciplined execution and continued focus on cost and capital efficiency. New business activity was another highlight of the year. We delivered a record $7,400,000,000 of new business wins, surpassing our prior peak. Finally, a strong balance sheet and cash generation continue to provide significant flexibility. During the year, we deployed more than $120,000,000 towards M&A and shareholder returns while maintaining a strong net cash position. Turning to page three. Chris Doyle: We Sachin S. Lawande: Before I go deeper into our 2025 results, I want to take a step back and briefly update you on the strategic work underway to build Visteon Corporation’s next phase of growth. While the majority of the benefits will come later, some of these initiatives are expected to show results in 2026. We are diversifying our customer base by expanding our presence with specification automakers, have historically been underrepresented at Visteon. In 2025, we secured another $500,000,000 of new business with Toyota. Building on the momentum from prior year, and launched new products with Toyota, Mahindra, Tata, and Maruti Suzuki We expect revenue from these OEMs to begin growing in 2026 and to ramp steadily over the next several years making them an important driver of our future growth. At the same time, software defined vehicles are now extending into other parts of the broader mobility ecosystem particularly commercial vehicles and two wheelers. While we have served these adjacent markets in the past, the changes driven by this trends are making them significantly more attractive growth opportunities while also helping us diversify our exposure. In 2025, nearly 15% of our new business wins came from two wheeler and commercial vehicle manufacturers. Compared to about 4% of our sales today. A particularly important milestone was winning the largest digital program in the two wheeler industry, approximately $400,000,000 in lifetime revenue with Honda. Launches for this program are scheduled to begin in 2027. Our manufacturing footprint and cost structure have long been a competitive advantage for Visteon, To further strengthen this advantage, we have increased vertical integration in manufacturing, to simplify the supply chain and capture incremental value. In 2025, we accelerated the insourcing of the molding of metal brackets used for large displays using an advanced lightweight textile molding process. We are the only tier one supplier that has this capability in house in the industry. We have also increased our optical bonding capacity in various plants, Finally, we began manufacturing automotive cameras to complement our in house surround vision software enabling a complete end to end solution. More broadly, investing in the business remains a top capital allocation priority. In 2025, we deployed approximately $180,000,000 across CapEx and M&A to support new program launches technology development, and vertical integration initiatives. Advancing our technology portfolio and aligning it closely with market trends is a key element of our strategic priorities. Today, I would like to highlight two emerging product trends in particular, advanced displays based on OLED technology, and AI in the cockpit. In 2025, nearly 50% of our new business wins were for displays, surpassing 2024 record levels and positioning this product for sustainable revenue growth. Importantly, we secured significant OLED display wins with luxury OEMs, in establishing Visteon's leadership in this segment of the auto market. While TFT displays will represent the bulk of the automotive market for displays, OLED displays will have greater share in the luxury vehicles. AI technology is advancing at an extraordinary pace Newer AI models deliver significantly higher intelligence, with far fewer parameters, enabling AI to move from the cloud to device based architectures, an essential shift for automotive applications. We are addressing this opportunity through two complementary offerings. First is our high performance compute hardware which provides the processing headroom and architectural required to run AI workloads in the vehicle. Early in 2025, we secured a win with Cherry in China and more recently, follow on business with Geely as they expand this architecture into the Lincoln co brand building on our Zika win in 2024. These are the most advanced cockpit systems in the industry, and are scheduled to launch in the 2026 reflecting both the pace of innovation our ability to execute alongside our customers. Second is Cognito AI, our in house AI based smart assistant for the cockpit. Over the past year, we expanded Cognito AI to support multimodal AI, combining large language models with vision models, allowing the system to interpret visual information such as road signs and symbols, alongside voice interaction, to deliver more contextual and intelligent driver experiences. Following CES, we have seen growing customer interest and deeper technical collaboration Together, our high performance compute systems and Cognito AI positions Visteon at the forefront of bringing AI into the automotive cockpit. Turning to page four. This slide provides more color on a original sales performance for the year. In the Americas, our sales were impacted by lower customer vehicle production, and by the steep drop in production of EVs at GM and Celanus. DMS sales took a further step down in Q4 after the expiration of the EV tax credit and resulted in a full year headwind of about 8% to our 2025 Americas sales. Offsetting these headwinds were a strong growth in digital clusters, displays, and infotainment programs at Ford, VW, Toyota, and Nissan on vehicles such as the Bronco, Tarok, Camry, and the Murano. With a strong performance in cockpit electronics, we were able to deliver a 5% growth of our market in this region despite the significant reduction in BMS sales. Europe was a standout market for us despite lower customer vehicle production, and the cybersecurity related disruption at JLR, one of our larger customers in the region. Our strong performance was driven by the ramp up of newly launched products, mostly large displays in digital clusters, with Audi, Ford, and Renault delivering an outstanding 11 growth over market in this region. We also benefited from our recently acquired engineering services businesses, which is an important strategic capability we are building starting in Europe. In rest of Asia, our sales were essentially flat as our growth in India and Southeast Asia were offset by declines with some customers in Japan. Our market outperformance in the region was driven by two wheeler programs with Honda, Royal Enfield, and TVS. We also benefited from a recently launched digital cluster program with Mitsubishi that is going on multiple car lines. Finally, as expected, sales in China declined year over year resulting in a significant headwind to our overall growth over market performance. The underperformance in China was largely driven by continued market share loss among global OEMs, and to a lesser extent, by vehicle mix and our product transition at Geely. Encouragingly, we delivered sequential sales growth in the fourth quarter supported by new product launches, including a new cockpit domain controller with Geely. Overall, we delivered 2% growth over market globally despite EV headwinds in the US and the ongoing challenges in China. This performance reflects the strength and diversification our product and customer portfolio, which has enhanced our ability to navigate market volatility. The strategic initiatives outlined earlier are expected to further strengthen the resilience of the business. Turning to page five. Our 2025 operational performance reflected strong execution and global reach, with new products launched on 86 vehicle models across 19 vehicle manufacturers. These launches were well distributed geographically underscoring balanced growth across all major regions. From a product perspective, approximately one third of the launches were for large displays and SmartCore programs, aligned with the industry's accelerating shift towards software defined vehicles. The launch mix also showed increasing momentum in hybrid vehicles, which performed particularly well in 2025 as well as in commercial vehicles and two wheelers. Several key fourth quarter launches are highlighted on this page, In China, we launched a new digital cluster on the refreshed Toyota Corolla and Corolla Cross models. The Corolla has been a long standing success for Toyota in the Chinese market, and the updated versions offered with both ICE and hybrid powertrains introduce enhanced smart features designed to reinforce Toyota's position this highly competitive segment. We also launched a center information display on the Mazda CX-5 SUV a key element of Mazda's return to growth plan for 2026. This launch supports both ICE and hybrid variants of the wake in the China market. In addition, we introduced a SmartCore system with Zeeker, further strengthening our position with Chinese OEMs adopting more advanced corporate architectures. In India, we introduced a fully integrated SmartCore based corporate system on Mahindra’s XUV 7XO featuring three twelve inch displays. The centralized compute system offers state of the art SDV capabilities including surround view, telematics, streaming media, OTA, ADAS visualization, besides advanced infotainment capabilities. Other fourth quarter launches included instrument clusters with Ford in North America, and Tata in India. In summary, we delivered strong operational performance in 2025, launching a high number of new products, aligned with key industry growth drivers, including the shift to software defined vehicles, increasing adoption of large displays, and rising demand for hybrid vehicles that sets us up for continued growth. Turning to page six. We delivered a record $7,400,000,000 of new business wins in 2025, 20% higher than 2024. This performance is particularly impressive given the slower OEM port activity during the year, especially in Europe and the US, as automakers adjusted to shifting market dynamics around electrification, and increased competition from Chinese OEMs. Displays and SmartCore performed exceptionally well, reflecting the continued acceleration of the software defined vehicle trend across the industry. Together, they accounted for approximately three quarters of our total wins. We also continued to build momentum in high performance compute system for the cockpit securing a second customer, Cherry, in China. We also secured significant wins in large format digital clusters to support the growth of ADAS and the increasing need to present safety critical information directly in the driver's line of sight. Turning now to the fourth quarter, we secured approximately $1,700,000,000 of new business wins and finishing the year on a strong note. A key highlight was a center information display program for a large full size ICE pickup in North America. Serving both commercial and retail customers. This is a flagship high volume platform and underscores how OEMs continue to prioritize the cockpit as a critical area of differentiation even in pickups and trucks. We also won an integrated and infotainment system on a high volume global SUV and truck platform for a Japanese OEM, where we displaced an incumbent supplier. This win highlights our ability to deliver integrated cockpit system sets scale and compete effectively on both technology and cost, In China, we secured a driver display program for an entry level sedan with Toyota, and expanded our high performance compute system on the Lincoln co vehicle at Geely. Overall, the breadth of our cockpit product portfolio continues to create meaningful growth opportunities for the company. The product and regional diversity of our new business wins positions us well to navigate industry challenges and drive continued growth. Turning to page seven. Let me close with a look at how we are thinking about 2026 and how it sets the path for our next stage of growth. For 2026, we expect sales to be in the range of 3.6 to five to $3,825,000,000. Starting on the left hand side of the slide, there are two specific headwinds we anticipate to impact 2026 both of which we expect will be largely behind us as we move into 2027. First, US EV production is expected to be lower following the reset in demand. As a result, we are assuming that BMS volume in the Americas will decline by nearly 50% year over year. Second, Ford discontinued several vehicle models in 2025 where we had content, and there are no successful programs for those vehicles. In addition, we expect net pricing, foreign exchange, and other commercial items represent roughly a 2% headwind which is broadly in line with normal pricing dynamics. Jerome will walk through these items in more detail. Offsetting these pressures, the right hand side of the slide highlights the building blocks of our next stage of growth, which begin to take shape in 2026. In China, we expect sales to grow modestly, lower customer vehicle production. We have two high performance compute SmartCore programs launching with domestic Chinese OEMs along with cockpit domain controller and display programs with German OEMs launching in the second half of the year. While we have been conservative in our estimates, there is potential upside if the upper segment of the vehicle market performs well as indicated by January market trends. Our strategic initiatives also begin to contribute in 2026. We have multiple program launches during the year, including several with Toyota, continued growth in India, and further expansion in two wheeler and commercial vehicles. These launches reflect the strategic work we discussed earlier, and help set the foundation for sustainable growth. The final bar on the slide represents the net impact of program activity across the remainder of our customer portfolio. This includes new program launches and production ramps across a broader customer base such as the panoramic display and cluster with Audi, digital clusters on multiple Renault vehicles, and new displays with Nissan and Mercedes that more than offset normal program roll offs. It should be noted that it excludes the specific headwinds and the strategic growth drivers we have already discussed. Separately, the supply of memory chips is tight throughout the industry, and we are working closely with suppliers to mitigate the gaps and develop alternative drop in replacements. While the situation is still evolving, we expect that we will be able to cover customer demand applying similar playbook as with prior semiconductor shortages. Overall, 2026 represents an important year. While sales are impacted by temporary headwinds, the second half of the year begins to reflect the progress we have made in executing our growth strategy. That positions us for a return to top line growth as we move into 2027 and 2028. With that, I will turn the call over to Jerome. Thank you, Sachin. Before getting into the details of the quarter and our outlook, Jerome J. Rouquet: I want to briefly step back and look at our financial performance over the past few years as it provides important context for how we have managed the business through a dynamic environment. Over this period, we have grown sales by more than 800,000,000, or 28%, despite our customer production declining by 13%. We have more than doubled adjusted EBITDA, and extended margins by over 500 basis points. Importantly, this margin progression has been steady and consistent, reflecting disciplined execution across pricing, cost structure, and operational performance. We have also generated strong cash flows. Adjusted free cash flow totaled 1,000,000,000 over this period, with an average conversion rate of approximately 42% driven by EBITDA growth and the sustained focus on working capital discipline and capital efficiency. While not shown on this slide, our return on invested capital remains in the high teens, well above our cost of capital and above our peer group, reflecting the quality of returns we are generating from our investment investments in the business. Taken together, these results demonstrate our ability to expand margins and generate cash even as volumes, mix, and regional dynamics have shifted. Turning to page 10. Sales for the fourth quarter were $948,000,000 coming in above our expectations, primarily driven by customer recoveries related to program shortfalls. In the quarter, sales benefited by 30,000,000 related to a customer claim on an EV program in the US. Of which a portion was used to settle supplier obligations. From a product perspective, displays continue to be the main growth driver year over year, while battery management systems were down following the expiration of the EV tax credit in the US. We also experienced several discrete headwinds in the quarter, including the Novelis fire impacting Ford and the cyber attack at GLR, both of which were known headwinds going into the quarter. There was no impact on the volumes, related to the potential Nexperia supply risk we referenced on the last call. Adjusted EBITDA for the quarter was 110,000,000 representing a margin of 11.6% and came in slightly above the midpoint of our guidance. One time items in the quarter represented a modest headwind as elevated warranty expense and some costs associated with resourcing away from the Nexperia more than offset the EBITDA benefit from the customer claim I mentioned previously. When excluding these onetime items, adjusted EBITDA margins approximately 12.5% on a normalized basis, reflecting continued commercial discipline and underlying cost performance. Adjusted free cash flow was strong, coming in at 77,000,000 supported by robust EBITDA levels and continued discipline in working capital management and capital efficiency. During the quarter, we returned capital to shareholders through $50,000,000 of share repurchases and 7,000,000 through our quarterly dividend, which we initiated in the third quarter. Our net cash position was 472,000,000 at the end of the quarter. Turning to Page 11. For the full year, sales were $3,768,000,000 down $98,000,000 or 3% year over year. Customer production was down 1% for the year, while currency was neutral. Pricing was a headwind of 4%. This includes our normal annual price reductions of 2% which are consistent with historical levels as well as lower customer recoveries. The reduction in recoveries reflects the unwind of prior year semiconductor inflation. Sachin S. Lawande: Revenue, offsetting headwinds from lower BMS volumes, In 2025, we delivered another record year for both our lower sales in China, and normal program roll offs. through disciplined cost execution. adjusted EBITDA dollars and margins. Pricing and lower customer recoveries were offset We delivered end to end product cost improvements including supplier cost reductions and vertical integration initiatives and drove productivity gains across engineering and SG&A. Throughout the year, we actively managed our cost structure in line with market conditions, enabling us to improve margins while continuing to invest in strategic growth initiatives. For the full year, the net impact from favorable one timers including elevated one time commercial recoveries was just under 30,000,000. Excluding these items, normalized adjusted EBITDA margins are in the mid 12% range for the full year. Before moving on to cash flow, I want to highlight our voluntary decision to change the methodology used to calculate our valuation allowance on US deferred tax assets. While there are two methodologies available that are acceptable under US GAAP, the methodology we will be using going forward enhances transparency and reduces complexity while also aligning with industry norms. We have reflected this accounting change in our US GAAP tax expense for the past three years in the 10-K. This change impacts the presentation of US GAAP taxes but does not affect cash taxes or underlying economics of the business. Additional details are included in the 10-Ks. Turning to Page 12. In 2025, we generated $292,000,000 of adjusted free cash flow reflecting continued strength in the underlying earnings profile of the business. Trade working capital was a source of cash for the year, driven by lower sales and inventory reductions. Cash taxes increased year over year due to increased profitability, the timing of tax payments and some level of discrete items. Interest was a net positive as income generated on our cash balances more than offset interest payments on debt. Other changes primarily reflect ongoing pension contributions and timing of cash flows. Capital expenditures were $133,000,000 for the year, or 3.5% of sales, illustrating the capital discipline of the company. This included continued investments in vertical integration as well as the purchase of land in India in the fourth quarter to support growth in this market. Taken together, our conversion ratio from EBITDA to adjusted free cash flow was nearly 60%. In total, we deployed approximately 275,000,000 of capital. This included both organic and inorganic investments, the return of approximately $72,000,000 of cash to shareholders through share repurchases and the initiation of a quarterly dividend. During the fourth quarter, we completed 100,000,000 pension derisking by transferring pension related assets and liabilities to an insurance company. This transaction had a noncash impact to net income of negative 7,000,000. Also in the fourth quarter, S&P upgraded Visteon to BA1, reflecting expanded margins strong free cash flow generation, a conservative financial policy, and sustainable demand for advanced cockpit technologies. Turning to page 13. Turning to our 2026 outlook. Starting with sales, we expect revenue in the range of $3,625,000,000 to 3,825,000,000.000 As Sachin discussed, we begin to see the benefits of our strategic growth initiatives in 2026 with more meaningful acceleration into 2027 and beyond laying the foundation for sustainable annual top line growth beginning in 2027. At the same time, 2026 includes several discrete headwinds, including lower BMS sales and the discontinuations of certain programs at Ford, with both items largely behind us as we go into 2027. Our outlook is primarily based on the January S&P forecast. Customer weighted production is expected to be down in the low single digits. Against this backdrop, we expect Visteon growth of a market to be in the low single digits, This is below our long term expectations due to the discrete headwinds in 2026 that positions us for stronger growth going forward as those headwinds roll off and our strategic initiatives accelerate. Before moving to EBITDA, let me provide some additional perspective on the commercial dynamics embedded in our outlook. Recognizing that this remains a dynamic area. There are several items that reduce sales year over year including normal annual pricing to customers, lower customer recoveries related to semiconductor and supply chain disruptions from prior years, as well as the non recurrence of certain commercial recoveries recognized in 2025. Partially offsetting these declines, we expect recoveries related to more recent semiconductor dynamics, including memory related costs. We also anticipate a modest tailwind from currency. On a net basis, we expect these various items items to represent approximately a 2% headwind to sales year over year. Adjusted EBITDA is expected to be between 455 to 495,000,000. At the midpoint of guidance, margins are 12.8%. As we have highlighted previously, our 2025 results included a net benefit of just under 30,000,000 above our normal run rate. Of that amount, we expect about only 10,000,000 to repeat in 2026, resulting in a 20,000,000 year over year headwind. Excluding this factor, we expect adjusted EBITDA dollars to be roughly flat year over year despite lower sales reflecting the underlying strength of the business and our continued operational focus. Compared to normalized margins of 12.5% in 2025, our guidance incorporates a 30 basis point improvement. Included in our guidance are ongoing benefits from cost discipline, emerging savings from vertical integration, and product costing initiatives. These are offset by increased investments in the business to support product development, including in AI and vertical integration. This outlook also incorporates an increase in memory cost with a year over year cost increase, representing approximately 2% of sales. We are in active discussions with our customers to pass along these costs and we have incorporated in our guidance a modest amount of potential timing mismatch between cost incurred and customer recoveries. These discussions are ongoing, and given their sensitive nature, we will not be providing additional details at this time. Turning to cash flow, we expect adjusted free cash flow of approximately $170,000,000 to $210,000,000 representing a conversion rate of approximately 40% at the midpoint. We currently anticipate working capital will be a slight use of cash as we increase inventory levels. Capital expenditures are expected to be approximately $150,000,000 or about 4% of sales, which includes the build out of a second manufacturing facility in India, as well as support of upcoming program launches, and continued investments in vertical integration. Overall, our 26 guidance reflects a business executing with discipline, maintaining margin expansion on a normalized basis, generating strong cash flow, and continuing to invest in the growth initiatives that support the next phase of our top line growth. As usual, we are not providing formal quarterly guidance, but I did want to share some directional insight before moving on. We expect first quarter sales to be the lowest of the year reflecting the industry production profile for 2026. Continued depressed BMS volumes and launches that are weighted towards the back half of the year. From a profitability standpoint, Q1 EBITDA will be negatively impacted by lower volumes as well as higher memory cost. Recognizing that not all customer recoveries agreements will be finalized by the end of the first quarter. Turning to page 14. In 2026, we expect to have more than half $1,000,000,000 of cash available to deploy. This amount represents a combination of cash on hand and cash that we expect to generate during the year. We will continue to be guided by the same disciplined capital allocation framework, prioritizing investment in the business while returning excess capital to shareholders. Starting with investments in the business, this remains our top priority. As discussed earlier, we expect to allocate approximately 150,000,000 to capital expenditures in 2026 positioning the business for future growth and supporting vertical integration initiatives. In addition to CapEx, we continue to see meaningful opportunities for M&A Our focus remains on expanding capabilities through engineering services, while also selectively evaluating opportunities to enhance our technology portfolio. While the ultimate level of investment will depend on how the transactions progress during the year, M&A deployment could be up to two times our annual CapEx investment levels. As always, we will remain disciplined and prioritize strategic fit and financial returns. Even after funding these growth investments, we expect to maintain significant capacity to return capital to shareholders. First, we are increasing our quarterly dividend to $0.375 per share, representing an increase of 36%. This reflects our confidence in the durability of our cash flow and equates to approximately 40,000,000 on an annual basis. In addition, we intend to remain active in share repurchases. At a minimum, we will offset dilution with the intent to be more opportunistic depending on market conditions and the pace of M&A activity. At the end of 2025, we had 75,000,000 remaining under our existing authorization, and we expect to revisit this level as the year progresses. To round out the cash flow picture, we have a modest amortization requirement on our debt facility, representing 18,000,000 of cash outflow in 2026. Taken together, our capital allocation plan for 2026 reflects a balanced and flexible approach continuing to invest in growth, returning capital to shareholders, and maintaining balance sheet strength as the business continues to transition and scale. Turning to page 15. Before we conclude, want to highlight our upcoming investor day, which will be held on June 25 in New York City. We look forward to sharing more detail on our long term outlook including how the strategic initiatives we have discussed today translate into growth and value creation over the coming years. We hope many of you will be able to join us. Thank you for your time today, I would like now to open the call for your questions. Operator: At this time, if you would like to ask an audio question, please press star then the number one on your telephone keypad. Again, that is star and the number one. Your first question is from the line of Luke L. Junk with Baird. Good morning. Thanks for taking my questions. Maybe Sachin S. Lawande: just to start with, Sachin, hoping we could just Jerome J. Rouquet: dig into the DRAM exposure a little bit more relative to the product portfolio, maybe just to scale that 2% impact to guidance both across portfolio and then kind of what that represents from a cost standpoint? And then maybe qualitatively, if you could also just speak to supply the supplier side of this and your ability to get in front of this, and I am just curious from a timing standpoint, you know, were you working on this relative relatively earlier versus when this became more known in financial markets? Sachin S. Lawande: Sure. Sure. So in in terms of Sachin S. Lawande: the use of memory, look, as you can imagine, we use memory chips in virtually all of our products. And we use different types of memories. You know, they they have DRAM for sure, but different types of DRAMs, but also flash memory. Now the the memory supply and and and that landscape looks different than the the logic chips that that we have had issues with in in the past. As you probably know, almost 90 plus percent of the market is is made up of essentially three suppliers, including Samsung, Kynix, and and Micron. And we we work with with all of them, and and we have a long standing relationship with with these suppliers and and a very strategic one. We we started to work with them towards the end of of last year As you might know, the the memory industry typically plans for a about a 10% growth in demand each year. But towards the second half, I would say more in the third quarter of last year, the demand signals from the rest of the industry, not automotive, but consumer electronics, data centers, etcetera, indicated that the demand in 2026 was going to be closer to about 50% and not the traditional 10% or so, thereabouts that industry was accustomed to. So the the main fallout of all of that is that the supply is gonna be tight everybody in all industries. Right? And automotive will also have the same situation. So what what we are doing in response to that and we started on this journey last year itself and I believe earlier than than many the industry, we started to work with our suppliers to secure the capacity for the full year. So that is something that, we have already made a lot of progress with. And we should be I would say, in a better position than most to be able to get those capacity reservations secured. Now even with that, where we see gaps, we are developing alternate pin to pin compatible drop in replacements. Similar to what we did with the logic chip shortages. And also evaluating new suppliers There are some new suppliers not many, but some that are emerging mostly in China. And we started engaging with them late last year and have already secured some supply from from these emerging suppliers. So net net, if I look at our full year demand for this year, should largely be able to cover customer demand There may be some timing impacts that we have to manage. Even that, I think as we work with our suppliers, we should be able to largely mitigate. Now on the cost side, as as Jerome mentioned, we have a increase in cost in this this memory chips on account of our, you know, historical relationship with the suppliers and the early engagement that we have, I believe we will be in a in a good position to have a a a good cost despite the increase, which we will expect to recover from our customers similar to, you know, the last semiconductor prices. So now to to to answer your other question about specifically how much is it, we we would rather not provide any breakdown of our materials mainly for competitive reasons. The increase that as Jerome mentioned represents about two of our sales probably as much as we can share for now. Luke L. Junk: Got it. I really appreciate color there, Sachin. For my follow-up, just want to dig in to the kind of the weighting of revenue this year. So very much appreciate the comment about first quarter sales and the impacts there. Just want to think about weighting the first half versus the second half this year as well, given the impacts from Ford and BMS are seem pretty immediate stepping into the year versus your launch cadence picking up into the back half? And then maybe if we could just walk at a high level into 2027 as well as some of these transient have not seemed like they should drop out and that launch cadence maybe should more fully read through. Thank you. Jerome J. Rouquet: Hey. Good morning, Luke. I will I will start, and then I will hand over to Sachin for '27. So, for '26, we have a as we had anticipated, we have a second half, which is going to be slightly better. Than the first half of the year, and that is really, due to the, launches that we have, that are, more back loaded. Towards the the end of the year. And and we have got that in China, We have got that with our key strategic initiatives. Including Toyota, that will really ramp up in Q3 and in some cases for Toyota in Q4. So overall, we have got about a 3% improvement in the second half versus the first half. When IHS was, I I think, close to 2%. So we are doing slightly better than than than the market in the in the second half versus the first half. Related to Q1, we do think that Q1 will be, the lowest, quarter of the year. Jerome J. Rouquet: On on Jerome J. Rouquet: the back of two things. The first one is the fact that IHS as well is guiding towards a decline year over year of about three to 4%. So we will have this reflected, in our sales. And we do see as well at this point pretty low level of BMS sales as we are going into, into the the the first quarter. So, that will obviously impact our Q1 sales, which will be, as I said, the lowest of the the year. Sachin S. Lawande: Thanks. Thanks, Jerome. Before I get into the 2027 topic, I would like to just briefly touch upon our performance in 2025 and our our two for '26. Because I think the dynamics there have a significant bearing on how we think about 2027. and the other was BMS. Combined, So if you think about 2025, we have we had two major headwinds. One was China, represented about seven percentage points of headwinds And we were able to offset that through new product launches, mainly in North America and Europe, twenty five. those And if you were to do exclude headwinds and the one timers, that represents about seven percentage points of growth over market. Now when you look at 2026, especially in the walk that we have provided for our sales, we have BMS again as a headwind. Perhaps we might be a little more conservative than the the for sure, S&P four's outlook. But nonetheless, we have BMS, and we have the discontinued vehicles at four. That we mentioned earlier. But China is no longer headwind. Now offsetting these are all two new product launches mainly in Europe and in Asia, particularly in China, However, most of the high value launches are in the 2026 to about five percentage points. Now as we go into 2027, although we will not provide specific financial targets on this call here today, By the way, we will do that in much fulsome treatment in our investor day in in June. What I can say is that we expect a top line sales growth since the headwinds both China and BMS, would largely be behind us. Well as this discontinued vehicles topic. And the growth that we will have from the new product launches, especially high performance compute systems in China, as well as displays and other products and the products we are making in the adjacent markets and our strategic initiatives should bring us back to our mid to high single digit growth over market in 2027 and and drive top line growth. So I hope that gives a much sort of broader context on current performance as well as what we expect in 2027. Luke L. Junk: Yep. Thank you very much. I will leave it there. Operator: Thank you. Your next question is from the line of Shreyas Patil with Wolfe Capital. Shreyas Patil: Thanks a lot for taking my question. Maybe just a quick clarification on your Shreyas Patil: commentary around memory. So just is your memory exposure equivalent to 2% of revenues? Or are you expecting an increase in memory costs? That is equal to 2%? Of of sales. Yeah. What what Sachin S. Lawande: what we have mentioned, the 2% is specifically regarding the increase. In the cost that we anticipate this year. Shreyas Patil: Okay. Thank you. And then maybe, you know, looking at the bridge the revenue bridge that you provided earlier, you are pointing to your traditional customers driving about two points of top line Shreyas Patil: line Shreyas Patil: line growth. That is about $75,000,000 Just curious what you are seeing in terms of launch activity broadly this year amongst those OEMs from some of the other suppliers that have reported, it does seem like '26 is a somewhat lighter year. For launch activity, particularly in North America and Europe. Is that similar to what you are seeing? And would that be a contributing positive if you are thinking about 2027? Sachin S. Lawande: Yeah. So so, Shreyas, I think we are seeing a little bit of a different perspective than some of our other peers perhaps. We have a significant amount of launch activity in Europe related to displays As you might remember, we have fun a high level of of displaced business A lot of it has come from Europe, in the past couple of years. And that is turning into revenue especially in the 20 launches in China. And so what has happened in China is after sort of a reset with with many of our international OEMs, not just the domestic OEMs. They have been launching new vehicles to compete in that you know, highly competitive market. And this seems to be the year, again, second half, this seems to be the year that they are introducing new vehicles And I think the timing also might actually work out very well if you have seen even the early numbers from from January in China, the market seems to be tilting in favor of more higher priced vehicles with all of the changes with respect to policies and pricing, etcetera, that have happened in that market. And we think, you know, that might actually help our mobile customers, but also our our our domestic customers like Geely. They have some high performance compute launches that we discussed earlier. With domestic OEMs, and they go into the more premium flagship vehicle models. So I I we do see a very healthy launch activity this year. Shreyas Patil: And and Sachin S. Lawande: me, that that is really signals again this STV trend now. Complemented by this AI trend. Starting to really drive some momentum. Shreyas Patil: Okay. Great. And maybe just one last one on the M&A pipeline you mentioned, I think it is about $300,000,000 or so. Maybe you could just unpack the how the what is kind of in that in that pipeline are are the the size of the companies that you are looking at And maybe the you know, how should we think about the the timeline for when you could you could execute on those deals? Thank you. Jerome J. Rouquet: Yeah. Let let me start, and I will hand over to Sachin as well. So we have not really given a number. The the chart may indicate that it could be as as much as twice the the amount of CapEx we have for '26. But we will see how it goes. We are quite ambitious in 2026 given the pipeline that we have And the criterias that we have got in mind for M&A remain the same as the ones that we have talked about in the past. The first one is that we want to have M&A that are bolt on by design, and that by that, we mean we want to look at fairly small acquisitions so that we can tuck them in our existing business pretty quickly. The the second criteria is that we want to have technology slash capability accretive. To what we are doing today, augmenting essentially the platform that we have from a software standpoint. And that includes as well engineering services. And as you know, we have already done two acquisitions and we are, considering as well further And then the third criteria that we have always considered as well is the fact that we want to have as much as possible these businesses being margin accretive from day one. So that we do not get a return that is going to be, in five or or even ten years. So kind of the three criterias that we have selected, in the past and that we are still continuing to apply as we look at, this pipeline of acquisition. 2026. And maybe just to add to what Jerome has said, you know, without Sachin S. Lawande: necessarily getting into any specifics about sizes of the companies, etcetera, that we are looking at. One thing to keep in mind, Shreyas, is if you look at our journey, of integrating more and more of the ECUs, we have gone from integrating the cluster and the IBI into CDC, not the HPC integrates even more ECUs including body control, gateways, plus additional rear seat entertainment, passenger side, entertainment as well. And now with the regulations in ADAS, in particular, in in Europe, is also expected to follow-up in in in China. We see that ADAS is gonna be more of a table stakes almost features and and something that we can look forward to in in integration in in a one of our future products. So we continue to look for opportunities where we can bring in those technology elements in house that can can allow us to take cost out and integrate more of the content in in our systems. So that should give you some sense of the kind of the companies we are looking at, none of which are a big transactions. As as Jerome mentioned, we prefer to focus on technology capabilities so that we can then integrate it in a better manner. With in our systems. Shreyas Patil: Okay. Thanks. Operator: Your next question is from the line Lupitae Macaulay with TD Cowen. Lupitae Macaulay: Great. Thanks. Good morning, everyone. Lupitae Macaulay: A first question, just going back to Slide seven and the revenue bridge. On the 2% headwinds from discontinued vehicles, I am curious whether you have content in some of the competing vehicles to to the the vehicles that are being discontinued and and whether it is an assumption for some pickup of revenue there? Or are you kind of more assuming that, that headwind does not get recovered or recouped by other competing vehicles might have content on. Yeah. I think yes. The answer is yes. We do we have Sachin S. Lawande: content in that sort of a very broad cross section of vehicles at that OEM. But at least as yet, we are not necessarily seeing the benefit Now that does not mean it may not happen. It could. Still early in the year. And we do not have full visibility into the OEM's plans. Given the the fairly significant you know, volume of vehicles that those represented, we do expect that they would try to fill that hole with some other vehicles, which in if that were to happen, then we would, I guess, benefit from it. Operator: So Sachin S. Lawande: we have we are not seeing that as yet, we have not included that in our outlook. If it does happen, then it might provide some tailwind. Jerome J. Rouquet: And I would add, Sachin, that we have used broadly IHS, in fact, for Jerome J. Rouquet: this discontinued vehicle, but as well just for overall Ford volume going into '26. Lupitae Macaulay: That is very, very helpful. And just as a second question, Lupitae Macaulay: strong bookings in 2025, that is great to see. Sachin, I was hoping Lupitae Macaulay: you had a target to share for bookings in 2026. And then if you kind of look at the last few years average booking, it does seem to support maybe a mid to high single digit revenue growth algorithm for the company in the medium term. I I think I heard you say, Sachin, to an earlier question that you may even Jerome J. Rouquet: get to that level as early as next year. Just hoping you kind of talk a little bit about Lupitae Macaulay: the implications of bookings for the company's growth in the medium term. Sachin S. Lawande: Yeah. Very good question. And if you think about, you know, the 2025 performance in particular, the things I would like to highlight. One are displays, which we did really well across the board, if you look at our displacements, they have were spread over Europe, North America, and and also Asia. And and those programs typically have a shorter lead time in terms of development and launch. Than the cochlear electronics programs. Those fundamentally with more software it takes longer to launch those those systems. So that is one factor. The other thing is that about 15% of our wins were on you know, two wheelers and commercial vehicles. And two wheelers in particular also have fairly short time to to to market. So that that is really the reason where why we feel that the infection of, you know, these wins turning into revenue and contributing to our growth of our market. Will be fairly earlier than than traditional, you know, and and or historical sort of averages in terms of time. And in terms of just outlook, for for this year, in particular, for new business wins, the pipeline of of new opportunities is pretty robust. I am I am very happy to see that given this environment where a lot of the customers that we have, especially outside of China, still in some sort of form or the other in terms of trying to get their portfolio adjusted. We still see a very robust pipeline. Again, thereby displaced, but also more for the domain controllers. And and a a emerge opportunity, which is very exciting. Is this AI dedicated ECUs for AI to bring AI into cockpits without necessarily re architecting the whole vehicle. This is starting in China. And and we are very excited and optimistic about it. And has the potential to come across, you know, into other regions fairly quickly. Lupitae Macaulay: That is very helpful. Thank you. Operator: Your next question is from the line of Tom Narayan with RBC Capital Markets. Tanaseo: Hi. This is Tanaseo on for Tom. Thanks taking the question. So on the last call, I think you guys mentioned a roughly 20% volume reduction for BMS in 2026. And it looks like that number has since jumped up to 50% So it sounds like you guys are still anticipating BMS to show some recovery in 2027. But is there anything you can give us on your longer term planning around BMS? And where you think it could get up to maybe as a percentage of revenue? Sachin S. Lawande: Absolutely. So let let me give you this the way we think about BMS. So especially in the US, first of all, I would start by saying that it is very difficult to forecast what EVs will do this year in particular first full year without all the incentives, But we can look at Q4 for as as one data point, not necessarily sufficient, but at least that is what we have in front of us. So even with the pull ahead that occurred, due to the expiry of the the incentive, we we saw a a Sachin S. Lawande: market Sachin S. Lawande: Penetration of about just over 5% of EVs in in the US in Q4. Now as as we think about 2026, we do believe it will start very soft in the sense that Q1 is probably going to be the low point of EV sales in in the US for continuing from the effects of the pull ahead in in last last year. And then Q2 onwards slowly recover. Now the question is to what level? Now what we have assumed in our outlook is very conservative number. We have assumed a roughly 3% penetration of EVs with our customers. I mentioned Q4 was over 5%. For the full year, it was over seven So it it feels like our 3% is fairly conservative. S&P has a 30% lower 2026 than 2025. And and if you look at you know, our numbers, it is closer to 50% drop year over year. So there could be some some upside if if if we are found to be too conservative here, but given everything, we felt it would be prudent to be a little bit more on the conservative side. Now if you about 2027 and going forward, the improvements that we see in in the cost of EVs and and continuing focus on those wire customers, in particular GM, we believe that the market should recover modestly from the lows of 2026 We will we will we will wait for a little longer to exactly what that could look like, but we believe it could be a very modest improvement and and a steady growth from there. Tanaseo: Okay. Gotcha. Thank you. I guess on a on a slightly higher level, it looks like you guys have pretty strong growth over market in Europe in 2025. I was wondering if you could give us a sense of whether you see any opportunities to capture additional business wins, especially from the Chinese domestic export into Europe? Sachin S. Lawande: Yes. And and we we do see a lot of positives from the Chinese OEMs activity in Europe not just with them directly, but also with European OEMs who are responding to the competitive threat by essentially uplifting the capabilities in the cockpits. Now we also have been able to win business in Europe, the Chinese OEMs, and we expect to able to do more of that as as we go forward. So to us, you know, Europe represents a a a interesting data point where the growth of of the Chinese OEMs sales actually helps the business in terms of driving more content in the cockpit. So we expect to see the dynamic not just limited to Europe, but in other regions there you see higher activity of of the China OEMs. Shreyas Patil: And to your point, we we do anticipate Europe to also Sachin S. Lawande: contribute more in terms of new business opportunities this year as well. Tanaseo: Okay. Great. Thank you. Operator: Your next question is from Joe Spak with UBS. Thanks. Joe Spak: I guess I wanted to go back to better understand some of the Joe Spak: memory commentary. And I know you are going to be you are you are talking about being limited here in what you are going to say. But in the overall bridge, you are talking about recoveries, pricing, FX being a 2% year over year headwind. Now you have the old recoveries, right, that is that is you know, probably lower year over year as you sort of indicated from the original semiconductor challenges, Price is sort of minus two. FX looks like it is probably a positive. So I I guess to get to that overall minus two, and I and if I take in the context your you know, the increase is about 2% of sales. It looks like you are assuming very little in terms of actual recoveries on memory. Is that is that about right? And and maybe just a comment on you know, sourcing here because it sounds like you are doing a lot of work I know a lot of the automakers are doing work as well, and there is some directed by. So you know, who who is really responsible for for for what? Yeah. Let me take the first question. Jerome J. Rouquet: Joe, good morning. So the buckets that you described are the right ones. We have got in this 2% annual pricing We have got, what I would call the legacy or the reduction in recoveries related to the prior chip shortage that are coming down. And then we have got on a positive side, recoveries for the the new memory tensions that are going on as well as some modest, effects. Maybe just to be very clear on the memory, we are we have baked in our assumptions that we will be recovering the majority of of these costs And, when I said the majority is that we are fully intending to recover everything, but there will be some level of timing that we have accounted for between the cost incurred and the the customer recoveries. And we will, as I mentioned, we will see that Q1 and that is probably going to be as well a shearing effect all the way to till the end of the year on that topic. But these are the four full buckets, and we are absolutely intending to recover the memory cost increases through our customer Sachin S. Lawande: And to your other question, Joe, you know, the OEMs activities are more related to understanding the situation and engaging with the suppliers. I do not believe that that they have direct sourcing, at least not with us. So in in our case, we we do virtually all of the sourcing of memories directly ourselves. Joe Spak: Okay. Joe Spak: But I I guess on if if the guidance also sort of assumes that you know, you you are re re recovering it all just with some timing mismatches. Then it mean, it is also you know, rough numbers. Is that fair to sort of say that is like a 20 to 30 basis point hit to your margins this year? Jerome J. Rouquet: We we have not given any specific. It is embedded in this 2%, so I would take that 2% as kind of the the essential piece of the work As I said, in fact, if you decompose maybe these buckets, if you think about it, annual pricing as well as say, legacy semiconductor recoveries will be fully offset by the efficiencies that we are generating in the business. Will be offsetting the memory cost increases to the majority will have some level of leakage, but nothing major. And then you have in that bucket as well, as I said, the the effects. Which is a pretty small number. Overall, when when we look at our business, and that is pretty valid in fact for the last two years, and it will be still valid as well for twenty six. The dilution of, recoveries has an impact of about 0.5 percentage points on the on on recoveries. So on on EBITDA. Sorry. So that that is kind of the the dilution that you see, over the years. Coming from that buck. Good. Okay. Maybe just one quick one just to to follow-up on the Joe Spak: the capital deployment and the M&A. And I know those are gradiated bars, you said the M&A could be you know, twice the CapEx or $300,000,000 or if I look at M&A to buyback, that is like a two to one ratio And if you add up, you know, CapEx, the the dividend, the debt, like, it looks like there is about you know, 300,000,000 total left there. So I guess I am just I am just wondering, like, if Operator: if Joe Spak: and I know there is ranges here, but if the M&A outlay goes up to that 300,000,000, does that mean there there is little left for for buyback? Jerome J. Rouquet: Yeah. These the slide shows, in fact, that buyback would be in the $100 plus million. Right. Our priority is going to be really focusing on, obviously, investing in the in the business with the CapEx. As well as focusing on these acquisitions. Obviously, the excess is going to go to dividend and as well share buybacks, but we do want to remain opportunistic in terms of the buyback. So that is really the key point as well. And we will, we will update you as we go, throughout the year. Operator: Okay. Joe Spak: Thank you. Shreyas Patil: Thank you. Jerome J. Rouquet: Thank you. This concludes our earnings call for the fourth quarter. Lupitae Macaulay: And full year of 2025. Jerome J. Rouquet: Thank you for participating in today's call and your ongoing interest in Visteon. Lupitae Macaulay: Thank you. Operator: This concludes Visteon Corporation’s fourth quarter 2025 result earnings call. You may now disconnect.