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Operator: Welcome to the Teekay Group Fourth Quarter and Fiscal 2025 Earnings Results Conference Call. [Operator Instructions] As a reminder, this call is being recorded. Now for opening remarks and introductions, I would like to turn the call over to the company. Please go ahead. Lee Edwards: Before we begin, I would like to direct all participants to our website at www.teekay.com, where you will find a copy of the Teekay Group's Fourth Quarter and Annual 2025 earnings presentation. Kenneth will review this presentation during today's conference call. Please allow me to remind you that our discussion today contains forward-looking statements. Actual results may differ materially from results projected by those forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the fourth quarter and annual 2025 Teekay Group earnings presentation available on our website. I will now turn the call over to Kenneth Hvid, Teekay Corporation and Teekay Tankers' President and CEO, to begin. Kenneth Hvid: Thank you, Ed. Hello, everyone, and thank you very much for joining us today for the Teekay Group's Fourth Quarter and Annual 2025 Earnings Conference Call. Joining me on the call today for the Q&A session is Brody Speers, Teekay Corporation's and Teekay Tankers' CFO; Ryan Hamilton, our VP, Finance and Corporate Development; and Christian Waldegrave, our Director of Research. Starting on Slide 3 of the presentation, we will cover Teekay Tankers' recent highlights. Teekay Tankers reported GAAP net income of $120 million or $3.47 per share and adjusted net income of $97 million or $2.80 per share in the fourth quarter. For the full year, Teekay Tankers reported GAAP net income of $351 million or $10.15 per share and adjusted net income of $241 million or $6.96 per share and realized gains on vessel sales for the year totaling $100 million. Spot tanker rates during the quarter were the second highest for a fourth quarter in the last 15 years. With our significant spot exposure and a low free cash flow breakeven, the company generated approximately $112 million in free cash flow from operations and at the end of the quarter, had a cash position of $853 million with no debt. This excludes $99 million of cash held in escrow at the end of the year related to payments for vessel purchases. Teekay Tankers continues to execute on its fleet renewal strategy. In January, we acquired three 2016-built Aframaxes for $142 million and bareboat chartered the vessels back to the seller on short-term contracts. We expect to take over full commercial and technical management of these vessels in the second and third quarter this year. In addition, we sold or agreed to sell two older Suezmaxes for gross proceeds of $73 million. And just this week, we finalized an agreement to sell our only VLCC for gross proceeds of $84.5 million with delivery during Q2. We expect to recognize total gains from these sales of approximately $45 million in the first and second quarter of 2026. Looking at our first quarter to date, the tanker market has continued to strengthen, and we have secured spot rates of $79,800, $56,900 and $51,400 per day for our VLCC, Suezmax and Aframax LR2 fleets, respectively, with approximately 78% spot days booked for our VLCC and around 65% spot days booked for our midsized fleet. Lastly, Teekay Tankers has declared its regular fixed dividend of $0.25 per share. Moving to Slide 4. We look at recent developments in the spot market. Spot tanker rates strengthened in the fourth quarter of 2025 due to a combination of fundamental drivers, geopolitical events and seasonal factors. Global seaborne oil trade volumes were near record highs during the fourth quarter due to the unwinding of OPEC+ supply cuts, coupled with rising oil production from non-OPEC+ countries, particularly in the Americas. In addition, tighter sanctions against Russia, Iran and Venezuela created trading inefficiencies, which have benefited tanker ton-mile demand while pushing more trade volumes away from the dark fleet towards the compliant fleet of tankers. Midsized tanker spot rates were further supported by disruptions on the CPC terminal in the Black Sea during November 2025, which led to a reduction of crude oil exports for around 2 months. This outage opened up the arbitrage to bring U.S. oil across the Atlantic to Europe, while poor weather in Europe prevented ships and ballast from returning across the Atlantic, giving rise to very strong rates for both spot voyages and lightering in the U.S. Gulf region. Spot tanker rates have strengthened at the start of 2026 with midsized rates trending above the 5-year high in February as many of the factors which supported the tanker market during the fourth quarter remain in place. Turning to Slide 5. We look at the impact of sanctions on tanker trade patterns. Geopolitical events continue to shape global oil trade flows and in recent months have pushed an increasing portion of global seaborne oil trade to the non-sanctioned or compliant fleet of tankers. As shown by the chart on the left, both Russia and Iran have found it increasingly difficult to sell their oil due to stricter sanctions leading to a more than 70% increase in sanctioned barrels at sea over the past 12 months. This includes both tankers in transit as well as oil held in floating storage and reflects the increasing complexity of the logistics chain for sanctioned oil exports. The end result is that buyers of Russian and Iranian barrels are having to find alternative sources of oil using the compliant fleet in order to compensate for the loss of sanctioned oil. This trend is most evident when looking at Indian crude oil imports. India became the top buyer of Russian crude over the past 2 to 3 years with imports averaging 1.6 million barrels per day in 2025. However, sanctions on Russian oil companies, Rosneft and Lukoil, coupled with an EU ban on the import of refined products made from Russian crude oil has led to a drop in imports to around 1 million barrels per day as of January 2026, with replacement barrels being sourced from the Middle East and Atlantic Basin via the compliant fleet. In addition, the U.S. and India recently signed a trade deal, which reportedly involves India further reducing the imports of Russian crude oil, which may push even more trade to the compliant fleet in the coming months. Finally, recent U.S. action in Venezuela is incrementally shifting trade flows to the benefit of compliant tanker demand. Close of Venezuelan oil to China via the dark fleet, which averaged 550,000 barrels per day in 2025 have fallen to 0 since the onset of the U.S. naval blockade in December. Venezuelan oil is now being transported entirely by the fleet of compliant tankers with most volumes in January being directed to the U.S. Gulf and Caribbean on Aframaxes. In the early part of February, we have also seen several loadings destined for Europe on Suezmaxes, while we understand that some Indian refiners have also booked cargoes for April delivery using VLCCs. To give an illustration of the potential impact going forward, an extra 500,000 barrels per day shift from Venezuela to the U.S. Gulf creates demand for approximately 20 Aframaxes. Turning to Slide 6. We review the key drivers for the medium-term tanker market outlook. Underlying tanker demand fundamentals remain positive. Global oil demand is projected to increase by 1.1 million barrels per day in 2026, which is in line with levels seen in 2024 and 2025. Demand could be further boosted by strategic stockpiling, particularly in China, where the country is projected to add just under 1 million barrels per day to strategic reserves during 2026 as per estimates by the U.S. Energy Information Administration. Non-OPEC+ supply growth is projected to increase by 1.3 million barrels per day in 2026, led by the Americas, which should lead to meaningful midsized tanker demand growth. The OPEC+ Group, which unwound over 2 million barrels per day of voluntary cuts in 2025 has announced a pause on further unwinds during the first quarter of 2026 and its supply policy for the remainder of the year is uncertain. On the supply side, over the recent months, we have seen an increase in tanker ordering, particularly for large crude tankers, which has pushed the size of the order book to a 10-year high when measured as a percentage of the existing fleet. As a result, tanker deliveries are set to increase in 2026 with a further acceleration in 2027. Though actual fleet growth will depend on the level of vessel removals through scrapping or via the migration of vessels from the compliant fleet to the dark fleet and the utilization of older vessels. While the order book size has increased over the past year, we should keep in mind that the tanker fleet is aging with the average age of the fleet now the highest in over 30 years, meaning that there will be a significant amount of replacement demand in the coming years. In fact, the order book, which now stretches into 2029 is completely offset by the number of compliant tankers reaching age 20 over the same time frame, not to mention the dark fleet of tankers, which already has an average age of over 20 years. So in short, while the tanker order book appears large on the surface, these vessels are needed to replace the older fleet of tankers, which are approaching the end of their trading lives in the coming years, although the timing of when vessels will exit the fleet is uncertain. Turning to Slide 7. We highlight TNK's key achievements in 2025. Reflecting on the year, the tanker market for 2025 was strong but volatile, influenced by several dynamic geopolitical factors. With our exposure to the spot tanker market and our low free cash flow breakeven levels, Teekay Tankers generated $309 million of free cash flows while returning approximately $69 million of capital to our shareholders via our regular quarterly dividend and $1 special dividend in May of last year. We commenced our fleet renewal process, including our recent transactions in January and February, the company acquired 6 vessels for $300 million, while selling 14 vessels for $500 million, booking estimated gains of approximately $145 million. As a result of these transactions, we have made progress towards reducing our fleet age. These transactions highlight our ability to act opportunistically given the dynamic market conditions. In addition to the fleet renewal transactions, we outchartered 3 vessels, extended an in-chartered vessel for another 12 months and sold our investment in Ardmore, generating a gross return of over 14% on this investment. Overall, our strong financial result was supported by our exceptional operational performance with 0 lost time injuries and 99.8% fleet availability, important metrics measuring the safety of our crews and reliability of our operations. Turning to Slide 8. We highlight Teekay Tankers' value proposition. First, as a result of our fleet profile, our operating leverage remains strong and the company is well positioned to generate significant cash flows in nearly any tanker market. With our 3 out charters and no debt, we have a low free cash flow breakeven of approximately $11,300 per day, which is down significantly from $21,300 per day in 2022. For every $5,000 per day increase in spot rates above our low free cash flow breakeven is expected to produce about $55 million of annual free cash flow or $1.60 per share. Second, Teekay Tankers has a strong balance sheet with no debt and a large investment capacity for future growth. Having $853 million cash position, we can transact quickly in this dynamic tanker market. And lastly, the company's performance is underpinned by our integrated platform. We believe our in-house commercial and technical management is a competitive advantage. Combined with over 50 years of operating experience in the tanker industry, we provide superior service to our customers and transparency through the value chain, which drives shareholder returns. In summary, the company's strategy over the last several years has been to maximize shareholder value through our exposure to the strong spot market. In 2025, we made progress to renew our fleet by making incremental investments in more modern vessels, while at the same time, selling some of our oldest tonnage. As we look ahead, our best-in-class operating platform and strong financial footing positions the company well to continue renewing our fleet, earning cash flow, building intrinsic value and returning capital to shareholders. With that, operator, we are now available to take questions. Operator: We'll take our first question from John Chappell with Evercore ISI. Jonathan Chappell: Brody, a couple of questions for you today on modeling. So the bareboat charters for the Aframaxes that you acquired and will take full commercial ownership in the second and third quarters. Between January and taking that full ownership, the P&L impact, is that you're just getting the bareboat rate that you chartered back to the previous owner. There's no OpEx, there's no D&A. There's no other impact except a revenue. Brody Speers: Yes, that's right. We're just getting the bareboat back. And those ships will actually dry dock in the first half of the year during that period, too, but we'll continue to get the bareboat rate during the dry docking. Jonathan Chappell: Okay. Great. The other thing I wanted to ask you was the G&A run rate. So you did the whole management reorg, et cetera. So as we look at kind of the last 3 quarters, is that the right run rate to think about going forward, maybe with some inflationary impact on there? Or is there anything that would either make that go up or down significantly from, let's call it, the last 3 quarter run rate? Brody Speers: Yes, I think that's right. I think if you look at even our annual G&A for the year, around $46 million. Going forward, I think we should be about that or maybe a little bit lower. So it approximates the run rate from the last few quarters. Jonathan Chappell: Okay. Final thing, sorry, just to harp on this stuff. It's the strategic stuff to market. I think we've covered that pretty well already. The D&A. So you've done a lot of fleet renewal, taken out the V, a couple more Suezmaxes. And then obviously, you're not going to add the 3 acquired Afras until, call it, the middle of the year. What do we think about for a first quarter starting point on D&A? Is it similar to 4Q? Or would it be a step down from there? Brody Speers: Yes. Yes, it should be pretty close to what we had in Q4 there at about $21.5 million or $22 million in the first quarter. Operator: Our next question will come from Omar Nokta with Clarksons Securities. Omar Nokta: Obviously, things are progressing quite nicely. You were mentioning the $850 million of cash you've got that gives you plenty of flexibility in this market to act quickly when an opportunity arises and you're getting close to that $1 billion number here, seemingly, I would say, in the next -- presumably the next few weeks or months. But -- and you have no debt. So just wanted to get a sense from you in terms of how you're feeling about this cash position you have on the balance sheet. Do you feel compelled to put that to work? And is there like a sense of urgency that you have either at your -- at the management level or at the Board level that you want to put that to work? And I guess maybe kind of related, obviously, to that is, how are you thinking about putting that to work when it's time? Is it more kind of drip fee dynamic in acquiring assets in the sale and purchase market? Or are you thinking more big picture M&A? Kenneth Hvid: Thanks, Omar. Welcome back. Good question. Obviously, it's a bit of a high-class problem we're sitting on here. But it's not something that's a big surprise to us. I mean we could obviously project this out. I think what has surprised us maybe in this quarter, last quarter and this quarter we are in here is how strongly the market has performed. That's obviously positive. We have still a lot of operating leverage and generating a lot of cash flow in this market. Had the market been low, we probably would have been a bit more active on the buying side. We still found a couple of ships, and we're happy about that. The way we look at it in a strong market, which very clearly, and we've seen the big uplift in tanker values here is that we're still an operator. We still want to renew our fleet. We still believe that there are deals that we can find in this market. So -- but at the same time, we also recognize that asset values have had another step up here, and that's natural as we are seeing spot rates as we have. I expect that we will continue to do a couple of purchases throughout the year here. I think it's a very tough environment to see that we do a major acquisition just because of the relative asset values. So I think the short answer to your question in terms of big acquisition versus drip feeding, I think, was your words. It will probably be more drip feeding with a couple of ships here and there. And the way we think about it is that we can still do it on a basis where we are selling maybe 1 old ship and buying 2 new ones and using a bit of the arbitrage that we have as we have seen a nice uplift also on the values of the older tankers that we have. Omar Nokta: Yes. Makes sense. And then I guess, perhaps a follow-up and clearly related. We're coming up on the 1Q dividend potential. I know you've declared $0.25. The past 3 years, you've conditioned us to anticipate a special with 1Q. Is the plan still to stick to that? And I know it's a Board decision, you can't just speak openly like that. But can we presume that the payout for the first quarter will be higher than what was done last time around? Kenneth Hvid: Yes. I'm just looking for my note to your question from exactly a year ago, Omar. And I think my answer at that time was that it's something we discussed with the Board at our March Board meeting and as we've done in the last couple of years, we typically announce any specials in connection with the May earnings release. Omar Nokta: Okay. I will try to remember that for next year. Operator: We'll now take our next question from Ken Hoexter with Bank of America. Ken Hoexter: Brody, I love going back to the May script to repeat it. So thoughts on -- you mentioned the 500,000 barrels increase in Venezuela can provide the increased demand for a number of vessels. Your thoughts on timing of Venezuela getting back up and running? Or is there an immediate amount that they've talked about kind of revamping and being able to scale up with speed before long-term capital investments have to be made. Is there a potential of that increase of 500,000 barrels? Kenneth Hvid: Yes. I think the -- it's Kenneth here. I'll pass it on to Christian. The oil is obviously being transported already now, as we said in our prepared remarks, but I'll let Christian comment on kind of our outlook for Venezuela. Christian Waldegrave: Yes. So last year, Venezuelan crude exports averaged about 800,000 barrels a day. We obviously saw in December and January after the U.S. naval blockade that those volumes fell to about 500,000 barrels a day, and it was all the long-haul flows to China that disappeared. Just looking at where it's tracking in February, we're already back up to about 700,000 barrels a day of exports. So the oil is starting to move again, and it's all going on non-sanctioned ships, primarily to the U.S. Gulf Caribbean region, but we've also seen 2 or 3 cargoes to Europe. And we know that India is starting to buy some barrels as well. So it looks like we're going to get back up to the normal run rate of 800,000 barrels a day of exports fairly soon. And then I think there's an expectation as well that with the Venezuelan oil industry opening up and foreign companies coming in and doing more investment that production and exports could be boosted within the year by another 200,000 to 300,000 barrels a day, but that's obviously dependent on how quickly they can get things moving there. So I think it's a good story for the tanker market in terms of the exports are shifting from the dark fleet to the compliant fleet. And then if we can get some extra production and volumes moving as well, then it's just going to benefit the midsized tankers, especially even more. Ken Hoexter: Great. How about the same thing, Christian, on an update on the Canada shipments? Christian Waldegrave: Yes. So it's an interesting one because, obviously, a lot of that Venezuelan crude, which is heavy sour was going to China. And so some of the Chinese state-owned refiners that were getting that heavy sour crude will probably be looking for replacement. And there are two areas they could replace it from. One is Middle East heavy crude and the other is Canadian. We have seen an increasing trend of the TMX exports going directly on Aframax to Asia. And I think it's a natural replacement for some of that Venezuelan crude. And we're also seeing a trend of the U.S. West Coast requirements are coming down because there's been some refinery closures there and the Benicia Refinery, I think, is in the process of closing down as well. So again, that just frees up more Canadian crude to flow to China. So I think we will see some volumes picking up there directly on Aframaxes, which again is going to benefit the Aframax market. Ken Hoexter: Yes. So it's staying on Aframaxes. It's not transloading the load. Christian Waldegrave: So now it doesn't seem to be transloading. It's going more directly on Afras rather than transloading a pile on to Vs. Ken Hoexter: Ken, how about a little history lesson, right? I mean it seems like something -- I don't know, maybe it's getting a little more antagonistic with Iran the last couple of days. If there is action, maybe a little history lesson on what's happened with rates and volumes with military action in the region? Kenneth Hvid: Yes. I think it's a good question. Right now, it's more in anticipation of something happening. And as you're probably alluding to, it's -- we go back to last time that we had action in the region where there was military action, and we looked at it back then, we saw a run-up in rates. We saw some security fears. I think we -- at the time, we pointed out that -- historically, we've never seen a closure of the Strait of Hormuz. But of course, that's what everybody is speculating about in the event that we see an escalation there, how is that going to drive up rates. And I would say the one difference we have this time around is that we've seen also consolidation in the VLCC segment. So it's a slightly different dynamic this time around in the event that charterers will be looking to secure tonnage quickly. But I think at this point, I mean, we see rates which are as high as we saw last time, but for slightly different reasons. And I think it's just a situation we need to watch. Christian, do you want to add anything? Christian Waldegrave: No, I think like Kenneth said, when we had the last time, obviously, it was last June during that 12-day conflict. And as Kenneth said, I think the big thing was during that time, there was no actual disruption to flows and to movements. It was more of a security sort of premium that caused the rates to spike and they came down pretty quickly. So it will depend if there's military action. Obviously, we don't know that. That's kind of speculative. But if there is military action, it depends on whether actual shipping and oil infrastructure is impacted or not. If the oil keeps flowing, then presumably, it will be a bit like last time, the effects might be short-lived, but it really depends on how it unfolds. Ken Hoexter: So if no attack on shipping or infrastructure, then rates -- you're saying they've already run up in anticipation and we see it cooling off. Okay. Got it. And then last one for me is the tanker order book. Now you mentioned 18% of the fleet, the highest since 2016, but you said optically, it's different as I think you said some of the vessels needed to replace an aging fleet. So maybe thoughts on -- your thoughts on supply/demand, Christian. How do you think we see the balance in the year ahead? Christian Waldegrave: Yes. It's going to be a timing issue, I guess, because as we laid out in the prepared remarks, the order book, while on the surface, it looks quite big. If you look at the fleet age profile, there was a lot of ships that were built in the late 2000s, especially 2008, 2009, 2010. So we're approaching a big hump in the fleet age profile that needs to be replaced. So the ships that are on order right now are needed to replace the older ships, but it's a matter of timing, right? We know when the ships are coming into the fleet, we don't know when ships are going to be exiting either through scrapping or other means. So in the meantime, like I said, the deliveries will ramp up this year and further into next year. So there's quite a bit of tonnage that needs to be absorbed. But for now, as we're seeing in the rate environment, the fact that the underlying demand is still positive. We're seeing more and more trade getting pushed to the non-sanctioned fleet. There are factors there that in the near term, at least suggest that the market should stay firm. But beyond that, it's going to depend on the timing of the order book coming in versus some of these changes that are going on, on the geopolitical side. So that's why we take a more balanced outlook on the medium term. But certainly, in the near term, I think things still look pretty positive. Operator: And that does conclude our question-and-answer session for today. I'd like to turn the conference back to the company for any additional or closing comments. Kenneth Hvid: Thank you very much for tuning in today. We look forward to reporting back to you next quarter. Have a great day. Operator: And once again, that does conclude today's conference. We thank you all for your participation. You may now disconnect.
Operator: Good morning, good afternoon, ladies and gentlemen. And welcome to Besi's quarterly conference call and audio webcast to discuss the company's 2025 fourth quarter and full year results. You can register for the conference call or log into the audio webcast via Besi's website, www.besi.com. Joining us today are Mr. Richard Blickman, Chief Executive Officer; and Mrs. Andrea Kopp, Senior Vice President, Finance. [Operator Instructions]. As a reminder, ladies and gentlemen, this conference is being recorded and cannot be reproduced in whole or in part without written permission from the company. I'd like to remind everyone that on today's call, we'll be making -- management will be making forward-looking statements. All statements other than statements of historical facts maybe forward-looking statements. Forward-looking statements reflect Besi's current views and assumptions regarding future events, many of which are, by nature, inherently uncertain and beyond Besi's control. Actual results may vary materially from those in the forward-looking statements due to various risks and uncertainties including, but not limited to factors that are discussed in the company's most recent periodic and current reports filed with the AFM. Such forward-looking statements, including guidance provided during today's call speak only as of this date, and Besi does not intend to update them in light of new information or future developments nor does Besi undertake any obligation to update the forward-looking statements. I would now like to turn the call over to Mr. Richard Blickman. Please go ahead. Richard Blickman: Thank you. For today's call, we'd like to review the key highlights for our fourth quarter and year ended December 31, 2025, and update you on the market, our strategy and outlook. First, some overall thoughts on the fourth quarter. Besi's revenue, gross margin and operating expense development in the fourth quarter '25 exceeded the favorable end of prior guidance. Revenue of EUR 166.4 million and orders of EUR 250.4 million, increased by 25.4% and 43.3% versus the third quarter of '25, due principally to a broad-based increase in demand by Asian subcontractors for 2.5D data center applications, renewed capacity purchases for photonics applications and a significant increase in hybrid bonding orders. Net income of EUR 42.8 million increased by 69.2% versus the third quarter of '25 due to higher revenue, increased gross margins from a more favorable product mix and lower-than-anticipated operating expense growth. Besi's progress in 2025 reflected the favorable influence of increased AI infrastructure spending on our business development. Orders of EUR 685 million increased by 16.8% versus 2024 due to strength in AI-related 2.5D demand for data center applications by Asian subcontractors and renewed capacity purchases for photonics applications. Growth accelerated in the second half of the year, with orders increasing 63.6% versus the first half of '25. Orders for AI applications represented approximately 50% of our total orders in '25 and revenue from Besi's computing end user market grew by approximately 40% of revenue in 2024 to 50% in 2025. For the year, revenue of EUR 591.3 million decreased by 2.7% versus 2024 due to lower shipments for mobile, automotive and industrial end user markets as a result of ongoing weakness in overall assembly markets. We continued to maintain attractive levels of profitability with gross operating and net margins realized of 63.3%, 29.3% and 22.3%, respectively. Given profits earned in 2025 and our solid liquidity position, we will propose a cash dividend of EUR 1.58 per share for approval at Besi's April AGM, which represents a 95% payout ratio. Liquidity remained strong at year-end with cash and deposits of EUR 543 million and net cash of EUR 36 million, increasing by EUR 24.4 million and EUR 43.8 million, respectively, versus September 30, '25. We distributed EUR 254.8 million in the form of dividends and share repurchases in 2025, roughly equal to levels of 2024. Next, I'd like to discuss the current market environment and our strategy. Tech insights currently forecast relatively flat assembly market growth between '24 and '25 driven by a push out of the anticipated assembly upturn from '25 to '26. However, they expect growth of 74% between '25 and 2030. Based on increased AI use cases and infrastructure spending, new product introductions, new fabs coming online and a recovery in mainstream assembly applications, we expect to significantly exceed such projected growth rates given our leadership position in advanced packaging. We are pleased with our operational progress in 2025 as we completed a comprehensive strategic plan review with enhanced revenue and profit targets and organized additional production capacity and infrastructure to help support that growth. We also experienced progress on our wafer level assembly agenda as hybrid bonding adoption expanded to 18 customers cumulative order grew to 150-plus systems and new use cases were identified for cold package optics, ASICs and consumer applications. In addition, 6 integrated hybrid bonding production lines were installed at a leading logic customer incorporating 30 Besi-hybrid bonders in collaboration with Applied Materials. The first 15-nanometer placement accuracy prototype system was also completed and available for customer qualification. Our position in the TC market was further enhanced as Besi's TC NXT adoption expanded to five customers for logic, memory and photonics applications. In addition, our Flip Chip and multi module die attach systems gained significant share in the market for AI-related 2.5D assembly structures addressing the rapid growth in demand for data center and photonics capacity. Further, we successfully introduced a variety of next-generation die bonding and packaging systems for each of our traditional mainstream markets as we prepare for the next market upturn. We see market conditions improving in overall mainstream assembly markets based on favorable semiconductor unit growth trends and a significant reduction of excess semiconductor inventory. Green shoots are appearing after an extended downturn of nearly 4 years in each of our principal end user markets. Customer road maps also point to expanded adoption of wafer-level assembly over the next 2 years related to hybrid bonding and TC NXT adoption in HBM 4, 4E, co-package optics, ASICs and new high-performance computing and mobile introductions. In addition, recent announcements of substantial AI-related infrastructure investments are expected to increase demand for advanced packaging. Increased AI investment has created capacity shortages for 2.5D packaging which has caused producers to secure increased production for many Asian subcontractors. Further, many new advanced packaging fabs are planned globally which should increase demand for our advanced packaging portfolio. Now a few words about our guidance. We entered '26 with increased optimism based on strong order momentum experienced in the second half of '25, which has continued to date in the first quarter of 2026. Our current optimism is based on anticipated growth in 3 promising Besi revenue streams, 3D wafer level assembly, AI-related to 2.5D capacity and more traditional mainstream assembly applications. Our optimism also relates to the significant increase in demand from Chinese subcontractors as the country builds out its AI infrastructure. For the first quarter '26, we anticipate that revenue will increase between 5% and 15% versus the fourth quarter of last year with gross margins ranging between 63% and 65%, aided by improved revenue and a more favorable advanced packaging product mix. Operating expenses are anticipated to increase by 10% to 15% as we maintain discipline in overhead growth while continuing to increase development spending to support long-term growth opportunities. That ends my prepared remarks. I would like to open the call for some questions. Operator? Operator: [Operator Instructions] The first question comes from Madeleine Jenkins from UBS. Madeleine Jenkins: My first one is just, Samsung has publicly said that they'll be dual tracking hybrid bonding and TCB 4E in HBM and the samples are being sent to customers. I was just wondering if you could kind of help us understand from a customer's perspective, what would make them choose the hybrid bonding version versus the TCB and vice versa? And then on that, just generally, when are you expecting the first high-volume orders to come through for hybrid bonding for HBM? Richard Blickman: Well, excellent, Madeleine, happy to share some more background. 2026 will be a very important year to understand the adoption of hybrid bonding for HBM stacking. As is publicly shared by Samsung in particular, keynote speech last week in Korea at the SEMICON is a very clear road map to adopt hybrid bonding for very important reasons and that is performance and also heat. And that, with all kinds of tests in previous years should be superior to using a reflow process to build these stacks. We are currently in the evaluation process, customer sample and qualification process. And as was published by that customer in the course of this year, early Q2, maybe Q2, May, June time frame, it should become clear how that inroad of hybrid bonding stacked in HBM 4, but also in the previous three, the 12 stack should find its way into the end markets. That is Samsung. As we all know, our other memory customer started already much earlier in testing and sampling hybrid bonded stacks and they are ready as soon as the market demands these technologies used for either HBM 4E or other stack devices. Also the 12 supposedly shows much better performance using a hybrid process than a refill process. And last but not least, the #3, the largest of all the memory -- the three memory producers, has also announced that it will start qualification of the hybrid bonding process in the second quarter of this year to also come towards the end of this year to the conclusion whether this is a technology used for high-volume mainstream in the generation of HBM 4 or whether that is in preparation of the next generation, the 20 stack. So all these tests, we will update you every quarter on the progress. Also, there's a lot of press coverage and those companies share that with the community also in conferences. So a very important year for hybrid adoption in the memory space. Madeleine Jenkins: That's very helpful. And then just my second question is on China. They're clearly adding a lot of AI capacity. Kind of how sustainable do you see this demand as being? Is it multiple customers? And also how high is your market share in this region for the AI bit? Richard Blickman: The market share is very high. To our surprise, we would have expected and, let's say, solid market share as we have with mass reflow for a long time, but our share has gone up significantly also among the Chinese. How sustainable that is? Well, the answer is that the world expects an enormous increase in building data centers. So for that 2.5D, some qualified that we are only at the beginning. Our position, as I said earlier, is very strong with a very solid market share. And that you can also derive from our margin, our ongoing margin, gross margin but also net margin development. Operator: The next question comes from Sandeep Deshpande from JPMorgan. Sandeep Deshpande: Richard, my question to you is regarding the logic market and the foundry market. I mean you've seen that some orders coming through in the last quarter on the foundry side. Do you expect that these orders from the foundry side continue into the first quarter? And when you say on your release that the order momentum remains strong in the first quarter, how would you quantify it? I mean, are we going to expect a strong sort of orders in the first quarter like you saw in the fourth quarter? Richard Blickman: Well, the answer is, first of all, yes. So as we guided, continued momentum, that also means that we expect more orders in the logic space for hybrid bonders. And as we all know, the program in Taiwan entails several steps to build out a complete new factory. The first install start in June and operators have to be trained, maintenance has to be organized and that's all underway. And you can expect, as was also the case with the current factory, the AP6, that over the course of several quarters, that capacity will be built because supposedly demand is building. So that looks very promising. Sandeep Deshpande: Then following up on that -- on the logic side, do you expect in the logic business this year that is '26 will be much better than in '25 because when you look at how your order intake was at the end of '24, you had about 100 cumulative hybrid bonding orders, you've had 150 at the end of '25. So there was a slight slowdown in terms of the order intake. And if this could accelerate now into '26? I mean, clearly, memory will also contribute to that, but will logic itself accelerate? Richard Blickman: Well, as I just explained to your first question, if all goes according to public shared plans, it should increase because already AP7 is supposedly twice the size of AP6 and that's only one customer. So the adoption for logic is continuing. We saw that in the whole of '25. Again, we now have 18 customers, of which most are the far most are logic oriented customers with all kinds of different device designs. Remember, the first was AMD which has expanded its family throughout. And then we have many others now following. The big question here is when will the largest end customer have a product line using this technology, that should be on the horizon. So that then will create a significantly higher demand than what we have witnessed in '25. But that's according to the road map we've shared forever. There's a nice slide in our deck where we see a development in the past 5 years and an expected significant growth in the next 5 years. As we've said many times, that line of growth, it can have several variations, especially as you said, the adoption of memory will change that landscape significantly in terms of total volume required but we're still on track on that, let's say, road map, we, ourselves derived from what is happening in the market in the past 4 years, which we update every year. So that's in a nutshell, the overall picture, we should or we could expect. Operator: The next question comes from Didier Scemama from Bank of America. Didier Scemama: Richard, I have a couple of questions. So first question is on HBM. If everything goes according to plan and your two lead partners decided to put the trigger on TCB or TC NXT and hybrid bonding, can you give us a sense of the magnitude of orders sort of the volumes that would be required to create a production line? I've got a follow-up. Richard Blickman: Well, as a rule of thumb, typically, one needs a factor more memory supporting a logic device. So when you take the rule of thumb of a factor of 4, then with the installed base so far for logic, which is now over 130 systems, shortly coming up 150. Then if you multiply that, then you know how much capacity you would -- or how many machines you would require to support the capacity for memory. It doesn't work exactly like that, but the factor for number of machines capacity required is significantly higher than for the logic. So that's a major step up what we can expect when that adoption occurs. But that, again, you see in that picture we share on the adoption scenarios. Didier Scemama: Understood. Very clear. My second question is on mobile. So if you remember, like, obviously, a few years back, very high-end smartphone adoption bonding. Can you just give us a sense as to, first, whether we should expect the traditional order intake in the first quarter related to high-end smartphone, new features, cameras, et cetera? And then if you look a bit further out, how this is shaping up to be in terms of hybrid bonding adoption, whether it's '27 or further out in at least your best guess? Richard Blickman: Well, this year, as we already shared a quarter ago, we should see some improvements or new updates on features on high-end smartphones. On the camera front, there are some new developments. But also maybe foldable versions are, let's say, on the road maps, and that requires also different solutions inside those cameras. So those are developments, which we see. But then the next question is what kind of computing power will need to support AI functions? And that is a big, let's say, question and that could have a significant impact and whether they are built with a reflow process or with a hard bonding process, chiplet architectures. As we've shared many times, there's a lot of development going on and certain road maps indicate those new major inflection points in technology, either already in '26 or certainly in '27. That is how it develops and there is no change in that road map. Does that answer your question? Didier Scemama: Yes. Just had a quick follow-up. For your third quarter guidance, I just wonder why your order conversion is quite a lot lower than it normally is? So I think it's about 100% plus or minus. So why on EUR 250 million in Q4, you're sort of guiding to only EUR 185 million or so at the midpoint? Richard Blickman: Well, a very easy answer. The orders were -- or let's say, the order placements were very much to the end of the quarter and the manufacturing throughput time for many of these orders, so take the high-end Flip Chip machines, the CHAMEOs, but also the multi-module attach, which is very much also for photonics, they take 12 to 16 weeks. So you simply can't physically arrange the shipment in the first quarter. So the answer also implies that you should see a significant impact on the second quarter. Operator: The next question comes from Charles Shi from Needham & Company. Yu Shi: The first one -- I want to go back to the comment about the hybrid bonding cumulative revenue orders, it was 150 plus by the end of last year. And if I do the math, and it looks like last year, the number of orders you got was actually more or less comparable with 2024. So the question here is what about 2026? What's the overall sense where the cumulative order number will go? 200 seems possible. I mean that basically assumes, I mean, flattish number of orders you're going to add this year versus 2025. But can you go to 250? Can you go to 300? And I mean, to go to higher numbers, what do you think needs to happen for -- yes? Richard Blickman: Two things need to happen. Number one, the adoption of hybrid bonding for mainstream applications for logic devices next to what is already now using hybrid bonding. So think about the big AI providers, which are still building certain modules using mass reflow, using TC, if they switch to hybrid bonding, that could change the landscape dramatically. And number two is as we discussed to earlier question, is the adoption of hybrid bonding for memory stacking. Yu Shi: Got it. But -- okay. So maybe I'll just go direct into memory. Now Samsung HBM 4E, that is the fact that it's happening. But I mean, on the other hand, if we understand correctly, the other 2 HBM customers have not even have a order from you -- hybrid bonding order from you. Why the hesitancy? That's the question I believe top of the mind for a lot of people here. And what's delaying them? And could they start getting some orders this year? Richard Blickman: Well, it's -- the other two. One of them with the U.S. base. They have ordered already several hybrid bonders to develop HBM stacking for about 3 years now. It's also known publicly that the other one, the Korean, will start evaluating the hybrid bonding process in April-May time frame, we are invited for that, and they have publicly shared that their end customer demands them to have hybrid bonded version available by the end of this year. So although cost is higher using a hybrid process, performance is better in two ways. Number one is speed and number two is heat. So it is gradually moving from TC solutions for stacking to a hybrid version. And the big question, will this move in '26 or certainly in '27? That's how we read the inputs from all three and the biggest end customer driving, ultimately, the change in specification for these end products. Next question. Operator: [Operator Instructions] The next question comes from Robert Sanders from Deutsche Bank. Robert Sanders: Yes. Good afternoon, Richard, maybe the first question would just be around the situation with Apple, which seems to be moving to using SoIC-X for the M5 Pro and M5 Max. Is that beachhead do you think going to be swiftly followed by other SKUs? Or is it going to remain do you think a relatively niche use of SoIC-X for high-end notebook type situations? And I have a follow-up. Richard Blickman: Well, that's precisely put. So they're all preparing from a production and technology readiness to be able to adopt this technology shift when decided. For us, what we can do is continue to offer whatever qualification samples, testing to be ready for that. There is one big question out there, how much additional computing power will be required for AI functionality? And that is what we hear, still the question to be answered. How does that impact the choice of the technology used in these mobile devices? Because in the end, it will increase the cost but then the functionality is significantly more advanced. So that open debate, you follow at conferences directly from customer engineers, and also, we had our technology advisory board meeting 2 weeks ago in Taiwan, where there were also technology persons from the community sharing road maps and thoughts exactly on this subject. Robert Sanders: And just quickly on China. Maybe you could just discuss a bit about what's happening in China. I mean I think it was 27% of your sales in the first half, but it has been higher than 45%. I mean it sounds like it's going to go up to close to 50%. Is that fair? And how do you think about the sustainability of that spending? Richard Blickman: Well, so far, we've always had this typical mix. You have non-Chinese customers producing in China. Since 30 years, all non-Chinese customers have set up assembly capabilities in every technology and that is still today the case. Although there's a lot new established outside China and Asia, in Vietnam, in Thailand, in Malaysia, Philippines and then India, but that's still slow and coming. So to be less dependent upon China. And then you have the emerging Chinese technology, which is growing year by year. And as we said for the 2.5D modules, we are very much engaged in these Chinese versions. So supposedly, the cost of ownership using our equipment is beneficial for local compared to local alternatives. Don't forget, we built all these machines in China. We have a wonderful facility in Leshan, which is expected this year to surpass the peak it achieved in '21. So although there's a lot of expectation that, that will become less, we don't see that at all. But we are expanding in Vietnam. As many of you know, we have set up a factory 3 years ago. We're expanding that significantly this year. By the end of this year, we're also able to build one of our die attach systems in Vietnam. And then as I said earlier, the expansion in Thailand, in Malaysia, the whole Pacific Rim, is preparing to have next-generation products produced in those countries rather than establishing more capacity in China. But the Chinese market itself is growing rapidly. Any next question? Operator: The next question comes from Daniel Schafei from Citi. Daniel Schafei: Basically, the first one would be on TCB NXT. You mentioned 5 players. I was just wondering, just to clarify, this is a testing or are some of them already high-volume manufacturing? And then if hybrid bonding will take longer for some customers, what is your expectation now going forward for TCB, especially given you are now gaining traction within TCB NXT? That would be helpful to understand. Richard Blickman: Well, number one, our system is designed for bond pad pitch below 20 micron. The world today is still above that, 25, 30. So the preparation with these five customers is to be ready once technology moves to smaller bond pad pitches and stretch the life of using a reflow process because the reflow has many advantages compared to hybrid bonding. One of them is simply cost. We have mentioned several times that our system has demonstrated even to be able to bond successfully at 10-micron bond pad pitches, and that comes very close to the crossover point with hybrid. So we cover the space between mass reflow Flip Chip and as mentioned earlier, very successful at this moment. And then the TC space where it becomes difficult for TC and then beyond that, the hybrid bonding. So gradually, always the industry moves to smaller geometries, and that is where exactly this TC NXT is aimed for. Your question, how much in high volume? Not yet. It's in the early stages in qualifications and in two areas. So in the logic space, so single die, but also one of the major memory producers is using TC NXT to prepare for the next generation. And that is what we mentioned last year when we received the order, 5 systems ready to go once that becomes the mainstream. Daniel Schafei: Perfect. And just as a follow-up, then you mentioned also earlier the adoption of hybrid bonding within '26 or '27. Just to understand what your expectations are right now, do you see hybrid bonding being adopted between all the HBM layers or only within certain layers? Yes, that would be just interesting to understand. Richard Blickman: Well, it can be a mix. There are different road maps showing a combination of a certain hybrid part of the stack and also a reflow part. So one has to go into a bit more detail to understand all of the road maps, but that is also why we have this 2-track development strategy that you have to cover both. Daniel Schafei: Okay. Is it then dependent on the HBM structure itself, where I would say the mix is more a hybrid bonding. Basically, the taller you go. My question... Richard Blickman: The reason -- sorry to interrupt you, is simply performance. If you connect direct copper-to-copper you have less heat in operating such as stack. And that allows you to get a higher power out of that stack and the higher the stack, the more, let's say, loss of power you have due to the heat. So a mix can already help in that performance. Operator: The next question comes from Nabeel Aziz from Rothschild & Co Redburn. Nabeel Aziz: So the first was just on hybrid bonding tool maturity. So I was just wondering if you could provide an update on the hybrid bonding tool maturity and progress that you're making on throughput and yield improvements? Richard Blickman: Well, we've come a long way that after 4 years, you certainly can see enormous progress. And where do you see that progress is, number one, the predictability of any application. So understanding the right preparation time required and the preparation processes, remember, cleaning, tracking, wet, clean plasma. And that is the most, yes, let's say, process technology, which sets us apart from many others. There are many bonders in the world which can place accurately. But exactly that bond process is where it's all about. Where are we right now? As I said in the beginning, we certainly have -- but there's still a long way to go. The process itself is, each time you could say every day, improved. One of the issues is always throughput, so the time required to place the die accurately. And the faster you can do that, you have more output of that machine and that influences the cost of ownership. So that [ battle ] is identical to what we have gone through with mass reflow Flip Chip for 25 years every year, either focus on accuracy improvement or focusing on throughput. And that combination is exactly the same challenge we have with now over 130 hybrid bonders operating in the field for larger die, smaller die, stacking dies and that's where we are. Nabeel Aziz: Very clear. And just a quick follow-up on that. A lot of your competitors are starting to develop hybrid bonding solutions of their own and in some cases, shipping R&D tools. So I just wondered how you see the competitive landscape in hybrid bonding evolving? And how competitive are your peers' tools with your own? Richard Blickman: Well, what we did share end of October was the simple fact that for the next round in Taiwan, that was based on the outcome of a complete landscape evaluation where -- because the orders were placed with us and are placed with us, the outcome is what it is today. But if you look at the whole landscape, everyone understands that hybrids sooner or later will become the mainstream technology for advanced packaging. So that's why every bonder company is focused on this market. How can you maintain your leadership? Because after 10 years nearly where we started this development with that big Taiwanese customer, it's all what I just said along the accuracy and speed. So today, the 100-nanometer is sufficient covering the logic and the memory requirements as it looks today. In the next year, we have to move down 250 because of the next-generation technology. And then the accuracy and speed combination is what sets us apart from others. Also, what is very important is the partnerships in this change of technology inflection from the assembly reflow space to hybrid bonding, hybrid bonding has to occur in front end. And front end requires complete different support structure than what we have in back end. Through the partnership with Applied Materials, now for 5 years, we have come at the levels that is supporting the highest end customers in the industry. And that combination is unique. So that support, so not only having a successful bonder, but also how to support customers 24/7 in a front-end environment is a complete different challenge than in the back end. So we see certainly competitors trying to participate in this market as well. But there is a very clear challenge for us to maintain in that lead. Operator: The following question comes from Ruben Devos. Ruben Devos: I just had one on your prepared comments where you talked about new hybrid bonding use cases that were identified for co-packaged optics. I was curious, is that mostly referencing sort of the material you presented at the Investor Day in June? I think you talked about sort of NVIDIA Spectrum X, which requiring 36 hybrid bonding tests per device. I think earlier in this call, you talked a bit about the factor difference between memory and logic, but how does that shape up for maybe co-packaged optics? And yes, I think the mid case was also somewhere around 50 cumulative units through 2030. But with the prepared comments around new use cases, might that really be contributing this year or next year? Richard Blickman: Well, that's a very, very big question. Number one, co-packaged optics is still in early days and a lot of development is going on with the use of hybrid bromine because the accuracy is required. So as shared in the Capital Markets Day or in the Investor Day, that is going on, that's continuous development. How many systems that entails? I can't tell you at this very moment. So that's -- you could qualify that as the next step in technology. So we first have the interconnect and co-packaged optics is a step beyond. Ruben Devos: Okay. And maybe something unrelated, talking about the mainstream market, basically, that's what I was thinking about. It's -- I think you also talked about green shoots, right, after a full year downturn. I think you mentioned smartphones in the mobile market, obviously, automotive and industrial are two other end-user markets. 50% of your business might already be computing. But so yes, a bit more color on maybe what you're seeing across the industry? What are maybe the die bonder utilization rates at this point? That would be very helpful. Richard Blickman: Well, we have seen, as we said, green shoots. We see some of our main customers for years in automotive and industrial after a long time showing signs and having new programs where equipment will be required, which gives a positive outlook for '26. That is referenced to Techinsights, which also expects the market to carefully improve in '26, more sizable in '27. So that's how our comment is also based on. What we have seen in these 4 years of very modest capacity increase only for new devices. We have seen development of many new devices ready for next-generation electronics, especially power devices for automotive, supposedly for hybrid application. So hybrid cars, I mean, not hybrid bonding. So in power, there's a lot happening. But still, the overall picture is not recovering to the extent which we are used to. But the growth in the other areas is so significant that, that offsets the -- yes, usually, our revenue, we've shared that forever. Automotive was between 15% and 20% of revenue. Now it's somewhere around 10% to 15%, depends on which quarter. It probably will drop in the next quarters or it has to turn. But that's about -- well, it is 10% to 15% of revenue. Operator: The following question comes from Marc Hesselink from ING. Marc Hesselink: Yes. Can we have a bit more view on the 2.5D photonics opportunity? I think that is sort of a momentum that's been building up throughout the year in '25. And I think with an extremely strong end with the order intake towards the end of the year, can you maybe see -- I would assume that in this business, maybe the -- because it's strategic investments, the visibility is a bit higher than in your usual mainstream product portfolio. So can you maybe see -- how do you see this ramping the capacity? Is it just a few quarters? Or is this a longer-term trend? Is this going to accelerate from where you are today? It would be very helpful if we get some extra detail there. Richard Blickman: Well, there are two growth drivers. Number one is simply the data center, let's say, capacity built in the world. So the connectors to connect those computers inside those, yes, data center units, that is what we have been involved in for the past -- over 10 years. But the second driver is that there is a technology step and that will require twice the amount of steps, the interconnect steps in these connectors than the current generation. So there is definitely more growth ahead of us for these two drivers. So not just the growth in data centers, but also in technology. I mentioned already, 10 years -- that started, well, over 10 years ago with Cisco modems. And these connectors, it's a set of 5 main customers, and they all produce for the very big end customer. And as long as that is growing as the world expects, we are directly linked to that. Does that answer your question? Marc Hesselink: Yes, it does. And maybe as a follow-up on that. Now that you're also seeing a lot of that volume coming from the OSAT. Is it then fair to assume that implies that it becomes even more mainstream and even more adoption beyond what you just mentioned? Richard Blickman: Yes, certainly. Certainly. And that's also publicly known that the IDMs, as usual, they offload more mature products to the subcontractor space and the more complex the technology, the more attractive that is for the subcontractor space. And we know the big two leaders, both starting with an A. But then there are many subcontractors who are also involved in this expansion into mainstream for data center computing applications. Any further questions? Operator: The following question comes from Martin Marandon-Carlhian from ODDO BHF. Martin Marandon-Carlhian: My first question is on the new fab of your Taiwanese customer, the AP7. Do you think the vast majority of the demand there will come from new customers adopting hybrid bonding? Or do you also expect AMD to be a big contributor since the announcement of its deal with OpenAI? That's the first one. Richard Blickman: Well, what we hear, and I was just there 2 weeks ago, there are several big companies, and we all know the names, either for high-end smartphones or for data center computing who are supposedly on the brink of changing from reflow process designs to hybrid bonded designs in whatever end products. And that is the driver for a factory, which is twice the size of what is currently the AP6. But then there is a next plan, AP7 is not the end. So there are major plans. So look at the model, which is shared by many of the front-end companies, what they expect in the next 3 years, the demand for AI translated into capacity that similar model you can use for the advanced packaging. So the next note plus an enormous expansion in end market demand. Whether that will -- as presented, we all know this industry but anyway, that's the picture driving the programs in Taiwan. Martin Marandon-Carlhian: Okay. Very clear. And the second one is a bit of a different one, is on high-bandwidth flash HBF, some expect HBF to be necessary to improve the memory capacity in future AI chip packaging. So my question is just what do you think about this? Do you think it's a driver for hybrid bonding or TCB? Is it part of the current discussion with your customer? Or is it not really relevant in the near future? Richard Blickman: Well, I can't answer that. Yes, simply, I have no, let's say -- if I would, I would answer it, of course, for you, but time will tell, and we are certainly following that closely. Operator: Ladies and gentlemen, we have arrived at the end of the presentation. I would now like to hand the word over to Mr. Richard Blickman for any closing remarks. Richard Blickman: Well, thank you all for joining us today. And in case you have any further questions, don't hesitate to contact us. Thank you. Bye-bye. Operator: Ladies and gentlemen, you may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the Ivanhoe Mines 2025 Fourth Quarter and Year-End Conference Call. [Operator Instructions] This call is being recorded on Thursday, February 19, 2026. And I would now like to turn the conference over to Tommy Horton, Vice President of Investor Relations. Please go ahead. Tommy Horton: Thank you very much, operator, and hello, everyone. I'd like to first and foremost, thank you for joining our call today and happy Chinese New Year. It's my pleasure to welcome you to Ivanhoe Mines' Fourth Quarter and Full Year 2025 Financial Results Conference Call. As the operator mentioned, my name is Tommy Horton, and I'm the Vice President of Investor Relations. On the call today from Ivanhoe Mines, we have Founder and Executive Co-Chairman, Robert Friedland; President and Chief Executive Officer, Martie Cloete; Chief Financial Officer, David van Heerden; Chief Operating Officer, Tom van den Berg; Executive Vice President, Corporate Development; Mr. Alex Pickard; and Executive Vice President for projects, Mr. Steve Amos. We'll finish today's event with a question-and-answer session, so you can submit your questions via the Q&A box on the webcast as well as through the conference operator via your phone line. Please also contact the Investor Relations team directly for follow-up questions that are not answered during the call today. Before we begin, I'd like to remind everyone that today's event will contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Details of the forward-looking statements are contained in our February 18 news release as well as on SEDAR+ and on our website, www.ivanhoemines.com. It is now my pleasure to introduce Ivanhoe Mines' Founder and Executive Co-Chair, Robert Friedland, for some opening remarks. Robert, over to you. Robert Martin Friedland: Thank you, ladies and gentlemen, and everybody listening in.I happen to be in the Middle East at this time. It's the month of Ramadan. The fast has just broken. It's also Chinese New Year. I've been living on an airplane in at least a dozen countries in the last three weeks, and we are on our way to the BMO conference, which is the largest of the mining conferences at this time of year. As we look at that, opening photograph of our opening remarks, I'm struck that on the 19th of February 2026, we can announce that we've jointly announced with Trafigura and Aurubis in Germany, the last shipping, and then down the Lobito Corridor to the Atlantic Ocean. That's a downhill rail run for about 3,200 feet elevation down to sea level, so the train is actually going downhill from the mine to the sea. This is the largest smelter on the African continent. It's a direct-to-blister furnace, the largest ever built in the world. With Outotec's engineering and Nerin from China, we can say it's the most modern and greenest of copper smelters going down the railroad. And, you know, when I look back to the years when the idea of copper coming out of the Central Congo was just a dream, but today it's reality and will last for generations. The Western Forelands is traversed by that new railroad. We have incredible exploration potential there. We continue to run about a $100 million a year budget in exploration for copper, and we find more copper per dollar or per penny than anyone in the industry. Our finding cost to find copper is under a penny a pound at a 1% cutoff grade, and very few districts even have 1% copper. So that's remarkable that it's just today that we jointly announced with Trafigura and Aurubis that this 99.7% copper is going its way to the ocean. In addition, the Zambian government to our south, who have a couple of smaller copper smelters, have announced that they will not export their sulfuric acid any longer to the DRC because they want to keep it for their own Zambian copper mining industry. That means that the sulfuric acid price has really risen very dramatically in the Congo, where it's used to leach oxide copper mines, and we've seen prices up to $700 a metric ton for sulfuric acid. So our smelter's producing an extremely valuable by-product. We also have our zinc mine operating, shipping concentrate to the United States. Concentrate for zinc that also contains gallium and germanium, extremely valuable critical metals that will be recovered in future. And the Congo is one of the greatest places to find these sorts of metals. So this is a big day for the Democratic Republic of the Congo as our smelter starts. And lastly, before I turn this over to Marna, our President and CEO, is an image of Platreef, which, after 34 years, has initiated production. Within two years, it will be a giant mine, and a few years thereafter, we think it'll be the largest and lowest cost producer in the world of a group of metals, platinum, palladium, gold, rhodium, which is on the critical materials list, and nickel and copper as well, which are on the critical materials list. So it's a, it's a tremendous turning point for our company. Things are really looking bright. The world needs these metals. And with that, I'm honored to turn this over to Marna. Thank you very much. Martie Cloete: Thank you, Robert, and good morning and good afternoon, everybody. Thank you for joining us. As Robert mentioned, this is a photo of Platreef that was inaugurated by President Ramaphosa in November. This mine is currently undergoing its Phase 2 expansion, and we will quadruple annualized production to approximately 450,000 ounces of precious metals by the end of 2027. So really, this is the one to watch over the next two years. If we move over to my introductory slide, with 2025 in the rear-view mirror, it's time for us to take stock of what we have achieved. And despite lower production and sales since May, Kamoa-Kakula generated close to 400,000 tonnes of copper, generating $4.2 billion in revenue at a 40% margin and an EBITDA of approximately $1.5 billion. A standout achievement at Kamoa-Kakula was the commissioning of the smelter, as Robert mentioned, the largest and greenest in Africa. The ramp-up of the smelter is ahead of schedule at over 60% capacity. This is a phenomenal achievement by our project and operation teams. Kipushi was the rising star, and after the completion of our deep bottlenecking project, it finished very strong, producing over 200,000 tonnes of zinc, and our guidance for 2026 is set at between 240,000 and 290,000 tonnes. Our 2025 production resulted in an EBITDA of $91 million. Our group EBITDA amounted to $578 million, with a net profit of $228 million. Our CFO, David van Heerden, will present our financial results in more detail shortly. We can move over to the next slide. For those listeners that participated at the Mining Indaba recently hosted in South Africa, it would be amiss if we do not highlight the role that the DRC is taking in the rush for critical metals on the global stage. Progress on regional peace via Washington Accords for Peace and Prosperity has boosted the outlook for the DRC, and we can witness this through significant foreign investment in the mining industry. There was a 7% increase in copper production year-on-year to 3.2 million tonnes in 2025, making up 14% of the world's production. In the last 10 years alone, copper production increased by 300%, cementing the DRC's position as the second-largest producer of copper worldwide. The S&P has revised its outlook for the DRC to positive due to external and fiscal progress, resulting in real GDP growth of 5% per annum. We can move over to the next slide. Our total recordable injury frequency rate of our operations continues to track in the bottom quartile compared with our industry peers. This is an incredible achievement, given that our workforce has rapidly expanded by over 150% in the past five years to more than 31,000 employees and contractors. For every new employee and contractor onboarded, safety training is a fundamental and mandatory part of the process. However, statistics offer little comfort in the face of loss of life, and it's regrettable that I have to report that we had an unfortunate incident that occurred at Kamoa-Kakula last week, while two employees were conducting maintenance work at the Phase 2 concentrator. During the task, a flammable liquid ignited, causing severe burns to both individuals. They were immediately transported to our on-site medical facility, where they received urgent care. Despite tireless efforts from our medical teams, one of the workers tragically succumbed to his injuries. We are deeply saddened by this loss of life and extend our heartfelt condolences to his families, our friends, and colleagues during this difficult time. The second contractor remains in a stable condition and continues to receive medical care. We are also in close contact with his family and are supporting them through this recovery. Safety remains our highest priority. A full investigation into this incident is underway to determine the cause and to ensure that appropriate corrective actions are taken to prevent such a tragedy from occurring again. We do, however, recognize that one life lost is one too many, and our focus is now on supporting those impacted and strengthening our commitment to ensuring that every person returns home safely at the end of each day. Lastly from me on our sustainability efforts, the following initiatives deserve a very special mention. At Platreef, we inaugurated the Masodi Wastewater Treatment Plant, which was constructed in partnership with the Mogalakwena Municipality. Greywater from this plant will be used in our operations in a closed circuit, providing an innovative, conservation-driven solution to our water use requirements for the mine. And at Kipushi, our total workforce now comprise of 97% Congolese nationals, with our processing plant department made up of 100% national workforce. Kipushi is really setting the standard for both Kamoa and Platreef, and we will work hard to achieving the same goals at our other mines. With that as an introduction, I will now hand over to David van Heerden, our CFO, to take you through our financial overview. David Van Heerden: Thank you, Marna, and good morning and good day to everyone joining the call today. Yes. Kamoa-Kakula achieved its highest ever revenue for a calendar year of $3.3 billion in 2025, and that was at a realized copper price of $4.40 per pound. Revenue was up from the $3.1 billion achieved in 2024. Annual EBITDA was $1.4 billion at a margin of 44%, and Kamoa-Kakula recorded EBITDA of $331 million for the fourth quarter, and that was up 69% from Q3, but was still impacted by the lower grade and ore processing. Although cash costs increased, the margin was up to 38%, and assisted by the higher copper price. Kamoa-Kakula sold almost 79,000 tonnes of payable copper in the fourth quarter, recognizing revenue of $866 million at a realized copper price of $4.98 per pound of payable copper. Sales for the quarter was in excess of tonnes produced, leading to a slight decrease in contained copper and concentrate inventory on hand to 50,000 tonnes at the end of the year. That was down from the 59,000 tonnes of copper on hand at the end of Q3. The majority of the inventory is sitting ready to be smelted, and by the Kamoa-Kakula smelter. Inventory at the Lualaba Copper Smelter in Kolwezi has decreased to about 3,000 tonnes. We expect, as we've sort of said before, that copper held in the stockpile and the smelting circuit will be reduced to approximately 17,000 tonnes during 2026 as the smelter ramps up. We therefore expect that the 2026 copper sales will be at least 30,000 tonnes higher than the copper production in 2026, with most of that, the stocking, expected to occur in the first half of this year. Moving to the next slide, where we show the usual Kamoa-Kakula EBITDA waterfall graph. The EBITDA waterfall highlights the drivers of the quarter-on-quarter EBITDA change. As we start on the left-hand side of the screen, the higher tonnes sold in Q4 compared to Q3 was responsible for a $47 million increase in EBITDA. The higher copper price, both provisional and realized, was responsible for a combined $168 million of the increase. Logistics and operating costs were a little bit higher than where they were in Q3, but I'll explain that more when we get to the cash cost slide. And then realization cost was slightly higher, mostly due to the higher copper price. Of the sales in the quarter, we had 50,000 tonnes provisionally priced at the end of December, and with the higher copper price in January and February to date, we do expect a very nice upward remeasurement of receivables again in the first quarter of 2026. Moving to cash costs, and for the fourth quarter, firstly, of 2025, that was $2.99 per pound of payable copper. As you can see from the breakdown of our cash costs that we present in our MD&A, logistics charges and G&A was abnormally high. During the quarter, the concentrate transported had lower contained copper and concentrate when compared to previous quarters, and there was also less concentrate sold at the Lualaba Copper Smelter. So in simple terms, more tonnes were moved to move the same amount of copper, leading to higher costs on a per pound of copper basis. The fact that tonnes sold for the quarter was also higher than tonnes produced, also had a also contributed to the increase. G&A for Q4 included a few one-off items relating to staff costs, consumable write-downs, and software expenditures. So we don't see the Q4 level really being completely representative of where we expect G&A costs to be in the future. And I think if you look at cash costs for the full year, it, it's pretty positive that the $2.16 per pound was still within our revised guidance range for the year. Throughout 2025, cash costs increased proportionally, basically, to the decrease in the grade processed from Phase one, two, and three, and then, of course, the stockpiles. And as we mine more higher-grade areas on the western side of the Kakula mine and the overall grade improves, cash costs per pound will trend back down again. But let's look ahead on the next slide. So our cash cost guidance for 2026 is $2.20 to $2.50 per pound of payable copper, and we expect that to improve to between $1.90 and $2.30 per pound of payable copper in 2027. The pie chart on the left-hand side shows the breakdown of our cash costs in the second half of the year in percentage terms, and then as represented by the yellow and green arrows, and we show where our cash costs are expected to improve over the coming year. So we expect that logistics and TC/RCs will improve by approximately 30% due to the impact of the smelter. And then we expect that mining, processing, and G&A will improve by approximately 20% on a per pound basis as the grade increases and improves. We obviously expect the smelter benefit to improve further over time, and as production of the smelter improves and as efficiency there also improves. Then there's obviously also a number of other areas where the team is placing focus on, and where they have strong belief that they can have further impacts on costs. As we turn to Kipushi on the next slide, Kipushi set a new record of quarterly production in Q4, and sold almost 48,000 tonnes of payable zinc for a record quarterly revenue of $138 million. Zinc sold was slightly in excess of zinc produced. So, fourth quarter -- sorry, actually, the other way around -- zinc produced was slightly in excess of zinc sold for the quarter. So, the fourth quarter could even have been better. But zinc prices have continued to trend upwards, so we will reap the benefits of that in the first quarter of this year. Kipushi's EBITDA for 2025 was $91 million, and $44 million of that was generated in the fourth quarter. Cash costs for Kipushi came down nicely as expected with the increased production, and was $0.86 per pound of payable zinc for the quarter, and $0.92 per pound for the full year, which was pretty close to the bottom of our guidance. Our 2026 guidance is $0.85 to $0.95 per pound of payable zinc, and it does include room for a increase in the benchmark treatment charges. So moving to the next slide, Ivanhoe recognized profit of $228 million for 2025, and this was $35 million higher than the profit for 2024, with 2024 being impacted by the fair valuation of our then convertible notes, which was redeemed in 2024. Our group-level adjusted EBITDA was $578 million for 2025, and only 7.5% lower than our annual record in 2024. The principal driver of our adjusted EBITDA was again our share of EBITDA from Kamoa-Kakula, but Kipushi has started to contribute meaningfully in Q4 of this year, and Platreef will do the same towards the latter parts of 2026. If we move to the next slide. Here we show a liquidity snapshot, and Ivanhoe had $885 million of cash and cash equivalents and short-term deposits on hand at the end of December, while Kamoa-Kakula had cash on hand of $311 million. The private placement with QIA in September and our senior notes issued in January leaves us in a very comfortable position at the end of 2025. Kamoa-Kakula concluded a two-year term facility of $500 million in the third quarter, and drew down $370 million of that in early October in 2025. But both Ivanhoe Mines and Zijin also funded cash calls of $150 million each to Kamoa-Kakula in December, assisting Kamoa-Kakula's liquidity. Our consolidated pro rata financial ratios continue to be comfortable with our net debt to EBITDA ratio of 2.1x. The net debt ratio will, of course, improve as our EBITDA grows in the coming periods. Moving to our capital expenditure on the next slide. At Kamoa-Kakula, we underspend in terms of our initial guidance in 2025, showing very good capital discipline. That underspend has been shifted to 2026, and we've also put revised guidance or guidance out for 2027 as a good indication of what we believe will be spent in that year. The work for Kamoa-Kakula's updated development plan is progressing well, and as we have noted, that will be filed before the end of March this year. At Platreef, Platreef came in towards very close to the bottom end of their 2025 capital expenditure guidance. Platreef completed Phase 1 development within and under budget, and that was the key driver to the low-ish or very good managed spend for Platreef in 2025. And then the 2026 and 2027 guidance is in line with the feasibility study completed in early 2025. And a large portion, $600 million of Platreef's remaining Phase 2 capital will be funded by the additional project finance facility, which has recently been signed. At Kipushi, the expenditure at Kipushi was also pretty close to the 2025 guidance, and Kipushi now moves to steady state, but then also with a few improvement projects planned for 2026. Yes. Thank you very much, and I'll now hand over to Tom van den Berg, Steve Amos and Alex Pickard, to take you further as part of the operations and projects update. Tom van den Berg: Thank you, David. As you can see in picture there before, Project 95 on its way. Kamoa-Kakula concentrate production. So despite the usually challenging year for everyone at Kamoa-Kakula, we would like to remind the audience that the mine still produced 389,000 tonnes of copper. It is still comfortably within the Tier 1 operations, among the top 10. The year for this year, that's 2025, Phase 3 will remain the star performer and locked in at plus 30% mill throughput and produced a record 145,000 tonnes. We expect the head grades to gradually improve through the year as the recovery plan advances, at Kamoa-Kakula, more so at Kakula. And then reaffirming the guidance numbers, though we expect that the first quarter will be the weakest, with lots of catching up to do in the second half of the year as we establish new accesses and new mining areas. Project 95 is also nearing its completion, which we aim to take recoveries at Kakula to well above 90%. So in brief, you can see there Phase 3, a record 144 tonnes of copper production in 2025. The Kakula mine, we've completed the Stage 2 dewatering activities, enabling the mine to reopen the higher-grade mining areas in the front of Kakula East as well as Kakula West. And then we're remaining our guidance at 380,000 tonnes to 420,000 tonnes and in 2027, potentially 500,000 tonnes to 540,000 tonnes. We can go to the next slide, please. Just looking at the dewatering. So the slide on the right-hand side depicts what was Kakula mine. We had a big fish right across with lots of water. We've only got the head of the fish left at this stage. So that blue that you see in the bottom right corner is effectively the pond that's left on the eastern side of the mine. The red dots demarcate new pump stations that we've refurbished and have got up and running. The black dots demarcate new pump stations that we're busy commissioning and recommissioning in different areas at the top of the northeast side of Kakula and the bottom at the southeast side of Kakula. We're busy establishing those currently as we speak, and then we've got one more pump station. In terms of water, we're seeing about 4,500 liters of water coming to Kakula, and we are able to pump that, and we have more capacity than that 4,500 at this stage. So we've completed the dewatering up to stage two, and currently what we're doing is we've got some selective mining happening on the eastern side in old stoping areas, plus inside the east side of the mine and down on the southeast side of the mine. The western side of the mine is totally dewatered, and our crews are busy accessing the high-grade areas there at the moment as we speak, and we will see better grades coming out the west side of the mine in a short time. We can go to the next slide. So the photo you see in the picture is the access at what we call Kakula mine, which is near Kamoa 1. So Kamoa 1, we started the access. We've actually progressed this quite well, and this box cut is taking shape as we speak. We also have started one at Kansoko Sud, and that is also in line, so it is also progressing very well. So those are new accesses. Kansoko Sud is to affect easier access into the Kansoko ore body and to improve productivity. This one that you see here in front of you in picture is at the Kakula box cut. We're gonna be adding additional crews and then rebuilding our stockpiles as we go forward and filling the mills. So we're in the process of finalizing an updated study to ramp up the underground operations back to 17 million tonnes per annum and maintain an excess steady state of excess 500,000 tonnes of copper. The work under the new mine design parameters informed by world-leading experts, and we will do more disclosure on that in time to come when the study is complete. So that should be in late March. Okay. Thank you. We can go to the next slide. What you're seeing here is the picture of the first casting that took place, the first anode, at the smelter. Apart from the recovery plans on the underground mining side, we are still hitting huge milestones overall at the Kamoa-Kakula project, so this was the commissioning. It's the largest copper smelter in Africa. It was completed last year at a capital cost of $1.1 billion and we announced this first anode production in December. This is a huge step change, as Robert spoke about, for Kamoa-Kakula to become an integrated metal producer, which reduces shipping costs dramatically and benefits from much lower credits, and acid credits will also be got, as David referred to, and I'll talk to that as well. The ramp-up of the smelter is ahead of expectations, and we are already over 60% of the steady-state feed capacity at the smelter. The first shipment, as Robert also referred to, has taken place along the Lobito Corridor, and this is exceptionally low-carbon copper that is reaching the market and off on its way to Germany right now as we speak. Thank you. We can go to the next slide. Just in terms of the direct, direct-to-blister smelter acid sales, we also had an equivalent of greater than 60% on the acid and acid production. We are producing around about 1,200 tonnes per day of sulfuric acid, and that's again at over 60% capacity. This acid has been sold to consumers in the DRC Copperbelt and taking advantage of the very high demand in the domestic market. Realized prices have been north of $450 a tonne, so very pleased with that. Thank you. I'm gonna hand over to Steve for the next slide. Steve Amos: Thanks, Tom, and hi, everyone. So, October 2025 was a big year for the project team. We commissioned our turbine G25 at the Inga Power Station. For those of you who don't know, the Inga Power Station is on the Congo River, one of the widest rivers in the world, in the western DRC. Initially, Kamoa is only receiving 50 megawatts of 178 megawatts, and that is due to constraints on the transmission. We're busy working at two of the converter stations, one at Inga, which is pictured on the right-hand side there, and one at Kolwezi, which is very close to our mine. We're busy installing a static compensator at Kolwezi, and by late March, that will boost the megawatts to Kamoa to 85. We're also busy with two filter banks at SCI, which is the Inga Converting Station, and that will increase the power to Kamoa to 125 megawatts. The deal we have with SNEL, the DRC power utility, is that we receive 70% of the available power from Inga, so 70% of the 178 megawatts, which is 125 megawatts. Next slide, please, Tommy. I think something quite exciting in terms of power that's going on, on the mine site, so on the Kamoa license, we have two IPPs, independent power producers, that are constructing two 30-megawatt solar farms on the site. These 30-megawatt solar farms are 30 megawatts, 24 hours a day, 365 days a year, so it is reliable power. The way they do that, they install, and I speak under correction, approximately 120 megawatts of solar power at these farms with battery storage. So it doesn't matter if it's nighttime or it's raining, we still receive our 30 megawatts. Timing on that, for the first IPP, between April and June this year, so 10 megawatts in April; 20, May; 30, June; and the second one, May to July, 10, 20, and 30 megawatts there as well. So we'll have 60 megawatts of clean, renewable power by July. What we're also doing is Phase 2. Phase 2 will be another 60 megawatts. Very similar kind of concept. Again, two IPPs identified, one of them from Phase 1. Contracts have been signed, and mid-2027, we're expecting the additional 60 megawatts, which will take us up to 120 megawatts of, of renewable power on site. That's all from me for now, Tommy. Tom van den Berg: Thanks, Steve. So Kipushi, this has been a very significant ramp-up year for the Kipushi mine. It started producing at the end of 2024. So as you can see, in 2025, a good ramp-up in terms of ore tonnes milled, zinc ore grade processed, and zinc concentrate produced, as well as zinc recovery. Production was a little low in the first half of the year, but since the debottlenecking, the project was completed in quarter 3, Kipushi has really hit its stride. 2,003 tonnes of zinc for the year was in line with guidance, above the midpoint of the range. In particular, we saw records in quarter four of 61,000 tonnes, and looking at December alone, 22,600 tonnes, which is equivalent to 270,000 tonnes annualized. We also highlight the recoveries we have been achieving at 93% in December, so looking to keep that up in the performance in 2026. Thank you. Alex Pickard: Thank you, Tom. It's Alex Pickard speaking. I'm just going to talk briefly about the sleeping giant that we have now awoken, I think, at Kipushi. I think you know you are in a bull market for commodities when the zinc price is finally trading at multi-year highs, so we're currently above $3,300 per tonne or around $1.50 per pound. But that's especially exciting given the fantastic progress the team have made at Kipushi with the debottlenecking. And so with that, we are announcing our guidance range for Kipushi of 240,000 tonnes to 290,000 tonnes of zinc in concentrates. As Tom just mentioned, our month of December was sort of bang in the middle of that range at about 270,000 tonnes annualized. So I think, for those who've had the pleasure of visiting Kipushi, it is an incredibly small footprint for a mine, and it's a very clean and tidy operation. But it's quite incredible to think that, from that small footprint, Kipushi will now be the fourth largest zinc mine in the world, as you can see on the right-hand side. As David touched on, with the operating costs trending firmly downwards at Kipushi and very low capital costs going forwards, we should start to see much more of a significant financial contribution from Kipushi, both in terms of EBITDA and cash flow. And then an announcement that we made a couple of weeks ago while our Executive Chairman was in Washington. We are working on options to recognize the value for Kipushi's by-product metals, which includes highly strategic, critical minerals, including germanium and gallium. So we are working very closely with our joint venture partner, Gecamines, which is the DRC state-owned mining company, and one of the current off-takers, which is Mercuria Trading. And what we're looking to do is move Kipushi concentrates or a portion of the concentrate to the U.S. markets, where currently there is a major investment taking place in zinc smelting and refining capacity, including critical minerals. Talking about the right time for Kipushi, it's also very much the right time for Platreef, and I think we're very close now to fully awakening the potential that we have at this incredible Platreef mine and the Platreef deposit. So the image that you can see here is the formal inauguration of Platreef, which took place on November 18, 2025. It was an excellent ceremony attended by the President of South Africa, who you can see in the foreground next to our chairman, Robert Friedland, and also included key members of the national and regional government, as well as the Ivanhoe Mines management team. The Phase 1 mill is not really the big story here. We've been campaigning ore from developments at lower grades. Really, that Phase 1 mill will start properly once we begin stoping in around one month's time. It is just the beginning of a much larger project, which ultimately will be one of the largest producers of platinum group metals in the world. So I'll pass back to Steve Amos to talk about the Phase 2 expansion, which is gathering steam. Steve Amos: Yes, thanks, Alex. So interesting times for Platreef. A major milestone happening towards the end of next month, and that is the commissioning of shaft 3. People might remember, a number of years ago, we made a decision to repurpose that shaft. It was initially going to be a ventilation shaft, so we've repurposed it into a 4 million tonne rock wasting shaft. It's not only the shaft, underground, there are 2 conveyors with stripe tips feeding that shaft, and very importantly, the first crusher underground will be commissioned before that shaft starts wasting. The crusher underground allows us to stope and crush material and waste it to surface. Why this is such a big deal for Platreef is that Platreef is significantly constrained by shaft 1. That's the shaft on the left-hand side. It's a 1 million tonne per annum wasting shaft, but it is handling all the men, all the material, all machinery and equipment that has to go underground, all development ore, and all stoping ore. So it's severely constrained, and this really opens up Phase 1. It supplies significantly more ore than Phase 1 can handle. And the advantage of the shaft really is that it allows us to build up a stockpile for the start of Phase 2, which is at the end of 2027. So once the shaft is commissioned, a total of 5 million tonnes of wasting capacity. Next, please, Tommy. So on the right-hand side is the big shaft. We call it shaft two, headgear is complete. We have a pilot hole from surface down 1,000 meters, 3.1-meter diameter. The idea with this shaft is, it de-risks Phase 2, but it really is the future for Phase 3. Phase 3 is about an 11 million tonne per annum operation. We've just appointed a contractor to do what we call Slype and line. So that is extend the diameter of the shaft from 3.1 meters to 10 meters and to line the shaft. And then, as I said, the shaft is capable of hoisting 8 million tonnes per annum. So in terms of schedule, men and materials, Q4 2028, and then hoisting, Q3 2029, and that's is the one of the largest shafts on the African continent. Just in terms of where we are with Phase 2, Phase 2 concentrator coming online at the end of 2027. EPC and contract award awarded, earthworks contract awarded, most of the long lead items for the plant awarded. So we are good to go for the end of 2027 for Phase 2, approximately 500,000 ounces 4E, platinum, palladium, rhodium, and gold, 10,000 tonnes of nickel and 5,000 tonnes of copper. Thanks. Alex Pickard: Thanks, Steve. And then looking at this slide, which is showing the PGM price deck over the past 12 months, what you can see here is a dramatic increase in PGM pricing, even with a small recent pullback in the month of February. All in all, you can see, we've had a 74% increase in the basket price for platinum, palladium, rhodium, and gold produced by Platreef, compared with the feasibility study prices. And so you can see on the chart, the yellow line, the dotted line, is our C1 cash cost of around $600 per ounce once we reach Phase 2 capacity, which is really underlining why we are building this Tier 1 operation in South Africa, which will be the highest margin PGM mine in the world, for many decades to come. And it's also worth noting that we, we have further support from the byproducts that are included in that cash cost, nickel and copper, which are also both trading at multi-year highs. A bit of fun with numbers, but if you look at the spot prices and the models that we previously published for our feasibility study and scoping study, you can get some pretty exciting numbers for Platreef that I think are very much not captured in today's share price. So if you look at the feasibility study case alone, which is, less than 2 years away and under $800 million in CapEx to get to production, the NPV today is looking at, in excess of $3 billion. And then when you look at the larger 1 million ounce expansion case, including Phase 3, the NPV is closer to $8 billion. So quite remarkable numbers coming from Platreef that we will hopefully start to realize or gain more recognition for as we continue with the Phase 2 expansion. Robert gave a good intro on the excitement that we have around our Western Forelands Exploration and our broader exploration efforts. As we say on the title here, the Makoko District is continuing to expand at a pace. We will be talking a lot more this year about our exploration efforts in general. We completed 53,000 meters of diamond drilling at the Western Forelands. It was a slightly slower year than we'd originally planned, just given what happened at Kamoa-Kakula, but still 53,000 meters enabled us to do a lot of step-out delineation work in the Makoko District. So you can see some of those drill holes represented on the map. Across the strike length, which is about 18 kilometers, we declared a mineral resource estimate last year, which contained around 9 million tonnes of copper. That was at average grades at about 2% copper. Some of it's very shallow, and in terms of grade, that is very comparable to the overall global Kamoa-Kakula resource. Where we've been focusing in terms of our drilling is on connecting the footprint between Makoko and Kitoko, so you can see the dots that are sort of adjoining those two ore bodies, and then stepping out to the south of Kitoko, which continues to expand, albeit at depth, and as well as that to the east of Makoko, where we are really now starting to connect the dots to a broader system back towards the Kakula West ore body. So our target with the Western Forelands is to put out an updated mineral resource estimate by mid-year, and safe to say, it will not be any smaller than the one we previously put out, last year. Finally, and quite an exciting announcement, we've also commenced our preliminary engineering work, and that's really looking at the camp, the facilities, the footprint that we need for the beginning of a new mining complex in the Western Forelands. So the idea being that once that mineral resource estimate is completed, we can really hit the ground running with a scoping study on the Makoko District. Then finally, just to close out, looking at our global exploration portfolio. So across the portfolio, which includes the Western Forelands, but it's also looking in Zambia and Angola for similar mineralization and trends as what we have in Western Forelands, and now also in Kazakhstan. We have a budget this year of $90 million. That's about 88% up on the previous year's spend. In fact, we plan to spend more in the Western Forelands at $50 million than we spent across the entire portfolio last year. In the coming weeks, we will be putting out some more information, specifically on the exploration program, so we can do a bit more of a deep dive with maps and so on, across the different licenses. But if we look across the entire portfolio, we're targeting 140 kilometers of drilling, so it's a huge amount of drilling, which is very much sticking to Ivanhoe Mines' DNA of growth and creating value through the drill bit. The right-hand side is just showing an indication of the exploration spend by project, so you can really think of that in terms of the amounts of drilling meters by project. So you can see, we also have a big emphasis this year on our joint venture projects in Kazakhstan. So with that, I will wrap up and hand back to Tommy Horton to chair the Q&A. Tommy Horton: Thank you very much, Alex and thanks everyone. We'll now proceed with Q&A. [Operator Instructions] So Operator, please proceed with the phone Q&A. Operator: [Operator Instructions] Your first question comes from the line of Daniel Major from UBS. Daniel Major: Yes, I just wanted to first question, just thinking about the updated life of mine plan for Kamoa, and particularly thinking about the reserve and resource element to that. Looking at the breakdown of the reserves, Kakula's got about 6.6 million tonnes of reserves at 4.8% copper, in the eastern, predominantly eastern section, is my understanding. Do you envisage you have to remove part of that from the reserves in this update, given the flooding and the seismic issue? Alex Pickard: You want me to take that one, Tommy? Tommy Horton: Yes. Got for it, Alex. Alex Pickard: Yes. So, Dan, I don't want to sort of preempt and go into too many details about, you know, what we will be disclosing in a lot of detail next month. But obviously, when you look at the Kakula mine, and specifically parts of the sort of old Kakula mine, so the central area that was flooded and is now largely dewatered, but at least partially dewatered, there will be some zones within that area which will be removed from the reserve. But, you know, largely speaking, those zones were already at quite a mature Phase of extraction anyway, so it's not a huge impact on those areas alone in terms of tonnage. But yes, you know, we could go on this subject for another half an hour. I think it's better once we've got the results out next month, then we can do more of a deep dive. Daniel Major: Okay, thanks. That's useful. And then, second question, in terms of the cost profile, and again, maybe trying to squeeze out more from what we'll get from the, life of mine update, but, essentially, yes, would it be a sensible assumption to assume something comparable to the 2027 guidance, from a cost standpoint, maybe slightly lower in 2028, 2029, assuming you achieve around the 550,000 tonne run rate at Kamoa-Kakula? David Van Heerden: Yes, I'd say pretty much the same as Alex. I don't think we should go in too much detail that far in the future, given we'll have that information to the broader public pretty soon. But I think it is fair to say that as production increases, we do expect costs to trend down, but yes, I'll leave it at that for now. Operator: Your next question comes from the line of Lawson Winder from Bank of America Securities. Lawson Winder: Can I ask about the U.S. Critical Minerals partnership? And you know, with the context, and my understanding is that currently, Ivanhoe receives no payment for the germanium and gallium contained in the Kakula ore. What would be the technical adjustments needed to extract that value? And then ultimately, like, how do you envision the U.S. partnership factoring in? Could there be some direct funding? And then what would be a timeline to expect some value to be realized from that? And then just a third sort of point on that same subject, is there any scope for the partnership to expand into copper? Robert Martin Friedland: Thank you, Bank of America. I don't know if you can hear me well. I think it's a little bit premature to talk about these subjects. Ivanhoe is planning to open a New York and Washington D.C. office, and we spent a lot of time understanding the viewpoint of the United States of America and its government. I think it's fair to say that the United States places the Democratic Republic of the Congo at the highest order of priority internationally. I think the penny has finally dropped that the Democratic Republic of the Congo is probably the world's greatest source of critical raw materials to the United States and other Western economies. I don't think it would be possible to have more attention on the Congo from the United States government than you could possibly imagine. Copper is now on the critical raw materials list, and it's now well understood that the middle part of the piece, smelting and refining, is absolutely critical to America's national security. There are a lot of metals in the lead business and the zinc business, which are produced as a byproduct of leaded zinc. Similarly, with copper, a copper smelter recovers many other critical materials. We're the first new mining company to build a world-class smelter, and we see ever-escalating interest in support for development of the DRC, and we expect this only to grow in the future. That's really all I want to say at this time. There's gonna be a -- I think we'll have more discussion about this publicly in the next few months. But thank you for your, for your interest on it. Lawson Winder: Thank you very much for your response. If I could ask one more strategic question, Robert, and perhaps Marna, you could weigh in on this, too. How do you view Ivanhoe's current appetite for M&A potential acquisitions, corporate level acquisitions or perhaps large asset acquisitions, particularly in light of the outlook for strengthening free cash flow from here, and then, you know, also in light of your recent partnership with QIA? Robert Martin Friedland: Well, I happen to be in Qatar at the moment, and as we said in our press release, we're in a continuous dialogue with all the world's major mining companies and sovereign investors, and we see a lot of opportunity to grow our company. I think interest in the Western Forelands is nearly infinite. We can find copper there a lot faster than we can mill it, that's for sure. So in the future, any excess milling capacity could be filled from initial mining in the Western Forelands, and then it can stand up its own standalone mining, concentrating and even smelting capacity. I think I can say that after some 40 years in the business, I have never in my lifetime seen the intensity and the focus of interest in the expansion of mineral development, not only in the Congo, and in Zambia, and in Angola, and in South Africa, but around the world. I think there's a more sober understanding now that all critical materials depend largely on Africa for their development. I mean, where else could you go and build a Tier 1 mine for $1.3 billion, as we did in Phase 1, and recover the investment in 10 months? Where could you build a $1.3 million mine and generate $6 billion of free cash flow from it in the first few years? My God, in the United States, you've got mines like Resolution that have been trying to get a permit for 35 years, and Pebble took another step backwards in Alaska just today. So, if you want to resolve our national security concerns, it's blatantly obvious that Africa is the continent that is the most important, and that places a tremendous premium on our operating team. The women and men that run our company that actually understand Africa, actually have highly trained African people. Because if there's one limiting factor to this whole mess, it's the shortage of trained people. I would say flat out, the biggest asset our company has is the quality of the operating staff. On the exploration side, probably the best in the world, and on the operations side, probably the best in Africa by a big margin. So the demand for these kinds of products, copper included, in the next 10 years is like trying to get the contents of the Hoover Dam through a garden hose, and there's really no chance to make a meaningful impact without the Congo. Look at how flat this land is. There's no ice, there's no snow. You got the highest grades in the world. If you got high-grade bauxite and high-grade electricity, hydropower, you win the game in aluminum. It's exactly the same in copper. If you got high-grade copper and hydroelectric power, it's obvious with no ice and snow, this is the best place in the world to mine copper. Congo has gone from about number 9 in the world in production to number 2 in the last few years that we've been having this dialogue. Louis Watum was the excellent Minister of Mines for the Congo. He worked for Ivanhoe for close to 10 years. He announced recently at Indaba that Chile better look over their left shoulder because here comes the Congo, working to pass Chile as the largest copper producer in the world in the next 5 or 10 years. And then solar power, I mean, you know, what's a better place to put up solar power than this flat land and this close to the equator? So the summary of these factors, I just want everybody to understand, if you can go to the Congo, you can mine copper. If you can go to the Congo, and you can mine zinc, and with that comes gallium and germanium, you can go to the Congo and mine anything. Congo holds some of the world's best resources of tin, tungsten, tantalum, all manner of rare earths, lithium. You name the critical metal, you're likely to find it at higher grades than anywhere in the world. And so we're very happy to be focused where we are. Lots of opportunities for us to combine forces with other mining companies. I think it's fair to say we've had discussions with virtually everybody you can imagine in the mining industry, and we expect this sort of thing to continue on a going-forward basis. That's all I'd like to say about it at this time, but it's a very intelligent question. Thank you. Operator: [Operator Instructions] There are no further questions at this time. I will now hand the call back to Tommy Horton for any closing remarks. Tommy Horton: Thank you, operator. As we've come up on the hour, we are at time. Unfortunately, there are a few questions that are still in the webcast queue. So I invite those people to reach out to the Investor Relations team directly, and we will answer those questions for you. So without further ado, we'll wrap up here for the day. Thanks again, everybody, and very much thank you for joining us. We look forward to talking to you again soon, and have a good rest of the day. I'll leave it over to you, the operator, to wrap up. Operator: And this concludes today's call. Thank you for participating. You may all disconnect.
Operator: Ladies and gentlemen, thank you for joining us, and welcome to the N-able Fourth Quarter 2025 Earnings Call. [Operator Instructions] I will now hand the conference over to Griffin Gyr, Investor Relations. Please go ahead. Griffin Gyr: Thank you, operator, and welcome, everyone, to N-able's Fourth Quarter 2025 Earnings Call. With me today are John Pagliuca, N-able's President and CEO; and Tim O'Brien, EVP and CFO. Following our prepared remarks, we will open the line for a question-and-answer session. This call is being simultaneously webcast on our Investor Relations website at investors.enable.com. There, you can also find our earnings press release, which is intended to supplement our prepared remarks during today's call. Certain statements made during this call are forward-looking statements, including those concerning our financial outlook, our market opportunities and the impact of the global economic environment on our business. These statements are based on currently available information and assumptions, and we undertake no duty to update this information, except as required by law. These statements are also subject to a number of risks and uncertainties, including those highlighted in today's earnings release and our filings with the SEC. Additional information concerning these statements and the risks and uncertainties associated with them is highlighted in today's earnings release and in our filings with the SEC. Copies are available from the SEC or on our Investor Relations website. Furthermore, we will discuss various non-GAAP financial measures on today's call. Unless otherwise specified, when we refer to financial measures, we will be referring to non-GAAP financial measures. A reconciliation of certain GAAP to non-GAAP financial measures discussed on today's call is available in our earnings press release on our Investor Relations website. And now, I will turn the call over to John. John Pagliuca: Thanks, Griffin. We entered 2026 with momentum, following another year of profitable growth and with confidence that we can drive continued strong performance. Cybersecurity is a matter of survival, and our AI-powered cybersecurity platform delivers the business resilience customers need. Our fourth quarter and full year results reflect this strength with strong results across our key operating metrics. Both fourth quarter and full year 2025 revenue grew 9% year-over-year in constant currency. We exited 2025 with ARR of $540 million, growing 8% at constant currency. Our adjusted EBITDA in the fourth quarter was $39 million, reflecting a 30% margin and $153 million for the full year, also reflecting a 30% margin. Beyond the financial results, we made exceptional progress across the business in 2025. We solidified our presence in the AI SOC market with the successful integration of our Adlumin acquisition, crossed $200 million of ARR in data protection and expanded into the VAR channel to broaden our sales reach. We also opened up a new R&D center in India to deepen our engineering capacity, elevated our cybersecurity brand and accelerated innovation across the platform with AI-driven capabilities. Our teams executed exceptionally well, and the business is meaningfully stronger as a result. Building on this progress, let's now discuss our strategy and approach moving forward. In particular, there's a lot of debate about the impact of AI on software, and I want to share how N-able is approaching AI and the tailwinds we see. First and foremost, we continue to think long term. N-able was founded over 25 years ago on the belief that small and midsized organizations would keep digitally evolving and would rely on technology experts to help guide that journey. This enduring belief anchors our business. AI accelerates digital evolution, which we believe is the fundamental driver of our business and fuels even greater opportunity. Durable truths guide this evolution. Businesses need to be secure, and they want to achieve this efficiently. N-able helps them accomplish both. AI enhances our ability to deliver these outcomes by automating routine tasks, strengthening threat detection and helping customers scale. For N-able, we believe AI is a fundamental tailwind, and we are not only embracing, but actively capitalizing on it. Second, our foundation is rock solid. With telemetry from 11 million IT assets across more than 500,000 businesses and decades of trust and cybersecurity expertise, we have the structural attributes to succeed in the AI era. We want to be clear about our stance on the AI-related debates unfolding in the industry. One narrative is that businesses will look to replace existing software tools with low-code and vibe coded solutions. We see our position in cybersecurity as fundamentally different. Building cybersecurity solutions isn't a part-time or easy job. The difficulty in stakes are too high. One mistake and your business can become extinct. Our cybersecurity software solutions are a foundational part of complex business infrastructure. Sitting at the cybersecurity table requires deep domain expertise, meeting stringent compliance standards, mastering a long tail of edge cases and an innovation engine capable of quickly responding to new and emerging threats. Businesses aren't looking for component parts to assemble. They want complete products and dependable cybersecurity outcomes. Coding is a component, N-able delivers the full product and the outcomes that actually matter. In fact, the democratization of coding is contributing to an increase in the scale, speed and sophistication of attacks. This has created a more dangerous AI-empowered adversary and makes our innovation, domain expertise and ability to deliver trusted outcomes more critical than ever. Another discussion is that new AI solutions will replace existing software workflows. We believe this view overlooks a key insight. Probabilistic AI doesn't replace deterministic workflows. It complements them. We are combining our SaaS system of record in context with an AI system of action. This unlocks step function value that we believe will take us to $1 billion of ARR and beyond. Let me be clear. The way we see it, AI doesn't erode our moat, it widens it. Third, and perhaps most importantly, we are delivering value with AI now. AI is embedded across our cybersecurity platform, reducing risk and improving customer efficiency. Each solution has exciting progress and use cases. I'll detail some product specifics in a moment. Underpinning our opportunity is a threat landscape that is constantly growing more difficult for businesses to manage. Attack services are widening, data volumes are growing and IT complexity is increasing. These challenges are further compounded as bad actors are utilizing AI to execute more advanced and widespread attacks. Business' need for cybersecurity has never been more critical and will only continue to grow. We believe N-able is well positioned to capture this growing demand. From a go-to-market perspective, our channel-led approach unlocks efficient global scale. And from a solution standpoint, our purpose-built platform, which spans security operations, data protection and unified endpoint management drives compelling value. We enable customers to identify and stop threats, protect and recover data and efficiently manage complex IT environments to realize true business resilience. This balanced platform breadth is our strategic advantage. By maintaining focused product development, we can continue to deliver technical excellence in each category where we compete. And by offering a wide breadth of solutions, we can also deliver platform-level value, including economic and technical benefits. Our approach improves technician feasibility and enables solution consolidation for our customers, helping them reduce risk and improve profitability. A near $300,000 ARR fourth quarter customer win demonstrates this value proposition in action. The customer consolidated the unified endpoint management, security operations and data protection on to N-able, displacing 5 separate competitors. We addressed 3 critical pain points that included automation gaps, alert fatigue and high data protection overhead costs. A deal of this magnitude from a customer with only approximately 50 employees speaks directly to the power of our strategy to deliver enterprise-grade security to every business. The combination of our best-of-breed capabilities and efficiency of our platform approach drove compelling value. Bringing it all together, our positioning is sound and our opportunity is significant. AI is a positive demand driver and a technology we are integrating across our platform. More broadly, as we seek to be a business that compounds value over the long term, our fundamental objective remains the same, focus on solving ever-evolving customer problems, deliver security and efficiency and unrivaled business resilience. With that said, let's now turn to key tenets of our 2026 plan. Our priorities span product innovation, strengthening our trusted brand and continued improvements in go-to-market operations. On the product side, we plan to continue to develop AI as a core differentiator. For our UEM solution, we are excited to debut N-zo, our powerful AI workflow assistant that users will be able to command to complete tasks and better run their IT and security operations. We believe this is a game changer. With a single query, customers will be able to derive insights and complete actions in seconds that previously took hours. As it evolves, our AI workflow assistant is intended to diagnose issues, recommend next steps, write and execute scripts, summarize device health and turn raw data from millions of endpoints into safe, reliable and efficient actions. Adding this orchestration layer is a force multiplier on top of our already powerful autonomous management capabilities. The industry faces a well-documented IT and security skills gap. Our customers operate labor-intensive businesses in a market with tight employment. AI can change that equation. We're empowering customers to automate more tickets, streamline workflows and amplify the capabilities of every technician. Closing the skills gap with technology rather than a headcount unlocks a new frontier of scalable, profitable growth. Additionally, we have received industry recognition positioned in the 2026 Gartner Magic Quadrant for endpoint management tools. Our roadmap also includes furthering our investment in AI within our security operations solution. AI unlocks security scalability that manual approaches simply cannot match. Within our security operations solution, AI now handles 90% of identified threats automatically, up from 70% a year ago, freeing customers to focus on higher-value strategic tasks. In addition to our AI advantage, we bring multiple proven differentiators, including interoperability across a spectrum of EDR providers and shared visibility into our data system. On the back of our product strength, we were excited to recently introduce a new cyber warranty program. We believe this warranty will help derisk adoption and bolster customer confidence. Our solution is scaling quickly, driving strong net new ARR dollar growth. A recent customer incident illustrates the real-world difference we make when it matters most. At 5:00 a.m. Christmas morning, attackers identified a transportation company as an easy target for a holiday heist. Fortunately, our security operations solution was standing guard and spotted the targeted server attack and moved quickly to lock down the compromised asset. Leveraging our AI-powered SOC, time to containment was mere minutes. No data was taken, no downtime occurred and what could have been a major business disruption was completely avoided. Threat actors don't take the holidays off and neither do our AI agents. Each of our 3 solution pillars is AI infused. And in data protection, our AI-enabled recovery testing saves customers hours of time and eliminates the guesswork involved in ensuring their backups are safe and secure. We aim to extend our advantage in data protection this year by adding Disaster Recovery as a Service or DRaaS and Google Workspace workload coverage. These are 2 highly requested billable capabilities across our 14,000 data protection customers and both represent meaningful TAM expansion. DRaaS solves multiple pain points. Customers are challenged to manage backup infrastructure themselves. They face large upfront hardware costs, expensive and time-consuming setup, ongoing maintenance and potential liability associated with storing data. At the same time, expectations are rising and businesses are seeking shorter return to operation timelines. These dynamics are particularly acute among upmarket customers. Our Disaster Recovery as a Service will allow customers to quickly launch virtual servers in our secure cloud environment. This delivers real-time restore capabilities, seamless business continuity and eliminates the need for them to have to manage backup ecosystems themselves, significantly reducing costs, time, risk and headache. Google Workspace coverage addresses another important customer need. Google Workspace has a large and growing footprint, particularly in the education sector and among cloud-first organizations. And customers want to ensure this data is protected and recoverable. Adding coverage will expand our strike zone significantly and unlock opportunity for N-able with both existing and new customers. Our high confidence and expectations from both DRaaS and Google Workspace are supported by a robust demand environment and our market trajectory. As customers manage rapidly growing data estates and ransomware attacks escalate, our data protection solution delivers the simplicity and robust performance customers value and continues to grow meaningfully faster than our total ARR. From a marketing perspective, 2026 is about capitalization on our brand strength. We protect over 500,000 businesses and bring 25 years of service excellence. The N-able name carries weight, underscored by Omdia recently naming N-able as a cybersecurity titan. That recognition validates the 3-pillar strategy we've been executing across unified endpoint management, security operations and data protection. The positioning is resonating. Partners and end customers alike are responding to the N-able brand, and we're seeing that translate into both deeper retention and new logo growth. From a sales and customer success perspective, our priority is accelerating portfolio adoption and deepening engagement across our full channel for both MSPs to VARs. Security operations is a standout growth lever and key to both objectives. Penetration of our AI-powered security operations solution remains in the early stages and more broadly, a large portion of MSPs still operate without a security operations solution. In fact, over 75% of our new lands are entering the category for the first time. We believe we are tapping into a sizable greenfield market with considerable upside. Pertaining to full channel development, we continue to expand our VAR outbound motion. This includes investments in field reps and channel account managers, which establishes critical in-market boots on the ground. From a product perspective, we are also seeing particularly strong traction with UEM in the VAR channel. Our all-in-one highly autonomous IT management and security value prop is resonating with enterprises struggling with vendor sprawl and tool complexity. With our UEM platform, we're replacing multiple point solutions with a single converged offering that spans patching, vulnerability management, remote access, endpoint management and endpoint security. This not only delivers cost savings and operational efficiency for our customers, but positions N-able to capture a larger share of endpoint spend as organizations consolidate their security and IT management stacks. We plan to double down on this momentum with increased field events, up level of account teams and continued investment in prospect pipeline generation. The success of our strategy and execution is reflected in our financials. We are sustaining a strong top line trajectory. N-able is not slowing down. Constant currency ARR growth in fiscal year '25 was 8% and the midpoint of our fiscal year '26 guide calls for the same. We are excited but not content. Our go-to-market and product strategy are aligned with customer demand. The foundation in place is to reach greater heights over time. Key to achieving this acceleration is the success of our channel expansion, new product introductions and monetization opportunities created by AI. We're executing today, while building for tomorrow. We've never been more energized and appreciate you're being part of the N-able journey. With that, I'll turn it over to Tim and then circle back for closing remarks. Tim? Tim OBrien: Thank you, John, and thank you all for joining us today. N-able continues to execute with focus and purpose. We exited 2025 with $540 million in ARR, growing 12% year-over-year, while delivering 30% adjusted EBITDA margin. Operationally, we deepened our presence in data protection and security operations, expanded our channel reach and accelerated AI innovation, all while maintaining a healthy balance of growth and profit. The acquisition of Adlumin was successful with cross-sell to our existing MSP customers performing well and ahead of our acquisition plan. I'll now walk through our fourth quarter and full year results, provide additional detail on the drivers of our performance and discuss our 2026 outlook. First, let's discuss our results for the fourth quarter and full year. For our fourth quarter results, total ARR was $540 million, growing at 12% year-over-year on a reported basis and 8% on a constant currency basis. Total revenue was $130 million, $3 million above the high end of our guidance, representing approximately 12% year-over-year growth on a reported basis and 9% on a constant currency basis. Subscription revenue was $129 million, representing approximately 12% year-over-year growth on a reported basis and 9% on a constant currency basis. As a reminder, we purchased Adlumin on November 20, 2024. As such, we only recognized approximately half a quarter of revenue in that period, while the fourth quarter of 2025 reflects a full quarter of Adlumin revenue contribution. This dynamic bolsters our fourth quarter 2025 revenue growth rate relative to our guidance for Q1 2026 revenue growth. We ended the quarter with 2,671 customers that contributed $50,000 or more of ARR, which is up approximately 14% year-over-year. Customers with over $50,000 of ARR now represent approximately 61% of our total ARR, up from approximately 57% a year ago. Our momentum upmarket has been consistent and pronounced. This customer cohort has grown from 46% of total ARR at the time of our 2021 spin-off and has historically retained at rates roughly 2% to 3% above the total company average, supporting our continued upmarket and cross-sell focus. Dollar-based net revenue retention, which is calculated on a trailing 12-month basis, was approximately 103% on a reported basis and 102% on a constant currency basis. For the full year, we finished 2025 ahead of our outlook with total revenue of $511 million, representing year-over-year growth of 10% on a reported basis and 9% on a constant currency basis. Subscription revenue was $506 million, growing approximately 10% year-over-year on a reported basis and 9% on a constant currency basis. Approximately 45% of our revenue was outside of North America in the quarter and the full year. Turning to profit and margins. Note that unless otherwise stated, all references to profit measures and expenses are calculated on a non-GAAP basis and exclude the items outlined in the GAAP to non-GAAP reconciliations provided in today's press release. Fourth quarter gross margin was 80% compared to 82% in the same period in 2024. Full year 2025 gross margin was 81% compared to 84% in 2024. Fourth quarter adjusted EBITDA was $39 million, $4 million above the high end of our guidance, representing approximately 30% adjusted EBITDA margin. Full year 2025 adjusted EBITDA was $153 million, representing an adjusted EBITDA margin of 30%. Unlevered free cash flow was $28 million in the fourth quarter and $101 million for the full year. CapEx, inclusive of $2 million of capitalized software development costs was $7 million or 5% of revenue in the fourth quarter. CapEx was $29 million, inclusive of $11 million of capitalized software development costs or 6% of revenue for the full year. We ended the year with approximately $112 million of cash and an outstanding loan principal balance of approximately $400 million, representing net leverage of approximately 1.9x. We refinanced our credit facility in the fourth quarter. increasing our commitment from approximately $336 million to $400 million. This new facility enhances our flexibility and supports our broader capital allocation strategy, including evaluating potential share buybacks and M&A. Non-GAAP earnings per share was $0.06 in the fourth quarter based on 188 million weighted average diluted shares and $0.39 for the full year based on 189 million weighted average diluted shares. Note that both the fourth quarter and full year non-GAAP earnings per share experienced approximately a $0.02 negative impact from onetime fees related to the new debt facility. We executed $30 million of share repurchases in the year, reflecting our belief in the business and our commitment to disciplined share count management. Turning to our financial outlook. Our guidance incorporates the following elements. First, our guidance assumes FX rates of $1.17 for the euro and $1.34 for the pound. More broadly, our outlook reflects our expectations for steady demand trends, stable retention and continued execution across our platform and sales channels. Key initiatives spanning our growth algorithm give us confidence in this view. In gross retention, we see our contract initiative and ongoing shift upmarket driving sustained strong performance. In net retention, we see cross-sell traction in security operations and data protection powering continued success. And on the new business side, our channel expansion, enhanced marketing engine and broader portfolio position us well to deliver consistent new logo growth. From an investment standpoint, in 2026, we intend to continue to make disciplined investments in AI and product innovation as well as go-to-market expansion. We are excited to make these growth-oriented investments, while materially improving our unlevered free cash flow on a year-over-year basis as we realize synergies from our Adlumin integration and begin to see benefits from our India development site investment. With that in mind, for the first quarter of 2026, we expect total revenue in the range of $131 million to $132 million, representing approximately 11% to 12% year-over-year growth on a reported basis and 6% to 7% on a constant currency basis. We expect first quarter adjusted EBITDA in the range of $35.5 million to $36.5 million, representing an adjusted EBITDA margin of 27% to 28%. For the full year 2026, our total revenue outlook is approximately $554 million to $559 million, representing approximately 8% to 9% year-over-year growth on a reported basis and 7% to 8% on a constant currency basis. Our full year ARR outlook is $581 million to $586 million, representing 8% to 9% year-over-year growth on a reported and constant currency basis. To be clear, the high end of our full year 2026 ARR guidance calls for approximately 20% more net new ARR dollars on a constant currency basis than in 2025. We expect full year adjusted EBITDA of $167 million to $171 million, representing an adjusted EBITDA margin of 30% to 31%. We expect CapEx, which includes capitalized software development costs to be approximately 5% of total revenue for 2026. We also expect our unlevered free cash flow to be approximately $114 million to $118 million. We expect cash interest payments of approximately $27 million, assuming interest rates remain in line with current levels. This cash flow outlook equates to a 17% increase in unlevered free cash flow dollars at the high end. Our model is built for profitable growth, and our outlook reflects this strength. We expect total weighted average diluted shares outstanding of approximately 188 million to 189 million for the first quarter and 188 million to 191 million for the full year. Finally, we expect our non-GAAP tax rate to be approximately 24% to 27% for both the first quarter and the full year. We are delivering strong financial results, while positioning the company for long-term success. Our 2026 guide calls for meaningful growth in constant currency, net new ARR dollars and unlevered free cash flow dollars. Our growth algorithm remains healthy across gross retention, net retention and new customer acquisition. We are executing well, and our AI-powered cybersecurity platform is resonating. Importantly, we are achieving these results, while continuing to invest for the long term with an exciting AI road map and clear path to further build our global go-to-market engine. Now I will turn it over to John for closing remarks. John Pagliuca: Thanks, Tim. We move forward with a strong financial profile, a durable position in cybersecurity and a focused strategy. AI is amplifying what we do, and we are delivering AI capabilities today. 2026 is a year of execution for N-able. And on behalf of nearly 2,000 N-ableites across the globe, I'm excited for what we will deliver. And with that, operator, we'll open the line for questions. Operator: [Operator Instructions] Your first question comes from the line of Joe Vandrick with Scotiabank. William Vandrick: John and Tim, so ARR grew about 8% on a constant currency basis in 4Q. Can you talk a little bit more about what you're seeing today that gives you confidence to guide to that slightly higher constant currency ARR growth in 2026? John Pagliuca: Sure. Yes. Joe, thanks. This is John. So I think the -- really, the guidance is underwritten, I would say, with a lot of confidence in that it's steady. There's a lot of steady assumptions in there. We're expecting steady to slightly improved gross retention. We're seeing that in the business. We have a list of new SKUs that some are in the market already that are gaining nice traction like our AI-powered XDR, but also in data protection, Disaster Recovery as a Service, Google Workspace that we mentioned in the prepared remarks. So it comes with a couple of combinations from the growth algorithm: one, the GRR improving; two, better expand on some of these new SKUs; and three, continued acceleration in our reach with the VAR community as well. So we have a multipronged approach. And I would say the guidance is baking in a moderate level of those performance -- of those things performing. William Vandrick: Makes sense. And then if I could just sneak in one more on the product side. You talked a lot about AI innovations that you have in the pipeline and one that you called out, I think it was called N-zo, which seemed really interesting. Just wanted to clarify, is this a product that you expect to be released in the coming year? And can you just talk a little bit more about the -- what value this is going to create for customers? John Pagliuca: Sure. So it's N-zo, and it's N-Z-O. Make sure we get the spelling right in the script. And so yes, it's in actually customers' hands right now and limited preview. We're learning from it and getting the behavior. So far, the reviews have been fantastic. It is an in-product AI agent. It's an in-product AI workflow assistant. So embedded today in our UEM, but the plan is to really embed these AI assistants or these AI agents in all of our -- all or most of our offerings. So what it will allow MSPs to do today right out of the gate, it allows them to really get a better assessment as to what their environments might look like with simple natural language, if an MSP wants to know if they have any devices that might be vulnerable, if there's a process that needs to get done. And that's today. And then in the go forward, it will actually be a source of action. So they'll be able to put in a request to understand what's going on in their customer environments, but then actually take a proactive action and remedy what might be a vulnerability or some type of operation. So it might have taken hours to do like a script or some type of level of automation. Now what we're seeing with the customers is they're able to go through their environments, assess their environments and take action in honestly, minutes using natural language. So that's the play. And if I think about AI in general, I would say there's a 3-pronged strategy to how we're approaching this. Number one, we have AI infused in our products today, right? And so both machine learning and Agentic AI, as an example, our AI SOC or XDR has AI in it today. What is that doing? That's making our customers and their customers more secure. That's providing a better experience. That's also giving us a competitive advantage over other solutions out there because I believe we are ahead as it relates to AI and our XDR. So today, not just in XDR, but across our offerings, we have in our products today, that should make our GRR better, that should make our expansion better because the solutions are better, there's better experience. And then we talked about the second prong, and that prong is more the in-product AI agents. Again, that should have a better experience, improve our GRR, but also give us an opportunity to even charge for a premium type of experience. And then the third prong are AI-specific SKUs and AI-specific agents that we can go charge for that have their own line item. So it's a 3-pronged strategy. I'd say we've already executed the first prong with the end product and we'll continue. And N-zo is the first example of that in-product AI agent helping the MSPs and their internal IT departments with their workflows. Operator: Your next question comes from the line of Mike Cikos with Needham. Michael Cikos: Congrats on the finish here -- and the strong finish to calendar '25. I wanted to cycle back first question to the prepared remarks, and I believe it was Tim's commentary regarding Adlumin. It sounds like the cross-sell to the existing customer base is coming in ahead of what you guys had originally mapped out at the time of the acquisition. Could you just help us think through what is driving that earlier-than-expected success? It's great to hear, but just any other guardrails you could put around that? And then I have a follow-up. John Pagliuca: Sure. Look, we knew we had a winner with the AI solution with Adlumin. And just as a reminder, this was a top 1 or 2 need that we saw in the MSP community. They needed help with the threats, and not just assessing the threats, but taking action on threats. And if you recall, Mike, this started off as an OEM arrangement. So we did our own extensive research, looked at all the solutions that are out there, bigger shops, other types of shops. We chose Adlumin because of the technology stack, the level of AI that was in it, number one. Number two, the fact that it was agnostic. And so what does that mean? That means regardless of an MSP or their end customers' environments, if they're using different firewalls or if they're using different EDR, different endpoint security, different manners to get their logs, we can ingest all of that. And I believe it's a combination of the AI-infused technology, the fact that we can actually assess but take action in minutes where competitive solutions might take hours or days, it's resonating, number one. Number two, we separate the software and the service so that we can allow the technicians eyes on glass as well. So what does that mean? A lot of offerings, it's more like a black box service. MSPs can see the same things that our AI SOC analysts are looking at, and that's resonating. There's a big push out there right now. Compliance is driving a lot of this need. And I think our original estimates, we -- I don't think we fully grokked the breadth of the demand. We knew that for our bigger MSPs, this was top of mind. The nice thing here is we're seeing our large MSPs picking this up, but even our very small shops. And compliance is driving a lot of that, the ongoing cyber threats, AI as a new adversary is driving that. MSPs are now baking this to the -- effectively their standard stack. And so I believe a solution like this will be a table stakes part of every MSP's service going forward. And I think the fact that it's a broader swath of the MSP base is what's driving some of that upside. Tim OBrien: Mike, I would probably just add, and John hit on it in his prepared remarks, is the mix of greenfield opportunities versus incumbents as well. We're seeing about 70%, 75% of the opportunities coming in from a greenfield perspective. So I think that's also been a catalyst in the equation as we've executed through 2025. Michael Cikos: That's great. That's very encouraging. And then a quick follow-up, again, just to drill into the guidance assumptions. If I look at what's -- the constant currency growth we're looking for in Q1 versus the full year, it implies some stronger growth maybe as we get into 2Q and then the second half of the year. And I'm just trying to get a better sense, is there anything we should be thinking about from a seasonality standpoint or maybe those data points you have on the slightly improvement or the stable GRR translates to an improved NRR in the back half of the year, the new products incubating? Again, can you just give us some more to underwrite this guide from where we stand today? John Pagliuca: Yes. Mike, looking back at 2025, we saw some seasonality in Q1. We actually kind of built ARR up from a growth standpoint, more so in the second half than the first half from a 2025 perspective. I think as we look at 2026, I'd expect some similar seasonality, probably more akin to what you touched on was the impact of some of the newer product initiatives will have heavier weight in the second half of calendar 2026 versus the first half. We've got a few things in customer preview that we plan to flip GA in the first half, which I'd expect to have more impact on the net new ARR in the second half of the year. So I would expect a similar kind of flow on a constant currency basis. 2025 blended a bunch of choppiness from an FX perspective. But kind of from a sequential standpoint, I would expect a little bit more seasonality in Q1 versus the rest of the year with better performance in the second half. Operator: [Operator Instructions] Your next question comes from the line of Matt Hedberg with RBC. Matthew Hedberg: John, I appreciate your comments at the start of the call around all of the market confusion around AI and certainly feel like, especially within your core customer base, you guys could serve as a bit of a catalyst for even customer AI adoption. When you look at your 3 pillars of N-able today, do you think there's -- do you think that they all could benefit from customers' increased focus on Agentic AI? Or do you think -- I'm just sort of curious how you think -- especially when we think of like Disaster Recovery as a Service. But just any sort of thoughts on like what elements of your business might actually see maybe even stronger uplift with customer AI adoption? John Pagliuca: Sure. Look, the key tenets of our business, and this is part of the durable truth, Matt, it's really about security and efficiency. And that plays into all 3, right? So we have our data protection suite, which we mentioned is over $200 million, is growing nicely. You mentioned Disaster Recovery as a Service that's coming in the middle of the year. The way that we're going to make sure that we're driving that experience for our MSPs and their clients and even some of the mid-market folks is by leveraging a good amount of AI. There's definitely an ability to make sure that the backups themselves are active, ready to go and continuing to collapse that RTO and RPO kind of metrics of XDR, of course, right? So XDR minutes matter in this world, right? You want to be able to contain a compromised asset. The example that we put in the script is a good example of that. So being able to drive more efficient, but also just taking action, leveraging AI is a big thing. And with our UEM, look, that's where we're driving a lot more of the efficiency, but also adding SKUs and AI SKUs in the future to help MSPs with compliance matters, right, to help MSPs with posture management. The best way to do that efficiently is by leveraging AI, right? So helping MSPs with their posture management across the cloud, across their complex environments. Going forward, Matt, one of the things I always say is that the verbs in our business have been the same for 25 years, and they'll continue to be the same for the next 25 years. We monitor, we manage, we secure, we protect, we recover, right? And the nouns continue to stack. In our future, the new nouns that will be coming is LLMs and agents and how does an MSP help make sure that, that data is protected. That data is secure, that data can be recovered. So these new nouns will stack on the old nouns and it will provide a tailwind for the MSPs and it will provide a tailwind for cybersecurity vendors and those that are servicing the MSPs. And then the last point I'll make, Matt, is it's also a big unlock, right? When I speak to MSPs and I speak to hundreds, if not thousands of MSPs annually, a top 3 issue for them is labor. And the fact that we can unlock the labor, it will allow these MSPs to go out and grow and service more SMEs in a scalable, more profitable way. And so our tools allow them to do that securely. Our tools allow them to do that efficiently. And really, our tools with AI will really provide an unlock for the labor bottleneck for the MSP community. And that's why we -- I agree with you. I believe we -- our job is to be a catalyst for this MSP market so that they can scale and service more and more, not just of the SMB, but also of the Fortune 1000. More and more MSPs, some of our studies suggest more than 3/4 of our MSPs are also going into a co-managed approach, where they're walking into a CIO or a CISO's office and saying, let me help with part of your security, let me help with your disaster recovery. And we're there to help make sure those MSPs can get into those bigger accounts, driving a bigger TAM and a bigger SAM for the MSP market itself. Matthew Hedberg: That's super helpful. And then I think one of the things you guys do really well is you balance stable topline growth with obviously EBITDA margin expansion. When we think to 2026, and obviously, we're anniversarying Adlumin and you're rolling out new organic products that you talked about in your script. How do we think about capital allocation when we look to 2026? I mean, should we expect a little bit of M&A, should -- obviously more organic investments? You mentioned VARs. But yes, just a little bit more on capital allocation, sort of balancing that growth and profitability. John Pagliuca: Sure. Look, Tim and the team did a great job with the structure of the new debt that we have. That gives us some flexibility. We take a look and we look at all different aspects. And I think you said it best, Matt, it's a balanced approach, right? We have the ability to buy back some shares as we did last year. So that's one option. But yes, I do expect us to continue to look at solutions that both MSPs and VARs and the mid-market look at to complement these 3 best-in-class offerings. And we'll continue to see if we want to build, which would potentially involve some R&D or OEM like what we did successfully with Adlumin and we've done successfully in other places or acquire. And it's really driven off of that North Star. And that North Star is what do the small, medium enterprise need to make sure that they are secure, that they are compliant, that they're staying one step ahead of the adversary. And so we have the flexibility to meet that need using a couple of different tactics, and we'll continue to look at and evaluate all the different avenues. And I think our strong balance sheet and our strong financial health gives us a leg up on a bunch of other folks, and therefore, that probability or optionality should allow us to meet the need of our customers. Operator: [Operator Instructions] Your next question comes from the line of Keith Bachman with BMO. Adam Holets: This is Adam on for Keith. But I wanted to follow up on the last AI question. So it's good to see the different prongs in growth levers there, but I was wondering if you can quantify the monetization opportunity there. And I know it's early, but in the past, you guys talked about the $3 per device per month opportunity. And I was wondering if AI adds meaningfully to that opportunity. And then second, on the other side, I know device headwinds have come up in the past, primarily from the macro. I was just wondering, is it possible in the future that AI use among MSPs and SMBs can create a headwind there? And if so, how do you defend against that? John Pagliuca: Thanks, Adam. So look, a couple of things. What we monitor, what we manage, what we protect, what we recover is more than just the endpoint, right? It's servers, it's virtual machines, it's SaaS applications, it's data and data growth. So that's number one. A good chunk of our revenue is really -- is on those kind of metrics or those kind of volume metrics. Number two, look, the SME, you guys have our power numbers, and you can do the math, right? We talk about 25,000 customers and over 500,000 or so small and medium organizations. I always say averages are for dummies, but the average there is 200. And I believe the SME is a little bit better insulated on potentially some of this like headline that people think about in the Fortune 1000. In other words, if you think about the end markets that the MSPs are servicing, it's health care, right? It's your doctor's office, your dentist's office, it's the financial adviser, it's education. And so I feel that, that's really well insulated. And then on the third part, we do continue to look to increase the ASP per MSP and per user by offering more SKUs. And a lot of those SKUs will be AI infused or AI-powered. So I believe it's going to increase our economic stack. It will expand our TAM. It will expand the TAM and the reach of our MSPs. And as we look to bring on AI-specific SKUs in the future, that will just add to that $30 economic stack as we go forward. So we're optimistic and it's all about making sure that we're delivering that need for the customer. But overall, our multipronged approach leaves us optimistic that we can expand and get more revenue per the MSP because they should be able to get more from their customer and they should have a better reach as they go forward. Operator: There are no further questions at this time. I will now turn the call back to CEO, John Pagliuca, for closing remarks. John Pagliuca: Thank you, operator, and thank you, everyone, for joining us today and your ongoing interest in N-able. See you next time. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Good day, everyone, and welcome to the Fortuna Mining Corp. Fourth Quarter and Full Year 2025 Financial and Operational Results Call. [Operator Instructions] It is now my pleasure to hand the floor over to your host, Carlos Baca, Vice President of Investor Relations. Sir, the floor is yours. Carlos Baca: Thank you, Matthew. Good morning, ladies and gentlemen, and welcome to Fortuna Mining's conference call to discuss our financial and operational results for fourth quarter and full year 2025. Hosting today's call on behalf of Fortuna are Jorge Alberto Ganoza, President, Chief Executive Officer and Co-Founder; Luis Dario Ganoza, Chief Financial Officer; Cesar Velasco, Chief Operating Officer, Latin America; David Whittle, Chief Operating Officer, West Africa. Today's earnings call presentation is available on our website at fortunamining.com. Statements made during this call are subject to the reader advisories included in yesterday's news release, in the webcast presentation or management discussion and analysis and the risk factors outlined in our annual information form. All financial figures discussed today are in U.S. dollars unless otherwise stated. Technical information presented has been reviewed and approved by Eric Chapman, Fortuna's Senior Vice President of Technical Services and a qualified person as defined by National Instrument 43-101. I will now turn the call over to Jorge Alberto Ganoza, President, Chief Executive Officer and Co-Founder of Fortuna Mining. Jorge Durant: Thank you, Carlos. Good morning, and thank you for joining us today. I'll start very briefly with the quarter before moving to our growth outlook. In the quarter, we delivered record adjusted net income of $0.23 per share, generally in line with analysts' consensus. Net cash from operations before working capital adjustments was a strong $0.48 per share, exceeding consensus estimates of $0.43. We also generated record free cash flow of $132 million for the quarter and again, record $330 million for the full year, highlighting the strength of our operations and balance sheet, which ranks amongst the strongest in our peer group, with over $700 million in liquidity and a net cash position of approximately $380 million. With that context, let me turn to the more important part of the story now, which is growth and value creation. As we have stated, our objective is clear: to grow Fortuna to more than 0.5 million ounces of annual gold production from long-life assets, achieving this over the next 24 months. This will represent approximately 65% growth from current production levels. Importantly, this is growth that we control. The ounces are already contained within our mineral inventory across advanced projects in our portfolio. As this production comes online, we expect it to translate into meaningful growth in free cash flow per share, supported by scale, asset quality, good geographic distribution and capital discipline. The delivery of this growth is driven by 2 core assets: Diamba Sud in Senegal and Seguela in the Ivory Coast. Starting with Diamba Sud, the project continues to advance on a fast track approach towards a formal construction decision in midyear, aligned with the publication of the feasibility study. This morning, we released an updated mineral resource estimate, showing a 73% increase in indicated resources to 1.25 million ounces of gold, which will form the key foundation for the study. For 2026, we have approved a $100 million budget at Diamba Sud, with $67 million of that allocated to early works, which include the camp facilities, major excavations and other enabling infrastructure. We began breaking ground this week and we filed our exploitation permit application earlier this month, marking important execution milestones. Mineralization at Diamba remains wide open, and we continue to carry out aggressive drilling in parallel with project development activities as we pursue further resource growth while growing, continuing and derisking project time line. Turning to Seguela. We're preparing for the next phase of growth through a plant upgrade study currently underway, evaluating throughput expansion options that potentially take the mine to 200,000 ounces of annual production. This work builds on recent reserve growth and position Seguela to deliver higher production and cash flow from an already high-quality long-life asset. In summary, Fortuna's growth to over 0.5 million ounces is visible, controlled and executable, supported by a strong balance sheet, a sound base of mineral resources and reserves and a clear focus on per share value creation. With that, I'll turn the call over to the operating team. David, do you want to share your update? David Whittle: Thank you, Jorge. Seguela delivered another strong quarter and for the second consecutive year, exceeded the upper end of production guidence. This consistent outperformance reflects the strength of the operation and the quality of the asset. Encouragingly, recent exploration drilling results providing further momentum, presenting opportunities to increase production levels beyond the current mine plan assumptions. At Diamba Sud in Senegal, the project continues to advance on schedule, early works programs have been approved, key contracts have been tendered and awarded and the project team is mobilizing in preparation for the next development phase. Importantly, during the fourth quarter, no significant incidents were recorded across our West African operations, underscoring our commitment to maintaining a safe and healthy workplace for all personnel. At Seguela, we produced 36,942 ounces of gold in the fourth quarter, consistent with prior quarters and ahead of the mine plan. For the full year, production totaled 152,420 ounces, exceeding the upper end of guidance by 4%. Mining during the quarter totaled 340,000 tonnes of ore, at an average grade of 3.71 grams per tonne gold, along with 3.92 million tonnes of waste, resulting in a strip ratio of 11.5:1. The processing plant created 410,000 tonnes of ore at an average grade of 3.01 grams per tonne gold, with throughput averaging 214 tons per hour. Ore was primarily sourced from the Antenna Ancien and Koula pits with waste mining also commencing for the Sunbird pit. The Sunbird underground project continues to advance strongly. Based on drilling completed through to the end of June 2025, we declared a reserve of just over 400,000 ounces. During the second half of 2025, 5 diamond drill rigs were allocated to Sunbird, delivering excellent results that support further resource growth. Given the strength of the Sunbird underground and the incorporation of Kingfisher Open pit into the life of mine plan, we've identified an opportunity to increase plant capacity. Like a [ podium ], the original plant builder has been engaged to evaluate expansion options, targeting throughput of between 2 million and 2.5 million tonnes per year. Early indications are positive and we expect to complete the study early this year. So again a strong operational performance translated into a cash cost of $710 per ounce of gold for the quarter and $679 per ounce for the year. AISC was $1,576 per ounce of gold for the quarter and $1,560 per ounce for the year, at the midpoint of guidance, despite an $86 per ounce impact from higher royalties lead to increased gold prices. Cost discipline remains a clear strength of the operation. In 2026, exploration drilling will continue at pace, with increased focus on infill drilling and step-out testing along [ stopes ] and at depth at Kingfisher as well as continued evaluation of additional targets across the 35 kilometers strike length from the Seguela [ land ] package. Drilling at Sunbird underground will also continue as we advance technical studies and progress permitting activities. Capital has already been allocated for long-lead underground mining equipment. Turning to Diamba Sud, exploration, environment permitting and feasibility work advanced meaningfully during the quarter. Government approvals were received for early works programs the ESIA during its final stages of approval. Following the rainy season, drill rigs were remobilized at SEMARNAT and other deposits with continued positive results, further strengthening our confidence in this already robust package. Thank you. Back to yourself Jorge. Jorge Durant: thank you, David. Now sure, Cesar will share the update on Lat Am operations. Cesar, please? Cesar Velasco: Thank you, Jorge, and good afternoon, everyone. Our Latin Africa operation delivered resilient performance in 2025 with no reportable safety incident, supported by strong production execution during the first 3 quarters of Lindero and consistent results at Caylloma throughout the year, where base metal production exceeded the upper end of guidance. Fourth quarter results at Lindero by impacted by mechanical downtime in the crushing circuit, which affected full year production. At Lindero, full year gold production totaled 87,489 ounces, approximately 6% below the lower end of guidance, affected entirely by the fourth quarter production, which totaled 19,201 ounces of gold, driven by 2 independent mechanical interruptions during the same period. An engineering review identified the structural fatigue risk in the primary crusher foundations. To address the root cause, we have approved a 35-day foundation replacement schedule for late March 2026 at an estimated cost of $2.2 million. Ore is being pre-stockpiled to maintain stacking continuity during the repair. This has been fully considered within our production plan and guidance for the year. From a financial perspective, Lindero generated $294.2 million in annual gold sales and EBITDA margin remained strong at 57% to sales. Cash cost of $1,117 per ounce of gold for Q4 and $1,132 for the year, well within guidance range. Q4 all-in sustaining cost improved to $1,639 per ounce of gold due to lower sustaining capital and reduced stripping, offset by the impact of maintenance interventions and temporary crushing solutions. AISC for the full year of $1,716 per ounce within guidance range. We are currently conducting approximately 6,500 meters of diamond drilling below the pit bottom, where mineralization remains open at depth. The objective of this program is to upgrade and estimated 40,000 ounces of inferred resources to the indicated and measured categories. These resources are located beyond the limits of the current final pit design and the resources pit shell. Lindero remains a high-margin, long-life mine with strong fundamentals. Now turning to Caylloma, the operation continued to deliver consistent and disciplined performance throughout 2025. In the fourth quarter of 2025, Caylloma produced 250,000 ounces of silver at an average head grade of 65 grams per tonne, maintaining production levels in line with the previous quarter. Zinc and lead production totaled 12.1 million and 8.4 million, respectively, at an average head grades of 4.32% zinc and 2.95% lead. Production remained steady quarter-over-quarter as mining continued from the same levels and stopes, supporting predictable milled feed and recoveries. For the full year production of [Technical Difficulty] Operator: Ladies and gentlemen, please remain on the line while we reconnect the speaker to the conference room. Thank you for your patience. Once again, ladies and gentlemen, please remain on the line while we reconnect the speaker to the conference room. Once again, ladies and gentlemen, please remain on the line while we reconnect the speaker to your conference. And Carlos your line is connected. Your line is live. Carlos Baca: Yes. We're back. Okay. Jorge Durant: I think we can move on to the financial summary with the CFO. Luis, please go ahead. Luis Durant: Thank you. So attributable net income for the quarter was $68.1 million or $0.22 per share. On an adjusted basis, excluding noncash charges, net income was $71.3 million or $0.23 per share. This represents a significant increase over the $0.06 reported in Q4 of 2024 and the $0.17 in Q3 of 2025. Year-over-year, that increase was primarily driven by higher gold prices. We realized an average price of 4,166 per ounce, an increase of over $1,500 per ounce, while consolidated cash costs rose only marginally by 5% to $971 per ounce. This pricing benefit was partially offset by lower production volumes stemming from the HPGR downtime at Lindero in December, as referenced by Cesar. Compared to Q3 of 2025, the $0.06 increase in EPS was similarly driven by a $700 per ounce rise in realized gold prices. I will take a couple of minutes to make a few other comments pertaining to certain items of our annual results. We recorded $26 million in general and administration expenses for Q4, which includes $6.9 million in stock-based compensation. This total is $9.5 million higher than Q4 of 2024. This increase was driven by 2 main factors: $5.3 million related to higher stock-based compensation due to our year-over-year share price appreciation; and $3.5 million in higher site level G&A, primarily due to timing of expenses. A full breakdown is available on Page 10 of our MD&A. Looking ahead, we expect quarterly G&A, excluding stock-based compensation to range between $14 million and $16 million across our corporate and site operations. Continuing with G&A, full year expenses totaled $97.7 million, an increase of $29 million over 2024. About 2/3 of this variance, approximately $20 million stems from stock-based compensation, driven once again by the year-over-year appreciation of our share price. We recorded a foreign exchange loss of $2.9 million for the quarter and $7.8 million for the full year. The annual figure includes a $13.8 million realized foreign exchange loss, primarily driven by our operations in Argentina. Notably, over $6 million of this realized loss stemmed from cash balances held [ in country ] during the first half of the year. However, this was fully offset by hedging strategies we implemented to protect the U.S. dollar value of our local currency. Interest and finance costs for the quarter were $2.6 million, which is $3 million lower than Q4 of 2024. And for the full year, interest costs totaled $12.3 million. This is a $12 million decrease from the previous year. This improvement was driven primarily by a significant increase in interest income which rose to $14.5 million in 2025 compared to $3.7 million in 2024, reflecting our growing cash balances. Finally, on the income statement, our effective tax rate for the fourth quarter was 33%, while the full year 2025 rate was 26%. These figures reflect the statutory tax rates in our operating jurisdictions as well as withholding taxes associated with the repatriation of profits. Looking ahead to 2026, we expect our effective tax rates to average between 30% and 33%. Moving to cash flow and liquidity. Our total capital expenditures was $44.5 million for the quarter and $178.1 million for the full year. Of the annual total, $109 million was dedicated to sustaining capital and $69 million to growth initiatives. This growth spend included $48 million for exploration across Diamba Sud, our operating sites and greenfield initiatives, along with $14 million to advance the Diamba Sud project. Free cash flow from ongoing operations, which accounts for sustaining capital reached $132 million for Q4 and $330 million for the full year. This represents an EBITDA conversion rate of 84% and 60%, respectively. We ended 2025 with $704 million in total liquidity, a $327 million increase over 2024, driven by our strong operating results and the sale of Yaramoko earlier this year. Back to you, Jorge. Jorge Durant: Carlos. That's all for management, and we can open the floor for Q&A. Operator: [Operator Instructions] Your first question is coming from Mohamed Sidibe from National Bank. Mohamed Sidibe: Maybe my first question, I can start with Diamba Sud and the positive resource update that you provided this morning. How should we think about the upcoming technical report? Will the increased resource be geared towards extending the mine life there? Or should we think about an improvement of the production profile in the first 2 to 5 years with maybe a little bit tonnage than previously expected. Any color would be great there. Jorge Durant: Yes. No, we do not anticipate this will lead to a change in throughput against what we presented in the PEA, which was released in October. So this will, I believe, have 2 impacts this new update Mohamed, one will lead to an extension of life of mine, right? And second, the new resources coming in come at a higher grade. So the new deposit in the inventory is Southern Arc, which today is the largest deposit at the Diamba Sud camp. And it is also the highest grade one. So at 1.9 grams, I do would expect that annual production -- the annual production profile benefits to some degree from that uplift as well. Mohamed Sidibe: That's clear on that front. And then so I guess a little bit more high grade in the front and then the lower grade material from the other assets can be used to extend the mine life there. If I can maybe ask yourself or David, maybe on the gold price assumption. So Diamba, you took it from about $2,600 to $3,300 per ounce. What was -- what are the key drivers behind that assumption? And if you can walk us through any reasoning behind that, using that price for the resource, please? Jorge Durant: Yes. That is the resource that we have used. Right now, everybody is adjusting their price decks and we are using the methodology we use, the number we derived is $3,300 for the resource. So you should anticipate that for the reserve estimate, we use a lower gold price. Just as a reference, for our budgets and reserves for 2026, it's something we estimate with a cutoff date of -- in the second half of the year. And we use $2,600 gold for the resources and $2,300 gold for the reserve. So you should anticipate we use for reserves a lower number, a lower gold price compared to the 3,300 in the resource. Mohamed Sidibe: That's great. And then maybe my final question on just the broader portfolio. I know you already guided to 2026, but how should we think about the cadence of production in the first half versus second half, specifically as with shipping at Seguela and production at Lindero? Just any color there would be appreciated. Jorge Durant: Production through the year should be, in general, steady. The only one is Lindero, where production in Q1 should be -- Q1, Q2 should be expected to be a bit on the softer side as -- that's part of our plans. As Cesar described, we are engaged in improvements, changes to the foundations of the primary crusher and then gradually picking up a bit better in the second half of the year once all of those works are complete. Where do -- we do see an more variation is in AISC through the year. We do expect a bit of a higher AISC in the beginning of the year, smoothing out, lowering throughout midyear into the second half to be where we guided, right? And that is just a function of capital expenditures being a bit more heavier in the first half of the year compared to the second half. Operator: [Operator Instructions] Your next question is coming from John Pereira. John Pereira: Sorry, I -- my line got disconnect. I'm not sure if there's any duplication from the previous caller. My questions are -- 1 of my questions is similar and really in terms of -- you talk about your plan to get to 500,000 ounces. And I'm just wondering if we could hear a little bit more color around that when you look at Seguela at current running rate of, we'll say, 160,000 ounces annually, if you can indeed achieve a 40% increase through your studies, that takes you to 225,000. And then obviously, Diamba Sud, if that goes forward, would contribute. So I'd just like to understand a little bit more color on from the various projects, how you equate to 500,000 when you expect or how does that ramp over '26, '27 and '28? Answer whatever you can. I know I'm asking a lot here. And then in terms of cost for the various projects for example, in Seguela, if we want to move that from 160 to 225, do you have a sense of what the CapEx cost would be for that? Diamba Sud talked about in terms of previous news releases and in terms of capital costs. But can you just give a little bit more flavor and then maybe if there's any increase in production expected from Lindero as well? Jorge Durant: Yes, absolutely. Let's start with Seguela. Seguela is a mine that was originally designed to operate at a throughput rate of 1.25 million tonnes per year. That was the nameplate capacity of what we built and commissioned in mid-2023. Today, the mine is operating. For 2026, we have budgeted and guided for 1,750,000 ounces of throughput in the year, right? Our aim is to take it to 2.2 million, 2.3 million tons per year. That is a brownfields expansion of the processing plant. We're well advanced with the studies, and we have confidence right now that technically, it's a very straightforward project. Most of the work will reside on the wet portion of the circuit, be it that thinners, pumping capacity, leach tanks. And we will certainly have to add a regrind ball mill. But as we understand it today, very little work will likely take place on the combination. So I can give you a broad range of the figure, we believe, will be required to materialize this expansion right now as the study is not complete, but the order of magnitude is in the range of probably $50 million, $60 million to $100 million on the high end. And by midyear, we will have a trade-off between the different options that we have and certainly final numbers for that. But in terms of order of magnitude, those are the magnitude we're talking about, right? In -- but of course, the processing capacity is just a portion of this project because the foundation for this resides in the resource and in the reserve. And we just published a few weeks ago, an updated reserve and resource estimate for this mine. And what we're showing is that we have 1.5 million ounces of gold in reserves and 400,000 ounces in the indicated category and 700,000 ounces in the inferred. And we continue drilling and finding more. So you should expect that before midyear, probably April, May, we will be updating again the resources and reserves for this mine. And it will be a constant deterioration for the next foreseeable future because we are having -- enjoying a lot of success with our drilling. So that is the foundation really for the expansion. And we are targeting 2.2 million tonnes per year, 2.3 million in that range. That range still needs to be well defined in the study. And that, with the grades we have in the reserve and in the resources that we do our modeling, should lead to a production in the range of 200,000 ounces of gold annually. So that is our target based on the work we're delivering. When can we achieve this? If we have a study completed by mid-2026, I think a project of this nature, advancing it at a fast pace, we're not subject to any financial limitations on this one, we can advance it quickly and expectation would be that 12 to 18 months, I think, would be -- probably the limiting factor is delivery times on key equipment, for example, a rig or a mill, right? Right now, delivery times are around 12 months. So 12 to 18 months, I believe, is what should be expected from the gold decision. We might a long way decide to derisk the time line, advancing with some early purchases. That's something that we can consider. But we are not there yet. We're still in the study phase. Moving on to the Diamba Sud, the same. Diamba Sud has a robust rich resource. We just updated it. We are very confident on the technical viability and economics of this project. We have a very strong PEA published in October that using $2,750 gold yields, an internal rate of return of 72% for our investment. So -- and that was with a smaller resource. So now with the figures we just updated, those -- this new resource, 1.25 million ounces indicated are going to inform the feasibility study that we aim to publish in May, June. But we are confident and the best use of our funds right now is advance the project in a way that we derisk the time line for first gold. So we have decided to commit this year $100 million for the Diamba Sud project and $67 million of that $100 million figure are allocated for early works. What does that entail? We're building the camp. We are initiating excavations. We plan to initiate excavations on the water storage facility and other ancillary infrastructure. We are planning to purchase -- place early purchase orders for critical equipment packages, power generators, SAG mill and other equipment packages. Placing those early orders will not only help secure our budget through the construction but also safeguard or time line to first gold. Everybody is happy right now about $4,000, $5,000 gold, but no one is thinking that everybody now wants to build a gold mine and the delivery times on the critical equipment that we use, the consumables or mines require, the people needed to execute all of these are quickly going to come in high demand and shortage, right? So how are we mitigating that risk? Putting our capital to work and advancing as much as we can, placing early -- getting ourselves early in the queues for critical equipment, securing the best people and the best teams from the engineering firm. So we're doing a lot of that right now. John Pereira: What do you consider long life? So you took a long life mine. You talked about 8 to 10 years is what you may be comfortable with? Jorge Durant: The target for us is a decade. We need to see not solely on reserves, but also considering at least our resources, we need to see a decade, a decade plus. Yes. John Pereira: So that tells me that we say within the next 2 or 3 years, you want to ramp to 500,000, 0.5 million ounces per year, then you are obviously in aggregate, going to target a resource of close to 5 million ounces through the various projects. So I guess you're well underway, certainly with Seguela, right? And Diamba Sud at 1.5 million [ ounces ] already, right? Jorge Durant: Let me help you there. if I do something in -- currently today in our aggregate or consolidated reserves, if you look at our website, what you will see is that we have 3 million ounces in reserves today on a consolidated basis, 2.2 million ounces in indicated resources, which are of good quality and it's just a function of timing until we start converting a big chunk of that into the reserve. And we have 2 million ounces of gold in inferred categories, plus $50 million in drilling being spent this year in exploration, not just drilling, but exploration. So the aggregate number, if I aggregate, which the regulators don't like, but if I -- just for the sake of conversation, the aggregate is over 7 million ounces. So we feel comfortable we have the resource base and reserve base to achieve our ambition. John Pereira: Right. Do you still have anything -- any exploration going on in Mexico? Jorge Durant: Yes. We do have some early stage exploration at 2 projects. One is being currently drilled. We don't talk much about those because those are early stage exploration. But yes, we still do some work. It's not a significant portion of the overall budget, but we're still there. John Pereira: Okay. Great. And then just lastly on Lindero. Where do you see that the production for Lindero going? Is there any growth or expansion plans planned for Lindero? Jorge Durant: Today, Lindero enjoys a decade in reserves, right? Reserves and resources, we clearly have a -- we're comfortable with 19 years there, right now as it sits. And Cesar touched on this during his intervention. We currently have a drill program because at the pit -- at the bottom of -- below the bottom of the pit, we have a open mineralization and we are targeting -- this is a target of 400,000 ounces of gold that we're currently drilling at the bottom of the pit. How much of that are we going to capture? Let me get back to you once the drilling is complete, but that is the target. And we're drilling -- we're set to start drilling in March, I believe, and so before year -- midyear, that program should be completed, and I expect we'll see a big portion of those ounces coming into the inventory mid in the second half of the year. Our budget there for exploration is about $5 million this year. Yes. Operator: Your next question is coming from Mohamed Sidibe from National Bank. Mohamed Sidibe: Just Seguela, maybe as you relate to the underground, could you share some color on when -- about the underground development plans you have there for Sunbird and when we could start to see ore from the underground within your plan? I'm not sure if you can give any color on that front. Jorge Durant: Yes. We have, Mohamed, a budget this year of around $14 million that will likely grow some. This year, we want to start the box cut and some purchases of underground equipment. The idea is that we are doing excavations in 2027, so probably late 2027, early 2028 is when we can start seeing production. Remember that we're still permitting. We're still permitting underground. So we expect we can achieve our permits late this year. I was at Indaba with the team, David and the team, we had a good meeting with the Director of Mines. For Sene -- Ivory Coast, and he was very keen to advance with the permitting and with the aim of having it permitted this year. So if we take his word, if we're permitted this year, we can initiate mining next, right? This will require ramps and crosscuts and ancillary infrastructure that will likely be developed throughout 2027 and first production in 2028. Operator: [Operator Instructions] That concludes our Q&A session. I will now hand the conference back to Carlos Baca, Vice President of Investor Relations, for closing remarks. Please go ahead. Carlos Baca: Thank you, Matthew. If there are no further questions, I'd like to thank everyone for joining us today. We appreciate your continued support and interest in Fortuna Mining. Have a great day. Operator: Thank you, everyone. This concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.
Paul Flynn: Good morning all. Thanks very much for taking the time to join us for the Half Year Results for FY '26 for Whitehaven. I'm joined here, as usual, by our CFO, Kevin Ball; and our COO, Ian Humphris, and we'll work our way through the presentation highlights as usual and then get ourselves to across for the Q&A section of today's format. Over the page, I should bring your attention to our disclaimer as usual. We do have forward-looking statements in these presentations as a matter of course. So I'll bring that to your attention for the obvious reasons. I'll move over to the highlights, and I'll start by saying, look, the company, as you know, for those who have been following the quarters, we've had a good first half year. We've laid out a pretty solid foundation for our first half of the year and sets us well up for the second half. Now I'll start with a couple of these important highlights, which we always do with safety and our compliance. Safety has been very good at TRIFR 2.9. Now we all know that moves around month-to-month a little bit here. And we finished the year at 4.6, but at 2.9 that is an excellent result. So all kudos to the team for looking after our people and making sure we're on this pathway to minimizing instances and injuries in our business. Now we all know also that it's been a wet 6 months in various states. And so despite that, our compliance has been very good. So we had no enforcement action events at all during the last 6 months, which has been very positive for us also. So again, kudos to the team for keeping that up despite some weather variation, particularly in Queensland, which we'll talk to a little bit later. Over to the highlights. The operational performance has been good. As you know, 20 million tonnes has been a very nice way to set a platform for the second half of the year. Queensland at 10.3, New South Wales at 9.7, both very good results. Equity sales of 12.8 million tonnes has been strong. So that's very positive, lower than first half last year, but of course, Blackwater is now 70% of our numbers on an equity basis rather than 100%. At a group level, we've averaged a price of AUD 189 per tonne, which includes AUD 212 for Queensland and AUD 168 for New South Wales. Our cost base has done very well. So $135 per tonne as we alluded to obviously in the quarter. That is now a confirmed number, as you would expect. So we can talk a little bit about that and the fact that we feel that there's upside in that also. Revenue of AUD 2.5 billion, 54% metallurgical coal, 46% thermal. Thermal being a strong component of the sales mix in the first half, and we can talk a little bit further about that in a moment. The underlying EBITDA for the half $446 million was actually a pretty good result. We have recorded an underlying net loss for the period of $19 million, and the statutory net profit after tax is actually $69 million, and Kevin will go through a bridge that helps you walk your way from one to the other shortly. We are in a good position. The balance sheet is in good shape, and the market has actually improved since Q1 and Q2 and have come to a conclusion. So the board has seen fit to declare a dividend, an interim dividend of $0.04 fully franked per share. And we're also going to commit up to $32 million of a buyback of equal value over the next 6 months. And now, of course, those who are doing the math will work out that, that when you consider on a whole year basis, which we do when we calculate the payout ratio, given that we're seeing better market conditions in the second half, we're likely, based on where things are pointing, to be at the top, if not slightly over the payout ratio, just given the fact that we are clearing the dividend at a point when technically, the policy says, we don't have NPAT and therefore, we don't pay a dividend, but we're doing that based on our confidence in the balance sheet strength and also obviously, the underlying market improvement that we're seeing. Now just to go over that market, those market conditions, if I could, for a little bit. As I said, Queensland average revenue of $212 has softened. New South Wales softened also an average of AUD 168 for our revenues out of New South Wales. The average for PLV across the period, $192. So that certainly started lower and has improved. So we did finish $212 for the end of the half, which is a positive side to see. The new price also did a similar sort of thing with average $108, but it vary between $104 and $112 for the period. And we have seen since the half year end an improvement on both sides of things. Now It's not streaking ahead. We saw some -- perhaps some frothiness as a result of weather-related activities in Queensland. So the PLV spiked up to 250 and has eased since then, but these numbers are both much better than what we've seen over the last 6 months. So that is very positive for us. Supply/demand feels pretty good. Our customers are wanting the coal, and so there's no concerns on our side at all in terms of moving our valuable product. So it's nice to see customers taking option tonnes as well. I'll look over on to the next page and look at the benefits of the enlarged group and the diversification of our markets and our products. It looks pretty good. 93% of our revenues is actually in Asia, which is no surprise, I'm sure to everybody, but you'll see a concentration of markets there in Japan, India, South Korea and Malaysia around out the top 4 of our revenue, but more generally, it's the right place to be from a growth of coal consumption perspective. And so we're well positioned to take advantage of that. As I said there, the metallurgical coal and thermal coal mix being 54%, 46%, respectively, a little bit lower on the met coal side in the 6 months just because we did have some very good coal production at Narrabri, as you know. And so that put a bit more coal into the first half for the thermal side of the equation. And that will balance out in the second half. So -- but it's certainly very positive and feel like we've laid a strong platform for the second half. Speaking of recurring slides, this slide, I want to move over to the underlying supply-demand outlook for both the thermal and the met with the high CV thermal and met. No change in our position there. This gives us confidence that we should continue to push forward and grow and invest, acknowledging that we do have structural shortfalls on both sides of our business. So that's a very positive, but nothing that we can see points to any change in that dynamic at all. Moving over to operational results. These numbers, I know you've all seen by virtue of the quarters that have gone before. But for those who haven't been watching this closely, as I say, we've rounded out a very good result for the year. So ROM 20 million tonnes, 10.3 million tonnes, 10.4 million tonnes, if you look at the slide with the rounding, for Queensland, 9.7 million tonnes for New South Wales. The sales actually, as I say, we had a change in our mix there just in this half because of strong New South Wales sales. So sales in New South Wales, 8.5 million tonnes versus Queensland 7.8 million tonnes. So that does change the mix a little bit for you, but that explains the 54% of met coal revenues just in the 6 months, as I say, the second half we'll see that turnaround. But overall, managed sales of 6.2 million tonnes is a good start to the year. Queensland, as I mentioned, excuse the rounding, it's 10.3 million tonnes as opposed to sum of those 2, which is 10.4 million tonnes, but we're very pleased with the results there. Blackwater at 7.3 million tonnes, good result and Daunia at 3.1 million tonnes. And these are all in the context of what's been a wet start to the year. So I think looking at those numbers, that's a solid beginning for this financial year. That's not to say New South Wales didn't have some weather either, it did. So I think that's very, very interesting given that Narrabri has had a very good contribution to the total numbers of 9.74 million tonnes in New South Wales, kind of their open cuts are doing what they need to do. Maules. Maules has a higher proportion back end to the second half of the year than we have in the first half. We're making great efforts to try and smooth that out month-to-month, but we do have a little bit more tonnes coming in the second half than we do in the first. And as a result, we've got a little bit of a skewing there. Otherwise, we're happy with the cost reductions, we'll speak to as well, but we're well on track to deliver our $60 million to $80 million out of the business by the year-end. And overall, we feel pretty confident about where we've been and how we set ourselves up for the second half of the year. So with that, I'll hand over to Kevin, who will deal with the financial side of things. Kevin Ball: Thanks, Paul. So I'm over on Slide 15, and it's the EBITDA bridge from half 1 FY '25 to half 1 FY '26. And not surprisingly, this tells me what happened, which is really prices were soft. So a $35 margin or a $35 reduction in price, together with the volumes that we saw when we sold the 30% of Blackwater out of the quarter contributes to the $505 million or $552 million decrease in sales volume and price. Costs, $2 a tonne, $2.50, I think it rounded down to $2, better. So we had a few headwinds in the costs in the first half, mainly from queuing at all the ports. So we had a strong build of low-cost production in December. So that should come out in the second half. And they've masked the underlying improved cost performance and held the cost improvement to that couple of dollars a tonne. So in half 1 '26, we reported an underlying EBITDA of $446 million. And I think what I see out of this is that calendar year '25 was the cyclical low that we've seen in the market, and that's, as Paul alluded to, an improving price scenario in the second half of FY '26. If I take you over the page, you can see the segment result between New South Wales and Queensland and reconciling to the group. On a revenue basis, met coal prices were a bit softer in the half than thermal coal. So Queensland contributed $1.3 billion in the half, which was 52% of overall revenues. New South Wales and thermal coal prices recovered a little earlier than the met coal prices. And so New South Wales had 48% of revenue or 1.15%. The half year EBITDA contribution from Queensland of $248 million showed the effect of those lower coal prices, while New South Wales delivered $215 million in EBITDA. In Queensland, with acquisition accounting, attributing a large proportion of the acquisition value of the property, plant and equipment, the depreciation charge in Queensland was $147 million, while there's also $36 million of amortization. Those -- the fixed depreciation costs at this low part in the coal price cycle have an outsized impact on NPAT at this point. So better prices and that impact will be lower. Underlying net finance expense of $135 million, it largely reflects the interest on the $1.1 billion term loan that we used to complete the acquisition of Blackwater and Daunia. But as we say, we're planning on refinancing that debt in this half. And then there's a small income tax benefit of about $6 million, which you'd expect of the $25 million underlying loss before tax. If I take over the page on costs, I'm going to say I'm pleased with the costs in the first half given the headwinds that we had in terms of weather and ports. I'm pleased, and I think Paul is going to talk about the $60 million to $80 million that's coming in cost outs, and we're across that. But at a group level, we realized an average price of $189 a tonne for our sales. And those tonnes that we sold cost us $135 to produce. We paid both governments an average of $20. It was a bit more in Queensland, a bit less in New South Wales. But in Queensland, the low point in the cycle, that average royalty rate was about 10.6%, while in New South Wales, it's around the 10% level. If I look at where we're up to in the first half, we're tracking at the bottom end of guidance. So that's a good thing. That $135 is the bottom end of guidance between $130 and $145. And as I said before, costs in the half unfavorably impacted by higher vessel queues in all ports for a portion of the half year and strong production levels in Q2 meant that low-cost production was held in coal stocks at 31 December. We also have a little impact here by the higher percentage of sales from New South Wales on previously and impact marginally because we had less blackwater tonnes in the sales mix this quarter because of the 30% sell-down. So margins in the half to December were 34%, which is about half the margin we earned in half 1 FY '25, but it's just consistent with the coal price environment. Moving forward, we have a new above rail haulage contract kicking in, in July. So we expect to save $3 a tonne around that. And we're continuing to accelerate the amortization of additional charges at NCIB to accelerate the amortization of debt, and we should see that fix itself late in this decade. Turn the page, and I'm sure everyone wants to understand how we get from an underlying net loss after tax of $19 million to a statutory net profit after tax of $66 million -- or $69 million rather. So we reported $446 million of underlying EBITDA in the half, which is an improvement on half 2 FY '25, which you would have seen in the previous slide. Group D&A, $336 million, outsized relative to EBITDA, but that's to be expected given the coal price period we've come through. And an underlying finance expense, we've talked about $135 million, and we can give you the breakup of that in some slides in the back -- in the appendix to this pack, which you've got. The nonrecurring items totaled $88 million. The largest portion of that was when we reset the deferred contingent expectation of what we're going to pay BMA as a result of the price movement. And I think in there as well, there's a $34 million technical tax accounting around derecognition of deferred tax liabilities relating to exploration as part of the sell-down. Sure, if you want to ask me questions about that outside of time, that would be lovely. Net debt. I got to say I'm really pleased with this. We came through this half really well, I think. The capital allocation framework really helps us in this process. If you look at us, we've spent $157 million on CapEx. So we're sustaining the business. So we maintain the productive capacity of the business through the bottom of the cycle. We returned $93 million to shareholders in the form of buyback and dividends, and we spent $39 million on other investing, which is really a little bit around the rare earth side of the world. And we finished the net debt balance at 31 December '25 at $710 million. On any view, when we turn the next page, you'll see that Whitehaven's balance sheet is particularly strong. So we have strong balance sheet, low levels of gearing, about 11%, a low level of leverage on a trailing basis about 0.8 at the bottom of the cycle, which is really good. And we kept $1.5 billion of liquidity to ensure that there was no doubt that we could comfortably meet our obligations. We've been saying this for a while. Since we sold down Blackwater, we've kept the cash reserve to meet that second payment to BMA. So the $500 million that's going to be paid on the 2nd of April is sitting on deposit. And the coal price contingent payment structure associated with that acquisition has been working as intended. We paid $9 million to BMA in July. And we're -- at the current moment, I'd say the number that we owe calculated is about USD 20 million, but it's lifting in this quarter with rising prices. But thanks. We're working to refinance our $1.1 billion acquisition facility, and we're just looking to lower costs. When you look at how the company is positioned, it's a really strong credit, probably one of the best coal credits around. But the finance acquisition was a piece that we put in place. Now we want to put that in with a piece of debt that fits the quality that we have. So let me hand back to Paul for the remaining of the slides. Paul Flynn: Thanks, Kevin. Just back to the cost side of things again, as Kevin was saying, and we said earlier, we feel confident we're going to be able to deliver our $60 million to $80 million in savings by year-end. This just gives you a little bit of color in terms of where we're finding the opportunities within the business. Being split state to state, we think there's going to be about 60-40 more or less if I divide it between the 2 states, and that slides back a little bit because all parts of the business have to contribute, not just the sites, but obviously the offices as well. And so we are finding opportunities across all areas there. Just to give you a bit of color, obviously, the organizational structures of the business continue to be aligned to a Whitehaven model. So we're seeing changes there in the operating model as we drive consistency across the business between the various operations. We're seeing upside in terms of maintenance strategies across our larger assets in particular, with obviously there is a big level of mechanical intensity there. And obviously, there's a lot of money being spent on maintenance. So there is that is fertile ground in terms of optimizing that. In New South Wales, we have been moving equipment around to make sure that the implement is best deployed in the space where it can be best utilized, tire lines and things like that, we're certainly seeing the opportunities for improvements there. Some sites, there's good transfer of knowledge between sites in terms of how we're doing well with tires on some sites and benefiting others. And of course, there's a major contracting arrangements are being reset and adjusted as a result of the opportunity, not just with scale, but also just the parts that we've inherited, we're changing those as we go along. And so we feel that we're in good shape to be able to deliver on our commitment here for $60 million to $80 million by the financial year-end. Now I'll turn over to slide, which is entitled the Queensland 5-year FOB cost test, that's adjusted for inflation. And this is really a commitment we made to you that we would go back. As you would imagine, we should in any event, which we have been doing, which is an acquisition of this size or post-implementation review should be done, and this has been part of that. So we knew all along that the estimates we put out at the time of the acquisition, obviously, were based on the work we were capable of doing during the due diligence phase, which generally has worked well and little surprises have come out of it. So quality work was done. But inflation has done its ugly work for the business. So we've called that out. And we said that we were going to adjust it at this half year and reset these numbers, which we are now doing. So definitely, when we've gone back and looked at purchase price indices and obviously, wage inflation indices, there's about $10 in that. So coming off the $120 average base, if you like, for what we gave you as the 5-year averages at the time of the acquisition. You should add $10 in there in terms of inflation. And the learnings and observations that we've made since, as I say, in that post-acquisition review, there are a number of observations that we can see that have changed the cost base. And I'll divide them, if I can, into temporary and then permanent matters. So I'll go through the bullet points that we've got there, but I'll firstly deal with the temporary ones. As you all know, we are definitely working hard to reinstate a comfortable level of stripped inventory that we feel like we should have in order to run at a higher degree of operation. Now we've been producing higher than what the mine has historically been doing in more recent years. So we are consuming the stripped overburden in advance at a higher rate. So this is going to take us a little bit longer than expected to do that. This is a high-quality problem, I have to say. But until we get to that point where we're satisfied that we have an inventory of strip ground enabling the efficient deployment of draglines and obviously, the elimination of downtime where it's been parked up because the bench is not ready, we will continue to have this effect in our business. And relatedly, with that, there's a higher degree of rehandle that goes with the dragline fleet whilst we're in that situation. So that is a feature which we'll have for a little while yet to go. Look, the other thing we've observed, and that is just part of experience now, we certainly observed the backlog of maintenance that's needed to be done. And so the major shutdowns for the big influence, so the draglines and shovels in particular at Blackwater have certainly featured, and it's important work and obviously not work you can do with any great detail. You can review the records and so on shutdowns and things in the DD phase, but we found that we we've needed to put some more money into that. And there are other examples of that. The crest wall say, for instance, we had to do quite a bit of work on them to ensure that utilization has improved. It has improved dramatically, which is very good, but that has required some work to get that fleet into the right shape and fit for purpose. The AHS isn't -- we had assumed a better level of productivity from AHS at the time of the acquisition. It's not there yet. And so we are working with CAT on that, and we are pushing hard to ensure that we can get to a level of satisfaction with the productivity across the autonomous fleet that we think it should be. Now those -- the summary of those ones, those 4 features I've just mentioned, they are the temporary ones. A couple of which are permanent more in nature. The same job, same pay, that is definitely an adjustment. That was obviously occurring at the time of the acquisition. And so we weren't able to size that. Now we have embedded that in our business now. Sadly, the cost of labor is going up as a result of all that, as everybody well knows. So that is influential in our cost base as is the higher level of demurrage, in particular, out of Daunia, but certainly Blackwater as well. The Queensland logistics chain does not work with the efficiency that we're accustomed to in New South Wales. I'm sure no one likes me here say that if you're a Queenslander, but that is a fact. And so the assumptions on demurrage have been adjusted accordingly. Now the cost base, $135 that we've talked about, very happy with that. Even given, as Kevin mentioned, the delays in ports and shipping and logistics in Queensland, in particular, that $135 does include a couple of extra bucks there just for those influences, which should unwind -- that part of it should unwind. But the reality is demurrage is going to be higher than we budgeted for in Queensland. So those are the 2 permanent ones I want to call out, the preceding were temporary in nature and will be alleviated as we continue to drive. So as a result of all of that, we're now giving you a range. I reset that range, '24 to '28. Obviously, there's only a few more years left in this of $140 to $145. Now we've been doing well on cost outs, as everybody understands with the business since we've acquired it, and we're only 6 or 7 weeks away from crossing the second anniversary. So I feel like we're making really good progress there, and we get ourselves down to $140 million in this period, I think that would be an excellent, an excellent outcome. That's not to say we stop trying because, as I say, the first 4 aspects of that I've mentioned are temporary. We consider those to be temporary in nature. And so we'll continue to push and drive greater productivity and lower costs as a result. Now over to capital allocation framework. Nothing new there for you in encompassed in this. So this has served us well. And we feel confident that even in this instance, so again, if you were to apply this framework sluggishly, then we wouldn't be paying a dividend because we have an underlying net loss, minor as it is, it is one. However, reflecting the balance sheet strength that we have and the improving market environment that we're experiencing, we feel confident that to recommend to our Board that we pay a modest dividend, and the Board has accepted that proposition and declared the $0.04, as we mentioned earlier. So $0.04 fully franked is a modest dividend, reflective of the fact that we come through the bottom of the cycle, but paying a dividend through a period that represents the outcomes from the bottom of the cycle, I think, is a very good outcome. And of course, we're aligning that with an equal sum of our buyback over the next 6 months, up to $32 million with a total of $64 million in dividends and buybacks out of the first 6 months, which, again, I think is a solid result. And over to guidance. Look, you can see we're tracking well in our guidance. Certainly, ROM targets to do 20 million tonnes in the first half. The upper end of our group guidance there, obviously, at the managed level is 41 million tonne. We would dearly like to make sure we can get close to that, if not surpass it. So we feel like we're in good shape. The challenge there, of course, is, of course, weather, and that's the major caveat. But otherwise, we feel we're in decent shape. The last quarter, you saw a run rate of 11 million tonnes in the quarter. We're carrying that momentum into the new quarter. So it's nice to see things moving along, which is very positive. The costs, as I mentioned earlier, and as Kevin spoke about, we've seen good progress on the cost side of things. And $135 out of the half that was weather affected and had some extra costs in it, I think, is really good. And we can see when -- month-to-month when we're doing the sales volumes that we -- and production volumes that we expect, we can see the upside associated with that. And so we feel positive that we can drive our costs down to the lower end of the range if we hit that top end of the ROM production. And so we feel pretty good about that. CapEx, as is our way, we're spending a little bit less than we -- the range we've given you. So at $157 million for the 6 months. I'm sure there will be a little bit of extra capital will come out in the second 6 months as people want to finish up projects and so on. But we're tracking obviously to the bottom of that range. And so again, that is reflecting a bit of history, I suppose. But the conservatism that we brought into our guidance will continue to apply. But overall, no change to our guidance. And moreover, we're tracking to the right end of the top end, and we're tracking to the lower end of costs, which is very positive. So overall, good solid 6 months, and we're looking forward to the second half. So I think we're in decent shape. So with that, I might hand back to the operator, and we can get some questions going. Operator: [Operator Instructions] Your first question comes from Dan Roden with Jefferies. Daniel Roden: Just wanted to probably kick it off with the potential refi of the $1.1 billion term loan. Can you remind us what the time line is with the non-call approaching? And I guess, do you have any revised expectations around the 10.5% in the current period? What cost do you think is -- or what rate do you think is realistic kind of when you are looking at refining that and what gating items for lenders would you expect, I guess, the considered important factors? Kevin Ball: Paul just pointed to me, Dan, so I'm the guy, I guess, to answer that one. We're well down this path, and we've been working on this for probably 6 or 8 months, to be honest with you, in anticipation of the first call period that's about the 12th of March. Expectations are we'll refinance this out before 30 June. And I think I said on the last call that if we had a 7 handle in front of it, I'd probably be okay. If I had a 6 handle in front of it, I'd be delighted. And I don't think my expectations have changed. Markets are improving. The ESG -- the benefit in Whitehaven Coal of having half the business in met coal or over half the business in met coal is really helpful when it comes to this financing and the structure of the financing lends itself to using those assets for that security and providing those funding. So Dan, my expectation is said, if it starts with a 6, I'll be delighted. If it has a 7, I'll probably be disappointed, but it's still 300 basis points cheaper than what we're currently paying on 1.1, which is USD 30 million to USD 40 million in savings. So that's the program. Daniel Roden: Yes, definitely. And maybe a quick follow-up, like if -- I guess if you -- are you seeing the market are supportive around those rates at the moment? Like you're obviously confident you can get something close to that. But if you aren't getting something close to that, how do you think about, I guess, paying down debt in terms of the capital management framework? Do you pay down debt more aggressively I guess, rates higher or if you don't aren't able to refi the debt like in half 2 when you are restructuring? Kevin Ball: I think I'd answer that question by saying this. I mean, in the back of the capital allocation framework, you'll see that we're talking about a BB+ rating. We're an organization that's had conservative credit metrics. In fact, the credit metrics we run are typically -- you classify them as investment grade. So we really are at the top end. We're at the top end of the high-yield piece or we're at the bottom end of the investment-grade piece. And if you talk to your debt guys, they'll tell you what that rate should be even with a coal premium attached to it. I wouldn't -- I'm not really in the conversation at the moment about entertaining a discussion around not being successful in that because I don't think that's helpful. And I don't think it's realistic either to be honest with you. We've had a number, several many inbound inquiries about helping out financing. And it feels like that ESG overlay that existed maybe 4 or 5 years ago is abating. It hasn't disappeared, but it's less than it previously was. Daniel Roden: And I might just ask on, I guess, the unit cost guidance as well, and I'm sure there'll be a lot of follow-ups on this. So I might just keep to my 2 questions and hand it over. But just with kind of outlines the '24 to '28 cost guidance at 10 to 15 on top of that. That's the new expectation. But just trying to unpack like you mentioned the kind of rate that we've had at the moment in the Queensland assets is around $140. Some of the historical costs there kind of become a bit obfuscated just in terms of the reporting structure. So I just wanted to very clearly articulate like what the expectation is on those Queensland assets over like, I guess, into half 2, '26 and then '27, '28, like what cost rate are you expecting in the Queensland assets? Paul Flynn: Yes. Thanks, Dan. Yes, look, what we are obviously highlighting today is the resetting of those 5-year averages based on what we can see the inflation. So what we are seeing for those Queensland assets is an average of $140 to $145. That is what we explicitly are saying. And so that obviously -- and you can do the math in terms of how our numbers have been looking for the first -- almost the first 2 years of our operations. Obviously, there's no surprise you can get our segment name, you can pull that apart. And so you can see that there's still cost upside in this business. And based on the things that we've highlighted that we feel are temporary that are keeping a little higher than where it should be, we think we can continue to pressure this down. So say, for instance, you get to the bottom end of that range at $140, I think that's a very good outcome in this context given the inflationary impacts that we've seen. And so the problem with this is that inflationary impacts can abate. They don't -- you never get that cost out of your business from the labor perspective in the first instance. So you can -- you do see inflation rise and fall on services for sure. But once baked into your cost base from the labor side of things and in addition to same job, same pay, you're never going to get rid of that. And so that is a problem and something that we need to work on from a productivity perspective. But yes, explicitly, that's what we're saying, $140 to $145 for Queensland. I think that is just reflective of the reality that we've inherited. As I say, I've tried to divide that up into temporary impacts versus ones that are baked in. And hopefully, that's useful for you all in terms of your calculations for Queensland assets. Daniel Roden: Yes. And then I was more trying to get a trajectory on that. You obviously talked about the strip ratio and impacts were transitory. I guess kind of coming out, maybe asking in a different way, when you come out of that guidance range, would you be expecting the costs are higher or lower than that $140, $145 range? Paul Flynn: Yes. Dan, you're going to have to hand this over to someone. But just to answer your question here, we're not giving guidance past that point. And so we'll deal with that on an annual basis once we're outside this acquisition, the remnants of this acquisition data that we gave you 2 years ago. Operator: Your next question is from Chen Jiang with Bank of America. Chen Jiang: Maybe first question to Kevin about your buyback. So your original buyback program of $72 million, you only have $4 million buyback left from that original program announced. And today, you announced $32 million buyback to match with the interim dividend. So is that fair to say actually, you added incremental buyback of $28 million in addition to your original $72 million? Paul Flynn: Chen, this has been a pain for a number of years. It's just the way in which the legislation comes. So what we've done now is we've said each half, we will tell you what the buyback is up to what that amount is going to be, and then we will close the buyback from the previous. So you should think that $72 million is dead, never to come back alive again and the $48 million is never to come back alive again, and then the $32 million will be the buyback for the next 6 months up to that number. And we're just trying to make this a lot easier for people to work their way -- work it in their models. Chen Jiang: Okay. So every 6 months, you will have some sort of number... Paul Flynn: Yes, that's right. The problem is the regulator gets a bit confused about this. And so that's why we've had to close a buyback, the previous chapter of buyback and open a new one. And so that's what we're going to have to do in order to assist people in avoiding confusion as to is there some tail that was unexpended during that period? Is that going to be added to this? Unfortunately, just the way the regulation works, it's needed to just close it off and then announce the next one. And then at the end of that period, then you have to say whether we did or didn't extend it all, but you'll close that one and then open a new one. Chen Jiang: Sure. That's very clear. I mean your previous buyback of that $72 million is almost completed. So anyway, -- and then just -- yes, yes, 94% completed. Yes. And then if I can have a follow-up on the cost, please. I understand it's an average of the 5 years. But looking at FY '24, FY '25, even FY '26, I guess, those Queensland costs much higher, right? So it's like $147 million or $145 million. So take an average, how should we think about this? I mean, is that like FY '27, FY '28 should be averaged down to get that $140 million, $145 million? Or the way to think is FY '27, FY '28 should be the range of $140 million to $145 million? Paul Flynn: Yes. Look, I think, Chen, as you would have expected with the first range we gave you and now with the reset, the higher cost period is the early years as we're getting our hands around things. And then you would expect us to continue to improve through that 5-year period. And so obviously, we're a couple of years in now. So we've got essentially 3 more to get within this range. And we feel like we feel confident we can do that. But yes, I would imagine the end, so the FY '28 period is going to be the cheaper, if I can say, the lower cost period. And obviously, first year of our operation being the higher. So the same philosophy applies to this new range that we've given you. Chen Jiang: Right. So averaging kind of averaging down in the 5-year... Paul Flynn: Yes, more expensive in the early years, cheaper in the later years, for sure. Operator: Our next question is from Paul Young with Goldman Sachs. Paul Young: First question again on these Queensland medium-term costs. There's really no real surprise here, I guess, from an inflation standpoint. And also, the operations are doing well, but not as well as you expected at the time of acquisition. But one thing you haven't mentioned here is actually it's all about moving dirt and coal and actually what the production assumptions are. So if you go back to the time of acquisition, I think you were forecasting that Blackwater would get to around 15 million tonnes of ROM on a 100% basis, and I think Daunia at 6 million. Are you still -- do you still think that's achievable? Or -- I mean, by the way, the Street doesn't have those numbers, Paul. So the Street is shy of that. So just curious around the volumes because ultimately, the unit costs are just a function of obviously, production. Paul Flynn: Yes, yes. It's a good point, Paul. Thank you. Yes. The reason why we didn't change it because we actually feel good about the physical side of things, and we've been saying that along the way. We're making good progress. The numbers you just recounted, we feel good about those numbers. So we've got a couple of years to get to it. Daunia has been doing well and is approaching those numbers, as you can see already. So that's very nice. Blackwater, obviously, is a bigger ship and requires a little bit more time to allow the benefits of the initiatives we put in place to turn around. But the physical side of things, we actually haven't been concerned about. It's just once we bought it, of course, we were able to lift the hood, look in a more detailed fashion. We can see the temporary things that we've got to deal with. So we feel positive about that. We're not disappointed about it. Obviously, the revenue assumptions that we used to justify the acquisition were obviously much less than the prices even you've seen today. And so from a valuation perspective, we feel very good about the acquisition and what it's been able to do for our shareholders. But overall, the physical, we feel good about, and we're just going to continue to drive these costs down. Paul Young: Yes. Understood. No, that makes sense. And then moving to New South Wales. And can I ask about Vickery again? I mean you talk about structural deficits from thermal coal. Vickery has been, I guess, shovel already or I know you guys are still working through the capital estimates. And so if you can remind me where you're at with that. But also just on the formal process, have you -- is there a formal process? I know you've had open and it's closed previously, but where you at with that? And then also with the new rail contract, does it make room for the larger Vickery project? Paul Flynn: Yes. Okay. Look, Vickery -- first, Vickery is fully approved, just to remind everybody, fully approved. The only official parts that are remaining of that is obviously FID. And so that's obviously manageable internally completely. So the Board is -- given that we've just come through the bottom of the cycle, we're not minded to address that in the next 6 to 12 months. But we are doing lots of work in the background on funding for Vickery. So that's important to us because lots of people have expressed interest in us bringing that forward. And we said to them, fine, we're not going to take all the risk. You've got to help us with it if you want the coal, which I think is the right thing posture for us to take. So we've had interesting inbound inquiries on the sales side. We've had interesting inbound inquiries on the infrastructure side. People want to help us build and operate that. So I think that's really -- that will be -- an extra 6 to 12 months is actually really interesting to see how we can bottom all that and obviously minimize the funding ask from the cash flows of the business. So that all looks pretty good. The rail contract is a really interesting reset. I mean that obviously was a product of a 10-year contract, and you only get that opportunity once to come along every 10 years. So we've taken it. The $3 we've mentioned to you per tonne is actually on the New South Wales business. So on a group basis, that's $1.50 of the cost base from 1 July onwards, just to be clear. So that's very, very positive. And in fact, we've actually started the process in Queensland as well because there is a renewal up there in another 18 months' time, more or less. So interested to see where that goes. But the question on Vickery, it does cater for. We've got upside potential for the tonnes. Now we haven't contracted those tonnes. So just to be clear, we've gone from being long above rail to matched, if not slightly short, with surge capacity attached to it. So we flipped this on its head nicely. So we're not carrying any extra cost in the business for above rail. And so -- but we have upside opportunity with both the haulage providers that are in place there to be able to add the Vickery tonnes as required. Operator: Your next question is from Rob Stein with Macquarie. Robert Stein: First 1 on the dividend. The $0.04 per share, does that obviously heavily borrows from what you're expecting to pay in next half. How should we think about the decision around the next half in terms of your capital allocation framework and sticking to that payout ratio? Are we still to expect that payout ratio to apply, i.e., we can deduct the next half's dividend, our expectations versus this half? Paul Flynn: Yes. Rob, look, we don't feel like we're borrowing from the next half. The balance sheet is in really good shape. So we feel like the capacity exists already from what we've been able to do. Now the fact if we're just purely following the calculation basis in our framework, because we're paying a dividend at a period when we record a loss, then reasonable expectations would say based on even pricing today that you're going to generate significantly more cash today than -- and through this next 6 months than we have in the first half. So all things being equal, there will be obviously this discussion in 6 months' time about the divi and there will be a reasonable divi. And most permutations that we've looked at says that you're probably going to be over the 60% of NPAT level simply by the fact you paid a divi in the first half when there was no NPAT. That's just a calculation outcome. But we're not taking now from what we think should be we're expecting to derive from operations in the second half. Prices obviously stay even if they -- even as if we were seeing them soften a little bit off the [ $250 ] down to the [ $220 ]. So March is about [ $220, $225 ]. I think in terms of looking at the outlook. Those numbers are much better than what we've experienced over the first 6 months. So cash generation has been good. We've seen good production in December. We've seen that good production following the momentum into January. Cash generation has been solid. So it's very good to see, and we feel like we'll be able to continue to make a second half decision around dividends when the time comes. Robert Stein: Okay. So consider it more as for want of a better word, a special allocation rather than a shifting in time period allocation, you're going to take an independent decision in the second half. Paul Flynn: No, we don't consider special -- that's not a characterization we would give it either. Obviously, the framework we set up, we want to be paying dividends through the cycle. The fact that we actually can after we just experienced the bottom of the cycle, I think is excellent. So I don't consider it's special, but the payout ratio is calculated on a whole year basis, just to be clear. Robert Stein: Cool. Okay. And then just on the -- probably the key topic of today, the Queensland cost guidance. Just to try to get a bit of a feeling for FX impacts on that cost guidance if FX were to hang at current levels or potentially even strengthen, what -- how should we think about the cost sensitivity of this number to that? Paul Flynn: Yes. Look, not much, I'll have to say because by and large, there are a couple of exceptions, as you can imagine. By and large, we're an Aussie dollar cost base business. And so currency affects the revenue line, affects our interest costs. To a degree, it affects the coal price itself and oil, but that's it. The rest of it is Aussie dollar based. Operator: Your next question is from Lyndon Fagan with JPMorgan. Lyndon Fagan: Paul, obviously, a lot of focus on the Queensland cost, but wondering if you're willing to share a medium-term outlook for the New South Wales business. I mean there is a number in the mid-120s around the ballpark. Paul Flynn: Thanks, Lyndon. Someone was bound to ask that wasn't. It was always going to happen. But look, I think we all understand the history why we have these 5-year averages for the acquisition. It's just because you've never seen these assets before because they're obviously consolidated within the broader BMA unit and no one got to see them. So we needed to give you something, so you could -- something that you could use. So we did that. Once we're outside of this 5-year period in those averages, we plan to go back to the normal guidance setting ratios that we have, which New South Wales is indicative of. And so no, we won't be doing that. But New South Wales has done very well. I thought you're going to go and point to another area, so you didn't, so I'll do it myself. The cost in New South Wales has been good. And production -- when you have Narrabri spinning out lots of tonnes, everybody knows Narrabri are our cheapest tonnes. And so when Narrabri production is good, the average costs do well. And so we feel pretty good about that and production continues to go well there. And we are reviewing our costs in New South Wales as we have been in Queensland. And we are finding savings there as well. And that's outside the resetting of the above rail haulage contract we just referred to. So that is positive. Kevin Ball: And if you don't mind, I'll step in and say, I think if you look at the New South Wales business, you've got a pretty strong contribution from Narrabri. You've got an underweighted contribution from Maules Creek relative to the year, and you've got a pretty strong contribution from the Gunnedah open cuts who are performing well, but they're probably our highest cost operations. So there's a few moving parts in how you assemble the New South Wales costs. And if you look forward over time, to that earlier question about Vickery, Vickery in its bigger form will help drive cost down in the business. So it's a bit difficult to give you that conversation. I think you need to almost deconstruct it and then reconstruct it based on volumes to contribute. Lyndon Fagan: No worries. I suspected I wasn't really going to get an answer. But I just thought I'd ask about the met coal outlook. We've obviously lost a little bit on the hard coking coal price. I'm just wondering whether -- how you're feeling about the sort of current market tightness and near-term outlook? Paul Flynn: Yes. Look, the market -- the underlying market has been pretty good. And when I say underlying, our interactions with customers, the demand has been good and people chasing our coal, which is nice. Obviously, prices took a bit of a leap there based on concerns around weather and so on and supply side constraints. We understand in the Bowen Basin there's still people dealing with a lot of water in their pits. And so whilst we have water too, we did manage ourselves very well through that rain. And so we're not seeing any of the impact -- negative impacts as a result of that, that are material to our guidance for the year. So we're in good shape. But there is some supply side constraint in Queensland. Now there have been a few -- there's been obviously with a few more tonnes coming on to the market as a result of a couple of mines, underground mines, Centurion has just restarted. So I think a little bit of excitement around that has tempered the price outlook for March and April. So for instance, if we're going to see some tonnes start to emerge from these restarted operations. So I think that sort of weighed on that a little bit. So I think the spot is down to what, 2 40 or somewhere around there. March is around 2 20, 2 25, somewhere in that region. So -- but these sort of much better numbers than where we've obviously been for the last 6 months. So we welcome all of it. But the underlying conversation with our customers, they want more tonnes. So we're keen to try and satisfy those needs. Operator: Your next question is from Lachlan Shah with... Lachlan Shaw: Two questions. First one, just on the Queensland costs. We've covered it at length. I wanted to just unpack a little bit though. So you have used language extended period of higher dragline rehandle. Is that to the end of FY '28? And I suppose part of that then is from FY '28, is there more do you think that you can kind of pull out of these assets here? Or is the FY '28 baseline to get your 5-year average to $145, is that FY '28 endpoint then the appropriate sort of jump-off point beyond that? And I'll come back with my second. Paul Flynn: Yes. Good. Thanks. The challenge there for us is that we -- as you know, we put more capacity into the pre-strip fleet to try and make up this ground, and that's been going well. But now you've got the draglines chasing down the pre-strip fleet. So that is -- that's, again, a good quality problem, but it is going to take longer to get ourselves. And as we increase production, which we have been, the inventory also needs to increase. And so that's just the slightly circular dynamic we find ourselves in. So yes, I think for another couple of years, we're going to be doing that. And so that brings us into the end of this outlook period. But that's taken into account... Lachlan Shaw: Okay. Yes. Yes. Okay. And so the inference is then FY '28 is sort of the appropriate jumping off point beyond that? Or is there more do you think that you sort of look at that far and think, okay, what more can we do? Paul Flynn: No, I think that you should take that as a jumping off point because if we want to expand materially further post them, we'll tell you. It's really just about volume. We obviously want -- as I said earlier, we feel good about the physical volumes in terms of the 5-year outlook. So if we want to go bigger than that, that will require some capital. And that will be a different conversation we'll have with you at the time. Lachlan Shaw: Great. That's helpful. And then my second question, so I just wanted to talk to met coal pricing and realizations, I guess, just interested in your perspectives at the moment. We're seeing a bit of disruption in the U.S. met coal market in terms of high-vol A, high-vol B widening to mid-vol hard coking coal. And then obviously, there's been sort of, I suppose, slightly soft recent mid-vol prices out of Queensland, too. What are you seeing in terms of the different markets across the met coal quality fraction? And how do you sort of anticipate that to impact realizations for you guys going forward? Paul Flynn: Yes. What we're seeing at the moment -- look, we all observe the ups and downs of the market. We see what you've just described. Obviously, we're generally playing in the low to mid-vol space, if I can use the U.S. vernacular. But generally, our products are all low vol other than the ones out of New South Wales if we're talking about semi-soft out of Maules or Tarra. The annoying part for us really is just trying to drag up realizations for the lower 2 products, if I can call them secondary products, the semi-soft and the PCI. The relativities of PLV to low vol, I think that's okay, but we would like to see improvements, and we're pushing our negotiations hard to improve the realizations for our semisoft, say, for instance, that's really important to Blackwater. And so pushing that hard in a market where steelmakers are struggling a bit. That's not an easy conversation. But the fact that we've got a couple of important steelmakers in our tent now, that helps them understand, obviously, the economics of the project itself. But then again, they got the tricky balance of the external market that they face for their product. So of all the things, I'd like to see a bit more of improvement in those realizations. That would be my question. Operator: comes from Glyn Lawcock with Barrenjoey. Glyn Lawcock: Paul, I'm going to try and ask Queensland costs in another way. So if I heard you correctly, you want to jump off in '28 at $140, and that is a real number in December '25. So you've given us today $10 inflation over the last 2.5 years, your jump-off point is 2.5 years from now. Do you think we should be thinking about another $10 inflation adjustment over the next 2.5 years? Just what's your sense inflation? So do we actually jump off in June '28 at $150 adjusted for inflation? Paul Flynn: Yes, that's a really good question, Glyn. We haven't assumed in our calculations that we would go through a similar period of inflation. Now obviously, that's a very topical question on a macroeconomic sort of level or political level in this country at the moment. We're not seeing inflation. I don't think we should assume the same is my bottom line here. The labor inflation that we've seen over the last 2 years has been quite extraordinary. Now I don't expect that's going to continue at the same way. Our EA negotiations that we -- that we're undertaking at the moment are reflective of a more realistic market where the industry is struggling a little bit and some players are really struggling. And so job losses have occurred. And so that's -- that inflation, at least at the EA level is better. Now having said that, our own personal or company-specific experience during that period was also affected by the fact that we've just grown -- we've just doubled and people's jobs had grown as well. So the amount of out-of-cycle remuneration changes that we saw during that period isn't indicative of where we're going to go going forward. And so that's settled down. But -- and generally on the supplier side, so on the PPI side of things, Jeff, that has moderated slightly. So I don't think we should be assuming the same -- a replication of the same period over the last 2.5 years. I don't think we should. Glyn Lawcock: Yes. And I saw the federal government just mean now health cover is going up 4-plus percent. So I don't think that matches inflation, but that's another discussion. But if I even take 2.5% inflation, right, I mean that's $3.50 a year. I mean that's 2.5 years, that means I'm up for about $8 a tonne increase just at an average 2.5% inflation rate. Paul Flynn: Yes. If you -- I understand the math. If you did nothing else, then that would -- that's that math... Glyn Lawcock: I guess I'm just trying to understand, can you fight inflation on top of everything else you're fighting just to get down to the 1 40, the nonpermanent issues you're dealing with. I think that gets you down to 1 40. But now I was just wondering if you've got other levers to combat inflation. I guess... Paul Flynn: That's why I called out the temporary components of it because those are the areas where we really can work, same job, same pay, labor cost. The only way to deal with labor costs have less labor, right? And so that's a challenge. We need a certain amount of people to man all the equipment we've got. And of course, we need to use it more productively, and we're striving to do that. But those -- the 4 areas we mentioned are ones we're working on because we certainly believe that we can alleviate some of the pressure we've seen on that in recent times. But it's a constant battle with inflation, as you know. Glyn Lawcock: Yes, sure. And then just on the balance sheet, I mean, you call out net debt $700 million, but that's going to double on the 2nd of April when you pay your next installment to BMA. Are you still comfortable with like a $1.4 billion in net debt, which you will jump up to next time you report? Paul Flynn: I don't expect it will jump to $1.4 billion at the next time we report. I think what you're missing in that conversation is what's the cash that gets generated between now and 30 June. So by the time -- no, let me finish. By the time you do that, I think where you get to is probably of an EBITDA number that I think Visible Alpha has about 1.3 or 1.4, Kylie, around there, then I think you're probably, again, 0.8-ish sort of leverage would be sort of where I expect it's going to fall. And those metrics, Glyn, as I said, what I want to draw out is really when we talk about our capital allocation framework, it's a business that has -- operates on investment-grade credit metrics, perhaps not yet at the scale needed to be investment grade, but has those metrics in it and is firmly in the high end of the subinvestment-grade debt. So from a business, we don't want to run a business that's completely unlevered. That's not the intention. And so we think we've got a pretty -- a capital allocation framework that drives a pretty prudent, conservative level of leverage and level of gearing in the business and -- yes. Glyn Lawcock: Yes. Sorry, I should have said pro forma as you pay it today. But no, you're right, you will generate a fair bit of cash if prices stay where they are by 30 June. So noes, but happy to hear you explain how you're happy to run with a bit of leverage. Operator: Your next question is from Chris Creech with Morgans. Christopher Creech: Just 2 quick questions for you, if you wouldn't mind. Paul, you spoke before about potential expansion of Blackwater sort of into the future. But I see that the sort of Blackwater North extension project was withdrawn in November last year. I know that sort of BMA submitted that. So is it more about you sort of wanting to optimize how you proceed with Blackwater? Or was there something else that sort of drove that withdrawal of that sort of project? Paul Flynn: I'll try and answer that as best I can. Chris. Look, we've got -- that site can grow substantially. We are in the approvals process for the expansion of the northern area of Blackwater. So -- but don't forget there wasn't -- there was actually an approval request put in place for a broader expansion to the South. And that obviously covered what we call Blackwater South. And there's obviously a significant area there, which has anywhere between 50 and 100 years of coal still in that southern region. So we have 2 areas, if you like, in terms of what we can do for incremental expansion over and above the improvement in the existing footprint of operational pits. So the northern area, as I say, that's currently on foot with our approvals processes. The southern area, BHP did lodge an application there, and we're looking at that very closely in terms of what we think is the Whitehaven version of that same future. The expansion I was referring to isn't actually about either of those. It's just actually about us thinking we can get more tonnes out of the existing footprint. that's operational today. And so there's plenty of ground, which is open at Blackwater, which has been left at different times in history when prices were low. Now those prices, obviously there is no resemblance to even the low prices today. And so a lot of those areas are capable of going back in relatively quickly to get back in and get extra tonnes. And so our view is we can get more out of what we've got even before we consider that northern approvals process opportunity or obviously, a whole approval -- whole process approval submission for the southern areas of Blackwater South. Christopher Creech: Yes. Got you. And just a second one and not to sort of flog a horse, so to speak, but I did ask you after sort of the first quarter results about Daunia AHS performance. And you say there's still obviously that performance sort of difference between where you want -- where sort of manned would otherwise be. Is it still tracking sort of where you want? Or does there sort of come a time where you sort of -- like what you guys did at Maules where you sort of move back to a fully manned operation to sort of achieve that sort of cost guidance that you guys have set? Paul Flynn: Ian has been waiting very patiently for a question to come his way. So look, it's not where we want it to be. We assumed it would go better. It's not bad. I don't give you that. I'm not saying that. It's just that we think it should do better. And we obviously had that experience you just described at Maules Creek. So we know what the benefit is of going back to man with the system. Now in fairness to Hitachi, that wasn't a commercial system. This one is. And so that was still a development project at Maules Creek. This one is, by all accounts, a commercialized system. And -- but we can -- we've -- because of our history, we're able to very quickly benchmark what the difference is between humans and not. And we can see that this is not there yet. And so the key question is how quickly can we get to where we're satisfied that we're doing the right thing for our shareholders, which is obviously the lowest cost, most productive iteration of Daunia we could possibly imagine. Ian? Ian Humphris: Yes. I love it when my boss covers everything in hands over. But look -- over and above that, look, we're engaged with Caterpillar at all levels through our organizations to improve it. I mean, as Paul said, we have seen improvement, but there is more to go there. So we're working on them. And I think we've got to be careful to differentiate Maules Creek and the CAT system at Daunia here. I mean, even if we went 100% at Maules Creek, the whole site was not an autonomous site. And I guess that interface and the difficulties around that. And then for those that are familiar with Maules Creek, it's an extremely highly intensive mine with a whole lot of interaction. So I guess our decision, I guess, the maturity of that system, the fact it was never going to be 100% AH mine site, even if we sort of ramped up to what we called 100% AH and that interaction is why we made the call that we never thought it would work at Maules Creek and be as efficient as a manned operation. Operator: Your next question is a follow-up from Rob Stein with Macquarie. Robert Stein: Just to try to extract Glyn's question a bit further. So there's inflation, which we can forecast macroeconomic driven, U.S., et cetera. And then there's escalation, which is industry-specific, regionally specific labor costs, construction costs, et cetera. Does the $140 to $145 target have inflation -- is it inflation adjusted, but not escalation adjusted out past '26, '27, '28? Paul Flynn: Yes. It's inflation adjusted, but we're not passed on escalations, no. We're not changing any escalation, just standard inflation. Operator: We have reached the end of our question-and-answer session. I would like to turn the call back over to Mr. Flynn for closing remarks. Paul Flynn: Thanks, everyone, for taking the time to listen in today and the questions that you've asked. If there's any further questions, you know where to find us. We look forward to seeing many of you, obviously, in the follow-up post this presentation. And thanks very much for your attendance once again.
Operator: At this time, I'd like to welcome everyone to the Talkspace Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] The press release and presentation of earnings results can be accessed on Talkspace's IR website. The presentation will be used to walk you through today's remarks. Leading today's call are CEO, Dr. Jon Cohen; and CFO, Ian Harris. Management will offer their prepared remarks and then take your questions. Certain measures that will be discussed on today's call are expressed on a non-GAAP basis and have been adjusted to exclude the impact of one-off items. Reconciliations of these non-GAAP measures are included in the earnings release and on the website, talkspace.com. As a reminder, the company will be discussing forward-looking information today, which may include forecasts, targets and other statements regarding plans, goals, strategic priorities and anticipated financial results. While these statements represent the company's best current judgment about future results and performance as of today, actual results are subject to many risks and uncertainties that could cause actual results to differ materially from expectations. Important factors that may affect future results are described on Talkspace's most recent SEC reports and today's earnings press release. For more information, please review the safe harbor disclaimer on Slide 2. Now I will turn the call over to Dr. Jon Cohen. Jon Cohen: Good morning, and thank you for joining the call today to review our fourth quarter and full year 2025 results. When I joined Talkspace at the end of 2022, the strategic pivot had already begun shifting from our Consumer model to a Payor fee-for-service model. Today, I am proud to look back at the progress we've made financially, operationally and towards our mission to deliver comprehensive, personalized mental health care to all. Since 2022, we have grown revenue at a CAGR of 24%, driven by Payor Sessions annualized growth of about 56%. During this time, our operating expenses as a percentage of revenue continued to decline, helping to drive operating leverage and improved EBITDA margins. For the full year of 2025, we delivered revenue of approximately $229 million, an increase of 22% year-over-year, driven by payer growth of 38%. In addition, we more than doubled adjusted EBITDA, growing from about $7 million in 2024 to $15.8 million in 2025, which represents an adjusted EBITDA margin of 7%. Our growth in Payor, where we now cover well over 200 million lives through insurance and employer benefits is driven by 2 factors: one, strategic initiatives we have put in place to bring people to Talkspace, including targeted efforts to increase awareness and drive high-intent referrals as well as deepen partnerships with the Payors to improve the patient journey and make it easier to find care; and two, our expanding offerings within the Payor channel to cater to new populations and differing levels of acuity. Both of these initiatives are underpinned by our continuous improvements to the member journey and our clinical network. We continue to drive increased consumer awareness through our paid media strategies, search optimization, partnerships and scaling brand recognition. Our awareness campaigns have been very successful over the last 3 years as recognition of the Talkspace brand continues to go up, while our spending on marketing has significantly decreased over the same period. Our initiatives to drive high-intent referrals has been successful with increasing volumes month-over-month from Amazon, Zocdoc and our strategic partners. We're also seeing a strong and growing presence of Talkspace in large language models due to the work our team has done to optimize on and off our website for increased visibility and citations. In the fourth quarter, general purpose LLMs drove an increasing percentage of traffic and checkouts as we continue to expand this new and growing channel. Recognizing that we provide high-quality clinical care, the Payors have partnered with us on several new initiatives to further simplify the patient experience. This includes directory integrations with several of our Payor partners and some utilizing single sign-on so that patients can log into both platforms with ease. Others are embedding Talkspace scheduling into their directories so that patients can book sessions without leaving the Payor site. We are currently working with one partner to launch the capability for their care coordinators to schedule Talkspace appointments on behalf of patients, a tool we will expand with other partners and Payors. During the year, we also expanded our offerings within the Payor channel. We invested in our psychiatry business, grew both military and Medicare enrollment and acquired Wisdo, the lower acuity AI-powered social health platform specializing in peer-to-peer community and coaching. On military, our enrollment continues to grow month-over-month following our January 2025 launch as does patient engagement through our direct-to-enterprise contract with the Navy. Our Medicare enrollment also continues to grow. And with the acquisition of Wisdo, we've seen increased interest in Medicare Advantage plans given Wisdo's proven impacts on loneliness and social isolation. In addition, Wisdo's partnership with Novo Nordisk to provide group coaching for patients on GLP-1s opens a new door for us into a previously untapped category of pharma partnerships. Our youth programs, which we initially launched at the end of 2023 across major markets, including New York, Baltimore, Seattle and North Carolina continue to deliver strong measurable impact on scale. In New York City alone, more than 45,000 teens are enrolled in our Teenspace program. 66% of enrolled teens showed measurable clinical improvement with the most common presenting needs being anxiety, depression, relationship challenges and stress management. The program is reaching historically underserved communities with nearly 45% of participants living in areas with high health and income disparities and 82% identifying as BIPOC. Engagement remains very strong with over 90% of teams actively texting with their therapists and more than half choosing messaging as their exclusive modality. The results of these programs reinforce Teenspace as a scalable public-private partnership model and Talkspace's leadership in youth mental health solutions. Specifically, in psychiatry, we expanded our network of psychiatry providers to over 400 providers, and we made a number of improvements to the patient journey to streamline processes like simplifying medication management workflow to be able to send medications directly to the member's pharmacy of choice. In April, we launched our integration with Amazon Pharmacy, allowing members to seamlessly fill prescriptions from their Talkspace provider and get fast free home delivery, making for a more convenient patient experience. Further, we created an easy pathway for members using Talkspace for therapy to receive an internal referral to a Talkspace psychiatrist, an investment through which we are seeing strong traction. Turning to AI. We are continuing to utilize the technology to improve business operations and incorporate AI enhancements into the platform to further improve the patient journey and provider workflow. These enhancements have reduced friction in several areas, lowering the number of registration drop-offs and leading more patients to successfully begin their care journey. Once a member is onboarded, we have also made it easier to schedule their appointments, increasing the number of patients that continue care after a first session. These efforts have resulted in an increase in the number of checkouts and a 49% increase in the number of patients completing a third session in the first month of care. Another factor contributing to our increase in session growth has been the success of Talkcast, our individualized AI-generated podcast that I've talked about in the past. When members open a Talkcast episode between their first and second sessions, they are 20% more likely to complete a second and third session. To date, we have produced over 76,000 episodes, which have been overwhelmingly well received. 95% of provider reviews and 92% of client reviews have been positive. In addition, our network management strategy has brought continued focus on curating our network of clinicians to optimize for the specific utilization trends we are seeing, ensuring that we have clinicians available in the right space at the right times to align with patient demand. Now let me turn to the TalkAI agent that we have been developing over the last year. Although general purpose large language models are now being utilized by a huge number of the global population, they were never built to support mental health. While these models have democratized access for millions, which is a good thing, they have unfortunately led to a rash of reported harmful outcomes. Mental health support requires something far more specialized and nuanced, including challenging distorted thinking, recognizing delusions and identifying risk in real time. The TalkAI agent we have built is designed to be the first safe AI agent specifically developed for mental health support, utilizing clinically recognized standards of care with continuous human oversight and privacy HIPAA protection. The LLM is trained and fine-tuned on Talkspace's massive mental health data set, identifies 10 areas of risk in real time, supports appropriate decision-making and avoids the pitfalls already seen in general purpose LLMs. It keeps clinicians constantly in the loop with clear escalation pathways to connect users at risk to a licensed human clinician in real time. TalkAI does not replace clinicians, but rather extends their reach, adhering to strict clinical standards while identifying new users who may need human interaction. I believe that the need for human care by trained therapists will increase as millions more people will be identified that need professional help beyond what our agent will provide. We are currently beta testing this quarter with the expectation to be in the market late in Q2. In summary, as you can see, we have come a long way in 3 years. There remains a tremendous opportunity in front of us and one we are positioned to continue to aggressively pursue. In addition to the core business, we believe we have strategically positioned ourselves to be a leader in the application of AI to mental health services in this rapidly moving current environment. I am pleased with the Q4 results and our full year business performance. Looking ahead to 2026, I am very optimistic about our capability and opportunity to continue to grow the business, expand profitability, and I'm encouraged by the strong momentum we have seen thus far in 2026. And now I'll turn the call over to Ian. Ian Harris: Good morning, and thank you for joining us. I want to first echo Jon's sentiment that we ended the year with some really solid momentum, and we are well positioned for that to continue. Today, I'll review our fourth quarter financial results before walking you through our financial outlook for 2026. Turning to the fourth quarter results. Total revenue for the quarter was $63.0 million, representing a 29.3% year-over-year increase. Our Payor business continued to be the primary growth driver with revenue of $47.7 million, up 41% year-over-year. Growth was driven by increased session volume and expansion across existing clients. Specifically, the number of sessions for the quarter was 450,000, representing a 36.3% year-over-year increase. Furthermore, the number of unique active Payor members for the quarter was 124,000, representing a 29.7% year-over-year increase. Within direct-to-enterprise, revenue was $11.6 million, an increase of 21.8% year-over-year. As we noted on our third quarter call, several new launches shifted from the third quarter into the fourth, and DTE also benefited from the inclusion of the Wisdo acquisition, which closed on October 1 and benefited from revenue associated with implementation work for certain new accounts. Consumer revenue was $3.7 million year-on-year, consistent with our intentional prioritization of both Enterprise and Payor channels. Gross profit was $26.9 million, up 24.4% year-over-year, resulting in a gross margin of 42.7% in the quarter. This was down 169 basis points year-over-year, primarily reflecting revenue mix shift towards Payor. Operating expenses were $23.1 million, an increase of 9.6% year-over-year. Importantly, operating expenses as a percentage of revenue improved meaningfully to 36.7%, down 660 basis points compared to the fourth quarter in 2024. Adjusted EBITDA was $6.6 million, representing 147.1% year-on-year growth with an adjusted EBITDA margin of 10.4%, up nearly 500 basis points versus the prior year. Turning to the balance sheet. We ended the quarter with $92.6 million in cash, a decrease of $25.2 million year-on-year, driven primarily by our share repurchases, which totaled $17.2 million in 2025 for the full year as well as the acquisition of Wisdo. For the full year 2026, we are providing initial guidance as follows: we expect revenue to be in a range of $275 million to $290 million, representing 20% to 27% year-on-year growth. We expect adjusted EBITDA to be in the range of $30 million to $35 million, representing growth of 90% to 122%. Looking back at our 3-year outlook introduced in early 2024 and which extends through this year, we expect to deliver a 3-year revenue CAGR of approximately 23% using the midpoint of our 2026 guidance, which is consistent with the 3-year outlook stated target of 20% to 25%. From a profitability perspective, we anticipate exiting 2026 with EBITDA margins in the mid-teens towards the high end of our 12% to 15% target range from that outlook. I want to share a few points on the underlying assumptions behind our outlook. From a quarterly cadence perspective, we anticipate revenue growing over the course of the year and similar to last year with the first half representing a little less than 50% of annual revenue as active Payor members and sessions grow throughout the year. In terms of our revenue mix, we expect Payor revenue growth to be in line with the Payor growth rate we experienced in 2025, driven by the activation strategies Jon outlined earlier. As we've discussed in the past, the Payor business brings a high degree of visibility given the longer retention of a Payor member compared to someone paying out of pocket and a material portion of our 2026 Payor revenue will actually come from Payor members already on the platform as of year-end 2025. We expect D2E to grow in the low single-digit percentages again this year. As a reminder, the first quarter historically has the highest number of accounts up for renewal and therefore, sees the highest attrition of any quarter in the year. Q4 performance also benefited from certain implementation revenue. So we would expect D2E revenue in Q1 to be sequentially lower than Q4. And finally, Consumer revenue will continue to decline by design. However, it's a much smaller headwind overall given the less material starting point in 2026. While the midpoint of 2026 revenue guidance represents 23% growth year-over-year, our Q4 run rate revenue, which is over $250 million, implies 12% growth at the midpoint. This is thanks to the accelerating growth we drove over the course of 2025. These trends, along with the internal efficiency measures that we continue to implement will drive further operating leverage through the P&L. Specifically, for adjusted EBITDA margins, we anticipate starting the year in the high single-digit percentages and exiting 2026 in the mid-teens, which will result in a similar quarterly cadence of adjusted EBITDA as we saw in 2025. In summary, we believe Talkspace is well positioned for sustainable growth and continued margin expansion, supported by strong momentum in our Payor business, improving operating leverage and increasing visibility into future demand. With that, we'll open the call for questions. Operator? Operator: [Operator Instructions] And we'll take our first question from Steven Dechert. Steven Dechert: Congrats on a solid quarter. Just around your large language model that you're currently in beta testing, what do you see as the key challenges in getting people that are currently using the general purpose large language models using yours as you roll it out? Jon Cohen: Thanks, Steve. This is obviously very much work in progress. As we stated, we're in beta with people registering as we speak to go through that testing of what this thing looks like. Where this thing is positioned as a place to have a serious conversation where your information is protected and where you have both security and safety behind you, I can't tell you yet because it's such early days about what kind of movement we'll have, what kind of people will use this versus the other LLMs. That is just absolutely a work in progress. So my message right now is to stay tuned. We will have a lot more information once we finish the beta. We've seen a little bit early results. But right now, my answer really is to stay tuned and let's just see what happens. It is being -- it will be positioned as somewhat different than the general purpose LLMs. I'm not obviously trying to [indiscernible]. I'm just telling you it's just early days, and we have a lot of interesting information right now, but we're certainly going to talk about it more as the next several months evolve. Steven Dechert: Got it. Yes, totally understand. And Ian, you just mentioned on the '26 guide that most of the revenue is already from members in the platform. So I guess I'm wondering, does the high end of the guide that's from additional new members that aren't currently on the platform? Just maybe what gets us to the high end of the guide said more simply? Ian Harris: Yes. Steve, just to clarify, I think in my prepared remarks, I said a material amount of Payor revenues from existing members on the platform. I want to call that out just because people forget, right, under the Payor model, that sort of longer lifetime on the platform and that's sort of longer tail of revenue allows us from a visibility standpoint to have a much higher level of conviction in terms of modeling out the Payor revenue, right? So as we start Jan 1, it's not a majority, but think of it as 30% to 50% range of our Payor revenue is actually coming from folks we already have on the platform. But in addition to that, obviously, we're going to, to Jon's comments, keep driving both from paid marketing work, additional organic work we're doing on the marketing front, which there's a lot of really exciting LLM sort of optimization work we're doing. And then very importantly, the direct integrations we're doing with the Payors and getting sort of more embedded with the Payors to lower that friction for people that find us through their insurance portal. So that will all drive new users throughout the year as we've done sequentially throughout '25, which then obviously has that long tail of sessions pulling through as well. Operator: We'll take our next question from Ryan MacDonald with Needham. Ryan MacDonald: Congrats on a great quarter. Maybe just to sort of double down on the Directory integrations. Obviously, showing some great success with the first Payor partner that you've rolled that out with. Can you just remind us on sort of how many additional sort of deep integrations you'll have sort of with additional partners this year? And I guess, what have you learned from the first partner that can be replicable to sort of continue that strong utilization with you? Ian Harris: Yes, I can start, and then I'll hand it over to Jon. I mean on the first Payor, like you said, it's been extremely successful. They're happy in so far as they're bringing a much friendlier consumer experience to their members and making it easier and candidly less frustrating, right, that sort of finding your care journey. And we view it as, obviously, from a CAC perspective, very accretive, right, to get that incremental conversion and additional traffic coming from the Payor. So it's early in '26, Ryan. So we're obviously working hard to do more. I would say line of sight we have today, there's probably, depending on how you look at it, call it, 3 directory integrations we're doing in the early part of '26. So for sure, at least 3. I think in terms of what that represents materiality-wise versus one last year, it's probably about similar size all in all, population-wise, maybe a little bit bigger in the aggregate, the 3. So as big or bigger of an opportunity as we saw with the integration in '25. What we're learning is, it's interesting. Some of these directories, it's sort of the first time they're doing these integrations. So we are sort of in this beneficial position where we're working in tandem with them on the design of how the directory works, which obviously gives us a level of influence to sort of shape what that experience looks like from our own knowledge, having done this, right, for a decade as a marketplace business ourselves. So they really appreciate the sort of edification we're able to bring there, but also helps us candidly, in terms of the algorithm, what helps screen providers hire? Is it quality? Is it schedule and sort of how that sort of search algorithm is designed, we sort of have a seat at the table for that. Ryan MacDonald: Really helpful color there, Ian. And then obviously, a lot of the success that you've had in the Payor business to date has been on the commercial side and obviously, in the military. Curious to get your thoughts about sort of the potential opportunity within Medicare sort of in 2026, particularly with CMS rolling out this access program. Is this sort of a potential opportunity to sort of supercharge or sort of fuel deeper Medicare efforts or to drive better utilization there? And are you intending to participate in the program? Jon Cohen: Yes. Thanks for the program. So the answer to that is on the access program is yes. We are acutely aware of the access program. We talked about it. We are -- class, we are -- we have submitted. We want to be part of it. It is outcome-based. We're very comfortable with what an outcome-based model would look like. So the answer to that is yes. We -- also, as you heard me say, we're -- the Wisdo acquisition on Medicare and MA has been very positive and continues to grow. And as we said in the past, we increases. It's been no surprise as I've talked about in the past. It's a relatively difficult market to penetrate only because it's so ubiquitous and it's across all 50 states. But we are making -- let's say we are making progress. But between Wisdo, access program, the stuff we're doing on the ground, we continue to be confident in how it will grow. Operator: We'll move next to Richard Close with Canaccord Genuity. Richard Close: Congratulations on a strong year and outlook. Jon, at the end of your comments, you said something about momentum already here in '26. And I was just curious if you could go a little bit deeper in terms of what you're seeing already through almost 2 months, the basis of that comment? Jon Cohen: I would -- the comment is because at the beginning of the year, it really does somewhat change things because people coming back on, they're looking at the assurances, they're beginning to reengage at a bunch of different levels. But most of what we're gauging everything is people coming on to the platform and doing sessions. So my comment was purposeful that we're continuing as we exit 2025 to see the momentum continue early on in '26. Ian Harris: Yes. And Richard, as you know, we take January as an opportunity to do a bunch of sort of marketing campaigns, right, post holidays, post New Year's resolution season. So a lot of sort of wood behind the ball from a marketing effort standpoint. The momentum Jon is alluding to is just that, right? The checkouts we're seeing, the CAC environment we're seeing, getting in front of folks and all of that's contemplated in the guide, consistent with the guidance. Richard Close: Okay. Second question would be just like overall behavioral health care costs, I know we've talked about this in the past, but I mean, you look at some of the benefit brokers and they cite increased behavioral health as one of the top expenses. And obviously, some of that's inpatient, but outpatient playing a role as well. I'm just curious your conversations with Payors in terms of rising health care costs. And you just did mention with respect to Medicare, you're comfortable with outcomes-based and whatnot. Just curious how you're thinking about potential utilization management or reimbursement changes and just the overall marketplace with respect to behavioral health? Jon Cohen: Yes. I think it's consistent with some prior discussions. We know -- obviously watching what's going on in health care costs, people paying more for their premiums. But remember, the mental health, not just the TAM, the market, but the more people engage in mental health, it actually saves people. As you know, there's a huge amount of data out there already that a good mental health support program saves people on the medical side. So that's one. Number two is the majority of costs that people are looking at to reiterate is really on the in-hospital side and the in-hospital diagnosis. It's really not -- it's not on what we're doing on the outpatient side. The outpatient side of mental health is a very, very small piece of the pie right now for the health care spend nationally. And then we -- some of the other products, when the talk AI agent comes to fruition. It will be a lower cost option. The Payors already know that. So I think there's a lot of positives from what we're doing. But I think that -- I don't think the global or national issues relative to the health care cost should have any impact on us. I just continue to see this to grow because it's actually a win-win for everybody, more people get mental health. Richard Close: As a follow-up to that, do you think your ability to show outcomes and the data that you have is a differentiator where maybe Payors skinny down the number of providers that they're -- or vendors that they're actually utilizing for these services? Jon Cohen: Absolutely. So we already have a couple of early value-based contracts. They're relatively rudimentary, quite honestly. It's time to first appointment, time to second appointment, how many people show up. But -- so all of those things we have in place. So we're very comfortable with anybody almost that comes to us for a value-based arrangement because we already have that in place. And one of the reasons that we are so comfortable because of the network. So the curated network is a really big deal, meaning we monitor -- as you know, we monitor the quality, we look at what therapists are doing. That's really important on a value-based contract because you have to be able to measure outcomes. And to measure outcomes, you got to be able to control the network. You got to be able to look and see what the quality is that's being delivered. So having those -- having all of that in place is really, really important to be able to deliver on a value-based contract. So we're pretty comfortable with all that. Ian Harris: And that dynamic you alluded to, Richard, I think that is exactly what is playing out with the directory dynamics, right? It's no coincidence we're being tapped to do these initial embedded directories. It's a function of years and years of providing them that data exactly as you allude to, the clinical oversight, the QBRs we do with the Payors, the audits. So they're, in some ways, rewarding us in that sort of -- I don't know if you use this phrase, Richard, but narrowing the network a little bit. Clearly, by doing these directories with us, we would expect, as we saw with that one Payor last year to take sort of outsized portion of share of their Payor portal traffic. So it's sort of indirectly them doing exactly what you're hypothesizing. Operator: We'll take our next question from Charles Rhyee with TD Cowen. Charles Rhyee: Jon, I wanted to ask a question, right? You kind of made the comment earlier, right? A lot of people are now seeking out information, but they're not just going to a search engine anymore, right? They're going into ChatGPT or something and asking them. And so you've talked about how do you optimize to be picked up by these LLMs so that people can get directed to you. And it sounds like is this like the new SEO? Like is even search engine optimization as much of a thing? Is it really now how do you optimize to be picked up by LLMs? Because it's something that we've heard from other companies as well more recently. And then connected to that really is, how do you then connect from maybe that kind of initial outreach by patient who is -- a patient who is going through a chat like an LLM or a ChatGPT or something and get them to your AI bot, right, which would be more a protected environment for patients. How do we bridge those 2? Or how do we get them to search you first? Let me just start there. Jon Cohen: Right. So great question. So actually, just -- I don't know if you've seen it, there's an article in New York Times this morning all about search engine optimization through LLMs. And I have talked about this. We have put in place. Our marketing folks have been aware of this for quite some time. So we actually have people who just are working through LLM search strategies so that we do appear on whether it's Gemini or Claude or ChatGPT. So we have been optimizing -- there's another term for it. It's called generic -- I think it's called generative optimization as opposed to SEO. But however, saying that we are not only aware of it that what we put in place mechanisms to make sure that people do find us. And we track it also, by the way. So we have seen this go up month to month to month. People who are finding us on the other LLMs, the number of people, it continues to increase month-to-month. So one, that's what we're doing on the SEO, very comfortable about where we are relative to that strategy. In terms of people finding us is an interesting question because we have not gone to market yet. We do have a fairly fully baked initial marketing plan so that people will find us depending on what they're looking for. Now there's a lot of nuances to that. We don't have time here to probably talk about all that. But meaning are they really looking for therapists? Are they looking to have a serious conversation. There's a lot of different things that people look for. We -- so as I mentioned a couple of minutes ago, our view on this is that if you want to have a serious conversation that's confidential, particularly around relationships or other issues that may be bothering you and your information is protected, if you're protected, and we have significant clinical background, that people will then make a decision about where they will go depending on what they want. We don't -- the answer, of course, is we don't have the answer yet. But we are being positioned. We are -- we'll start off being positioned in a little bit different mode than the others. But the -- I can't even say the jury is out because we haven't gone yet. So we will know more, as I said, once we finish the beta in terms of why people are coming to it, how people are using it, which will be a significant bunch of data points about how we relatively -- how we go to market after that. Ian Harris: We'll have a separate marketing initiatives and budget just for the LLM product, right? So in the guide, there's little to no revenue associated with TalkAI revenue, which, as Jon alluded to, we'll launch this summer publicly. But there'll also be a separate marketing effort there. While we don't historically disclose traffic or conversion numbers on our core platform, suffice it to say, if you just look at even the best-in-breed e-com brands, you can imagine there's a ton of traffic coming to our site who never check out, right? So we actually view based on the research we've done, the TalkAI product is going to be absolutely TAM expansionary for us because there's a lot of people who are curious about therapy, they come, they search. But as you know, it's not sort of a fleeting decision somebody makes just to buy something, right, to enter therapy. So a lot of people actually come to -- and we actually think this is going to capture, I don't want to call it a lower intent, but maybe a group of people who are not quite ready to see a human-to-human therapy session, but are willing to take on sort of this more of a GPT type interface. So we'll have a separate marketing effort around that from a paid standpoint. But I also want to flag just from organic, we think there's a lot of folks coming to our site today who are not monetizing at all that we will retain once we have a TalkAI product. And that -- and this is completely separate from the GEO, the generative engine optimization work, which I would agree with your succinct take. It is sort of like the new frontier for SEO, which honestly, we're benefiting a lot from our historical strength in SEO. And so it's -- as Jon said, it's a small but growing very fast sort of channel for us on the core side. Charles Rhyee: Okay. That's really helpful. And that kind of clarifies some of my thoughts because I was just curious how do you transition people if they're searching through a ChatGPT, but it's -- what you're saying is that the low-hanging fruit is all the people that come to your website already that you want to monetize. So at least you have this initial base, and it seems like people are getting to you in some fashion. My second question, though, is maybe -- have you had any discussions with like a Humana? When we think about the MA opportunity, we've obviously seen now the advanced rate notice for 2027 is actually quite poor, and we're looking at potentially another round of benefit cuts from plans going into -- not this year, but going into next year. Where does behavioral health, do you think in your partners' minds sit in terms of benefits? Is that something that you think they might look to cut back on? Or is this something that you think is pretty safe? Jon Cohen: Yes. I mean if you're alluding to employers, I can't answer you. We have a -- most of that is through... Charles Rhyee: I was thinking about Medicare Advantage for '27 just because of the... Jon Cohen: Yes. Our view right now is that Payors continue to be very interested in what we're offering and MA continues to grow. But we'll continue to talk to whoever is out there. I think that Humana is another whole question about how they're going to approach the market now. But I can't tell you anything more except that we still continue to have interest on the MA side. Operator: We'll take our next question from Bobby Brooks with Northland Capital Markets. Robert Brooks: As we think about how you guys are mapping out driving higher utilization into 2026, what are the 3 or so most important levers you feel you have at your disposal to help drive that? Jon Cohen: Well, no particular order. We've talked at length already about the directory integration. I think you've heard me talk about the change that we made had a very, very significant impact on the number of people that are booking checkouts, booking for session, second and third. That's been a really big [ add ]. And so I think as I talked about before, that's a never-ending journey. There are literally -- you can't believe how many more things you could do to test and to change to make sure that you actually get more people through to the funnel and through the funnel. So that's the second. I would say, again, no particular order, the third is partnerships. You've heard us talk about the growth in both Amazon, Zocdoc and the 20-plus other partners that we've announced. We will continue to lean in on the partnership expansion because a lot of it -- it's beneficial for both the partners and for us to get the referrals. So I would say that those 3 levers, journey, partnership and certainly directories. And probably in a general sense, [ that number ] is just our ongoing relationship with the Payors. Robert Brooks: Got it. And then just curious to hear more on the beta testing of TalkAI. And obviously, it's still early, but wanted to know -- wanted to hear more what's the plan -- like what -- how are you thinking of early plans of commercializing it? Are you -- and maybe are you in any active conversations with kind of the larger LLMs of potentially licensing it? Just trying to get a sense on that. Jon Cohen: Yes. Our go-to-market is to be direct-to-consumer first, which is what we've talked about is the launch and then -- and test all the different models about who's coming, why they're coming, what sort of price point makes sense. So that whole direct-to-consumer is the #1 focus. We are in discussions with multiple -- to be honest, with several other entities about their interest in our LLM. And I would just say just TBD -- but there are other discussions going on with other people. Ian Harris: On the early learnings of the beta, which, call it, a little bit shy of 1,000 users at the moment, we've been -- I don't want to say pleasantly surprised, but it's been really interesting to see just how engaged folks are with the product. And this has been well covered in sort of general reporting on LLMs, but the willingness of people to share with the AI therapy product -- therapeutic product as opposed to a human has been quite astonishing. So very, very, I'd say, promising sort of engagement and retention thus far. And then as Jon said, the intention would be like any sort of product-led growth strategy, start with D2C right, sort of an out-of-pocket revenue model, take the learnings from that and that initial data from those initial cohorts, which will then inform how we would approach it more on the enterprise side, talking to whether that's employers, other large groups. Robert Brooks: That's super helpful. And then just last one for me. Jon, when we were on the road in December, I thought you made a really interesting remark that I think would be good to hear on the call about, obviously, you've had a long career in the medical field and have seen -- have been in kind of a couple of different spaces of it. And you mentioned how another -- in your past slides, you've never seen -- people -- insurance companies are always coming to ask for lower prices, but that's not what you've seen. Could you maybe reiterate that comment? Jon Cohen: Sure. So -- yes, we talked about we expect single-digit increases -- increases in our Payor reimbursements on our fee-for-service. So we are negotiating. We are going back with them. There are several coming up where we'll look for small increased rates. What you're alluding to is, yes, the prior industries where I've been, whether it's physician networks, hospital, ERGs, laboratories, it's usually the reverse. They're usually looking for how much less they're going to pay you. It just turns out that the mental health space is something that the Payors really, really continue to be interested in promoting and supporting relative to their relationship with the employers and their employees. So because we are, as I said, not just available, accessible, but an affordable option for them and significantly scalable, we remain very attractive to the Payors, so -- which, as Ian alluded to, which is why the partnerships and everything else are really, really important to us. So the long-winded answer to, yes, I'm very happy that we get increased rates. It's a bit of a surprise to me. Operator: We'll move next to Steven Valiquette with Mizuho Securities. Steven Valiquette: A couple of questions here. First on the '26 revenue guidance, obviously coming in pretty strong versus the high end of the range that you targeted 3 years ago. I guess, are you able to provide any color or just remind us roughly how much revenue you're expecting from Wisdo in '26? I'm just trying to get a sense for just rough approximation for like the organic versus the inorganic growth this year. I'll let you answer that one first, and I'll ask the follow-up after that. Ian Harris: Steve, yes, we haven't broken out Wisdo separately. It will show up depending on the type of contract, most likely in D2E or the Payor lines of business and to a lesser extent, a little bit of the consumer there. So it's embedded in the 3 business lines we report out. I would think of it if you're -- I understand the question sort of inorganic benefit from them. It's fairly modest, so single-digit millions contribution for '26. Steven Valiquette: Okay. Got it. Okay. And then yes, the next question here. I guess with the industry environment rapidly moving right now, which you kind of alluded to, not just in relation to AI, but other factors as well. Does this increase your appetite and/or need to look at additional external assets or possibly do additional tuck-in acquisitions this year? I know it's always hard to answer those questions, but I guess the question would be, are you well positioned the way you think you are right now with your own enhancements on the internally developed TalkAI agent and recent Wisdo addition. But I just wanted to get your sense for that. Ian Harris: Yes. No, we appreciate the question. I mean, certainly, we have the wherewithal to do more tuck-ins, right? We ended the year with almost $93 million of cash and equivalents on the balance sheet. I would say, given we just did the Wisdo acquisition, we want to make sure that's a successful outcome. It's the first tuck-in we've done in a number of years and for this management team, our first. So our main priority is to make sure that one is successful. I would say the excitement and resources and attention that we're dedicating to the TalkAI project is very substantive. And so the sort of de novo organic internal developed growth opportunities is probably where I would -- if I had to bet, we'll spend most of the time. So nothing immediate in terms of our portfolio that feels like a gaping hole that we need to address inorganically. I would say we feel very good about the hand we have today sort of already under our roof. And then as you know, just on that cash point, we bought back $17 million of stock in 2025, still have a very good amount of capacity under our existing buyback program. So in terms of uses of cash, that's another one. We obviously have that sort of arrow in our quiver for '26. Jon Cohen: Yes. I would add that on the -- it's an interesting question you have there on the TalkAI and even all of our other AI initiatives to improve the business and patient journey. Just as a reminder that Talkspace has been around 14 years and it's always been an innovative company quite honestly. I mean, it was -- they did most of the original work for texting and messaging and then got approval for that. So when we made the decision to further invest in AI initiatives, again, just to remind you, the company reported out AI risk algorithms back in 2018 and 2019. So this -- the reason I bring that up is we have a fair degree of significant expertise on the inside relative to our ability to do this kind of work. Obviously, you don't have everything and you go outside and you get other people to help on a consulting basis, whatever you need. But the core Talkspace technology capability is very, very high. Operator: We'll take our next question from Peter Warendorf with Barclays. Peter Warendorf: Just curious, given the anticipated growth this year, if you guys are comfortable with the size of the provider network as it is right now? And if there are any specific pockets that you feel like you might need to address? Ian Harris: Peter, the short answer is yes. We feel very good about it. We actually -- Jon had some notes in his prepared remarks about what we call the curated network. So we're actively pruning, engaging, trying to activate. And I think it was, maybe Bobby's question, sort of the rank ordering of how we're activating folks. One of the indirect components of that, which I think is not as obvious because really on the supply side is making sure we're engaging the network to have adequate availability such that when someone comes in and they want a certain day at a certain time, a certain type of therapists, we have that, right? And there's a lot of creative ways we're working on the product to make sure we're capturing that sort of consumer intent in real time. So short answer is we feel very good about where it is. It will grow here and there. It's very specific state by state. If we add a big partner with a certain type of population, do we need to ramp up hiring there? We've had numerous examples where our recruiting team has proven again and again, they're very effective and very nimble in ramping up supply when and if needed. But as sort of a run rate basis, we feel very good about where we are. The one area I would flag which we grew quite a bit in 2025 was on the psych side. So Jon talked about it as one of the more exciting sort of newer service offerings for us, psych. And what we mean by that is really medication management has been a very small-ish, but very fast-growing component of our Payor business. And so you'll see, I think in our 10-K, we ramped up our provider network on the psych side quite a bit in '25. Peter Warendorf: Got it. Okay. And then one quick one on the consumer side. The DTC revenue obviously is becoming a smaller headwind every year. But just curious how much of that you guys think you're capturing elsewhere on the Payor side of the business as that revenue kind of continues to fade away? Ian Harris: Yes. I would say most of it we capture. I mean, as you go through the registration flow, we make it pretty unavoidable for a prospective consumer -- prospective member, I should say, to not share with us your insurance info. So we very much lead with that intent to capture you on the Payor side. Now that said, there's always for whatever reason, the long -- small tail folks we don't cover or they just rather pay out of pocket for whatever reason. There is always that option. But we surmise we're capturing most of that consumer attrition. And then, yes, to your point, it will be less of a headwind on a dollar basis in '26, just given the smaller starting point in the year. So quickly becoming sort of more and more immaterial. Operator: And that does conclude the Q&A portion of today's call. And this also brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect. Goodbye.
Operator: Good day, and thank you for standing by. Welcome to the Mastech Digital Fourth Quarter 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, Jenna Lacey, Manager of Legal Affairs for Mastech Digital. Please go ahead. Jennifer Lacey: Thank you, operator, and welcome to Mastech Digital's Fourth Quarter and Full Year 2025 Conference Call. If you have not yet received a copy of our earnings announcement, it can be obtained from our website at www.mastechdigital.com. With me on the call today are Nirav Patel, Mastech Digital's Chief Executive Officer; and Kannan Sugantharaman, our Chief Financial and Operations Officer. I would like to remind everyone that statements made during this call that are not historical facts are forward-looking statements. These forward-looking statements include our financial growth and liquidity projections as well as statements about our plans, strategies, intentions and beliefs concerning the business, cash flows, costs and the markets in which we operate. Without limiting the foregoing, the words believes, anticipates, plans, expects and similar expressions are intended to identify certain forward-looking statements. These statements are based on information currently available to us, and we assume no obligation to update these statements as circumstances change. There are risks and uncertainties that could cause actual events to differ materially from these forward-looking statements, including those listed in the company's 2024 annual report on Form 10-K filed with the Securities and Exchange Commission and available on its website at www.sec.gov. Additionally, management has elected to provide certain non-GAAP financial measures to supplement our financial results presented on a GAAP basis. Specifically, we will provide non-GAAP net income and non-GAAP diluted earnings per share data, which we believe will provide greater transparency with respect to the key metrics used by management in operating the business. Reconciliations of these non-GAAP financial measures to their comparable GAAP measures are included in our earnings announcement, which can be obtained from our website at www.mastechdigital.com. As a reminder, we will not be providing guidance during this call nor will we provide guidance in any subsequent one-on-one meetings or calls. I will now turn the call over to Nirav for his comments. Nirav Patel: Thanks, Jenna. Good morning, everyone. Thank you for joining us today as we review our fourth quarter and full year 2025 results. When I started in 2025 as CEO, I set 3 transformation priorities: mobilizing our leadership team; establishing clarity on where we are headed; and moving our organization towards that direction. We believe we have made meaningful progress across each of these priorities. The market backdrop remained challenging throughout 2025. Clients remain cautious with their technology budgets while pushing their modernization agenda as best as they could through prudent discretionary spending. Despite this environment and the revenue pressures that accompanied it, we delivered stable margins in Q4 and the full year. We believe this outcome reflects deliberate choices around stronger pricing discipline, tighter operational controls and a focus on revenue quality. Beyond financial discipline, we believe we also took meaningful strides in establishing the foundational layer for our core capabilities. We expanded our data platform build and scale-up, moving our relationship with GCP and Snowflake to the next level alongside our established Informatica partnership that we announced earlier in the year. We also established our industry solutions practice where we are building AI-powered industry-led workflows as we help companies reimagine themselves in an AI-first world, whether they are accelerating with AI, transforming with AI or reimagining with AI. Now let me provide you a brief summary of our segment performance. In our IT Staffing Services segment, revenues during the fourth quarter of 2025 declined 7% year-over-year, while headcount fell 16.7%, underscoring our focus on higher-value work and improved revenue quality. Kannan will provide more color on this in his remarks. Despite these volume pressures, we believe our business continued to perform well operationally even with the seasonal impact we typically face in Q4 from the holiday season. We achieved our highest ever average bill rates at $87.32, reflecting our disciplined approach to pricing and our emphasis on higher-value engagements, and we are increasingly positioning our staffing consultants, not just as capacity, but as enablers of our clients' AI modernization journey. In our Data and Analytics Services segment, revenues for the fourth quarter of 2025 declined 24% year-over-year, largely due to backlog reversal from some of our 2024 engagements and reflecting a challenging comparison against the results in the second half of last year. However, we saw strong bookings activity during the fourth quarter of 2025, up nearly 37% over the same period last year, driven by strong renewals, which we believe reflects our customers' confidence in our ability to continue delivering value for them. We believe the market is at a crossroad. We are seeing traditional business models being disrupted by AI, and this disruption is accelerating as leading AI hyperscalers like OpenAI and Anthropic become more enterprise focused. To survive and thrive in this environment, we believe companies with strong fundamentals and forward-leaning leadership that can quickly pivot to the new will build a more sustainable moat over the long run. There is an open canvas to invest in, and we intend to position ourselves to capture that demand as it materializes. 2025 was a foundational year. As we look ahead, we believe 2026 will be a year of execution. We are seeing the strategic actions we took last year, putting us in a position of strength as we implement our vision to build an AI-first services company. We have 3 clear priorities for 2026: to deliver long-term sustainable growth; unlock substantial value for our customers; and invest in building truly differentiated capabilities to win in the future. We believe we are entering 2026 with clarity on our direction, conviction in our strategy and confidence in our ability to execute and win in the market. As I've said from day 1, growth is only meaningful when it is sustainable and profitable. We intend to drive efficiency across the organization, operate with accountability and ensure that every investment we make creates lasting value for our customers, employees and shareholders. With that, let me turn it over to Kannan to walk through the financials. Kannan Sugantharaman: Thanks, Nirav. Good morning, everyone. I will now discuss our fourth quarter and full year financial results. During the fourth quarter, we delivered consolidated revenue of $45.5 million, a year-over-year decrease of 10.4% as compared to the prior period. Our IT Services segment -- IT Staffing Services segment delivered revenue of $37.7 million, 7% lower than the prior year period. As Nirav noted, our focus on revenue quality resulted in all-time high Mastech bill rates at $87.32, though our billable consultant base declined by 168 consultants since the fourth quarter of 2024, a 16.7% decline that was largely concentrated towards the last 2 weeks of the quarter. The decline was driven largely by 2 main factors: first, a notable impact driven by in-sourcing from one of our top 10 customers, a strategy they implemented in Q4 consistently across all vendors, which has impacted us as well. We expect the impact of this to continue through the first half of 2026. The second, our focus on quality of revenue and high-margin deals has resulted in us consciously exiting nonstrategic staffing positions. Our Data and Analytics Services segment reported revenue of $7.8 million, a decrease of 24% as compared to the prior year period, largely due to backlog reversal from some of our 2024 engagements. Fourth quarter bookings totaled $11.3 million as compared to bookings of $8.2 million in the prior year after accounting for project reversals of $2.8 million in Q4 of '24. Gross profit totaled $12.9 million, representing a decline of 12.5% compared to the same period last year. Gross margin decreased by 70 basis points relative to the fourth quarter of 2024. Although both segments individually showed improved performance in Q4 '25 versus Q4 '24, the overall margin was impacted primarily by changes in business mix and a reduced share of revenue from the Data and Analytics Services segment compared to the prior year period. GAAP net income was $1 million or $0.08 per diluted share compared to a net income of $0.3 million or $0.02 per diluted share in the prior year period. We incurred $0.7 million in severance and finance and accounting transition costs during the fourth quarter of 2025 as compared to $2.1 million in the fourth quarter of 2024, which was -- which are reflected in the year-on-year increase in GAAP net income. Non-GAAP net income was $2.5 million or $0.21 per diluted share compared to $2.8 million or $0.23 per diluted share in the prior year period. Full year 2025 -- for the full year 2025, we delivered consolidated revenue of $191.4 million, a year-over-year decrease of 3.8% compared to the prior year period. Our IT Staffing Services segment delivered revenue of $158.1 million or 2.6% lower than the prior year period. Our Data and Analytics Services segment reported revenue of $33.3 million, a decrease of 9.1% as compared to the prior year period. Gross profit of $53.1 million was a decrease of 4.6% as compared to the prior year period. Gross margins remained flat year-on-year, largely driven by decreases in revenue of our Data and Analytics Services segment. GAAP net income was $0.6 million or $0.05 per diluted share compared to a net income of $3.4 million or $0.28 per diluted share in the prior year period. As we had previously discussed, we expected to incur transition and severance costs that would impact near-term reported financial results. We incurred $5 million in severance and finance and accounting transition costs during 2025 as compared to $2.1 million during 2024, which are reflected in the year-on-year decline in GAAP net income. Non-GAAP net income was $8.6 million or $0.72 per diluted share compared to $8.6 million or $0.71 per diluted share in the prior year period. This was a year where we fundamentally reimagined how we operate. We didn't just talk about transformation, we acted on it. The EDGE initiative, Efficiencies Driving Growth and Expansion, which we launched in Q3 of 2025, has begun reshaping our cost structure, sharpening our resource allocation and freeing up investment capacity for the capabilities that we believe will define our competitive advantage in the years to come. We maintained positive momentum on EDGE during the fourth quarter as we continued focusing on optimizing our organization and the operating model. We now believe EDGE has created the capacity we need to invest in execution in 2026, in our offerings, in our go-to-market strategies, in our leadership and to fuel sustainable value creation as we become an AI-first organization ourselves. SG&A expense items not included in non-GAAP financial measures, net of tax benefits are detailed in our fourth quarter 2025 earnings release for the periods presented, which are available in our website. Our financial position. During the fourth quarter of 2025, our liquidity and overall financial position remained solid. On December 31, 2025, we had $36.5 million cash balances on hand, no bank debt outstanding and cash availability of $19.9 million under our revolving credit facility. Our days sales outstanding measurement on 31st December 2025 was 54 days, which is well within our target range and in line with our DSO measurement a year ago. During the fourth quarter, we repurchased approximately $0.7 million worth of Mastek common stock at an average price of $7.2 per share. For the full year, we repurchased approximately $2.2 million worth of Mastek common stock at an average price of $7.49 per share. At the end of the fourth quarter, we had approximately 123,556 shares available under our previously announced share repurchase program that expired on February 8, 2026. Finally, I am pleased to share that our Board of Directors has authorized a new share purchase program effective February 16, 2026. Under this program, the company is now authorized to repurchase shares of the company's common stock up to an aggregate value of $5 million. We believe this authorization underscores the Board's confidence in our strategy and the trajectory of our business. We also believe our strong financial position enables us to enhance shareholder value while continuing to invest for sustained growth. Operator, this concludes our prepared remarks. We will now open the line for questions. Operator: [Operator Instructions] And our first question comes from Lisa Thompson at Zacks Investment Research. Lisa Thompson: So I have a few little questions, and then I just want you to go over the big strategy for this year and next. First off, what did you end the quarter with how many consultants? Kannan Sugantharaman: So we ended our headcount for December at billable headcount 8-4-0, 840 billable consultants in IT staffing services as of December '25. Lisa Thompson: And how many employees do you have in total now? Kannan Sugantharaman: 1,488 as of December '25. Lisa Thompson: Right. So first question is, are we done with onetime expenses and severance or no? Kannan Sugantharaman: Our finance and accounting transition is complete. So there are no more of transition costs that we are likely to incur. And in most cases, most of our severances are already done with respect to the reorg that we had done. So we don't expect anything more material or significant to hit us in the future. Lisa Thompson: Great. So now that you've had some time to implement all your cost cutting, how much more do you think you're going to be saving in 2026 versus what you spent in 2025, excluding all the onetime stuff? Kannan Sugantharaman: Right. So let me explain that in terms of the overall program of EDGE, right? So the idea was efficiencies that drove growth and expansion. That program, which was focused on driving quality of revenue, process simplification and automation and disciplined self-management was effectively to unlock capacity for investment, which we believe most of them has already gone in and has been delivered as of Q4. There were 2 tracks, efficiency to free capacity and the growth to reinvest. So our efficiencies, we were focused on cost optimization, diagnostics, process simplification, operational excellence, rationalization of our contracts and so on. And Q3 '25 actions continue to have positive impact in Q4 of '25. But one of the major milestones in Q4 '25 was the completion of, of course, the finance transition, right? Our growth, our focus on enhancing talent, competency building and market expansion, we are now starting to invest a lot more on some of those elements. We now have the senior leadership team in place for our AI and analytics solution, and we are beginning to start traction in there. And we are also hiring leaders in the banking and financial services domain to target new logos in this space. So we see multiple levers playing a part in the transformation journey, and we are hoping that all of these will fill in seamlessly as we reinvest and reorient for growth in 2026. So look at 2025 as the laying foundation year, 2026 as the year of execution and investment where in Q1 of 2026, we will start disproportionately investing in our offerings, in our go-to-market strategy and in our leadership. Lisa? Lisa Thompson: Okay. All right. So what are your -- what's the grand plans for 2026 and 2027? Are you looking to increase revenues or increase profits? Or what's the plan for this year? And then what do you think you'll come out of this year looking at 2027 like? Nirav Patel: Lisa, this is Nirav. Let me take that question. So look, I think growth is paramount for us. And all that we began last year from a strategy and sort of a transformation standpoint was to serve that single most purpose of driving growth for us. And everything that we are doing around EDGE, reorganizing ourselves towards more of a new way of working with AI and then preparing the capability organization and partnerships to scale in that area, right? So where we are right now, right? We believe now we have kind of a clarity of thought on 3 fundamental questions, in my opinion. Who we serve, what we serve and last, how we serve. And we have identified a few industry segments that we would like to focus and double down on, particularly in spaces like health sciences, financial services and also retail and consumer markets because those tend to be right now continuing to be somewhat disrupted, but also providing a backdrop of an opportunity for us to offer multi-scale growth in that. We also want to try to refocus our energies on targeting what I call the Global 2000 customers so that we are working with the largest of the customers that define the market. So to me, I feel that who we serve addresses that. And when we talk about what we serve to them, we want to try and offer a suite of offerings that help companies reimagine themselves in an AI-first world. I mean, needless to say, the world is quickly trying to modernize themselves with all things AI. And so depending on where they are in the journey, I think clearly, there is a huge, what I call, pilot to scale gap where more and more companies are sort of no longer looking at pilots, but are accelerating their path to scaling up AI adoptions in their organizations. And those offerings are very central for us. We have to build the core capabilities that we think we can -- allows us to win in that future. And finally, I would say on that, transforming them with AI, accelerating with AI and reimagining with AI are the set of kind of offerings that I feel our clients find a lot more resonating today as well as in the future. And how we serve is really all about our commercial and delivery model. I think we have reoriented ourselves. We began that journey doing that last year, where we are relooking at how we organize ourselves commercially from a go-to-market standpoint, but more importantly, drive a delivery excellence and delivery model to reorient ourselves to suit our customers. So we are disproportionately investing in our people and preparing the organization to be AI-ready. And I think that the direction going forward between '26 as well as in 2027 is all around the pivot to the new and driving what I call a somewhat of a credible moat for us in the company that can deliver sustainable growth. Sorry for this, a little bit of a long answer, but Lisa, this was important to understand how we are reshaping ourselves internally to prepare for the future. Lisa Thompson: Yes. So given the environment out there for using IT consulting and staffing, can you grow this year? Or is the market just not going to cooperate? Nirav Patel: I think if I kind of talk about the market trends, right, the macro backdrop continues to be volatile. Let's be clear on that. We are operating in an environment where kind of geopolitics, macroeconomics are driving what I call significant changes across trade, regulatory frameworks and other areas that impact enterprise decision-making, right? Historically, the effects of these types of policy shifts usually takes a quarter or 2 to fully reflect in your client spending behaviors and IT budget decisions. What we are trying to do is to stay extremely focused and stay close to our, what I call, the biggest of the customers we serve to assess how many of these macro elements are impacting them. And so hence, try to gauge about where we think we are going to go as a direction with our clients we have today. As it relates to our top customers, this becomes a very important point. That said, I think so far in Q1 and the discussions that we have been having as the new year has been taken off, we haven't seen any like a radical shift or a pressure that really concerns us. I mean we are seeing reasonable confidence from our clients and a continued focus on modernization and accelerating that journey. I mean this is something they really want to push forward through 2026. While near-term visibility remains limited, which is consistent with what we have been seeing in the market, the underlying demand drivers haven't weakened to say the least. Our clients still need to move forward, and I think we are well positioned to help them do that. Operator: And our next question comes from Marc Riddick of Sidoti. Marc Riddick: I wanted to touch on first with the consultant count reduction, sort of how that sort of plays into SG&A levels. Is it -- can you talk a little bit about maybe the timing of that? And does the SG&A level for, say, the fourth quarter, is that a reasonable quarterly run rate that we should be looking at? Or how should we think about SG&A levels and sort of how that tracks to EDGE program efforts? Kannan Sugantharaman: Yes. So I think from an EDGE program, we have been able to achieve the efficiencies that we want thus far. So what you're seeing in our Q4, I would say, is reasonably efficient in our mind. But what, Marc, as I was talking and explaining, the EDGE has 2 parts to it, right? There is an efficiency part and there is the investment part. And from Q1 onwards, we do plan to have outsized investments that we are making on the talent and enhancing talent, competency building and the overall market expansion in the AI and the analytics space, right? So that's what we intend to do at this point in time is to double down on some of those investments and making ourselves ready to capture the market, especially in the space that Nirav explained. Marc? Marc Riddick: Okay. Great. And then maybe we could shift gears and go toward the bill rate improvements there and maybe sort of talk a bit about some of the things that you're seeing there and sort of the potential upside that may take place, whether it's ongoing pricing discipline or the like. Kannan Sugantharaman: Sure. No. As you would have seen in what I spoke in my script, right, our headcount reduced 16.7%, but our revenues dropped only by 7%, right? And that's the factor of our focus on the quality of revenue, right? We were deliberate in choosing better margin projects with higher bill rates over low-margin staffing, and you will see that reflected in our average bill rate going up to $87.32, right? And we believe the strategy has helped us so far. And expanded the kind of work that we do with our customers. And we intend to continue with this while also focusing on expanding our current relationships and creating new pipeline for the staffing business. Marc? Marc Riddick: Okay. And then also, I think in your prepared remarks, you made commentary around booking trends versus a year ago period as you were exiting Q4. Can you talk a little bit about that and maybe put some numbers on sort of where those were and maybe as an offshoot from that, what you're seeing with different client verticals, maybe what might be driving that? Kannan Sugantharaman: Yes. And Nirav, you can chime in as required. But as we explained in the last quarter, there has been a good uptick with respect to our overall bookings. As I said in the prepared remarks. Our bookings is north of $11 million that we had closed for the Q4 as against 8.2 million that was after the project reversal. That's $11.3 million is what we closed. And at this time, our demand is largely broad-based, Marc. We have made inroads this past quarter with our health care customers, our financial services customers, our consumer clients and are also actively pursuing large transformation initiatives and opportunities across these industries. So that's been our bookings. So we have been pretty encouraged by what we saw in Q4. Nirav Patel: And if I can just add to what Kannan said, Marc, Nirav here. I think, look, the -- I think the bookings really reflect to me a couple of things, right? One is renewals give me a very, very strong belief that our customers continue to find us relevant. So today, the way I think about it is our strength in our Q4 bookings largely came from a significant amount of renewals that customers got back to us in reinforcing that, hey, we would like to continue to work with us. And so to me, that definitely is a very strong signal in the way you think about renewals securing that. Now what that also does and the second point that I was wanting to say is that it actually presents us a platform and a play in many of these customers to go aggressively and help them with the AI pivot. So if I were to go build a lot of these new capabilities that we are already on our way to go scale them up, these renewals give me a renewed sense of confidence for our commercial organizations and teams to say, hey, we want to go back to the same financial services clients. We want to go back to the same retailers that we work with as our customers. And that's probably the best thing an organization can do when your macro backdrop and the market volatility continues is to somewhat centrally stay focused back on the customers you have and serve them more deeply. So I think to me, this is a huge win for us in some form to really secure that levels of confidence from our clients in Q4 and gives me a sense of optimism in the way we think we can possibly shape 2026 with new bookings and new deals that we can scale up into these accounts. Marc Riddick: Great. And then last one for me, and I'm certainly encouraged to see the authorization announcement. That certainly is a positive signal. I was wondering if you could talk a little bit about one of the other benefits that we saw was improved cash. I think we're just $36.5 million of cash at the end of the year. How should we think about other cash usage prioritization potentially beyond EDGE, I guess, I mean, and maybe how you think about the potential for either M&A activity or appetite and thoughts on what valuations you may be seeing out there if you are inclined to consider those? Kannan Sugantharaman: Yes. No, thanks for that, Marc. And yes, the company has had generated a very good and strong cash flows, especially driven by solid operating cash generation, low capital expenditures. This performance reflects largely, in my mind, significant improvement in working capital particularly in receivables and accrued liabilities, which helped offset some of the transition costs that we had on finance and account -- reorganization and the structural optimization that we did. And we continue to manage cash conservatively with absolutely no debt in our balance sheet yet. And we are looking to optimally use this for our strategic priorities. Of course, one part of that is about the continued share repurchase program, but a larger part of it necessarily is going to be on the invest part, right? So as we look to invest on partnership, as we look to invest on capabilities and when there is an opportunity to also be acquisitive, those are all opportunities we are looking at to optimally invest the cash in our balance sheet. So that is exactly what we are trying to do as part of the EDGE program, and that is what we will do as part of our continued investment program, investment in terms of capabilities, in terms of our people, in terms of talent acquisition and into making sure that we have the appropriate partnerships and the capabilities driven either organically or when there is an opportunity to also go inorganic about it. Operator: [Operator Instructions] I'm showing no further questions at this time. I'd like to turn it back to Nirav Patel for closing remarks. Nirav Patel: Thank you, operator. If there are no further questions, I would like to thank you for joining our call today, and we look forward to sharing our first quarter 2026 results with you in May. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Paul Flynn: Good morning all. Thanks very much for taking the time to join us for the Half Year Results for FY '26 for Whitehaven. I'm joined here, as usual, by our CFO, Kevin Ball; and our COO, Ian Humphris, and we'll work our way through the presentation highlights as usual and then get ourselves to across for the Q&A section of today's format. Over the page, I should bring your attention to our disclaimer as usual. We do have forward-looking statements in these presentations as a matter of course. So I'll bring that to your attention for the obvious reasons. I'll move over to the highlights, and I'll start by saying, look, the company, as you know, for those who have been following the quarters, we've had a good first half year. We've laid out a pretty solid foundation for our first half of the year and sets us well up for the second half. Now I'll start with a couple of these important highlights, which we always do with safety and our compliance. Safety has been very good at TRIFR 2.9. Now we all know that moves around month-to-month a little bit here. And we finished the year at 4.6, but at 2.9 that is an excellent result. So all kudos to the team for looking after our people and making sure we're on this pathway to minimizing instances and injuries in our business. Now we all know also that it's been a wet 6 months in various states. And so despite that, our compliance has been very good. So we had no enforcement action events at all during the last 6 months, which has been very positive for us also. So again, kudos to the team for keeping that up despite some weather variation, particularly in Queensland, which we'll talk to a little bit later. Over to the highlights. The operational performance has been good. As you know, 20 million tonnes has been a very nice way to set a platform for the second half of the year. Queensland at 10.3, New South Wales at 9.7, both very good results. Equity sales of 12.8 million tonnes has been strong. So that's very positive, lower than first half last year, but of course, Blackwater is now 70% of our numbers on an equity basis rather than 100%. At a group level, we've averaged a price of AUD 189 per tonne, which includes AUD 212 for Queensland and AUD 168 for New South Wales. Our cost base has done very well. So $135 per tonne as we alluded to obviously in the quarter. That is now a confirmed number, as you would expect. So we can talk a little bit about that and the fact that we feel that there's upside in that also. Revenue of AUD 2.5 billion, 54% metallurgical coal, 46% thermal. Thermal being a strong component of the sales mix in the first half, and we can talk a little bit further about that in a moment. The underlying EBITDA for the half $446 million was actually a pretty good result. We have recorded an underlying net loss for the period of $19 million, and the statutory net profit after tax is actually $69 million, and Kevin will go through a bridge that helps you walk your way from one to the other shortly. We are in a good position. The balance sheet is in good shape, and the market has actually improved since Q1 and Q2 and have come to a conclusion. So the board has seen fit to declare a dividend, an interim dividend of $0.04 fully franked per share. And we're also going to commit up to $32 million of a buyback of equal value over the next 6 months. And now, of course, those who are doing the math will work out that, that when you consider on a whole year basis, which we do when we calculate the payout ratio, given that we're seeing better market conditions in the second half, we're likely, based on where things are pointing, to be at the top, if not slightly over the payout ratio, just given the fact that we are clearing the dividend at a point when technically, the policy says, we don't have NPAT and therefore, we don't pay a dividend, but we're doing that based on our confidence in the balance sheet strength and also obviously, the underlying market improvement that we're seeing. Now just to go over that market, those market conditions, if I could, for a little bit. As I said, Queensland average revenue of $212 has softened. New South Wales softened also an average of AUD 168 for our revenues out of New South Wales. The average for PLV across the period, $192. So that certainly started lower and has improved. So we did finish $212 for the end of the half, which is a positive side to see. The new price also did a similar sort of thing with average $108, but it vary between $104 and $112 for the period. And we have seen since the half year end an improvement on both sides of things. Now It's not streaking ahead. We saw some -- perhaps some frothiness as a result of weather-related activities in Queensland. So the PLV spiked up to 250 and has eased since then, but these numbers are both much better than what we've seen over the last 6 months. So that is very positive for us. Supply/demand feels pretty good. Our customers are wanting the coal, and so there's no concerns on our side at all in terms of moving our valuable product. So it's nice to see customers taking option tonnes as well. I'll look over on to the next page and look at the benefits of the enlarged group and the diversification of our markets and our products. It looks pretty good. 93% of our revenues is actually in Asia, which is no surprise, I'm sure to everybody, but you'll see a concentration of markets there in Japan, India, South Korea and Malaysia around out the top 4 of our revenue, but more generally, it's the right place to be from a growth of coal consumption perspective. And so we're well positioned to take advantage of that. As I said there, the metallurgical coal and thermal coal mix being 54%, 46%, respectively, a little bit lower on the met coal side in the 6 months just because we did have some very good coal production at Narrabri, as you know. And so that put a bit more coal into the first half for the thermal side of the equation. And that will balance out in the second half. So -- but it's certainly very positive and feel like we've laid a strong platform for the second half. Speaking of recurring slides, this slide, I want to move over to the underlying supply-demand outlook for both the thermal and the met with the high CV thermal and met. No change in our position there. This gives us confidence that we should continue to push forward and grow and invest, acknowledging that we do have structural shortfalls on both sides of our business. So that's a very positive, but nothing that we can see points to any change in that dynamic at all. Moving over to operational results. These numbers, I know you've all seen by virtue of the quarters that have gone before. But for those who haven't been watching this closely, as I say, we've rounded out a very good result for the year. So ROM 20 million tonnes, 10.3 million tonnes, 10.4 million tonnes, if you look at the slide with the rounding, for Queensland, 9.7 million tonnes for New South Wales. The sales actually, as I say, we had a change in our mix there just in this half because of strong New South Wales sales. So sales in New South Wales, 8.5 million tonnes versus Queensland 7.8 million tonnes. So that does change the mix a little bit for you, but that explains the 54% of met coal revenues just in the 6 months, as I say, the second half we'll see that turnaround. But overall, managed sales of 6.2 million tonnes is a good start to the year. Queensland, as I mentioned, excuse the rounding, it's 10.3 million tonnes as opposed to sum of those 2, which is 10.4 million tonnes, but we're very pleased with the results there. Blackwater at 7.3 million tonnes, good result and Daunia at 3.1 million tonnes. And these are all in the context of what's been a wet start to the year. So I think looking at those numbers, that's a solid beginning for this financial year. That's not to say New South Wales didn't have some weather either, it did. So I think that's very, very interesting given that Narrabri has had a very good contribution to the total numbers of 9.74 million tonnes in New South Wales, kind of their open cuts are doing what they need to do. Maules. Maules has a higher proportion back end to the second half of the year than we have in the first half. We're making great efforts to try and smooth that out month-to-month, but we do have a little bit more tonnes coming in the second half than we do in the first. And as a result, we've got a little bit of a skewing there. Otherwise, we're happy with the cost reductions, we'll speak to as well, but we're well on track to deliver our $60 million to $80 million out of the business by the year-end. And overall, we feel pretty confident about where we've been and how we set ourselves up for the second half of the year. So with that, I'll hand over to Kevin, who will deal with the financial side of things. Kevin Ball: Thanks, Paul. So I'm over on Slide 15, and it's the EBITDA bridge from half 1 FY '25 to half 1 FY '26. And not surprisingly, this tells me what happened, which is really prices were soft. So a $35 margin or a $35 reduction in price, together with the volumes that we saw when we sold the 30% of Blackwater out of the quarter contributes to the $505 million or $552 million decrease in sales volume and price. Costs, $2 a tonne, $2.50, I think it rounded down to $2, better. So we had a few headwinds in the costs in the first half, mainly from queuing at all the ports. So we had a strong build of low-cost production in December. So that should come out in the second half. And they've masked the underlying improved cost performance and held the cost improvement to that couple of dollars a tonne. So in half 1 '26, we reported an underlying EBITDA of $446 million. And I think what I see out of this is that calendar year '25 was the cyclical low that we've seen in the market, and that's, as Paul alluded to, an improving price scenario in the second half of FY '26. If I take you over the page, you can see the segment result between New South Wales and Queensland and reconciling to the group. On a revenue basis, met coal prices were a bit softer in the half than thermal coal. So Queensland contributed $1.3 billion in the half, which was 52% of overall revenues. New South Wales and thermal coal prices recovered a little earlier than the met coal prices. And so New South Wales had 48% of revenue or 1.15%. The half year EBITDA contribution from Queensland of $248 million showed the effect of those lower coal prices, while New South Wales delivered $215 million in EBITDA. In Queensland, with acquisition accounting, attributing a large proportion of the acquisition value of the property, plant and equipment, the depreciation charge in Queensland was $147 million, while there's also $36 million of amortization. Those -- the fixed depreciation costs at this low part in the coal price cycle have an outsized impact on NPAT at this point. So better prices and that impact will be lower. Underlying net finance expense of $135 million, it largely reflects the interest on the $1.1 billion term loan that we used to complete the acquisition of Blackwater and Daunia. But as we say, we're planning on refinancing that debt in this half. And then there's a small income tax benefit of about $6 million, which you'd expect of the $25 million underlying loss before tax. If I take over the page on costs, I'm going to say I'm pleased with the costs in the first half given the headwinds that we had in terms of weather and ports. I'm pleased, and I think Paul is going to talk about the $60 million to $80 million that's coming in cost outs, and we're across that. But at a group level, we realized an average price of $189 a tonne for our sales. And those tonnes that we sold cost us $135 to produce. We paid both governments an average of $20. It was a bit more in Queensland, a bit less in New South Wales. But in Queensland, the low point in the cycle, that average royalty rate was about 10.6%, while in New South Wales, it's around the 10% level. If I look at where we're up to in the first half, we're tracking at the bottom end of guidance. So that's a good thing. That $135 is the bottom end of guidance between $130 and $145. And as I said before, costs in the half unfavorably impacted by higher vessel queues in all ports for a portion of the half year and strong production levels in Q2 meant that low-cost production was held in coal stocks at 31 December. We also have a little impact here by the higher percentage of sales from New South Wales on previously and impact marginally because we had less blackwater tonnes in the sales mix this quarter because of the 30% sell-down. So margins in the half to December were 34%, which is about half the margin we earned in half 1 FY '25, but it's just consistent with the coal price environment. Moving forward, we have a new above rail haulage contract kicking in, in July. So we expect to save $3 a tonne around that. And we're continuing to accelerate the amortization of additional charges at NCIB to accelerate the amortization of debt, and we should see that fix itself late in this decade. Turn the page, and I'm sure everyone wants to understand how we get from an underlying net loss after tax of $19 million to a statutory net profit after tax of $66 million -- or $69 million rather. So we reported $446 million of underlying EBITDA in the half, which is an improvement on half 2 FY '25, which you would have seen in the previous slide. Group D&A, $336 million, outsized relative to EBITDA, but that's to be expected given the coal price period we've come through. And an underlying finance expense, we've talked about $135 million, and we can give you the breakup of that in some slides in the back -- in the appendix to this pack, which you've got. The nonrecurring items totaled $88 million. The largest portion of that was when we reset the deferred contingent expectation of what we're going to pay BMA as a result of the price movement. And I think in there as well, there's a $34 million technical tax accounting around derecognition of deferred tax liabilities relating to exploration as part of the sell-down. Sure, if you want to ask me questions about that outside of time, that would be lovely. Net debt. I got to say I'm really pleased with this. We came through this half really well, I think. The capital allocation framework really helps us in this process. If you look at us, we've spent $157 million on CapEx. So we're sustaining the business. So we maintain the productive capacity of the business through the bottom of the cycle. We returned $93 million to shareholders in the form of buyback and dividends, and we spent $39 million on other investing, which is really a little bit around the rare earth side of the world. And we finished the net debt balance at 31 December '25 at $710 million. On any view, when we turn the next page, you'll see that Whitehaven's balance sheet is particularly strong. So we have strong balance sheet, low levels of gearing, about 11%, a low level of leverage on a trailing basis about 0.8 at the bottom of the cycle, which is really good. And we kept $1.5 billion of liquidity to ensure that there was no doubt that we could comfortably meet our obligations. We've been saying this for a while. Since we sold down Blackwater, we've kept the cash reserve to meet that second payment to BMA. So the $500 million that's going to be paid on the 2nd of April is sitting on deposit. And the coal price contingent payment structure associated with that acquisition has been working as intended. We paid $9 million to BMA in July. And we're -- at the current moment, I'd say the number that we owe calculated is about USD 20 million, but it's lifting in this quarter with rising prices. But thanks. We're working to refinance our $1.1 billion acquisition facility, and we're just looking to lower costs. When you look at how the company is positioned, it's a really strong credit, probably one of the best coal credits around. But the finance acquisition was a piece that we put in place. Now we want to put that in with a piece of debt that fits the quality that we have. So let me hand back to Paul for the remaining of the slides. Paul Flynn: Thanks, Kevin. Just back to the cost side of things again, as Kevin was saying, and we said earlier, we feel confident we're going to be able to deliver our $60 million to $80 million in savings by year-end. This just gives you a little bit of color in terms of where we're finding the opportunities within the business. Being split state to state, we think there's going to be about 60-40 more or less if I divide it between the 2 states, and that slides back a little bit because all parts of the business have to contribute, not just the sites, but obviously the offices as well. And so we are finding opportunities across all areas there. Just to give you a bit of color, obviously, the organizational structures of the business continue to be aligned to a Whitehaven model. So we're seeing changes there in the operating model as we drive consistency across the business between the various operations. We're seeing upside in terms of maintenance strategies across our larger assets in particular, with obviously there is a big level of mechanical intensity there. And obviously, there's a lot of money being spent on maintenance. So there is that is fertile ground in terms of optimizing that. In New South Wales, we have been moving equipment around to make sure that the implement is best deployed in the space where it can be best utilized, tire lines and things like that, we're certainly seeing the opportunities for improvements there. Some sites, there's good transfer of knowledge between sites in terms of how we're doing well with tires on some sites and benefiting others. And of course, there's a major contracting arrangements are being reset and adjusted as a result of the opportunity, not just with scale, but also just the parts that we've inherited, we're changing those as we go along. And so we feel that we're in good shape to be able to deliver on our commitment here for $60 million to $80 million by the financial year-end. Now I'll turn over to slide, which is entitled the Queensland 5-year FOB cost test, that's adjusted for inflation. And this is really a commitment we made to you that we would go back. As you would imagine, we should in any event, which we have been doing, which is an acquisition of this size or post-implementation review should be done, and this has been part of that. So we knew all along that the estimates we put out at the time of the acquisition, obviously, were based on the work we were capable of doing during the due diligence phase, which generally has worked well and little surprises have come out of it. So quality work was done. But inflation has done its ugly work for the business. So we've called that out. And we said that we were going to adjust it at this half year and reset these numbers, which we are now doing. So definitely, when we've gone back and looked at purchase price indices and obviously, wage inflation indices, there's about $10 in that. So coming off the $120 average base, if you like, for what we gave you as the 5-year averages at the time of the acquisition. You should add $10 in there in terms of inflation. And the learnings and observations that we've made since, as I say, in that post-acquisition review, there are a number of observations that we can see that have changed the cost base. And I'll divide them, if I can, into temporary and then permanent matters. So I'll go through the bullet points that we've got there, but I'll firstly deal with the temporary ones. As you all know, we are definitely working hard to reinstate a comfortable level of stripped inventory that we feel like we should have in order to run at a higher degree of operation. Now we've been producing higher than what the mine has historically been doing in more recent years. So we are consuming the stripped overburden in advance at a higher rate. So this is going to take us a little bit longer than expected to do that. This is a high-quality problem, I have to say. But until we get to that point where we're satisfied that we have an inventory of strip ground enabling the efficient deployment of draglines and obviously, the elimination of downtime where it's been parked up because the bench is not ready, we will continue to have this effect in our business. And relatedly, with that, there's a higher degree of rehandle that goes with the dragline fleet whilst we're in that situation. So that is a feature which we'll have for a little while yet to go. Look, the other thing we've observed, and that is just part of experience now, we certainly observed the backlog of maintenance that's needed to be done. And so the major shutdowns for the big influence, so the draglines and shovels in particular at Blackwater have certainly featured, and it's important work and obviously not work you can do with any great detail. You can review the records and so on shutdowns and things in the DD phase, but we found that we we've needed to put some more money into that. And there are other examples of that. The crest wall say, for instance, we had to do quite a bit of work on them to ensure that utilization has improved. It has improved dramatically, which is very good, but that has required some work to get that fleet into the right shape and fit for purpose. The AHS isn't -- we had assumed a better level of productivity from AHS at the time of the acquisition. It's not there yet. And so we are working with CAT on that, and we are pushing hard to ensure that we can get to a level of satisfaction with the productivity across the autonomous fleet that we think it should be. Now those -- the summary of those ones, those 4 features I've just mentioned, they are the temporary ones. A couple of which are permanent more in nature. The same job, same pay, that is definitely an adjustment. That was obviously occurring at the time of the acquisition. And so we weren't able to size that. Now we have embedded that in our business now. Sadly, the cost of labor is going up as a result of all that, as everybody well knows. So that is influential in our cost base as is the higher level of demurrage, in particular, out of Daunia, but certainly Blackwater as well. The Queensland logistics chain does not work with the efficiency that we're accustomed to in New South Wales. I'm sure no one likes me here say that if you're a Queenslander, but that is a fact. And so the assumptions on demurrage have been adjusted accordingly. Now the cost base, $135 that we've talked about, very happy with that. Even given, as Kevin mentioned, the delays in ports and shipping and logistics in Queensland, in particular, that $135 does include a couple of extra bucks there just for those influences, which should unwind -- that part of it should unwind. But the reality is demurrage is going to be higher than we budgeted for in Queensland. So those are the 2 permanent ones I want to call out, the preceding were temporary in nature and will be alleviated as we continue to drive. So as a result of all of that, we're now giving you a range. I reset that range, '24 to '28. Obviously, there's only a few more years left in this of $140 to $145. Now we've been doing well on cost outs, as everybody understands with the business since we've acquired it, and we're only 6 or 7 weeks away from crossing the second anniversary. So I feel like we're making really good progress there, and we get ourselves down to $140 million in this period, I think that would be an excellent, an excellent outcome. That's not to say we stop trying because, as I say, the first 4 aspects of that I've mentioned are temporary. We consider those to be temporary in nature. And so we'll continue to push and drive greater productivity and lower costs as a result. Now over to capital allocation framework. Nothing new there for you in encompassed in this. So this has served us well. And we feel confident that even in this instance, so again, if you were to apply this framework sluggishly, then we wouldn't be paying a dividend because we have an underlying net loss, minor as it is, it is one. However, reflecting the balance sheet strength that we have and the improving market environment that we're experiencing, we feel confident that to recommend to our Board that we pay a modest dividend, and the Board has accepted that proposition and declared the $0.04, as we mentioned earlier. So $0.04 fully franked is a modest dividend, reflective of the fact that we come through the bottom of the cycle, but paying a dividend through a period that represents the outcomes from the bottom of the cycle, I think, is a very good outcome. And of course, we're aligning that with an equal sum of our buyback over the next 6 months, up to $32 million with a total of $64 million in dividends and buybacks out of the first 6 months, which, again, I think is a solid result. And over to guidance. Look, you can see we're tracking well in our guidance. Certainly, ROM targets to do 20 million tonnes in the first half. The upper end of our group guidance there, obviously, at the managed level is 41 million tonne. We would dearly like to make sure we can get close to that, if not surpass it. So we feel like we're in good shape. The challenge there, of course, is, of course, weather, and that's the major caveat. But otherwise, we feel we're in decent shape. The last quarter, you saw a run rate of 11 million tonnes in the quarter. We're carrying that momentum into the new quarter. So it's nice to see things moving along, which is very positive. The costs, as I mentioned earlier, and as Kevin spoke about, we've seen good progress on the cost side of things. And $135 out of the half that was weather affected and had some extra costs in it, I think, is really good. And we can see when -- month-to-month when we're doing the sales volumes that we -- and production volumes that we expect, we can see the upside associated with that. And so we feel positive that we can drive our costs down to the lower end of the range if we hit that top end of the ROM production. And so we feel pretty good about that. CapEx, as is our way, we're spending a little bit less than we -- the range we've given you. So at $157 million for the 6 months. I'm sure there will be a little bit of extra capital will come out in the second 6 months as people want to finish up projects and so on. But we're tracking obviously to the bottom of that range. And so again, that is reflecting a bit of history, I suppose. But the conservatism that we brought into our guidance will continue to apply. But overall, no change to our guidance. And moreover, we're tracking to the right end of the top end, and we're tracking to the lower end of costs, which is very positive. So overall, good solid 6 months, and we're looking forward to the second half. So I think we're in decent shape. So with that, I might hand back to the operator, and we can get some questions going. Operator: [Operator Instructions] Your first question comes from Dan Roden with Jefferies. Daniel Roden: Just wanted to probably kick it off with the potential refi of the $1.1 billion term loan. Can you remind us what the time line is with the non-call approaching? And I guess, do you have any revised expectations around the 10.5% in the current period? What cost do you think is -- or what rate do you think is realistic kind of when you are looking at refining that and what gating items for lenders would you expect, I guess, the considered important factors? Kevin Ball: Paul just pointed to me, Dan, so I'm the guy, I guess, to answer that one. We're well down this path, and we've been working on this for probably 6 or 8 months, to be honest with you, in anticipation of the first call period that's about the 12th of March. Expectations are we'll refinance this out before 30 June. And I think I said on the last call that if we had a 7 handle in front of it, I'd probably be okay. If I had a 6 handle in front of it, I'd be delighted. And I don't think my expectations have changed. Markets are improving. The ESG -- the benefit in Whitehaven Coal of having half the business in met coal or over half the business in met coal is really helpful when it comes to this financing and the structure of the financing lends itself to using those assets for that security and providing those funding. So Dan, my expectation is said, if it starts with a 6, I'll be delighted. If it has a 7, I'll probably be disappointed, but it's still 300 basis points cheaper than what we're currently paying on 1.1, which is USD 30 million to USD 40 million in savings. So that's the program. Daniel Roden: Yes, definitely. And maybe a quick follow-up, like if -- I guess if you -- are you seeing the market are supportive around those rates at the moment? Like you're obviously confident you can get something close to that. But if you aren't getting something close to that, how do you think about, I guess, paying down debt in terms of the capital management framework? Do you pay down debt more aggressively I guess, rates higher or if you don't aren't able to refi the debt like in half 2 when you are restructuring? Kevin Ball: I think I'd answer that question by saying this. I mean, in the back of the capital allocation framework, you'll see that we're talking about a BB+ rating. We're an organization that's had conservative credit metrics. In fact, the credit metrics we run are typically -- you classify them as investment grade. So we really are at the top end. We're at the top end of the high-yield piece or we're at the bottom end of the investment-grade piece. And if you talk to your debt guys, they'll tell you what that rate should be even with a coal premium attached to it. I wouldn't -- I'm not really in the conversation at the moment about entertaining a discussion around not being successful in that because I don't think that's helpful. And I don't think it's realistic either to be honest with you. We've had a number, several many inbound inquiries about helping out financing. And it feels like that ESG overlay that existed maybe 4 or 5 years ago is abating. It hasn't disappeared, but it's less than it previously was. Daniel Roden: And I might just ask on, I guess, the unit cost guidance as well, and I'm sure there'll be a lot of follow-ups on this. So I might just keep to my 2 questions and hand it over. But just with kind of outlines the '24 to '28 cost guidance at 10 to 15 on top of that. That's the new expectation. But just trying to unpack like you mentioned the kind of rate that we've had at the moment in the Queensland assets is around $140. Some of the historical costs there kind of become a bit obfuscated just in terms of the reporting structure. So I just wanted to very clearly articulate like what the expectation is on those Queensland assets over like, I guess, into half 2, '26 and then '27, '28, like what cost rate are you expecting in the Queensland assets? Paul Flynn: Yes. Thanks, Dan. Yes, look, what we are obviously highlighting today is the resetting of those 5-year averages based on what we can see the inflation. So what we are seeing for those Queensland assets is an average of $140 to $145. That is what we explicitly are saying. And so that obviously -- and you can do the math in terms of how our numbers have been looking for the first -- almost the first 2 years of our operations. Obviously, there's no surprise you can get our segment name, you can pull that apart. And so you can see that there's still cost upside in this business. And based on the things that we've highlighted that we feel are temporary that are keeping a little higher than where it should be, we think we can continue to pressure this down. So say, for instance, you get to the bottom end of that range at $140, I think that's a very good outcome in this context given the inflationary impacts that we've seen. And so the problem with this is that inflationary impacts can abate. They don't -- you never get that cost out of your business from the labor perspective in the first instance. So you can -- you do see inflation rise and fall on services for sure. But once baked into your cost base from the labor side of things and in addition to same job, same pay, you're never going to get rid of that. And so that is a problem and something that we need to work on from a productivity perspective. But yes, explicitly, that's what we're saying, $140 to $145 for Queensland. I think that is just reflective of the reality that we've inherited. As I say, I've tried to divide that up into temporary impacts versus ones that are baked in. And hopefully, that's useful for you all in terms of your calculations for Queensland assets. Daniel Roden: Yes. And then I was more trying to get a trajectory on that. You obviously talked about the strip ratio and impacts were transitory. I guess kind of coming out, maybe asking in a different way, when you come out of that guidance range, would you be expecting the costs are higher or lower than that $140, $145 range? Paul Flynn: Yes. Dan, you're going to have to hand this over to someone. But just to answer your question here, we're not giving guidance past that point. And so we'll deal with that on an annual basis once we're outside this acquisition, the remnants of this acquisition data that we gave you 2 years ago. Operator: Your next question is from Chen Jiang with Bank of America. Chen Jiang: Maybe first question to Kevin about your buyback. So your original buyback program of $72 million, you only have $4 million buyback left from that original program announced. And today, you announced $32 million buyback to match with the interim dividend. So is that fair to say actually, you added incremental buyback of $28 million in addition to your original $72 million? Paul Flynn: Chen, this has been a pain for a number of years. It's just the way in which the legislation comes. So what we've done now is we've said each half, we will tell you what the buyback is up to what that amount is going to be, and then we will close the buyback from the previous. So you should think that $72 million is dead, never to come back alive again and the $48 million is never to come back alive again, and then the $32 million will be the buyback for the next 6 months up to that number. And we're just trying to make this a lot easier for people to work their way -- work it in their models. Chen Jiang: Okay. So every 6 months, you will have some sort of number... Paul Flynn: Yes, that's right. The problem is the regulator gets a bit confused about this. And so that's why we've had to close a buyback, the previous chapter of buyback and open a new one. And so that's what we're going to have to do in order to assist people in avoiding confusion as to is there some tail that was unexpended during that period? Is that going to be added to this? Unfortunately, just the way the regulation works, it's needed to just close it off and then announce the next one. And then at the end of that period, then you have to say whether we did or didn't extend it all, but you'll close that one and then open a new one. Chen Jiang: Sure. That's very clear. I mean your previous buyback of that $72 million is almost completed. So anyway, -- and then just -- yes, yes, 94% completed. Yes. And then if I can have a follow-up on the cost, please. I understand it's an average of the 5 years. But looking at FY '24, FY '25, even FY '26, I guess, those Queensland costs much higher, right? So it's like $147 million or $145 million. So take an average, how should we think about this? I mean, is that like FY '27, FY '28 should be averaged down to get that $140 million, $145 million? Or the way to think is FY '27, FY '28 should be the range of $140 million to $145 million? Paul Flynn: Yes. Look, I think, Chen, as you would have expected with the first range we gave you and now with the reset, the higher cost period is the early years as we're getting our hands around things. And then you would expect us to continue to improve through that 5-year period. And so obviously, we're a couple of years in now. So we've got essentially 3 more to get within this range. And we feel like we feel confident we can do that. But yes, I would imagine the end, so the FY '28 period is going to be the cheaper, if I can say, the lower cost period. And obviously, first year of our operation being the higher. So the same philosophy applies to this new range that we've given you. Chen Jiang: Right. So averaging kind of averaging down in the 5-year... Paul Flynn: Yes, more expensive in the early years, cheaper in the later years, for sure. Operator: Our next question is from Paul Young with Goldman Sachs. Paul Young: First question again on these Queensland medium-term costs. There's really no real surprise here, I guess, from an inflation standpoint. And also, the operations are doing well, but not as well as you expected at the time of acquisition. But one thing you haven't mentioned here is actually it's all about moving dirt and coal and actually what the production assumptions are. So if you go back to the time of acquisition, I think you were forecasting that Blackwater would get to around 15 million tonnes of ROM on a 100% basis, and I think Daunia at 6 million. Are you still -- do you still think that's achievable? Or -- I mean, by the way, the Street doesn't have those numbers, Paul. So the Street is shy of that. So just curious around the volumes because ultimately, the unit costs are just a function of obviously, production. Paul Flynn: Yes, yes. It's a good point, Paul. Thank you. Yes. The reason why we didn't change it because we actually feel good about the physical side of things, and we've been saying that along the way. We're making good progress. The numbers you just recounted, we feel good about those numbers. So we've got a couple of years to get to it. Daunia has been doing well and is approaching those numbers, as you can see already. So that's very nice. Blackwater, obviously, is a bigger ship and requires a little bit more time to allow the benefits of the initiatives we put in place to turn around. But the physical side of things, we actually haven't been concerned about. It's just once we bought it, of course, we were able to lift the hood, look in a more detailed fashion. We can see the temporary things that we've got to deal with. So we feel positive about that. We're not disappointed about it. Obviously, the revenue assumptions that we used to justify the acquisition were obviously much less than the prices even you've seen today. And so from a valuation perspective, we feel very good about the acquisition and what it's been able to do for our shareholders. But overall, the physical, we feel good about, and we're just going to continue to drive these costs down. Paul Young: Yes. Understood. No, that makes sense. And then moving to New South Wales. And can I ask about Vickery again? I mean you talk about structural deficits from thermal coal. Vickery has been, I guess, shovel already or I know you guys are still working through the capital estimates. And so if you can remind me where you're at with that. But also just on the formal process, have you -- is there a formal process? I know you've had open and it's closed previously, but where you at with that? And then also with the new rail contract, does it make room for the larger Vickery project? Paul Flynn: Yes. Okay. Look, Vickery -- first, Vickery is fully approved, just to remind everybody, fully approved. The only official parts that are remaining of that is obviously FID. And so that's obviously manageable internally completely. So the Board is -- given that we've just come through the bottom of the cycle, we're not minded to address that in the next 6 to 12 months. But we are doing lots of work in the background on funding for Vickery. So that's important to us because lots of people have expressed interest in us bringing that forward. And we said to them, fine, we're not going to take all the risk. You've got to help us with it if you want the coal, which I think is the right thing posture for us to take. So we've had interesting inbound inquiries on the sales side. We've had interesting inbound inquiries on the infrastructure side. People want to help us build and operate that. So I think that's really -- that will be -- an extra 6 to 12 months is actually really interesting to see how we can bottom all that and obviously minimize the funding ask from the cash flows of the business. So that all looks pretty good. The rail contract is a really interesting reset. I mean that obviously was a product of a 10-year contract, and you only get that opportunity once to come along every 10 years. So we've taken it. The $3 we've mentioned to you per tonne is actually on the New South Wales business. So on a group basis, that's $1.50 of the cost base from 1 July onwards, just to be clear. So that's very, very positive. And in fact, we've actually started the process in Queensland as well because there is a renewal up there in another 18 months' time, more or less. So interested to see where that goes. But the question on Vickery, it does cater for. We've got upside potential for the tonnes. Now we haven't contracted those tonnes. So just to be clear, we've gone from being long above rail to matched, if not slightly short, with surge capacity attached to it. So we flipped this on its head nicely. So we're not carrying any extra cost in the business for above rail. And so -- but we have upside opportunity with both the haulage providers that are in place there to be able to add the Vickery tonnes as required. Operator: Your next question is from Rob Stein with Macquarie. Robert Stein: First 1 on the dividend. The $0.04 per share, does that obviously heavily borrows from what you're expecting to pay in next half. How should we think about the decision around the next half in terms of your capital allocation framework and sticking to that payout ratio? Are we still to expect that payout ratio to apply, i.e., we can deduct the next half's dividend, our expectations versus this half? Paul Flynn: Yes. Rob, look, we don't feel like we're borrowing from the next half. The balance sheet is in really good shape. So we feel like the capacity exists already from what we've been able to do. Now the fact if we're just purely following the calculation basis in our framework, because we're paying a dividend at a period when we record a loss, then reasonable expectations would say based on even pricing today that you're going to generate significantly more cash today than -- and through this next 6 months than we have in the first half. So all things being equal, there will be obviously this discussion in 6 months' time about the divi and there will be a reasonable divi. And most permutations that we've looked at says that you're probably going to be over the 60% of NPAT level simply by the fact you paid a divi in the first half when there was no NPAT. That's just a calculation outcome. But we're not taking now from what we think should be we're expecting to derive from operations in the second half. Prices obviously stay even if they -- even as if we were seeing them soften a little bit off the [ $250 ] down to the [ $220 ]. So March is about [ $220, $225 ]. I think in terms of looking at the outlook. Those numbers are much better than what we've experienced over the first 6 months. So cash generation has been good. We've seen good production in December. We've seen that good production following the momentum into January. Cash generation has been solid. So it's very good to see, and we feel like we'll be able to continue to make a second half decision around dividends when the time comes. Robert Stein: Okay. So consider it more as for want of a better word, a special allocation rather than a shifting in time period allocation, you're going to take an independent decision in the second half. Paul Flynn: No, we don't consider special -- that's not a characterization we would give it either. Obviously, the framework we set up, we want to be paying dividends through the cycle. The fact that we actually can after we just experienced the bottom of the cycle, I think is excellent. So I don't consider it's special, but the payout ratio is calculated on a whole year basis, just to be clear. Robert Stein: Cool. Okay. And then just on the -- probably the key topic of today, the Queensland cost guidance. Just to try to get a bit of a feeling for FX impacts on that cost guidance if FX were to hang at current levels or potentially even strengthen, what -- how should we think about the cost sensitivity of this number to that? Paul Flynn: Yes. Look, not much, I'll have to say because by and large, there are a couple of exceptions, as you can imagine. By and large, we're an Aussie dollar cost base business. And so currency affects the revenue line, affects our interest costs. To a degree, it affects the coal price itself and oil, but that's it. The rest of it is Aussie dollar based. Operator: Your next question is from Lyndon Fagan with JPMorgan. Lyndon Fagan: Paul, obviously, a lot of focus on the Queensland cost, but wondering if you're willing to share a medium-term outlook for the New South Wales business. I mean there is a number in the mid-120s around the ballpark. Paul Flynn: Thanks, Lyndon. Someone was bound to ask that wasn't. It was always going to happen. But look, I think we all understand the history why we have these 5-year averages for the acquisition. It's just because you've never seen these assets before because they're obviously consolidated within the broader BMA unit and no one got to see them. So we needed to give you something, so you could -- something that you could use. So we did that. Once we're outside of this 5-year period in those averages, we plan to go back to the normal guidance setting ratios that we have, which New South Wales is indicative of. And so no, we won't be doing that. But New South Wales has done very well. I thought you're going to go and point to another area, so you didn't, so I'll do it myself. The cost in New South Wales has been good. And production -- when you have Narrabri spinning out lots of tonnes, everybody knows Narrabri are our cheapest tonnes. And so when Narrabri production is good, the average costs do well. And so we feel pretty good about that and production continues to go well there. And we are reviewing our costs in New South Wales as we have been in Queensland. And we are finding savings there as well. And that's outside the resetting of the above rail haulage contract we just referred to. So that is positive. Kevin Ball: And if you don't mind, I'll step in and say, I think if you look at the New South Wales business, you've got a pretty strong contribution from Narrabri. You've got an underweighted contribution from Maules Creek relative to the year, and you've got a pretty strong contribution from the Gunnedah open cuts who are performing well, but they're probably our highest cost operations. So there's a few moving parts in how you assemble the New South Wales costs. And if you look forward over time, to that earlier question about Vickery, Vickery in its bigger form will help drive cost down in the business. So it's a bit difficult to give you that conversation. I think you need to almost deconstruct it and then reconstruct it based on volumes to contribute. Lyndon Fagan: No worries. I suspected I wasn't really going to get an answer. But I just thought I'd ask about the met coal outlook. We've obviously lost a little bit on the hard coking coal price. I'm just wondering whether -- how you're feeling about the sort of current market tightness and near-term outlook? Paul Flynn: Yes. Look, the market -- the underlying market has been pretty good. And when I say underlying, our interactions with customers, the demand has been good and people chasing our coal, which is nice. Obviously, prices took a bit of a leap there based on concerns around weather and so on and supply side constraints. We understand in the Bowen Basin there's still people dealing with a lot of water in their pits. And so whilst we have water too, we did manage ourselves very well through that rain. And so we're not seeing any of the impact -- negative impacts as a result of that, that are material to our guidance for the year. So we're in good shape. But there is some supply side constraint in Queensland. Now there have been a few -- there's been obviously with a few more tonnes coming on to the market as a result of a couple of mines, underground mines, Centurion has just restarted. So I think a little bit of excitement around that has tempered the price outlook for March and April. So for instance, if we're going to see some tonnes start to emerge from these restarted operations. So I think that sort of weighed on that a little bit. So I think the spot is down to what, 2 40 or somewhere around there. March is around 2 20, 2 25, somewhere in that region. So -- but these sort of much better numbers than where we've obviously been for the last 6 months. So we welcome all of it. But the underlying conversation with our customers, they want more tonnes. So we're keen to try and satisfy those needs. Operator: Your next question is from Lachlan Shah with... Lachlan Shaw: Two questions. First one, just on the Queensland costs. We've covered it at length. I wanted to just unpack a little bit though. So you have used language extended period of higher dragline rehandle. Is that to the end of FY '28? And I suppose part of that then is from FY '28, is there more do you think that you can kind of pull out of these assets here? Or is the FY '28 baseline to get your 5-year average to $145, is that FY '28 endpoint then the appropriate sort of jump-off point beyond that? And I'll come back with my second. Paul Flynn: Yes. Good. Thanks. The challenge there for us is that we -- as you know, we put more capacity into the pre-strip fleet to try and make up this ground, and that's been going well. But now you've got the draglines chasing down the pre-strip fleet. So that is -- that's, again, a good quality problem, but it is going to take longer to get ourselves. And as we increase production, which we have been, the inventory also needs to increase. And so that's just the slightly circular dynamic we find ourselves in. So yes, I think for another couple of years, we're going to be doing that. And so that brings us into the end of this outlook period. But that's taken into account... Lachlan Shaw: Okay. Yes. Yes. Okay. And so the inference is then FY '28 is sort of the appropriate jumping off point beyond that? Or is there more do you think that you sort of look at that far and think, okay, what more can we do? Paul Flynn: No, I think that you should take that as a jumping off point because if we want to expand materially further post them, we'll tell you. It's really just about volume. We obviously want -- as I said earlier, we feel good about the physical volumes in terms of the 5-year outlook. So if we want to go bigger than that, that will require some capital. And that will be a different conversation we'll have with you at the time. Lachlan Shaw: Great. That's helpful. And then my second question, so I just wanted to talk to met coal pricing and realizations, I guess, just interested in your perspectives at the moment. We're seeing a bit of disruption in the U.S. met coal market in terms of high-vol A, high-vol B widening to mid-vol hard coking coal. And then obviously, there's been sort of, I suppose, slightly soft recent mid-vol prices out of Queensland, too. What are you seeing in terms of the different markets across the met coal quality fraction? And how do you sort of anticipate that to impact realizations for you guys going forward? Paul Flynn: Yes. What we're seeing at the moment -- look, we all observe the ups and downs of the market. We see what you've just described. Obviously, we're generally playing in the low to mid-vol space, if I can use the U.S. vernacular. But generally, our products are all low vol other than the ones out of New South Wales if we're talking about semi-soft out of Maules or Tarra. The annoying part for us really is just trying to drag up realizations for the lower 2 products, if I can call them secondary products, the semi-soft and the PCI. The relativities of PLV to low vol, I think that's okay, but we would like to see improvements, and we're pushing our negotiations hard to improve the realizations for our semisoft, say, for instance, that's really important to Blackwater. And so pushing that hard in a market where steelmakers are struggling a bit. That's not an easy conversation. But the fact that we've got a couple of important steelmakers in our tent now, that helps them understand, obviously, the economics of the project itself. But then again, they got the tricky balance of the external market that they face for their product. So of all the things, I'd like to see a bit more of improvement in those realizations. That would be my question. Operator: comes from Glyn Lawcock with Barrenjoey. Glyn Lawcock: Paul, I'm going to try and ask Queensland costs in another way. So if I heard you correctly, you want to jump off in '28 at $140, and that is a real number in December '25. So you've given us today $10 inflation over the last 2.5 years, your jump-off point is 2.5 years from now. Do you think we should be thinking about another $10 inflation adjustment over the next 2.5 years? Just what's your sense inflation? So do we actually jump off in June '28 at $150 adjusted for inflation? Paul Flynn: Yes, that's a really good question, Glyn. We haven't assumed in our calculations that we would go through a similar period of inflation. Now obviously, that's a very topical question on a macroeconomic sort of level or political level in this country at the moment. We're not seeing inflation. I don't think we should assume the same is my bottom line here. The labor inflation that we've seen over the last 2 years has been quite extraordinary. Now I don't expect that's going to continue at the same way. Our EA negotiations that we -- that we're undertaking at the moment are reflective of a more realistic market where the industry is struggling a little bit and some players are really struggling. And so job losses have occurred. And so that's -- that inflation, at least at the EA level is better. Now having said that, our own personal or company-specific experience during that period was also affected by the fact that we've just grown -- we've just doubled and people's jobs had grown as well. So the amount of out-of-cycle remuneration changes that we saw during that period isn't indicative of where we're going to go going forward. And so that's settled down. But -- and generally on the supplier side, so on the PPI side of things, Jeff, that has moderated slightly. So I don't think we should be assuming the same -- a replication of the same period over the last 2.5 years. I don't think we should. Glyn Lawcock: Yes. And I saw the federal government just mean now health cover is going up 4-plus percent. So I don't think that matches inflation, but that's another discussion. But if I even take 2.5% inflation, right, I mean that's $3.50 a year. I mean that's 2.5 years, that means I'm up for about $8 a tonne increase just at an average 2.5% inflation rate. Paul Flynn: Yes. If you -- I understand the math. If you did nothing else, then that would -- that's that math... Glyn Lawcock: I guess I'm just trying to understand, can you fight inflation on top of everything else you're fighting just to get down to the 1 40, the nonpermanent issues you're dealing with. I think that gets you down to 1 40. But now I was just wondering if you've got other levers to combat inflation. I guess... Paul Flynn: That's why I called out the temporary components of it because those are the areas where we really can work, same job, same pay, labor cost. The only way to deal with labor costs have less labor, right? And so that's a challenge. We need a certain amount of people to man all the equipment we've got. And of course, we need to use it more productively, and we're striving to do that. But those -- the 4 areas we mentioned are ones we're working on because we certainly believe that we can alleviate some of the pressure we've seen on that in recent times. But it's a constant battle with inflation, as you know. Glyn Lawcock: Yes, sure. And then just on the balance sheet, I mean, you call out net debt $700 million, but that's going to double on the 2nd of April when you pay your next installment to BMA. Are you still comfortable with like a $1.4 billion in net debt, which you will jump up to next time you report? Paul Flynn: I don't expect it will jump to $1.4 billion at the next time we report. I think what you're missing in that conversation is what's the cash that gets generated between now and 30 June. So by the time -- no, let me finish. By the time you do that, I think where you get to is probably of an EBITDA number that I think Visible Alpha has about 1.3 or 1.4, Kylie, around there, then I think you're probably, again, 0.8-ish sort of leverage would be sort of where I expect it's going to fall. And those metrics, Glyn, as I said, what I want to draw out is really when we talk about our capital allocation framework, it's a business that has -- operates on investment-grade credit metrics, perhaps not yet at the scale needed to be investment grade, but has those metrics in it and is firmly in the high end of the subinvestment-grade debt. So from a business, we don't want to run a business that's completely unlevered. That's not the intention. And so we think we've got a pretty -- a capital allocation framework that drives a pretty prudent, conservative level of leverage and level of gearing in the business and -- yes. Glyn Lawcock: Yes. Sorry, I should have said pro forma as you pay it today. But no, you're right, you will generate a fair bit of cash if prices stay where they are by 30 June. So noes, but happy to hear you explain how you're happy to run with a bit of leverage. Operator: Your next question is from Chris Creech with Morgans. Christopher Creech: Just 2 quick questions for you, if you wouldn't mind. Paul, you spoke before about potential expansion of Blackwater sort of into the future. But I see that the sort of Blackwater North extension project was withdrawn in November last year. I know that sort of BMA submitted that. So is it more about you sort of wanting to optimize how you proceed with Blackwater? Or was there something else that sort of drove that withdrawal of that sort of project? Paul Flynn: I'll try and answer that as best I can. Chris. Look, we've got -- that site can grow substantially. We are in the approvals process for the expansion of the northern area of Blackwater. So -- but don't forget there wasn't -- there was actually an approval request put in place for a broader expansion to the South. And that obviously covered what we call Blackwater South. And there's obviously a significant area there, which has anywhere between 50 and 100 years of coal still in that southern region. So we have 2 areas, if you like, in terms of what we can do for incremental expansion over and above the improvement in the existing footprint of operational pits. So the northern area, as I say, that's currently on foot with our approvals processes. The southern area, BHP did lodge an application there, and we're looking at that very closely in terms of what we think is the Whitehaven version of that same future. The expansion I was referring to isn't actually about either of those. It's just actually about us thinking we can get more tonnes out of the existing footprint. that's operational today. And so there's plenty of ground, which is open at Blackwater, which has been left at different times in history when prices were low. Now those prices, obviously there is no resemblance to even the low prices today. And so a lot of those areas are capable of going back in relatively quickly to get back in and get extra tonnes. And so our view is we can get more out of what we've got even before we consider that northern approvals process opportunity or obviously, a whole approval -- whole process approval submission for the southern areas of Blackwater South. Christopher Creech: Yes. Got you. And just a second one and not to sort of flog a horse, so to speak, but I did ask you after sort of the first quarter results about Daunia AHS performance. And you say there's still obviously that performance sort of difference between where you want -- where sort of manned would otherwise be. Is it still tracking sort of where you want? Or does there sort of come a time where you sort of -- like what you guys did at Maules where you sort of move back to a fully manned operation to sort of achieve that sort of cost guidance that you guys have set? Paul Flynn: Ian has been waiting very patiently for a question to come his way. So look, it's not where we want it to be. We assumed it would go better. It's not bad. I don't give you that. I'm not saying that. It's just that we think it should do better. And we obviously had that experience you just described at Maules Creek. So we know what the benefit is of going back to man with the system. Now in fairness to Hitachi, that wasn't a commercial system. This one is. And so that was still a development project at Maules Creek. This one is, by all accounts, a commercialized system. And -- but we can -- we've -- because of our history, we're able to very quickly benchmark what the difference is between humans and not. And we can see that this is not there yet. And so the key question is how quickly can we get to where we're satisfied that we're doing the right thing for our shareholders, which is obviously the lowest cost, most productive iteration of Daunia we could possibly imagine. Ian? Ian Humphris: Yes. I love it when my boss covers everything in hands over. But look -- over and above that, look, we're engaged with Caterpillar at all levels through our organizations to improve it. I mean, as Paul said, we have seen improvement, but there is more to go there. So we're working on them. And I think we've got to be careful to differentiate Maules Creek and the CAT system at Daunia here. I mean, even if we went 100% at Maules Creek, the whole site was not an autonomous site. And I guess that interface and the difficulties around that. And then for those that are familiar with Maules Creek, it's an extremely highly intensive mine with a whole lot of interaction. So I guess our decision, I guess, the maturity of that system, the fact it was never going to be 100% AH mine site, even if we sort of ramped up to what we called 100% AH and that interaction is why we made the call that we never thought it would work at Maules Creek and be as efficient as a manned operation. Operator: Your next question is a follow-up from Rob Stein with Macquarie. Robert Stein: Just to try to extract Glyn's question a bit further. So there's inflation, which we can forecast macroeconomic driven, U.S., et cetera. And then there's escalation, which is industry-specific, regionally specific labor costs, construction costs, et cetera. Does the $140 to $145 target have inflation -- is it inflation adjusted, but not escalation adjusted out past '26, '27, '28? Paul Flynn: Yes. It's inflation adjusted, but we're not passed on escalations, no. We're not changing any escalation, just standard inflation. Operator: We have reached the end of our question-and-answer session. I would like to turn the call back over to Mr. Flynn for closing remarks. Paul Flynn: Thanks, everyone, for taking the time to listen in today and the questions that you've asked. If there's any further questions, you know where to find us. We look forward to seeing many of you, obviously, in the follow-up post this presentation. And thanks very much for your attendance once again.
Operator: Thank you for standing by, and welcome to the Qube Holdings Limited FY '26 Half Year Results Investor Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. Paul Digney, Managing Director. Please go ahead. Paul Digney: Hi, all. Thank you for joining this morning's call. I'm joined in the room by Qube's CFO, Mark Wratten; and Head of Investor Relations, Paul Lewis. As usual, I'll kick off the call with a summary of our highlights for the half, followed by some comments on the divisional performance. Then I'll hand over to Mark to discuss some key financial items. And then back to me for -- to go through the full year outlook before taking your questions. Starting on Slide 6, results overview. Qube has once again delivered a solid half year result. The financial performance reflects the strength of our business, reflects a combination of organic growth and the contribution from acquisitions recently completed. Activity levels remain mostly favorable across our core markets. And as you've heard before, the diversity of our operations supported growth and helped offset any challenges. Both Mark and I will talk more about the financial results as we get through this presentation. On to Slide 7. We provide an update of the scheme of arrangements here. As you know, on Monday, we announced that the MAM led consortium have confirmed their offer at $5.20 per share per Qube. We have now entered into a scheme implementation deals with the consortium. This is an exciting milestone in the evolution of our business. And MAM's offer underscores the value of our strategy and the quality of our business and our people, most importantly. I'm confident that this transaction will provide a platform for the business to grow and continue to grow while maintaining a strong track record of enhancing supply chains in the regions that we operate. Obviously, the timing is contingent now on regulatory and other approvals, and we're aiming to have a scheme booklet out to shareholders in May so that shareholders will then have the opportunity to vote on the scheme. Returning to our performance for the half and safety performance on Slide 8. Our positive safety performance was sadly marked by the death of a tire fitting contractor at our Narromine Agri facility in October. Qube and the management team has continued to support investigations into this tragic event. During the period with our ongoing focus on safety, our TRIFR continued to improve, decreasing by 21% compared to last year's result. Our LTIFR and our CIFR also improved during the half. The rollout of our BeSafe program also continued. There are some great safety videos worth checking out on our social media networks. Turning to our key markets, Slide 9. Once again, it's clear that strong performance in some areas helped balance out some challenges in others. In Containers, the Australian logistics operations performed in line. New Zealand container logistics impressively performed better than expected and so did Patrick's, performing better than expected also. In Agri, Agri again made a good contribution, which underscores the value of our trading strategy, and an agile integrated service offering to our customers. More automotive benefit from a full period contribution from the AAT Webb Dock West, which is also known as MIRRAT, but was offset by lower than anticipated storage and quarantine services across all AAT terminals. Forestry was relatively stable despite some softer wood chip volumes in Australia, while in New Zealand, we saw a modest uplift in earnings. The resources business was better than we expected due to better volumes and also with better cost controls, which helped offset a major contract ceasing in the period. Energy once again delivered ahead of expectations, except for some delays in renewable projects. And in general, Stevedoring and the other sections on the slide, this was slightly impacted mainly due to unfavorable volume mix across our port operations in Australia. Now turning to divisional performance on to Slide 11. For the operating division, I won't spend much time on this slide as I'll dive into each BU shortly. As you can see from the slide, logistics and infrastructure was responsible for the lion's share of the growth in the half. Turning to Slide 12, logistics and infrastructure. EBITDA profits jumped around 22%. The addition of Web Dock West helped the performance in the period. However, the AAT terminals performed weaker overall due to a decline in high margins and ancillary services, which I mentioned before. Container and logistics volumes were broadly stable across Australia and provided another solid result. The New Zealand performance was better than expected in the half. And with the Nexus acquisition completed in December, we are expecting further New Zealand upside in the second half. The IMEX continued to deliver improved results and volumes as volumes ramped up. And Agri performed well in the period with grain up almost 50% through our bulk channels in the half. Turning to Slide 13, Ports and Bulk. In the Ports and Bulk business unit, it's fair to say it had some mixed performance across its end markets. The Energy business delivered another strong earnings contribution from the oil and gas activities, including the commencement of decommissioning work getting underway during the period. However, in the energy space, we had profit impacts from our renewable sector due to setup costs in Western Australia and some project delays in Queensland. We saw reasonable volume at Stevedoring across most commodities in our ports operation. However, unfavorable product mix in the half did impact earnings and margins. Overall, forestry was relatively stable with a modest uptick in earnings in New Zealand. The bulk activities in resources sectors was better than we expected. This helped offset the impacts of some major projects ceasing and the delays in some new projects coming on stream. And also, the bulk business did benefit from a full period contribution from the Coleman's acquisition, and the initial contribution from the Albany Bulk Handling acquisition. Now on to Slide 14, briefly looking at Patrick. Patrick was better than we originally forecasted, which is pleasing. Market share was relatively stable at 41%, and the EBITDA improved, thanks to a number of things, higher volumes, favorable volume mix and increasing ancillary revenues. And pleasingly, during the period, the business also extended several key customer contracts. I will now hand over to Mark to take you through some of the key financial information, and then I'll get to the outlook after that. Mark Wratten: Thank you, Paul, and thank you to everyone on today's call for listening in. As Paul has already highlighted, Qube delivered a very pleasing first half set of results. I'll now take you through a few financial slides. Starting with Slide 16, Qube's underlying results. Paul has already covered our Logistics and Infrastructure and Ports and Bulk business units as well as Patrick. A few other points to note include: strong result in our operating division contributed to an increase in group underlying EBITDA of 9.8% over the prior period. Pleasingly, Qube's EBITDA margins, excluding the high revenue, low-margin grain trading business, improved from 10% to 10.6%. As we had guided to earlier in the financial year, this EBITDA improvement was partly offset by an increase in net finance costs which increased by $9 million against the prior period due to higher average debt balances and no interest income on the now fully paid repaid shareholder loans to Patrick. The NPAT share from associates increased by $7.5 million, which was mainly attributable to the great first half result from the Patrick business. At the underlying NPATA line, we delivered $157.5 million, which was an increase of 10.1% over the first half FY '25. On the back of these results, the Board has declared an interim dividend of $0.0535 per share fully franked, which will be payable on the 9th of April. This dividend is at the top end of the Board approved dividend payout ratio, which is 60%. Before leaving this slide, I'll make some short comments on the 2 material nonunderlying adjustments that we reported in our H1 statutory results. The first item is $101.5 million pretax profit on the divestment of our interest in the beverage property, which we announced was sold in December 2025. The second material item of $37.3 million was a reversal of an onerous contract provision relating to Qube's obligations at the time of exiting the Minto Properties, which we divested in January '25. This obligation was successfully resolved during the period, allowing us to now reverse this provision. The original provision was also treated as a nonunderlying item in our FY '25 accounts. Moving to Slide 17, capital expenditure. In first half FY '26, Qube's gross CapEx was $216 million. This is broken down into the 4 major categories on this slide. Qube spent $35 million on 2 small but strategic acquisitions in the first half, being the Albany Bulk Handling business in Western Australia in July and the Nexus Logistics business in New Zealand in early December. The Albany Bulk Handling business has been fully integrated into the Qube, while the Nexus integration is progressing to plan. We also spent $88 million on organic growth-related assets in the category set out in the table below. The major spend was on new bulk storage facilities in Queensland and Western Australia and mobile assets and specialized containers to support new or expanded contracts. The $22 million investment in specialized containers predominantly relates to new contracts with Iluka for the Balranald project and WA Oil for a decommissioning project. In the period, we also spent $88 million of replacement CapEx, mostly on mobile fleet assets and material handling equipment. Finally, we spent $5 million on the 2 Moorebank rail terminals. During the first half, Qube also received proceeds of $163 million from the divestment of assets with a significant amount being for the beverage property, which I mentioned earlier, and some rail rolling stock assets in excess of our business requirements. After all of the above, net CapEx in the first half was $53 million. Taking you now to Slide 18, cash flow. During the first half 2016, Qube's net debt decreased by circa $51 million with the key cash flow items detailed on this bridge. The first half cash conversion, excluding grain trading working capital was 71%, which is a relatively typical result for Qube given the material first half outflows that don't repeat in the second half. Working capital movements for our grain trading business was a positive $29 million for the period to total $117 million at the end of the first half. The first half FY '26 cash flows also included the $53 million of net CapEx that I just spoke to as well as $81 million in distributions received from our associates, mainly from Patrick. Finally, if I can now take you to Slide 19, balance sheet and funding. You will remember that in FY '25 Qube completed a number of capital management initiatives, which together continue to place the business in a strong balance sheet position. During the first half of FY '26, we haven't been required to revisit our debt facility as we have significant available liquidity, which at the end of December '25 was over $1.1 billion. Our average debt maturity is 4.4 years, and we have no facilities maturing in the second half or in FY '27. Qube's gearing ratio reduced to 31.6%, which is at the lower end of the Board's current approved range. overall ore, we retain significant headroom against our bank covenants. Qube maintains investment grade credit ratings from both Fitch Ratings and S&P. That's all for me. Now I'll hand you back to Paul. Paul Digney: Thanks, Mark. And now Slide 21, the full year '26 outlook by key markets. Across our -- the outlook across our key markets for the full year is generally favorable. In containers, we expect Patrick to perform slightly better as well as New Zealand. The outlook for Agri year-to-date has been good, although the remainder of the year could moderate due to global conditions and farmers currently holding on to inventory, which is reflected in the revised outlook for Agri. In automotive, there are some early signs of improvement in the demand for ancillary service in the second half, which is positive. In forestry, we expect that to stay the same as the first half of the year. And while in our resources businesses, we anticipate some improvements, thanks to more favorable product mix and better volumes. This should partly offset that misalignment I spoke about before between contracts ending and new one starting. Finally, in Energy, as I mentioned before, the outlook remains positive for the oil and gas activities However, the new renewable projects will be delayed into next year and will be a benefit to next year's revenue. Now to the final slide, Slide 22, before I take questions. Full year 2026 underlying earnings outlook. The underlying earnings outlook remains positive for the full year, with solid EBITDA growth for the operating division. The outlook for associates also looks positive, largely thanks to the higher contribution from Patrick's. And at a group level, we expect to deliver a solid NPATA and EPSA growth of between 6% and 10% for the year. To summarize, while it's been a very busy half particularly with the Macquarie transaction and the due diligence bubbling along in the background, our half year performance saw us deliver another record result. Revenue improved, margins improved again. Return on average capital employed improved above 10% for the first time and now on its way to our new target plus above 12%. And our earnings per share improved and the outlook remains positive for the full year. Thank you for your time. I now would be happy to take your questions. Operator: [Operator Instructions] Your first question comes from Justin Barratt from CLSA. Justin Barratt: My first question, I just wanted to ask about if you could talk a little bit more about your grain trading business. It looks to be doing a pretty good job of materially improving throughput through your operations? Paul Digney: Yes. Justin, I mean, yes, our strategy has been very successful. A lot of the grain that's moving through our assets is I think more than 50% is our trading arm, pushing that inventory through our terminals and our up-country facilities. So yes, we've been -- we've built a pretty good strategy there. We've kept our product to our customers and through our trading arm fully agile and fully flexible. So Yes. I mean the current conditions, pricing is a bit lower. FX is not working as good as possible for trading, but we're pushing through some good volumes. Justin Barratt: Okay. Great. And then on Ports and Bulk, your guidance for FY '26 now a little bit softer than your previous guidance. And just noting your comment around the timing between cessation of some contracts and ramp-up of new contracts. I was wondering if you could expand on that comment a little bit for us, please? Paul Digney: Yes. I mean some areas -- I mean, we've had. Probably in the wind farm sector, we felt that we probably -- from a profit point of view, we do a bit better. There's probably -- setup costs have been a bit more, but we're setting up for the future in Western Australia. Some of the tail of some of the wind farms that we're finishing off at the moment, before other ones start in 12 months' time or so. It's probably been probably not as financially benefit for us. So there's been some impacts there. General Stevedoring turnaround after the industrial. The IR issues last year have improved, but we felt that they probably might improve a bit better. So we're looking for that improvement in the second half a bit. So we're just being a bit cautious there. Iluka Balranald is delayed probably 3 months into next half. So yes, it sort of swings around about. But yes, we are sort of broadly flat outlook for Ports and Bulk. Operator: Your next question comes from Jakob Cakarnis from Jarden Australia. Jakob Cakarnis: Paul, Mark, just 2 for me, if I could, please. Can you just talk to the drivers of the CapEx guidance change, please, for FY '26. So just interested in your considerations as you've put that together for us today, please? Paul Digney: I'll hand over to Mark. Obviously, there's quite a reduction there. Mark Wratten: Jakob, yes. No, so we spent less CapEx in the first half than we had anticipated and there's an element of that flowing through into the second half. I think we had -- in the initial guidance that we gave in August, we had included sort of what we call, referred to as a CapEx pool. So for acquisitions and we've completed a couple, as I mentioned, $35 million in the first half. We've got a couple that we sort of anticipate may drop in the second half. But overall, we think across the year, it's less than what we sort of had, sort of set as a sort of an amount aside back in August. And then there's just an element of the guide just being very careful around other maintenance CapEx, and we've been not -- I guess, to make sure that we're sweating our assets as much as we could. So I think it's just been a -- it's just maybe an element of first half being a bit too ambitious around when we could spend it. But we've got some really good -- I think some of it goes to what Paul was mentioning earlier around timing. So we've got some project -- really good projects coming up where the CapEx is now more likely to be spent in '27 than it is in '26. Jakob Cakarnis: Understand that maybe you'll be in a different environment as that goes ahead. Just one final question. I appreciate that there's still a bit of water under the bridge. But for those on the call, how do we think about a distribution of any surplus capital if that exists in the business? And how do we think that around timing with your other announcements and maybe the implementation deed, please? Mark Wratten: Yes. So if -- per the announcement on Monday morning and you'll see it in the scheme implementation deed as well. Obviously, the cash price is $5.20 but reduced by any dividends that we pay between now and completion, and that's inclusive of the interim dividend that we announced today, $0.0535. So we can -- for the scheme implementation, we can pay a maximum of $0.40 of dividends overall. And the whole idea around that, Jakob, is to say to try and optimize our franking credits. We've got quite a large franking credit balance and we're trying to get a lot of that to the benefit of shareholders between now and completion. So you'll see that we've got the ability to pay a special dividend within this -- agreed with Macquarie. And we'll seek, per the note -- in the announcement, we'll seek ATO class ruling to make sure that, that's all dot the I's, cross the T's, so to speak, in regards to those franking credits for any special dividend being available to shareholders. Jakob Cakarnis: Mark. So am I right in thinking that, that occurs, sorry, in terms of timing as the deal is closing? Or is there an interim milestone that we need to keep in mind? Mark Wratten: No. So obviously, if the deal dragged into the second half of this calendar year, Jakob, and we do our full year results, you could expect a final dividend, right, if it's sort of -- if not completed before October, say. Otherwise, a special dividend is likely to be paid immediately prior to the actual completion of the deal. So very -- a few days probably before the actual cash component would get paid. So it would be almost simultaneous. Operator: Your next question comes from Andre Fromyhr from UBS. Andre Fromyhr: Maybe just staying on the scheme topic. Wondering if you could give any sense of what are the main regulatory approvals that are going to require you to work on? And what kind of time line you would expect around that? Paul Digney: Yes. So obviously, ACCC and Feb are the key approvals. And so I mean, I think we're working a time frame between up to 4 to 6 months, potentially that. So yes. Andre Fromyhr: Are there any particular parts of the portfolio that you've already identified as sort of more in focus from an ACCC approval? Paul Digney: I mean from our perspective, we don't think there should be any issues. I mean other than actuals around this process. I mean, again, this is not a merger. It's a change of ownership transaction. So there may be a look-through on Port of Newcastle, but the actuals will go through that process. But once they start that process and go through it, they'll understand. The ownership structure and the management structure is totally different. So there's no alignment there. And again, this is just an ownership change. It's not a merger of operations. So from my view, there shouldn't be any issues, but obviously, there's a process we need to run through, and we'll respect that process and so will Macquarie. Andre Fromyhr: Okay. Then back on the operations. I was just wondering if you could talk a bit more about the drivers of the margin in Ports and Bulk? I understand it's a diverse segment. But I guess that margin has been depressed for a few years now and has come down year-on-year again this period. Wondering if you can talk through the role that demand or utilization side has played there? Or is there cost inflation? Or is it a mix issue? Just curious to understand a bit more detail around that. Paul Digney: I think for the period, it's just been, I mean, we did call out that bulk would sort of go into a little bit of a decline because of contracts ceasing and that sort of stuff. That we did call out. Actually, it was better than we expected and the way the guys have managed that process. We haven't really seen much wind farm activity which sits in that sector, which is -- which goes through a lot of fixed costs, and it's reasonably high margin. So we didn't get that. The general Stevedoring business, we had products, we had reasonable volumes, but certain volumes, certain commodities and certain ports make more money than other things, in just the way that mix fell out. Probably it wasn't -- hopefully, the second half better with how that product mix goes. There's some stuff that we're working through in that area. I just think it's the period, it's just sort of a combination of some areas of where we would have impacted margins, and hopefully, we can get that improving in the second half. Andre Fromyhr: Okay. And last one for me is MIRRAT, Wondering if you're able to share what the EBITDA contribution was in the period or even better, like a sense of what a normal annualized run rate is for MIRRAT's EBITDA under Qube's ownership and sort of what your plans are for growing that business? Or is it more just the bolt-on to your existing AAT terminals? Paul Digney: I haven't got a number in front of me, so I can't provide that. I think we provided maybe a number at acquisition. So we were tracking a little bit lower than that this period because of less quarantine and storage services. So -- but we look at MIRRAT as a long-term asset. And so we're very confident where we're at with MIRRAT. Mark Wratten: Yes. Andre, when we -- I think the normalized or sort of what we sort of coming into the year is around $30 million to $33 million of EBITDA. And as Paul said, the first half, which is sort of a little bit -- sort of below what we expected, then that $30 million to $33 million is sort of on a full year basis. And that's sort of at a very I guess, at a sort of very normalized run rate without sort of heavy volumes of ancillary services. Operator: Your next question comes from Samantha Edie from Morgan Stanley. Samantha Edie: Congratulations on the result and the takeover. I just have 2 questions today, please. So just with the first question. So I can see that the resources outlook has improved, which was guided to be a bit of a headwind in FY '26. And you did have a strong first half overall. But I guess, if we're just thinking about the second half earnings in each of the key markets you provided on Page 21 of the preso, are there any key market earnings there that are expected to go backwards half and half? Paul Digney: I think I'll probably called out a little bit cautious around -- just around the Agri volumes. I mean, we've done very well to date in regards to the strategy. And there's a lot of wheat on storage and upcountry and that sort of stuff. So we look to continue to push that through. So we've been a bit more cautious on that. Renewable projects is that's not going to change too much. We're not going to see much of that work, so which we expect it to be better. So there are probably 2 areas. But on the flip side of that, I think as I called out, the auto the storage and quarantine services that we have through AAT terminals looks to be more demand for that coming in the second half. It was very light in the first half. Patrick, New Zealand has been really good for us and looks promising in what we've done there, putting those businesses together. So that's been a good sign in oil and gas. There's probably potential slight upside there to offset any of those other things that might be maybe a bit lighter than we would have expected probably a couple of months ago. Samantha Edie: Okay. That's great. Mark Wratten: Sam, sorry, I mean it just goes about diversity again, right? That's just -- yes, it's sort of self-protect ourselves through the strategy. Samantha Edie: Yes. Great. And then just the second question is around Patrick's Fremantle lease. So I think that lease is meant to expire around 2031 unless that's changed. So is this like still the case? And then is it likely that this will be extended? And then can you also talk through what an extension will look like. So yes, just any color around that, please? Paul Digney: Yes. I think, Sam. The unknown on that is really what happens at Westport and the relocation from Fremantle down to Westport. It's still unclear of time frames on that sort of stuff. So you would assume an extension at Fremont or will occur when that occurs, I'm not too sure. But yes, it will go beyond the current position at this point in time. So I mean, we'll work with the Fremantle Port and the other stakeholders around that and potentially transitioning in the long term, which is a long way away still. There's plenty -- there's still plenty of capacity at Fremantle to operate for decades. So yes, it's -- I think to answer your question, very likely of an extension. I can't give the time frame of when the port would get relocated and when it does and if it does. Operator: Your next question comes from Nicole Penny from Rimor Equity Research. Nicole Penny: One follow-up on grain and the comment that you've moved 57% of New South Wales bulk volume. Could you comment on whether there's it clear change in market share you're seeing or whether the volume remains a function of crop volumes, high and solid crop volumes? And secondly, if you could comment on in addition to farmers holding on to grain that you already mentioned. Are you seeing any other structural changes in farmer selling behavior? Paul Digney: I think just what I called out. I mean, yes, I mean, we've increased our market share, I guess, in the New South Wales market. I'm not to comment about what our competitors do and what we do, but we have done that. I think our strategy has been quite good and quite agile with our customers and what we've built out over the last 2 years. Fundamental changes, I think as I called out earlier, the price of wheat at the moment is a point where -- and I think farmers are holding on for this point in time, but there is abundance of week there. So how it pushes through the system. We'll see how that plays out over the next 6 months. But we're just a little bit -- I guess, we've been able to push grain through. We've been able to source grain, put it through our network, but we're just a little bit cautious with how that's sort of playing out at the moment. So I don't think anything has really changed. I think farmers have decided to not sell as much as they want at this point in time. At some point in time, it's got to push through the system. Operator: Your next question comes from Owen Birrell from RBC. Owen Birrell: Just one first question with regards to that special dividend potential. In your slides, you say you have the potential to pay $0.40 per share dividend with franking credits worth up to approximately $0.17 per share. Can I just confirm that, that $0.17 per share is the level of franking credit balance you have at the moment? And if not, where is your franking credit balance. Mark Wratten: That would be -- we have a franking credit balance is subject to some further work that we're doing, but we believe that at this point in time that we'll be able to fully frank up to the $0.40 that we have agreement with. So yes, we're pretty confident about that. But as I said, we're making sure that -- and you'll see in the little footnote on the bottom of that page that we're going to seek ATO-class ruling, make sure that we pass all of their relevant franking credit integrity rules to make sure that it's fully available to our shareholders or particularly obviously those ones that can benefit from a franking credit. Owen Birrell: Okay. Perfect. I understand that. And just secondly on the -- again, on the ag business. Obviously, it's been a very good success story for you. I just wanted to get a sense of where your export terminals are relative to potential capacity? A 49% increase to the 1.8 million tonnes exported through your terminals. It sounds like a big increase. But if the -- if FX wasn't a headwind, if pricing wasn't a headwind, where do you think you would have been able to get to with that volume? Paul Digney: Good question. I mean we still have got extra capacity to push through our network. So the first half is pretty good numbers. I mean, if you double that and plus another 10% or 20%, that would be getting towards maybe capacity in those terminals, but we're still pushing the limits and we still have the ability to expand a bit of that capacity if needed to. So we're in a pretty good spot there. Owen Birrell: I guess, the origin of my question is that your grain trading activity is effectively running at 0 margin. Actually, it's even less margin than you were doing last year. So you're clearly leaving something on the table. Obviously, you're making it back through your utilization of your physical assets. But at some point, those physical assets get full. I guess the question is, do you then start to take margin through grain trading? Paul Digney: Potentially. It will just matter to the circumstances of the world grain prices, right? So at this point in time, it's quite low. So if prices are higher, yes, there's probably more margin going forward. Operator: There are no further questions at this time. I'll now hand back to Mr. Digney for closing remarks. Paul Digney: Thanks, everyone, for joining the call. I'll be speaking to some of you guys and lady soon. Yes, thanks again for your support, and have a good day. Cheers. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: I would like to welcome everyone to the FTG Fourth Quarter 2025 Analyst Call. [Operator Instructions] Please note that this call is being recorded. I would now like to turn the call over to Mr. Brad Bourne, President and Chief Executive Officer of FTG. Mr. Bourne, you may proceed. Bradley Bourne: Thank you. Good morning. I'm Brad Bourne, President and CEO of Firan Technology Group Corporation, or FTG. Also on the call today is Drew Knight, our Chief Financial Officer. Before we go any further, I must caution you that this call may contain forward-looking statements. Such statements are based on the current expectations of management of the company and inherently involve numerous risks and uncertainties, known and unknown, including economic factors in the company's industry generally. The preceding list is not exhaustive of all possible factors. Such forward-looking statements are not guarantees of future performance, and actual events and results could differ materially from those expressed or implied by forward-looking statements made by the company. The listener is cautioned to consider these and other factors carefully when making decisions with respect to the company and not place undue reliance on forward-looking statements. The company does not undertake and has no specific intention to update any forward-looking statements written or oral that may be made from time to time by or on its behalf, whether as a result of new information, future events or otherwise. 2025 was another successful year for FTG. We had record revenues, EBITDA and earnings, and we made great progress in integrating FLYHT into FTG and positioning it for future success. More specifically, in 2025, FTG accomplished many financial goals, including our bookings were $209.9 million in the year, marking a 14% increase over 2024. Our backlog at year-end was $148.5 million, a 21% increase from last year. Our revenue was $191 million, an 18% increase over 2024. Our adjusted EBITDA was $32.7 million in 2025, up 27% from $25.8 million last year. Our adjusted net earnings were $13.5 million in 2025, an increase of 31% from 2024. Our operating cash flow less lease payments were $13.7 million in the year. And we maintained a strong balance sheet with net debt of $8.3 million or 0.3x trailing 12-month EBITDA, including $11.2 million of government loans. Other accomplishments in 2025 included we took steps to grow our defense business. FTG Circuits recently qualified for two significant classified defense programs. Delivery is expected to start in 2026 and ramp up through 2027. FTG overall will also benefit from increasing customer demand on legacy defense programs. We diversified our revenue sources to reduce our exposure to U.S. tariff risks for our non-U.S. sites. During the year, we ramped up deliveries in support of the C919, China's first domestic single-aisle passenger jet. Also during the year, De Havilland Aircraft of Canada selected FTG to provide updated cockpit control panel assemblies for the new Canadair 515 aerial water bomber. FTG completed first deliveries of some units to De Havilland on this program in late 2025. We took steps to create value from the FLYHT acquisition. We obtained supplemental type certificates or STCs for the AFIRS Edge+ program for Boeing 737 in Canada, the U.S. and China and for Airbus A320 in Canada, Europe and China. The transition of AFIRS Edge to in-house production is now underway, and FTG recently delivered its first units to an airline in Asia, marking a key milestone in value creation from the FLYHT acquisition. And we strengthened the FTG leadership team. We continue to bolster our leadership team, including appointing a new CFO, Drew, who's with us today; Executive Vice Presidents for both the Circuits and Aerospace segments as well as some key site leaders due to retirements and other organizational growth. Also during the year, FTG appointed Russell David and Christine Forget to the FTG Board of Directors. Russell has served as a Board member and Senior Executive of corporations and as a senior partner at Deloitte in Corporate Finance and M&A advisory. Christine has served as a Board member and senior executive at several corporations, including as VP Global Procurement at Bombardier. Drew will provide more details on our 2025 and Q4 results shortly. Let me turn to some external items. Our end market demand remains strong. Airbus delivered 793 aircraft in 2025. But more importantly, they're looking to ramp to over 1,000 aircraft annually in the next few years. Airbus has a backlog of over 8,000 orders, which is over a decade worth of production at current production rates. At Boeing, they shipped 600 planes in 2025, up from 384 in 2024. 2024 was low due in part to the safety incident on the Alaska Air 737 as well as the machinist strike they had later in the year. But looking forward, Boeing has plans to ramp their production to over 800 planes annually in the next few years. Boeing's backlog is almost 6,000 planes, so also over a decade's worth of orders at current production rates. While 2024 might have been a low point for Boeing, it has become clear that Airbus is outperforming Boeing in the air transport market in terms of aircraft shipped, and they hold a 60% market share based on order backlog. This has implications for FTG's plans going forward. In the business jet market, Bombardier reported a high single-digit shipment increase for 2025. They shipped 157 aircraft in the year. They are also pushing hard to add a defense component to their business, and they've had some success to date in selling their business jets for defense applications. In the helicopter market, Bell Helicopter reported a 20% revenue increase in 2025, driven by increased defense programs. All of this bodes well for us as we look to future demand in the coming years. We also looked at results from some key defense contractors. For instance, Lockheed Martin reported a 6% revenue growth in 2025. And also related to defense, Boeing was selected to develop and produce the next-generation air dominance fighter. This is good news for them. And based on the supply chain approach on the previous air superiority fighter, the F-22, I would expect the sourcing for this will be U.S.-only suppliers. We did have content on the F-22 when it was in production through our Chatsworth facility. We are better positioned now to increase our content on U.S.-only procurements with our 5 U.S.-based sites. Also importantly, there are new commitments from all NATO members, including Canada, to ramp defense spending to 3.5% of GDP with another 1.5% for defense infrastructure. And Canada has said they will increase defense spending in 2025-'26 to 2% of GDP. All of this indicates significant increases in defense budgets for all European countries and Canada. The recent creation of a defense investment agency in Canada to accelerate and streamline future procurement activity is positive for the industry here. And the U.S. is also looking to increase defense spending next year. Looking at the longer term, Boeing's most recent 20-year forecast for commercial aerospace shows significant long-term industry growth, and it continued to show 20% of all new aircraft deliveries going to China, close to 40% to Asia, as has been the case in the recent forecast. Business jet market has already seen traffic recover. A recent business jet market forecast from Honeywell similarly predicts growth in this market of 5% in 2026 and 3% annually over the next decade. So as we have said for many years, FTG's goal is to participate in all segments of the aerospace and defense markets as each moves through their independent business cycles. It is not often all segments are growing, as seems to be the case now. Beyond this, let me give you a quick update on some key metrics for FTG for our fourth quarter and full year. First, as already noted, the leading indicator of business is our bookings or new orders. Our bookings were $210 million in the year. This resulted in a backlog of $148 million at year-end. Full year sales were $191 million, which is up 18% over last year. 2/3 of this growth is driven by the acquisition of FLYHT earlier this year and the balance from organic growth. In our Aerospace business, sales were up 43% in 2025 compared to last year. The increase is about 90% due to the acquisition of FLYHT. Sales in Toronto and Tianjin were up, while activity in Chatsworth was down in the year due to timing of some orders. There was a significant ramp-up in C919 shipments in the year as well as assemblies for both Boeing and Airbus aircraft in Q4. The C919 shipments benefited both Toronto and Tianjin, while other shipments benefited Toronto. On the circuit side of our business, sales were up 6% over last year. All of this is organic growth. Our strongest growth in the year was in our joint venture in China, followed by our Haverhill and Chatsworth sites. Minnetonka had strong demand, but our ability to ramp production was constrained by adding and training new production staff. Overall, at FTG, our top 5 customers accounted for 51.7% of total revenue in the year. This compares to 58.4% last year. It's great to see the drop in customer concentration as we add sites and expand our customer base, partly through the acquisition of FLYHT. Airlines were 2 of our top 20 customers in the year due to the FLYHT acquisition. Also interesting to note of the top 10 customers, 6 are customers shared between Circuits and Aerospace. We like to see the shared customers as it means we are maximizing our penetration of these customers by selling both cockpit products and circuit boards. Given the actions of the new administration in the U.S. of implementing tariffs, it's also good to see that one of our top customers is outside of the U.S., and this is in China, and another 8 have operations outside of the U.S. While on this topic, 69.9% of FTG sales are to U.S.-based customers. This includes sales by U.S. sites as well as sales from FTG sites in Canada or China. This compares to 78.3% last year. While the sales grew by 5% in the U.S., they grew by 46% in Asia, 140% in Europe and by 35% in Canada as we benefited from previous efforts to expand globally, including things like our content on the C919 aircraft in China and acquiring FLYHT sales globally. The increase in sales outside the U.S. are helpful in the event of any tariffs that might impose on our non-U.S.-based sites. Our goal is to continue to grow our non-U.S. revenue for our non-U.S. sites. In 2025, 36% of total revenues came from our Aerospace business compared to 29% last year. Aerospace business share increased due to the acquisition of FLYHT. I'd now like to turn the call over to Drew, who will summarize our financial results for 2025. And afterwards, I will talk about some key priorities we are working on. Drew? R. Knight: Thanks, Brad. Good morning, everyone. I would like to provide some additional detail on our financial performance for 2025 and Q4. On sales of $191 million, FTG achieved a gross margin of $60.6 million or 31.7% in 2025 compared to $44.2 million or 27.3% on sales of $162 million in 2024. As such, gross margin in 2025 was a substantial improvement and up 430 basis points. The increase in gross margin dollars and the gross margin rate is the result of increased scale on our fixed cost base, operational improvements, the addition of our new Aero-Calgary business and favorable foreign exchange rates. Revenue per employee was $254,000 in 2025 as compared to $240,000 in 2024, which is a 6% increase. Q4 2025 on sales of $51.7 million, FTG achieved a gross margin of $15.8 million or 30.6% compared to $12.8 million or 28.3% on sales of $45.2 million in Q4 2024. The increase in gross margin dollars for Q4 2025 as compared to Q4 2024 is a result of increased sales volumes in the Aerospace segment, including the new Aero-Calgary business, operational improvements and favorable exchange rates. From a geographical standpoint, FTG's sales growth was global, as Brad noted earlier. Diversification improved as 70% of FTG's revenues were derived from customers in the U.S. in 2025 compared to 78% in 2024. SG&A expenses were $26.7 million or 14% of sales in 2025 as compared to $20.4 million or 12.6% of sales in the prior year. The increase of $6.4 million during fiscal 2025 was primarily due to the acquisition impact of $4.7 million at Aero-Calgary. The remaining increase included Hyderabad, India start-up expenses, restructuring costs and acquisition expenses. Q4 2025 SG&A expense was 13.3% of sales, which is up from 12.7% in Q4 2024. Similar to the full year, this is mostly due to the Aero-Calgary business, which has high margins and high SG&A as well as restructuring costs and some India costs in 2025. R&D costs for 2025 were $10.9 million or 5.7% of sales compared to $7 million or 4.3% of revenue in 2024. R&D efforts included product and process improvements at the Circuits segment as well as Aerospace segment process improvements and product development. FTG is exposed to currency risk through transactions, assets and liabilities in foreign currencies, primarily U.S. dollars. The average exchange rate experienced in 2025 was 1.39 as compared to 1.36 in 2024, which equates to a weakening of the Canadian dollar of 2.2%. We estimate that for each 1% of weakening of the Canadian dollar, FTG would experience an increase in pretax earnings of $0.8 million, absent of any hedging countermeasures. Adjusted EBITDA, as detailed in the MD&A, was $32.7 million for 2025 or 17.1% of sales compared to $25.8 million or 15.9% of sales for 2024. Adjusted EBITDA is up 27% over 2024 as a result of growing the top line organically and via the acquisition, operational improvements and managing expenses. Adjusted EBITDA for Q4 2025 was $7.9 million or 15.4% of sales as compared to $7.6 million or 16.7% of sales in Q4 2024. While adjusted EBITDA dollars grew somewhat, the percentage of sales declined due to the new Aero-Calgary business, which added top line and gross margin that essentially broke even. We expect this business to scale up with new revenues on a fixed cost base to become profitable in the near future. In 2025, FTG recorded net earnings of $13.1 million or $0.52 per diluted share as compared to $10.8 million or $0.45 per diluted share in 2024 for an increase of 15.6%. For Q4 2025, net earnings were $3.7 million or $4.4 million in Q4 versus $4.4 million in Q4 2024, while adjusted net earnings were $3.9 million in Q4 2024 as this is adjusted for $0.8 million of reduction in contingent consideration related to the Minnetonka acquisition, which was booked as profit in Q4 2024. Q4 2025 adjusted net earnings showed a decline of $0.2 million versus prior year as reported. However, 2025 was burdened by $0.3 million of intangible amortization from the FLYHT acquisition, and there was $0.8 million of FX change from a gain in 2024 to a loss in 2025. Normalizing for these differences for an apples-to-apples comparison, then Q4 2025 is $0.9 million better than Q4 2024. The 2025 effective income tax rate was approximately 27.8% as compared to 27% in 2024. I would like to remind everyone that FTG continues to have substantial tax losses available to offset future income and the accounting benefits of these losses has not been recognized in our financial statements. These tax loss carryforwards are located in both the U.S.A. and Canada with the Canadian losses recently acquired in the acquisition of FLYHT in December 2024. Our net debt position as of Q4 2025 is $8.3 million as compared to a net debt position of $0.7 million as of Q4 2024. The debt increase resulted from the acquisition of FLYHT. Cash flow from operating activities in 2025 was $18.1 million as compared to $14.5 million in 2024. Full year cash flow from operating activities increased by $3.6 million. Cash used for lease liability payments was $4.3 million in 2025 as compared to $3.7 million in 2024. Capital expenditures were $4.6 million as compared to $7.2 million in 2024. Going forward, we expect CapEx to be closer to FTG's long-term target of 3% of revenue, notwithstanding any significant capacity increases. As at 2025 year-end, the corporation's primary sources of liquidity totaled $78 million, consisting of working capital of $58 million and $20 million of unused credit facilities. Accounts receivable days outstanding were 55 at the 2025 year-end, down from 70 in the prior year. Inventory days were 105 at 2025 year-end, up from 96 in 2024. And accounts payable days outstanding were 58 at the end of 2025 as compared to 68 in 2024. On to the outlook. We entered Q1 2026 with a record level of backlog of $148.5 million, of which approximately 80% is expected to be converted to revenue in 2026. The new business activities in both the aerospace and defense industries are strong and continue to accelerate. Both the circuits business and aerospace business are winning their share of new customer RFPs, including a couple of substantial classified defense programs, as Brad mentioned. We are focused on managing cash flow and improving operational efficiency and continuing with the FLYHT integration, which will bear fruit. Our complete set of year-end and quarterly filings are now available on SEDAR. With that, I would like to turn things back over to Brad. Bradley Bourne: Thanks, Drew. Let me delve into some other important items for the future of FTG that will continue to build on our accomplishments from 2025. We will continue to pursue growth in the defense market. As noted previously, we expect defense spending to continue to grow in Canada, the U.S. and NATO. We've had some good success on some new programs in the U.S. last year, and we're pursuing more new programs in 2026. Beyond this, we will look for opportunities outside of the U.S. as well. The NATO budget was about 1/3 of the U.S. budget a decade ago, and it is 2/3 its size today. So it's definitely a market of interest to us. As Canada ramps its defense spending and its commitment to NATO, we are hopeful that it will create new opportunities for FTG sites outside the U.S. After the U.S. and NATO, the next biggest defense market is India. And as we get our site established there, we will look to capture some market share in this market as well. We will look to capture more work in the commercial aerospace market and grow as volumes ramp up. As part of this, we will look for ways to increase our activity with Airbus as they are the stronger performer right now. To do this, we will leverage our Canadian and China sites, and we will continue to investigate establishing a footprint in Europe. Given the uncertainty regarding tariffs from the U.S., we will look to continue to diversify our revenue streams for our non-U.S. sites. Some of the items I already mentioned will assist in this, but it will remain a priority action for us in 2025. In 2025, about $58 million of sales from our Canadian sites were to the U.S. customers. The site did increase their non-U.S. sales, but more will be done in 2026. Across FTG, sales outside the U.S. grew from $35 million in 2024 to over $57 million in 2025. We will increase our sales staff outside the U.S. in 2026 to help drive this growth. Tariffs are now impacting input costs in our circuits business. This is because a lot of materials used in our manufacturing processes originate outside of North America. The impact is highest for our U.S. sites, but Toronto is also impacted when materials shipped via the U.S. to Canada. We estimate the overall cost impact to be in the millions of dollars in 2026. We have started to work with customers to pass on these increased costs to them and their end users. And we will continue to take steps to create value from our acquisition of FLYHT. As of December 1, 2025, we have renamed the business, FTG Aerospace Calgary, as we amalgamated it legally into FTG. The amalgamation was done to possibly enable us to use FLYHT tax losses beyond just our operation in Calgary. But to be clear, we do not have certainty that this will be possible. In the Calgary business itself, we believe we are now well positioned to have a strong year as a result of our product certification and STC efforts last year. We are seeing strong demand for all three products, and our pipelines look robust. The licensing revenue on our SATCOM radio product has returned and should be consistent going forward. The licensed product ends up on Airbus aircraft, so we know the demand is strong. The Edge+ WQAR has lots of STCs in place. And with our first delivery behind us, we are quoting many new opportunities in a number of geographic jurisdictions. And we are starting to manufacture this product in our Tianjin plant to enable us to capture this margin as well. We expect sales of their weather product to ramp up in 2026 as well with contracts in place with both NOAA in the U.S. and U.K. Met in England. We are looking to manufacture both our SATCOM radio and the WVSS weather product in our Chatsworth facility in 2026. These actions should enable FTG Aerospace Calgary to be a positive addition to FTG and further mitigate risk from the U.S. tariffs. We will also open our aerospace facility in Hyderabad, India in 2026. Our decision to expand geographically was partly to look for an insurance policy against anything negative happening to our China operations, but was also partly to expand into new regions with growth potential. As we analyze options, we concluded India is a very cost-effective place for manufacturing, and with Prime Minister Modi's Make in India policy, coupled with significant defense spending, it will be an ideal place to operate. We selected Hyderabad as it has an aerospace hub primarily focused on manufacturing. Our facility is under construction. It now looks like Q2 2026 for its completion. In the meantime, we will be sourcing the necessary equipment to be ready to go. Our estimated total investment is forecast to be approximately $2 million. As we enter 2026, we see continued strong demand across most sites. All of our $148 million backlog, 80% of that is due in the year. We continue to assess possible corporate development opportunities that could fit with either of our businesses. We have a few areas of interest, including establishing a footprint in Europe, growing our presence in India or expanding our technology in a few areas. With a focus on operational excellence in all parts of FTG, our strong financial performance in 2025, our recent acquisitions, our key sales wins, we are confident we are on a strong long-term growth trajectory. This concludes our presentation. I thank you for your attention. I would now like to open the phones for any questions. Jenny? Operator: [Operator Instructions] Your first question is from [ Ben Asuncion ] from Haywood Securities. Unknown Analyst: Ben dialing in for Gianluca here. Congrats on the quarter. Could you perhaps give us a qualitative snapshot of how the backlog looks from a defense perspective? The Fed's here just announced a nice package on Tuesday, and we were wondering if you have any preliminary thoughts on how you might be looking about pursuing this and grabbing a piece of the bigger pie. Bradley Bourne: Well, sure. I guess, first, -- to answer your question specifically? No, I actually don't know how my backlog splits out in terms of defense activity. What I would say is historically, we're running at about 40% defense, 60% commercial with some of the wins that we talked about on some classified programs, so I'm not going to name names of them, but that should increase our defense percentage a little bit, but I don't have an exact number. And then with regard to Canada, we're looking at it from a couple of perspectives. For sure, defense spending is going up. Canada just issued a defense industrial strategy, which is good for -- it's going to be great for the industry. I think it's something we've all been looking for and waiting for and asking for, for a number of years. The fact that's out is great. And it talks about build, partner, buy. So they're looking for ways to have the defense spending in Canada benefit the industry and build the industry. So I think that's going to be good for us. And then beyond that, as part of this, they are looking to make investments in companies or assist companies in making investments is a better way to put it. And we're definitely looking at that as well to see if there's funding sources to assist in investment activities we might be planning in the future. Unknown Analyst: That's great. And I guess just for my follow-up here, are you starting to see any incremental quoting activity or program acceleration specifically in Canada for these defense initiatives? Or is it too early in the cycle? Bradley Bourne: Yes. For us, it's early in the cycle. We -- our activity in Canada historically has been remarkably small. We went from 5% of sales to 6% of sales last year. But we're putting effort into it. Definitely, we're having lots of discussions with more Canadian companies about opportunities, but I wouldn't say it's converted into quoting activities yet. Operator: Your next question is from Steve Hansen from Raymond James. Steven Hansen: Brad, just on the new defense programs, it sounds like they're going to remain unnamed. That's fine. It does sound like delivery is expected to start later this year, though, and then ramp up next year. What kind of capacity capabilities do you have right now? I think you referenced Minnetonka still having some constraints. So I'm just trying to get a sense for how that capacity plan looks relative to the ramping new programs. Bradley Bourne: Right. Sure. So capacity growth in FTG for all but one site is really about adding people and training people and getting them contributing. And so for Minnetonka, specifically, we have tons of capacity in terms of plant and equipment. So that one is all about adding people, training people. I've said this in the past, and I'd say it again here that adding people -- getting people is easy, but the way I'd describe it these days is if I add 10 people, 3 of them are going to leave because they don't like it. 3 of them are going to leave because we don't like them. And then you have a few left over that get through that training process, which is going to be at least 6 months, and then they're contributing to the business. So ramping capacity is constrained or the rate of ramp is constrained by that process of adding and training people. And that goes for all sites except one. My Circuits Toronto facility, for sure, to grow that capacity, I need to add plant and equipment as well as some people. But we have added that or included that in our plan for 2026. We have a capital investment plan for that site that should add at least 30% capacity to it. So the good news is when a plant hits capacity, it generally is not at every process in the building. There's 1 or 2 bottlenecks. So if you can add capacity in those bottleneck areas, you increase the capacity across the whole plant. So that's what we're doing in Toronto. We're committing to it. And as I say, at least a 30% growth in capacity is planned in that site for the end of the year. Steven Hansen: Okay. That's helpful. And just, I mean, rough magnitude, is there any ability to give rough magnitude on these new defense programs and what they mean for '26 and '27? I presume they're relatively low rate production to start with, but just wanted to get a sense for what the opportunity set is there. Bradley Bourne: Yes. And I guess activity started last year, to be fair. Now some of that was qualification build or initial deliveries. We're expecting it to be material amounts this year. It's going to be in the millions of dollars. Beyond that, I just -- I don't know is my honest answer exactly how much we'll ramp this year. But for sure, the overall demand on these programs is crazy big in the tens of millions of dollars. But whether we will be able to support all of that is not clear yet and whether it would be -- the production allocation is not 100% set. So we'll see how much of that we get and how much of it we can support. But the demand is huge on these programs. Steven Hansen: Okay. That's good context. And then just one last follow-up for me, if I may, is just on the COMAC program. You've had some good success there. They did stumble a little bit in their own delivery profile last year, but my understanding is they expect to ramp again next year. Just relative to the initial contract that you signed, it looks like there's just under $10 million of value left there. How do you think about sort of that residual piece relative to what you delivered in '25 and whether or not you need to renegotiate or re-up the program? And how does that outlook stand for COMAC? Bradley Bourne: Yes. A whole bunch of comments on that. I guess, first one, you're right, their deliveries were a little bit lower than their expectations last year, but that has not impacted our production rates or the demand for our deliveries to them. So their build rate still seems to be strong. The contract we signed a few years ago is complete at some point later in 2026. I have every expectation that there will be a follow-on -- it's not even a contract, a follow-on purchase order against the existing contract at some point this year that will carry production into the next few years. And then in addition to that, two other things going on of great interest. First one, in our contract, we also supply spares to them. And so we signed a spares contract with them just a few months ago that will be delivered in 2026. So it's a little bit of additional revenue. And then not a huge revenue impact for us in the year, but they're looking at a handful of design changes on our product and other products in the plane. The good news and the interesting news on this is they're doing this as part of their effort to get certified by EASA in Europe for enabling that plane to be sold and flown in Europe. So I don't know, not sure how they're going to do on that, but I think it's interesting. And definitely, EASA is engaged with them to go through the certification process. So that might create additional demand for that aircraft beyond what you see in China and the Far East. Operator: Your next question is from Russell Stanley from Beacon Securities. Russell Stanley: I guess, first, just on the orders look particularly high in Q4. Wondering how much the new defense programs may have contributed there or if there's anything else you would call out behind that beyond just ordinary demand. I know simulator-related demand has contributed in the past. But I'm wondering if there's any lumpiness there that you would call out? Or should we just look at this as a particularly strong quarter? Bradley Bourne: Yes. I guess, first of all, specifically on the simulator, there was no big lumps of simulator orders in Q4, so that did not drive it. Our simulator activity is pretty constant right now. I'd love to see a lump one day, but right now, I don't see that. Beyond that, I am just -- I going to say it's mostly just strong demand across the business in Q4. No significant single contracts of big value in the quarter and definitely nothing of significant value in the quarter related to the two defense programs I talked about either. So the -- yes, it's just strong demand across the business. Russell Stanley: Great. And how should we think about R&D spending relative to sales going forward? It looked a little elevated in Q4. I'm wondering, can you provide any more color as to what you're working on there? And to what extent maybe the Q4 number reflected work on those two defense wins? Bradley Bourne: Right. Yes, it was up a little bit in the quarter. I agree with you on that. We again, nothing significant. We're definitely -- we spend a lot of time every quarter in driving process improvements, capability improvements in our circuits business. Definitely, some of that related to the defense programs, but not some -- not a material amount, but definitely, we are doing some development to support those programs and some other activities in other sites in the quarter. So -- but that's definitely the game for our circuits business to just keep driving capability improvements and be able to support the new technologies that generally are what we see on new programs. On the aerospace side, we did some -- continue to do development work on some of the products we sell. We show it in R&D. Some cases, it's customer funded, some cases it's not. The R&D we did in FLYHT in the year, generally, we did some development on the weather WVSS-II that was expensed in our R&D numbers in the year. We did a lot of work around STCs in the year. That was -- that's on our balance sheet as deferred development because for sure, it has future value. So that's not in the R&D number. Hopefully, that helps. Operator: Your next question is from Nick Corcoran from Acumen. Nick Corcoran: Congrats on the strong year. Just the first question, margins were down a bit in the quarter despite higher revenue. Can you maybe talk about what the drivers are and what we should expect for margins going forward? Bradley Bourne: Sure. I assume you're talking EBITDA margin. But assuming I got that right, let me start on that. So first one, I think as Drew reported, our gross margin in Q4 was up, as you would expect. So as revenue goes up, margins go up -- gross margin goes up. But for sure, below gross margin, a couple of things to comment on. Also, Drew already mentioned this, but we had a basically revaluation of assets on the balance sheet in the quarter that was -- showed up in the P&L as an FX impact. It was a $600,000 hit in the quarter, $800,000 variance compared to last year. So that definitely hurt. If you were going down to net income, we have higher intangible asset amortization this year because of the FLYHT acquisition. So that when you're trying to compare Q4 last year to this year, that hurts on net income, doesn't hurt on EBITDA. And I guess the last one, which we didn't really talk about, but we do live in the real world. We definitely had a production or operational challenge in our Circuits Toronto facility in the quarter. We basically had our production -- or part of our production shut down for almost 2 weeks. It impacted revenue a little bit. And I think if you looked at it, you'd see our Circuits revenue was down in Q4, and it definitely impacted profitability. I don't -- it's hard to have an exact number on this because you don't know what it could have been if we had not had this challenge. But definitely, it impacted revenue and gross margins and therefore, EBITDA margins in the quarter as well. Good news is it was kind of in the middle of the quarter and the challenge was around. We had some contamination in our water that hurt some processes. But for sure, by November and by the end of the year, that issue was behind us. So it happens. As I say, we live in the real world. We dealt with it. I think the people at the site dealt with it really well, and it was back under control for year-end. Nick Corcoran: That's helpful. And maybe can you talk about how much of it might be driven by mix just between aerospace and defense? Bradley Bourne: Yes. I mean it's -- I'm not sure how that impacted profitability. Definitely, it impacted revenue that if you see our revenue was up dramatically in our cockpit product business in Q4. That increase was 100% driven by commercial aerospace. We had large deliveries of cockpit products for the China C919 aircraft to end the year and we had large deliveries of some cockpit assemblies we delivered to one of the Tier 1 avionics companies in the U.S., but these assemblies end up on both Boeing and Airbus aircraft. Those deliveries ramped up in Q4. But again, on the commercial aerospace side. So that drove the revenue growth. I think our margin and our profit is not really driven significantly based on whether it's commercial aerospace or defense. Nick Corcoran: That's fair. And then maybe moving on to FLYHT. With the business amalgamated, what opportunities are there to improve the margins in the business? Bradley Bourne: Yes. It's just -- we got to -- we have to have sales of the three products. We got to get them delivered, and it's got to -- if we have revenue, we will have margins and profit. And I think we will have good revenue. The SATCOM radio is an existing product. There's three ways we generate revenue from that. We sell hardware, and we have some good orders on that. So I think we're going to have some good SATCOM radio sales in 2026. We sell data where we basically resell Iridium data for people who use the radio. So that becomes another revenue stream. And then the third one is we license the design to a company who then sells the radio into Airbus, and that licensing revenue kicked in, in Q4, and I expect it to be kind of a regular amount each quarter going forward. So that product looks good. So I think we'll have revenue, therefore, we'll have margin. The WQAR or Edge+ product, we're seeing huge opportunities for us. We're working hard to establish a market position. So there's going to be a combination. We have to win some orders, but I think we also have to have a plan to ramp margins as we go forward and capture market share, but I do expect that's going to happen in the year. And then lastly, on the WVSS-II, the weather sensor that we sell, we have contracts in place. We need to get through some certification processes. We're trying to get that product certified on a 737 and on the Embraer 145. That's just because the airlines that are planning to fly this product. If we get those certifications done in 2026, which I'm sure we will, then we'll start to see some hardware sales from that product. And there's also a data or recurring revenue stream from that product. So as we get more units installed, the data sales will go up. And so I don't know all indications to me are that we are going to see some good revenue from that business in 2026. And for sure, that will just drive good margins as well. Nick Corcoran: Great. And maybe one last question for me. I believe the Toronto union contract is coming up for renewal. Any comment on that? Bradley Bourne: I can comment that you are correct. It is coming up for renewal middle of this year. There has been no discussions yet, no negotiations. They haven't started. Typically, we do it kind of towards the end of the contract because you never settle this until the end. But for sure, that's a bit of a risk in 2026. But other than our one instance a couple of years ago, we've been pretty successful in getting through contracts without any disruption. So hopefully, we can do that again this year. Operator: Your next question is from [ Sebastian Sharlin ] from Agave Capital. Unknown Analyst: Following up on the FLYHT amalgamation that happened in December, I know you said the key there is to increase the sales, and I think I see the paths that are open for this. Wondering on the SG&A side because sales and gross margins have been great there. On the SG&A with the amalgamation, should we expect more restructuring in terms of the sales team perhaps combining together or even just the admin side? I think Drew mentioned something about not being sure you can amalgamate them with the Calgary operation. Bradley Bourne: Yes. Let me start with the sales part of it. So I really don't see a path to integrate the sales teams of FTG with FLYHT. And the reason I say that is FTG, we sell basically into original equipment manufacturers. We sell into the Honeywells, Collins, GEs, Boeings, Bombardiers. The FLYHT products are for the aftermarket, and we sell to the airlines. So it's definitely a very different sales channel. The FTG guys are good at what they do. The FLYHT sales guys are good at what they do. So we're not going to integrate the teams, I guess, with one exception that Peter Dimopoulos runs sales and -- has run sales at FTG for a number of years. He's definitely also running sales at FLYHT or running the FLYHT sales team. That's really just to bring the FTG mindset to the FLYHT sales process. But beyond that, not really. And then on the rest of the SG&A on the admin side, we took a lot of cost out last year because they were public before we acquired them and a lot of public company costs. I don't see a lot -- I don't see any real opportunity for SG&A savings going forward. So the key really is to grow the revenue number, and that will bring down the SG&A percent of sales. Unknown Analyst: Great. Super color. I get. So it's more going to be a referral kind of way of working together with the sales teams than integrating. And perhaps the next one is a little more technical for Drew. You mentioned there are -- you guys have a bunch of tax loss carryforwards, especially since you acquired FLYHT, I think it's north of $42 million in Canada, if I'm not mistaken. You mentioned that you will benefit from them, but they're not as a tax asset on the balance sheet yet. Should we expect those to be at some point considered on the balance sheet? I know the condition they need to be likely -- more likely than not to be, I'd say, harvest in the future? Or is that something that's never going to happen? R. Knight: No. So I guess it's a couple of steps. So step one, obviously, was the amalgamation. And the one certainty is as FLYHT becomes profitable, that should be tax-free profit. So that's certainly a good thing. But now that we have the amalgamation done, we've got some work to do just to prove that FLYHT is a same or similar business to FTG, which it's in the ballpark, but it's not exactly the same. So we've got to document that and get a pre-ruling from CRA on the fact that it's a similar business and we can utilize and access those tax losses. Unknown Analyst: Makes sense. And yes, the amalgamation was December 1, which is in the new fiscal year. Would it be reasonable to believe that work would be done by the end of this fiscal year? R. Knight: It's reasonable to believe that the work will start in this fiscal year. It's just starting now. So we're certainly targeting to get it done by the end of the year, but it could bleed into early 2027. But I would say that FLYHT broke even or was slightly profitable in 2025. And the plans for 2026, as Brad mentioned, there's a bunch of sales opportunities and growing the top line there. We expect FLYHT to be profitable, and that should be tax-free profit. Unknown Analyst: Great. That's helpful. Perhaps the last one for Brad. You mentioned input costs sometimes because of crossing the border, input costs coming from the U.S., for example, increasing the product cost and then that you are already discussing to pass on through those to customers. More out of curiosity, do your products, especially the circuit boards use RAM, the memory chips, which have been on a tear recently in terms of price increase? Or are they not in your product? Bradley Bourne: No. We don't. So that's not our issue at all for sure. It's just -- it really is most of the circuit boards in the world are made in Asia. So the supply chain really is mostly in Asia. So when we make them here, we're importing products. Obviously, for our U.S. sites, we import it into the U.S., but even for Canada, sometimes the product comes from Asia to the U.S. and Canada. So we are purely seeing tariff cost impacts on a lot of the raw materials for circuit boards. So we are yes, working with customers to pass it on. They don't like it, but we don't like it either. So we're just trying to find a way to be fair. We didn't cause it. They didn't cause it. We just got to work together to manage our business. Unknown Analyst: Okay. So no RAM memory chips kind of included in the product need to be to worry about. Great. Operator: Your next question is from Steve Hansen from Raymond James. Steven Hansen: Just a quick follow-up. I know you referenced the India facility to be done in 2Q and you've got equipment on order. How should we think about the ramp of that facility through the back half of '26 and into '27? Bradley Bourne: Yes. So a couple of things. It's partly what I said on for my other side. So for India, today, we have 2 employees. We are just starting the process to staff up. There's going along with building the building, getting equipment, we got to hire the people and train the people. The revenue impact in 2026 is negligible. We're going to be spending our time training people, building product, going through government or industry certifications like AS9100, that type of thing, customer approvals. So negligible revenue this year. Hopefully, in 2027, we start to see some benefit from that. But I honestly have not tried to put a number on it for 2027 yet. Steven Hansen: Okay. That's helpful. And then just lastly, on the corp dev, you referenced you're looking at a number of different opportunities. I think you cited sort of three buckets. Is there one in particular that you're focused on or that you think has the best opportunity set for you guys? I think you referenced Airbus exposure being one in particular. But just how do you think about that set of opportunities as they stand today? Bradley Bourne: Yes. I mean I'm always interested and always looking. Definitely, as I've said a million times, my plan for FTG is always try to find a way to double the business every 5 years. To do that, I go to have organic growth plus I could do some acquisitions. So it's always on the table, something we're looking at. Definitely, FLYHT's well under control. So we're not focused on trying to integrate that. So we can look forward into what's next. Yes, Europe is of interest to me. I've said that for a bunch of reasons, it's of interest to me because of Airbus. It's of interest to me because NATO defense spending is ramping so much. It's of interest to me because it's a jurisdiction with no real risk of tariffs. So lots of reasons why I'm interested in it. And so that's probably top of my list. But beyond that, certain technologies, if the right deal became available, I'd be interested in those. And so the only thing I would say, I'm not looking to expand beyond my current product base, whatever we do would still be focused in circuits or cockpit products. And that won't change because I, for sure, believe we can do another couple of doubles at FTG, still staying focused in these product areas. Steven Hansen: Okay. Great. And actually, just one last one then, if I may, and it dovetails on your last remark is just how do you think about the new platform developments out there? The DOD down South has got a big new push towards new modernized technology and warfare. And just trying to think about how you decide to leverage that theme or get involved with that theme over time, recognizing that the volumes are still relatively low today. Bradley Bourne: Yes. It's an important topic for us for sure that my belief is the best way for FTG to change or grow our market share is to get involved in new platforms when they're in development. And so there's lots of new platforms in development in the U.S., and it could be helicopters, it's fighters, it's drones, there's just everywhere. There's lots of new developments going on. So we are doing whatever we can to try to secure a position on these and then ride them into production in the coming years. None of this happens quickly. But you have to be there at the beginning if you want a shot at that production revenue stream. So we definitely do that, and we will continue to do it. And I'd say, particularly on the defense side right now, there's a lot of opportunities. Operator: [Operator Instructions] And your next question is from Russell Stanley from Beacon Securities. Russell Stanley: Just a question on the circuits business. Wondering if you can talk about space, how much of a share that is now of revenue and maybe what opportunities you're seeing there given the growth potential? Bradley Bourne: Yes. Well, we're interested in. And I guess I don't talk about it a lot. I always say I want to be in all these different market segments because they all go through their own cycles. And then I don't talk about space, but we definitely do circuit boards for space. And interestingly enough, we do cockpit products for space, too. And -- now we have products on the Orion spacecraft that hopefully will be flying shortly. It almost took off in February, but maybe in March. But back on the circuit board side, it's of interest to us. I'd say our history is we're not involved -- we haven't been involved in the crazy high-volume programs like Starlink and that. But it's of interest to us as a -- I can say, a relatively small percentage of our overall business. We do some work with MDA in Canada. We do some work in the U.S. We do work with Honeywell Space. So yes, but it's a small percentage of our overall business. Operator: There are no further questions at this time. Please proceed. Bradley Bourne: Okay. Thank you. A replay of the call will be available until Thursday, March 19, at the numbers on our press release. The replay will also be available on our website in a few days. I thank you all for your interest and participation. Thank you. Operator: Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may now disconnect your lines.
Operator: Good day, everyone. Welcome to Altus Group's Q4 and Full Year 2025 Financial Results Conference Call. At this time, I would like to hand things over to Camilla. Please go ahead. Camilla Bartosiewicz: Thank you, Lisa. Hi, everyone, and welcome to the conference call and webcast discussing Altus Group's fourth quarter and year-end financial results for the period ended December 31, 2025. Our press release, MD&A, financial statements and the slides accompanying our prepared remarks are all available on our website and as required, have been filed to SEDAR+ after market close this afternoon. I'm joined today by our CEO, Mike Gordon; and our CFO, Pawan Chhabra. Before we get started, I wanted to point out a couple of things. As discussed at our Investor Day, beginning with our Q4 results, we have rolled out some of our new disclosures. To help investors and analysts rebuild their models under our new reporting format, we have published a supplemental document that shows a representation of our historic results, posted on the Investors section of our website along with the other materials I referenced. Earlier this week, we announced the sale of our appraisal business to Newmark. This business has been moved under discontinued operations for our results. And accordingly, our results for continuing operations exclude the Appraisals business revenue and adjusted EBITDA contribution. Also of note, we plan to eliminate the corporate cost line in our reporting at some point in 2026. Turning to our disclaimer slide. Some of our remarks on this call and in our disclosures may contain forward-looking information based on certain assumptions and are therefore subject to risks and uncertainties that could cause actual results to differ materially. Please refer to the forward-looking information disclaimer in today's materials. We also use certain non-GAAP financial measures, ratios, total segment measures, capital management measures and supplementary and other financial measures as defined in National Instrument 52-112. We believe these measures provide useful additional insight into our performance, and they may assist investors in evaluating our shares. However, they are not standardized under the measures of IFRS and may differ from similarly titled measures used by other issuers and may not be comparable. They should not be considered in isolation or as a substitute for IFRS measures. Further details are provided in our IR materials as well. And finally, unless otherwise noted, all percentage and basis point growth rates discussed on today's call are presented on a constant currency basis relative to the comparable period in '24. I would also like to point out that the supplemental document includes the majority of those numbers on an as-reported basis. And with that, I'll now turn it over to Mike. Michael Gordon: Thanks, Camilla, and hello, everyone. Before we begin, there's been a lot of market discussion around how AI may reshape the software landscape. Let me take a moment to address how we view this at Altus and why we believe our position is well protected. From our perspective, AI reinforces our strategic direction and strengthens the advantages that already differentiate our business. In commercial real estate, valuation, accuracy, auditability and trusted data are nonnegotiable. These decisions influence significant capital deployment and involve robust scrutiny and fiduciary responsibility. Outcomes must be explainable, defensible and grounded in high-quality data. That's precisely where Altus stands apart. So first, our solutions are trusted in CRE valuation to the point where "ARGUS it" is commonly used as a verb in the industry. When a product becomes shorthand for the task itself, it signals our position in critical client workflows and market trust that goes well beyond the software features. Second, our strength is amplified by our network effects arising from significant value provided to our customers. Our valuation solutions are core to the valuation collaboration across investors, lenders, owners, appraisers, asset managers and auditors. We are not just a tool used by one stakeholder. We serve as a platform that facilitates the creation, review and use of valuation information by multiple stakeholders in the CRE industry. Every additional participant in this ecosystem reinforces the value of the platform for all others, and this is not something that can be easily replicated. Third, as AI evolves, our role becomes even more strategic. We are enhancing our agentic capabilities to do more than just generate insights but rather perform critical actions within the valuation workflow. From data ingestion and validation to scenario analysis and recommendation engines, our platform will increasingly act as the orchestration layer that connects and coordinates every stakeholder in the valuation process. And finally, across the CRE ecosystem, ARGUS is the system of record for valuations. We support tens of thousands of users globally, stewarding valuations on portfolios and funds worth millions and billions of dollars in value. That scale creates proprietary data sets, historical context and benchmarking depth that is extremely difficult to replicate via AI. So when we at Altus think about AI, we don't see disruption to our model, but we see acceleration. AI systems are only as powerful as the data, the context and the workflow integration behind them. Those are precisely our advantages. Additionally, with our strategic shift to asset-based pricing, we see ourselves as less vulnerable to the disruption risks associated with seat-based models. We also believe that our increasing use of AI internally has potential to unlock tremendous efficiencies. As we demonstrated at our Investor Day, the internal use of our valuation agent capabilities will free up our VMS experts' time and significantly reduce manual work and focus on higher-value tasks. We demonstrated how automating the valuation process can decrease the time to valuation by up to 90%. This is on top of AI deployment within our R&D teams where increased use of AI coding will further optimize our R&D expenses, increase our speed of innovation, rapidly increase the value and the delivery of our products to our customers. Again, we see AI as the accelerator to our strategic efforts, not a threat. Now turning to our full year financial results. 2025 was a year where steady revenue growth and excellent retention reinforced the strategic importance of our solutions. Even in the softer market, we demonstrated that demand for our solutions remains resilient and driven by client needs, not market cycles. The team also demonstrated strong cost discipline and operating leverage, driving a 310 basis point improvement in consolidated margins. As you'll hear from Pawan shortly, we see more opportunity to drive margin improvements in this coming fiscal year. We are also beginning to see the cash generation potential of the business come through, which gives us confidence as we look to enhance our capital return plans. The team executed well against our strategic initiatives, driving value for clients, delivering innovation and optimizing our corporate structure and capital allocation to unlock shareholder value. Upgrading ARGUS Enterprise clients to ARGUS Intelligence remained a major focus for us. We closed the year with the vast majority of our clients recontracted and are now turning our attention to driving deeper engagement on the platform and adoption of our add-on capabilities. On the innovation front, we bolstered ARGUS Intelligence with Benchmark Manager and advanced Valuation Agent. For those of you who missed the demo, we have advanced our AI capabilities to make the valuation process faster, more accurate and insightful. This is already being tested internally with our VMS professionals. AI complements the professional judgment of our valuation experts, helping reduce their effort while at the same time increasing the amount of information used to reach conclusions. Our AI capabilities are quickly evolving from optimization and information analysis to more complex agent-led workflows for decisioning. We have a deep road map on continuing to enhance both agentic and decision-making AI and see a significant opportunity to drive efficiency and value for clients. We also delivered numerous feature enhancements throughout the year. As of note, we have been approved for a patent on the Altus Knowledge Graph, reinforcing the R&D investments over the past years. The Altus Knowledge Graph, which is built on our AI, enables us to connect disparate asset-level data to form a common golden record using an Altus ID. It is a foundational component of ARGUS Intelligence, as we help our customers collaborate with each other and collate their data. Strategically, we're doubling down on the simplification of Altus, both through portfolio and organizational optimization, as we enhanced our capital allocation framework with a higher weighting towards capital returns. We kept the momentum going starting the year at an accelerated pace. We opened the year on a high note with some client announcements. I'm pleased to share that we now have big brokers upgraded to ARGUS Intelligence, including JLL, Newmark and Cushman, and we are currently migrating their data to the platforms using our integration data solutions. We are also making meaningful progress on our portfolio rationalization. We announced the sale of the Canadian Appraisal business and have a couple of additional divestitures underway that we anticipate could close in the first half of 2026, including having recently signed an LOI for the Canadian Development Advisory business. In addition to the AD&A (sic) [ A&DA ] segment, we have identified select noncore Analytics businesses for potential divestiture. Our objective is to sharpen our focus and simplify the portfolio as we continue our transformation and prepare for a U.S. listing in 2027. On the cost side, we took decisive steps to streamline operations, reduce unnecessary layers and align our cost structure with our future direction. Earlier this month, we initiated a restructuring program and other cost actions that will deliver millions of dollars in annualized savings. Alongside this, we implemented targeted go-to-market refinements designed to better support client needs and drive growth. These decisions are never taken lightly, but they are important to ensure we operate with focus and discipline. And then finally, we remain committed to returning capital to shareholders and announced that the Board approved an increase to our annual plans, giving us the flexibility to deploy up to $800 million this year. We can do this through a combination of various methods, including our NCIB and potential SIB tenders. We're evaluating methods to return up to an additional $450 million to shareholders within the first half of 2026. Our plan is to be in the market over the next 100 days, returning that capital. We believe the current market environment presents an opportunity to allocate capital at attractive return levels, and our best investment continues to be on Altus itself. It's certainly been a busy period, but that pace reflects our ambition. We are moving with urgency and discipline because we see the real opportunity to create value. I'll now turn things over to Pawan to dive into our quarterly results. Pawan? Pawan Chhabra: Thank you, Mike. We closed the year with momentum and disciplined execution. Recurring revenue continued to grow steadily, and we delivered our sixth consecutive quarter of margin expansion as operating leverage strengthened across the business. Turning to the Analytics segment. We delivered another quarter of steady revenue growth and margin expansion. Performance was led by our flagship solutions, ARGUS Intelligence and VMS, which continue to drive strong customer adoption and renewal activity. Overall, software revenue grew 5.4% with ARGUS Intelligence delivering double-digit growth. As Mike noted, our portfolio optimization efforts will streamline noncore products that are dilutive to growth and retention, strengthening the long-term profile of the segment. Quarter also included a heavier renewal mix toward the end of Q4, which can affect quarterly comparability but doesn't change the segment's trajectory. VMS grew at 9.8% in the quarter. That result includes a onetime benefit from an operational efficiency that allowed us to complete the valuation work earlier than usual, shifting that revenue into Q4 on a go-forward basis. Excluding that shift, underlying growth was in the 5% range. Our margins expanded by 360 basis points in the quarter and 270 basis points for the full year. We finished at 33% adjusted EBITDA margins, reflecting the discipline in how we operate and the leverage we're unlocking as we scale, putting us in strong position as we work towards Rule of 40 by end of 2027. The margin expansion reflects a combination of factors: revenue growth, ongoing portfolio optimization, enhanced delivery efficiency through our global service center, benefits from restructuring initiatives and disciplined expense management. Turning to some of our recently introduced operating metrics for the Analytics segment. All of our KPIs are trending in the right direction. Recurring revenue was up, software and VMS ARR were up and our retention metrics remain strong. This reflects the durable high-quality nature of our key recurring revenue streams. This quarter, we also rolled out our new disclosures across the P&L to better align our reporting with other technology companies. We're steadily progressing towards our target model, and the improvements we saw in Q4 are encouraging. In particular, we're benefiting from the optimization of R&D and G&A, which will increasingly reflect the impact of our restructuring activities, product portfolio rationalization and third-party cost optimization. This quarter continued our pattern of strong cash generation with double-digit growth driven by record conversion. As Mike mentioned, we're seeing the cash generation strength of this business come through consistently, which reinforces our confidence in our capital return plans. We ended the year with a very strong balance sheet, giving us the flexibility to execute those plans while maintaining financial strength. As discussed at our Investor Day, we believe the business can comfortably operate with modest incremental leverage over time, and we intend to progress towards our funded debt-to-EBITDA target of roughly 2.5x to support those returns. And finally, I'll wrap with an overview of our business outlook, which we're presenting on an organic basis for continuing operations only without the Appraisal business. As you can see on this slide, we're expecting steady top line growth and sustained margin expansion. To be very clear, the constant currency growth rates represented our guidance, but we've also presented the indicative dollar range for easier comparison. The implied dollar ranges are based on our January FX assumptions, which are subject to fluctuations and will cause the dollar figures to differ from what we ultimately report. Our expectations are based on our target growth algorithm, which expects roughly 80% of the growth to be driven by volume and pricing and 20% by new logos. Adjusted EBITDA margin expansion is expected to be driven primarily by improved operating efficiencies and expense management, reflecting the actions we took this past month that Mike just discussed. Within that framework, we expect software to remain our strongest grower, maintaining solid high single-digit growth. For VMS, we're not underwriting a market rebound. Our outlook assumes sustained growth consistent with current market conditions. And in data, we see opportunities to improve growth, and we expect that progress to build over the next couple of quarters. Given the ongoing plans for other divestitures, we'll update our guidance throughout the year as additional transactions get completed. With that, Lisa, let's open up the line for questions now. Operator: [Operator Instructions] Your first question comes from Erin Kyle, CIBC. Erin Kyle: I first wanted to just ask on the guidance here. I just want to get some help comparing apples to apples. And maybe for the full year guidance, I understand it excludes Appraisals. But maybe can you help us understand where you expect the Development Advisory business to land from a revenue and EBITDA standpoint for 2026? I think most estimates at this point still include both Appraisals and Development Advisory. Pawan Chhabra: Yes. It's a fair question, Erin, and great hearing from you. So as you noted, our guidance now has flipped to recurring and continued operations. The continued operations drops out the Analytics guide, which we moved to discontinued operations. Post the divestitures that Mike outlined in terms of the noncore businesses and DA, we're essentially going to be an analytics company. So we're just getting ahead of it in regards to how we're formulating our guidance. As it relates to the Development Advisory business, historically, you've seen that as a combined segment. Appraisals represented about 30% of that number. Development Advisory was about 70% of that number. And then when you break apart Development Advisory, it was -- it's about 70% North America and about 30% APAC. So hopefully, that gives you a little bit of clarity in regards to how to compare it to how you guys have modeled it in the past in regards to just the overall revenue contribution to the total number. Our plan in regards to guidance is, as we sign definitive LOIs, we'll start moving these businesses over to discontinued operations, which will lead us to then recast our guidance to just help you guys continue to drive that level of clarity. Erin Kyle: Okay. And is that 70-30 split on both a revenue and EBITDA basis or just revenue? Pawan Chhabra: Yes, so the numbers that I gave you were on the revenue component. Erin Kyle: Okay. And then on the adjusted EBITDA side, I just wanted to ask about some add-backs in the quarter. There were $17.5 million in other operating expenses added back. Can you maybe just clarify what's included in there? I see $12 million allocated to corporate initiatives and strategic projects in the quarter, so maybe that specifically, if you could just expand on what's in there. Pawan Chhabra: I'm sorry, Erin, did you say in the other operating category? Erin Kyle: Yes, the other operating expenses in the adjusted EBITDA. Pawan Chhabra: Yes. So the other operating, as you mentioned, includes a host of different elements in it. Give me a second. So we've got the -- some degree of transitional costs in that $18.5 million related to some of our onetime corporate initiatives and strategic projects that we've run. We also benefited from about $6.5 million of realized and unrealized FX gains in Q4 of last year, and so that is obviously part of that $18.5 million higher on a year-over-year basis. Erin Kyle: Okay. That's helpful. And I'll squeeze one more in here, maybe for Mike. Just on the AI disruption risk, I appreciate you touched on it earlier on the call. I just wanted to expand on it a little bit in terms of some of the commentary we maybe heard out of some of the larger real estate brokerages last week just discussing ways to leverage their own proprietary data internally with AI. And I realize we did just see -- you signed a licensing agreement with Newmark for Portfolio Manager and Benchmark Manager as well. So maybe just how are you thinking about, yes, some of your customers looking to go in-house with their own data? Michael Gordon: So I think from the standpoint, we're not seeing that trend per se, Erin. What we're being pushed on by our customers is with the value that they see in ARGUS Intelligence is that they are wanting to get their data loaded into ARGUS Intelligence so that they can collaborate with others more quickly. I think that as we have very good data protection rights for our customers, we do a very good job of curating their data. And from the perspective of them leveraging the solution, I think that they look at us as an extension of what they would see as in-house as well. So where you have like alignment is that we see that our customers, especially the ones that I mentioned, are eager to use the new concepts that we have and use some of the tools that we have, the AI tools, and we have a number of like what we would call white box and gray box AI tools that they can go ahead and leverage going forward as well. So we -- I think we're looking as an extension to them versus just being in competition with them. Operator: The next question comes from Paul Treiber, RBC Capital Markets. Paul Treiber: I was hoping you can dig a bit further into 2026 guidance. Just for the 4% to 6% revenue growth, you mentioned a couple of moving parts there with VMS versus ARGUS Intelligence. Can you just elaborate further on the growth that you expect for ARGUS Intelligence and the drivers of that, particularly with ARR was quite healthy this quarter, up 11%? How do you see that translating into ARGUS Intelligence growth in '26? Pawan Chhabra: Yes. It's great hearing from you. Hope all is well. Just it's a great question. As you know, externally, we've created the categories of software, data services and VMS. Software includes all of our software components, and so when I talk about high single-digit revenue growth, we're talking about all of the software categories, including ARGUS Intelligence and our other software categories. But if you were to break that apart and look at ARGUS Intelligence specifically, we are seeing great traction on there. You see that from the ARR growth rates, particularly high from a full year perspective. It was very strong in quarter as well, too. And so within the software category, we expect ARGUS Intelligence to be double-digit growth within that paradigm with some headwinds from the other software categories as we continue to resolve those onto the platform over time but very bullish in regards to the progress that we've seen in ARGUS Intelligence, both in terms of the ARR growth in the quarter as well as the continued strong retention metrics, both on a gross and on a net basis. So very, very pleased with that progress. We have, I would say, at this point, 80% of our ARGUS Enterprise ARR is sitting on ARGUS Intelligence, and we continue to move the needle in regards to moving more and more of our business to asset base. So roughly 40% of our business in ARGUS Intelligence is sitting on asset base. And when you look at that from a total segment perspective, keep in mind, VMS is all asset-based. So the percentage of our business that's sitting on asset base now is the lion's share of our revenue. Paul Treiber: That's helpful. The second question is just on -- previously disclosed the proportion of customers that have contracted to use the cloud, and I think it was the vast majority. The -- what proportion of those have actually migrated over to the cloud and where you can start mining or using some of that data for your analytics products? Pawan Chhabra: Yes. So the majority of our clients are now sitting on ARGUS Intelligence, and we're working very closely with our delivery teams, our services teams and the clients to provision those models that they've migrated over to be able to leverage the tools and technologies that are available to them through Benchmark Manager, Portfolio Manager. There is a degree of data cleansing that has to happen. It's really a change in user behavior in regards to hardening the data so that it can become referenceable and something that we can benchmark. And so there's a lot of effort in regards to working with our clients to resolve kind of this last mile element of getting their models ready for full benchmarking. Michael Gordon: Yes, Paul, one other thing that we've done and just the -- when we talk about the patent that we just got. As we leverage the customers' information for them on ARGUS Intelligence, we're now doing it by asset versus by valuation. And so we're now building out probably a fuller view of that asset for those customers and as a result, a view that is not only greater in the intensity of the data looking at things but also goes horizontally with time so that they can start looking at time series as well. So from this perspective, we think we're giving them like a better 360-degree view of what that has done not only today, but where it has been and where it's going. Operator: Gavin Fairweather from ATB Cormark has the next question. Gavin Fairweather: Maybe we can just dig in on the go-to-market refinements that you referenced, Mike. I remember back in 2020 or 2021, the last time you did a bit of a go-to-market overhaul, it led to a pretty meaningful increase in sales productivity. So maybe you can just discuss the changes that you're making and what impact you'd expect that to make? Michael Gordon: Sure. I think -- and thanks for remembering that. It makes me feel good. The thing that we have is we've had historically a business that -- even in Analytics, the different parts of the business went together separately. So our VMS team, our software sales team, our data sales teams, while they try to coordinate, they did go and separately do things, and their quotas and how we would pay them were really set up on their own opportunities. What we've changed and with us putting Rich Sarkis into the role of Chief Commercial Officer, our entire suite of valuation solutions now go to market in one motion. Now there's work to be done to make sure that, that motion works in a consistent, coherent way. But what we believe is what we have is now, instead of having maybe 60 software sales guys and a few guys looking at VMS and data, we have probably over 600 people in our organization focusing on the customer every day, while they're acting either in the sales function, a customer support or a customer success function or just an account management function or delivery function. And so as we've done that, we've also focused on making them focus on the customer first, whether it's for their product or their solution or something else. And so what we've seen -- and we just ran our sales kickoff. What we've seen is, as we've been training these guys around it, it's not only talking about the value that their solutions bring but how they can bring total solutions as customers are asking for it. And we're starting to see good pickup in executive sessions with our customers. Just like everything's happened to everybody over the last 4 to 6 weeks, we're seeing a lot of them ask questions on where we can fit in and how we can help them solve some of the problems with their internal staff. So I would look at it as we are -- it's easy to say that we're doing a consultative or value-based sell, but we see those things really driving pretty well. And we have our Connect conference happening in about -- maybe about just under 2 months from now, and we'll be pulling that together even further for that conference. Gavin Fairweather: Appreciate that color. And then maybe just on ARGUS Intelligence, can you discuss the shape of the renewal book through kind of '26 and '27 and where those renewals are stacked up? Pawan Chhabra: Yes. It's a great question. As you know, we went through a heavy renewal cycle last year, and we purposely -- prior to last year, we're signing up clients to 1-year contracts, so we can move them from seat-based to asset-based pricing. Majority of those clients now that have moved to asset-based pricing are now on 3-year contracts, and so we have a smaller cohort this year of renewals than we did last year. And so a lot of that focus from a sales effort is really focused now on, a, moving the seat-based asset base; and two, ensuring that we can continue very strong motions on our cross-sell and upsell opportunities into those clients. Michael Gordon: If I added on to that, where we -- when we were doing the analysis earlier this year, the -- our expected renewals this year will be down about 20%, not because we're losing anything because, as Pawan said, they've gone to 3-year contracts, and we would expect that to be down and like average out next year as well. So getting back to the go-to-market motion that I was talking about, the team's got more time focusing on cross-sell or upsell opportunities with them, especially around the different product sets that we have. Gavin Fairweather: Appreciate that. And then just lastly for me, thanks for the new disclosures. I guess the problem with putting out gross retention, net retention is that it opens up questions about churn. So maybe can you just discuss the primary reasons for churn? And maybe you could talk about like what gross retention looks like if you just focus on the ARGUS business and then how you think ARGUS Intelligence could influence churn going forward as the customers take a broader suite of your solutions. Michael Gordon: If I start, if I go to the churn on the ARGUS business, the ARGUS business has very little churn. Typically, we see gross retention in and around or above 95%. And where we get any churn is when you get down into like if you think about our very long-tail customers, where we get funds that come and go and they go and they leave, but we're very sticky with that, so that's pretty strong for us. Where we actually -- in some areas, around data last year, we saw a little bit more churn, and part of that is like -- and this was -- we have a strategy to fix that. That business has typically been the feed the beast business. It's very much market to the customers, do work around them. We're starting to see good impacts on net retention. And then if you get into the VAS retention, well, we talked about that at Investor Day. That's incredibly high retention and keeping current customers. That business, though, tends to have a lot of what we look at. We look at net upsell and downsell in that business. We rarely have any churn. Does that help? Gavin Fairweather: That's great. Operator: Next up is John Shao, TD Cowen. John Shao: So could you tell us the pace of your margin expansion throughout 2026? Because it looks like you're going to start with 18% to 19% in Q1, and we'll finish the year with 25% to 26%. So that basically implies a much higher EBITDA margin close to 30% by Q4. Is that a correct thinking? Pawan Chhabra: Yes. Look, so that is correct. Again, as we talked about our guidance from a kind of midterm perspective at Investor Day, we talked about it in the form of Rule of 40, and that Rule of 40 was a combination of high single-digit revenue growth which would then imply margins by the end of 2027 to get us to that Rule of 40, so low to mid-30s in that range. And so the point of what we're doing here is just we're building a steady pace of improvement. Our revenue is going to continue to steadily improve, and we're taking direct actions to make sure that we're scaling our business appropriately with our growth to drive that margin expansion. And so we have a lot of confidence in regards to our margin expansion capabilities. Mike referenced the fact that we did do some actions in regards to just making sure that we continue to remain in fighting shape as we rightsize the business. It's just good hygiene work for us, but we're going to get the full year benefit of the work that we've done in 2025 into 2026, which will help us get to those measures that you're talking about. So you're thinking about it in the right way. We should see a steady progress throughout 2026 to get us to what we talked about at Investor Day for 2027. John Shao: Got it. And back to the Rule of 40, how much of your Rule of 40 target by '27 is dependent on a broader market recovery in terms of the macro? Any update since last Investor Day? Do you still think 2026 will be a key year for some recoveries? Pawan Chhabra: Yes. As I mentioned, our guide is not underwriting a market recovery, and Mike refers to this often with the Board. We're going to have good growth in a down market, and we're going to have great growth in an up market. And so as we think about our guide and its correlation to the market, investment decisions are being highly selective now. While dry powder is up, transaction activity is up. We're seeing a greater degree of selectivity, and that plays right into our strength in regards to helping our clients ensure that they are managing risk appropriately and driving performance and investing in the most profitable and highest return assets. And so we built a plan, and we're executing around the plan where we're going to continue to see steady growth in any market. And if the market has significant tailwinds, then we should have great growth. But we're confident in our path right now in any market. John Shao: Maybe one last question for me on AI. So if you're going to roll out more agentic AI features, how should we think about -- number one, is the pricing of these additional features. And maybe number two, could you talk about the impact on your margin profile? Because my understanding is the tokens from some of the frontier models can be quite expensive. Michael Gordon: That's a fair question. So there's 2 ways that we look to do this and just in some of the experience I've had with it. We'll roll it out in a method that it is -- it runs by itself or it runs alongside human intelligence. And so depending on how they will use it, they can use it to support or they can use it to provide reports on that. The key thing that we need to make sure is when we run this is we need to understand the cost to run that based off of the compute power that we have. So as we've looked at this, we've looked at what those costs look like and what those loads look like. So we have a pretty good sense of how those things will run. And we feel like those will be, from a gross margin perspective, as profitable as some of our other lines of business when it comes to ARGUS Intelligence. Operator: We'll take the next question today from Richard Tse, National Bank Capital Markets. Richard Tse: In the outlook section, you sort of talked about 80-20 sort of growth from volume pricing and then new logos. How does that mix change under different market conditions for commercial real estate? Pawan Chhabra: Yes. Look, we've got a tremendous opportunity from a cross-sell and upsell perspective as we continue to roll out new features and functionalities in our product suite, which gives us that opportunity both from a pricing perspective. New logo, [ we were certain ] about 20% of our growth in new logo. There's a lot of efficiencies that we've built within the business to be able to deliver our solution at a better cost point for us, particularly in VMS as we're leveraging a lot of the technology that we're rolling out to the clients where the beta customers internally to adopt those solutions. And so that is giving us the opportunity to expand our VMS from Tier 1 into Tier 2 opportunities to continue to capture the new logo opportunity. But we've got a large base of clients. We've got a whole new suite of offers that we can bring to those clients, and that's going to give us that opportunity from a pricing perspective and from a volume perspective to be able to drive more into existing relationships. Plus, the team selling the full portfolio of solutions plus our scalability from a cost perspective allows us to go after white space and new clients as well. Richard Tse: And just your perspective kind of on the market in general. Like if you had to sort of rate it on a scale of 1 today in terms of the market conditions for Altus specifically, like where do you think we are right now? Pawan Chhabra: Yes. Look, I can give you kind of my thoughts on market sentiment, but there are views that people can talk both sides of the coin on. We've seen rate volatility has eased, but trade policy, regulatory uncertainty continues to weigh on the sentiment. Transaction activity, we did see improvement through 2025, and it's fully expected that the transaction activity is going to continue to be good in 2026. But the recovery is uneven across asset types. You're seeing multifamily and industrial continue to lead. Retail is stable, and office is bifurcated between prime space leasing and some of the older commodity stock that continues to reprice. I mentioned we've got near record levels of dry powder that continues to build. But there's going to be a lot of selectivity in regards to how that capital is deployed in the markets, and that's where it's a tailwind for us. It's a very strong opportunity for us to really help the CRE industry maximize the performance and effectively manage the risk and make better and more informed decisions. And so this market environment plays to the strength of exactly the value proposition that we're selling to our clients. Richard Tse: Great. And just one last quick one for me. With respect to other potential noncore divestitures, specifically in Analytics, can you maybe help us understand a little bit what may be considered noncore? Because in terms of trying to value the stock, we sort of want to see what a run rate business looks like here going forward. Michael Gordon: Yes. I think, listen, there's not a lot where we would have this in Analytics. But just to be very straightforward, we are in the valuation space. And so as we look at like what we do, anything seen -- any of the products that we have Argus branded to or some of the new products that we've had and we're putting out there or the analytics-based products and our workflow, those are all very much in the valuation space and helps in that platform. That also includes the data that we include and ingest into that platform as well as clearly our VMS team. We look at them as the guys who really get a lot of activity on that platform. If it's a couple of steps removed, it starts to be something that we will be looking at and deciding does it make a lot of sense to keep it. But it's -- there's not going to be a lot of things there. But we just are -- as part of like the review that we started when we talked about at Investor Day, we're still continuing on that, and there'll probably be a couple of small items that we'll move on. Operator: [Operator Instructions] We'll go to Stephen MacLeod from BMO. Stephen MacLeod: I just had a couple of questions just regarding the guide given the new reporting and some of the changes to the reportable segments. Just quickly first on the Development Advisory business. So you've signed an LOI, but it's not -- but it's still included in the guidance. Is that right? Michael Gordon: Yes. Let me answer that. That's right. That is actually -- and it got -- as we talked about, it's in italics. We just got that done. So as we were announcing things, Stephen, I think we wanted to be a little conservative on that. But our belief is that, that will be done, hopefully, more or less by the next 60 to 70 days. Stephen MacLeod: Right. Okay. Okay. That's helpful. And then just on the advisory -- or sorry, the Appraisals business breakdown, Pawan, did you say it was -- it's roughly 30% of the underlying AD&A business? Pawan Chhabra: Yes, that's correct. About 70% of the previous development -- the AD&A number was about 70% Appraisals -- I'm sorry, 30% Appraisals, 70% Development Advisory. And within Development Advisory, North America represents about 70% and APAC represents 30%. Yes, so you were correct. Stephen MacLeod: Okay. That's helpful. Camilla Bartosiewicz: Put another way, Appraisals did $31 million in revenue last year, if that helps. Stephen MacLeod: Okay. I saw that in your disclosure. That's helpful. And then maybe just finally, just on now the pre-IFRS 16 basis that you're reporting EBITDA, is -- would you expect your occupancy costs to change much heading into 2026 given some of the cost-saving measures that you've began implementing in 2025? Pawan Chhabra: Yes. Look, I mean, as we stated on numerous occasions, we do have a wide real estate footprint that we're rationalizing as we continue to simplify the business. So we would expect that to continue to lower as well, too. Stephen MacLeod: Right. Right. Okay. Okay. That's great. A lot of my other questions have been answered. Lots of great color. Operator: We'll now take a follow-up from Gavin Fairweather, ATB Cormark. Gavin Fairweather: Just on capital allocation, you indicated an amount that you'll look to deploy in the first half above and beyond what you've already done. With $800 million, you've left yourself with some additional kind of capacity and room for the back half. I guess I'm just curious kind of under what conditions you'd look to become more aggressive in the back half of the year and increase the amount of capital returns. Michael Gordon: I think for us, it's going to be something that as we -- we'll continue to watch the market. We'll continue to watch the sentiment. And we believe we have good value in what we're doing, and we will get there fairly quickly. I think that, as we said, we're going to deploy a good portion of that in the first half. I think depending on how the instruments that we use are taken up, that will be dependent upon how we start to deploy in the second half and when we deploy. I think if the market remains a little choppy in -- or similar to as we've seen it, we'll start -- we think that that's still a great buying opportunity for us, and so then we'll continue to leverage that. Operator: And everyone, at this time, there are no further questions. I'd like to hand the conference back to Mr. Mike Gordon for any additional or closing remarks. Michael Gordon: Well, I would just want to thank everybody for getting on the call. It's been a pleasure to talk to all of you, and thank you for the questions. As we talked as a team here, we're excited about the opportunities for this year, and we're getting to work. So looking forward to talking to you all coming forward in the next couple of months. Have a good night. Operator: Once again, everyone, that does conclude today's conference. We would like to thank you all for your participation today. You may now disconnect.
Operator: Good day, everyone, and welcome to the Copart, Inc. Second Quarter Fiscal 2026 Earnings Call. Just a reminder, today's conference is being recorded. Before turning the call over to management, I will share Copart's safe harbor statement. The company's comments today include forward-looking statements within the meaning of the federal securities laws, including management's current views with respect to trends, opportunities and uncertainties in the company's industry. These forward-looking statements involve substantial risks and uncertainties. For more detail on the risks associated with the company's business, we refer you to the section titled Risk Factors in the company's annual report on Form 10-K for the year ended July 31, 2025, and each of the company's subsequent quarterly reports on Form 10-Q. Any forward-looking statements are made as of today, and the company has no obligation to update or revise any forward-looking statements. I will now turn the call over to the company's CEO, Jeff Liaw. Jeffrey Liaw: Thank you, Owen. Welcome, and thank you for joining our second quarter fiscal year 2026 earnings call. I'll begin with some brief remarks on trends in our insurance business before passing the call to Leah to provide a summary of our financial results. We'll then be happy to take your questions. On our insurance business. For the second quarter, our global insurance units declined 9% or 4%, excluding the effect of catastrophic units from a year ago. Our U.S. insurance units declined 10.7% for the same period or 4.8%, excluding those catastrophic units. The underlying drivers of these changes remain consistent with what we've discussed on our prior calls. First, shifts in policies in force and exposure levels across insurance carriers who themselves are experiencing differential growth rates. Softer overall claims activity driven by a consumer pullback in auto insurance coverage, all partially offset by continuing increases in total loss frequency. On the latter point, total loss frequency continues its inexorable rise, consistent with the long-term historical trends we've observed and discussed at great length. In the United States, total loss frequency was 24.2% in the fourth quarter of calendar year 2025, a slight 10 basis point uptick from a year ago. The year ago period, of course, does include the effects of Hurricanes Helene and Milton. It's notable that total loss frequency has increased over that period, nonetheless. Then when you step back a bit over a multiyear horizon, the upward trajectory becomes clearer still. Total loss frequency in calendar year 2015 was 15.6% in comparison to 23.1% in calendar year 2025. Against that backdrop, our focus remains on delivering superior long-term economic and service outcomes to our insurance clients. First and foremost, we maximize returns for our insurance partners. We believe our auction returns continue to reflect structural advantages of our marketplace and recent account wins for which we have empirical before and after returns data validates that position. As you know, industry-wide vehicle values have normalized somewhat from the elevated levels we observed during supply constrained -- supply chain constrained period of 2021 and 2022 as evidenced by Manheim indices and otherwise. We are nevertheless generating record average selling prices for our U.S. insurance consignors. As we discussed at great length on our first quarter call, we attribute this performance to the scale and diversity of our global buyer network, rising international participation, enhanced data-driven merchandising and the liquidity that comes from consistently finding for each vehicle we auction its highest and best use globally. The critical driver of long-term competitive advantage for Copart is that liquidity. We migrated first to an online-only auction in 2003 and have benefited from an almost 2-decade head start in comparison to the rest of the industry. In short then, we benefit from a growing base of bidders as evidenced in bidders per auction, bidders per lot, watch list additions per lot and so on. Our selling customers have also voted with their pocketbooks, entrusting us with more pure sale units than they ever have before, knowing our auction will achieve a full and fair market value. The ancillary benefit from that change and that evolution is that our sellers can themselves reduce their own internal administrative burdens by extension. As evidenced by marketplaces across a multitude of industries, liquidity begets liquidity. The fact that our auctions continue to drive strong returns and price discovery yields further growth by bringing new sellers to our platform and frankly, by enhancing the economic attractiveness of the total loss pathway for our insurance clients as well. Our strong returns are literally one of the critical drivers of rising total loss frequency in the industry. To that point, our U.S. insurance ASPs for the quarter increased 6% year-over-year. Excluding the effect of the catastrophic events from a year ago, our average selling prices for the U.S. insurance sector grew by 9% year-over-year, yet again outpacing industry trends. The second important element from our insurance carriers' perspective is cycle times, both from assignment to vehicle retrieval and from vehicle retrieval to vehicle sale. These are critical drivers of economic value and policyholder satisfaction for our insurance clients. To deliver excellent pickup times, we operate the largest tow network in the industry by a long shot, a unique combination of third-party subcontractors, owned trucks and employed drivers and what we call truck-in-a-box operators, who are independent third-party drivers who leverage Copart's purchasing and financing scale for their vehicles. All of these service providers benefit from Copart's best-in-class route density to optimize performance and cost. Finally, our Title Express offering, the process by which we obtain loan payoff balances and accelerate the retrieval of original titles, whether held by the banks or by individual policyholders, is by a factor of 5x or more the largest such platform in our industry. In many cases, we deliver cycle times 10 days better or more than the insurance clients can deliver on their own because we benefit from unmatched scale and the purpose-built technology platform that, that scale enables. On the specific question of claims activities, we talked at length about -- on our last 2 calls about trends we've observed in the insurance industry, including consumers paring back their coverage by foregoing collision coverage, raising their deductibles or both. These trends have continued in our most recent quarter, historical data does indicate over the long haul that these are more cyclical forces than they are secular. The last point I wanted to make was to shed some light on artificial intelligence and what it means as a critical tool for Copart specifically. We have deployed artificial intelligence at scale along multiple dimensions across our enterprise, including my own significant personal engagement in Quad code and other such platforms. We've observed, not surprisingly, an exponential monthly increase in use by our own in-house team of engineers. With approximately 1,000 full-time engineers across North America, Europe and Asia, we have by a healthy margin, the most robust and experienced bench of technology talent in the industry and the tech platform to show for it. Artificial intelligence is turbocharging their productivity day-to-day. We have also deployed our artificial intelligence in business analytics, document processing, our call for release processes, driver dispatch and so on and so forth. As one commercial example, 2 full years ago, we launched a total loss decision tool to the industry, which assists insurance carriers in making expedited total loss decisions with limited information, including, for example, a small sample of photos and otherwise. In every case, as we deploy this critical technology, we are appropriately respectful of the critical privacy and reliability considerations that our sellers will have as well as the business practices, legal and regulatory considerations of our insurance business partners specifically. We have already seen AI substantially increase our productivity across functions, and we will deploy it -- we will continue to deploy it to continue doing so. We also know that artificial intelligence will enhance the value proposition we can deliver to sellers and buyers at our marketplace over the long haul. With that, I'll turn the call over to our CFO, Leah, to discuss our second quarter financial results. Leah Stearns: Thank you, Jeff, and good afternoon to everyone on the call. I'll begin by walking through our financial results for the quarter, beginning with our consolidated performance, followed by a review of our U.S. and International segments. For the second quarter, consolidated revenue declined 3.6% year-over-year to $1.12 billion. The prior year included revenue from over 49,000 CAT-related vehicles. Excluding CAT, consolidated revenue increased 1.3%. Service revenue declined 4% and purchased vehicle sales decreased 1.4%. Revenue performance was driven by higher ASPs, which were up 6% on a reported basis and 7.1% excluding CAT, which were offset by lower unit volumes, which declined 8% globally and down 3.6%, excluding CAT. Global insurance units declined 9.3% or 4.1% adjusted for CAT, while global noninsurance units decreased 2.7%. Global inventory declined 7% from the prior year, while global assignment volume declined low single digit. Global gross profit decreased 6.2% to $492.8 million. The prior year included profit from the CAT units, and this quarter included a $6.8 million onetime expense accrual related to international VAT. Adjusting for these items, global gross profit increased 0.4% and global gross margin increased 178 basis points to 45%. Operating income declined 8.8% to $388.7 million, while net income was $350.7 million, down 9.5% from last year. And earnings per diluted share decreased 9.2% to $0.36. Turning to our U.S. segment. Total units declined 9.5% or 4.5%, excluding CAT and direct buy. Insurance volumes decreased 10.7% or 4.8%, excluding CAT, which are consistent with the claims frequency trends Jeff described a few moments ago. Dealer Services unit growth was 5%, while commercial consignment units, which are marketed through our BluCar channel, declined 11.8%, reflecting higher repair activity among our rental customers, while fleet and bank finance seller volume continues to grow at a healthy double-digit pace. In addition, as we continue to shift lower value units to our direct buy channel, reported U.S. purchase units declined 23.6% or just 8% on a normalized basis. As of the end of the quarter, our U.S. inventory had declined 8.1% from the year ago period. During the quarter, U.S. assignments declined low single digit from the prior year Purple Wave's gross transaction value growth of more than 17% over the last 12 months continues to significantly outperform the broader industry and reflects our strong performance in our expansion markets as well as growth in our enterprise accounts. U.S. total revenue declined 5.5%, but was flat excluding prior year CAT events. Fee revenue declined 5.6% and was also flat, excluding CAT, as lower unit volume was offset by an increase in revenue per unit. U.S. insurance ASPs increased 6% or 9% excluding CAT, and noninsurance ASPs increased 2%. U.S. gross profit decreased 7.2% to $430 million or 1.6% excluding CAT, and gross margin was 46.6%. Operating income was $341.5 million, down 9.2% year-over-year or 2.3%, excluding CAT and U.S. segment operating margin was 37.1%. Turning to our International segment. International units declined less than 1% or grew 1%, excluding prior year CAT events. Insurance units decreased 2.6% or 1% excluding CAT, and international noninsurance units increased 9.1%. We continue to see strong noninsurance growth across our diversified international footprint, including in the U.K. and Canada. Revenue increased 6.1% or 7.7% excluding CAT to $200 million, including a $13.4 million favorable FX impact. Service revenues increased 7.7% or 9.4%, excluding CAT, which was driven by a 7.6% increase in fee revenue per unit. International insurance ASPs rose 9%. Gross profit grew 0.9% and operating income was $47.2 million or a 23.6% operating margin. Finally, turning to our capital structure and liquidity. Copart remains in an exceptionally strong position. We ended the quarter with liquidity of approximately $6.4 billion, including cash and cash equivalents of $5.1 billion and no debt. We continue to generate robust free cash flow, which has increased 58% year-to-date. This is supported by disciplined capital allocation into assets, which position us to efficiently support our growth to serve both insurance and noninsurance clients while also delivering strong operational efficiency. In addition, during the second quarter, we began to repurchase shares of our common stock through open market purchases and have subsequently repurchased shares under a 10b5-1 plan through the month of February. Fiscal year-to-date, we have repurchased over 13 million shares for an aggregate amount of over $500 million. And with that, I'd like to thank you for joining the call, and we'll open it up for questions. Operator: [Operator Instructions]. And our first question comes from the line of Bob Labick with CJS Securities. Bob Labick: So Jeff, you talked a little bit about some of the macro factors, claims frequency and lower earned car miles we talked about last call and stuff, trending similarly to prior calls. What are the kind of -- what are the things you guys are watching to see changes that will change this trend line and get the industry volumes back to growth going forward? I know, obviously, total loss frequency will impact that as well. But excluding total loss frequency, what are the other kind of macro factors that we can watch and you're watching to get industry volumes back to growth? Jeffrey Liaw: Yes. Fair question, Bob. I think there is -- as you know, there's cyclicality in the auto insurance industry itself, which you'll see in the form of premium growth and contraction. You'll see in the form of combined ratios and so forth. And I think a good portion of the industry, as you know, had passed through finally with the approval of various regulatory bodies, rate increases over the course of the past few years, long after, frankly, the carriers themselves had experienced underlying cost inflation in the repair universe, labor and otherwise. So there's a lagging effect where it took them a while and which it took them a while to pass the rate increases through, and so today, they have now far healthier income statements, but also compromised growth as a result. I think historical trends or any guide, there are ebbs and flows in that regard and many or some -- some or many will begin reinvesting in growth and driving policy growth in the form of both marketing dollars as well as more competitive approaches to rates as well. So I think those are the kinds of things I'd look to as the consumer always weighs various -- their basket of goods and services purchased, I think more so than on average over the course of my time in the industry and over -- in comparison to Copart's own history, I think consumers have felt the pain more in the past year or so, relatively speaking, and have pared back their insurance coverage as a result. I think the numbers do bear that out. Bob Labick: Okay. Great. And then just one more for me, just changing gears a little. SG&A has been back to getting generally operating leverage have been flat after a period of time where you had growth for multiple reasons. One of them was the sales force buildup. So I was wondering maybe if you could just give us a sense of what you've learned from that sales force -- what you've learned from the buildup? What are the expected returns and outcomes from the larger sales force? And how have they been -- what are the successes and failures so far from that? Jeffrey Liaw: Yes, fair question, Bob. And I think it probably oversimplifying the picture to say it's merely the sales force itself for sure. We have invested in our commercial capabilities, as you described them, but also in product and tech. And along these other dimensions you've heard us talk about, whether it's the services we provide to the insurance carriers in the form of Title Express, the artificial intelligence back to tools and so on and so forth. So there's more to the picture than just that alone. But yes, we do believe it drives differential returns to us, both in the form of unit volume, better selling prices, better economics period overall. I don't tend to read too much into any given quarter or any given quarter's percentage change versus a year ago. I understand for a host of reasons why you and other analysts might, right? But we basically treat each expenditure as its own decision that needs to be warranted by the economics. Every investment we make is justified by the economics of this specific project itself. And so in the aggregate, there will be periods in which SG&A grows more than in others. I wouldn't have read that much into even the past few years as you described, just as I wouldn't read a whole lot into today's results either. The calculus remains the same, invest the capital on behalf of our shareholders as though it's ours because it is to generate profitable growth for the enterprise hard stop. Operator: The next question comes from the line of Craig Kennison with Baird. Craig Kennison: I wanted to ask about your land capacity needs. If you look at or project your volume for the next 1-, 5- and 10-year period and take into account faster cycle times that you've experienced, but also whatever market share dynamics are out there, how would you frame your need to invest in additional land capacity? Leah Stearns: Sure, Craig, I'll take that. Today, I think we are in an incredibly strong position relative to where we were, say, a decade or even longer ago. That has been a result of very disciplined and focused investment in the magnitude of several hundreds of millions of dollars per year. But we are still focused on where we want to be positioned 10 years from now. And that ultimately may require additional investments in land. Certainly, faster cycle times will allow us to use our land on a more efficient basis. And we take all of that into consideration as we look at individual assets, as Jeff said, even on the investment front, whether it's G&A or incremental land parcel, we look at it on a specific investment basis to ensure that it's adding capacity and capabilities for Copart to serve our customers in the future. So ultimately, we'll continue to use that same discipline and that same approach. I certainly think that relative to where we were, like I said it's at the outset, 10 years ago, we're in a much better position from a land ownership perspective than capacity, but we do anticipate continuing to invest in our portfolio on a disciplined basis to ensure that in a decade from now, we will be well positioned as well. Jeffrey Liaw: Craig, I'd add to that point that I think it was now April 2016, so almost exactly 10 years ago, we launched the -- what you remember you were here at the time, the 20/20/20 initiative in which we were going to acquire 20 facilities, expand 20 facilities in the course of 20 months in recognition that the industry was growing and that we were shorter on capacity than we should be. We've invested very aggressively over the decade since to develop both new capacity -- purchase new land to develop new and existing facilities and to frankly, buy out facilities that we had largely leased over the years. We recognize that long-term stewardship for the industry really requires ownership. Leasing means you don't ultimately control your ability to service the insurance industry. We want to ensure that we could do just that. Now sitting here where we are, as Leah just described in February of 2026, we are in a considerably stronger position than we were then. We now have dedicated catastrophic facilities, as you're well aware, in the many hundreds of acres of otherwise idle land in anticipation of storms. The one caveat I'd provide to you is that this is a dynamic puzzle, as you know, with industry trends and distribution of vehicles and population and so forth that land acquisition and development by its nature is a long lead time activity, right? So we can't wake up one morning and discovered that we suddenly need dramatically more land in the state of X and be able to respond accordingly. So we have to account for some margin, which we effectively do across the United States and invest accordingly. But for sure, as Leah said, we are in a far more robust position than we once were. Craig Kennison: Yes. And then, Jeff, just a follow-up on your AI commentary. Certainly, it's been a big topic, especially in the last week. But could you maybe share with us where you see any disruption risk to what Copart does and where you feel well defended by your moat as it stands today? Jeffrey Liaw: I think we're always appropriately paranoid about disruption and the directions that it could come from. So we are always acutely aware of the need to disrupt ourselves and to inject the technology in all the places where we could enhance productivity first, but also deliver a better experience still to our sellers and buyers. So there are certainly a range of different folks, different purveyors of vehicles today, some that have been in existence for decades, others of which are more upstart by nature, virtual only, et cetera. I think the fundamental moats that ultimately define who we are, still are physical storage capacity for sure, a global liquid buyer base for sure, a highly recognized online auction platform, deep regulatory knowledge across 50 states, across a multitude of countries right? that is in and of itself a barrier entry as well. And then as for where those disruptive dimensions might be on the technology front, we're hell bent on making sure that we do it first. So I would say I don't see a specific threat on the horizon, but I'm also -- we're always looking over our shoulder as well. Operator: The next question comes from the line of Bret Jordan with Jefferies. Bret Jordan: I've a question about market share dynamics. Do you think it's becoming more price competitive as the other player in the space doing, I guess, either rebating or discounting or pricing delta to you that would explain what seems to be a differential in unit growth. Obviously, you've got the title transfer product and the cycle times and the foreign buyer base that would suggest that Copart might be a better outcome. But I guess how do we think about the differences that we're seeing in units recently? Jeffrey Liaw: Yes. The unit growth phenomenon, I think, is described -- is explained in part by just differential growth rates in the insurance industry itself, right, which is to say if we didn't win any accounts from others in the industry and they didn't win any from us. There still is a delta in the growth rate of our underlying customers themselves that can explain a "market share shift, " right, without literally losing one account one way or the other. That said, I think your point -- your second point is the important one, which is that our industry has always been price competitive for the years that I've been here and many years before that. Probably for the entire existence of Copart, we have competed against others in the industry on the basis of price. Today, we are increasingly competing on the basis of delivered economic outcomes, which is a far better lens through which to view the Copart business. It's our responsibility as an enterprise, our commercial team's responsibility and my personal responsibility to make sure that we convey that message to our customers and to the industry that they understand it's not just the X that you are paying to Copart or to your alternative providers, but it is the delivered economic outcome, which is, first and foremost, overwhelmingly so the selling price for the vehicle that you're selling at the platform. Secondarily, the cycle times, which have both direct economic consequences in the form of storage, for example, and indirect consequences in the form of policyholder satisfaction and the like. And on a tertiary, maybe further down still than that, the fees that you're paying us or to others in the industry. It's our job to convey that message. It's a complex nuanced one. We have to make sure we have the right audience for it and the data behind it. But I would say, in virtually every case in which we have run the test empirically, the data bears out of that thesis that the returns that we generate dwarf any other differences that you could perceive in the full stack P&L. Bret Jordan: Okay. Great. And could you -- I might have missed this. Did you give us an update on how CDS has been doing? Leah Stearns: Yes. CDS had a nice quarter. They were up 5% year-over-year in terms of unit volume. Bret Jordan: Okay. Is that growth with various dealers? Or is that comp store -- is that comp dealer growth? Are you expanding it to a broader user base? Or are you growing within the current user base? Leah Stearns: We're always growing the user base. Operator: Our next question comes from the line of John Healy with Northcoast Research. John Healy: I wanted to spend a little bit of time just on accident frequency. For the last 3 or 4 quarters, I feel like it's been a hot button debate. And knowing Leah and Jeff, I'm sure you guys don't stop thinking and working on this viewpoint. I would love to spend a little bit of time there. Just any updated thoughts about ADAS view of kind of the algorithm that investors might be able to use to think about the nuances of growth. Obviously, the volume numbers are down big, but there's some explainable reasons in terms of policies in force that you noted. But I was just hoping we can try to get some comfort with thinking about that overarching volume number for the industry, put aside whatever you or IAA are doing. Just what does this business really grow, do you think in the next 3 to 5 years? Jeffrey Liaw: Fair question, John. And I would say it has been true for probably all of our adult lives, if not our entire lives, that accident frequency, generally speaking, declines year-over-year. That has always been true because cars are designed better and they're safer over the years. In the 1970s and the 1980s, we saw for the first time the proliferation of anti-lock brakes. Eventually, we'd see traction control and so on. Today, of course, the safety technologies are arriving in the form of forward autonomous braking modules, lane departure warning, sensors, rear cameras and so on and so forth. So accident frequency has declined always, plus or minus year-over-year. I think there's one blip from -- if I have my years straight from 2013 to '15 or '14 to '16, some short period of time in which that wasn't true. I think cell phone proliferation, smartphone use accelerated in a way then it was unusual in [ mice ] or standards. So accident frequency declines, it always has. And as a result, the number of cars involved in collisions declines generally. The reason it historically has happened very gradually is because the relevant population of vehicles is in the hundreds of millions in the U.S. and the number of new vehicles we'll ship in a given year, depending on the state of the economy, is 15 million or 14 million or 18 million, right? The vehicle park of 300 million or so in the U.S. can turn over only so fast. So the changes in accident frequency end up being gradual. And the tailwind in the business is that even if the number of cars that are in accidents decline, the number of cars that are totaled in absolute terms still grows because there are more -- enough total loss frequency increases to more than offset the decrease in accident frequency. Based on what we know now, I don't think that calculus changes. I think there are certainly folks in the autonomous driving universe who may have a different view, but we continue to believe that the algebra is still the same. There is an installed base of vehicles that will collide. There is an awkward transitional period also as many of those cars don't have the newest and best technology while cars are on the road that do. The cars that do are often driven by drivers who are still more distracted than they otherwise would be. We've talked about that thesis some in the past as well, the notion of risk homeostasis and folks tolerating more risk as they drive as they depend still more on technology. So the interplay of all of the above still leads us to believe that the number of cars that are totaled industry-wide is likely to grow over the medium to long term. That's still the calculus as we see it. To your question also on accident frequency, the reality is that a lot of the data often happens in arrears, right? The [ police ] reported crashes, fatalities, the most objective such indicators sometimes are published on a lagging basis. But based on everything we track on a regular basis, our fundamental thesis remains unchanged. John Healy: Got it. That's helpful. And just on capital allocation, obviously, you're being pretty direct with the repurchase visibility now. But is this the right tool for you guys? Do you see yourselves just using open market purchases? Or do you look to kind of evaluate maybe something more formal or conceptual in terms of accelerated program or something like that? Or do you think this is just the right approach for right now? Jeffrey Liaw: Yes. Over the course of my tenure, and I think over the course of Copart's 40-something year history, we've used a range of different tools including open market purchases as we've recently executed all the way to more structured Dutch tenders and the like. We always evaluate the full range of tools by which to execute the strategy. I think on the margin, I think that's ultimately more rounding error than it's not. I think [ what you've ] seen us conclude is that it made sense to buy Copart shares back as a way to distribute capital back to shareholders to distribute some of the cash flow that we had generated over the years back to shareholders. We thought this was an opportunistic time to do so, and this is the mechanism we chose to use in the moment. As you might imagine, the calculus, the various inputs into that kind of decision can change as to the magnitude or the form of the buybacks that it might take. I think it's difficult to predict in the vacuum what that means as we look forward. Operator: The next question comes from the line of Jeff Lick with Stephens Inc. Jeffrey Lick: Jeff, I know you're always thinking about long-term stuff. I was wondering if we just think about the next year that's in front of us, year or 2, things that are changing. Obviously, you've got an insurance cycle, rates are coming down and marketing dollars going up, so they'll be more focused on profitability and lease returns that will be ramping up, potentially a lot of those lease returns will be EVs. And then obviously, we've talked about the interesting kind of transition where you'll have some autonomous in the hands of a select few. I'm just curious if any of these things you view affecting your business in some kind of nonlinear way? And then just as a follow-up, I'm just curious since you guys did make the decision to buy back shares and you're very deliberate in how you do everything, why did you view now is the time to do it? Jeffrey Liaw: Sure. To tackle those questions separately, I don't know that the catalysts you described, whether it's a mix of technologies, lease returns and so forth, could have an effect on the business and the trajectory of the business in the near and medium term. From our vantage point, it doesn't change the trajectory over a 5- or 10-year term, insofar as that would inform how we choose to invest in physical capacity, technology, our people, business process, artificial intelligence. It doesn't per se change what we do day-to-day, right? I think we are always most keenly focused on the metrics and the forward indicators that would guide decision-making, right, as opposed to what might guide near term, what might influence near-term results, right? It's more the decision-making that we're focused on day-to-day. As to your question about the share buybacks, there's no particular witchcraft or anything magical to it. I think it's a function of what general valuation multiples are and where interest rates are, our own views of Copart relative valuation in comparison and also the general long-term perspective that we return capital to shareholders via buybacks, right? So the fact that we're doing them is, in some respects, inevitable. I think we plus or minus said that in the past. The fact that we're doing them right now is a function of all of the aforementioned. So there's nothing unusual. No aspects of that decision that you would find particularly creative, right? It's the ordinary calculus that would go into a decision like that. Jeffrey Lick: And then just one last quick follow-up. As you think about units inflecting positive, is there any particular catalyst that you look for? Or will it just be the law of negative numbers getting less negative? Is there anything that you're looking for that says, hey, this might drive an inflection back to positive unit growth? Jeffrey Liaw: Yes. I think the question is probably almost too general, right, meaning we have so many different geographies and businesses, and we continue to drive growth in the BluCar segment. You heard Leah's color about the rental car universe being -- having a slightly different approach this quarter. There's cyclicality that's not necessarily tied to the macro economy when it comes to rental car dispositions. And the same is true, frankly, for repossessions from the financial industry or fleet management from corporate clients and such. But nonetheless, taking a step back, our growth in the noninsurance world has continued. In the insurance universe, I think you've heard us describe the under insurance or insurance purchasing behavior of consumers as a cyclical matter. We believe that's true. We believe the historical numbers would back that up. As for the shifts of policies among different carriers, we believe that to some extent, that's cyclical as well, right, that we do see growth ebb and flow across any individual carrier. We may be in a uniquely or unusually Copart adverse moment in time in that respect, right, that some of the carriers that we are strongest with, have not grown as much in the course of the past 12 or 24 months. But over the long haul, we view those trends as often more cyclical than they are secular. Operator: [Operator Instructions]. The next question comes from the line of Jash Patwa with JPMorgan. Jash Patwa: Just wanted to start with a question on the headwind from rising mix of uninsured customers. Jeff, as you've noted previously, these vehicles are still getting into accidents, but maybe flowing through alternate channels. With Copart having deemphasized the low-value units from some of these channels, has this led to an additional pressure on Copart's overall volume growth relative to the broader salvage industry, including the noninsurance channel? And I have a follow-up. Leah Stearns: Jash, I'll take that. I don't think so. Most of the lower value units are units that are less than $1,000 in pre-accident value. So they are very old nondrivable what the industry would consider junk units. I think the units that we are seeing flow through on the uninsured or underinsured side, are likely ending up in impound yards. They're likely ending up retained with the driver, but they then need to find a way to either get it repaired or dispose of the vehicle. So ultimately, some of those vehicles end up at our cash for cars business. Some of them may end up being auctioned or sold through an impound yard. So there are other avenues in which those vehicles could be disposed of. It just so happens that it's a highly fragmented market, given that it's the consumer's decision to determine where that ultimate vehicle goes if it's not going through the insurance channel. Jash Patwa: Understood. That's helpful. And then I just appreciate your perspective on the heavy equipment expansion. How has this initiative performed relative to your internal expectations a couple of years ago when Purple Wave was integrated? While the industry cycle has been challenging, curious like what areas do you see as a room for improvement? And given the significant consolidation opportunity in the sector, what has kept Copart on the sidelines from pursuing more M&A activity over the past couple of years? Jeffrey Liaw: Jash, fair question. I'd say that the -- at the time we made the investment in our Purple Wave platform, I think we had not -- we had not fully appreciated the disruption that the tariff complex would introduce into the industry and the uncertainty that it would inject into the industry for heavy equipment, right? It has caused something of a medium-term paralysis as folks didn't know if they should be selling because prices might go up or they should be buying because prices might go down. It has introduced some friction into an industry that had previously been more liquid. And I think we've seen that from other providers in the space, publicly traded and otherwise. On your question of how to grow the business, we have invested in our platform organically in the form of hiring more sales talent, again, investing in the tech platform, investing on the product side as well. And we've grown that business well, growing that business at a rate that outpaces the industry generally. M&A is always a lever available to companies like ours, of course, with our capitalization and capabilities. It's not our general inclination, right? We have been long-term company builders and have built Copart with the exception of one very meaningful M&A transaction some decades ago in the form of New England recovery. We've by and large, grown the business organically. That is certainly the most durable way to create value for our shareholders long term. The fastest way to grow territory is, of course, to acquire companies, we're most interested in building durable value as opposed to simply building terrain. So I think that's our approach by default, if there arise compelling M&A opportunities in heavy equipment or otherwise, we certainly would pursue them. But you probably know from having followed us over the years that our bar is very high, right, that in the 10 years I've been here, we've only done a tiny handful of acquisitions collectively representing a very tiny percentage of enterprise value. That hurdle will always be high, which is not to say we wouldn't do it. But I just want you to understand the cultural bias, which is to grow and to grow organically. Jash Patwa: Understood. That's very helpful color. And if I could sneak one more in here. Could you double-click on the sequential moderation in service revenue gross margin in the quarter and whether there were any onetime factors that may have impacted it during the quarer? Leah Stearns: Sure, Jash. I had mentioned in my prepared remarks that there was a $6.8 million onetime tax accrual in the International segment. If you look at the ex-CAT margins, I think you'll see that year-over-year on a gross margin basis, we performed quite well. And then on the international side, there was that onetime item. Operator: There are no further questions at this time. I'd like to turn the call back to Jeff Liaw for closing remarks. Jeffrey Liaw: Thank you for joining us, and we'll talk to you next quarter. Have a good afternoon. Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.
Operator: Good day, and welcome to the CarGurus Fourth Quarter and Full Year 2025 Earnings Conference Call. Please note, this event is being recorded. I would now like to turn the call over to Kirndeep Singh, Vice President and Head of Investor Relations. Please go ahead. Kirndeep Singh: Good afternoon, and thank you for joining us. With me on the call today are Jason Trevisan, Chief Executive Officer; and Sam Zales, President and Chief Operating Officer. We will be making forward-looking statements, which are based on our current expectations and beliefs. These statements are subject to risks and uncertainties, and our actual results may differ materially. Information concerning those risks and uncertainties is discussed in our SEC filings. We undertake no obligation to update forward-looking statements, except as required by law. Please refer to our press release and our investor presentation on the Investor Relations section of our website for a reconciliation of GAAP to non-GAAP measures. I'll now turn the call over to Jason. Jason Trevisan: Good afternoon, and thank you for joining us. 2025 was a pivotal year for CarGurus. We accelerated product innovation, expanding how we serve dealers and consumers as a marketplace, software and data company, drove significant growth and profitability and returned capital through disciplined share repurchases. Revenue from continuing operations grew 14% for the full year, our second consecutive year of mid-teens growth and adjusted EBITDA from continuing operations grew 25% year-over-year. Wallet share expanded, retention reached its highest level in 3 years, new dealer additions accelerated and consumer traffic growth translated into increased lead volume. Internationally, we delivered 27% year-over-year revenue growth, driven by accelerated dealer acquisition, wallet share expansion and strong lead growth. Our performance was supported by faster, more prolific AI-driven innovation, which increased product velocity and strengthened our differentiation among both dealers and consumers. We launched more new products in 2025 than in any prior year, embedding data and intelligence directly into dealer workflows and consumer decision-making. Key launches included dealer solutions like PriceVantage and new car exposure and consumer features like CG Discover and Dealership Mode. We continued bolstering our support of dealer workflows across inventory, marketing, conversion and data. This product innovation further cements our role beyond lead generation into daily operating workflows, expanding our addressable market into adjacent software and data categories. Early traction validates demand, engagement and differentiation. Our consumer launches expanded our role across the shopping journey from research through in-dealership decision-making and purchase, driving higher intent engagement and higher converting leads. Our broader portfolio of consumer functionality, combined with the largest inventory selection and a foundation of trust and transparency reinforces our leadership position as the most visited automotive shopping platform in the U.S. We also executed with discipline. We made the prudent decision to wind down CarOffer while retaining its sourcing technology and data to strengthen our inventory products. Those learnings have informed better pricing and inventory technology solutions that both drive high incremental margins and reinforce the value and performance of our marketplace. Now I'll walk through our progress across our 2025 Drivers of Value Creation. Driver number one, expanding our suite of data-driven solutions across dealers' workflows to help them drive more profitable businesses. In 2025, our most critical dealer metrics achieved impressive growth. Consolidated QARSD grew 8% year-over-year. Global paying dealer count increased by 2,399, Add-on product adoption rose nearly 25% year-over-year, engagement and platform usage grew and retention strengthened. Underpinning the products and intelligence we deliver to dealers is a growing body of data that we're translating into higher fidelity insights through AI. On average, last year, we ingested approximately 0.5 billion first-party shopper signals each day, translating them into real-time consumer demand, pricing and inventory insights our dealer customers are leveraging for measurably improved performance. In 2025, dealer data insights became central to dealer workflow with 60% of global paying dealers using these insights across their operations. What began as validation of the value dealers ascribe to our data is now embedded in how they make more profitable data-driven decisions. Building on this foundation, we launched PriceVantage in October, our first specialized software product designed to move dealers from passive data consumption to action-oriented pricing decisions. Early results demonstrated accelerating inventory turnover and increasing VDP views. Engagement has been strong with nearly 80% of adopting dealers active weekly on the PriceVantage suite of products. Compared with their prior usage of our free pricing tool, PriceVantage users execute 66% more price changes and log more sessions per day, all clear indicators of deeper reliance on data-driven pricing workflows. Collectively, these efforts embed CarGurus more deeply into dealer operations and decision-making, driving stronger adoption, more consistent action and clear evidence that our intelligence-led solutions improve efficiency and profitability. Driver number two, meeting the evolving needs of car shoppers by powering a more intelligent and seamless journey. In 2025, we strengthened the consumer side of our marketplace by increasing our reach and the quality of shopper engagement. Traffic grew faster than our primary competitors year-over-year, reinforcing our position as the #1 most visited automotive marketplace. Nearly half of monthly visitors shopped exclusively on CarGurus, indicating a high degree of reliance on the platform. That behavior translated into results, fueled by lead growth in the U.S., CarGurus-led sales grew year-over-year. And according to a 2025 Clarivoy study, CarGurus influenced 55% of all attributed vehicle sales. We believe that scale and influence create a stronger foundation to introduce new consumer experiences that deepen engagement and generate richer signals. Our generative AI search experience, CG Discover, continued to scale. Unlike other tools that simply repackage search results, Discover responds in real time and acts as the decisioning copilot using live marketplace inventory, deep automotive expertise and demand signals to quickly and flexibly answer consumer requests. Discover traffic grew 3.5x and leads grew 10x quarter-over-quarter. Depth of engagement also strengthened with average session time up nearly 20% and Discover users spending 4.4x more time than regular visitors. Each interaction generates richer demand and pricing signals, strengthening our data and intelligence layer. We also extended our trusted user support into later stages of the purchase process. CarGurus was the #1 car shopping app in 2025 by downloads, monthly active users and time spent, giving us scale at the point of purchase. Dealership Mode now live across all consumer app users moves our role beyond discovery and further into the transaction funnel by assisting consumers on dealer lots. In just the first few months, thousands of shoppers on average open Dealership Mode on dealer lots each day. 80% of app users who visit a dealership lot have not submitted a lead in advance. That means 4 out of 5 high-intent shoppers using our app on dealer lots are not attributable to us. We believe that Dealership Mode creates a clear opportunity to increase previsit lead submissions and drive measurable traffic to dealers. These investments delivered greater transparency and broader support to consumers for a more seamless shopping experience. We entered 2026 with a more differentiated consumer experience and a stronger foundation to meet shoppers where they are in their journey. Driver number three, enabling dealers and consumers to complete more of the transaction online, streamlining the final steps of the deal. We scaled digital deal to 13,500 dealers globally, adding nearly 3,800 dealers year-over-year. This growth reflects growing consumer demand for and dealer reliance on workflows that move more of the transaction online and generate higher intent prospects. We embedded high-value transactional capabilities earlier in the shopping journey, including expanded financing, trade-ins, deposits and appointments. Digital Deal leads with high-value actions increased 78% year-over-year in 2025 and represented approximately 70% of Digital Deal leads, while financing-related leads grew 86% year-over-year, reflecting deeper shopper progression into the transaction and stronger purchase intent. Overall, Digital Deal leads convert up to 4.7x higher than standard marketplace leads with even greater lift for shoppers located farther from the dealership, delivering higher quality and higher converting shoppers to dealers. Collectively, these changes are shifting more of the transaction online while preserving the in-person experience that the vast majority of consumers still want. While 86% of buyers ultimately see the car in-person, 83% say they want to complete more of the shopping process from home according to our 2025 Consumer Insights Report. By meeting that demand, we improve consumer engagement and offer more transaction support for dealers. That's especially important given the nature of the car buying journey, which remains a high consideration decision and often the second largest purchase a consumer makes in their lifetime. Shoppers want to research and compare options, understand pricing, availability and trade-offs and still negotiate price and test drive vehicles in- person before committing. Confidence and trust matter at every step of the journey. That reality continues to shape how we invest in our platform, brand and own channels and how we show up as discovery paths evolve. Following the performance of the 2025 Big Deal campaign, we are extending the campaign into 2026 with product-led spots highlighting dealership mode and CG Discover. We believe these experiences bring clarity and confidence to the car shopping process and reinforce the trust consumers place in CarGurus as the #1 most visited automotive marketplace. We expanded our impressions by 50% year-over-year and direct and owned channels are our fastest-growing traffic sources with direct visits up 16% year-over-year and the app contributing 34% of leads. We're also leading automotive marketplace competitors in the emerging AI-driven discovery landscape. While AI remains a small share of overall traffic today, in Q4, CarGurus generated more AI-driven traffic than our closest competitors, and these users convert at higher rates, submitting leads at nearly 50% higher rates than traditional SEO in Q4. To date, AI traffic has been additive to our overall acquisition mix, increasing visibility rather than displacing existing channels. AI is reshaping discovery across many categories. In automotive, the shift has been more measured. However, we are not waiting for it to accelerate. We are expanding AI-driven traffic across both paid and nonpaid channels. On the paid side, we've been early adopters of new AI-powered tools with Google, Bing and Meta with promising initial performance results. We plan to test emerging AI search ad formats, including those introduced by OpenAI as they become available. On the nonpaid side, we have strengthened and will continue to evolve technical platform best practices and scaling proprietary content so it is discoverable across LLM environments, not just traditional organic search. We believe our depth of experience and success in audience acquisition across many channels, combined with a disciplined test-and-learn approach positions us well as this landscape evolves. While AI may shape how shoppers begin their journey, it does not change what they need in a major purchase, clarity and confidence. Even when journeys start in AI environments, consumers still come to CarGurus to validate listings, confirm availability and make data-driven decisions. As discovery paths evolve, platforms with the deepest inventory, broadest dealer coverage, most comprehensive retail data and highest ROI will be best positioned to remain central to the transaction. We believe our market leadership, data depth and dealer integrations position us to continue serving that role. Stepping back, 2025 was an outstanding year for CarGurus. We delivered strong financial results while deepening dealer and consumer reliance on our products across more steps in the car buying and selling process. More decisions are informed by our data and AI, more workflows run through our platform and more of the car shopping journey now takes place with CarGurus involved. It was also a year of strong product innovation. The many products we launched in 2025 have shown promising signs of engagement and scaling, giving us confidence in our investments in new product innovation. For example, we expect the monetized dealer products we launched in 2025 to grow approximately 15x in 2026 and achieve 8-figure revenue levels and exciting exit rates. Entering 2026, our platform is firmly embedded in dealer operations and now serves a larger TAM than a year ago. With disciplined execution continued investment in AI-driven innovation and proven products to support both our customers, our focus remains straightforward. We intend to execute with rigor, build products to strengthen the dealer workflow and consumer journey while further differentiating CarGurus. Before turning to our results, I want to address 2 reporting updates. First, we completed the CarOffer wind down in the fourth quarter of 2025. We have presented CarOffer's financial results as discontinued operations in our consolidated financial statements for all periods presented, except for the statements of comprehensive income, redeemable noncontrolling interest and stockholders' equity and cash flows. Unless indicated, the fourth quarter and full year 2025 results we will be discussing on this call relate to our continuing operations. Second, beginning in the fourth quarter of 2025, we report our financial results as a single segment following the CarOffer wind down. Now let me walk through our financial results, followed by our guidance for the first quarter and full year 2026. Fourth quarter revenue grew 15% year-over-year to $241 million at the high end of our guidance range, driven by strength in our subscription-based listings revenue as well as overperformance in advertising and strength in our international business. Full year 2025 revenue was $907 million, up 14% year-over-year, our second straight year of mid-teens revenue growth. In the fourth quarter, U.S. QARSD grew 8% year-over-year, and we added 1,357 paying U.S. dealers year-over-year. We continue to expand our dealer base while taking greater wallet share, driven primarily by upgrades and broader adoption of add-on products with modest contribution from like-for-like price increases and higher lead quantity and quality. Robust revenue growth continued in our international business with fourth quarter revenue up 32% year-over-year and full year revenue up 27% year-over-year, driven by new dealer adds along with a modest tailwind from favorable FX. International QARSD grew 16% year-over-year in the fourth quarter. International dealer count growth surged 14% year-over-year to 8,360 dealers. I will now discuss our profitability and expenses on a non-GAAP basis. Fourth quarter and full year non-GAAP gross profit was $223 million and $842 million, respectively, representing 14% year-over-year growth in each period. Fourth quarter non-GAAP gross margin was 92%, down about 90 basis points year-over-year. For the full year, non-GAAP gross margin increased by about 40 basis points to 93%. Fourth quarter non-GAAP adjusted EBITDA grew 13% year-over-year to $88 million, above the midpoint of our fourth quarter guidance range. Adjusted EBITDA margin was about 60 basis points lower year-over-year at 37%. Full year 2025 non-GAAP adjusted EBITDA grew 25% year-over-year to $319 million, and adjusted EBITDA margin rose by approximately 310 basis points year-over-year to 35%. Fourth quarter and full year non-GAAP operating expenses totaled $141 million and $547 million, up 15% and 10% year-over-year, respectively. The increase in the fourth quarter reflected higher sales and marketing expense and investment in new product innovation, as mentioned earlier. As a result of the CarOffer wind down, we incurred and paid $13.3 million in total expenditures, of which we incurred and paid $5.4 million in onetime cash restructuring charges attributable to discontinued operations. This was at the low end of our previous $13 million to $15 million wind-down estimate. Fourth quarter and full year GAAP net income per diluted share attributable to common stockholders was $0.56 and $1.96, up 24% and 62% year-over-year, respectively. From 2023 to 2025, this measure has grown at a 56% 2-year CAGR. Fourth quarter and full year non-GAAP net income per diluted share attributable to common stockholders was $0.63 and $2.28, up 17% and 31% year-over-year, respectively. We ended the year with $191 million in cash and cash equivalents, an increase of $12 million from the end of the third quarter, primarily driven by higher adjusted EBITDA, partly offset by $57 million in share repurchases in the quarter. In 2025, we repurchased about $350 million in shares, completing our 2025 share repurchase program. Since the fourth quarter of 2022, we have repurchased about $721 million in shares or about 25% of our outstanding shares. Additionally, I'm pleased to share that our Board has authorized a new $250 million share repurchase program, which will be available through December 31st, 2026, highlighting our commitment to return value to shareholders. I will now turn to our guidance for the first quarter and full year 2026. We expect our first quarter revenue to be in the range of $240.5 million to $245.5 million, up between 13% and 16% year-over-year, respectively. For the first quarter, we expect our non-GAAP adjusted EBITDA to be in the range of $72 million to $80 million, up between 5% and 16% year-over-year, respectively. As a reminder, our guide reflects our continuing operations absorbing approximately $1 million in ongoing quarterly CarOffer expenses following the wind down. We expect first quarter non-GAAP earnings per share to be in the range of $0.52 to $0.58 and diluted weighted average common shares outstanding to be approximately 94 million. Turning to the full year. We expect 2026 revenue to grow in the range of 10% to 13% year-over-year. We expect full year non-GAAP adjusted EBITDA margins to compress approximately 1.5 to 2.5 percentage points in 2026 relative to 2025. We believe that the adjusted EBITDA margin implied by the midpoint of first quarter guidance is a reasonable proxy for the first 3 quarters of the year, with fourth quarter margins expected to be higher due to seasonality. This reflects increased investment in product, technology and development as we plan to continue our accelerated pace of AI product introductions for both dealers and consumers. With that, let's open the call for Q&A. Operator: [Operator Instructions] Our first question comes from the line of Ralph Schackart with William Blair. Ralph Schackart: Jason, with the strong guide outlook of, I think, 10% to 13%, maybe talk about sort of the visibility and durability of that growth rate. I think it's sort of a key investor question, sustaining these high growth rates in the marketplace business. And then maybe if you could add some perspective as you layer on new products with this reinvestment cycle that you'll go through in 2026, maybe provide some perspective on how those new products be additive to growth over the long term. Jason Trevisan: Sure. Ralph, so the strong growth, as you described it, is a function of a lot of things. I would say at the beginning or sort of at the core, it's a function of the fact that on our 2 growth levers of QARSD and new dealers across all our markets. So globally, we have good visibility. We have no customer concentration. And so we can look at the levers, and we have a number of levers that we have been executing really well on that have continued to drive QARSD and are also now driving pretty consistent and nice dealer adds. And so whether it's new products or upsells or growing lead volume and quality, growing connections, you heard us talk about how Dealership Mode is now showing dealers that we're sending them even more consumers that were not submitting leads. And so sort of at the core, our value prop just continues to strengthen. And it also strengthens in absolute terms. It also strengthens in relative terms compared to our competitors who are not growing at those paces -- yes, at those rates rather. But then on top of that, we also have new products. And so you -- we mentioned a couple, and we called out some of the products that were launched in 2025 and gave some perspective and parameters around how those are going to contribute. But we also have a number of products before we even get to that, that have continued to grow and differentiate us, some of which we monetize, but many of which we don't. But what they do is they drive retention and they drive engagement, and that allows us to grow our dealer base and have more pricing power. And so all of that is healthy and strong. And between U.S. and international, we have long runways in both those areas. In terms of new products, so the big thing for us is moving into software and data across the dealer workflow verticals of inventory, conversion and data in addition to marketing. And that's opening up -- that's about doubling our TAM. And you heard us, hopefully, from our remarks, you glean the fact that while they start small, they're growing quickly and they're showing really strong engagement. One of the levers of QARSD is new products, and that has continued to strengthen as a lever for us. And as we invest more in technology and product, we see that as a nice long-term lever for us. Operator: Our next question comes from the line of Chris Pierce with Needham & Company. Christopher Pierce: I know you had some stats in there about new products and 8 figures and -- but I just want to understand, is PriceVantage part of the full year revenue guide? Or is that still such a small portion? but I guess I just want to understand if the new TAM is in the revenue guide or something that is further down the road or what's the best way to think about it? Jason Trevisan: Yes. No, it's certainly part of it because we've launched it. And so we've in our operating plan. And new car exposure was also launched in '25. So that's also included, and that's part of our marketing vertical. So the new TAM that we talk about, the doubling is in the non-marketing verticals, and we're obviously just scratching the surface of it, but we think there's huge potential because, again, as a reminder, all of the products that we build in those areas are reinforced by and reinforce our marketplace. And so it's not like with PriceVantage d, we're not just another start-up offering a pricing tool to dealers. We are obviously established, but we're a company that has a relationship with the dealer who's coming to them and saying, we have the most data, we have the most intelligence. Here's pricing software and here's what it will do to your performance on our marketplace. Nobody else can say that. As the largest marketplace, that carries a lot of weight. And so the same applies with conversion, the same applies with data. Christopher Pierce: Okay. And then just as a follow-up, how should we think about this new margin range? Is this a year of investment specifically as you land in this new TAM and kind of want to have momentum in new product as you kind of try to penetrate this new TAM? Or is this sort of a new normal and we should think about you guys consistently kind of wanting to plow money back into the business to leverage your leadership position? Jason Trevisan: I don't know if it's binary. I mean I think we absolutely want to do the latter that you said. We want to continue investing in product. In marketplace models, it tends to be a winner take most. Scale matters. Scale helps a deeper, broader platform, drive stickiness and engagement. And so we're not in it to -- and I know you didn't say this, we're not in it to milk for margin. We're in it to sustain long-term growth and drive healthy margin. And so the comment or the guide rather on '26 and the range that's specifically not guiding beyond that. That's not saying it's a new normal nor is it saying it's onetime. But I would say that the most helpful perspective maybe to hear from us on it is we're trying to optimize for long-term growth, customer stickiness and a healthy margin business. And if you want to look at Rule of 40 type metrics, we're performing well there the last couple of years and expect to next year as well -- this year as well. Operator: Our next question comes from the line of Naved Khan with B. Riley Securities. Naved Khan: Yes. So I had a question on just this -- the margin outlook for 2026. And I get the -- your thinking behind investing for growth even as you deliver on a least rule of 40 or higher than that. But curious in terms of the areas you're going to invest in between product and marketing, is it going to be more skewed towards marketing? And maybe within that, you kind of mentioned about investing in paid agentic channels. Is that a part of it? And how should we expect that expense to grow? And then the second question I have is just around the price advantage. Can you remind us on the pricing for this product? And if you're kind of marketing it in a tier in a higher tier? Or is this a separate add-on? And what's the recent -- what's the latest kind of uptake on this? Jason Trevisan: Sure. In terms of where we're investing, so some of this will be a repeat from last quarter. But -- so in 2025, a lot of our investment growth, let's say, was around sales and marketing and account management. As we look at '26 and even in the back half of '25 in our marketplace business, but into '26, we are investing much more behind the momentum in building new products. And so that's coming in the form of investing more in product, technology and development. We are -- and I'll come back to that in a second. So that's sort of bucket 1. In '26, bucket 2 is international and bucket 3 is account management. And so really focusing on the first bucket, though, we have become much more prolific in introducing new products. We have gotten a lot of efficiency from AI. And so we're taking that efficiency and translating it into productivity. And if you think about the fact that we are moving from not only introducing products and marketing, but moving into entire other verticals at the dealer, inventory conversion, how they convert the leads that we send them and the customers that we send them and then market and data intelligence, we're standing up new software products and new data products, and we're going into new areas of the dealer. And that is not a small lift that to compete well there, you have to build robust products. And so -- it's a very product growth-driven mindset that we have and early measurement is through adoption and engagement and then pretty rapidly it's through things like retention and revenue. In terms of PriceVantage price point, we haven't given specifics on it. What we've shared last quarter is still the -- what we're sharing now, which is we're testing different price points. It is sold a la carte to your second part of your question. And so it's not bundled in. It is a separate price point product. You do need to be a marketplace customer to get it, but it's sold a la carte. You also mentioned paid AI LLM-based marketing. That's well, AI sourced audience is still very small for us. We are positioned the best there by third-party measurement. So we're there as that channel grows. But most of them don't have paid models yet. And so virtually all of the traffic that we're getting from LLMs today is organic traffic. Operator: Our next question comes from the line of John Colantuoni with Jefferies . John Colantuoni: I have 2. First, when thinking about your outlook for revenue for the quarter and the year, can you talk to your expectations for the relative contribution of Dealer Count and QARSD? And second, I believe you mentioned that retention reached a 3-year high. Can you talk about what's helped drive improved dealer satisfaction? And how does that elevated retention fit into your outlook for customer gains and monetization? Jason Trevisan: Sure. I'll start, John, and then Sam will talk about the retention piece. We don't break out the revenue outlook between QARSD and rooftops. I think if you look at the last couple of years, you'll see pretty consistent trends. What I will say is what we've talked about quite a bit in the past is the relation -- and you can see this in our investor deck, the relationship between those 2 metrics. When we grow rooftops more quickly, that has a dampening effect on QARSD even if all of the underlying levers of QARSD are just as strong as they otherwise would have been. And so we don't -- we obviously have a lot of models and benchmarks and internal metrics that look at those 2 metrics. But from an external perspective, we optimize to and communicate about MRR, monthly recurring revenue and then actual revenue. Sam, do you want to talk. And so yes, and as part of all of that, retention is a key ingredient. One of the best ways to grow rooftops is to retain as much of your installed base as you can. And so Sam will talk about some of those factors. Samuel Zales: Thanks, John, for the question. Really proud of that retention. You know that our focus with our sales and account management teams is new business growth from the existing base and then retention. It's all part of what we call net monthly recurring revenue. It's happening because, number one, the ROI is clear to our customers. When you look at lead growth, both quantity and quality, we're in an advantaged position, and we are producing a tremendous set of results. And you've seen lead growth in both our global markets, U.S. and Canadian and U.K. markets have been phenomenal. We've added, as Jason said, this account management function. What we've done specifically on that one is added this dealer performance partner group. What they do is come from an industry background. They're retail professionals who join the CarGurus team and then go in and share best practices across our leading national providers all the way down to best practices at a small independent dealer. That kind of investment has made massive changes to the lead management practices our dealers are following, and they're, in turn, growing their close rates even further than where they were previously. And then finally, you embed in that the new software and data tools we're providing and you suddenly become a profit maximization engine for our dealers. So you look at that and say, as dealers have said, PriceVantage is advantaged in the marketplace because you are #1 in consumer demand signals for me. And number two, you have more inventory in your sites, you can help me price to maximize my profitability. That, plus the data we're providing in dealer data insights literally makes you a part of the operating system at dealerships. And I think that's the biggest reason you're seeing us today with the record retention of our customer base. Operator: Our next question comes from the line of Brad Erickson with RBC Capital Markets. Bradley Erickson: I guess 2 for me. One, when you think about kind of the content provided to the LLMs, your content, I mean, how should we think about kind of the moat there and maintaining the direct relationship with the customer just philosophically? And then second, the monthly uniques in the U.S. have really inflected kind of in the past 3 or so quarters versus '24 that was maybe a little bit more flattish, plus or minus. Can you share just kind of what's been driving that higher growth here in the monthly uniques in the U.S. Jason Trevisan: Sure, Brad. It's Jason. I'll take the content to the LLM. So LLMs are a new form of search, obviously. But at the end of the day, they are a form of search, which is not sort of -- behaviorally, it's very different from traditional search. But structurally, it's not very different from traditional search. And so consumers are looking for guidance. They're looking for direction. They're looking for answers. And it's a question of can the search engine provide a sufficient enough answer for them to take the next action they need to? Or do they need to go to a specialist. And ultimately, we are seeing and we feel and see from our research, what we're seeing in the ultimate data as well that a small but growing percent of consumers are starting at the LLMs, and they are using that as a starting point, and then they are coming to us to gain the confidence and the trust and the validation and the context and the workflow that they need in order to go through the shopping journey. And so we are taking an approach, which is we want to make sure we're positioned well there because it's clearly a growing channel. And so we are sharing our data with LLMs in a controlled way. We're giving them access to certain data, not all data. We are helping them to create a good experience for the consumer because we have the most data in the industry, and we're able to give them the sort of keys to that content or which content we decide to give to them. But then the experience that they get there is a fraction of what they get on our site. And so we're very conscious about the totality of the consumer experience, which is not a one and done. Typically, this is a multi-month experience for consumers. And so it's about the data, but it's also about the experience and the context. And just as we're a company that's now about 20 years old, and we've adapted through many iterations in technologies, and each one is unique and AI is certainly unique. But as it's gone from SEO to SEM and social has risen and video has risen and app has grown in phone and e-mail and text and chat and mobile versus web. I mean, we've adapted through all of that and continue to deliver a really good service. So in terms of traffic trends, Sam, do you want to talk about it, and I can add if helpful. Samuel Zales: Brad, thanks for the question. We're really proud of 2 aspects that are driving that kind of traffic growth for our business. The first is the consumer experience and continuing to invest in that, particularly with AI at the center of that. Number two is broadening our reach to consumers in different elements of their purchase cycle. So moving back to research and decision-making as well as the purchase process, as you've seen with products we've launched and our brand campaign is taking us there. I'm really proud of the Big Deal campaign. We just announced this week that we launched our newest Big Deal campaign for TV and online and social advertising. You're going to see more from us on that. And that highlights Discover, as Jason talked about, our AI-driven, very differentiated conversational search tool as well as Dealership Mode, which we talked about as well. So I think the 2 things you're seeing from that are: one, app downloads and monthly active users and traffic and leads coming from that for us as a very important own channel for us, really important that, that comes directly to us. And number two is our direct traffic up 16% because those brand campaigns have reached a broader audience in the marketplace and then taking them down through Discover or Dealership Mode on their app and making them real live purchasing customers for our dealers to see with full attribution. We're really proud of that growth. Operator: Our next question comes from the line of Andrew Boone with Citizens Bank. Andrew Boone: I'd like to follow-up on the last question. And what I'm trying to get at is the proprietary information that's available to you guys. As I think about certainly franchise dealers, but I really want you to focus on kind of the independents. Can you talk about the long tail of what may be available to CarGurus that won't be able to be scraped or picked up by an agent in the future that really does make your information proprietary rather than what could be built by an LLM in the future? And then as I think about your own AI products and AI consumer mode with Discover, can you help us understand whether that's improving conversion? Or how does it actually change the consumer action on the site as it relates to improving financials or leads or whatever you want to highlight? Jason Trevisan: Sure. And the second part of your question was specific to Discover. Is that right, Andrew? Andrew Boone: Yes, sir. Jason Trevisan: Yes. Okay. So on the first part, -- and I mean, we can talk in terms of indie dealers, but I think it's a pretty similar answer to both. I mean I would first start with we have really deep relationships with over half the market of dealers, and we have relationships with tens of millions and are visited by tens of millions of consumers every month, and we have a relationship with them. And both sides of that marketplace, if you will, have trust in us and have history with us. And so yes, the data may be the keys to the kingdom, but there's also all of the infrastructure that goes around it in the form of relationships. In terms of getting more tactical, I guess, we have a -- that has been crafted over many, many years, an understanding of what the consumer wants to know and needs to know in shopping for a car. And we have brought that to an experience that includes things like IMV and a deal rating and a dealer rating and understanding collaborative filtering and what other shoppers have shopped for, and we have personalization that creates a good sort order, the most relevant sort order for a consumer. We have data that we're catering to dealers who are using that data to perform their businesses better. And so from a data and actual data perspective, I would say it's like a system of competitive advantages that it's when you bring it all together that it really starts to sing. And then we could also choose and a number of marketplaces are choosing this too, we could choose to cut off access to certain parts of our data. And we may do that. I mean this is obviously an extremely dynamic environment right now. And so we're watching things every day as to how to approach it. But I think of it as there's both sides of relationship, there's trust and there's the totality of the workflow in the context. And then maybe it might be these custom indices that we've done like IMV and Deal rating, but it's the belief in those. And you're increasingly hearing that somebody can build an agent or there may be an agent that goes and performs a task or get some information. But if there isn't trust in that and an ability to verify and validate, then it's not that useful. And for a purchase is considered and big as this, a consumer absolutely needs that trust and confidence. For Discover, and this is, I think, another worthwhile angle to mention, which is like we're also not sort of sitting on our hands here ignoring AI in our own products while the world develops quickly on AI. So Discover is a good example of that Dealership Mode is a good example of that. I would say the key things that Discover is doing is, number one, it's getting us access to a higher funnel customer. Historically, if you didn't know what type of car you wanted, we really weren't that useful to you. We would send you to some filters and would -- it would be a clunky search experience. Now we're able to be extremely useful to people that don't know what type of car they want that may not even know the make model trim ontology at all, and we can help them find that. So that's number one. Number two is we are helping them get to a better answer for what they're looking for. And that's because it's conversational and it's colloquial and it has memory and is personalized and is not confined to the filters and the ontological structure. And so it allows people to ask for things like larger wheels or shinier hub caps that they -- the filter didn't exist for that they can now get to. So number two is it helps them get to a better answer. Number three is it engages them more. And so we're seeing multiple interactions. And I think that ultimately leads to them having more confidence when they then connect with a dealer. And so adoption is growing. Traffic grew 3.5x. Leads were up 10x quarter-over-quarter. And so clearly, we're finding an audience for it and they're finding engagement. And then we're closely watching how those leads convert once they get to the dealer. But our -- like a lot of things in our business, we have found that the more information you give a consumer, the more qualified they become as a lead. Operator: Our next question comes from the line of Rajat Gupta with J.P. Morgan. Rajat Gupta: I just had a couple of quick ones. You mentioned earlier, Jason, that the industry is consolidating towards fewer providers over time. I'm curious if you can give us any update on that, how that trend has progressed? Has that accelerated in any meaningful way recently? What are you baking in, in your outlook in terms of that shift in the industry? I'd love to hear your thoughts. And I have a quick follow-up. Jason Trevisan: And Rajat, consolidating. Rajat Gupta: I mean the dealers are consolidating towards like fewer marketplace options. Jason Trevisan: Yes. So I mean, the stat that we've given, which may be a couple of quarters dated now is that it used to be, I think, dealers on average would subscribe to 3-plus marketplaces, and that now is down to sub 2. I think it was 1.8 or 1.7. And so that's like a self-reported dealers are sharing that. You'll also hear dealers when you talk to them, they will talk about the need to streamline their partners and their vendors. And that's across many areas of their business, not just consumer marketplaces. And so that's sort of another way to triangulate into the theme or the trend anyway. And then I just -- I mean, you just look at the spend and the wallet share and where the wallet share is going. And we have continued to outpace market growth, which means we're gaining share. I do think there's growth in the market, penetration of dealers of digital marketing among dealers relative to offline or traditional marketing continues to grow. So I think we're in a growing market for sure, but we're certainly -- we're not in a 14%, 15% growth market. And so we're definitely taking share there. And I also think our -- especially over the last year to 2 years, our pace of innovation has accelerated, and that's creating a better and better consumer experience as evidenced by Discover, Dealership Mode, a number of things, and that continues to grow our leadership position. Rajat Gupta: Understood. And a quick follow-up. We were at [ NADA ] we have these -- we have a lot of like new and upcoming DMS providers, cloud-based and also some of the legacy ones moving from single-tenant to multi-tenant. I'm curious, like is any of this helping with this consolidation, making it easier for you to penetrate just given you have a little more advanced tools and tech internally. I'm curious if any of that is driving this market share shift at all? Jason Trevisan: I don't think a proliferation of start-ups is driving -- is driving acceleration consolidation. I would say that we are -- have -- among the many things we've accelerated recently, one area is integration with other technology providers. And that's both been a push and a pull. We've been pulled to them by them seeking our data, knowing that we're the largest marketplace. And we've been pushed to them by dealers who say, I love CarGurus. I use your data all the time. I love XYZ the other provider. I really wish you 2 would work together. And so through partnerships and integration, we are becoming more intertwined with the leading providers or the providers of the future, which is a service to our customers. Operator: Our next questions come from the line of Ron Josey with Citigroup. Jamesmichael Sherman-Lewis: This is Jamesmichael Sherman-Lewis on for Ron. Two, if I may. First, great to see the traction with DDI and PriceVantage in the 8-figure revenue level target for monetized dealer products. But at a higher level, how are you balancing monetizing these newer analytics via subscriptions versus passing on greater value to dealers, particularly as we think about newer offerings like the instant market value model coming online soon? And then I have a follow-up. Jason Trevisan: Yes. It's a -- that is a very -- we could talk for hours about that. And so there's not a simple answer. What I would say is that as our data grows, I guess. But as the uses of our data grows in the form of DDI, which would be more insights and intelligence in the form of products and informing products like PriceVantage, we are having to get certainly more sophisticated and think more broadly about how to price, package, bundle, deliver, take to market, onboard, et cetera, our customers, which is why we've invested in account management, by the way. And so there's not a silver bullet. There's not even really a single formula for when to bundle, when to offer freemium, when to give away, when to charge a la carte. But what we're trying to do is really, we're just trying to grow engagement because what we've shown is as dealers engage more with our products, they perform better on our platform. And so it's us doing some art and science every day, every month as we're rolling out products to look at what are the behaviors and what do we think is going to drive long-term engagement. Jamesmichael Sherman-Lewis: Great. I appreciate the color. My follow-up, I know we've hit on the margin trajectory a few times on this call. But could you add more color on relative investment intensity across product offerings, brand investments, international expansion or other areas? Any way to rank order the magnitude here as where you might lean in more this year? Jason Trevisan: It's what I said before that number one is in product and tech; number two, international; number three, account management. Operator: Our next question comes from the line of Tom White with D.A. Davidson. Wyatt Swanson: This is Wyatt on for Tom. I'd like to hear more about international ambitions over the course of 2026, given that you're the #2, 3, 4 player in your international markets. What are you doing this year to continue grabbing share from your competitors internationally? Samuel Zales: Thanks, Wyatt. It's Sam. I'll take the call. Not 3 or 4, we're #2 and fast gaining on #1. So sorry to give that specificity. These were businesses that if you haven't heard of it before, they were small, slow growing and unprofitable, and now they're sizable, fast-growing and profitable. That's happening because we are driving tremendous lead growth and lead quality. We're ranked #1 by our dealers in ROI in those markets against all of the other players that have existed. We're actually coming up on our 10th year anniversary in both markets, Canada and the U.K., very proud of what we've accomplished over those years. And I think what you've seen in the -- both the dealer adds in international and the QARSD growth is a combination multiplier effect that says there is a market out there for many of these dealers, if not all of them, to say, and these are the calls I'm fielding day-to-day. We want to diversify our spend from the partner who we worked with in the early years, who's the largest player in the market, and it's not being effective for us anymore. And we don't like some of the things that have happened in those markets. You may have read about the U.K.'s fourth quarter initiatives that one of our competitors made to try to force products to our dealers and price increases that led them to say, we're going to move over to other players in the marketplace. We'd like to look at the player that gives us more ROI. So it's opened up many more of those conversations for net dealer adds and the growth in our QARSD. And I think you don't get 27% growth in an international market in the fourth quarter without that kind of momentum. So I -- we feel very strongly about it. Jason just mentioned that -- it's the second biggest area of investment for our business. We're differentiating. So think about the products we're bringing to market here in the U.S. with Discover and Dealership Mode. Those are differentiators for consumers and dealers that our competitors have not built. So our thought is we will hope to build a product road map that's similar to the one we built here and then bring it to international markets. That's a road map for us. So thank you for asking. We're really excited about the growth and the potential. Wyatt Swanson: Got it. Yes, that's fair. And that's really helpful. And on the topic of international, could you maybe quantify the EBITDA drag related to international expansion that's reflected in the margin outlook for the full year? Jason Trevisan: Yes. We don't break it out. So as Sam mentioned, there -- we're one segment now. And as Sam mentioned, there high-growth profitable businesses. And the stats you heard in the script on Q4 give a good sense of the growth. So that's the extent of the detail we can give. Operator: Our next question comes from the line of Joseph Spak with UBS. Unknown Analyst: It's Alejandro on for Joe. Maybe could you help us sort of disaggregate the QARSD growth for the year for pricing versus the addition of new products and how that's compared to sort of year prior? Jason Trevisan: '25 versus '24? Samuel Zales: It actually does. Jason Trevisan: Pricing is towards the [ bot ] -- unit pricing is one of the weakest levers -- or one of the least strong levers because we don't pull it very hard, frankly. So up-leveling is number one, upgrades rather, adoption of add-on products is number two. And then the bottom half are price increases and lead quantity and lead quality. And then there's a number of things that we continue to add to the products that are free, which support these things like listing upgrades and even price increases, I suppose. And so it's not like we're trying to squeeze water from a stone. We're actually putting more value in the product to drive those. Unknown Analyst: Understood. And then maybe just as a follow-up, like given the high level of investments that you're expecting, like how should we think about the capital allocation repurchases going forward? Jason Trevisan: How should you think about the stock repurchases you said? Unknown Analyst: Correct. Jason Trevisan: I mean -- well, the high investments going forward, we gave a sense of what our margins would be. And I think if you looked at our margins -- EBITDA margins are still extremely strong compared to benchmarks. And if you look at our investment in things like technology and R&D, we're also right in line. So I guess, high is a relative comment or a trend-based comment, but not necessarily a relative comparative one. In terms of share repurchases, we announced a $250 million new program. And so I would think about that being the potential for it. And the way we think about it is we think about investment in the business, which goes into our EBITDA calculations and output. We think about M&A, which we're always evaluating. And then we think about returning capital to shareholders, and that's the share repurchase. Operator: Our next question comes from the line of Marvin Fong with BTIG. Marvin Fong: Just a housekeeping question. I just wanted to double-click on the statement you made about new products reaching 8 figures for the 8-figure revenue level, you said. So first part, is that for the total of 2026? Or do you think you can actually hit 8 figures in any given quarter? And then kind of relatedly, just how should we think about the trajectory of revenue growth as I sort of think about these new products? Do you -- is the upper end of your guidance -- revenue guidance imply that you could exit 2026 still at double-digit growth? Jason Trevisan: It's a full year. It's in reference to full year. the 8-figure comment. And we haven't commented on exit rates. I think if you -- given the Q1 guide and the full year guide and looking at historical, you can get a sense for how you think they might play out quarterly, but we haven't spoken to quarters to give you exit rates. Operator: Go ahead. You're fine. Jason Trevisan: Sorry. Okay. Yes. So we knew that was the end. So thanks, everyone, for your time this evening. Thanks so much for the questions. We're extremely proud of a really strong 2025. So huge thanks to our team and our customers, and we're extremely excited for 2026 and the momentum behind us. Thanks, everyone. Have a good night. Operator: Thank you. And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, ladies and gentlemen, and welcome to the GRAIL Fourth Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that this conference call is being recorded. GRAIL Investor Relations, please begin. Unknown Executive: Thank you, operator, and thank you all for joining us today. On the call are Bob Ragusa, our Chief Executive Officer; Aaron Freidin, our Chief Financial Officer; Josh Ofman, President; Sir Harpal Kumar, Chief Scientific Officer and President, International; and Andy Partridge, Chief Commercial Officer. Before we get underway, I'll remind you that we'll be making forward-looking statements based on current expectations. It's our intent that all statements other than statements of historical fact, including statements regarding our anticipated financial results and commercial activity will be covered by the safe harbor provisions for forward-looking statements under federal securities laws. Forward-looking statements are subject to risks and uncertainties. Actual events or results may differ materially from those projected or discussed. All forward-looking statements are based upon currently available information, and GRAIL assumes no obligation to update these statements. To better understand the risks and uncertainties that could cause actual results to differ, we refer you to the documents that GRAIL files with the SEC, including GRAIL's most recent quarterly report and upcoming annual report. This call will also include a discussion of GAAP results and certain non-GAAP financial measures, including adjusted gross profit and adjusted EBITDA, which exclude certain specified items. Our non-GAAP financial measures are intended to supplement your understanding of GRAIL's financials. Reconciliations of the non-GAAP measures to most directly comparable GAAP financial measures are available in the press release issued today, which is posted to our website. And with that, we turn to Bob. Robert Ragusa: Good afternoon, everyone, and thank you for joining us to review results for the fourth quarter and full year 2025 and discuss recent business updates. 2025 was a year of significant commercial growth for GRAIL, and we have shared a number of exciting developments so far in 2026. We issued a press release this afternoon with top line results from our NHS-Galleri trial. We observed a substantial reduction in Stage IV cancer diagnosis, increased Stage I and II detection of deadly cancers and a fourfold higher cancer detection rate, outcomes that matter for patient care. While there was a trend towards reduction in combined Stage III and IV, the trial did not meet the primary endpoint of statistically significant reduction. These data show the benefit of multi-cancer screening with Galleri and provide the strongest evidence for the recommended annual screening interval. Harpal will talk through the top line NHS-Galleri trial results shortly. In our earnings press release, we also noted full results from all 35,000 participants in PATHFINDER 2 and were consistent with data presented from the first 25,000 participants presented at ESMO last year. We anticipate presenting full data from both NHS-Galleri and PATHFINDER 2 in mid-2026. Based on strong results from the NHS-Galleri and the PATHFINDER 2 study, we also announced today that we are moving forward with a planned expansion of our field sales and medical team. We believe this expanded engagement will enable us to continue to drive commercial momentum. To recap quickly on the strong commercial performance for Galleri in 2025, which we shared in January, the U.S. Galleri test volume grew 36% to more than 185,000 Galleri tests and U.S. Galleri revenue grew by 26%. Our prescriber base is now approximately 17,000 providers, up 30% from prior year. Galleri's growth in 2025 was driven by both breadth and depth of prescribing. We have been in the market with the Galleri test now for more than 4 years. And from the launch of Galleri through December 31, we have sold almost 0.5 million Galleri tests. We remain on track for continued commercial growth in 2026 with new and expanding partnerships, including digital health opportunities and further integration into health systems. We are focused on expanding awareness of multi-cancer early detection and Galleri's important performance and capability differentiation. We anticipate growing patient, provider and employer conviction in Galleri as other performance, safety and clinical utility data sets are read out. A few weeks ago, we announced that we completed our PMA submission with the FDA. The PMA marks a critical step forward, making Galleri available to more people and advancing early detection to provide a significant public health benefit. The submission represents years of focus, disciplined work to achieve design, development and validation of Galleri in large, diverse screening populations. Josh will share more about our PMA later in this call. Additionally, earlier this month, the Nancy Gardner Sewell Medicare Multi-Cancer Early Detection Screening Coverage Act became federal law. This establishes a Medicare coverage pathway for FDA-approved multi-cancer early detection tests. As a leading MCED developer, it is our privilege to stand with legislators, patient advocates, clinicians and researchers who have championed the cause. I'll now hand it over to Harpal to discuss top line results from the NHS-Galleri study. Harpal Kumar: Thank you, Bob. We're very pleased to share top line results from the NHS-Galleri trial. I want to begin with a huge thank you to the more than 142,000 participants who took part in this study as well as to NHS England, the cancer prevention trials unit at Queen Mary University of London, cancer alliances, investigators and the clinical teams whose dedication made this landmark trial possible. Detailed results from the NHS-Galleri trial will be submitted for presentation at the upcoming ASCO meeting in Chicago in late May. The design of the NHS-Galleri trial was informed by a large body of evidence showing that across multiple cancer types, reductions in late-stage disease are strongly associated with reductions in cancer mortality. While we did not observe a statistically significant reduction in combined Stage III and IV cancers through the trial, which was the primary endpoint of the study, there was a favorable trend after the prevalent screening round, and we saw compelling evidence of Galleri's benefit. Comparing the two arms of the study, Stage IV diagnoses in the prespecified group of 12 deadly cancers decreased with each year of sequential Galleri screening, with a greater than 20% reduction in the second and third rounds. Similar reductions were observed across all cancers. The reduction in Stage IV cancer diagnoses is a critically important outcome, which we believe can lead to more effective intervention for patients, particularly given the substantial and growing arsenal of effective treatments for many Stage III cancers. In fact, there is a dramatic improvement in survival for many types of cancer at Stage III as compared with Stage IV. These results are the first time a multi-cancer early detection test has demonstrated population scale stage shift and reduction in metastatic disease in a randomized trial. Screening with Galleri increased the overall cancer detection rate fourfold compared to standard of care and identified substantially more Stage I and II cancers in types that are typically detected at late stage. Screening with the Galleri test also resulted in a substantial reduction in the number of cancers detected clinically through emergency presentation, which are associated with significantly higher mortality and health care costs. And these benefits came with a strong safety profile. No serious safety concerns were reported in any of the approximately 70,000 participants who received the Galleri test across 3 rounds of testing. This is the first randomized multi-cancer early detection data set and is unprecedented in scale. Additional analyses are underway to better understand these rich data. As with any study, it's important to evaluate the results in the context of the design and execution. One observation is that we saw higher-than-anticipated incidence of Stage II cancers in this trial as compared with prior study experience. The number and distribution of cancer stages across screening rounds suggests the potential for a stronger effect with longer follow-up as data matures. And so we're planning to extend data collection by 6 to 12 months, and we'll reevaluate the impact with more mature data. In both the U.S. and the NHS data, the time to diagnostic resolution appears to improve over time as physicians gain experience with the Galleri test and diagnostic workup. Our learnings from this trial enrich our understanding of cancer biology, multi-cancer screening and the importance of implementation, particularly in ensuring rapid and thorough diagnostic investigation after a positive test result. Our mission is to detect cancer early when it can be cured. And we're delighted that these results show the potential for more patients to receive treatment with curative intent and have more time with their family and friends. We believe this is the best chance to bend the cancer mortality curve at population scale. As a reminder, the data we're sharing today is limited to our top line analysis. We plan to submit the detailed results for presentation at ASCO later in the year. I'll now pass it to Josh Ofman to review more about our recently completed PMA application. Joshua Ofman: Thank you, Harpal. At the end of January, we completed the submission of the final module of our PMA application to the FDA for Galleri. We're extremely proud of this pivotal milestone in advancing early cancer detection and addressing unmet needs in cancer screening. From the beginning, GRAIL has been completely committed to rigorous scientific and clinical evaluation to ensure that multi-cancer early detection testing is supported by strong data. The PMA submission is focused on test performance and safety results from 2 large registrational studies, including the first 25,000 participants in the U.S.-based PATHFINDER 2 study with 1-year follow-up and data from the prevalence screening round or the first year of the NHS-Galleri trial, the largest and only randomized controlled intended use trial of any MCED test. The PMA submission is also supported by a bridging analysis to compare performance of the version of Galleri used in our registrational trials to the updated version that has been submitted to the FDA for premarket approval. The results from the first 25,000 participants enrolled in PATHFINDER 2 were presented in October at the ESMO Congress. And we've now completed the analysis of the full 35,000 participants and the results are consistent. The performance data from the prevalent screening round of the NHS-Galleri study, including metrics focused on test performance, clinical validation and the clinical benefit of detection at Stages I through III, including a reduction in Stage IV were also included to further enhance the data set and provide additional data on more cancers to the FDA. As a reminder, the FDA designated the test as a breakthrough device in 2018. The PMA was submitted at the end of January, and we are anticipating about a 12-month review period. To discuss our fourth quarter financial results, I'll pass it off to Aaron. Aaron Freidin: Thanks, Josh, and good afternoon, everyone. I'm pleased to present our results for the fourth quarter and the full year of 2025. Fourth quarter results were strong with revenue of $43.6 million, up $5.3 million or 14% as compared to Q4 2024. Total revenue for the quarter is comprised of $42.3 million of screening revenue and $1.3 million of development services revenue. Development services revenue includes services we provide to biopharmaceutical and clinical customers, including support of clinical studies, pilot testing, research and therapy development. Full year total revenue was $147.2 million, up 17% from full year revenue in 2024. Full year 2025 revenue was comprised of $138.6 million of screening revenue, up 28% over full year 2024. U.S. Galleri revenue in 2025 was $136.8 million, up 26% over 2024 and in line with our guidance of 20% to 30% growth. Revenue also included $8.6 million of development services revenue, a decrease of 49% from 2024. We are seeing continued demand for the Galleri test, and we sold more than 57,000 tests in the fourth quarter and more than 185,000 tests for the year. Screening revenue of $42.3 million in the fourth quarter was up 34% as compared with the fourth quarter of 2024, primarily based on an increase in sales volume. In 2025, we began leaning into the price elasticity we see in the market and are finding success in expanding access with our discounting programs. Development service revenue in the fourth quarter of 2025 was $1.3 million. Net loss for the fourth quarter of 2025 was $99.2 million, an increase of 2% as compared to Q4 2024. Net loss for the full year was $408.4 million, an improvement of 80% as compared to the full year 2024. Net loss in 2024 included goodwill and intangible asset impairment of $1.4 billion. In addition, net loss for 2025 and 2024 included amortization of Illumina acquisition-related intangible assets of $138.3 million. Non-GAAP adjusted gross profit for the fourth quarter of 2025 was $23.1 million, an increase of $5.2 million or 29% as compared with Q4 2024. Full year non-GAAP adjusted gross profit was $73.6 million, an increase of $15.8 million or 27% as compared with the full year of 2024. Primary drivers of the increased margin were revenue mix and efficiencies of scale related to increased Galleri volume. Adjusted EBITDA for the fourth quarter of 2025 was a negative $71.8 million, representing an improvement of $12.2 million or 15% as compared to Q4 2024. Adjusted EBITDA for the full year 2025 was a negative $320.6 million, an improvement of $163 million or 34% as compared to the full year 2024. We ended the quarter with a cash position of $904.4 million. This balance included $436 million in proceeds from both our private placement of equity in October as well as our ATM equity issuance program in November and December. As a reminder, we have shared in the past our long-term gross margin target of 50% to 60% at scale. We are making good progress on attaining these margin targets. And as we saw in the third quarter, volume efficiencies make a big difference. In connection with our supply agreement with Illumina, we are obligated to pay them a royalty on revenues. Those royalty payments are suspended until December of 2026. When resumed, we expect to pay Illumina a royalty in the high single digits, subject to certain terms and perpetuity on net sales generated by our products on revenues in oncology. We expect that these payments will make an impact on our gross margins beginning in 2027. Given strong performance in the self-pay market and the momentum we are seeing with positive data readouts, we are reiterating the guidance we shared in January today of Galleri sales growth of 22% to 32% and cash burn for the full year of 2026 to be no more than $300 million. Our cash runway extends into 2030, and we are well positioned to navigate growth over the next several years as we pursue critical milestones toward broad access. Bob, back to you for concluding remarks. Robert Ragusa: Thanks, Aaron. To close, our teams at GRAIL continue to do great work advancing towards our vision of population scale multi-cancer early detection. We are approaching our 10th anniversary as a company this March, and we are energized by recent milestones and achievements, including the consistently strong performance we are seeing for Galleri across our studies. We presented positive registrational clinical study results for the first 25,000 participants in the PATHFINDER 2 study in October and today shared top line results for the NHS-Galleri trial and the full 35,000 participant PATHFINDER 2 study. We're looking forward to data presentations for both studies later in the year. The business continues to grow, and we are excited about expanding our partnerships with digital health companies and health systems to continue to expand access to Galleri. We have now completed our PMA submission with the FDA and new federal law provides the pathway for Medicare to cover FDA-approved multi-cancer early detection tests. We're in a strong financial position with more than $900 million in cash as of December 31st. I'd like to thank each of our employees for their incredible commitment and dedication to our mission to detect cancer early when it can be cured. We'll now turn the call over to question and answer. Operator, please go ahead. Operator: [Operator Instructions] Our first question will come from Subbu Nambi with Guggenheim. Subhalaxmi Nambi: Can you confirm that you don't expect the FDA approval decision to be impacted by the miss of the stage shift endpoint? We know the FDA PMA package only included the prevalent screening round of NHS, but reasonably reviewers at the FDA will see this outcome, right? Robert Ragusa: Yes. Thanks for the question, Subbu. So as you know, the FDA will look at the effectiveness and safety of our submission. And so with the data that we have both from PATHFINDER 2 as well as the current -- the prevalent round of the NHS-Galleri, they'll be looking at that data. So there's not an obvious correlation or obvious impact between the final results of the NHS-Galleri study and the FDA's view on the test. Subhalaxmi Nambi: And one follow-up. Is there any read-through from missing the NHS-Galleri stage shift endpoint to the Medicare REACH study, which has a primary endpoint of incidence rates of Stage IV cancers, right? And does that have any impact as Medicare -- as you look to getting some coverage? Robert Ragusa: Yes. Thanks again. Josh, do you want to take that? Joshua Ofman: Sure. Yes. No, you're absolutely correct. So the primary endpoint of the REACH study is a Stage IV reduction, which is what was observed quite strongly in the NHS-Galleri trial. So I think the only read-through is that we believe that it's critically important and clinically important to reduce the incidence of metastatic disease in Stage IV cancer, and that's a really important clinical endpoint, and we're looking forward to assessing that in the REACH trial. Subhalaxmi Nambi: And Josh, what if we don't reach the statistical significance there, would that have any impact? Or you're saying because it's 50,000, the study is not powered enough? Joshua Ofman: Yes. No, we believe the study is properly powered. It will have a control group, and we believe it is properly powered for that type of study, given the effect size that we know and the cancer detection rate that we're seeing. So we're very optimistic about observing that effect, but we need the study, obviously, to read out, and that's going to take some time. Operator: Your next question will come from Kyle Mikson with Canaccord Genuity. Kyle Mikson: Hopefully, you can hear me. I guess first one would be, how does the results here kind of impact your strategy to expand Galleri to other countries in terms of data generation and rollout plans? How would that differ now? And then maybe you could just touch on what are next steps in the U.K. Have you had any discussions with them so far? Or is that later on? Robert Ragusa: Yes. Thanks for that, Kyle. So we do think as we outlined in the releases that strong reduction that we saw in Stage IV cancer, the fourfold improvement in cancer detection rate compared to standard of care, the absolute number of Stage I and II cancers increasing and the reduction in emergency presentation. We think all of those will be important as we go to other countries and the discussions with them. Obviously, other countries will -- each one will evaluate those elements independently. But we do think that's going to be a strong data set to go out there. So I think that's going to be very useful. Maybe I'll pass it over to Harpal to comment on the U.K. and the impact there. Harpal Kumar: Yes. Thanks, Bob. I mean just adding to what Bob said first, I mean, we think this is a really strong data set that demonstrates compelling clinical benefit. We know that there is now a growing arsenal of very effective treatments for many types of stage -- many types of cancer at Stage III. And so the potential benefits that we're talking about here from the NHS-Galleri study are going to be applicable worldwide. And so I don't think it has any -- certainly no negative bearing on our international approach. Indeed, I would hope it has a positive bearing on our international approach. So we feel really, really very pleased with the overall set of results. With respect to the U.K. specifically and the NHS, yes, look, we've just got these data. We haven't started having those conversations yet. My anticipation would be that they would want to see the full results before engaging in meaningful conversations, and we expect to have those at ASCO. Kyle Mikson: And then I hate to nitpick, but if you're expanding the sales force, if the results didn't meet the endpoint, I guess, like what's the thought process there. You're very bullish on the future here. I'm just curious what's driving that. Robert Ragusa: Yes. So again, if you think about the things we saw in terms of reduction in Stage I and II, the -- excuse me, the increased Stage I and II cancers, and the reduction in Stage IV cancers, those are things that we've looked at within the U.S. that are very, very relevant to clinicians. And maybe to give a little more color, I'll pass it over to Andy, our Chief Commercial Officer. Andrew Partridge: Yes. Thanks, Bob. Based on the market research studies that we've done and also consistent customer feedback that we've received from early adopting customers, the NHS-Galleri results that we've released today, we believe, based on everything we've heard and done will be both compelling and meaningful to our customers in terms of the magnitude of both the Stage IV reduction that we've disclosed and also the increased cancer detection rates of fourfold. And we believe that's going to increase both the depth and breadth of prescribing. Hence, we're expanding the provider sales force territories in the U.S. Operator: Your next question will come from Doug Schenkel with Wolfe Research. Douglas Schenkel: I'll try to get them all out there upfront and then listen. So first, really a follow-up to the very first question, and I think it's the most important question tonight given the stock reaction in the aftermarket. So I want us to be airtight on this. Is the probability of FDA approval unchanged as a result of the NHS-Galleri readout? Because if the answer is, the probability is unchanged, it would mean the value associated with FDA approval and by extension, CMS reimbursement is also unchanged. So that's the first question. Yes or no, has the probability not changed? The second question is on NHS coverage in the U.K. I know, again, you just got a question on this, but I'm curious if there are any examples you can point to where a diagnostic has been reimbursed after missing a primary endpoint. And then my third question is, has your analysis of NHS-Galleri results led you to any explanation regarding why you came up short of the primary endpoint? Are there potential design issues or population SKUs, anything like that? Robert Ragusa: Yes. Thanks, Doug. Maybe, Josh, I'll hand over to the FDA questions to you. Joshua Ofman: Yes. Thanks for the question, Doug. Everything we've learned from the FDA, their history with us, our conversations has been, their focus is going to be on clinical performance and safety. And the data set that we are -- that we have submitted includes the full PATHFINDER 2 study of the first 25,000 participants and the first year, which is the performance period of the NHS Galleri trial. In their advisory board meetings and their public comments, they have been quite clear that their focus is on clinical validation and not clinical utility. And what we've tried to demonstrate in the NHS trial is a population level effect well beyond clinical validation and clinical performance. And we were able to demonstrate a really important finding of a substantial reduction in Stage IV cancers and a fourfold improvement in the cancer detection rate. But those are things that are not part of our submission right now to the FDA. And based on their own comments, they're going to be focused on clinical validation. Robert Ragusa: And maybe Harpal, you want to maybe just comment... Harpal Kumar: So I think -- Doug, I think your second question was around endpoints on diagnostic studies. I think it's just worth pointing out that it's extremely rare for any diagnostic to go through a randomized controlled trial. It's very common for drugs to go through randomized controlled trials, but you actually very rarely see a diagnostic test evaluated in as rigorous a way as we have done through the NHS-Galleri trial. I just think it's really important to make that point. Not only have we rigorously assessed it through an RCT, but it's enormously large trial, 142,000 people. So we have a data set the likes of which I am not aware any other diagnostic has been through other than sort of really significant interventional diagnostic type products. So I think that's the first thing to say. The second thing to say is this is an enormously rich data set, and it has a large number of components to it, and we've shared those with you today. It's absolutely right to say we didn't hit the primary endpoint. But what we did see was a very compelling clinical benefit here. And I think that story stands in terms of generating excitement out there in the clinical community around what's possible with a test like this. Being able to reduce Stage IV cancers gives clinicians the opportunity to use curative treatments that they otherwise wouldn't have the opportunity to use. So I think that's really very compelling. And then your third question, I think, was about what are we learning looking at the data. And just a couple of comments on that. First of all, it's -- we've not had this data for very long. We're looking into it. There's a lot of data to work through. One of the things we've seen is that -- and if I break apart the primary endpoint, it's a combined Stage III and IV reduction. And so when you break that apart, we did see a Stage IV reduction. But as we've commented on, we saw an increase in Stage II cancers. And one of the things that looks to be the case when we look at the data is that we expect to see a stronger effect if we were to continue to follow up this cohort for a longer period of time. And that's why we're saying we want to extend the follow-up for a further 6 to 12 months, and that's why we'll be doing that. So that's one of the things that we've seen when we're looking at the data, but there's a lot more to learn. Operator: [Operator Instructions] your next question will come from Catherine Schulte with Baird. Catherine Ramsey: I guess, first, just on that last point of extending the trial follow-up by 6 to 12 months. Is that something that you and NHS have already agreed on? And I guess, what is the goal of what you will see in that 6 to 12 months? Is it to push more on the Stage III reduction? Or is there something else that NHS is hoping to see? Robert Ragusa: Yes... Harpal Kumar: Yes. Thanks, Catherine. We haven't discussed it in any detail with the NHS yet, but I think it's -- I really can't see any obstacles in being able to do that. What it requires is not going back to participants or clinicians. It would be a continuation of passive data collection, which is already being recorded. And so it's just about the passage of time and agreeing with the NHS team that we can get access to that data. I think that will -- I don't foresee any significant obstacles in that regard. And in answer to your second question, yes, what we want to see is particularly the control arm data maturing more than we've been able to see. And perhaps if I just elaborate a little bit on that, what you tend to see in a screening trial -- in any screening trial is that you're finding cancers that would have been detected later. And so if you think about what that means in practice, you're pulling forward into your intervention arm cancers from the future. For a control arm of the study, those cancers may not yet have manifested. So when you're comparing 2 arms of the study, what you'd like to have is long enough follow-up that you can compare the 2 arms really, really well together. And what we've concluded looking at the data is we probably need a longer follow-up time to be able to do that adequately. Catherine Ramsey: And then for the NHS, I know they put out their National Cancer Plan earlier this month and still reiterated their commitment to and interest in multi-cancer early detection. We've got OLS closed an application process for what sounds kind of like a AdAC-related study using multi-cancer tests in primary care to triage patients with nonspecific abdominal symptoms. Is that something that you guys are involved in? And maybe just talk to the broader relationship with NHS. Harpal Kumar: Yes, happy to do so. So we've been having ongoing conversations with the NHS really over the last 5 or 6 years. Those conversations continue very actively and certainly will continue here on in. Of course, we were very pleased to see in the NHS Cancer Plan a couple of weeks ago, a number of references to multi-cancer early detection and indeed, the excitement within the NHS and the Department of Health in England for the possibilities that this new technology offers for really transforming the landscape for cancer patients. So the multiple references in the Cancer Plan, I don't think it's an exaggeration to say, comes from the conversations and relationships we've been having with the NHS over the last 5 or 6 years. With respect to the second part of your question, yes, there is a process underway to further evaluate the role of multi-cancer detection in a symptomatic context. And this is a follow-up from our SYMPLIFY study that we reported a couple of years ago. Necessarily, the Department of Health has to go through a competitive application process. It doesn't -- it can't just offer that opportunity to GRAIL. So that application process is underway. And as you might expect, we are applying to be part of that process and are hopeful that, that will move forward. Certainly, we believe our data from the SYMPLIFY study is very strong and very encouraging in that context. Operator: Our next question will come from Dan Brennan with TD Cowen. [Operator Instructions] Daniel Brennan: Maybe just one on Medicare. So assuming you're successful with FDA, I'm just wondering, I know Medicare, you have the favorable pathway, obviously, and FDA approval, assuming you get that, that would be terrific. But we're under the impression that Medicare does consider clinical utility. So how do you think they would look at the NHS trial? And how would that potentially impact the Medicare decision? Robert Ragusa: Josh, do you want to take that? Joshua Ofman: Great. Yes. Obviously, Medicare is going to -- upon FDA approval now has the statutory authority to provide coverage for multi-cancer early detection tests and we'll initiate a national coverage analysis and really look very carefully at the data. And we believe we're going to have a very robust package of data to submit to CMS, including all of our registrational trials, everything about NHS-Galleri, including the substantial Stage IV reduction, the fourfold increase in the population cancer detection rate, the increase in detection of Stage I and II cancers and also very strong clinical performance overall. And so we think that, that combined with our real-world evidence, our clinical surveillance program and the REACH study in Medicare patients at the time of the NCD will be a very robust package for them to evaluate. Again, Medicare has never evaluated a multi-cancer early detection test before. There is no known bar that has been set. And so we feel like we're going to be able to provide them an incredibly robust package of evidence to consider coverage for Galleri. Daniel Brennan: Okay. And then maybe just on -- I appreciate the Stage IV is down, which is terrific, but the III, given some of the anomalies you discussed was up. Like collectively across Stage III and Stage IV, can you say if there was a decrease and kind of what the level of that decrease was? Harpal Kumar: Yes. I can't really comment any further at the moment. There was not a statistically significant reduction. But what we did see was a trend towards a reduction over time, and that was a favorable trend. I think that's as much as I can say at the moment, but we are planning to present the full results at ASCO later in the year. Daniel Brennan: And I mean if I can sneak in one final one. So the trial was set up for 3 years. Obviously, it was going to be a surrogate for mortality because mortality would just take too long. So I think that was pretty well established. Was there a decision when you set it up for 3 years as opposed to maybe setting it up with a longer follow-up period, kind of how that decision was made? Obviously, it sounds like now you're hoping, obviously, the longer follow-up will still prove out the study. But I'm just wondering when you went into it, how was that decision made? Harpal Kumar: Yes. I mean, look, as with any study, it's designed and sized and powered with the best information you have at the time. And at the time, we felt that 3 rounds of screening followed by a year of follow-up would be sufficient. I think with the benefit of hindsight, we probably should have allowed for a longer follow-up period. There have interestingly been a number of publications over the last couple of years about screening studies in general, not just about NHS-Galleri, which make this exact point that the trial should be followed up for longer than 12 months post the last appointment. As I say, this trial was designed 6 years ago, and that was the best information we had at the time. But as I've already touched on, on this call, we have the ability to continue follow-up. So that's what we're going to be doing. Joshua Ofman: And it's probably just worth noting that most screening trials have gone on for decades, at least 1 decade, if not 2. And so this was a very -- in the context of screening trials, this was actually a very short trial with a very ambitious endpoint. And that's part of the story here. But it is the first time that an MCED test has shown the ability to shift the stage diagnosis for the population in a randomized clinical trial. And I don't think we should let that kind of go by. Operator: For our next question, we'll return to Kyle Mikson with Canaccord Genuity. Kyle Mikson: So just given you see these results now, at this point, can you go to the FDA kind of narrow or adjust, let's say, your label maybe to the 12 cancers that you performed the best in or maybe like an older patients, like an older subset perhaps? And just generally, like how does this impact your thoughts on the -- like a potential advisory committee meeting based on there was an -- there was an AdCom back in '23 already? Joshua Ofman: Yes, sure. Again, we don't think that this finding is going to impact the approvability of Galleri with the FDA. The FDA is clearly going to be focused on clinical performance and safety and the profile of data that was delivered to them. And in that context, we will work through labeling with the agency. Should they seek clarification on the intended use, and narrowing of the indication to the things that you suggest, we'll be negotiating that with them in due time. But we feel like we have a very strong and compelling evidence package for our current intended use, which is adults at elevated risk for cancer such as adults over the age of 50 and with additional risk factors if they are younger than the age of 50. So we feel like we have a robust package, and we'll see where the labeling ends up. Robert Ragusa: Yes. And maybe just to add to that, the -- it's also we haven't really brought up this across the 3 rounds of the large participants in NHS-Galleri as well as the 35,000 in PATHFINDER 2, there was no serious adverse events across the entire trials. So those are really large numbers. So from a safety perspective, it was really good showing up. Joshua Ofman: And we think the benefit risk profile is quite compelling as a result of that. Harpal Kumar: And just to add something that Josh said, in relation to your point about the 12 cancers, the reason we specify this group of 12 cancers is because it represents 2/3 of all cancer mortality. So if you can make a difference in that group, you really are making a dramatic impact at population scale. But I would draw your attention to something that's in our press release, which is when we talk about the Stage IV reduction and the fact that it's more than 20% in the second and third rounds of screening, yes, it's true for the 12 cancers, but it's also true for all cancers. And so I don't think there's any reason at this stage to think that we should be narrowing our claims only to the 12 cancer types. Joshua Ofman: That's a great point, Harpal. Thank you for making that. And just to your last question about the AdCom. It's certainly possible that there can be an AdCom. The FDA has already held an AdCom. And so we are not sure whether that's going to happen. We will wait and see. But we've made the case to the FDA that based on their prior AdCom that they've already held and the fact that we've addressed all of those issues in our submission, which was just completed recently, that there's likely no need for one. But we'll see what the FDA decides. Kyle Mikson: All right. Super helpful. Just a quick follow-up. Obviously, the NHS-Galleri results are pretty relevant to the FDA submission, but I don't believe there's much read-through to USPSTF inclusion. So in a worst-case scenario, you don't get FDA approval, which again is not the -- you guys expect that. You could get a USPSTF inclusion, get into -- or get Medicare coverage according to the legislation and so forth. Are your thoughts on guideline inclusion unchanged? Or is that -- you still don't think that's the necessary milestone for you guys that FDA is most likely going to happen? Joshua Ofman: Well, I'm not sure I'm fully following your question, but let me try to take a stab at it. We think the first most important milestone is to get an FDA approval. And we think that, that is going to be an incredible moment for patients and provide amazing amounts of conviction in the clinical community and the payer community. Many of the payers have told us that, that would be the gating step for them. They would like to see an FDA approval before they would provide coverage or consider Galleri for coverage. And then obviously, there will be a CMS, NCA, National Coverage Analysis decision as we've discussed already. So we think those are the most critical things. And USPSTF evaluation would then come after that. And obviously, that was -- that is important if you don't have a coverage pathway within CMS. And that's why the USPSTF pathway was put into place because the CMS had no statutory authority to provide coverage for preventive services. But the CMS does have statutory authority now. So we see the USPSTF as being supplemental to that. But in terms of guidelines, we think the FDA approval is going to be one of the most critical parts and then the very strong and robust evidence base we have about all the clinical benefits that Harpal has described. Kyle Mikson: Yes. Just to clarify, I was just saying like if the USPSTF committee if they're going to take this data into account, but it's -- we're talking [indiscernible] in the future probably. So maybe it's not relevant. But anyway, thanks for the time. Operator: There are no further questions at this time. I will now turn the call back to GRAIL for closing remarks. Unknown Executive: We look forward to presenting full data from our 2 registrational studies in mid-2026, a longitudinal randomized controlled NHS-Galleri trial, including clinical utility and performance and the full 35,000 participant PATHFINDER 2 study. So we look forward to providing future updates, and thanks, everyone, for joining the call. Operator: Ladies and gentlemen, this concludes the call. You may now disconnect.
Operator: Greetings, and welcome to the American Coastal Insurance Corporation's Fourth Quarter 2025 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to your host, Jeremy Hellman , Vice President at The Equity Group and American Coastal's Investor Relations representative. Please go ahead, Jeremy. Jeremy Hellman: Thank you, operator, and good afternoon, everyone. American Coastal Insurance Corporation has also made this broadcast available on its website at www.amcoastal.com. Replay will be available for approximately 30 days following the call. Additionally, you can find copies of the latest earnings release and presentation in the Investors section of the company's website. Speaking today will be President and Chief Executive Officer, Bennett Bradford Martz; and Chief Financial Officer, Svetlana Castle. On behalf of the company, I'd like to note that statements made in this call that are not historical facts are forward-looking statements. The company believes these statements are based on reasonable estimates, assumptions and plans. However, if the estimates, assumptions or plans underlying the forward-looking statements prove inaccurate or if other risks or uncertainties arise, actual results could differ materially from those expressed or implied by the forward-looking statements. Factors that could cause actual results to differ materially may be found in the company's filings with the U.S. Securities and Exchange Commission in the Risk Factors section in the most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q. Forward-looking statements speak only as of the date on which they are made and except as required by applicable law, the company undertakes no obligation to update or revise any forward-looking statements. With that, it is my pleasure to turn the call over to Brad Martz. Brad? B. Martz: Thank you, Jeremy, and welcome, everyone. During the fourth quarter of 2025, American Coastal continued to demonstrate that we are a unique, high-performing specialty underwriter producing strong returns on capital that is very well positioned for the future. A lack of hurricane activity in the current period helped drive solid earnings growth compared to the same period last year that was impacted by catastrophe losses yet remain profitable. Our full year net income of $106.8 million exceeded our full year guidance at the beginning of 2025, which was $70 million to $90 million. And even with a major hurricane loss, ACIC would have landed above the midpoint of our guidance. Over the last 3 years, ACIC has produced over $336 million of pretax profits and returned over $60 million to shareholders through special dividends. I think it's fair to say our strategic transformation has been nothing short of spectacular. Yet I believe we're capable of more. As forecasted last quarter, premiums written in the current period rebounded nicely, increasing approximately 59% compared to the third quarter of 2025, but declined 19% year-over-year due primarily to rate decreases. Rates are falling in our business due in large part to Florida's legislative reforms that are clearly working as evidenced by reduced reinsurance costs and lower losses incurred. For the full year, our net premiums earned of $306.8 million were also above the midpoint of our 2025 guidance, which was $290 million to $320 million. Total revenues increased year-over-year despite a much more competitive environment without sacrificing underwriting discipline. With softer market conditions persisting in commercial property insurance, we expect premium production to remain challenging as our risk appetite is highly correlated to modeled expected returns on capital. Last month, we revealed plans to improve the company's business profile by introducing new revenue and earnings growth pathways in the E&S market. While we are not necessarily looking to grow commercial property exposure in the short term, we do believe there are pockets of opportunity to underwrite new profitable commercial residential property insurance business inside and outside of Florida, where we can leverage American Coastal's technical expertise and competitive advantages. Our E&S ambitions and investments are more about putting the company in the best possible position to succeed over time rather than chasing growth in this part of the property cycle. With that, I'd like to now turn it over to our Chief Financial Officer, Lana Castle, for more specifics on our fourth quarter and full year results. Svetlana Castle: Thank you, Brad, and hello. I'll provide a financial update, but encourage everyone to review the company's press release, earnings and investor presentation and Form 10-K for more information regarding our performance. As reflected on Page 5 of the earnings presentation, American Coastal demonstrated another strong quarter with net income of $26.6 million. Core income was $25.8 million, an increase of $19.8 million year-over-year due to a $20.5 million decrease in incurred losses as Hurricane Milton made landfall in the fourth quarter of 2024, resulting in a full excess of loss catastrophe retention. For the full year, net income was $106.8 million and core income was $103.7 million, an increase of $26.8 million. Our combined ratio was 58.6% for the quarter and 60.1% for the full year. Our non-GAAP underlying combined ratio, which excludes current year catastrophe losses and prior year development, was 58.9% for the quarter, a decrease of 7 points from the prior year. For the full year, our underlying combined ratio was 61.5%, which is below our 65% target. We continue to maintain a strong reserve position. Page 6 of our presentation shows more detailed quarter-over-quarter comparison with net premiums earned driving higher revenue compared to 2024 as a product of stepping down our gross catastrophe quota share from 20% to 15% effective June 1, 2025. Operating expenses remained relatively flat, decreasing $1.3 million or 3.4%. Page 7 provides a year-over-year comparison of our results. Revenues for the full year increased $38.8 million or 13.1% in 2025, driven by the quota share step down previously mentioned as well as a step down from 40% to 20%, which was effective June 1, 2024, and impacted 2024 results. Total expenses remained flat year-over-year, though operating costs increased $22.6 million, largely as a result of reduced ceding commissions. This was offset by the retention related to Hurricane Milton. Page 8 shows balance sheet highlights. Cash and investments grew 19.8% in 2025 to $647.7 million, reflecting the company's strong liquidity position. Stockholders' equity increased 34.8% since year-end to $317.6 million, driven by strong underwriting results. Book value per share is $6.51, a 33.2% increase from year-end 2024. These increases are inclusive of a special dividend of $0.75 per share declared in the fourth quarter, totaling $36.6 million. As shown on Page 9, through strong results, the company has seen increased liquidity and book value per share since the first quarter of 2023. I'll now turn it over to Brad Martz for closing remarks. B. Martz: Thank you, Lana. I'm extremely grateful for our team and for our business partners as they are the true reasons for ACIC's outperformance of its peer group and the insurance industry returns overall. That completes our prepared remarks for today, and we are now happy to field any questions. Operator: [Operator Instructions] Our first question today is coming from Michael Phillips from Oppenheimer. Michael Phillips: I guess I wanted to start, I guess, Brad, with the gross premium results this quarter down around 19%. It looks like from December through September, at least your commentary on the rate environment is 13%. It looks like it kind of maybe stabilized. I guess I want to see if you can comment on that. But then talk more about the premium in this quarter. Last quarter, you said you intentionally slowed down for exposure limitations and expected to rebound this quarter to continue into the next quarter. It looks like maybe that didn't happen or maybe it did in your view. I just want to talk about that and kind of how this quarter's 19% drop compares to what you were thinking. B. Martz: Thanks, Mike. Good questions. And I would just reiterate that quarter-over-quarter, premium rebounded almost 60%. So we're okay with that. The machine, when you slow it down, it does take time to crank it back up sometimes. So we felt it was super important to hit the average annual loss targets that we set for September 30. That's a key measuring stick for our core catastrophe reinsurance program, and we were successful in delivering on hitting that target. So we believe we took the appropriate measures to manage our exposures in the third quarter. That being said, obviously, October got off to a little bit of a slow start because of just the time it takes to continue to receive quote, bind and issue policies given the lead times associated with that activity. So it's a challenging market environment. We make no bones about it. We are walking away from risks that are previously may have met our return on capital hurdle rates, but today might not be. So we're trying to be disciplined. And I think you'll see a little bit of volatility in the written. But from an earn perspective, I have no worries. I think we've given solid revenue guidance for 2026. No promises on us being able to hit those numbers, of course. But hopefully, we did demonstrate some predictability in our business with the results we posted relative to the guidance in 2025. Michael Phillips: Okay. That was helpful. I guess your last couple of words there were what I was going to go next. Maybe I'll still go there and just to see what you think. But if growth continues to slow maybe more than you thought, that obviously will affect earned later in the year. It sounds like you're not worried of the -- at least for now, you're not worried about the revenue numbers you talked about earlier this year. B. Martz: Yes, that's right. I mean we're going to push hard for changes in expenses commensurate with the changes in revenues. So I think it's just super important for us to continue to work extremely hard on obviously putting together the best possible risk transfer program. We can compile at 6/1. We had a very successful placement of our 1/1 AOP CAT program and our Catastrophe Aggregate program with those being down year-over-year on a risk-adjusted basis quite substantially, well ahead of the rate change in the fourth quarter or the premium -- written premium change year-over-year in the fourth quarter. So we feel good about the 6/1 renewal. It's not -- those programs are much smaller. It's not a perfect read-through to the June 1 program. But obviously, if we're suffering rate change of whatever percentage, we're going to be pushing hard to see loss costs and reinsurance costs come down a commensurate rate to protect margin. And if not, that could put some pressure on the combined ratio and/or we will be more selective in what business gets written, both new business and renewal business. Michael Phillips: Okay. Maybe one smaller one on the margin piece. The G&A ratio has kind of ticked up a bit. And I wonder what's driving that? And any expectations for this year on that one? B. Martz: Nothing notable to point out. Obviously, we had some distortion in the first half of the year with some payroll tax credits that artificially reduced our recurring normal operating expense levels, but third quarter and fourth quarter represent a true current run rate. So first half of '26 won't necessarily be a perfect comparison with first half of '25. But other than that, I don't have anything to call out on G&A. Michael Phillips: Phenomenal results on the margin side. So congrats on that. Operator: Next question is coming from Mitchell Rubin from Raymond James. Mitchell Rubin: You've outlined plans for expansion into South Carolina, Texas and broader nationwide E&S markets through ACES and the expanded AmRisc partnership. Could you provide some color on how underwriting margins, catastrophe profiles and reinsurance structures in these markets differ from your Florida book? B. Martz: Sure. Thanks for your question, Mitch. I think they are relatively similar. The phenomenon of named windstorm exposure is not much different in Texas and in South Carolina. That being said, I think those states will run at a slightly higher combined ratio. So it's hard to forecast that precisely. But our experience having underwritten in those states previously through Journey Insurance Company would suggest that it's comparable. So we're going to focus on the same classes of commercial residential property that we write today. It's primarily condos, apartments and assisted living facilities. Any other classes would be outside of our comfort zone today, and we would have to provide you a little bit more color around such initiatives. But the expansion with AmRisc, to answer that part, we're super excited about. That's been a long time coming for us. They're obviously a terrific partner, 25 years of successful inception-to-date results through their organization, and we're proud to have offered them some capacity. It's a modest line that we're starting with, with roughly $100 million of full year premiums. That being said, under -- if the market hardens and they needed more capacity, we could consider increasing that. And conversely, if the market softens and margins are not in line with expectations, we could see that being reduced. But it's a 2-year deal. It's done. It's off and running. We'll start recognizing some premiums from their nationwide commercial E&S property portfolio in March. Mitchell Rubin: I appreciate the color there. So with the debt to total capital ratio at 32% in the quarter, and you've previously stated a long-term target of around 25%, how are you prioritizing deleveraging, funding ACES and potential capital return in 2026? B. Martz: The debt matures at the end of 2027. So there's no immediate need to address that. Obviously, job 1 is to earn an underwriting profit, continue to drive book value per share and increasing shareholder equity through our organic earnings profile. So I think that in and of itself will continue to bring down that debt-to-cap ratio. That being said, we've stated that we will be seeking to reduce the overall amount of financial leverage in the system. So I think when it comes time to refinance that debt, I would expect the company to shy away from a straight refinance. I think total debt would likely fall anywhere between $50 million and $75 million. And that's a level we're comfortable with. But we'll see. That -- a lot of that will depend on the earnings generation, cash flow generation in the business. We're excited to be able to return some of our profits to shareholders in the last 2 years, so $60 million, as I noted. And we're watching the stock price carefully. We do think the company is significantly undervalued and repurchasing shares is also an option. Typically, we think about buybacks as something that would require a significant market dislocation. But that being said, at the current earnings multiples, we think the stock is a good buy. Mitchell Rubin: Congrats on the quarter and the year. Operator: Your next question today is coming from [ Akshay Forma ], a private investor. Unknown Attendee: Congratulations on a good quarter and a great 2025. I have questions on the E&S opportunity, so the new company, ACES. I joined the call a little late, so forgive me, but do you mind giving an update on where you are with creating the new entity from your last call and the update? And then I have one more follow-up question. B. Martz: Yes. The update is -- it is still pending regulatory approval in the state of Arizona. So it did take us pretty much the better part of the fourth quarter to complete all the background checks and biographical affidavits, et cetera, that were required. Typically, the state of Arizona doesn't even begin reviewing any kind of new company application until that's been completed. So we've cleared that hurdle, and I believe they're working on it, and we should have an update for you shortly. But right now, the certificate of authority is still pending. Unknown Attendee: And how should we think about like the forecasted gross premiums for ACES for 2026? And then also like thinking longer term, how should one think about ACES market share? So in the January presentation, you had mentioned about the E&S opportunity market, about $1.4 billion in Florida, $1.9 billion in Texas and $455 million in South Carolina, which comes up to like a total of $3.7 billion of opportunity. So like can we expect if things fall in the right place, ACES also to have the same market share as what AmCoastal has, which is, I think, around 25% market share. Is that kind of like where the team is targeting? Or how should one think about it in the long term? B. Martz: I mean it's a great question. I think, obviously, we want to have a market leadership position in anything we do. That's the ultimate goal. How long it takes to achieve something like that is anyone's guess. But for 2026, the premium ambition for ACES is relatively small. I'd say 5% or less of our total revenue guidance for the year is going to come from ACES. It's really about '27 and beyond. For the initial year of ACES, assuming it's gets approved and capitalized, which, of course, the timing of that is still even uncertain. But in the first 12 months of its operation, it's going to operate just as a collateralized reinsurer. It will take time for us to go and get it rated by A.M. Best and put it in a position to be a direct writer of commercial property business. So -- but that being said, whatever capital we inject into ACES, we are going to put it to work, doing deals to -- similar to what we've recently done with AmRisc with that net quota share producing -- expected to produce over $100 million on a first -- on a full year basis. So it's not out of the realm of possibility that ACES could someday be on par with American Coastal, but it's probably unlikely. I see it being a little bit smaller for the next 3 to 5 years. But beyond that, yes, I mean utopia would be a perfectly balanced portfolio between admitted and non-admitted business between Florida and non-Florida states with great spread of risk and geographic diversification. Unknown Attendee: Got it. And then in terms of like combined ratios for all these -- for ACES -- would you say that, that kind of tracks like your goal of 65% combined ratio like while you have for AmCoastal? Is that still like the overall kind of target what you're looking for? B. Martz: I think that's aggressive. The condo book in Florida is a little bit unique because of its -- the Florida market and because of the duration at which we've been underwriting in that particular geography. So the knowledge, the experience, the scale we have and as well as the benefit of the Florida hurricane cat fund probably make that unachievable. But historically, the commercial residential property insurance combined ratio in Florida underlying combined, again, excluding cat, has operated between 65% and 75% throughout the 18-year history of the company. So we -- it depends on the loss experience, of course. But you got to have an underlying margin. That's what our Chairman is constantly preaching. With an underwriting margin that allows you to absorb the catastrophes when they occur and the soft market cycles when they occur. Without a margin, then you're really setting yourself up for disappointment. So we believe that the -- everything we do is going to be accretive and earn an acceptable return on capital, but I wouldn't expect business generated through the E&S platform to achieve the same exact results that our condo book in Florida has achieved. Unknown Attendee: My last question is going to be on share repurchases. So I know the team has mentioned in a couple of conferences as well that the stock is undervalued. I believe it, too, and I'm a shareholder as well, and I believe the stock is undervalued. So I guess my question is, what's holding the team back from share repurchases? I know you mentioned you would do or you would look at share repurchases when the stock is undervalued. So I'm just curious what's holding the team back. B. Martz: It just hasn't been our top priority. I appreciate the sentiment, and we hear you. And I think going forward, it will be given slightly more consideration. I don't know if that consideration will trump how we feel about special dividends. We love the optionality of that and waiting until we're through hurricane season to really be able to accurately measure what excess capital we may or may not have. So ideally, we'll obviously still be able to pay a special dividend every year, but the amount of that will be driven by our loss results, which are inherently unpredictable. That being said, we're monitoring the stock. We're obviously not a complete outlier with some of our peers. But to the extent that we are not rewarded for continuing to produce exceptional returns, yes, I mean we're buyers at these levels. Operator: Thank you. We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments. B. Martz: Nothing further from the American Coastal team. Operator: Thank you. That does conclude today's teleconference webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.
Operator: Good morning, and welcome to the Rural Funds Group Half Year Results Presentation and the Half Year Ended 31 December 2025. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to James Powell, General Manager of Investor Relations. Sir, please go ahead. James Powell: Good morning, and welcome to the financial results presentation for the Rural Funds Group for the half year ended 31 December 2025. Presenting today is David Bryant, Managing Director; Tim Sheridan, Chief Operating Officer; and Daniel Yap, Chief Financial Officer. After the presentation, we have allowed time to take questions from attendees who can submit a question by typing into the question box and clicking submit. For those dialing in today, to ask a question, please dial star 1 when prompted, and I'll now hand over to our first presenter. Tim? Tim Sheridan: Good morning, everyone. I will present the financial results for the half before handing over to David Bryant. The first half of FY '26 has been a positive period for the group. Net property income is up 7% and Gearing has reduced on a pro forma basis and FY '27 CapEx is significantly lower compared to the past several years. Independent valuations and asset sales continue to confirm RFF's asset values and both adjusted funds from operations, AFFO, and distributions are on track to achieve full year guidance. Now moving on to the financial results in more detail. The first slide of this section details RFF's key earnings drivers for the period. Net property income from leased assets increased by $3 million to $49 million. The 7% increase is mainly due to additional rent being charged from the development of leased macadamia orchards as well as annual indexation mechanisms that occur in all of our leases. Net farming income represented $1.1 million, mainly derived from favorable dryland cropping and cattle results on Kaiuroo. While this result is an improvement on the prior corresponding period, the second half contribution of this segment is forecast to be significantly higher following the harvest of macadamia and cotton crops. From an expense perspective, fund expenses were in line with the prior period. However, interest on debt increased by $4 million. This was largely due to a decrease in the interest that is able to be capitalized, reflecting the completion of various asset development programs. These results provided net cash earnings or adjusted funds from operations of $21.5 million or $0.55 on a per unit basis. Importantly, AFFO is on track to achieve full year forecast, noting the expected second half skew in farming income. After adding noncash items, earnings of $44 million or $0.113 per unit was generated in first half '26. This is compared to $13 million for the prior period. The favorable result driven by positive revaluations on interest rate swaps as well as the gain on the sale of water entitlements. Finally, on this page, RFF paid 2 distributions during the half totaling $0.0587 per unit, which is in line with forecast. Now looking at the balance sheet. Assets increased marginally during the period as a consequence of development capital expenditure. The adjusted NAV per unit at 31 December was $3.10 per unit, a minor increase of $0.02 per unit, reflecting the mark-to-market of interest rate swaps. Pro forma gearing remained largely unchanged at 39.1% despite $70 million of development CapEx being deployed during the period. This CapEx was funded from the sale of 2 surplus sugarcane properties and excess water entitlements. These transactions demonstrate RFM's commitment to fund capital expenditure with asset sales and ultimately bring RFS gearing back towards the target range of 30% to 35%. Further to this, additional asset sales are expected during the balance of this financial year. This next page provides additional detail of property valuation movements that have occurred within RFF over the past 6 months. Independent valuations were a range for 25% of assets which were in line with book values and consistent with our policy to independently revalue all assets at least every 2 years. On the remaining portion of the portfolio, directors' valuations were applied. The movement in this segment mainly reflects the depreciation of bearer plans in line with accounting standards. Further evidence to support asset valuations is the divestment of farms, which have occurred at or above book value. 2 sugarcane farms were sold for 10% above their book value and water entitlements sold at their adjusted book value. Water is held at cost in the statutory accounts in line with accounting standards. And therefore, this sale provided a substantial gain as they were sold at approximately 2.5x their purchase price. Looking now at the capital management aspect of the group. During the period, RFF's core syndicated debt facility went through a scheduled refinance, providing a tenor extension and an improvement in the bank margin. The core facility remains well within all covenants, including the loan-to-value ratio and ICR. Despite our intention to fund development, capital expenditure program with asset sales, we note that the facility does have sufficient headroom to fund committed CapEx for FY '26 and '27, if necessary. Forecast FY '27 committed capital expenditure compared to the prior 3 years is detailed on this page. It highlights that RFF is now past its peak CapEx requirement for intensive asset development programs with significantly lower forecast CapEx to occur in FY '27. The debt facility is 60% hedged with a reasonable level of hedging locked in through to FY '29. The portion of hedging may also increase as asset sales are completed and debt is reduced, positioning the fund well in the event of any future increases in interest rates. I'll now hand over to David. Thank you. David Bryant: Good morning, ladies and gentlemen. I'll provide a portfolio and strategy update for the Rural Funds Group. Starting this section is a photograph of the Queensland property Kaiuroo, shown in the image or the first stage developments, which were detailed in the prior results presentation and are now complete, including pumping infrastructure, a water storage and irrigated cropping area. Similar developments will be inducted on different locations on Kaiuroo over the next 18 months. Once fully developed, this property will be more profitable and more attractive to potential lessees. Kaiuroo serves as a useful example of the broader strategy for the Rural Funds Group to generate higher returns through asset developments using RFM's farm development expertise while maintaining a majority of lease income from a diversified portfolio of agricultural assets. The various metrics on this page provide evidence of this approach. Looking more closely at the leasing revenue of the group as at the 31st of December, 83% of RFF's assets were leased for a weighted average lease expiry of 13.2 years. The largest lessees are shown on the left of this page and include high-quality institutional grade counterparts. Revenue is also diversified by agricultural sector and indexation mechanisms. As noted at the start of this section, the Rural Funds Group seeks higher returns through asset development opportunities. Assets in this category are presented on this page and include those being held for potential future development currently under development and properties for which the developments have been completed. Overall, these assets represent $342 million or 17% of the portfolio. Importantly, the majority of these assets are able to be operated by RFF and contribute farming income. Two sectors providing a material contribution to farming income in FY '26, our macadamias and cropping. Macadamia orchards on 2 aggregations will be harvested over the coming months and the harvest of irrigated cotton fields will occur over April and May on Kaiuroo and on Lynora Downs. Turning to additional income-producing opportunities for the Rural Funds Group. RFM will shortly provide documentation for unitholders to approve a further increase to the J&F guarantee. The guarantee is a security arrangement, which supports the cattle finance facility for the Rural Funds Group lessee, JBS, and has been in place since 2018. As a result of growth in JBS' business, increases to the J&F guarantee have been previously approved by unitholders in 2020 and 2022, shown in the chart in the top left. Unitholders will be asked to vote on 2 increases, the second being contingent on asset sales, which ensures that RFF's pro forma LVR does not increase. Importantly, the increases to the J&F guarantee are accretive to RFF providing up to an additional $0.01 per unit of AFFO on a full year basis, assuming the approved increases are fully utilized. Documentation is expected to be provided to unitholders in March '26, and a separate investor webinar will be held to provide more details on the resolutions. Finally, the last page of this section summarized the sustainability updates, which were provided in the FY '25 annual report, including emissions, which have been disclosed by the group for several years. Now moving to the outlook and conclusion. In summary, the results presented today represent a business as usual set of disclosures. We have made some progress on asset sales, but intend to do more as evidenced by our clear statements that capital expenditure programs will be funded by asset sales. Capital management is ongoing with appropriate debt headroom and hedging in place. And finally, guidance is reaffirmed both for AFFO and distributions. Following the retail investor road show RFM held last year, we are offering our retail investors the opportunity to participate in an asset tour at a Victorian vineyard in late 2026. If this is of interest, I encourage you to register via the QR code or directly with our Investor Services team. Thank you for listening, and I now invite questions from attendees. Operator: [Operator Instructions] Our first question will come from the line of Cody Shield with UBS. Cody Shield: Just firstly, on the $80 million of asset sales you look to do as part of the J&F guarantee piece. What kind of assets would you be looking to divest there? And what kind of time line would you be looking to achieve that in? Tim Sheridan: Cody, it's Tim speaking. It's further water sales. So we still have some high security water entitlements which haven't been sold, and it's a couple of the low-yielding cattle properties. So asset sales, additional asset sales, they're well progressed. We're targeting selling approximately $200 million worth of assets over the next, call it, 12 months, and they're just all processes are ongoing for those. Cody Shield: Okay, that's clear. And then just on the scheduled refinance, could you provide some flavor on where the overall margins were prior to this and where they sit now? Daniel Yap: Cody, it's Daniel here. So we went through the refinance back in November and December last year. So we did see some savings in margins compared to the previous tranches. So we're probably seeing about 5 to 10 basis point decreases on those respective margins. Cody Shield: Okay. Daniel, maybe just the last one for me on just where yield is sitting across the book and what you're seeing in the way of transaction evidence? Tim Sheridan: So we've offloaded about $65 million worth of assets in the past 6 months. They have all occurred at or above book value. So we sold a few sugar can farms, which were at about a 10% premium to book value all the water is transacted at book value, the adjusted book value because water is held at cost. And then beyond that, the process we're going through to sell some cattle assets, we're confident that we will achieve book values on those. So I think it's -- we're not seeing any significant increases in asset values, what we're seeing a bit of a plateauing, but it's really supporting our asset base. Operator: Our next question comes from the line of James Ferrier with Canaccord Genuity. James Ferrier: Just a follow-up from the first question around the asset divestments associated with the J&F guarantee increase. You've got that $34 million of New South Wales River water contracted to divest in the second half. Is that included in the $80 million? And I guess you could add on Cobungra, which is in the market that probably gets you 80% if those 2 assets qualify? Tim Sheridan: Thanks, James. It's Tim. So at the full year results, we had flagged that we were going to sell $200 million worth of assets. We're now targeting at selling $260 million worth. So we've increased it because we still want to get our gearing back towards the target range of 30% to 35%. And so that we've sold $60 million during the period, we still have about $20 million, call it $22 million of high security water that has not yet been sold. We will look to sell that. And then beyond that, we've got Cobungra, which is on the market, and we have some other cattle assets we're looking at. James Ferrier: Yes. Understood. Okay. And so based on those plans, the gearing would reduce to that 30%, 35% range? Tim Sheridan: Yes, it would still be towards the upper end on a pro forma basis, so call it 35%, certainly won't get the 30%. That's on the basis that we do the J&F increase. Initially, that J&F increase that we're proposing, we're only looking to take that to $160 million. We're seeking approval to $200 million, but that will occur over time. James Ferrier: Okay. On Slide 15 with respect to the development portfolio there, what's the implied yield on those assets as it sort of stands within the FY '26 guidance? I mean, some of those assets would be are applicable to no income? Tim Sheridan: That's right. If we look at the ones that we're operating, so our farming income for the first half was about $1 million. On a full year basis, we're expecting that to grow to just over $5 million. So the ones that we're operating, we're anticipating to generate $5 million of farming income. And then you can divide that by the asset they use to give you the yield. But we're forecasting about a $4 million income from farming in the second half. So $1 million in the first and then $4 million in the second half. James Ferrier: Okay. That's helpful. And what's the outlook as it stands today? What's the outlook in terms of your leasing or divesting some of those assets? Tim Sheridan: Yes. So with Kaiuroo, so Stage 1 is completed. We still got to do Stage 2 of the developments. That will occur over the next or call it, 18 months, 12 to 18 months depending on the wet season and rain. So Kaiuroo would then be fully developed at the end of that. In terms of the Macadamia, that 670 hectares we're planning, it will be fully planned by the end of this financial year. So then it's developed and ready to lease out. They're probably the 2 most significant in terms of when they are actually leased out. It depends when we can find the right or the right counterparty at the right rate. So that may take more time. James Ferrier: Yes. Understood. And then last question for me just on the proposed increase in guarantee previously increased that instrument in the past. What's interesting from my perspective is that we've got some pretty extreme volatility in cattle prices over the past 5 years or so. And I'm interested in what you've had around the variability in the income stream to RFF through that period. What sort of variability you've seen from JBS as the operator through that price volatility period? Tim Sheridan: Yes. It's a good question. Because of the structure of that transaction, we have seen no -- we haven't seen any variability in returns. So that guarantee is providing about a 10.5% cash yield on it, no variability. It's been we simply pay a fee based on guaranteed earnout. What is happening because of the increase were seeing in cattle prices and because of demand for Australian beef, JBS is simply wishing to feed more cattle and the purchase of those cattle is costing them more. So that is why they're seeking an additional guarantee amount. In terms of the counterpart, JBS, they've been fantastic. It's a highly acquisitive transaction for RFF with a strong counterpart. Operator: Our next question on the line of Thomas Ryan with Moelis Australia. Thomas Ryan: Just a question on yields in general across each of the segments. Could you just talk through where you're still finding that that's too low? And just noting your words, how you presented these in your reports just in terms of those assets that you might look to divest outside of the $80 million? Tim Sheridan: Yes. Slide 29 is probably illustrates this best. So where we've got natural resource. So these are cattle properties or dryland cropping properties. They have relatively low yields. So call it a 5% -- we can get about a 5% lease rate. That suggest a backdrop of interest rates at, call it, 5.8%. So those types of assets at the moment on a fully levered basis that's accretive to earnings. But because the gain in cattle land base has been so significant over the last 4 years, it's hard to see that cap rate of, call it, 5% increasing. And it's hard to see the capital growth being as significant as it has been. So they're the types of assets we're looking to divest. On the left -- on the things like the J&F guarantee or the permanent planning, they all have much higher cap rates and much more long-dated leases. So we don't see any variability in those lease rates and those assets are all accretive based on current interest rates. Thomas Ryan: And just one more question on your hedge profile. It hasn't really changed from the full year. Can I just get a clarification over how you can see that going out for the outer years and also be sort of the state of your existing facilities and how you're thinking about the headroom? Daniel Yap: Yes. It's Daniel here. So we are continuing to monitor the hedging market on a regular basis. At this stage, we are approximately 60% to 70% hedged. Particularly with asset sales in the pipeline, that could potentially increase. But we are looking for opportunities in the mid- to long term sort of period where rates come back to -- or hopefully come back to what we said we would target. So it is something that we'll continue to monitor as we look to extend our hedging profile. Thomas Ryan: And just the last question if I may. Just noting the result from TWA the other week. How are you thinking about their opinion in general? David Bryant: We don't think about them at all because we're not investing any more money in them. I mean it's an industry that's probably got 25% overcapacity globally and that is going to take capacity destruction to reduce the oversupply, and it's going to take time for consumption to increase very slowly. So that industry is going through a very deep cycle. Our vineyards, they're performing very well. We've got the leases that we renewed them last year such that now, I think we've got 13 years to lease expiry. The assets are performing very well for treasury. They're part of their core brands, particularly the high-end brands. So we're very relaxed about continuing to own those assets. There's indexation clauses in them. And in 13 years' time, I hope for the sake of everybody in the wine industry, that it's through the cycle. Tim Sheridan: And I'll just add those in any make up 5% of our forecast revenue. So it's quite a small segment. Operator: Our next question comes from the line of James Druce with CLSA. James Druce: Sorry if this has already been addressed but across the real estate sector, we've seen bank margins come in quite considerably over the last 6 to 12 months, we've seen sort of 20 to 30 basis points improvement. I appreciate you guys didn't have anything expiring for a couple of years but is there -- and you probably have done some recently as well, but can you just talk to what margins are doing for you and any opportunity that you have there? Daniel Yap: It's Daniel here. So we have been going through an annual refinancing cycle for each of our tranches. So we just went through one of the -- refinance one of our tranches. As part of that, we did see margins come back. But I previously quoted that margins came back about 5 to 10 basis points from the previous margin, which was 2 years ago. So what we'll see as we look to refinance at the end of this calendar year is hopefully a continuation of the decrease in margins. James Druce: Okay. And do you have a feel for what it is compared to where? I mean are you still looking for another 10 basis points or I mean what can you kind of see in there? Tim Sheridan: After your comments, James, we'll try and seek another 30 basis points. I think I mean that we see another 10, at least on another on 35, but that's 12 months away. Operator: Thank you. I'd like to hand the conference to James Powell for web Q&A. James Powell: Thank you. Just a reminder to our unitholders that have dialed into the presentation this morning, that we'd encourage you to submit a question via the question box which you should be able to see at the bottom screen, and there's a Submit button as well as sometimes falls outside of the aperture. So scroll down and hit Submit so we will answer your question as they come in. We have had a few which is coming already from ours. So I'll hand over to David in the first instance to respond to them. David Bryant: Thanks, James. There's a few questions that -- there's some very good questions here actually. But anyway, I'll start with the first one, which is why is the dividend the same each year despite net profit being different each year. So our dividend is driven by our FFO, so the amount of cash that we generate each year as distinct from profit. And the distinction -- if you go to Page 7 in the presentation, the distinction is best drawn by looking at earnings for the half year, which was $44 million and FFO for the half year was $21 million. So you've got a big disparity. What you'll see, if you go back through the years is the FFO has been largely consistent but flat. whilst the earnings has been generally significantly higher than the FFO. The difference is explained by noncash items, and it's normally in 90% of the times, it's the property valuations, the revaluations of property, and we've experienced really strong capital growth over the past, I suppose, 5 or 6 years. And that's why the earnings has been high, but it's been moving around because it depends on the valuation cycle, depends on the capital growth and so forth. But the FFO is really the cash we collect minus the expenses. And that stayed fairly consistent, but flat largely. So there's the distinction. And now that leads me to the next question, which it's a very good question, so good, in fact, that we've had it from 3 different people so far this morning, and that is when are we going to increase distributions? The answer is -- one of the question has made the very good point that if we -- is it closing the gap between our share price and NTA, why is that gap there and that perhaps increasing distributions would close that gap. So when are we going to increase distributions? The answer is when FFO increases. When is FFO going to increase? It started to increase. We've got to the point now where our FFO and our distributions are roughly the same, so that we've got about 100% payout ratio. We are achieving growth in income from indexation clauses and a range of other things. We're achieving growth in income, so that growth in FFO, I should say. And so we would expect continued FFO growth. Once we get to 95% or below payout ratio, in other words, once we can get our FFO, so it's higher than our distributions, then we'll have room to move with increasing distributions. Look, I reckon that that's more than 12 months away. But I would hope, but I can't -- it's impossible to be certain because there's a lot of moving parts to this more than 12 months away, but less than 2 years away. But the moving parts that are perhaps obvious to you all, but I won't labor the point here, but the moving parts, of course, are interest rates in particular. And then just the various volatility that you have when you're renting things out, generally, you get the rent, and we would expect that would always be the case, and we would get indexation as well. That's a long answer to 4 questions. So thanks for your patience. Just one moment, we'll just absorb another question here is if asset development drives growth, how does that reconcile with a marked reduction in CapEx? So yes, there's been a marked reduction or there is forecast to be a marked reduction in CapEx because we have not been putting more -- acquiring more assets for development because we have fully utilized the balance sheet capacity. In other words, we've got enough gearing. We don't want any more gearing or any more debt, particularly with higher interest rates and just -- and what is prudent. So that is what's capped the development pipeline. However, what you'll see that we're doing is selling some assets to pursue growth by wanting to finance more cattle in feedlots. So there's more than one way to skin a cat without getting fair in your mouth. And so we're going to drive growth through a different strategy in this higher interest rate environment, and that is by increasing our allocation of capital to the livestock business. I think that's all of our questions. And so I'll say thank you very much for your attendance and for your interest in the Rural Funds Group, and we look forward to continuing the journey over the coming year. Thank you. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.
Operator: Hello, and thank you for standing by. Welcome to QBE Fiscal Year 2025 Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Andrew Horton, Group Chief Financial Officer (sic) [ Chief Executive Officer]. Sir, you may begin. Andrew Horton: Good morning, everyone, and let's begin. I'm here with Chris Killourhy, our new group CFO. Hopefully, you've had a chance to take a look at our release this morning. We've had a great year with an ROE just shy of 20%. And we're very proud of these results. Before we begin, I'll start by acknowledging the traditional owners of the many lands on which we meet today. For me, this is the Gadigal lands of the Eora Nation and recognize their continuing connection to land, waters and culture. I pay my respects to the elders past and present, and I extend this respect to any First Nations people joining us today. Moving to Slide 4 with a snapshot of our results. This is a great summary of our performance. We exceeded all our key guidance and targets this year. Headline GWP growth picked up to 7% and tracked ahead of our guidance for mid-single-digit growth. We beat our combined ratio guidance again this year with an excellent result of 91.9%. Our catastrophe experience and an improvement in our crop business drove the majority of the upside relative to the 92.5% we reiterated in November. Profitability is attractive across the majority of portfolios, and we're confident of sustaining strong underwriting performance. We had an exceptional investment result this year. Our high-quality investment portfolio returned 4.9%, driving another record year of income. Collectively, both post-tax profit of USD 2.1 billion and earnings per share were up around 25% for the year. And our return on equity at around 20% is excellent. Capital improved to 1.87x and remains comfortably above our targets. This leaves us with valuable flexibility to support growth alongside active capital management. In November, we announced our first buyback in several years and we wasted no time in getting started through late December. The final dividend of $0.78 takes a full year dividend to $1.09, which is a 50% payout. It's clear the business is in fantastic health with strength across the board from growth to underwriting investments to capital. Moving on to Slide 5. This is a simple summary of our progress in recent years. It's been roughly 4 years since we refreshed our strategy in late 2021. Since then, we've executed well, driving steady improvement in both financial performance and also the key metrics we track around people, culture and customer. This year, we've extended a strong and consistent track record of growth. Underlying organic volume growth continued at 7%, and we have a business that can confidently sustain this trend. We have strong messages on catastrophe costs and reserving. This year, catastrophe costs were $400 million below budget, marking the third consecutive year below allowance. These have not been light cat years by any means, with '23 and '24 amongst the costliest years on record for the industry. And the $130 billion of insured losses in 2025 was only modestly below last year. I'd also remind you that these aggregate figures mask the fact that the insurance industry is picking up a greater share of industry losses as reinsurers have moved further away from the action. We had a favorable reserve development this year, and we've spoken about our confidence in more stable and predictable reserving outcomes. Piecing these elements together, the end outcome is a simple picture. Our combined operating ratio steadily improved, volatility is down and ROE is up. This is driving strong returns for shareholders. Our TSR is roughly double the local market since we launched our strategy, and we see great opportunity ahead. Before passing to Chris to unpack the results in more detail, for the next few moments, I want to take a step back and share how we're thinking about performance over the medium term. So turning to Slide 6. This is a summary of how we think about the industry outlook and the 5 medium-term aspirations since we have for QBE. The audience -- this audience will appreciate the increasing complexity in the world, which is resulting in a risk landscape for our customers, which is highly complex. Risk awareness is elevated and the role commercial P&C has to play has never been more important. With this complexity, the industry is needed to become more mature and sophisticated, but ultimately, those in the industry, you truly understand risk, plus of scale, diversified operations are going to be in the driver's seat over coming years. We have great breadth and diversification in the business with capacity to deploy across all our key markets, spanning insurance and reinsurance. I do think this point is underappreciated, but is going to become more obvious and valued asset for QBE as we continue to execute around these aspirations. Delivering durable growth while sustaining strong margins and returns. So turning to Slide 7 on growth. The great breadth in our portfolio means there will always be classes we can grow. Looking out over the medium term, there are 3 overarching pillars to how we think about growth. Firstly, we remain in supportive market conditions. While rates are softening in parts of the portfolio, this is coming from a starting point of very strong rate adequacy. As we look to 2026, over 90% of our portfolio is expected to be at or above rate adequacy, defined by the pricing we need to achieve target returns. This foundation of strong and broadly distributed profitability is an excellent starting point as we look to grow the business. This picture may not be present every year, though with a diversified business, we'll always have flexibility to navigate various product cycles. Touching on some of the structural opportunities over the coming decade. Many of the global investment megatrends on this graphic will give rise to new risks and in some cases, rapid growth in insurance value pools. We have broad expertise across most specialty and commercial lines with leading underwriters and strong relationships. It's hard for many in the market to match our capacity to deploy collaboratively across 3 divisions, multiple classes of business covering both insurance and reinsurance. We'll continue to work with our major trading partners to provide innovative solutions and position into these fastest-growing economic megatrends. I'll leave you with a handful of data points. We have a leading energy and renewables presence who truly shine when brokers are looking for innovation. Investment in clean energy will be substantial, resulting in insurance premiums in the tens of billions of dollars. We're finding our strong position in these segments dovetail nicely into the growing energy requirements supporting artificial intelligence. Alongside this, the construction of data centers will drive significant growth in premium across multiple classes over the next few years. And as the world continues to digitize, cybersecurity moves higher as a risk for companies of all sizes, while AI liability will be of increasing focus. Cyber premiums around $15 billion today are expected to increase towards $30 billion at the end of this decade. Growing mobility demands will result in more boats, planes and trucks, while infrastructure investments support growing and urbanizing populations will be substantial. So plenty of areas where premium growth will substantially outpace the general economy, and we're well placed to capture a sensible share in the context of a well-balanced portfolio. The final pillar speaks to some topical trends in the industry. Firstly, surrounding the structural increase in market facilitization. We have a leading portfolio solutions franchise, which has been around for roughly 2 decades. We've seen and participated in the complete journey of this burgeoning market and learned a lot along the way. Today, our Portfolio Solutions team manage about 20 different facilities, and we lead two of the world's largest. Facilitization is only going to increase as it represents a more efficient option for the customer and broker and if structured correctly, strong performance for the carrier. In and around each of the investment megatrends just touched on, there are facilities already being developed. And as a market leader, we'll get the first look. As more business gets facilitized, it will come at the expense of those without a strong market proposition or genuine underwriting expertise. This will ultimately consolidate capacity toward market leaders. Finally, on AI, we continue to build, deploy and partner to enhance many aspects of our business. AI will allow us to boost underwriter productivity, unlock sharper risk insights and become a more efficient and effective business. We have a significant amount of proprietary data and market insights, which have been built through market-leading franchises in operation for many decades. AI can help us to better unlock and leverage these data assets and further enhance our market position. So let's turn to Slide 8. This slide brings many of these points together, detailing our new medium-term outlook. Our financial outlook has been primarily based around a single year ahead with both premium growth and the combined ratio. With where we stand today, having restored performance and pivoted the business as an organization, our strategic focus is much longer dated. The quality of our earnings is substantially improved with better breadth, stability and visibility. Our planning is more medium term, and we organize ourselves around a much clearer view of value creation for the enterprise. So we want to start sharing some of that with you and begin translating our medium-term plans into our guidance. To get ahead of the obvious question, medium term for us here means the next 3 years. So starting with growth, we see a continuation of mid-single-digit GWP growth over the medium term. Where we can do better and deploy capital at strong returns, we'll always hold a preference to grow the business. Over the medium term, we see our Group ROE trending in the 15% plus range. This assumes an effective tax rate of around 25% and an investment return sustain in the 3% plus range, which is essentially what futures predict today. Underpinning the outlook is a view that combined ratios are fairly sustainable around current levels. We spoke in August about the breadth in our business with 50-plus sales, which aggregate up to around 14 underwriting pools. Each have different P&L characteristics, different claims drivers, different capital requirements and different dimensions across combined ratio and investment income. How effective we are as capital allocators will be a key driver of our performance as we look to deploy our capital to optimize risk-adjusted returns and drive value. With 2025 marking QBE's fourth consecutive double-digit ROE, on the right-hand side, you can see the extent to which we've driven compelling value for our shareholders. As we continue to execute over the medium term, we should be able to extend this picture where a 15% plus ROE profile will continue to deliver great value for shareholders. Before moving on, I want to emphasize that this is not signaling any relaxation of our focus on combined ratio. It will always be a key metric for QBE. Now ultimately, we manage the business to a view of return on equity, and the combined ratio is really an output of our portfolio mix. So moving to Slide 9. Having discussed growth and returns, this slide gives some color on how capital fits into the picture. We shared our capital allocation framework last year. It's relatively straightforward. We have an aspiration to grow the business, provided we can achieve adequate returns. All our pricing models and view of rate adequacy is calibrated to an ROE hurdle, which works out to roughly 1.5x our Weighted Average Cost of Capital. This is a hurdle, not a ceiling, which many parts of the portfolio are comfortably clearing. We just delivered an ROE of almost 20% and see returns holding over the hurdle over the medium term. We have a 40% to 60% dividend payout ratio, which should be highly dependable through market and economic cycles. And finally, we have additional levers to distribute surplus capital beyond the dividend as needed, as we recently highlighted with the buyback announcement. Had a small window in December to start buying before the close period and completed around $90 million of the total. I want to build a track record of following through on these announcements and moving through them with some pace. So looking ahead, the simple outlook of mid-single-digit growth alongside returns of 15% plus ROE suggests a very healthy picture for capital. We have ample flexibility to support growth and likely see ongoing surplus capital generation on top. To ensure we optimize returns, we'll look to return any surplus. This will be an annual assessment as we exit the year where we have full visibility of our current period profits and growth plans for the year ahead. The final message on this slide relates to alternative capital. We've historically had limited alternative capital in our business. As these markets and investors have evolved, we do see opportunities from both a cost of capital and capital efficiency perspective. This can be an important lever for us as we strive for sustainable mid-teen returns, particularly where we can build long-term strategic partnerships. I'm going to stop here and pass to Chris to take you through the financials and should take a moment to welcome him this morning. As you know, we placed a great deal of emphasis on consistency and stability of management in recent years. We've been focused on building greater talent depth and genuine succession pathways. I'm proud that we've been able to announce Chris into his new role in such a quick time. He's a highly experienced and talented executive and having operated through a number of key roles for QBE in the past decade, will no doubt settle him well and become a great asset for us. So over to you, Chris. Christopher Killourhy: Thank you, Andrew, and good morning, everyone. It really is a privilege for me to be speaking for the first time today as Group CFO. As Andrew mentioned, I've been lucky enough to be with QBE for around 12 years now across actuarial leadership, divisional CFO roles and most recently leading QBE Re. Across those roles, 2 things have consistently stood out, the depth of our talent and the strength of our culture. And it's that foundation that I believe that underpins the performance we're sharing with you today. Turning first to Slide 11. 2025 was an excellent year. We exceeded plans and delivered QBE's strongest Return on Equity in many years. Gross written premium grew 7% to $24 billion, around 8% if we exclude crop and exit. The combined ratio improved to 91.9%. That's more than a better -- that's more than 1 point better than last year and comfortably ahead of our outlook of 92.5%. This result is underpinned by both prudent reserving and a continued focus on portfolio optimization. Investment income was around $1.6 billion, delivering a return of 4.9%. The net impact from ALM activities was again broadly neutral, and our tax rate for the year was 24%, modestly better than an actual tax rate of around 25%, and that's driven by the mix of our earnings tilting towards our North American tax group. Profit for the year was a record $2.1 billion. Earnings per share grew around 25% and our ROE has increased to 19.8%. Our capital position also remains very strong with a PCA multiple of 1.87. Our final dividend of AUD 0.78 takes the full-year dividend to AUD 1.09, up 25%. The payout ratio remains at 50%, a level we see as sustainable. Above this level, it's likely that we will continue to use buybacks to distribute surplus capital. We've also increased the franking rate of the final dividend to 30%, which we expect to maintain going forward. Turning now to Slide 12. Headline GWP growth of 7% exceeds our mid-single-digit outlook with underlying growth close to 8% if we exclude exits. This is a full 4 points higher than headline growth in 2024 and highlights the impressive momentum we continue to see across the business. Growth continues to be skewed to the Northern Hemisphere led by reinsurance, Accident and Health, portfolio solutions and targeted adjacencies in North America. Australia Pacific was broadly stable, but the story here is momentum, which improved through the second half with a return to ex-rate growth that we expect to continue into 2026. We entered 2025 with a clear set of initiatives to restore growth in ASPAC, including new partnerships, distribution improvements and a more dynamic approach to pricing. It's been great to see the outcome of execution as these actions gain traction. A brief comment on our crop business and its impact on Net Insurance Revenue. Crop GWP increased 11% to $4.3 billion. However, given our focus on portfolio optimization, Net Insurance Revenue actually declined by 6% over the period. This is because we've increased sessions to the federal reinsurance pool, materially reducing exposure to those states we regard as underperforming, including California and Texas. This does, however, weigh on Group Net Insurance Revenue growth in 2025. But in 2026, I'm pleased to say that Group GWP growth and Net Insurance Revenue growth should be much more closely aligned. Before moving on, it's worth remembering that our ex-rate growth here includes both volume and exposure adjustments. And these exposure adjustments play an important role in managing inflation. Our underwriters generally adjust on sums insured for property lines on wage rolls or turnover for workers' compensation and liability lines. And in the case of energy and marine lines, premiums often adjust off commodity prices. Turning to Slide 13 for a little more on the group's underwriting performance. Underwriting performance was excellent with a combined ratio of 91.9%. Catastrophe costs were around $750 million, which is well below allowance, but this is a pleasing outcome in a year where industry losses have been pegged at $130 billion, including a challenging year here in Australia and the devastating California wildfires. We shared catastrophe costs at our November update and losses have increased only modestly from this level. I do think that highlights the quality of the portfolio given the challenges observed here through the Australian summer. I'd also remind you that if we cast the mind back to the first half, we were comfortable with our catastrophe budget then in what was actually the most expensive first half on record for the insurance industry. Turning now [Audio Gap] to reserving. I do believe we're now starting to see the impact of our more prudent reserving strategy that Andrew and Inder have outlined over recent years. During 2025, we recognized a modest central estimate release of $40 million, and that's our first full year [Audio Gap] in several years driven by short-tail lines plus LMI and CTP [Audio Gap] while retaining prudence against more uncertain longer-tail lines. Our reserve strength and resilience has steadily improved over recent years, and I'm confident we're exiting 2025 with group reserves in the strongest position we've held for many years [Audio Gap] needed. Importantly, these charts also highlight the extent to which we're managing to multiple pricing cycles. This diversification provides a meaningful lever through which QBE can manage the overall underwriting cycle. This picture results in an overall rate increase of around 1% for the year. If we exclude Property business and Lloyd's, the rate increase is actually closer to 4%, which have been fairly steady throughout the year. Premium rate adequacy remains comfortably in excess of targets across the group, and as Andrew touched on, is broadly distributed across the business as we look to 2026. The expense ratio was 12.4%, while absorbing an elevated investment envelope of around $300 million. These investments are supporting modernization, including the migration of Australia Pacific portfolios onto our new cloud-based Guidewire platform. Importantly, expense growth has moderated meaningfully now at 5% from closer to 10% over the past few periods as we're starting to drive greater efficiencies. Highlighted another way, in 2025, headline GWP growth was 7%, which contrasts favorably with a headcount reduction of 1% over the same period. Efficiency, along with capital allocation is going to be a major focus for me, and we've got a meaningful opportunity as we drive greater benefits from recent investments embed the deployment of AI and work ruthlessly to eradicate process inefficiency. Looking ahead, we expect an expense ratio of around 12% in 2026 and for that to guide lower over the medium term. Turning now to Slide 14 with some more information on the performance of each of our divisions. Pleasingly, all 3 divisions have delivered margin expansion. Under Julie's leadership, North America improved by over 1 point despite pressure in Accident & Health and Aviation. Starting with our crop business, this business delivered a result of 88%. That's our strongest performance in 7 years. The positive performance reflects in part the early benefits of the strategic overhaul we've highlighted throughout the year. We reset our leadership team, recalibrated our utilization of the federal fund and repositioned our private products portfolio. Further benefit from these actions is anticipated in 2026. Alongside the benefits from internal actions, the portfolio was supported by better-than-average yields in a number of our key Midwest states, including the Dakotas, Iowa, Illinois, and Nebraska. Our Commercial Lines business in North America has also performed well. However, as flagged earlier, our specialty business has been impacted by claims activity in A&H and Aviation, resulting in a combined operating ratio of over 100% for our U.S. specialty business. I'd like to say some more on Accident & Health. This is an excellent business in a growing sector of the economy with strong market position, good track record and a highly attractive through-cycle return on capital. We write close to $1 billion in premium. And this year, we did see a lift in claims severity on account of rising treatment costs, medical advancements and the demand for new drugs. The team has responded quickly through rate, policy terms, and attachment points. Around 70% of the book renews at 1 January, and we achieved a rate increase north of 20% in addition to tightening terms. We'll continue to monitor loss trend, and we'll take whatever action necessary to return this book to profitability. Moving now to International. It's been another year of impressive performance for Jason's business with growth across all segments and a combined ratio of 88.5%. We did benefit from cat running below allowance, which offset some reserve strengthening in certain liability and marine portfolios as called out at the half. Given 2 of our more cycle-exposed segments, namely Lloyd's and Reinsurance, reside in International, it's sensible to say a little more on rate here. Rate for International was fairly flat for the year, where our U.K., Europe and reinsurance businesses saw rates in the low to mid-single digits, this was partly offset by some softening in our Lloyd's portfolio. Putting this in some context, however, since 2018, our Lloyd's business has benefited from cumulative rate change to 2025 of around 60%. This contrasts with the rate reduction of around 3% at the 1/1 renewals last month. Similarly, for QBE Re, rates were down 1% at 1/1, where we renew over half the book, but that contrasts with cumulative rate increases of around 65% since 2017. We do see it as a positive that competition is largely restricted to rate, while discipline remains around terms and conditions. For both QBE Re and Lloyd's, terms and conditions, attachment points, how we selectively deploy capital year-on-year and how we leverage facultative reinsurance are frequently more important than rate when it comes to delivering performance. Finally, on Australia Pacific, SES business had an excellent year with the combined ratio improving significantly, supported by favorable reserve development across 15 of our 20 sales, along with easing inflation. The impressive performance is despite catastrophe costs running modestly over budget in what we know was an active catastrophe year. Overall, rate increases tracked in the low single digits, fairly stable on what we reported at the half year. And looking ahead, we'll benefit from substantial CTP rate increases put through in recent months, including around 15% in New South Wales. Turning now to our investment results on Slide 15. Our investment portfolio delivered another record result with income of around $1.63 billion, representing a return of around 4.9%. Risk assets returned almost 10%, while fixed income yields exited the year at approximately 3.7%. And for reference, futures markets currently imply the fixed income yield will exit 2026 at around 3.8%. Investment FUM increased by 17% this year, with roughly 1/3 of that attributable to the weakening U.S. dollar. Our assets and liabilities are, however, well insulated from FX. And while funds under management have increased, so too have our claims reserves. Similarly, the increased prescribed capital amount associated with higher FUM and reserves is absorbed by an increase in available capital, resulting in negligible impact on the PCA multiple. There remains a modest FX gain of $24 million in the group P&L, and that's reported within the expenses and other line shown here in this table. Investment mix shifted slightly with risk assets of 15% of the portfolio. The OCI fixed income book now stands at around $3.5 billion or 12% of our overall core fixed income portfolio. Moving now to Slide 16 and an update on reinsurance. We achieved another strong and importantly, sustainable reinsurance outcome. Our diversification by region and class of business means we have a highly sought-after proposition in the market. Given the support of our strong reinsurer relationships, we were again able to reduce the attachment point of our CAP program now to $250 million. That's a reduction of almost 40% in just 2 years. And this is at a time where in the market more generally, attachment points and terms and conditions are rarely moving. Ultimately, we see this as strong external validation of our approach to portfolio management and the initiatives we've executed to reduce problematic exposures. The lower cat retentions have allowed us to modestly reduce the cat budget to $1.13 billion, whilst maintaining sufficiency around the 80th percentile. Whilst the allowance has been trending lower, group property premiums have been fairly stable. And the chart here summarizes catastrophe experience for our North American division and helps illustrate the improvements in our catastrophe portfolio. You may recall that historically, this division had driven much of our cat volatility. It's a simple picture, highlighting the impact of portfolio remediation led by Peter and Julie, including the exit of multiple programs, the middle market business and our consumer portfolios. Despite these exits, our share of regional property premium is down only modestly in contrast to a much more significant fall in our share of property losses. Finally, on reinsurance, I did want to expand on Andrew's earlier comments about alternative capital. Following the launch of QB Re's first Cat Bonds in 2025, the 2026 bond has broadened coverage to the whole group, attaching now at $800 million. The bond provides greater certainty around the availability of capacity whilst also reducing our overall cost of capital. We also launched the casualty sidecar on the QB Re casualty portfolio. As you know, you can think of the mechanics of the sidecar is similar to that of a quota share. And we've effectively quota shared around 1/3 of the casualty reinsurance portfolio for the 2025 underwriting year. In effect, this allows QBE to swap underwriting risk for fee income, enabling us to recycle capital, manage reserve risk and ultimately support more capital-efficient growth. These are early transactions as we build our profile in these markets, but I do see this space as important as an important lever for QBE as we calibrate the business to deliver sustainable mid-teen returns. Turning now to my final slide, Slide 17. I'm fortunate to be inheriting a balance sheet in excellent health. We received credit rating upgrades from both S&P and Fitch moving to AA- for the first time. The year-end PCA multiple has increased to 1.87. And following payment of the final dividend and adjusting for the buyback, the pro forma PCA reduces to 1.73. Alongside our 50% payout ratio, the buyback brings our total shareholder distributions to around 65% of this year's profits. And turning finally to funding. We retired our Tier 1 notes effectively replacing this funding with Tier 2 issuance. This reduces our cost of capital and leaves us with significant flexibility to engage these markets opportunistically if we need to in the future. This does mean that our debt to capital increased by around 4 points to 24%, but we expect gearing will glide back toward the middle of our target range over the medium term. It's been a pleasure to have the opportunity to present what I believe are a very positive set of results today. But before passing back to Andrew, I wanted to briefly touch on a small transaction we announced earlier in the day. We've agreed terms to sell and exit our global trade credit and surety business, chiefly composed of our Australian and U.K. trade credit operations. While this business has performed well over an extended period underpinned by an excellent team, we recognize its leverage to macroeconomic settings. The exit will allow us to recycle capital into our core focus areas where we see a greater opportunity for long-term growth. Total premiums under consideration around $200 million, and we're planning to close later in the year. The modest upfront proceeds and capital release will add to today's messages around capital strength. I'll pause here and hand back to Andrew. Andrew Horton: Thanks, Chris. We gave our 2026 outlook back in November, and there's no change today. We see growth continuing in the mid-single digits and a combined ratio of around 92.5%. We expect the pace of growth will sustain over the medium term and see a solid 15% plus outlook for ROE. We've included a quick bridge here of our 2025 underwriting result to this year's guidance of 92.5%. I appreciate many will adjust our reported result of 91.9% for the favorable catastrophe experience and this leaves you in the early 94% range. Consistent with what we flagged in November, there were 3 categories driving the bridge to our outlook. Firstly, reinsurance spend and our cat budget. We achieved quite significant savings on the new program and our cat budget will be a touch lower year-over-year. Secondly, on expenses, we had an expense ratio of around 12.4% this year and should be able to land at 12% or better in 2026. And finally, on ex-cat claims. We see support from pricing initiatives. Chris spoke to the substantive 20-plus increase at 1/1 in A&H. While small, our U.S. Aviation portfolio recently saw rate increases of over 40% for the large airline segment. And closer to home, we've now put through mid-teen increases in New South Wales CTP. Where there's claims activity the industry is showing discipline and pushing for rate. Our performance management agenda has plenty of remaining upside, particularly as we work through remaining underperforming cells. And finally, we've spoken about the elevated level of large claim costs where we expect some normalization. Through the recent reinsurance renewal, we're also able to lower the retention for our risk excess of loss cover. The coverage were generally attached for non-cat large claims of $50 million previously and in many instances, that is now just $25 million. This will help manage large claim volatility. So I hope that gives you a bit more clarity on how we're seeing things into 2026. We'll hold our usual first quarter update alongside our AGM on May 8. Before wrapping up, I do want to thank our 13,000 people for their contribution to these outstanding results, which we can all be proud of. With that, I want to thank you for joining us. And before passing to the operator, I want to remind you, we'll be taking just 2 questions per analyst. Thank you once again. Operator: [Operator Instructions] Our first question comes from the line of Andrew Buncombe with Macquarie. Andrew Buncombe: Congratulations on a great result. Just the first one for me. In previous years, there's been some surprise around how you pay out the first half dividend, just to set us off on the right track for next year. Can you just remind everybody how you think about the payout in the first half results for dividends? Andrew Horton: Yes, exactly. I think we're paying it, Andrew, on a 1/3, 2/3 basis. I was just getting confirmation before I made that comment. So we're just seeing 1/3, 2/3 rather than 50% of the first half profit. And that sort of takes out the volatility. So we look at 1/3 of where we're forecasting to be at the end of the year rather than 50% of where we are at the half year. Andrew Buncombe: Excellent. And then the other one from me was just can you remind us whether there's any benefit to the FY '26 combined ratio from the tail of any of the roll-off of the North American portfolio, the noncore portfolios? Andrew Horton: No. So we're expecting not to talk about the roll-off of the North American book anymore. It's just an all-inclusive number. So no expected benefit, no expected negativity from it. It's relatively small at this point in time, so we can absorb it within the North American numbers. Andrew Buncombe: My congratulations again. Andrew Horton: Thanks, Andrew. Operator: Our next question comes from the line of Andrei Stadnik with Morgan Stanley. Andrei Stadnik: Can I ask my first question around the casualty sidecar? I think you mentioned reinsuring about 1/3 of the risk. But can you remind us the dollar figures involved? Because I thought this sounded relatively meaningful. Andrew Horton: Yes. Chris, can I hand to you as you were running that business when we did it. Christopher Killourhy: Sure. I mean the size of the sidecar is in the region of $450 million. I think a way of thinking about the cycle, the benefits we get. It's roughly -- the ratio is roughly sort of 1:3 in terms of premium to capital. But where we really see the capital benefit potentially coming in is in outer years as reserves build up and we bring more years in? Andrei Stadnik: For my second question, you've spoken a lot about all facilities and how you've been growing that. Can you talk a little bit more maybe about some of the efficiency benefits? Are you seeing anything on the cost there, particularly in the context where there's some really heavy criticism about the cost of operating in the Lloyd's market and how long they're taking to replatform. So the way you run a facility, is that a way to maybe help with that? Andrew Horton: Yes. So I mean, the great beauty about them is the facilities are both Lloyd's and some that are non-Lloyd's. From our point of view, we write about $1.5 billion of premium with a group of around 20 people. So our own costs of doing it are low. For brokers, it's very efficient for them because they have a preplaced amount, so they don't need to open broke that amount within the facility. So the brokers costs go down, and they pass some of that on to the clients or some cost to the clients. So the clients benefit from a lower price. The brokers have lower costs, and we have relatively low cost to actually write it. So generally, it works out well for the buyer of insurance, the intermediary and ourselves. And that's why I believe these are things that are going to stay. The market did have a facilitization 25, 30 years ago. And I don't think there was that balance of dividing up the economic benefit, particularly well. And therefore, they generally collapsed in the late 90s. These are much larger, much more structural and the client and buyer benefits quite a lot. Operator: Our next question comes from the line of Kieren Chidgey with UBS. Kieren Chidgey: Andrew and Chris, just first question on the North American combined ratio detail. you've provided today on Slide 14, just sort of 97.7% at a divisional level, obviously, including crop. And I think you're flagging a profit in noncore this period. So it does imply the core business, excluding crop and that noncore is well into the 100% level. And I appreciate Accident & Health, you've already flagged as an issue in aviation, but just keen if you can give us an idea around how the rest of the U.S. business was tracking last year ex those 2 areas, particularly given it was a benign [ cat year ] and it looks like you had a bit of PYD support there as well. Andrew Horton: Yes. So I have a go at starting on that. So as it breaks down into crop, commercial and specialty, the crop business obviously had a very good year as we've talked about. The commercial also had a good year. That's broken down between the property programs, which not surprisingly performed well. You made the comment about having a few [ cat ] percentage of losses also dropped. So the activity we've taken to rebound that portfolio has worked well. A commercial casualty within that business was also good, a bit of stress in workers' comp in that division. But overall, the commercial performed well. So the challenge, I think, as Chris just mentioned, was almost all in the specialty and had a combination of factors. It has the A&H book, does have aviation, which had 1 or 2 large losses. We did pick up some prior year negative in transaction liability, which the market has recognized in the U.S., and we've seen rate increase quite considerably in transaction liability, particularly in the U.S. on the back of it. And 1 or 2 of the financial lines programs did not perform well. So you're right. I think the overall combined ratio, excluding crop, is close to 100% year-on-year, but we see the potential improvement in the A&H. We think we're on top of the transaction liability in the market moving. Financial lines programs have either dropped or changed. So we see that as a positive, although it's negative in 2025, positive for the potential performance of the business in 2026. Kieren Chidgey: Andrew, the ex rate growth in the U.S. in the year ahead, sort of outside obviously, the repricing in A&H and aviation, are you actually growing in those specialty areas have been quite weak in the past year? Andrew Horton: So I think that's a great question. I don't think there'll be any ex rate growth, particularly in A&H. We'll probably be looking at the rate and ensuring we've got the right clients and the right portfolio. I think there will be some extra growth in aviation. We've been working on that team for a number of years now. It's a great team. So we do want to build on that. And then within the U.S., most other lines will be looking for ex rate growth in 2026. Kieren Chidgey: My second question is just on reinsurance you flagging significant reinsurance savings in the year ahead, I guess, not out of line with sort of double-digit renewal reductions we've heard sort of globally at 1 January, but there's quite a bit that goes on in your reinsurance line with the crop quota share and the like. Can you give us a better feel for how much cat reinsurance spend is and roughly how meaningful this rate reduction on the cat cover is into 2026. I know it's complicated as well with some of the reinsurance transactions, Chris has probably talked about earlier. Andrew Horton: Yes, it's not going to be an easy one to answer on this call. We may have to come back to it. And as you say, we saw the reductions in the property cat reinsurance, which is in line with what people have been talking about. And it seems to vary between 10% and 20% depending on who you talk to and whether you've changed your retention or not. So we're definitely in the mid-teens in terms of price savings on the cat reinsurance. I think we'll have to come back to you on the mix because you're right, there's some in our reinsurance spend. There's always going to be some complexity of how much we reinsure in the crop world, and we're looking at how do we balance what we retain and what we reinsure. And we do this reinsurance to the federal funds in the U.S., but we also buy some external reinsurance. And if we're comfortable about the crop performance, we may lower our external reinsurance. It's not a simple one to work out exactly what percentage of our gross premiums we're going to reinsure out. Chris, I don't know if you have a better answer than that, but we may need to come back to you and give you a bit more depth on that outside this call. Christopher Killourhy: Yes. I think on the breakdown, we can come back with more detail. I think to Andrew's point that we hugely value the relationships we have with our reinsurers. So we don't want to go into too much of exactly where we got to on the final negotiation. But to Andrew's point, we see the -- you'd have seen ranges between 15% to 20%, and we'd like to think we came out towards the better side of that. But I think most meaningfully for us is the fact that we're able to secure the reduction in attachment point and also the cat bond we placed this year has just helped us a little bit with bringing down the overall cost of the program. Kieren Chidgey: Okay. You can't sort of give us a rough feel for that combined cat budget reinsurance building block on your core waterfall, how you're viewing that from a materiality point of view next year? You've been quite clear on the expense ratio improvement. Andrew Horton: Yes. Well, on the waterfall, it's obviously not coming from crop. It's coming from the cat mainly because that is the one where we're seeing rate reductions. I don't know, we obviously give it in size on the waterfall. So let's come back to you and we can come up something on that. Christopher Killourhy: It's approaching a point improvement, maybe in the region of 80 basis points for both the cat, the combined benefit of the reduction in the cat allowance and also the reduction in the cost of the program. So in the aggregate, it's around about 80 basis points. Operator: Our next question comes from the line of Julian Braganza with Goldman Sachs. Julian Braganza: Just the first one, just looking at your initial estimate of ultimate claims for 2025. You sort of alluded to that. It's looking very strong and improved materially just over the last few years, particularly from 2024. Just want to understand, one, how much of that improvement is due to mix versus resilience? What are your expectations here for leases over the medium term? And also just what's baked in your ROE guidance for reserve releases as well over the medium term? That's the first question. Andrew Horton: So I mean part of it is what we've been talking about in a number of years of ensuring we are reserving well for claims, especially medium and long-term claims, and we do think that's building up, which is a positive sign for us. I don't know whether you've got anything else to add to. Christopher Killourhy: Yes. I mean I think in terms of as we look forward, we're not sort of factoring anything in specifically for reserve releases in the -- in our guidance. But if you -- exactly to Andrew's point, if we just think of the math that we're holding on to long tail -- on our long tail portfolio, we're holding on to the loss ratios for a period of 3 years. So by definition, you would expect that to all things being equal to translate into some releases, but we haven't factored that explicitly into the guidance we've given today. Julian Braganza: Okay. And just to clarify as well, your ROE guidance assumes 80% POA on the cat budget similar to what you've structured this year and last year? Just the clarification. Andrew Horton: No, definitely Yes. Julian Braganza: Awesome. Okay. And then just a second question. In terms of just your cat loading, 5% to 6% of NEP, is there an opportunity to bring that down further as you think about derisking your business from a cat perspective, look at some of your global peers, they're around the low single-digit mark. We've seen your MERs come off. We've seen noncore losses run off as well. So just wondering how you're thinking about that over the medium term? Andrew Horton: Yes, I don't think we necessarily think about lowering it. What we've spent a reasonable amount of time over the past few years was taking out the cat losses, which were too large. In other words, it wasn't in good balance. So I think writing property business in catastrophe zones is fine as long as you're in control of the balance of it, you don't have too much of it, you're comfortable with the reinsurance program you have, and you keep back testing that against various catastrophic losses that you haven't got an outsized share. So we haven't really thought in bringing it down to a lower level. And while it delivers a good ROE and we can cope with that volatility within the rest of the book. We have not set ourselves a target of getting the 5% to 6% down to 4% to 5% to 3% to 4%. So we actually quite like it at the pricing it is, complements everything else we do. It makes us important to brokers and clients when we can do both. So no, we're not thinking of lowering it. Operator: Our next question comes from the line of Nigel Pittaway with Citi. Nigel Pittaway: First of all, a question on growth. I mean, Andrew, you mentioned that, obviously, at the moment, you're still seeing supportive market conditions with competition confined to rates and where necessary, people are disciplined in pushing for rate. I mean do you see any risk to that? And then in that context, do you expect your sort of GWP growth in '26 to be in similar areas to '25, obviously, taking into account the fact you've said there'll be no unit growth in A&H and a bit of pickup in growth in Australia. Andrew Horton: So I think it's a great point. So I feel comfortable in the medium term of looking at the growth. So 2026, definitely, with the breadth of the book and the support we're getting in pricing and the areas we're focusing on, feel pretty comfortable about that. We do believe QBE Re and the portfolio solutions and cyber will continue to grow into 2026, and those were 3 good growth areas for us in 2025. We're trying to think of other areas. There are new areas, and we touched on earlier on about as renewables going to grow or the energy world going to grow and data centers, a lot of talk about insurance and data centers, and I'm sure we'll get a share of that. So I feel pretty comfortable about the 2026 growth. We're also trying to balance it of not putting too much stress into the system, and I've talked about this before, it growing mid-single digit is not trying to overstress us. We're not forced into growth in any way, shape or form because fundamentally, margin is by far the most important thing. And we're trying to get this margin under as much control as possible and manage the volatility around that margin. So yes, I feel pretty good about 2026 where the rating environment is. Just as a touch point, rates on Jan 1, where we write a reasonable amount of the international business virtually in line -- almost exactly in line with where we thought they were going to be. So we haven't seen anything in the first 1.5 months that takes us away from this potential growth for 2026. Nigel Pittaway: And then I mean in terms of the rate rises and terms and condition changes you've put through in A&H, I mean at 3Q, you sounded pretty confident competitors were going to follow suit. I mean the latest intelligence is that that's what you've done is pretty much in line with the market? Or have you been sort of stricter than the rest of the market in your reaction to the losses that occurred this year? Andrew Horton: I think, Nigel, we're in line with the market. As you say, there's been a lot of talk about this. So that's a good thing because it means the market needs to resolve it and it's obviously nothing unique to us, and it's much easier to resolve when the market is accepting the issue rather than we're the only ones who think we need a rate of x and the market is happy with half x or 75% of x. So it's definitely a market-wide issue and numbers are similar. I'm sure we're going to find some people who are further ahead of it, and some people aren't as up speed in it, and the portfolio is going to vary a bit. But fundamentally, I feel good that it's a market-wide issue and rate is holding. Operator: [Operator Instructions] Our next question comes from the line of Siddharth with JPMorgan. Siddharth Parameswaran: Couple of questions. Just firstly, on the ex-cat claims ratio bridge that you've flagged the improvement that you're flagging from '25 into '26. I was just hoping you could help us understand what's happening on the inflation versus rate side. In terms of what I saw in the fourth quarter, it seemed like rates were slightly negative, and I know you're flagging some rate increases since 1 Jan, but just wanted to get a perspective, one would think that six months ago, you flagged that rate was behind inflation and rate has got lower. So just keen to make sure that we understand where that improvement is coming from? Andrew Horton: Yes. I mean if we just do it at a completely macro level, I think the rate increase across the whole portfolio in '26 is going to be a low number. And what we're planning for is inflation being 2 or 3 points higher than that. So we definitely have that. And that means if we did nothing and just renewed everything and nothing actually changed, margin would potentially shrink. But that's not what we'll be doing. And some of the rate increases built into the exposure you charge anyway. So the rate is always a bit of a -- this is a headline premium adjustment as opposed to that inflation being built into the exposure on which you charge the same rate. So it's a very simple number. We're changing the portfolio on the back of it. You try and focus not surprising on core clients that have a better, better rating and you drop the ones that are worse in an environment where you potentially are being squeezed. That could be property or A&H and therefore, you can end up with a similar outturn despite apparently having this difference between inflation and rate. The other thing I'd say is inflation is always an estimate, and generally, you don't really know what it's going to be like until a few years down the track while rate is what it is, and it's just purely based on a premium number. Christopher Killourhy: I think another point I'd add. I mean, Andrew mentioned earlier about we see circa 90% of our portfolio as being above adequate. And actually, it's interesting when we look at rate movements that the 10% of the portfolio that, therefore, is inadequate is where we're still seeing rate strengthening come through. So I think it again goes to evidence that the market is still behaving pretty rationally. Siddharth Parameswaran: I guess the question was just around the 2 components. What is your view on rate and what is your view on inflation? Andrew Horton: Yes. So I'd say in total, the view on the rate is, it's going to net to a small single digit, but the spread is obviously large because we talked about A&H getting 20% plus, and they are going to be 1 or 2 that go negative. And then the inflation assumptions are going to average to 3%, but some of them are going to have inflation of 10% to 20%, and some are going to have none. And overall, net-net-net, those are the 2 numbers. But there's so much more to the group than those 2 numbers. So I'm not sure what to do with them because I don't see 1:3 meaning margins should go down by 2 because that just assumes we don't do anything, and we will be. And that's what Chris was trying to pick up on. When you got it well rated, you're relatively comfortable to continue with it. And when you -- it's not well rated, you're not. Operator: Our next question comes from the line of Simon Fitzgerald with Jefferies. Simon Fitzgerald: Just quickly, Andrew, you talked about rate adequacy. I just wanted to explore that a little bit more in the context of property. I recall that you said, I think, at the half that property could fall by 25% in terms of rate adequacy before you would lose interest in that segment. In some pockets of property, property core, for example, we are getting a little bit close to that. And I noticed in terms of the graph on Page 21, property forms 33% of GWP. I was just hoping you could maybe break that down a little bit more in terms of the ones that are exposed to that sort of 10% to 15% as you described or more and ones that aren't. Maybe you could just sort of describe that property portfolio in a little bit more detail. Andrew Horton: Yes. I haven't necessarily got the quantum of it all, but I'll have a go at it. So we write catastrophically exposed property and non-cat exposed property. So what we're finding is the specifically U.S. cat exposed property is taking the largest decrease. So that's starting with the largest decrease or planned was in 2025, probably will be in 2026. And that's often what's driven the reinsurance, the cat reinsurance. It's been the reduction in the U.S. property cat reinsurance going down. Elsewhere in the world, it is less than that. Going to -- if your non-cat European property, of which we write a reasonable amount, we're probably seeing no rate decrease, rates holding and it's fine. So you've got that big spread. So within the 30-odd percent, there is a big spread between the U.S. cat and, let's say, European non-cat. And everything else is plotted in between on that. So of course, when we're looking at rate adequacy, we're trying to break it down by portfolio, by country, by type and determining what is rate adequate and what isn't. So I'd expect this year, potentially the most stress could be the U.S. cat. That said, of course, it was the one that went up the most in the 4 years prior to it. So its rate adequacy went up over shot. I mean this is what the insurance industry can do with a volatile classes. We find myself inadequate, we overshoot and then we start coming back to where we could have been the whole time if we've known exactly what everything was going to happen. So that's why we tried to show these cumulative rate change charts, just to remind people where we've actually come from in each of the lines business. I'm not sure I've answered it as precisely as you would like. What I'm trying to flag is we've got a lot of different types of property geographically cat, non-cat within the portfolio and trying to manage those to deliver the best risk-adjusted return. Again... Simon Fitzgerald: Maybe a question -- just in regards to the change in the reinsurance structures and so forth, can you just give us a little bit of guidance in terms of '26 about how we should be thinking about that reinsurance expenses line and will it be broadly similar to '25 or what sort of decrease should we expect given the new change? Andrew Horton: Yes. I mean the property cat reinsurance is definitely coming down. And we just -- I think we were saying earlier on, we probably need to do some analysis of that and share that with you because it's quite hard to determine what the net position of that reinsurance line is going to be based on it having property and casualty and some quota share and crop in it. And so we need to do that rather than me try and estimate it now. So let's come back to you on that. Operator: Our next question comes from the line of Freya Kong with Bank of America. Freya Kong: Providing the bridge to 92.5% for this year. Just as a follow-up to Sid's question about 1% rate versus 3% inflation. Are there any business mix shifts that are being assumed in getting us to 92.5%, i.e., shift towards lower combined ratio lines next year? Andrew Horton: Yes. I mean, obviously, when we were talking earlier on about trying to grow the QBE Re and QBS and cyber, potentially those at this point in time have good margin, and therefore, we're trying to push those. So that's it -- I mean, that's a really important point that we're forever rebalancing the portfolio, and therefore, it's not stable. So the math just doesn't work that we just take these 2 numbers and assume everything is going to come down on that basis because we're not at all sitting in a consistent position year-on-year. So we're doing exactly what you're suggesting of -- and it's pretty obvious, isn't it, remediate the ones which are under pressure and really grow the ones where the margins are good. And that's what I think we're getting better at and why the results are improving as we've done more and more of that. And what we've done is let go some of the businesses that historically gave us combined ratios greater than 100% and also drove quite a lot of the volatility around it. So that's why we feel comfortable. So in that ex cat element, there is a reasonable amount of rebalancing and is also looking at some of the portfolios that truly need to change and how do we change those and that can be re-underwriting, going back to our core shrinking, there could be a number of things in it. That's why we feel comfortable about it. Sorry, Chris. Christopher Killourhy: I think it's a great question because I think one of the things we do want to be really respected for is how we move capital between portfolios across cycles. And we just see that as good underwriting, good sort of running an insurance company. So absolutely, there will be sort of change in the portfolio in terms of rebalancing the business we see as being more adequate or performing better. What I would say, however, is there is sort of a fundamental mix shift in terms of, for example, increasing our weighting to property cat because it runs at a lower combined ratio, that would then bring in some additional volatility. So we are -- the mix will change as we just look to keep rebalancing towards the business we see is more adequate, but we're certainly not relying on a shift to sort of more volatile business to bring the combined ratio down. Freya Kong: Okay. Great. That's really helpful. And can I just ask on Accident & Health, what's the impact been on retention in the book, given you push through 20-plus percent price increases? And is this still an area for growth in the medium term, assuming remediation this year go as well? Andrew Horton: So the latter part, definitely. I mean we've been involved in this group or the team since 2001, and I think we acquired the company in the late -- around 2010. So it's been with us a long time. They've got a lot of tenure. They manage all sorts of different types of events that have taken place. So definitely want to grow it. I think in the short term, we've don't really want to grow too much this year. We've been able to retain almost everything we wanted to retain. I think that just shows stress in the market, the fact that people are shopping around and struggling to get a move and have come back to us on the back of trying to do that. It's generally a relatively low retention business. So these companies do move on a regular basis. So I think the average retention normally is around 70%, which is considerably lower than our average, which is in the 80s on average. So generally, it is a shopping around business, and I think more has taken place this year. And therefore, we've been able to retain everything we wanted to retain. Christopher Killourhy: Yes. And I think we do see, as Andrew says, this is a portfolio that, I guess, does have lower in general retention rates than we'd see elsewhere. And one of the things we do all see generally over time is that the renewed business tends to perform better than the new business because it does sort of take that one cycle just to sort of harvest the business. And so there is an element of while it was growing, you will just get a little bit of strain in there. So that's part of what we're just managing going forward as well. Operator: Ladies and gentlemen, due to the interest of time, I would now like to turn the call back over to Andrew for closing remarks. Andrew Horton: I'd just like to thank everyone for joining us today, and I'm sure we're going to be seeing a number of you over the next week or two. Thank you very much.
Operator: Good day and thank you for standing by. Welcome to the AMN Healthcare Fourth Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Randy Reece. Please go ahead. Randle Reece: Good afternoon, everyone. Welcome to AMN Healthcare's Fourth Quarter and Full Year 2025 Earnings Call. A replay of this webcast will be available at ir.amnhealthcare.com at the conclusion of this call. Remarks we make during this call about future expectations, projections, trends, plans, events or circumstances constitute forward-looking statements. These statements reflect the company's current beliefs based upon information currently available to it. Our actual results may differ materially from those indicated by these forward-looking statements because of various factors and cautionary statements, including those identified in our most recently filed Forms 10-K and 10-Q, our earnings release and subsequent filings with the SEC. The company does not intend to update guidance or any forward-looking statements provided today prior to its next earnings release. This call contains certain non-GAAP financial information. Information regarding and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release and on our financial reports page at ir.amnhealthcare.com. On the call with me today are Cary Grace, President and Chief Executive Officer; and Brian Scott, Chief Financial and Operating Officer. I will now turn the call over to Cary. Caroline Grace: Thank you, Randy. Welcome, everyone, to our quarterly recap and year-end update. We are pleased to review our 2025 accomplishments and highlight what we expect looking ahead. Several themes prevailed last quarter and so far in the first quarter as we saw healthy seasonality in Nurse and Allied staffing, a return to sequential growth in international nurse staffing, increasing demand in our leadership and search businesses, along with extraordinary need for labor disruption support. We had outsized labor disruption revenue in the fourth quarter and with 2 large events in the first quarter, we anticipate significantly more labor disruption revenue this quarter. For the full year 2025, we finished with revenue of $2.73 billion and adjusted EBITDA of $234 million. We reduced debt by $285 million in 2025. Fourth quarter revenue of $748 million was 2% higher than the year ago quarter and $18 million above the high end of guidance. Gross margin came in slightly above the high end of the guidance range and adjusted EBITDA margin was at the high end of guidance. Labor disruption revenue in the fourth quarter was $124 million, nearly doubled over the year ago quarter. Excluding labor disruption, revenue for the quarter was $624 million, slightly above the midpoint of our guidance range. By segment, excluding labor disruption revenue, Nurse and Allied Solutions and Physician and Leadership Solutions came in at the high end of guidance. Technology and Workforce Solutions revenue was $2 million below the midpoint of the guidance range. Nurse and Allied revenue of $491 million grew 8% year-over-year. Excluding labor disruption, segment revenue was down 7% year-over-year, improved from down 13% in the third quarter. Travelers on assignment, which do not include labor disruption, grew 6% sequentially in the quarter. In the first quarter of 2026, we expect Nurse and Allied revenue to be up more than 135% year-over-year or excluding labor disruption, up 2% to 4% year-over-year and up 4% to 6% from the fourth quarter. We are seeing positive year-over-year demand in Allied, including our Schools business and the seasonal demand decline in Travel Nurse in line with last year. Physician and Leadership Solutions revenue in the fourth quarter was $170 million, down 2% from the year ago period. Every business in the segment exceeded the assumptions embedded in guidance with interim leadership and search showing the most upside. For the first quarter of 2026, we expect Physician and Leadership revenue to be down 5% to 8% year-over-year. Within this outlook, we project interim to be down in the mid-single digits year-over-year with search flat to up from prior year. We expect locums to be down mid-single digits year-over-year as we have seen some disruption in early-year demand with certain clients who are experiencing strike events, along with seasonal demand declines. However, our outlook remains positive for sequential growth in the segment for the middle quarters of the year. In the fourth quarter, Technology and Workforce Solutions revenue was $88 million, down 18% year-over-year or down 14%, excluding the divested Smart Square business. Within language services, our tiered service strategy to address price competition is already in trial with several clients, and we expect to see gross margin benefits from this strategy in the second half of the year. As we have now developed and deployed this new strategy, we are able to support a broader range of client choices. Our language services delivery models use our leading technology platform to provide medically qualified human interpreters on demand for clinical interactions as required by federal regulations. To support the entire patient journey, we are expanding our capabilities by investing in AI technology enablement to support the administrative and other nonclinical interactions with patients where human interaction is not required. We have momentum from new client wins in Q1 and a growing sales pipeline, giving us the opportunity to return to year-over-year revenue growth in Language Services later this year. VMS revenue in the fourth quarter was $16 million, lower by 4% quarter-over-quarter and 28% year-over-year. After rolling out ShiftWise Flex to our client base in early 2025, our emphasis was on deploying enhanced capabilities in our industry-leading VMS. These include advanced analytics and reporting, generative and Agentic AI and expanded support for managing internal float pool and internal agency. These investments broaden our ability to win new business and expand our solution set with current clients. In the first quarter, we expect Technology and Workforce Solutions revenue to be down in the mid- to upper teens year-over-year or low teens, excluding Smart Square. We expect Language Services revenue to be modestly lower sequentially. The downward sequential trend for VMS is moderating with the driver of decline in the first quarter being 2 fewer days. As we look forward, our consolidated first quarter outlook includes an assumption of $600 million in labor disruption revenue from multiple strike events. Although the labor disruption revenue reduces our consolidated gross margin, it does drive operating leverage. Our team has risen to the challenge of serving the day-to-day needs of our 2,000 clients while also managing 2 large indefinite duration strike events on both coasts. I am profoundly impressed by the energy, commitment and teamwork we have sustained in driving quality outcomes for our clients during these events. We're also very pleased with the performance of the event management system we built over the past 2 years as the backbone of our differentiated labor disruption solution. Strategic clients expect us to support them through disruptive events, and we are committed to supporting them as part of building long-term partnerships while ensuring continuity of quality patient care. We have discussed over the past 3 years how our team has automated, reorganized, tech-enabled and rebuilt our business processes to ensure that AMN would be ready when staffing demand rebounded. While we have reported on the improvements in our speed to fill and ability to compete across broader market segments, the labor disruption events in recent months have proven that our enhanced platform and solutions can successfully handle significantly higher levels of demand. Also strengthening our response is how we develop the ability to seamlessly onboard suppliers into our technology and programs during a demand spike. This strengthens our position as a preferred partner for other staffing vendors. Beyond the needs for labor disruption support, we view 2026 as a year of transition as we work to return all our businesses to growth. At the start of this year, conditions in the health care labor market show signs of returning to normal as measured by the rates of hiring and attrition. Clients are increasingly using a blended labor model to support revenue growth, and more clients are seeking support for centralizing their control over contingent labor spend, including heightened interest in locum. We see rising recognition of the value of having a long-term strategic partner for workforce management, and AMN is well positioned to be that partner. We expect to see Allied International and Search return to year-over-year growth in Q1, with the other businesses returning to growth in the coming quarters. After 2026 and excluding labor disruption, we see a path to delivering sustainable organic revenue growth of 4% to 6% per year while growing operating expenses at half the rate of revenue growth, resulting in 10% to 15% growth of adjusted EBITDA. Cyclical drivers should help our industry return to growth, but we also have positioned AMN to fuel growth from market share gains and an improving revenue mix. In our robust sales pipeline, we see the potential to regain momentum in MSP, where we have demonstrated the value of having AMN as a long-term business partner. We are gaining share in the large direct and vendor-neutral segments of the market. The investments we made, including AI enablement across recruiting, applicant tracking, credentialing and support, are transforming the way we operate. We are demonstrating that we are a much faster and more agile company with a stronger technology base than we were just a few years ago, giving us greater optimism about improving earnings power over the long term. Words cannot express the gratitude I have for our corporate team, our clinicians and our suppliers for their tireless dedication to ensuring our ability to support our clients and providing continuous care for their patients. Now let me turn the call over to Brian for additional details about our fourth quarter results and full year results, along with our first quarter outlook. Brian Scott: Thank you, Cary, and good afternoon, everyone. Fourth quarter consolidated revenue was $748 million, above the high end of our guidance range, driven by labor disruption revenue that was $24 million above guidance. Revenue was up 2% from the prior year and 18% sequentially. Consolidated gross margin for the fourth quarter was 26.1%, slightly above the high end of our guidance range. Gross margin declined 370 basis points year-over-year and 300 basis points sequentially. Labor disruption revenue reduced fourth quarter consolidated gross margin by 130 basis points. Consolidated SG&A expenses were $152 million compared with $159 million in the prior year and $139 million in the previous quarter. Adjusted SG&A, which excludes certain expenses, was $143 million in the fourth quarter compared with $145 million in the prior year and $129 million in the previous quarter. The sequential increase in adjusted SG&A is primarily attributable to a $5 million unfavorable professional liability actuarial adjustment, a $4 million net increase in bad debt expense and approximately $5 million of additional costs to support the large labor disruption event. Fourth quarter Nurse and Allied revenue was $491 million, up 8% from the prior year, exceeding the high end of our guidance range, driven by higher-than-anticipated labor disruption revenue. Sequentially, segment revenue was up 36%. Excluding labor disruption, segment sequential growth was 5%. Year-over-year Nurse and Allied segment volume decreased 5%, average rate was flat and average hours worked were down 1%. Sequentially, volume was up 6%, average rate was up 1% and hours worked were down 2%. Travel Nurse revenue in the fourth quarter was $209 million, a decrease of 9% from the prior year period, though up 6% from the prior quarter. Allied revenue in the quarter was $147 million, down 1% year-over-year and up 3% sequentially. Within Allied, our Schools business grew revenue 10% year-over-year. Nurse and Allied gross margin in the fourth quarter was 21.6%, a decrease of 220 basis points year-over-year. Sequentially, gross margin was down 250 basis points, driven by the lower labor disruption margin in the quarter. Moving to the Physician Leadership Solutions segment. Fourth quarter revenue of $170 million was down 2% year-over-year. Sequentially, revenue was down 5%, driven by seasonality in locum tenens. Locum tenens revenue in the quarter was $136 million, flat year-over-year and down 7% sequentially. Interim leadership revenue of $24 million decreased 8% from the prior year but was up 4% sequentially. Search revenue of $9 million was down 8% year-over-year and up 1% sequentially. Gross margin for the Physician and Leadership Solutions segment was 27.5%, down 100 basis points year-over-year. Sequentially, gross margin increased by 30 basis points. Technology and Workforce Solutions revenue for the fourth quarter was $88 million, down 18% year-over-year and 7% sequentially. Language Services revenue for the quarter was $70 million, down 9% year-over-year and 7% sequentially. VMS revenue for the quarter was $16 million, a decrease of 28% year-over-year and 4% sequentially. Segment gross margin was 48.1%, down 920 basis points from the prior year period due to an adverse revenue mix shift, lower margin in Language Services and the sale of Smart Square. Sequentially, gross margin declined 340 basis points. Fourth quarter consolidated adjusted EBITDA was $54 million, down 27% year-over-year and 5% sequentially. Adjusted EBITDA margin for the quarter was 7.3%, down 290 basis points from the prior year period and 180 basis points sequentially. Fourth quarter net loss was $8 million. This compared with net loss of $188 million in the prior year period, which included a noncash goodwill impairment charge and net income of $29 million in the prior quarter. Fourth quarter GAAP loss per share was $0.20. Adjusted earnings per share for the quarter was $0.22 compared with $0.75 in the prior year period and $0.39 in the prior quarter. Days sales outstanding for the quarter was 47 days, which was 8 days lower than a year ago and 10 days lower sequentially. Excluding impacts from the large labor disruption events, year-end DSO was 56 days. Operating cash flow for the fourth quarter was $76 million, and capital expenditures were $8 million. As of December 31, we had cash and equivalents of $34 million and total debt of $775 million. We ended the year with a net leverage ratio of 3.3x to 1. Recapping financial highlights for the full year 2025, we reported revenue of $2.7 billion, a year-over-year decrease of 8%. Gross margin for the year was 28.3%, a decrease of 250 basis points from the prior year. Adjusted EBITDA was $234 million, a decrease of 31% from the prior year. Full year adjusted EBITDA margin of 8.6% was 280 basis points lower year-over-year. For full year 2025, we reported a GAAP loss per share of $2.48 and adjusted earnings per share was $1.36 compared with the prior year GAAP loss per share of $3.85 and adjusted earnings per share of $3.31. Full year cash flow from operations was $269 million and capital expenditures totaled $36 million. Moving to first quarter guidance. We project consolidated revenue to be in the range of $1.225 billion to $1.24 billion. This revenue guidance includes approximately $600 million related to labor disruption support with the final amount subject to completion of the events. Gross margin is projected to be between 23.5% and 24%. The impact of labor disruption revenue this quarter reduces our gross margin by about 300 basis points. Reported SG&A expenses are projected to be approximately 14.5% to 15% of revenue and include about $40 million of additional costs in the quarter to support labor disruption activity. Operating margin is expected to be 5.9% to 6.5% and adjusted EBITDA margin is expected to be 9.7% to 10.2%. Additional first quarter guidance details can be found in today's earnings release. Now operator, please open up the call for questions. Operator: [Operator Instructions] The first question of the day will be coming from Jeff Silber of BMO. Jeffrey Silber: Since the labor disruption business is such a big part of 4Q and expected to continue in this quarter, I just wanted to drill down a little bit on there. Do you have like either separate operating procedure, separate sales force for this? How do you make sure that it doesn't disrupt the rest of your business? Caroline Grace: Yes. A couple of things. One is we have developed over and invested in over the past 2 years, technology and operating model to be able to support strike events. That system is being used not just in the strike events that we're doing now. We also used it in the strike that we supported in the fourth quarter. We have a dedicated strike team. It includes sales down into leadership roles and operations roles for very large events like what we have now. You have resources coming from across the company and from external sources as well. So we have a playbook for how we bring those resources on seamlessly. They're trained. We have operating procedures against it. So we really have built a system so that we will have as little disruption to our core business as possible when we're supporting these types of events. Given the magnitude of what we've supported in the first quarter, we have moved many, many corporate resources on to support this. It has had some marginal impact on some of our core business. But really, relative to the size of events, the playbooks and everything that we've put in place over the past 2 years is working incredibly well. Jeffrey Silber: Okay. That's helpful. Shifting gears a bit. I know the stock market is a bit jittery about AI disrupting a bunch of different businesses. And specifically with your company, I think some of the recent stock pressure might have been because of some fears on your language translation business. Can you talk a little bit about that in terms of what you think the risks might be and how you're countering them? Caroline Grace: Yes. And just as a reminder, for our language service business, it is focused on clinical health care setting. And that by government regulation is required to have a human interface and a human providing that service. Our capabilities are tech-enabled, but we have humans who are delivering that, which allows our clients to be able to comply with federal laws. So we really have been focused much more on the clinical side of it. We look long term, this is an important service to be providing to patients and for health care systems. The clinical setting is also higher risk. So beyond it being regulated, it's not an area that we have had any clients coming to us and saying, I want to look at AI as one of the areas that I would want to focus on in the clinical setting. We have had conversations around how do we use better AI enablement, both within our technology that is connecting the patient to all these medically trained interpreters. And we've also had clients who are looking at the overall patient journey and really wanting to ensure that they have some continuity in that patient journey outside of the clinical setting. So going from admitting into the clinical setting into discharge. So in my prepared remarks, I talked a little bit about what we're doing in terms of investing in AI enablement for us to be able to play in a broader part of that journey where you don't have that mandate and regulation to be able to have the human providing the interpretation. Operator: And our next question is coming from the line of A.J. Rice of UBS. Albert Rice: Maybe just a couple of quick questions here. First, just following up on the labor disruption situation. The nurses that you get to fill an uptick that involves $600 million of incremental revenues in the first quarter, are those people that are generally known to you and have taken travel assignments before? Are you getting them from a new source? And do those then become people that you can use to have in your pipeline for future assignments? How should we think about the implications of that kind of revenue increase going forward in the business? Caroline Grace: Yes. So a couple of things. One, in terms of the supply that we get, and these are very -- you're having 2 simultaneous indefinite events happening. And so from a supply standpoint, we have crisis workers that are known to us that are coming in for these events. We have some that are new to us. We engage suppliers in these events as well. And so we might have some travelers -- clinicians who are typically travelers come in or per diem and some that really focus on supporting these types of labor disruption events. So you're going to get a little bit of a mix in terms of the clinicians that are coming in. We have had very, very high fill rates in both of these events. So we have had access to great supply to be able to support these clients. We've also been able to use not just what we've built in our event management system over the past 2 years, but what we've done over the past 3 years in being able to recruit faster, and we've used our AI recruiter in these events, we've been able to not just fill at a higher level, we've been able to fill much faster for clients. In terms of the relationship then that we have with these clinicians after this, we have great experiences with them. And so we would view this as an opportunity for them to continue working with us, whether it's supporting future labor disruption events or coming and supporting as a traveler or a per diem type of role. Albert Rice: Okay. Interesting. We've gotten some questions about the Kaiser contract overall, which obviously is a big factor here, that relationship and partnership. I know that doesn't really mature until later in the year. I don't think maybe the end of the year. Is there any update because of all of this that maybe that gets reworked early, and it gets put to bed early? Caroline Grace: So our contract with Kaiser goes through the end of this year. We expect them as part of their normal governance process to go through an RFP this year. We have been very busy with them in the beginning of the year, and we have a very strong, deep, long-standing partnership with them. Albert Rice: Okay. And then my last question quickly is a different area. It looks like the March Visa Bulletin was published today and is advancing the retrogression date by 4 months and then you get 2 months of improvement in Philippines. That's sort of meaningful, it seems like to me. Is that enough to change the way you look at the international staffing business for '26? Caroline Grace: Yes. So for those that haven't been tracking this afternoon, the latest visa bulletin was released. So the rest of the world advanced 4 months to October 1 of '23, and the Philippines advanced 2 months to August 1, '23. That was more progression than we had expected in this visa bulletin. So we expect -- and we've talked about this in January that we expect mid-teens growth in 2026 from international. That's a higher-margin business for us. And so A.J., think about this that this would help us, particularly kind of at the end of this year going into 2027. Brian Scott: A.J., this is Brian. I mean I think we -- with some of the other restrictions that were put in place late in the fourth quarter and beginning of this year, this is definitely a positive because that's the counterbalance to several countries where we do recruit from that are potentially -- they're on a pause right now that the ways we're going to bring them in there from different countries, but also as those dates move forward, we have a lot of supply in both the Philippines and other markets. And so any time you see that date move forward, it's going to be positive both near and long term. Operator: Our next question is coming from the line of Kevin Fischbeck of Bank of America. Kevin Fischbeck: I wanted to follow back up on that point about the labor pool and the strike disruption. Does it in any way crowd out your ability to staff other projects? Is there like a headwind in the core business as a result of this that we should be thinking about when this business goes away? Is there an uplift? Or is that completely separate and not an issue? Caroline Grace: No, if you look at some of our guidance for the nurse business in the first quarter, you actually continue to see strong support for the core business. And so the way that we have built our ability to support strike also enables us to continue to support our core clients. And we can also, in a unique way because we have transparency, ensure that those clinicians do not get pulled off from our core clients as well, Kevin. So we've been able to do both simultaneously, and you see that in our guidance for the first quarter. When we look forward to the second quarter, what we would expect to see in the second quarter in our nurse business is the normal seasonal patterning that you have after winter orders. We had healthy winter orders this year. So anything that you would potentially see in the second quarter like that we have line of sight to right now would really be more reflective of that. Given that these are both indefinite strikes that have been going on for some period of time, it's really hard to predict what would happen in the second quarter in terms of as they get back to kind of business as usual, what that looks like. But we're not seeing really any meaningful impact in how it's enabled us to be able to support and staff our core clients. Brian Scott: Yes. I'd just add, I mean, we've talked about on the last few calls that when -- it's still an attractive market, clinicians want to travel. And when there's the right opportunities priced the right way, we're able to pull supply in and fill jobs quickly. So you can imagine these types of events are attractive to nurses that want to fill them, but there's -- that doesn't mean there still aren't a lot of other attractive opportunities. Geographically, these are kind of concentrated in 2 places. particularly in California, you have to be California licensed to be able to work one of these. And so there's a large pool of talent that may not have that license that's working on other assignments as well. So it's -- we -- in this case, again, it's a large market, and this is -- this can be an and strategy for us. Caroline Grace: And Kevin, the other part that I would add is you don't have as much certainty when you're going in and working a crisis like this that you would have if you were doing a 13-week travel assignment. So it really is a bit of individual preference about, am I going to potentially take something that would be higher paying but would be not -- you have risk that you may not actually get days or hours versus something that you had more structure around how long the contract was. Kevin Fischbeck: Yes. I was going to kind of segue to kind of follow up on that. Just that I guess the way that you kind of been characterizing the softness in the business more recently is that there's a lot of demand from the hospitals, but just not at the right clearing price. I guess like the strike revenue is probably at a higher clearing price. And -- so I'm trying to figure out how much we should be thinking about of the higher fill rates as a relationship to that dynamic just that the rates are higher, and therefore, it's just easier to fill because you're hitting that price point versus some of the things that you've talked about that might actually be more kind of positive indicators as it relates to Q2, 3, 4, to the rest of the year? Caroline Grace: Yes. Think of it as -- and this has been a consistent theme really for some period of time. If you have an order that's priced right, it gets filled. And so given how fast you have to build a workforce in a crisis, there's a very strong transparent market around what that looks like. So you typically get it priced right so that you can fill and stand up your workforce. In our non-strike business, if you have orders that are priced right, they're getting filled. So the same corollary holds true. Outside of strike, you might have systems that have an ability to wait a week or wait 2 weeks to see if an order gets filled and then they can increase price. When you're trying to staff a crisis, you don't have some of that same flexibility. Brian Scott: Yes. And we've had some clients where they have -- where the demand is strong enough and the need is urgent enough. And as they adjust price, to Cary's point, we fill those orders very quickly. So we have real-time data around that and continue to educate clients. And I think as you're -- as we talked in the prepared remarks, as you're seeing more normalization in hiring trends by hospitals, so they're kind of going back to the kind of pre-COVID normalized levels of hiring and attrition, they're going to typically find a place where they may have more urgency on trying to fill roles, and that's typically where you might see more flexibility on pricing. And when that happens, we can fill those jobs. So I think we're -- we've been at a point of stability now for several quarters. And I think that the next leg from history would be that you would start to have clients starting to think a little bit differently about how their models around perm and use of contingent labor and that flexibility and the cost, the cost trade-off there. And with that, it drives more constructive conversations about what type of rate is needed to be able to fill the right mix of jobs for them. Kevin Fischbeck: Okay. And then just last question. On the AI disruption potential, I wasn't sure I was 100% following because it sounds like you guys feel like the business has some in-place moat to it that you really can't be disrupted because of the regulatory aspect of face-to-face, but it also sounds like you're responding and changing your pricing and you're seeing pressure on that business at the same time. So just are those separate dynamics that are causing it and it's not AI, it's something else? Or how should we be thinking about that? Caroline Grace: It's a separate dynamic. It is not AI. And so the space that we're in, in language services is protected by government regulations requiring human interpreters. What we are seeing in terms of the pricing pressure is really an aggressive competitor consolidator that we talked a bit about in 2025 coming in that put pressure on. We were very agile in responding. We have developed and we now have in pilot a new service model that can compete against that. We have it in pilot with a couple of clients. And so that really is in response to a competitive environment. And the secondary thing we had in 2025 is you had the impact of tougher immigration policies on the industry. So those really were the 2 factors that we saw in 2025, but they are separate and not related to anything from an AI standpoint. We do believe not just for this business, but for all of our businesses, as you heard in our comments and some of the answers to our questions, we think AI can be accretive to us. We're using it in our client-facing technology in how we automate our own processes and how we support our recruiters. And so we think that AI can be very helpful to us in terms of helping productivity and speed and things that are really important in our business. Operator: The next question is coming from the line of Trevor Romeo of William Blair. Trevor Romeo: I wanted to ask about your guidance and specifically the margin piece. I know it is probably very difficult to fully strip out the strike business. But just any help you can give us on kind of what underlying margins with a normal level of labor disruption revenue would look like and what's embedded in the Q1 guidance from that perspective? Brian Scott: Sure. Yes, we tried to give some of that in the -- both in the release and the prepared remarks, but you can -- for example, the total revenue, again, if you can take that range and you were to strip out the $600 million that we put in, that's going to put you in the $625 million to $640 million revenue range, completely excluding anything related to labor disruption. And then on the gross margin, the 23.5% to 24%, we said there's about a 300 basis points drag related to that. So you can -- if you kind of exclude that, you're looking at somewhere more in the 26.8%, close to 27% range. So not -- just slightly down from the fourth quarter. And then the underlying SG&A would be running in the [ 130 to 135 ] range. So I think you can kind of work through the math on that. That's adjusted SG&A to kind of infer what the underlying adjusted EBITDA would be. It's pretty similar to what we had in the fourth quarter when you strip out strike, and that's the run rate we're at right now. Trevor Romeo: Okay. That's helpful. And then I guess I just wanted to follow up on the long-term targets. You talked about, I guess, 4% to 6% organic growth on the top line beyond this year. Just given that there have been a lot of changes to some of your businesses over the last few years, would love to narrow down what are your expectations for each of the segments over the long term? And maybe just the moving pieces that could get you to the bottom end or the top end of those ranges would be great. Brian Scott: Yes. I mean I guess I'd say to start with the -- we expect to maybe this year, we talked about to start to see recovery in the year-over-year growth. We have a couple of businesses like Search and International that in the first quarter, we expect to be at either flat or up in the first quarter. And at different quarters throughout the year, we start to regain positive growth. So that's why we said really that longer-term algorithm as you move into 2027, you're kind of lapping these different quarters of getting back to positive growth. And then we would expect through each of our segments, not disproportionately different rates of growth, more in that -- we gave a 4% to 6% range. I don't think we'd expect it to be significantly above or below that range. But as we see a more normalized environment for our core staffing businesses, we think that between volume and rate, an environment, we're going to see continued increasing demand for health care consumption. We think that's a reasonable expectation for the top line. And then some modest improvement in mix driving gross margin, but really the other big factor is the ability to drive operating leverage as we see continued top line growth. I think the initiatives we have, the investments we've made over the last several years and really upgrading a lot of our core systems. Now as we continue to invest in operational improvement and starting to embed AI more into a lot of our operations, we're seeing -- it's very early still, but we're already starting to see some of the benefits of that and how we can scale at a lower cost. And so we're confident that as we get into the out years that we'll be able to generate a nice incremental margin on that top line growth, and that's how you get to the double-digit EBITDA growth rate that we think we can achieve longer term. Operator: And the next question is coming from the line of Tobey Sommer of Truist. Tobey Sommer: I wanted to ask a question about seasonality past the first quarter. Sometimes after the winter period where there's seasonally better demand, Travel Nurse and perhaps sometimes Allied can be down sequentially in 2Q to the extent you care to, could you comment about seasonal patterns that you expect to unfold for the balance of the year? Brian Scott: Sure. Yes, I think that you characterized it well to start there. We -- as Cary mentioned earlier, as the winter orders come off in nursing, it would be very normal to expect to see a decline sequentially from Q1 to Q2. And I think as -- we're still in the middle of this quarter. But as we look at the demand and booking trends that we would expect to see that happen in the second quarter, but pretty consistent, we'd say a normal sequential decline. Allied has been performing very well, is kind of firing on all cylinders. They have some typical decline just on the Schools part of the business as you start to move into the summer. But that segment overall -- and then international, we would expect to see growth sequentially and year-over-year in the second quarter. But the net of that, we would expect to be down sequentially in the second quarter for Nurse and Allied. Conversely, for the Physician and Leadership segment, we typically see growth in locum tenens from the first to the second quarter. And with it, the trends we're seeing in interim search, we would expect the same. So that segment should be up and will partly offset the decline in Nurse and Allied and then the Technology and Workforce Solutions as we talked about Language Services, some of the changing strategies we have there has allowed us to start to regain some footing on winning new contracts. We've had several wins in the first quarter here and more under contract. I think that -- and then we had some headwinds in Q1 with early in the quarter with some of the weather impacts. So we'd expect to see a little better performance in Language Services in the second quarter. So the net of all that, it probably comes out if you take out strike from that, it's probably a pretty flattish second quarter would be a reasonable expectation just if we have our normal kind of seasonal behavior along with some of the momentum we're seeing in certain businesses. Tobey Sommer: I appreciate that. And just one question on the strike for me with the $600 million. Is there a date upon which if the strikes end prior to that, that it will be less than $600 million and a period of time that it would be perhaps greater than that just as we ride out the rest of the quarter, how do we interpret news flow relative to those numbers? Brian Scott: Yes. We're basically trying to provide it up to kind of where we are today as best we can. So I'll just say that. So to the extent that they continue, obviously, all parties are I'm sure working through trying to get these resolved. But if they continue longer, then we've historically not wanted to try to predict whether these happen or how long they'll be in duration. So we'll only really give what we can see in front of us right now. Tobey Sommer: Got you. And one more for me, if I could. There was a study out about the relative pricing and cost of full-time nurse labor versus contingent staff that showed things close to parity. In the context of these strikes, which invariably end in a new contract that guarantees full-time comp increases, what's your expectation for bill rates in that relationship between contingent travel nurses and their full-time equivalents? Caroline Grace: Yes. If you -- the data that Randy puts together would show something relatively similar, Tobey, to that report that you mentioned. We've already started having some clients, particularly coming up from finance and CFOs starting to really look at that and looking at contingent labor as being an attractive opportunity for them, not just on a relative cost basis, but you get flexibility along with the cost parity that you're mentioning. And so over time, what we really need to start seeing in 2026 is increases in bill rates, right? So we've talked about stabilizing bill rates that we saw throughout 2025. What we really would want to see in 2026 is increases in bill rates to reflect some of the underlying natural increases that you would see in terms of wage expectations. We started to see that in pockets, but we'd want to see it more consistently. Operator: And our next question is coming from the line of Mark Marcon of Robert W. Baird. Mark Marcon: Most of mine have been asked, but just going on the strike, if it continues, are there any sort of downsides that you foresee in terms of just the reputation or the branding with regards to other nurses that may not participate in a strike or anything along those lines or from a legislative perspective? I imagine the clients are really grateful but just wondering this general reputation. And then obviously, unions are typically averse to travel nursing and any sort of legislative pressure they might put on. Caroline Grace: So clients are very grateful, and it's a very important service that we provide to clients. We only provide support to our strategic clients just because of the intensity of what it requires to be able to deliver. From a clinician standpoint and from a union standpoint, these solutions give the unions the ability to strike. From a legal standpoint, if there was not an ability to be able to support patient care, it would take away the ability for them to strike. So we look at the solution set for us as a really important service, not just to clients, but broadly speaking, to clinicians and at the core of it to support continuity of care. So these opportunities to support a crisis attracts -- is very attractive to a group of clinicians. So we think it enhances our ability to offer a wide range of roles that different clinicians may want and for us to be an important connector for them to these opportunities. Mark Marcon: Great. And then can you give us -- so just if we take a look at that $600 million, you basically said that's through -- is that through today in terms of the day? And so therefore, we can calculate what the revenue per day is, and therefore, we could -- if the strikes continue, we could basically assume that there's further upside with regards to the estimates that you provided. Is that a correct way to look at it? Caroline Grace: Doing revenue per day would be hard because you can't think of these strikes as being static. They're dynamic. You might have some of their union members coming back at different points in time. So it's not kind of a take the number and try to do an average number. Brian Scott: Yes. The needs are dynamic. So it doesn't -- it's probably directionally -- I can understand we're going to take that approach, but it's not -- that would be oversimplifying in terms of going forward. Mark Marcon: Okay. Great. And then just on the 4% to 6% long-term growth rate, are you being a little conservative? Just when we take a look at the patient and clinician demographics, from a longer-term perspective, it looks like we should end up seeing some very healthy long-term demand. So I'm just kind of wondering how you're thinking about that. Or are you thinking just long term, meaning just '27, '28? Or is that truly long term? Brian Scott: I like the way you think, but I think we want to be mindful that there are external forces, whether it's economic changes that can influence our industry and just the unknown of the future. I think that's -- we feel like that's a reasonable way to approach a longer-term market. We'll always be striving, of course, to exceed that. And a big function will be just our ability to gain share over time as well. I think we're well positioned to do that. But we also want to make sure -- I think part of the point of providing some of that long term is just that we do think we're moving back into a market that is a little more in a stable mode and the way we interact with our clients, creating opportunity for us to grow with them and the ability to drive incremental margin over time as well. So again, we'll always strive to obviously deliver the best results possible for our shareholders. But with it, there's just enough unknown in the future. I think it's more appropriate to be prudent in any type of expectations we set. Caroline Grace: Also because we really only provide guidance 1 quarter out, I think giving a framework that is longer than that is also helpful, particularly given the comments that we talked about last year around stabilization and some of the factors that not only you mentioned, but also Brian talked about. Operator: Our next question is coming from the line of Constantine Davides of Citizens. Constantine Davides: Brian, I guess, first question for you. Anything you can articulate around cash flow expectations for the year? And I guess I'm thinking specifically of what you might see in the first quarter with the outside strike benefit, but any other factors we should be contemplating? I know you took CapEx way down in '25. So wondering if that's the right level for '26 as well. But any kind of factors or considerations on cash flow? Brian Scott: Yes. Thanks for the question. I'll start with the second part of that on the CapEx side. We had said for '25, we were expecting to spend somewhere in the kind of $40 million to $45 million range. We ended up at just in the high 30s. We would still expect to be in that low 40s -- low to mid-40s range. The higher CapEx we had for several years in part was it gave us the ability to really upgrade a lot of our systems that had some technical debt and also advance some of our systems like our ShiftWise VMS. So the good news is with a lot of that work done, it's allowing us even at this lower level of CapEx to deploy a much larger percentage into enhancements and innovation, including some of the AI initiatives that we've been accelerating. We'll -- if we continue to see really good returns, we have the ability to invest more, and that's, we think, a competitive advantage for us where I think a lot of our -- a lot of the competition is probably having to pull back more, and this gives us an opportunity to continue to lean in and invest more in our systems. But we think at that level, we're able to still advance our strategy. On the cash flow side, you'll see for 2025, we actually had a very, very high conversion of our EBITDA to free cash flow, kind of 2 influences there, but there was some very, very favorable working capital components to it that puts us at a higher level than we'd normally see. Historically, we've talked about free cash flow to EBITDA somewhere in that 60% to 65% range, well above that in '25. You'll see some of that flip the other way in 2026. We'll likely have more of a working capital drag in the year. So if you looked across the 2 years, we'd expect to be up in that 60% or higher range, but it would not expect to be at the same level in '26 as we had in '25. But we'll still have a nice healthy continued free cash flow, and that is allowing us to -- we've now, at this point, paid off our revolver, and we can invest in the business and continue to bring our leverage ratio down with longer-term target is to get below 3. With the guidance we've given for the first quarter, we'd expect to be below 3 on an LTM in Q1. And so this -- we're feeling very, very positive about our balance sheet position and again, the ability to invest in the business. Constantine Davides: Great. I appreciate that color, Brian. And then, Cary, just I guess, any commentary around pipeline for new business in Nurse and Allied? And I guess, specifically, what are you seeing in terms of volume of opportunities this part in '26 versus maybe what you saw last year and any kind of trends you'd call out? Caroline Grace: #1, we have a healthy pipeline, and it's broad-based. And so it's relatively evenly split maybe with a slight bias to vendor neutral in the pipeline. We started to see a theme in 2025 that we talked about that even if there was RFPs going out, there was a bias towards incumbency. That kind of cuts both ways. It helps us from an incumbency standpoint, but you have to have a pipeline sufficient enough to get enough of those opportunities through. As we left 2025 and into this year, we have seen wins both on the MSP side and on the vendor-neutral side, which we would expect to come on sometime in the next quarter, quarter plus, which will help us on a volume standpoint. We also have sales teams that are focused on direct opportunities, which we've seen momentum on both in 2025 and as we go into 2026 as well as cross-selling to our existing client base, which we think is a -- continues to be a significant opportunity for us. We got traction on that in '24, '25 and into this year. But we see a balanced and healthy sales pipeline as well as conversion of that pipeline as we left last year. Operator: And the next question is coming from the line of Jack Slevin of Jefferies. Jack Slevin: Congrats on the quarter. And I appreciate you sneaking me in here at the end of the call. I'll just leave it to one. Most of mine have been asked. And I don't know if it's just me, but I guess the size of the strike number is frankly a little disorienting, and I'm still sort of just coming out of it on that one. So maybe just to like level set on expectations. I know you don't guide for the full year, but that '26 base scenario you had sort of talked about in January at a conference. I guess when you think about the 1Q guide ex strike, and I know it's a little hard to parse those numbers, but sort of that trajectory and the trajectory in general of the business versus sort of how you've been speaking to it earlier this year, it seems like it's a little better, but I'd just love to get your thoughts like maybe more specifically on the margin front about are things shaping up the way that you've been thinking about when we try to parse away as best we can this big opportunity you've got in front of you in the first quarter? Brian Scott: Yes, I'll start. I mean, I guess I'd say, generally, we have a pretty similar view for the year. I understand how the guide for -- these are 2 kind of unprecedented events in terms of the size and duration. And so it has this impact on the first quarter. But if you kind of look through that, and we've tried to give enough color on what the underlying business trends are looking like, say overall, it's pretty consistent with what we expected coming into the year, which is a good thing. We have good conviction on our growth strategy and seeing good trends almost across the board here. And for those that aren't, we're actively working on that. So I wouldn't say there's any significant change. And again, if you take the Q1 less some of the taking out labor disruption, it's pretty aligned with, I think, overall with where consensus is, and that is probably driven by the commentary we've given before. And the trends through the year, I think, are still pretty consistent with what we've shared. So I don't know if you had anything to add, Cary. Caroline Grace: Yes. The only [indiscernible] what Brian just said. As you think about strike, and I know we've talked about this in a number of different ways, but it is incredibly important to clients to provide this. And so beyond the numbers, it was -- it's very important to the clients that we're supporting that they can provide continuity of care. The second piece for us is and it gets a little bit back into what Brian was just talking about in terms of our revolver is at 0 right now. It's an important frame around how we think about cash and our ability to continue to get our leverage ratio down. So that outlook did change with this, Jack, and just the magnitude of it. And I know we talked about that, and Brian talked about it in some of the prepared remarks that we had. But the third piece is it really -- we had confidence in everything we are building and automating and our ability to really deliver in a high-demand environment in a different way to be able to do these events simultaneous with supporting our core business at a high level really was a test for us that of everything that we've built over the past 3 years. And so that gives us even a higher degree of confidence as demand in the industry comes back on how we can deliver on that. Brian Scott: Yes. The other thing that's kind of exciting is as you've gone through these events, as Cary mentioned earlier, some of the deployment of AI tools because you're having to spin up a significant amount, obviously, of clinical workers in a very short order and then just all the logistics and operational support that goes behind that. So we've -- the technology team has done a fantastic job partnering with the business to advance probably faster than we would have otherwise, some of our AI recruiting capabilities, some of our reporting capabilities. And so that work, although focused first on labor disruption is extremely transferable to our core business. So that is one, I think, opportunity that we're just getting -- shining a light on more that we think will help us as we go through this year, and it will accelerate the pace, not only in our recruiting, but some of our other operations as well. And that's -- the team is getting very excited about that. Caroline Grace: Yes. And the last part that I probably know this is a call about numbers, and there's a lot of them in this. Our people are extraordinary. And so we talk about our culture being different, about it being something that is incredibly important to how we go to market, how we serve clients. If you spent 1 minute with any of our teams that are supporting these events, you would have a very clear view about how that is incredibly differentiating for us. Operator: Thank you. This does conclude today's Q&A session. I would now like to turn the call over to Cary Grace for closing remarks. Please go ahead. Caroline Grace: Thank you for your interest in our company and for the opportunity not only to talk about 2025, but also to get a sense of our very busy start to 2026. So thank you for your interest. Operator: This concludes today's conference call. You may all disconnect.
Operator: Good day, and thank you for standing by. Welcome to the LegalZoom's Fourth Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that today's call is being recorded. I would now like to hand it over to your speaker, Madeleine Crane, Head of Investor Relations. Please go ahead. Madeleine Crane: Thank you, operator. Welcome to LegalZoom's Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining me today is Jeff Stibel, our Chairman and Chief Executive Officer; and Noel Watson, our Chief Operating Officer and Chief Financial Officer. As a reminder, we will be making forward-looking statements on this call. These forward-looking statements can be identified by the use of words such as believe, expect, plan, anticipate, will, intend, and similar expressions, and are not and should not be relied upon as a guarantee of future performance or results. Such forward-looking statements are based on management's assumptions and expectations and information available to us as of today's date. These forward-looking statements are also subject to risks and uncertainties that could cause actual results to differ materially from such statements. These risks and uncertainties are referred to in the press release we issued today and in the Risk Factors section of our most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission. Except as required by law, we do not plan to publicly update or revise any forward-looking statements, whether as a result of any new information, future events or otherwise. In addition, we will also discuss certain non-GAAP financial measures. We use non-GAAP measures in making decisions regarding our business, and we believe these measures provide helpful information to investors. These non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations of all non-GAAP measures to the most directly comparable GAAP measures are set forth in our investor presentation, which can be found on the Investor Relations section of our website at investors.legalzoom.com. I will now turn the call over to Jeff. Jeffrey Stibel: Thank you, Madeleine, and thank you all for joining our call. 2026 marks LegalZoom's 25th anniversary, reflecting our longevity and evolution as a company. Our founders set out to democratize law by transforming how people navigate the legal system. Today, AI is making legal work easier to start. LegalZoom makes it safe and seamless to finish. Since I became CEO, we have been steadily refocusing our business to capture the AI opportunity while recognizing that certain tasks and complex legal matters will always require human judgment and supervision. We are winning by combining intuitive technology with trusted experts, strong execution and ongoing compliance. In short, we solved the last mile with humans in the loop. Our performance in 2025 is an early validation of our strategy. I'm proud of our results, but I am even more excited for what's to come. We entered 2026 from a position of strength. Let me remind you of our strategy, how we're winning and why it's durable? Our goal is to be the trusted guardians of small businesses and individuals lives and aspirations, enabled by the best technology available. We do this through our ecosystem of AI and expert powered legal, compliance and business management solutions that support small businesses as they form and grow. Our strategy is simple, automate what can be automated and then win through deep expertise and high-touch service where it matters most. AI can help you start. LegalZoom helps you get it done. Today, more customers are starting with AI platforms like ChatGPT, Gemini, Claude and Perplexity, getting information, document reviews and insights while increasingly trying to complete complex tasks. We believe AI tools are accelerating entrepreneurship by lowering barriers to starting and running a business, as evidenced by the data, U.S. business formations have accelerated over the last few quarters. We suspect some of this is anomalous, but we believe AI is a meaningful tailwind. Crucially, this is expanding our addressable market, and we plan to capture more of that market but not with the old software-only playbook. As our market expands, we will leverage AI to continue to lead in what can be automated, but we recognized early that long-term growth cannot come from automation alone. That's why in 2023, we moved our flagship automated formation product to free, choosing to cannibalize our own business before the market did. Here is the key insight. Defense alone is not a strategy. We believe durable growth will come from what AI cannot automate, nuance, judgment, execution and accountability. Over the past 2 years, we've laid the foundation for the shift by strengthening our subscription business, reorienting our go-to-market strategy to focus on higher-value customers and scaling AI while strategically integrating human experts into the workflow at critical junctures. Better still, a human in the loop also increases conversion and attachment across our automated products because customers move forward with confidence knowing we stand behind that. This brings us to the opportunity ahead. We are expanding beyond formations to serve existing businesses. We are confident this will enable us to capture a greater share of our serviceable addressable market by broadening our customer base and driving higher wallet share. Human expertise applied where it matters most will drive our growth. We are capturing this opportunity through our human-in-the-loop strategy, which is 2 layers, expert and service. Our expert layer includes our legal advice subscriptions delivered through our nationwide attorney network, trademark and IP services delivered by our owned law firm and most recently, our white glove concierge offerings. We expect these products to be our fastest growing. This is where we solve the last mile for AI by inserting the right level of human review by building trust, ensuring quality, maintaining confidentiality and meeting ongoing regulatory requirements. Our service layer, products like registered agent and virtual mail, benefits from structural advantages tied to regulation, physical presence and human execution, making it inherently durable. Over the past 2 years, we've enhanced service levels and have grown through premium pricing and retention improvements. These products anchor long-term relationships and function as a platform from which we can expand into higher-value services across our entire existing base. Our near-term goal is to accelerate growth in our human-in-the-loop strategy by prioritizing high-value subscription products. Longer term, as we expand our go-to-market efforts to reach established businesses, we expect to capture accelerated share of our serviceable addressable market. As Noel will detail, we will leverage our partnerships both with key AI platforms and our broader partner channel as we unlock to activate and scale. To sum up, we are leveraging AI to grow efficiently, scaling human-in-the-loop services and expanding our ecosystem to help small businesses stay compliant, protective and confident over time. AI may change how businesses begin but LegalZoom is how they thrive. We are uniquely positioned to deliver what others cannot. The last mile, real accountability, real expertise and real outcomes. Our 25-year foundation of data, trust and legal infrastructure gives us a moat that compounds as technology evolves. This positions us for durable growth not just in 2026 but for decades to come. With that, I'll say thank you for your continued support and turn it over to Noel. Noel? Noel Watson: Thanks, Jeff, and good afternoon, everyone. Before I walk through the results and our outlook, I want to briefly reanchor on our financial priorities. Over the past year, our focus has been clear: driving durable, high-quality subscription growth while scaling efficiencies across the business to expand margins. We made meaningful progress on both in 2025, and we expect that momentum to continue in 2026. As you heard earlier, our strategy is focused on building a more resilient revenue base through higher value subscription offerings and AI-enabled human-in-the-loop services. These efforts are improving unit economics, driving predictable revenue and reinforcing our competitive position where execution and expertise matter most. With that context, I'll start with our financial results and then discuss our outlook for the year. For the full year 2025, we grew revenue 11% to $756 million, more than double the growth rate from our initial outlook, inclusive of the Formation Nation acquisition. This performance reflects successful integration and incremental growth of Formation Nation, organic revenue growth of 3% and strength across our subscription portfolio. Full year subscription revenue increased 13%, the result of continued focus on higher-value customers and differentiated premium human-in-the-loop service offerings. We also delivered strong profitability. Full year adjusted EBITDA was $172 million representing a 23% margin, up approximately 100 basis points year-over-year. We expanded margins while continuing to invest in AI and product innovation, demonstrating our ability to grow efficiently and with discipline. Turning to our fourth quarter results. Total revenue was $190 million in the quarter, reflecting growth of 18%. Subscription revenue increased 20% to $131 million marking the fourth consecutive quarter of accelerating growth. Subscription revenue was driven by strength in our registered agent and compliance offerings, along with contributions from Virtual Mail, our 1-800Accountant partnership and Formation Nation. This performance reflects the combined impact of several initiatives executed throughout the year, including pricing actions and improved retention in our registered agent and compliance offerings. We ended the quarter with approximately 1.94 million subscription units, up 10% year-over-year. Unit growth was driven by increased Virtual Mail adoption, the inclusion of Formation Nation subscriptions and bundled offerings that combine bookkeeping and legal advisory services with certain Formation products. We expect modest unit growth in 2026 as we fully lap the bundling of these offerings. ARPU was $266 for the quarter, up 1% year-over-year. This reflects the early benefit of our focus on ARPU expansion, particularly in higher-touch human-led services, partially offset by bundled subscriptions that included lower-priced offerings. Looking ahead to 2026, we expect ARPU to be an important driver of subscription revenue growth as we see a customer mix shift toward higher-value subscriptions, including legal plans, compliance and concierge where human expertise, regulatory rigor and ongoing engagement matter most. This mix shift toward higher-value offerings reflects the early success of our human-in-the-loop strategy. We continue to see encouraging adoption of our concierge product suite. These white glove do-it-for-me offerings provide one-on-one guidance and related full-service filing and fulfillment services, allowing customers to offload complexity and focus on running their business. Today, we are selling our concierge subscription offerings online and directly through our sales force. At an average price of over $1,100 per year, they are driving stronger lifetime value and higher quality customer relationships. Turning to transactions. Revenue increased 12% to $59 million. driven largely by Formation Nation and growth in annual report filings. This was partially offset by the expected decline in BOIR revenue. Transaction units declined 1% to 239,000, reflecting the elimination of BOIR activity, partially offset by Formation Nation transactions and higher annual report volumes. Excluding BOIR and Formation Nation, transaction units increased 5%. We processed 112,000 business formations in the quarter, representing 17% year-over-year growth. This increase was driven by Formation Nation and continued growth in formations acquired through our partner channel. This year, we aim to further leverage our partner channel to acquire high-quality small businesses. In 2025, we laid the foundation to scale by modernizing our partner platform building new embedded partner experiences and adding more than 100 partners and collaborators, including Perplexity, OpenAI's ChatGPT, VistaPrint, SoFi and American Express. In 2026, we plan to build on this momentum as we deepen these relationships, expand embedded integrations and onboard a strong pipeline of SMB-focused brands. Average order value was $248 for the quarter, up 13% year-over-year, driven by increased adoption of higher-priced concierge services and the elimination of lower-value BOIR transactions. Looking ahead, we expect transaction revenue growth in 2026 to benefit from higher value customer acquisition and growth in our concierge suite. Finally, deferred revenue declined by $10 million sequentially, reflecting normal seasonality in the business. Turning to profitability, where all of the following metrics are on a non-GAAP basis. Fourth quarter gross margin was 71%, flat with the prior year period. Sales and marketing costs were $56 million or 30% of revenue, an increase of 29% from prior year. Customer acquisition marketing costs increased $5 million or 13%. You may recall last year, we tested lower performance marketing spend levels to evaluate efficiencies. In 2026, we expect to continue investing in brand and partner channel initiatives concentrated in Q1, resulting in CAM spend increasing slightly faster than revenue. Non-CAM sales and marketing expenses increased $8 million or 103% from the addition of Formation Nation and investments in our concierge sales team. Technology and development costs were $14 million, up 5%. General and administrative expenses were $15 million, an increase of $1 million or 10%. Our strong execution drove adjusted EBITDA of $50 million, representing a margin of 26%. Free cash flow was $28 million in the quarter, down 22% compared to $36 million for the same period in 2024. Our free cash flow decrease was largely due to the timing of changes in working capital. For the full year, free cash flow was a record $148 million, up 48% year-over-year. We ended the quarter with cash and cash equivalents of $203 million. Our cash position decreased by $34 million versus Q3 2025, driven by share repurchases, partially offset by strong free cash flow generation. During the quarter, we repurchased approximately 4.3 million shares of our common stock for approximately $42 million. For the full year, we returned approximately $80 million to shareholders through share repurchases, repurchasing 8.3 million shares of our common stock at an average price of $9.71 per share. Through consistent share repurchases since our IPO, we've reduced our share count by approximately 10%. As of December 31, 2025, we had approximately $70 million authorized and available under our share repurchase authorization. So far in Q1, we have remained active in the market. As a reflection of our confidence in the business, our Board of Directors approved a $100 million increase to our existing share repurchase authorization. Our $100 million revolving credit facility remains undrawn. Supported by a strong cash position and robust free cash flow generation, we intend to continue to balance returning capital to our shareholders, investing in high-growth areas of our business and selectively assessing strategic M&A opportunities. Now turning to our outlook. We feel confident in the trajectory of the business as we exit 2025 and the stronger, more scalable foundation we are operating on. This positions us well to continue to drive high-quality growth even as we lap several initiatives from last year. For the full year, we expect revenue in the range of $805 million to $825 million, representing approximately 8% year-over-year growth at the midpoint. This compares to 3% organic growth last year, representing meaningful acceleration. Critically, the acceleration is being driven by contributions from higher value offerings as we prioritize quality customer acquisition and our human-in-the-loop strategy. For the full year, we expect to achieve adjusted EBITDA in the range of $190 million to $200 million or growth of 13% at the midpoint. Our outlook reflects improved gross margins and disciplined cost management, partially offset by higher product and marketing investments focused on higher value and established business customer acquisition. Of note, we continue to be disciplined with head count as our organization onboards more AI and technology into our processes. Relatedly, we recently completed a gross reduction in headcount of 5% earlier this month, allowing for improved operating leverage while preserving investment in high-growth initiatives. For the first quarter, we expect revenue in the range of $200 million to $203 million or 10% growth at the midpoint. This includes continued execution of our initiatives and balanced growth across transaction and subscription revenue. And we expect to achieve adjusted EBITDA in the range of $34 million to $36 million, representing a 5% year-over-year decline at the midpoint. This reflects a shift in the timing of our CAM investments with brand spend and partner channel investments weighted more heavily toward the beginning of the year to align with peak business formation seasonality. As reflected in our full year guidance, we expect a stronger year-over-year adjusted EBITDA performance over the remainder of 2026. In closing, we've never been more optimistic about the future of LegalZoom and the opportunities that lie ahead. The transformational progress we have made uniquely positions us to lead in the online legal services space as the only company that combines AI-assisted legal services with human expertise at scale to deliver trustworthy, high-value products to small businesses. Through a series of high-impact initiatives, we are confident in our ability to drive strong financial performance as we further differentiate LegalZoom's competitive positioning. I'd like to thank the entire team for their efforts and dedication to our success. And with that, I will now turn the call back to the operator for Q&A. Operator? Operator: [Operator Instructions] Our first question will come from the line of Ella Smith from JPMorgan. Eleanor Smith: So first, Jeff, maybe for you. Are there any early metrics on how the concierge product is doing? And to what extent is that factored into your 2026 expectations? Jeffrey Stibel: Thank you, Ella. There are some early proof points and the green shoots, and we have factored those in. That said, we factored them in, in a conservative way. We're still in the early innings. We're still launching products regularly. We continue to launch products, but the success that we've seen is quite encouraging. And it's one of the reasons why we said this will become one of our biggest growth drivers. Eleanor Smith: Great. And given the strength of the business formation environment, do you see any likeliness of sizing up customer acquisition marketing throughout the year? Jeffrey Stibel: We do. And you see this to some extent, with our Q1 marketing and we accelerated a bit of that spend earlier in the year as a result. What we're looking for are the right types of customers, not just all customers who are forming, but the ones who will go through their life cycle alongside us. And we have gotten really, really good at identifying those, targeting those and marking to them, both through traditional marketing means through our brand advertising and ultimately through the partner channel. Noel Watson: And just to add, Ella, the Q1 incremental marketing spend is driven primarily by brand. And so that's a message that we want to get out there early. That's their peak seasonality in terms of customer demand. And you'll see for the full year, we're still expecting CAM spend to be relatively in line from a percent of revenue standpoint for the full year, maybe a slight -- we have it growing slightly faster than revenue, but the timing throughout the year will be a little bit more optimized to our peak seasonality. And the other thing to mention is our marketing is performance-based, right? So if we see strength in demand, we will spend up into that. And if we see some softer demand, then it adjusts appropriately as well. Operator: Our next question will come from the line of Trevor Young from Barclays. Trevor Young: Great. Two for me. First, just on the revenue growth guide and the cadence throughout the year. It does imply a bit of a step down for the full year, kind of starting the year in 1Q at 11% at the high end full year 9%. Is that just a function of the tougher compares as the year goes on, lapping Formation Nation here in 1Q? Or is there something else going on? And then my second question for Jeff kind of relatedly, what needs to go right from here to be a durable double-digit grower? You've said in the past that you intend to accelerate growth without having to dip into the margins. And my rough math is you grew kind of high single digits organic in '25 and '26 is somewhere around kind of stable or slight acceleration in that upper half of the guide. So what needs to go right to get back to double-digit growth durably? Noel Watson: Yes. Thanks for the question, Trevor. I think importantly and excitingly, the outperformance we saw in Q4 was driven by several different initiatives where we're seeing strength in the business. We mentioned in our prepared remarks, our compliance-related retention rates are improving, which we're really excited about. I think that speaks generally to the health of our customer base in the broader environment, but we're also seeing strength in the younger cohorts, which we think is a reflection or a signal of some of the value improvements we've made in terms of the delivery of our service. We also saw a strength in Virtual Mail, Formation Nation, our partner channel. So lots of initiatives that we expect to carry forward and drive growth in 2026. But to your point, there are some meaningful initiatives that were really successful in 2025 and drove growth that are creating some comping challenges and grow overs including Formation Nation, our 1-800 Accountant tax partnerships, some pricing that we did last year. And those do accelerate throughout the year. So you hit the nail on the head. That is what is creating some of the decel that you see from Q1 relative to the full year guide. Jeffrey Stibel: And to address your second question, which is very much related to the first and similar to what we were talking about earlier with Ella's question and as well, what we talked about at your conference when we dug into the things that need to happen, we've laid most of the groundwork there. And I think we're being appropriately smart and thoughtful about what our guide is in '26. But the reality is our guide does show organic acceleration, and it's already pretty significant. To shift over into the double-digit side where we want to be, where we are looking to be as we come out of '26 and into '27, what needs to go right is this human-in-the-loop strategy. First and foremost, it needs to expand our serviceable addressable market. We talked about this a number of times. This allows us to penetrate into a broader set of small businesses, those who are established, those who will give us greater share of wallet and those who are going to grow with us and such that we can grow alongside them. And then second, as we look at this AI opportunity, it also incrementally drives the SAM in a different way in that what you're doing is you're opening up a market of individuals, mainly small business owners who didn't know they previously had a legal problem. And we are already seeing that now. So we're seeing green shoots on the market expansion and then we're able to capture those, clip those with the new products that we're developing. So as we deploy more and more products, as we start to lap the 1-year indicator on subscription so that we can see what churn looks like and retention, that's where we're going to have increasing confidence and be able to increase that guide. Operator: Next question come from the line of Michael McGovern from Bank of America. Michael McGovern: I guess could you speak to the conversations that are ongoing with some of your partners, I think you mentioned Perplexity, OpenAI. How -- can you update us on like the mechanics of how you get to being that last-mile delivery type of provider for legal services for LLMs and what does that kind of handoff look like from the middle mile to the last mile in that scenario? Jeffrey Stibel: Great question, something we're deeply focused on, something I am personally incredibly excited about, and have taken the initiative and lead alongside our business development team and the operations and technology folks. The bottom line is the right answer is we don't know and they don't know yet. However, both parties have identified a problem, whether AI is able to complete the first 80%, 85% or 90% can be in dispute. Whether they will be able to finish the job for most small businesses is not in dispute. There is no question that more and more people are self-identifying as having a legal issue. And what we want to do is make sure that we are front and center and perhaps the only solution in many cases to solve that last mile. And when you think about the infrastructure that we have, thousands of network lawyers and owned and operated law firm, the ability to tackle national matters, local matters, state matters, IP matters, personal matters, there really isn't anyone on the technology side positioned at all, forget well positioned to tackle the problem of I've reviewed something, I've identified some issues. I either feel reasonably comfortable with like a second opinion or I don't even understand what I'm supposed to be signing outside of LegalZoom. And that's where we come in, and we've been rapidly working both on the partnership side and on the technology and product integration side to make sure that we are there when these technologies actually get a customer to an awareness stage and 80% stage and then now what? And we want to be that solution to the now what. Michael McGovern: Got it. And a quick follow-up. I think in the past, you've talked about how you're relatively platform-agnostic, if you will, when it comes to LLMs. Is it safe to say you're attempting to have more and more conversations throughout the industry longer term, expand partners longer term? Jeffrey Stibel: Absolutely. That is that statement is spot on. Operator: Next question will come from the line of Elizabeth Porter from Morgan Stanley. Lucas Cerisola: This is Lucas Cerisola on for Elizabeth Porter tonight. Could you talk to the contribution from Formation Nation to both subscription and transaction revenue in Q4? And how might that progress throughout the year if new business formations remain strong? Noel Watson: Yes. This is Noel. I'll take that question. So in Q4, Formation Nation contributed about $9.8 million on the transaction side and $5.7 million in subscription revenue. Formation Nation, since we acquired them, the business has performed really nicely. A lot of that stems from the integration and the sharing of resources and knowledge between the 2 groups. And we have an expectation that, that business will continue to grow in 2026. So we're seeing growth throughout 2025, and the expectation is that momentum carries forward. Lucas Cerisola: Got it. Super helpful. And then how do you think about the additional investments needed to ramp up the human-in-the-loop and last-mile services within the business? And then as you expand into new products next year, how that progresses? Jeffrey Stibel: Yes. I'll take it at a high level and I'll maybe speak to any specifics. There will and have been and will continue to be significant investment going into that. That's at the high level. Underneath, we're seeing material savings in other areas. Both of these are driven by AI. One is strategic, shifting to that human-in-the-loop. The other is tactical, driving AI throughout our organizations to create savings that we can use to deliver what we need to do on the product side for human-in-the-loop and continue to drive margin expansion. And you can see this in the dichotomy between a really strong print in Q4, accelerated growth into 2026 and beyond. Yet we did an approximately 5% reduction in force that we just announced because we were able to do it with some of the technology efficiency that we've driven throughout the organization. Noel Watson: Yes. And I would just say that you can see that reflected in our guide. We've been very conscious of balancing both the focus on revenue growth as well as profitability. And so we've realized margin improvements for several consecutive years now, and our guide suggests a margin improvement, both from a gross margin standpoint and an EBITDA margin standpoint in 2026. So those efficiencies -- and we still feel like we're middle innings. We're getting more efficient every day. We're leveraging a lot of the tools that folks are talking about in market to generate efficiencies. And as Jeff said, we're balancing -- reinvesting some of those in growth and taking some to the bottom line. Operator: Our next question will come from the line of Matt Condon from Citizens. Matthew Condon: My first one is just as you've continued to focus more on acquiring existing businesses and less on business formation. Have you seen any material change in the top of funnel metrics to date? Or is that more of an opportunity as we move into 2026? And then my second question is just on competitive dynamics. Just have you seen or observed any meaningful changes in the competitive landscape over the past few quarters? Any new entrances, anything different from existing players? And just how do we think about competitive intensity in 2026? Jeffrey Stibel: You bet. Those questions are actually interrelated. So I'll again try to take those at a high level. When you look at the opportunity for existing businesses, as we mentioned in the last couple of quarters, we've started with our own base of businesses, and we have seen proof points and growth therein. We have gone from there to leverage partners. It is probably one of the biggest unlocks in the strategy because we can now go to an SMB ecosystem of partners to start to drive customers that way and leverage other people's channels. And we've had some success, some early success with the partner channel and driving partnerships. And ultimately, we think that the real opportunity is going to come in '26 and beyond as we start to grow those partnerships and then do direct marketing. But again, that's really a '27 and beyond point more than anything. And then on the competitive intensity side, sorry, I didn't mean to ignore that. Although we haven't seen much. Frankly, we look at much of what people have considered as competitors, potential partners for us because what we are doing with this human-in-the-loop strategy isn't something that those competitors can do. They are largely pure-play software providers. So from my standpoint, our standpoint, the real focus is how can we work with them and dominate this larger expanded SAM in such a way that what you might historically think of as a competitor should actually want to partner with us or might need to actually send customers our way just so that they can solve those customers' problems. Operator: Next question will come from the line of Patrick McIlwee from William Blair. Patrick McIlwee: Great results here. So my first question, I believe in September of 2025, you lapped some of the changes you made to your compliance pricing and your bundling strategy. Noel, with that said, is there any way you can frame or quantify the impact that had over the last year, just as we think about how impressive your fourth consecutive quarter of accelerating growth was? Noel Watson: Yes. I think first of all, the growth acceleration came from multiple fronts. Part of it was the bundling. Part of it was pricing action. Part of it was just some of our other products attaching well. And then finally starting to see some improvement in retention as well. So it was really multifaceted. I will say the bundling that we did through -- we did multiple different trials of different bundles throughout the year. That's something that we're going to continue to do. We're going to continue to test in that regard and include different products. What we saw was that really helped progress us along our focus on quality share and driving quality customers to us. And it really impacted SKU mix. So we started to see people move up SKU into more of our premium SKUs and some of the foundation that supported what we saw on the concierge side. So it has different tentacles and there are multiple fronts driving it. I wouldn't call out any one in particular, as being the clear driver of growth. Patrick McIlwee: Okay. And I know formations grew substantially year-over-year, understanding that's not a big focus anymore, but obviously, that grew largely year-over-year. You've got a larger denominator there, but it does look like your share slipped a bit more than normal even with the contribution of Formation Nation. I mean is that largely a result of your focus on higher intent customers? Or how should we think about your pursuit of share versus customer LTV going forward? Noel Watson: Yes. This is something we've been talking about for a while, where we are keenly focused on quality share. We want customers that are serious about starting a business or willing to make an investment in that business. And we think those customers we can help and they'll sustain longer, which creates more of an LTV opportunity for us. And so from a macro standpoint, I'd say the macro has been supportive. We feel like it's a very healthy environment, but we think some of the census reporting is anomalous. And we've seen it where it's been weak, and we don't feel that in our business. It's been stronger. We don't feel that same impact that we had previously. And I think that's partly because of this focus on quality share. It's partly because we've increased the percentage of our business that's subscription-oriented. So we generally take a neutral position when we think about our plan and expectations moving forward from a macro standpoint. And our expectation is that we will meet the guidance that we set out for the year regardless of the macro backdrop. Operator: Our next question will come from the line of Brent Thill from Jefferies. Sang-Jin Byun: This is John Byun on behalf of Brent Thill. Just two questions. One, you mentioned 3% organic growth in '25. And I want to see how we should think about the 8% guide that you gave? I mean is that comparable to that 3%? And obviously, it depends on how you treat Formation Nation, I guess. And then on the concierge products, I mean you've rolled out several, I suppose, and -- which one is doing better where you're seeing more traction, more success? Noel Watson: Yes. On the guidance, yes, you could think about -- we think about those as apples-to-apples. There's a little rounding errors around that in terms of we're not taking any credit in that 3% for growth that we drove post the acquisition within Formation Nation. And then this year, there's a little bit of inorganic from the timing of the acquisition last year. But that's the reason why we called that out is to really shed a light on the fact that organically the business we expect to accelerate this year from a full year basis. Jeffrey Stibel: Yes. We're actually pretty excited about the organic trajectory. I'd say we're pleased but not satisfied. We can do better, but it's in the right direction. And on concierge, I would say our compliance-oriented products around concierge feels like the strongest uptake and adoption right now and the biggest opportunity for us long term. So that's the predominant one that we're focused on because it is so opaque between regional, state and national levels, how to remain compliant, particularly how that changes over time, and that's where our concierge experts and specialists really add a lot of value. Noel Watson: And one of the ways we really activate customers within our base is through communication around their compliance status, right? Many businesses, they start -- they're in compliance when they start their business, but over time, their businesses evolve and change and their compliance -- either regulatory requirements change or the business becomes more complex and their individual set of requirements change, and they fall out of compliance. And so starting with reinstatement by letting folks know that they're out of compliance and those folks responding saying, "Hey, I need your help getting reinstated. And then clearly, I also need help managing my compliance moving forward." So that's been a real successful approach for us as well. And that really extends that learning, we think, will extend into the opportunity for existing businesses. Operator: Our next question will come from the line of Kishan Patel from Raymond James. Kishan Patel: This is Kish Patel on for Josh Beck. How are you thinking about the potential impact to key workflows or billing terms across the core business and human expert network as agentic legal tools and software start to proliferate? Jeffrey Stibel: I mean for us, it's actually an accelerant in two respects. First, internally because we use so many of those workflows to actually power our human-in-the-loop strategy, it actually allows us to scale more cost effectively. And externally, it drives increased SAM, serviceable addressable market. So as we said earlier, this is a big unlock for us to increase our market and market share of those established and existing businesses. Kishan Patel: Got it. And can you share any trends through the year and into 1Q '26 on how AI search is impacting traffic and conversions? Jeffrey Stibel: Sure. I mean, look, it's still pretty early in terms of what is happening, but the trend should look no different and look no different than what you're seeing overall in the general market. You're seeing less and less traffic and quality traffic come through traditional search engines and more and more coming from AI queries. And we're seeing that as well, and we're actually taking advantage of that as what we see as a key opportunity into '26 and '27. Noel Watson: Yes. I think one other trend to call out there is when you think about the traffic coming through, it's higher qualified traffic. There's more folks that are getting question answered without -- while still in AI experience. So the ones that actually come through tend to be more highly qualified and convert better. Operator: Our next question will come from the line of Ron Josey from Citi. Ronald Josey: Jeff, you talked about reorienting to higher-value clients and broadening the customer base. Just talk to us about the tools the team is using to do just that and the progress you're making. And then, Noel, on the shift in timing on marketing, it makes a lot of sense given the seasonality here in the year, but talk to us about the brand focus and where you plan to be ramping the spend on marketing? And when do you think you'll see the returns, is this a 1Q thing? Or is this a quarter lag? Jeffrey Stibel: Great. Thank you. On that first question with respect to the tools that we're using, I'll break it up into 2 categories, and then probably break it down even further. On the tools question directly, what you're asking, we're leveraging a variety of different AI systems. What we're not doing is leveraging specialized systems. So most of them are on the generalized side. We discussed what we're doing with Perplexity and with OpenAI and ChatGPT. We're seeing huge efficiency gains and advantages that help us drive new product deployment at a faster rate, which is absolutely critical as we focus on the other side of the toolkit which are these experts that we're bringing in. We, right out of the gate, when I joined, started to bring in that service layer back that we didn't have prior, and we've now been filling that out with layers on top of that. So we went from service and sales to concierge, think of those as business consultants and business advisers to our legal network, which we're getting more and more entwined into our products and becoming more customer facing. What is effectively allowing us to do is take a model that wouldn't have scaled prior because if you had a lawyer, they might be able to manage 10 clients a day and get the lawyer to leverage technology or the concierge rep to leverage technology or the service rep to leverage technology to go from 10 customers to 100 to 1,000 and then on so that it scales proportionately or super linearly even in some cases such that we can expand margins and drive more throughput while satisfying our customers' problems. So we are rapidly deploying technology. Some of it is owned and operated, and we're doing it in-house. This is particularly around our data on the proprietary side. But most of it, we're leveraging generalized systems and specializing it to our various use cases. Noel Watson: Yes. And on the brand side, we've been very happy with some of the changes we made throughout 2025, the new assets that we created, the messaging has worked really well. And what we saw is as we increase brand as a percentage of our total CAM spend, we really still saw a strong ROAS without some of that deferred realization of value that you would otherwise would expect. And so we're leaning further into that, in particular, in Q1, which we think is well timed, and that's through connected TV, YouTube, social channels, we're trying to stay very diversified with the places that we post our brand messaging. And we expect that to pay dividends in a relatively short period of time. As a reminder, with the heavy subscription orientation of the business from a revenue standpoint, if you generate bookings in Q1, you'll realize some of that revenue throughout the year. But that's why we're making a... Jeffrey Stibel: And the final piece, and this speaks to the spend that we're doing in brand right now is this also drives forward into our partner strategy. As we show the brand strength and the quality of our human-in-the-loop strategy intertwined with that trust that comes with an answer and a service that comes from LegalZoom, that helps drive that partner strategy forward as well. Operator: Next question will come from the line of Stephen Ju from UBS. Stephen Ju: If I heard you guys correctly on the prepared remarks section, it seems like Formation Nation is driving growth in subscription units as well. So can you talk about the success that you might be having in moving that customer base from what was probably historically, the one-and-done transaction to upselling them other products from the broader sort of LegalZoom portfolio? Jeffrey Stibel: Sure. And look, the success is similar to what we have done in LegalZoom proper. I would argue that if anything, it is slower than what we would like. And I think that there is even more to be done. But remember, this is our value price service offering. So we have been driving more and more of the lower cost or lower propensity to purchase customers towards those brands, particularly Inc Authority. But they continue to have strong success both converting in general and then shifting to subscription where appropriate. So I actually suspect there'll be more to come. Operator: All right. Thank you. I'm not showing any further questions at this time. With that, this concludes the question-and-answer session. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.