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Operator: Good day, and welcome to the Q4 2025 Akamai Technologies, Inc. Earnings Conference Call. [Operator Instructions] Please note that today's event is being recorded. I would now like to turn the conference over to Mark Stoutenberg, Head of Investor Relations. Please go ahead, sir. Mark Stoutenberg: Good afternoon, everyone, and thank you for joining Akamai's Fourth Quarter 2025 Earnings Call. Speaking today will be Tom Leighton, Akamai's Chief Executive Officer; and Ed McGowan, Akamai's Chief Financial Officer. Please note that today's comments include forward-looking statements, including those regarding revenue and earnings guidance. These forward-looking statements are based on current expectations and assumptions that are subject to certain risks and uncertainties and involve a number of factors that could cause actual results to differ materially from those expressed or implied. The factors include, but are not limited to, any impact from macroeconomic trends, the integration of any acquisition, geopolitical developments and other risk factors identified in our filings with the SEC. The statements included on today's call represent the company's views on February 19, 2026, and we assume no obligation to update any forward-looking statements. As a reminder, we will be referring to certain non-GAAP financial metrics during today's call. A detailed reconciliation of GAAP to non-GAAP metrics can be found under the financial portion of the Investor Relations section of akamai.com. With that, I'll now hand the call off to our CEO, Dr. Tom Leighton. F. Leighton: Thanks, Mark. I'm pleased to report that Akamai delivered strong fourth quarter results as we continue to make major progress in positioning Akamai for the future. Revenue grew to $1.095 billion, up 7% year-over-year as reported and up 6% in constant currency. Non-GAAP operating margin was 29% and non-GAAP earnings per share was $1.84, up 11% year-over-year as reported and in constant currency. Q4 revenue for Cloud Infrastructure Services, or CIS, was $94 million, up 45% year-over-year as reported and up 44% in constant currency. That's an acceleration from the 39% growth rate we achieved in Q3. The rapid growth was broad-based within CIS, driven by our ISV solutions, by Infrastructure as a Service and storage customers and by customers leveraging EdgeWorkers and WebAssembly, which offer improved performance and lower cost for edge native applications. In each of these areas, we're starting to benefit from AI-related tailwinds as customers make greater use of AI applications and agents across their businesses. Last quarter, Akamai took a major step towards the future with the launch of Akamai Inference Cloud, our platform to support the growing demand to scale AI inference on the Internet. Akamai's architecture uniquely positions us to power and protect AI the way we power and protect the web by bringing AI physically close to users enabling the faster performance and global scale needed to unlock AI's full potential. We believe the AI market is entering a critical transition point, the first inning of a long game to come, where inference or the execution of queries against a trained model is the new frontier. This requires purpose-built infrastructure to enable distributed low-latency, globally scalable AI at the edge with response times measured in a few tens of milliseconds. Akamai Inference Cloud does just that by incorporating NVIDIA Blackwell GPUs into Akamai's distributed cloud infrastructure with its unparalleled global reach and security at the edge. This enables intelligence to run instantly, securely and exactly where it's needed, right next to the user, agent or device. As evidence of our strong momentum, we're delighted to announce that we recently signed a 4-year $200 million commitment for our Cloud Infrastructure Services with a major U.S. tech company at the forefront of the AI revolution. I've had the privilege to work at Akamai for many years, and I have to say that it's really exciting to see such a pivotal player in the AI ecosystem choosing Akamai Inference Cloud for such a large AI use case. We also signed many other new and expanded contracts for our Cloud Infrastructure Services in Q4. An AI chatbot platform based in India signed a 3-year contract for our IaaS and Enhanced Compute Support solutions and save 45% on compute costs they would have paid to a hyperscaler. A very well-known antivirus software company chose Akamai's cloud for their VPN service, telling us they liked our performance and support better than what they previously got from 2 of our cloud competitors. A leading social networking platform that was using us on a pay-as-you-go basis committed to consolidate their multi-vendor stack on to Akamai's cloud platform, providing us with another takeaway from a hyperscaler. Two adtech companies in China chose us for our significantly lower latency and dramatically reduced egress costs. And one of the world's largest retail companies expanded their use of our edge compute platform to improve their digital shopping experience and increase conversion rates. As a result of the strong customer demand that we're seeing and the strong AI tailwinds across the marketplace, we anticipate that the very rapid growth rate for our Cloud Infrastructure Services will accelerate further in 2026. Our security solutions also performed well in Q4, led by continued strong demand for our market-leading API security and Guardicore Segmentation solutions. Revenue from these high-growth security products grew 36% year-over-year as reported and 34% in constant currency. Last month, Akamai was recognized as a customer's choice for Network Security Microsegmentation in the Gartner Peer Insights report for 2026. Akamai earned a 99% recommendation rate, scoring above market norms for both user adoption and overall experience. Last quarter, we saw continued strong demand for our Guardicore Segmentation platform with both new and existing customers. One of North America's largest financial institutions purchased our segmentation solution to gain visibility and protection across all of their network assets as part of a 4-year $40 million contract. South Korea's largest mobile operator selected Akamai following the well-publicized BPFDoor security incident, which exposed gaps in East West Security and Zero Trust maturity. The customer chose our solution for workload level segmentation, deep visibility and resilient enforcement across hybrid environments. We also signed deals for segmentation in Q4 with one of the largest carriers in the U.K., a major branch of the U.S. armed services and multinational banks in North and South America and Scandinavia. In Q4, we also saw increased demand for our API Security solution, signing new customers across multiple verticals including financial services, technology, health care, real estate, retail and travel. Customers who chose Akamai API Security in Q4 included a major European automaker, a telco in the Middle East as well as airlines serving Asia Pacific and Latin America. We also signed a 5-year $47 million commitment from one of the largest hardware companies in the world, in a contract that included API Security and Cloud Infrastructure Services Along with other Akamai offerings. We had many other customers in Q4 who purchased multiple security products across our portfolio including one of Asia's largest airlines, which signed a $10 million contract for multilayer protection over 5 years and a 3-year $45 million renewal with one of the world's largest financial institutions, to migrate nearly 100 critical applications away from hyperscaler security and onto the Akamai platform to ensure best-in-class DDoS and web application protection, high availability, and robust security support from Akamai Security Operations Command Center. Earning the trust of customers is imperative for Akamai. The world's biggest brands trust us to keep their apps performing well even under peak traffic conditions. They trust us to protect them from myriad attacks and to keep their data safe. And they trust us for our reliability. We saw how much this trust matter to customers who relied on us during the recent holiday season, a time when one of our competitors took down their customers with multiple multi-hour outages. Major enterprises know who they can trust, and we're grateful for the trust that our customers place in Akamai. Last quarter, we were honored to be named by Forbes in their list of America's Most Trusted Companies and in their list of America's Best Companies for 2026. Forbes analyzed thousands of the largest public and private companies in the U.S. across 11 dimensions, including financial performance, customer sentiment, employee ratings, reputation for innovation, executive leadership, cybersecurity and sustainability. We were also honored by The Wall Street Journal, naming Akamai to its list of America's best managed companies, The Management Top 250. This ranking by the Drucker Institute analyzed publicly traded companies based on customer satisfaction, innovation, financial strength, social responsibility and employee engagement and development. Before I hand off to Ed, I want to thank our employees and our management team for their achievements in 2025. Together, we're successfully executing on our ongoing transformation of Akamai into the cybersecurity and cloud company that powers and protects business online. We believe that the investments we're making today are enabling Akamai to do for cloud and AI, what we've done for security and CDN and enabling Akamai to grow even faster as a result. Now I'll turn the call over to Ed to say more about our results and our outlook for Q1 and the year. Ed? Ed McGowan: Thank you, Tom. I'm pleased to report that we delivered excellent fourth quarter results with total revenue of $1.095 billion, up 7% year-over-year as reported and up 6% in constant currency. We also delivered strong bottom line results with non-GAAP EPS of $1.84, up 11% year-over-year as reported and in constant currency. Moving now to revenue. Compute revenue, which is comprised of the high-growth Cloud Infrastructure Services or CIS solutions and our Other Cloud Applications, or OCA, was $191 million, up 14% year-over-year as reported and in constant currency. For Q4, CIS revenue was $94 million, accelerating to 45% growth year-over-year as reported and 44% in constant currency, a nice jump from 39% growth last quarter. CIS now represents approximately 50% of total compute revenue. Moving to security. Revenue was $592 million, up 11% year-over-year as reported and 9% in constant currency. Revenue from API Security and Zero Trust Enterprise Security combined was $90 million, an increase of 36% year-over-year and 34% in constant currency. Notably, API Security grew by more than 100% year-over-year, exiting the year with a revenue run rate exceeding $100 million. Security revenue was driven by strength of our high-growth product suites and a favorable tailwind from term license revenue. For the fourth quarter, license revenue rose to $18 million, up from $12 million in the same period last year. As a reminder, our term license agreements are generally for one to 3 years and we continue to maintain exceptionally high renewal rates in our term license business. Moving to delivery. Revenue was $311 million, down 2% year-over-year as reported and down 3% in constant currency. These results highlight the continued steadying trends we have seen in our delivery business throughout 2025. International revenue was $542 million, up 11% year-over-year or up 8% in constant currency, representing 50% of total revenue in Q4. U.S. foreign exchange fluctuations had a negative impact on revenue of $5 million on a sequential basis and a $12 million positive impact on a year-over-year basis. Moving to profitability. In Q4, we generated non-GAAP net income of $270 million or $1.84 of earnings per diluted share, up 11% year-over-year as reported and in constant currency. This better-than-expected performance was primarily driven by higher-than-expected top line revenue in the fourth quarter. Finally, our Q4 CapEx was $154 million or 14% of revenue. Moving to cash in our capital allocation strategy. As of December 31, our cash, cash equivalents and marketable securities totaled approximately $1.9 billion. During the fourth quarter, we did not repurchase any shares. For the full year 2025, we spent $800 million to buy back approximately 10 million shares, marking the largest annual buyback in our history. As it relates to the use of capital, our intentions remain the same, to continue buying back shares over time, to offset dilution from employee equity programs and to be opportunistic in both M&A and share repurchases. Now before I provide Q1 and full year 2026 guidance, I want to touch on some housekeeping items. First, as Tom pointed out, we recently signed our largest compute customer contract. We're very excited that this technology company has committed to a minimum 4-year spend of approximately $200 million on our Cloud Infrastructure Services with a large majority of that spend for our AI Inference Cloud. We expect to start recognizing revenue from this contract in the fourth quarter of 2026. Second, to capitalize on this transaction and with growing AI Inference Cloud pipeline, we intend to invest approximately $250 million of CapEx this year to augment our AI Inference Cloud. Third, we have recently observed significant inflationary pressure within the computer hardware market due to unprecedented industry investment in AI, specifically, we're seeing a dramatic increase in the price of memory chips, which is driving up the cost of servers. This supply constraint has necessitated an upward adjustment to our CapEx forecast of approximately $200 million for 2026. Next, I want to remind you some typical seasonality we experienced in operating expenses throughout the year. First, we recently completed a targeted reduction in our workforce to better align our talent with our long-term growth priorities. While this action streamlined certain areas and reduced our OpEx, we do not anticipate generating net savings for the full year. Instead, we are reinvesting those savings directly back into the business, specifically to scale our go-to-market efforts and to support our colocation and CIS infrastructure requirements to maximize our growth opportunities. In Q4, we took a $55 million restructuring charge that was primarily comprised of severance costs and impairments of certain intangible assets. Second, looking at the first quarter, we typically see a seasonal increase in expense. This is driven by higher payroll costs resulting from the reset of social security taxes for employees who maxed out in 2025 and stock vesting from employee equity programs, which tend to be more heavily concentrated in the first quarter. Third, as we look to the second quarter, we expect operating expenses to remain relatively flat on a sequential basis. The savings realized from our restructuring and the roll off of the higher Q1 payroll taxes will be offset by our annual merit cycle, which takes effect on April 1. Moving to FX. Foreign currency markets are expected to remain volatile throughout 2026. As a reminder, we have approximately $1.3 billion in revenue that is denominated in foreign currency. Largest currency exposure on revenue includes the euro, the yen and the Great British pound. Finally, as previously noted, Cloud Infrastructure Services now accounts for approximately 50% of our total compute revenue and is growing rapidly. Recognizing CIS is the primary growth engine and a significant focus of our investments. For the compute business, we will begin reporting it as a stand-alone revenue category effective in the first quarter of 2026. For simplicity, we will consolidate delivery and other cloud apps into a single reporting category starting in Q1. To assist with your year-over-year analysis and financial modeling, we have published 8 quarters of revenue history, for these revenue categories and supplemental schedules as part of today's reporting package on our Investor Relations website. In addition, for added transparency, we will disclose quarterly revenue for OCA independently for the remainder of 2026. Now moving on to guidance. For the first quarter of 2026, we are projecting revenue in the range of $1.06 billion to $1.085 billion, up 4% to 7% as reported or 2% to 5% in constant currency over Q1 2025. We expect Q1 revenue to be lower sequentially from Q4, driven by the following factors. First, reduced onetime license revenue in Q1 from Q4 levels; second, 2 fewer calendar days in Q1 compared to Q4, plus 2 less days of usage revenue; and finally, less seasonal traffic in Q1 compared to Q4. The current spot rates, foreign exchange fluctuations are expected to have a positive $4 million impact on Q1 revenue compared to Q4 levels and a positive $22 million impact year-over-year. At these revenue levels, we expect cash gross margins of approximately 71% to 72%. Q1 non-GAAP operating expenses are projected to be $339 million to $348 million. We anticipate Q1 EBITDA margin of approximately 39% to 41%. We expect non-GAAP depreciation expense of $145 million to $147 million and we expect non-GAAP operating margin of approximately 26% to 27%. With the overall revenue and spend configuration I just outlined, we expect Q1 non-GAAP EPS in the range of $1.50 to $1.67. This EPS guidance assumes taxes of $57 million to $60 million based on an estimated quarterly non-GAAP tax rate of approximately 19%. It also reflects a fully diluted share count of approximately 148 million shares. Moving on to CapEx. The reason I highlighted earlier, we expect to spend approximately $254 million to $264 million in the first quarter. This represents approximately 23% to 25% of revenue. Looking ahead to the full year for 2026, we expect revenue of $4.4 billion to $4.55 billion, which is up 5% to 8% as reported and 4% to 7% in constant currency. Moving on to Security. We expect Security revenue to grow in the high single digits on a constant currency basis in 2026. The Cloud Infrastructure Services or CIS, we project revenue growth to accelerate to 45% to 50% year-over-year. We expect this momentum to build throughout the second half of 2026 driven mainly by the scaling of our AI Inference Cloud business. For delivery and other cloud apps, we expect both will decline in the mid-single digits year-over-year. Specific to delivery, we expect the revenue to decline in mid-single digits for the year, with Q1 being slightly higher due to the wraparound impact of the Edgio transaction from last year. By way of comparison and for consistency with 2025, using our former compute reporting methodology, we expect the combined growth of CIS and OCA to be at least 20% year-over-year. At current spot rates, our guidance assumes foreign exchange will have a positive $36 million impact on revenue in '26 on a year-over-year basis. Moving on to operating margins for 2026. We are estimating non-GAAP operating margin of approximately 26% to 28% as measured in today's FX rates. The decline in operating margin for the full year 2026 is due mainly to increased colocation and depreciation expense associated with the continued buildup of our CIS business. We anticipate that full year capital expenditures will be approximately 23% to 26% of total revenue, driven by the investments and costs that I mentioned earlier. As a percentage of total revenue, our 2026 CapEx is expected to be roughly broken down as follows: for network-related CapEx, we expect approximately 4% for our delivery & security business, approximately 10% to 13% for compute, and for other CapEx, we expect approximately 8% for capitalized software with the remainder being for IT and facilities related spending. Excluding the impact of the increased hardware pricing, 2026 CapEx would have trended within the 18% to 22% range. The impact of increased server costs is mainly included in the compute line item above. Moving to EPS. For the full year 2026, we expect non-GAAP earnings per diluted share in the range of $6.20 to $7.20. This non-GAAP earnings guidance is based on a non-GAAP effective tax rate of approximately 19% and a fully diluted share count of approximately 147 million shares. With that, I'll wrap things up. Tom and I are happy to take your questions. Operator? Operator: [Operator Instructions] And today's first question comes from Sanjit Singh with Morgan Stanley. Sanjit Singh: Congrats on a very strong Q4 results. Ed, you provided a lot of great detail on the dynamics around CapEx as well as the momentum you're seeing within -- with the CIS business. When I look at the increase in CapEx, I mean, it's roughly coming up by, I think, $270 million. Going back to like the discussion that we've had in prior quarters, that roughly $1 of CapEx equals to $1 of revenue. Does that still hold? And as we think about this increase in CapEx, how should we think about that translating into revenue from a timing perspective, both this year and then maybe going beyond 2026? Ed McGowan: Sanjit, thanks for the question. So obviously, I talked about having some inflation in memory chips, hopefully, that is something that doesn't last for a long time. So that obviously skews your CapEx a bit. And as I talked about, most of that is affecting your compute because there's a lot more memory in those servers. So the $1 CapEx for $1 of revenue would not hold true for this particular buying CapEx, but it's not that far off. Generally speaking, we're seeing something roughly like that. Obviously, for larger deals with longer commitments, we will offer volume discounts. But even for some stuff, you might get a slightly better return like, for example, we'll be launching a rental service where you can rent GPU by the hour starting sometime later this quarter, where the list price for that's $250 million, so that would work out a little bit higher. But generally speaking, it's a decent number to work with -- modeled it a little bit lower for this year, just given that we've seen higher CapEx costs associated with the memory prices. Sanjit Singh: Understood. And then just one follow-up on the Akamai Inference Cloud opportunity. Really encouraging to see that 4-year deal with a major tech company. Can you speak a little bit about the pipeline? I know we have some really big customers looking at the opportunity. But just in terms of the breadth of interest pipeline. Any color you can provide there on potential more customers signing up for the service? F. Leighton: Yes. Pipeline is very strong. In fact, the Inference Cloud offering we announced in the fall where we deployed the GPUs into 20 cities that's already sold out, even though it's not generally available yet, just from the beta customers. And so now we're ramping up the investment there, as Ed mentioned, and very strong pipeline. In fact, with the large customer we talked about already committing to take over a substantial portion of that. The areas of interest are broad at a high level, obviously, inference applications, also post-model training, but specifically things like transcoding, real-time translation, generative media to generate images and video on the fly and the new Blackwell GPUs, very good at doing that with much lower latencies. Vision, processing what is seen, customer support bots, all sorts of gaming applications, streaming, rendering, modifying characters as you go along in the game. In commerce, virtual fitting room kinds of applications. So it's almost like the buyers looking at themselves in a mirror wearing the clothes, also making sure the close will fit, so you have fewer returns, a lot of robotics and autonomous vehicle kinds of applications, areas that these folks might not traditionally be Akamai customers, now potentially large compute customers. And generally, the field of local LLMs, as people -- companies do more kinds of things themselves, but want to operate their own model. That's great because that's the kind of thing you'd want to do on Inference Cloud and have it done close to where your employees are. So we're very enthused about what we're seeing so far and a lot of potential for growth for us. Operator: And the next question comes from Mike Cikos with Needham & Company. Michael Cikos: Congrats on the strong end to '25. The first question I have for you on that major U.S. tech customer, can you help us think about how this came together? It's great to see the duration. We're talking 4 years and the $200 million minimum commitment. But was this a new logo to Akamai? Or were they a previously existing customer within CIS or another portion of the Akamai portfolio? And then I just have a quick follow-up. Ed McGowan: Sure. I'll take this one, Tom. So the good news, it was an existing customer. It wasn't one of our largest customers, though. This was somebody who was using us for CDN and security and then had discussions with them going for several months now on a pretty exciting workload. We're not at liberty to disclose who it is. But the good news is existing customer who has dramatically increased their spend, and we hope there's a lot more business to do with them. Michael Cikos: That's excellent. And I appreciate that, Ed. I guess the follow-up, some of the Sanjit's line of questioning. When thinking about the capital intensity here, and I really appreciate the disclosure. It sounds like you guys have been busy on your side, but how do we think about the level of CapEx you guys are deploying here? Are you changing in any way how you're sourcing servers or going in and buying hardware versus where we've been previously, just given the heightened price components that we're seeing out there in the market and they feel that this is somewhat different as far as the cycle and persistence of these pricing dynamics? Anything that would be incremental as well. Ed McGowan: Yes, sure. No problem. And the capital intensity isn't necessarily increasing for any other reason than we're seeing significant demand for CIS. So that's the major driver. And obviously, making that purchase of $250 million for the Inference Cloud is very well informed. And as Tom mentioned, we have -- it's great to have one customer who's taking a good chunk of that and having that committed, it's just a great opportunity for us to put that capital to use. So I hope we do more of that. So I'm very happy about that. Now in terms of -- as the complexity of what we're doing or what we're buying, changing, no, not really. We're buying mostly servers and networking equipment and things like that. We are looking at trying to reduce the impact of the server -- the memory chip increase in costs. So we're looking at sourcing things differently from different sources, et cetera. But generally speaking, there isn't really any significant change. And as far as our co-location posture, we're still using the third-party colo providers. At some point, maybe that changes once we get a lot larger. But no real significant change. And hopefully, as I broke out the different components, if you want to think about it this way, you take out the $200 million for the price increases. And then if you look at that purchase of the AI Inference Cloud as sort of something that we did that was a little -- a little different than last year. The normalized CapEx is kind of at the lower end of what our range typically would have been. So this is a good kind of capital intensity increase when you have a chance to fuel a business that's growing as fast as CIS is. Operator: The next question comes from Rishi Jaluria with RBC. Rishi Jaluria: Nice to see acceleration in the CIS business at scale. Maybe 2 questions, if I may. Number one, if I start to think about some of the success that you're having on CIS, it sounds like you're having that with existing Akamai customers that may have used you for delivery or security or combination thereabove. Maybe can you help us understand, as you think about going back to those customers, is the total ACV or whatever sort of metric you want to use, with those customers growing meaningfully as a result of this? In other words, just trying to get a sense that it's not a situation of money that maybe they would have spent for delivery in the past. And as we think about pricing in DIY, it's money that's going elsewhere that this is actually being additive to those customers' total bills, if that makes sense. And then I've got a quick follow-up. Ed McGowan: Yes, yes, great question. It's certainly, it's additive. We don't -- we're not horsetrading any delivery for compute or anything like that. As a matter of fact, this particular large customer was done out of cycle, so it wasn't even done as part of a renewal. So it's all 100% additive. And I would say, yes, we're having good success with existing customers, but also with new customers. And Tom talked about the pipeline. What's interesting with that pipeline is we are starting to see verticals. We don't typically are strong in from a legacy perspective as far as CDN goes. And so that's good to see. We see partners bringing us new business. And there's really a mix in that pipeline of new and existing customers. And we've actually seen total new customer count pick up over the last 1.5 years or so, and I think a lot of that has to do with having CIS as an offering that's more broad. Rishi Jaluria: Got it. That's helpful. And then maybe I'd be a little remiss if I didn't ask about kind of some of the onetime factors going on in calendar year '26. As you think about your guide for the year and obviously appreciate the granularity. Just can you maybe help us understand, I know this isn't the Akamai of 10 years ago when maybe live events were a lot more meaningful. But I still just want to understand what are kind of your assumptions in terms of the major events are happening between Winter Olympics going on right now between the FIFA World Cup in the summer, got some big AAA gaming releases that may or may not happen, obviously, release dates kept getting pushed out. Maybe just help us understand kind of the puts and takes and how that ties into your numbers? Ed McGowan: Yes, sure. Happy to take that one. So if you think about events, they come in different flavors, you get the small events like a live concert or a Super Bowl, those tend to be very small revenue. Sometimes you might get a capacity reservation fee. So maybe that might be $0.5 million to $1 million or something. So nothing too dramatic there. Something like the Olympics 3 weeks long, it's a few million dollars, depends on how many rights holders you have, how many different rights holders you sign, et cetera. So it's not a huge jump. Doing $1 billion-plus a quarter, it's fairly insignificant to the quarter. It's a good business, so we'll take it. Something like the World Cup, it's a little bit longer. So you'd probably see maybe $3 million to $5 million, $5 million to $6 million, something like that. But again, nothing overly material, although it's nice to have all these events. And then the things like an NFL season much better, you're going to generate a lot more revenue there from a number of different customers. So it really depends on the length of time and the number of people that have rights. Something like a gaming release depends if it's a really popular release that has a lot of updates to it that can be popular and can drive some extra revenue. It really depends. Something like Fortnite certainly was a big tailwind for us several years ago. If you see a new console refresh cycle, that's a much bigger impact for us because you're talking now about hundreds of millions of consoles getting firmware updates and lots of updates. So that's the way to think about the event. So it's nice to have them, but it's not overly material for the year. Operator: And our next question comes from Roger Boyd with UBS. Roger Boyd: Congrats on a good end of the year. I wanted to ask about the handful of larger CIS deals that you had noted last year as being delayed out of the back half of the year. Can you just update us on how those are progressing and maybe how those are embedded into the 2026 guide? And I think you mentioned the $200 million deal you signed this quarter will start to ramp in the fourth quarter. At a high level, can you just talk about the typical ramps you're seeing in compute? Is any part of this result of capacity constraints? And do you expect to see these ramps on the compute deals get shorter over time? Ed McGowan: Yes, it really depends. Some we can get up and running pretty quickly. It really just depends on the size of the transaction and if there's any specific geo where we may need to get some additional colocation. The colocation market is tight. But we've got -- we're a big buyer of colocation, so we're doing pretty well there. We did see some of the larger workloads ramp up at the end of last year, and we've modeled in what we think those will do. And I talked about this particular really large deal will start ramping in Q4. And part of that is we have to -- we're ordering all the chips, putting them in place, getting some space. So it just takes a bit to ramp that up. It is -- obviously, GPUs are pretty tight supply chain, but we're able to get those out and launched here. So we've modeled in a variety of different outcomes on that in terms of our guidance range. But if the bigger the deal usually takes a little bit longer to ramp, and in some cases, people can get up and running very shortly. Operator: The next question is from Fatima Boolani with Citi. Fatima Boolani: I wanted to focus on the trajectory of the delivery business. I think this has been asked in a couple of different permutations. But I wanted to ask it at more of a higher level with respect to the aggregate environment for internet traffic and traffic volumes. You've had a bunch of your peers sort of talk to accelerating or improving traffic trends. I was hoping you could compare and contrast for us what you're seeing on the Connected Cloud Network? And then the flip side of that coin is just the pricing dynamic. So to your point, the delivery business has seen a pretty substantive degree of stabilization over calendar '25, and it seems like that is going to persist. So I just kind of wanted to unpack the P and the Q on the delivery equation? And then I have a follow-up as well, please. F. Leighton: Yes. At a high level, the trends that we're seeing and projecting for this year are pretty comparable to what we saw towards the latter half of last year. Traffic environment seems very reasonable. Obviously, fewer players in the market than a couple of years ago. Pricing environment remains competitive. We still have folks out there selling, in some cases, at very low prices, which we won't do. We -- in particular, we see some costs rising as we've talked about, especially in memory and in some cases, we'll actually be raising prices to help offset those costs. But I would say at a high level, what we're expecting this year is pretty comparable to what we saw last year, especially in the back half of the year. Fatima Boolani: I appreciate that. And Tom, you had sort of talked about the rental service that you're going to launch in the upcoming quarter. I wanted to take the opportunity to have you unpack that, what the expected structure is, what the economics look like? And maybe in a more broader sense, the type of utilization that you are expecting on your network as you think about and deploy this $250 million of incremental capital to scale out the inferencing cloud ahead of the capturable opportunity? F. Leighton: Yes. So in terms of Inference Cloud, there's 2 models. One is the traditional model where you buy access to the GPU by the [ VM hour ] or the token. And that's what we'll be going GA later this quarter. The GPUs we deployed into 20 cities are already pretty much sold out. So we're adding an order of magnitude, more capacity, and that's what the $250 million investment is for. And in addition to selling by the token or [ VM hour ], we will be selling clusters so that you might decide to buy hundreds or thousands of GPUs in certain locations. So that will be a new model that we're introducing this year and have some very large customers buying CIS in that way. Ed McGowan: Yes. The one thing I would add, Fatima, is in terms of the early pipeline, we are seeing a bit more skewed to the customers who want to guarantee the capacity. So they're asking for whether it's several hundred or thousand or whatever GPU for a period of time, multiyear time kind of deals, which is obviously a better model. I'd like to see that. In terms of the usage, we haven't done that yet. So we don't know exactly how that's going to play out. So we've got a range of various outcomes there. But certainly, there's a lot of early excitement and demand in the pipeline that we're seeing for what we're buying. Operator: And the next question comes from Frank Louthan with Raymond James. Robert Palmisano: This is Rob on for Frank. Congratulations on the strong 4Q. So my question is, what sort of revenue commitments are you guys able to get from customers today relative to before? How prevalent are those now versus previously what percentage of revenue on the delivery side is under those commitments? And what's your outlook for delivery growth this year, specifically with AI-based traffic, if you can give us a better sense of that? F. Leighton: Yes. We are seeing longer commits for -- really for all of our services, partly that's by design. And I think customers also interested in having that take place. And with the delivery growth, we're looking at about the same rate, so mid-single digits this year. And Ed, do you want to add to that? Ed McGowan: No. I would just say you'll see like the RPO is growing for the total company quite a bit. That's just a function of what Tom is talking about in terms of folks making longer-term commitments. And we've incentivized our sales force to get longer commitments. As far as the delivery market itself, not a huge change there in terms of commitments. There are some customers that might commit a percentage. Some might give you some type of exclusive or either a part of their business or geographic area, et cetera. So there's really no dynamic change in the delivery business. It's roughly the same in terms of committed versus uncommitted. But since the other parts of the business are growing much faster, security and compute, we're seeing a lot longer and bigger commitments. Operator: And our next question comes from John DiFucci with Guggenheim. John DiFucci: A lot of interesting things happening here, Tom and Ed, and especially around the CIS business. And thanks again -- thanks for breaking that out historically, too. Last year, you announced a very large contract with a social media customer. And I think this is sort of a follow-up to Roger's question. And that company had a lot going on internally, right, and externally, too. And it required the additional build-out of capacity by you. I think we're a year into that, and we believe -- I believe the buildout is complete by you, but I still think there's a lot going on with that company. I guess could you -- because a lot of this stuff could come on lumpy. And I'm just trying to figure out how to think about this going forward? And this is like the first deal like this, and it was great to hear about that $200 million 4-year deal, too. But with this deal, have you started recognizing revenue yet from that customer? And if not, can you share a little bit about what you expect to recognize revenue? And then I guess one other part related to this is that social networking deal you talked about that's going to consolidate on Akamai and take away from a hyperscaler that I think Tom mentioned in his prepared remarks, is that the same customer? Or is that another customer? Sorry for the long-winded question. Ed McGowan: No worries, John. I hope by interesting you mean good interesting. So I'll take that. It's not the same customer. It's a different customer. In terms of the lumpiness you talked about, generally speaking, we don't see lumpiness per se. As I talked about with the new deal we just signed, the $200 million 4-year deal, I expect that to be fairly even, maybe there's some upside as usage ramps. But there's not like say, a big chunk of revenue and then it goes away or whatnot. But we do expect that to start ramping in Q4 just as we start deploying, make the purchase, get the GPUs, get them up, customer has to do their testing and then they go into a full launch. So that just takes some time. So starting in Q4, we expect that to ramp up and then continue into next year. And then in terms of the large customer we signed last year a $100 million deal, we did start taking a little bit of revenue in Q4. We expect that to continue to ramp up throughout the year. I will say there is some seasonality. We do have a little bit of work in the compute business that might be tied to, say, like a season or something like that, say, a sports season. So you may see a little bit of extra revenue in, say, Q4, and it dips a little bit in Q1. But generally speaking, you don't see big lumpiness, as you said, in the compute business. John DiFucci: Okay. And that makes sense. That makes sense. I was thinking sort of like Oracle, but they're bringing on these huge AI training data centers, which are just come all online, but that's not how your business is. And I guess just one follow-up, not a little bit unrelated here, added to an accounting question. How much of that fourth quarter restructuring charge of $55 million, was any of that in cash for this quarter? Or was the -- because the cash flow was a little weaker than I think people expected. And CapEx is higher so I get that. But was that... Ed McGowan: Yes, good question. So most of the cash flow is a timing issue just in terms of timing of cash receipts and payments and we made some pretty big tax payments before the end of the year. So that skews the cash flow. But if you look at last year, I think it's relatively in line with last year. But in terms of the restructuring, that cash will go out in Q1. So the majority, a little over half was intangible assets, so there's no cash associated with that. Severance was a little less than half that will hit in Q1. John DiFucci: Okay. Great. And a lot going on here, but -- and I actually -- I definitely meant good when I said interesting. Operator: The next question is from Will Power with Baird. William Power: Okay. Great. Maybe just to switch gears to security. Great to see the continued Guardicore Segmentation API Security strength and API, I guess, topping up $100 million. It'd be great just to get a better kind of outlook since for growth expectations on those 2 pieces in 2026, how that folds in? And then probably for you, Tom, it would be great to get your perspective just on how you're thinking about any potential AI risk kind of across your security portfolio, just given some of the market concerns out there? It seems like the businesses have been pretty resilient. But maybe you can just comments on what you're maybe seeing competitively from any other AI entrants or technologies in the marketplace. F. Leighton: Ed, why don't you take the first then I'll do the second. Ed McGowan: Sure. Happy to. So yes, very happy with what we're seeing with Guardicore and API Security. We had a really good, strong fourth quarter finish in terms of bookings. And the nice thing with both of these businesses is we're seeing a nice mix of new customers versus existing, especially with Guardicore. As a matter of fact, the majority of revenue is coming from new customers associated with Guardicore, which is great. And then with API, both actually are very low on a penetration rate within API Security, less than 10% of our existing customers have purchased that. So there's an enormous amount of runway there. We're seeing a lot of -- big adoption across many, many different verticals, too. So it's not just a one vertical like financial services. It's really across everything. So we expect, as we go into next year, very similar to last year. In terms of API and Guardicore now a little bit more scale, driving the majority of the growth. The other product lines, whether it's bot management and WAF continuing to grow, albeit slower and then service is continuing to grow as well. So we expect growth in most of those categories, maybe Prolexic tends to be a little bit more ventured but maybe that's not, I guess, more flattish. But we do expect growth across the board and this year to look pretty similar to last year with the majority coming from API and Guardicore. F. Leighton: Yes. And to your second question, that's a great question. We are not seeing risk from AI and do SaaS do-it-yourself kinds of things. One of the key reasons for that is for our services, security services, you really need to run it on the large distributed platform by and large. And one reason for that is if you try to sort of do it yourself and your data center in a few locations, you just get overwhelmed with the volume of the traffic. And you don't have any chance to really apply the security because you're flooded. And that's where Akamai's distributed platform makes the critical difference as we intercept all that traffic, the bad traffic, out where it starts, and we can do that at great scale. And so we're not -- I don't think -- we don't have that kind of exposure. Now the good news is if the AI induced risk to SaaS as that materializes, that's a big tailwind for us on the compute side because these enterprises are going to need to run their models that are doing these SaaS tasks and generally, they're going to probably want to run them close to where their employees are, and that's a perfect application for our inference cloud. So on balance, if that really materializes, that's a tailwind for Akamai, I think, not a headwind. Operator: Next question comes from Jackson Ader with KeyBanc Capital Markets. Aidan Daniels: This is Aidan Daniels on for Jackson Ader. Just curious on the compute side. What are you guys seeing as some of the main reasons for customers choosing Akamai over whether it's other hyperscalers or other competitors for compute workloads at the edge? And I know cost has been a key element you guys have called out in the past, but was just looking for some added color on how Akamai can continue to win some of these deals? F. Leighton: Yes. Great question. It's performance. It's scale. And yes, cost is generally lower. But just as an example, we talked about on the last call, the 3 big hyperscalers in the U.S. are all using our compute. And for them, it's not a cost issue because they have their own clouds, obviously, for them, it's performance issue because we can run their logic in a lot more locations than they can do themselves with their clouds. And so that results in better performance for them, they're closer to the users and better scale, especially if you're doing things around video that are a bit intensive. You need to do that in a much more distributed fashion. And then for other customers, cost does come into play. As we talked about some of our customers getting really substantial savings as they move out of the major cloud providers, the hyperscalers to Akamai. In fact, Akamai achieve major savings as we moved out of the hyperscalers, a lot of our applications onto our own cloud. So better performance, better scalability and better cost in many cases. Operator: And the next question comes from Patrick Colville with Scotiabank. Patrick Edwin Colville: Just one for Dr. Tom, please. I guess I just want to go back to the Inference Cloud. I mean you talked earlier about some nice use cases for accelerated compute at the edge. And it seems like the comment spread is that latency is important for those use cases. But I guess my question is this. I mean, in the CPU world, edge compute was a good market, but it wasn't enormous. Most compute happened locally on device or at the hyperscaler core. Why would accelerate compute be different that you're going to have this large and very exciting markets at the edge? F. Leighton: Yes, good question. And it's not just latency. Latency of course, matters, but it's scale. When you think about some of the AI applications, generative media, you're generating video, processing video. And just -- you don't have the capacity, the bandwidth at a core data center to be generating or processing millions of personalized videos concurrently. You got to do that in a distributed fashion. Just like anything with live sports or anything like that, it's got to be distributed. So it's not just latency. And increasingly, as we're seeing these applications, they are bandwidth intensive. Also, when you talk about doing speech, when you're conversing with your avatar, it does need to be real time. You can't be going far away to a data center or it's not the same experience. Now in the past, the GPUs weren't fast enough to make that work. But now they are getting to that point where it is a few tens of milliseconds. And so the latency does matter more now. Patrick Edwin Colville: And can I just ask a quick follow-up there on the Inference Cloud, again, actually. I mean, 2 parts. First one is, do you need to do any software updates in terms of the software that Akamai has for customers to run Inference Cloud? And then, I guess, the kind of -- the second part is in terms of Akamai's target customers here, it seems like the customer profile is slightly different to the existing customers. Am I interpreting that right that you will be able to sell this to existing customers, but also a new cohort and maybe even AI natives? F. Leighton: It's a broader customer pool. So our existing customer base, yes, they are good targets for us. But there's also, as we talked about, Ed mentioned, there's a lot of customers who are signing that weren't using Akamai before because maybe they didn't really have delivery needs or even web app firewall at any kind of scale. And so they're new to Akamai. And in terms of software updates, we're always upgrading the software in our cloud platform, but it's nothing special per se with the GPUs. It works very much in the way that Akamai Cloud has worked, Linode has worked. We are selling an additional model, as Ed talked about, with clusters with a long-term contract in addition to the traditional model, which by the VM hour or by the token. Operator: The next question is from Jonathan Ho with William Blair. Jonathan Ho: Congratulations on the large AI inferencing deal. I was wondering if you could give us a little bit more color in terms of what was unique about Akamai to cause the customer to maybe choose your solution over competitors? And if you could maybe give us a sense of philosophically, whether you're building out capacity to meet that demand? Or are you comfortable investing even above that demand as you're adding capacity? F. Leighton: Yes. It's what we've been talking about, it's really good performance, very reasonable cost. And I'd add for something that's this critical an application, trust matters. And we talked a little bit about that a few minutes ago. Akamai customers do trust us. We've really earned that with our delivery and security services, our reliability, our customer support. And for something this big and critical, I think that makes a big difference. So -- and we are needing to build out in this case. And that's part of the large investment that Ed talked about, we're greatly increasing the capacity of Inference Cloud. As I mentioned, we pretty much sold out the 20 locations with the GPUs that we have deployed starting in the fall. And now we're going to increase that by about an order of magnitude and part of that will be used by this large customer that we talked about. Operator: And the next question comes from Rudy Kessinger with D.A. Davidson. Rudy Kessinger: Jonathan actually took the main one that I had. But on the $250 million, you're spending to augment the AI Inference Cloud build-out. I guess by year-end this year, I mean, how many locations do you intend to have GPU capacity? And I believe that the initial announcement last quarter, it was like 17 or 19 locations or something. But how many do you intend to have that GPUs in by the end of this year? F. Leighton: Yes. I -- we're in about 20 now, and I don't expect that number to be a lot larger, but the locations we're in, themselves will be a lot larger, which enables us to add the model where we can sell clusters of GPUs. Operator: And the next question comes from Mark Murphy with JPMorgan. Arti Vula: This is Arti Vula on for Mark Murphy. Ed, I believe you mentioned that you're seeing deals in the pipeline coming from verticals that maybe weren't as prevalent before. Can you help us understand what those newer verticals are? And then are those coming more from the direct sell motion or from the channel? Ed McGowan: Yes. So it's a little of both. We're getting some from the partners that we work with. We announced a relationship with NVIDIA. They refer customers over to us as an example. And in terms of the verticals, think of things like life sciences, manufacturing, health care, different types of industrials. Typically, generally don't have really big websites, but do spend an awful lot on compute and they're also good security customers as well. So direct motion is part of it. The direct is doing a good job of introducing this to all of our existing customers. I've gone on a couple of calls. And certainly, it's really going to have a lot of interest and customer feedback is that they believe we have a right to win here. It makes a lot of sense for us going here. There's an enormous amount of curiosity and we're doing a lot of proof of concepts. So good to see that the demand is coming from a variety of different sources. Arti Vula: And then [indiscernible] at least 3 named wins versus hyperscalers now it's across CIS and security. You guys have always found success there, but do you see any changes in the competitive dynamics there? Is that improving for you guys versus the hyperscalers? F. Leighton: You cut out on the first part of the question, the competitive dynamic in what area? Arti Vula: Against the hyperscalers. F. Leighton: So what we've competed with the hyperscalers in delivery and security for over a decade, I don't see any fundamental change there. We compete very successfully against them. In fact, 2 of the 3 big hyperscalers are large Akamai customers for delivery and security. And of course, now we're adding compute into the mix and already all 3 are using us for our compute capabilities. And again, there, it's not an issue of cost for them. It's an issue of better performance, at least in part because of our distributed nature. We can get their compute logic closer to their users where they want it. Ed McGowan: Yes. One thing I'd add, it's not just -- just would add, it's not necessarily that the only way we win is by taking business away from them. In a lot of cases, we're seeing new workloads, especially as inference becomes a much bigger part of the equation in AI, a very good spot to go to, and customers have challenges where either latency needs to be very, very low and you need to be super close. We've seen some customers tell us that even being in a different state in the U.S. gives them too much latency. They need to be within couple of hundred miles, which is different than what you've typically seen in even the CDN world. So it's not a question of a zero-sum game where we win they lose, it's we do some from time to time, take some workloads. We do go head-to-head in competition where we would go in a bake-off and sometimes we'll perform better, et cetera. So the market is just growing so fast that there's plenty of room here for us. I think we're starting to demonstrate that we're becoming a real player here. Operator: And the next question comes from Jeff Van Rhee with Craig-Hallum. Vijay Homan: This is Vijay Homan on for Jeff. Just one for me. I know you mentioned the impact of AI on the cloud segment. I was hoping you could just expand on the impacts of AI on security and delivery revenue maybe to the extent that that's driving traffic and how it's changing the demand of your customers for your services? F. Leighton: Yes. So there's a variety of impacts with AI on security. One of them is that AI really helps enable the attacker. And so we're seeing much larger bot nets out there because the attacker can use AI to take over a lot more devices, they can use the AI to train malware to get around known defenses, and so you see more penetrations. You've seen the AI with deep fakes you couldn't possibly know are fake. So in a lot of ways, it's making the attack environment much harder to defend against. Also, as enterprises adopt a lot of AI apps and agents, that's a whole new attack surface. And you need special defenses, like, for example, our new firewall for AI. Also today, enterprises are in a tough shape. They don't even know all the shadow AI they have. And so we have new capabilities there with our API security to extend it, to identify the AI applications they have exposed. So you need to know what AI you've got out there and you need to defend it with special firewall capabilities, which we do. So I think AI is having and will continue to have a positive impact for our security business in terms of our revenue even though the attack landscape is nastier, in some ways, it's more need for Akamai services. In terms of delivery, we are, of course, seeing a rise in the scraper bots. And so if left undefended, that would create a need for more traffic. Now for our customers through our bot management solutions, we actually help them to deflect a lot of the scraper bots, give them visibility into what the various bots are, what they're doing. And then our customers decide, okay, which ones do they want to block, which ones do they want to do special things for. So I'd say on balance, yes, probably a traffic increase to an extent. But again, there, it's more -- creating more of a need for our bot management so that our customers can handle the various scraper bots in the way that makes sense for their business. Operator: And this does conclude today's question-and-answer session as well as today's conference. Thank you for attending today's presentation. You may now disconnect your lines.
Operator: Good day, ladies and gentlemen, and welcome to the Prothena Biosciences Fourth Quarter and Full Year 2025 Financial Results Conference Call. My name is Jeannie, and I will be your coordinator for today. [Operator Instructions] I would now like to turn the presentation over to Mark Johnson, Vice President and Head of Investor Relations at Prothena. Please proceed. Mark Johnson: Thank you, operator. Good afternoon, everyone, and welcome to today's call to review Prothena's business progress, fourth quarter and full year 2025 financial results and 2026 financial guidance. Please review the press release we issued earlier today, which is available on our website at prothena.com and is also attached to a Form 8-K filed today with the SEC. In addition, we are using supplemental slides, which are available on our Investors website, Events & Presentations section. On today's call, Dr. Gene Kinney, our President and Executive Officer, will provide opening remarks, including an overview on Prothena's corporate strategy. Chad Swanson, our Chief Development Officer, will provide an update on our ongoing partnered clinical programs. Then Phil Dolan, our Vice President and Head of Discovery Research, will provide an update on our active preclinical programs. Tran Nguyen, our Chief Strategy Officer and Chief Financial Officer, will then discuss our 2025 financial results and 2026 financial guidance before turning it back to Gene for closing remarks, at which point, we will open up the call for a Q&A session. Brandon Smith, our Chief Operating Officer, will also be available during the Q&A session. Before we begin, I would like to remind you that during today's presentation, we will be making forward-looking statements that are subject to certain risks, uncertainties and other factors that could cause actual results to differ materially from those referred to in any of the forward-looking statements. For a discussion of these risks and uncertainties associated with our forward-looking statements, please see our press release issued today as well as our most recent filings with the SEC and our annual report on Form 10-K to be filed with the SEC for our fiscal year 2025. We disclaim any obligation to update our forward-looking statements. With that, I'd like to turn the call over to Gene. Gene G. Kinney: Thank you, Mark, and thank you all for joining us today. Let's begin on Slide 5. In 2025, we saw significant progress with our clinical pipeline where 2 of our partner programs, prasinezumab and coramitug, advanced into Phase III clinical trials. Roche advanced prasinezumab into the Phase III PARAISO trial, evaluating 900 participants with early Parkinson's disease. This decision was informed by results from 2 Phase II clinical trials that both demonstrated consistent slowing of disease progression. Novo Nordisk advanced coramitug into the Phase III CLEOPATTRA trial, evaluating 1,280 patients with amyloid transthyretin cardiomyopathy or ATTR-CM. This decision was informed by results from their Phase II trial demonstrating positive NT-proBNP and echocardiogram changes as well as directional observation of benefit in the 6-minute walk test. Our collaborations with Bristol Myers Squibb also progressed in 2025 with several important advancements, including the Phase II TargetTau-1 clinical trial, evaluating BMS-986446 in early Alzheimer's disease, which was fully enrolled in 2025 with completion expected in the first half of 2027. Bristol Myers Squibb also completed a Phase I study evaluating a subcutaneous formulation of BMS-986446 in 2025. And BMS-986446 obtained Fast Track designation from the U.S. FDA for the treatment of Alzheimer's disease. And finally, we are conducting a Phase I trial for PRX019, which is on track for completion in 2026. We also shared important updates from our wholly owned preclinical portfolio in 2025. In the fourth quarter, we introduced our CYTOPE technology with presentations of our TDP-43 CYTOPE program for ALS at 2 scientific congresses. At a high level, these data demonstrated that our CYTOPE technology has the potential to enable precise targeting of intracellular disease pathways. We also reported results from our Phase I ASCENT clinical program evaluating PRX012 in patients with early Alzheimer's disease. The results help to elucidate the profile of this once-monthly subcutaneous anti-A beta antibody. Based on significant scientific advances over the last several years, we believe we can further improve this profile with the addition of transferrin receptor technology and are actively advancing a PRX012 transferrin program in preclinical development. Turning to Slide 6. We have several key 2026 priorities that we believe meaningfully contribute to long-term value creation. The first is to ensure we are best positioned to capture value embedded in our clinical partnerships. As a reminder, all of our partnerships with large pharma companies are programs that originated from Prothena's R&D engine. This year, we have the potential to earn up to $105 million in aggregate clinical milestone payments if coramitug achieves a prespecified enrollment target in its ongoing Phase III trial and if BMS decides to advance PRX019 into Phase II clinical development. In addition, we have now received all the necessary approvals from our extraordinary General Meeting of Shareholders, and confirmed by the Irish High Court to support a share redemption program in 2026. Finally, we continue to advance our knowledge and understanding of our preclinical portfolio to support our business development team as they explore research collaborations and licensing agreements. For example, we are engaged in a research collaboration with a large pharmaceutical company that explores multiple approaches for applying our CYTOPE technology to advance and elucidate intracellular targeting. We look forward to establishing additional research collaborations, which may lead to future licensing deals. Our strategic priorities are supported by our $308.4 million cash and restricted cash balance as of year-end 2025 and our prudent capital utilization to ensure that we are well positioned to receive future potential economics from our partner programs. Let's move to Slide 7 to review our upcoming catalysts from our partner portfolio. Looking ahead, we have 2 potential milestones in 2026 from coramitug and PRX019, which could be worth up to $105 million. In the first half of 2027, we expect Bristol Myers Squibb to complete their Phase II TargetTau-1 trial for BMS-986446. And in 2029, we expect primary completions from the 2 Phase III trials evaluating Roche's prasinezumab and Novo Nordisk coramitug. In total, when you look at our 4 partner clinical programs, they have the potential in aggregate to deliver up to approximately $3 billion in future milestone payments, which is in addition to any royalties. With that, I'll now turn the call over to Chad to discuss our partner programs in more detail. Chad Swanson: Thanks, Gene. Let's start on Slide 9. Prasinezumab is a humanized IgG1 monoclonal antibody designed to selectively bind aggregated forms of alpha-synuclein to reduce neurotoxicity and slow disease progression of Parkinson's disease by blocking further accumulation and propagation of these toxic aggregates. Based on the consistent results from 2 Phase II clinical trials, PADOVA and PASADENA and our open-label extensions, our partner, Roche, made the decision to advance prasinezumab to Phase III, bringing this potential first disease-modifying therapy one step closer to patients. In fact, Roche made this decision based on a number of important questions. First, is there an unmet need? Yes, there are over 10 million patients globally, and it is the fastest-growing neurodegenerative disease with no approved disease-modifying therapies to slow progression. Second, does it address the foundational target? Yes, alpha-synuclein is a known biological driver of PD progression and the clinical evidence to date demonstrates efficacy potential and supports a favorable safety and tolerability profile. Third, is there a meaningful therapeutic differentiation? Yes. The totality of data suggests clear evidence of delayed motor progression even on top of the standard symptomatic treatment levodopa. And finally, is there a strong commercial rationale? Yes, Roche believes prasinezumab represents a global peak sales opportunity greater than $3.5 million. For Prothena, our deal includes up to $620 million in potential future milestone payments and sales royalties tiered to high-teen percentages. In the fourth quarter of 2025, Roche initiated the Phase III PARAISO clinical trial, which will enroll approximately 900 participants with early Parkinson's disease with primary completion expected in 2029. Moving on to Slide 10. This is an important data set from the Phase IIb PADOVA trial, which Roche presented at ADPD 2025. Here, they show progression on the MDS-UPDRS Part III scale from baseline, which is used to measure disease progression on motor symptoms. This figure shows the results for an exploratory endpoint looking at the subset of participants, approximately 75% of the trial population were on stable levodopa treatment comparing 24 months of prasinezumab treatment versus placebo. What we see is a 40% relative reduction in progression with a nominal p-value of 0.0177 on this exploratory endpoint. These were very important results as they were used to further optimize aspects of the Phase III PARAISO trial design. On Slide 11, let's review key aspects of the Phase III protocol that were optimized to increase the relative probability of successful outcome. First, increased patient population. The Phase III trial is evaluating 900 patients, whereas the Phase IIb PADOVA trial enrolled 586 patients. Second, all patients in the Phase III trial are required to be on stable symptomatic treatment with levodopa. In the prior Phase IIb PADOVA trial, the approximately 75% of patients on levodopa treatment were nominally statistically significant on the primary outcome and exploratory endpoint shown on the previous slide. Third, the duration of the Phase III trial is a minimum of 24 months versus 18 months in the prior Phase IIb PADOVA trial. In the PADOVA trial, the patients who are on treatment for at least 24 months had greater separation from placebo on the exploratory endpoint shown on the previous slide. We believe Roche will continue to communicate clinical results from its completed Phase II trials and ongoing open-label extensions at upcoming medical conferences. We look forward to the primary completion of the Phase III PARAISO trial expected in 2029. Moving to coramitug on Slide 12, potential first-in-class amyloid depleter antibody for the treatment of ATTR cardiomyopathy being developed by Novo Nordisk. ATTR-CM is a rare, progressive and potentially fatal disease characterized by deposition of abnormal non-native forms of transthyretin amyloid in vital organs. Coramitug is thought to deplete both the positive amyloid and circulating non-native TTR to prevent further deposition and to improve organ function. This mechanism of action has the potential to provide benefit for all ATTR-CM patients, even those patients currently receiving treatment with a stabilizer or silencer. Novo Nordisk completed its Phase II clinical trial evaluating coramitug in ATTR-CM in 2025 and presented those positive results in a late-breaking session at the American Heart Association's 2025 Scientific Session with a simultaneous publication in the journal circulation. The results demonstrated reductions in NT-proBNP and echocardiogram improvement suggested of cardiac remodeling, all with a favorable safety profile. It's important to note that these results were demonstrated on top of standard of care with over 80% of patients across coramitug and placebo controlled arms receiving concomitant TTR stabilizers. Based on these results, Novo Nordisk initiated a Phase III CLEOPATTRA trial, which is intended to enroll approximately 1,280 ATTR-CM patients, primary completion expected in 2029. Based on peak sales estimates for the currently approved ATTR-CM drug, we believe that coramitug represents a multibillion-dollar market opportunity, allowing Prothena to potentially capture future milestone payments of up to an additional $1.13 billion. Let's review the Phase II results on Slide 13. This was a 12-month 105-patient Phase II trial randomized to placebo, 10 milligram per kilogram coramitug or 60 mg per kg coramitug. The co-primary endpoints were change from baseline versus placebo and NT-proBNP in the 6-minute walk test. The 60 mg per kg dose of coramitug resulted in a statistically significant reduction in NT-proBNP versus placebo with a 48% difference and a p-value equal to 0.0017. In addition, coramitug actually reduced NT-proBNP below baseline values in the 60-milligram per kilogram group. For the 6-minute walk test, the 60 mg per kg coramitug group demonstrated an encouraging numerical improvement but was not statistically significant, likely due to small sample size and short study duration. Additional analyses included a wide range of echocardiogram parameters, including measure of left and right ventricular systolic function, diastolic function and estimated pulmonary arterial pressures. Across these measures, coramitug at 60 mg per kg was associated with improvement compared to placebo suggested of cardiac remodeling. These results were the basis for advancing coramitug Phase III. As we see in Slide 14, the Phase III CLEOPATTRA trial is anticipated to enroll approximately 1,280 ATTR-CM patients randomized 1:1 to coramitug plus standard of care, placebo plus standard of care. The trial is available to New York Heart Association Class 1 through 4 patients with some additional inclusion/exclusion criteria. The primary endpoint is a composite endpoint of either the number of cardiovascular deaths or recurrent cardiovascular events such as hospitalization or an urgent heart failure visit. We look forward to the primary completion of the Phase III CLEOPATTRA trial expected in 2029. Moving on. Let's now discuss BMS-986446 on Slide 15. This is our potential first-in-class anti-tau antibody being developed by Bristol Myers Squibb. BMS-986446 was specifically designed to target key epitope within the microtubule binding region or MTBR of tau, protein implicated in the causal pathophysiology of Alzheimer's. Tau tangles along with amyloid beta plaques are core hallmarks of Alzheimer's pathology and tau is strongly linked to clinical and cognitive decline. To date, BMS-986446 has completed its Phase I MAD in sales as well as an open-label single-dose trial to assess the subcutaneous formulation. In addition, BMS-986446 was granted Fast Track designation by the U.S. FDA for the treatment of Alzheimer's disease. Bristol Myers Squibb completed enrollment in the ongoing Phase II TargetTau-1 clinical trial in approximately 310 patients with early Alzheimer's in 2025, and we expect study completion in the first half of 2027. Alzheimer's disease represents a multibillion-dollar market opportunity. And in our partnership with BMS, we have the potential to earn up to an additional $562.5 million in future milestones as well as tiered sales royalties up to high teens percentages on a weighted average basis. Slide 16 illustrates the various areas where antibodies have been developed to target tau. Tau is a large protein comprised of approximately 440 amino acids in some forms with multiple phosphorylation sites, truncation sites and multiple splice variants. One of the long-standing challenges in the field has been how to best target the tau protein in order to provide functional benefit in the context of disease. We took an approach called empirical epitope mapping in order to identify an antibody that delivered consistent robust effects. This work led us to target the MTBR domain, which was the only area that satisfied our internal requirements. The field has since clarified that MTBR domain is central to fibropmation, feeding and cell-to-cell transmission of tau pathology. MTBR-tau-243 has been shown to be highly correlated tau-PET and disease progression. In preclinical studies, MTBR-targeting antibodies demonstrated blocking of internalization and spread of tau, leading to the reduction of tau pathology. Ongoing Phase II clinical trials, including the Phase II TargetTau-1 for our partner, BMS, are underway. A different anti-MTBR-tau antibody recently demonstrated positive trends on biomarkers, including MTBR-tau-243 and tau PET in a small number of patients. Slide 17 highlights the Phase II TargetTau-1 trial design, which enrolled approximately 310 patients with early Alzheimer's disease, randomized 433 and placebo low-dose BMS-986446 and high-dose BMS-986446, respectively. The primary endpoint is change from baseline in brain tau deposition as measured by tau PET at 76 weeks with secondary endpoints measuring functional and cognitive changes, including CDR sum of boxes and iADRS. We are excited to learn the results from this Phase II trial with primary completion expected in the first half of 2027. And finally, I'll briefly review PRX019 on Slide 18. For our agreement with Bristol Myers Squibb, we are conducting the Phase I trial, both single ascending and multiple doses evaluating safety, tolerability, immunogenicity, PK and pharmacodynamic effect. We expect to complete the trial in 2026 and are eligible for a potential milestone for BMS decide to further develop PRX019. In total, we have the potential to earn up to $617.5 million in future milestones, tiered sales royalties up to high teen percentages. With that, I'll now turn the call over to Phil Dolan to discuss our wholly-owned preclinical portfolio. Philip Dolan: Thanks, Chad. Please turn to Slide 20 for an overview of our exciting new CYTOPE technology. Our CYTOPE is an innovative targeting technology invented by Prothena to reach virtually any cell type and enable precise targeting of intracellular disease pathways in the brain and periphery through an endosomal uptake and escape mechanism that preserves membrane and vesicle integrity following systemic administration. This technology potentially allows for targeting of previously undruggable intracellular disease targets. Each CYTOPE program is uniquely tailored to target a specific intracellular disease pathway. It is comprised of a cell internalizing technology, a targeting element derived from a macromolecule such as an antibody and may include optional elements such as the addition of receptor-mediated technology to enable delivery to specific cells or tissues. Our first disclosed program to utilize this technology is our TDP-43 CYTOPE amnoscorphic lateral sclerosis or ALS. Let's discuss further on Slide 21. ALS is a progressive fatal neurodegenerative disease characterized by the selective loss of upper and lower motor neurons and in the majority of cases by cytoplasmic aggregation and nuclear depletion of the RNA binding protein TDP-43. Current approved therapies used to treat ALS seek to affect disease progression by targeting broad mechanisms such as cytotoxicity and oxidative stress rather than the core molecular pathology. These treatments do not stop or reverse motor neuron degeneration and to date, provide limited clinical benefit. Consequently, there remains a major unmet need for disease-modifying therapies that directly address TDP-43-driven mechanism. Using our internally discovered CYTOPE technology, we have developed an anti-phosphorylated TDP-43 CYTOPE lateral that is designed to address the core molecular pathology associated with approximately 97% of ALS cases. This regulation of TDP-43 triggers both toxic gain of function and loss of function deficits in the context of disease. A key challenge in the field has been how to effectively target intracellular phosphorylated TDP-43 aggregates, which are broadly deposited in the CNS and periphery while preserving normal TDP-43 function. As shown in the slide, neither conventional antibodies, small molecules or oligonucleotides have all of the components needed to effectively target and eliminate intracellular phosphorylated TDP-43 aggregates. And our TDP-43 CYTOPE on Slide 22. TDP-43 CYTOPE was designed to specifically bind to and degrade intracellular phosphorylated TDP-43 aggregates that are central to ALS pathology. In preclinical studies, our unique TDP-43 cytope has been demonstrated to degrade phosphorylated TDP-43 associated aggregates located in the cytoplasm, addressing the toxic gain of function pathology. In addition, we have demonstrated that administration of our TDP-43 CYTOPE addresses the related loss of function biology potentially through restoration of TDP-43 trafficking and the function of normal TDP-43 in the nucleus. Importantly, the unmatched targeting specificity suggests that we may effectively reduce the pathogenic phosphorylated TDP-43 aggregates while preserving normal TDP-43 activity throughout the body. Moving to Slide 23, which highlights some of the key data presented at the Society for Neuroscience Congress in November of last year. On the left, we show supportive data on how TDP-43 CYTOPE addresses toxic gain of function by significantly reducing brain and muscle pathology in a highly aggressive ALS mouse model following systemic administration. These findings are particularly compelling given rapid persistent and aggressive accumulation of pathogenic aggregates in the rNLS8 transgenic mouse model of ALS. On the right, we show supportive data demonstrating that TDP-43 CYTOPE also addresses the loss of function biology. Here, TDP-43 CYTOPE attenuated RNA mis-splicing caused by cytoplasmic TDP-43 aggregation in both human neuronal cells and mice. This is exciting data from our TDP-43 CYTOPE program and supports the potential of our CYTOPE technology more broadly. We look forward to continuing to elucidate the potential of this program and the technology. Let's move to Slide 24 to provide an update on our PRX012 transferrin receptor preclinical program, or PRX012 TFR. Trontinemab is an anti-Abeta antibody developed from gantenerumab to also include transferin receptor binding technology. So far, reported data indicate the addition of transferrin targeting in trontinemab has resulted in improvements over gantenerumab, including significantly decreased the time required to achieve meaningful amyloid reduction and substantially lower risk of ARIA-E associated with amyloid targeting antibodies. Given the potential of our PRX012 antibody, which is based in part on our demonstration of the activity of this antibody in the clinical setting, we believe the combination of transferrin receptor binding technology could be very exciting. Let's move to Slide 25. Last year, we reported interim results from the PRX012 ASCENT Phase I clinical program, including a mean reduction in amyloid PET to approximately 27.5 centiloids at month 12 for patients who received a monthly subcutaneous dose of 400 milligrams of PRX012 from the start of the study. Preliminary results for patients reaching 18 months of treatment with the 400-milligram dose showed a mean reduction in amyloid PET to approximately 16 centiloids and 9 of the 12 patients achieved amyloid negativity defined as having a centiloids value less than 24.1. But as we reported in August, the ARIA-E rates for PRX012 were noncompetitive relative to FDA-approved anti-Abeta antibodies. Based on these collective results, we believe a PRX012-TfR approach is appropriate for further development. It is our desire to improve over PRX012 while maintaining a convenient once-monthly subcutaneous administration. Currently, we are exploring partnership interest for PRX012-TfR while advancing the program preclinically. With that, I'll turn it over to Tran to review our financial results. Tran Nguyen: Thanks, Phil. Please turn to Slide 27. Today, we reported financial results that were in line or favorable to our 2025 financial guidance. Please refer to our press release for a detailed breakdown of our financial results. In terms of our 2025 financial performance relative to guidance, we had net cash used in operating and investing activities of $163.7 million, which was favorable to our guidance range of $170 million to $178 million. Net loss was $244.1 million, which was in line with our guidance range of $240 million to $248. As of December 31, 2025, Prothena had $308.4 million in cash, cash equivalents and restricted cash, which was favorable to our guidance of $298 million. As of February 12, 2026, Prothena had 53.8 million ordinary shares outstanding. Additionally, we continue to have a simple capital structure with 0 debt. Turning to our 2026 financial guidance on Slide 28. We expect our full year 2026 net cash used in operating and investing activities to be between $50 million and $55 million. We expect to end the year with approximately $255 million in cash, cash equivalents and restricted cash, which represents the midpoint of the range. The estimated full year 2026 net cash used in operating and investing activities is primarily driven by an estimated net loss of $67 million to $72 million, which includes an estimated $24 million of noncash share-based compensation expense. And as a reminder, our 2026 financial guidance does not include the up to $105 million of potential aggregate clinical milestone payments from strategic partners in 2026 related to the advancement of both coramitug or ATTR amyloidosis with cardiomyopathy by Novo Nordisk and PRX019 for neurodegenerative diseases by Bristol Myers Squibb. With that, I'll turn the call back to Gene for closing remarks. Gene G. Kinney: Thank you, Tran. Moving to Slide 30. As we've shared today, we have a robust pipeline of programs that address significant unmet needs for potentially millions of patients, caregivers and their families. It is our mission to continue to further develop our programs and elucidate the potential of our technology to address these needs. Let me end by recapping our 2026 strategic priorities, which are to capture the value embedded in our clinical partnerships, including up to $105 million in clinical milestones in 2026, to implement a share redemption program and invest in our preclinical portfolio to support our ongoing partnering efforts in the form of research collaborations, especially on our CYTOPE technology and drive future partnerships for our unpartnered programs. I'm proud of Prothena's execution and resilience in 2025, setting us up for an exciting future. We are well capitalized with a robust cash position and remain focused on delivering long-term shareholder value by delivering on our mission to patients. With that, we will now open the call to Q&A. Operator? Operator: Your first question comes from the line of Yasmeen Rahimi with Piper Sandler. Unknown Analyst: This is Shannon on for Yas Rahimi. Congrats on the great progress, guys. We just wanted to know with the primary completion dates for the partnered program trials PARAISO and CLEOPATTRA not expected until 2029. Could you maybe walk us through some of the key milestones to look out for in 2026 and 2027 and what those milestones might be contingent on? Gene G. Kinney: Yes. Thanks for the question, Shannon. So as we kind of laid out, we have a lot of things happening this year into next year and for the next several years. So I think as we look to some of our emerging technologies, some of the CYTOPE activities that we talked about on the call, we certainly expect to share more of that information this year through scientific presentations in particular, around our TDP-43 CYTOPE program and obviously, the progress we're making there. We talked about in 2027 in the first half of 2027, starting to see the data coming from our partner tau program with Bristol Myers Squibb. So we think that Phase II program would be very interesting as it was outlined by Chad on the call. Clearly, the primary outcome measure there is tau PET. So we think this is going to be a very interesting evaluation of our MTBR targeting tau approach. And then obviously, very much looking forward to the 2 Phase III readouts with primary expected completion dates in 2029, as you outlined, for both coramitug and prasinezumab. And clearly, as we indicated, not only do we think that those are well positioned based on the Phase II results, to be tested in an adequate way in the Phase III studies, but also represents the potential for significant medical advance in areas with pretty high unmet need and also, I think, very interesting economic opportunities with respect to the commercial opportunity there. But -- so yes, so I think it's actually going to be a very busy time for us. And the only other thing I would mention here, and maybe, Tran, if you want to speak to it further, as we look forward to instituting our share redemption program this year as well. So that's something that we needed to get approval for in an EGM, which took place at the end of last year, needed Irish High Court approval for that. And I think this year, we expect to implement that. Tran Nguyen: Yes, we'll make further announcements of that closer to the filing of our 10-K. But that also being said, to repeat that this year, we'll also have potentially up to $105 million worth of clinical milestones from our partners, which Gene covered in our prepared remarks from coramitug and PRX012. So exciting 2026 and beyond. Operator: Your next question comes from the line of Michael DiFiore with Evercore ISI. Michael DiFiore: One on PRX012. If you could just elaborate how you try to keep the amyloid data story alive versus much larger, more advanced competitors. And as a relative follow-up, there are many transferrin receptor tech platforms out there. Maybe you could describe what the ideal transferrin receptor platform would offer that would make one stand apart. Gene G. Kinney: Yes. So thank you for the question. You broke up a little bit, but I think I got most of it. And maybe I can -- I'll ask Brandon to jump in just with respect to the BD space a little bit here. But just to answer the question first in terms of why we're excited about our PRX012 transferrin-based approach. Look, there are 2 elements to these types of molecules, right? And I think a lot of what we've learned about this space and the potential of adding transferrin technology or receptor technology to anti-beta antibodies comes from the gantenerumab/trontinemab approach. And there, I think we had a good understanding of what the activity rate on both the amyloid removal side as well as the ARIA-E side for gantenerumab was and then adding a transferrin-based approach that had certain characteristics to it. This is the Roche approach, I think gave us the results in trontinemab that we can directly compare to gantenerumab. What we think we have here with PRX012 is we've described now data for the parent molecule, PRX012. And with a once-monthly subcutaneous presentation, showing what we think are very interesting and impressive results in terms of amyloid removal. So at a flat dose at once-a-month subcutaneous administration, seeing the majority of patients be amyloid negative, seeing the average centiloid value being quite low, we think positions us in a way that we can say this is a very convenient and very robust antibody with respect to amyloid removal what we thought was a little less competitive in those results were some of the ARIA-E rates. And so here, with this technology provided that, we follow the path with respect to transferrin that others have seen success with gantenerumab and trontinemab, that we have the opportunity to take advantage of that emerging biology and potentially see an improvement in the overall profile of PRX012 with the PRX012 transferrin program. So we're excited about that. We think that's something that we can move forward relatively quickly and get a pretty definitive answer very early in Phase I clinical testing, given that we know the characteristics of the parent PRX012 so well. As you say, there's been a lot of interest in this space with respect to licensing, and we think that's a good thing. We're certainly happy to see that the momentum is not only continuing, but I think continuing to build around these types of approaches, which have the potential to decrease some of the AE profile limitations of the anti-Abeta antibodies and potentially increase the primary mechanism of action, which is removal of amyloid. But maybe, Brandon, you can speak a little bit more to just some of the dynamics of what's happening in the business development space, particularly in this class. Brandon Smith: Yes, I appreciate that, Gene. And I appreciate the question. So from the market perspective, there is clearly a high level of interest for the approach that we're taking. And what we're building off of relative to what gantenerumab saw when they added transferrin and turn it into trontinemab, we think we're uniquely suited to build upon that story. And the market has begun to recognize that, and our dialogues are active. That's probably the best I can say about the BD dialogue. What's really interesting about the space, though, is also the opportunity potentially to grow. And what we're following very closely is that profile that Gene described, which is once-a-month subcu, leveraging a better ARIA profile that we expect to see and hope to see coming with the addition of transferrin is uniquely suited for where the market is heading, not just early Alzheimer's disease, which we think we have a unique capability there, but really around the presymptomatic space. We're looking forward to what the field is seeing in the presymptomatic space. We expect readouts this year. And that opens up a unique opportunity for us because we are a paradigm that is much less frequent, much less cumbersome. And when we're talking about those presymptomatic patients, that's exactly what they need. You need something that is uniquely set up for them, something that is not cumbersome and it potentially helps prevent the progression. So that's recognized in the field and something that is very interesting. Obviously, we're also very interested in the data that we're generating internally to help build upon that program. We hope to talk about that over the course of this year, internally with you and with our potential partner. Operator: Your next question comes from the line of Eric Schmidt with Cantor Fitzgerald. Alexa Deemer: This is Alexa Deemer on for Eric. Congrats on the great year. So for the Phase I study of 019, which is expected to complete this year, do you plan to share data from the study this year? And what do you want to see for this program to advance? Gene G. Kinney: Yes. It's a great question. Thank you for the question. So with PRX019, that is a program that we have a partnership with Bristol Myers Squibb on. We have not, for strategic reasons, talked about the target of that yet, except to say that it's broadly applicable to neurodegeneration. I think as Chad mentioned in his comments, that Phase I study is being conducted by us. We expect that to complete this year. And what we would then do is share that information with our partners at Bristol Myers Squibb. And I think you heard both Tran earlier say, and I said in my remarks as well that the potential to achieve up to $105 million this year through partner programs, some of that is tied to decisions made around PRX019. So what we expect is that we'll share that information with Bristol-Myers Squibb at the end of the day, it will be up to them to decide what and how much of that information to share publicly. But obviously, we'll be talking about that a little bit later this year. And with that said, maybe, Tran, you can add. Tran Nguyen: Just a reminder, they have global rights to this program. They exercised it. They paid us $80 million for it. So hence, the data is theirs and theirs to decide on how to disseminate that. So that being said, what we would do is, of course, announce if we've earned and they've taken that molecule forward into further clinical development, and that's when we'll earn the clinical milestone associated with PRX019. Operator: Your next question comes from the line of Jason Butler with Citizens. Jason Butler: Can you maybe just from a broader level, speak to how you would think about the amount of data necessary to secure a partnership for the CYTOPE platform? Or ultimately, if you made the decision to advance the program into the clinic yourselves from the CYTOPE platform, what data you'd want to see to derisk the initial clinical development? Gene G. Kinney: Yes. Thanks for the question, Jason. So maybe I can start with a little bit of the biology here, and then Brandon can speak a little bit to just the development strategy. But I think from a TDP-43 perspective, the data we shared last year, I think, was interesting, both with respect to the CYTOPE technology and also to the idea of targeting TDP-43 in the context of ALS. And Phil covered this in some of his remarks. But I think for the CYTOPE technology, one of the things you clearly saw and particularly in those animal studies, the in vivo animal studies in the rNLS8 mice is you saw that with systemic administration, you were not only seeing activating with this intracellular target in a very disease or pathological specific way, but you were seeing actually removal of that target. And in the CNS, you were seeing that as well. So that's an important context here, which is systemic administration, you're seeing robust CNS activity. So not only does this platform appear to allow us to target things in the intracellular space but also seems to allow us to do so in the central nervous system as well. And so we think that, that's a really important lesson learned from the technology. And again, as was mentioned by Phil, we're not seeing any evidence that we're disrupting endosomes or causing problems that other forms of technology that have attempted to do these sorts of things have suffered from. I think in terms of ALS, it's particularly interesting. We know 97%, again, Phil covered some of this, 97% of patients has TDP-43 dysfunction as a core element of their pathology. And one of the challenges in targeting TDP-43 intracellularly directly is how to target the abnormal form of these proteins while leaving the normal form to do a day job, which is essential for cells to function properly. And so by having a very specific targeting approach, you were able to see that specificity translate into not only kind of sorting out the toxic gain of function, which is the aggregate that you see in the cytosol, but also interestingly in vitro setting in human cell types, correcting the loss of function, which is really the misplicing variant or the misplicing dysfunction that you see in the level of the nucleus. And so that seemed to be corrected as well. So that's very exciting, targeting an abnormal form of TDP-43, which we know leads to both a loss of function and gain of function and seeing indications that you can address both. So we're excited by those data. We think the mouse model, which is an extraordinarily aggressive mouse model, most folks in an unchanged way, if they don't change the mouse model in some way, really struggle to see any effect here, we saw some very robust clearing of the intracellular aggregates of TDP-43. So that said, in terms of what we need to see, we think we're very excited by what these data are telling us to date. And obviously, we are interested in continuing to move that program forward. In terms of just the strategy around this program and potentially other programs within our CYTOPE technology platform, maybe, Brandon, you can speak a little bit to that. Brandon Smith: Yes. Maybe the easiest thing to do is just to note that the technology itself didn't become publicly known until November of last year, right? And so we are -- with that, that was the impetus for many subsequent conversations. And what we've been finding is that there really is a very broad set of applications for this technology. And what's unique is that set of applications goes well beyond neuroscience, which is our area of expertise, and it's essentially therapeutic area agnostic. So we can cast a very wide net from a BE standpoint and solve problems that some of our potential partners are looking to solve by utilizing this technology. One of those specifics is that -- and I think we alluded to this in our call is that we're already even in the 3, 4 months time frame that we're talking about, we've established specific research collaboration, but have others in process that are very focused on learning what we've learned from our TDP-43 program and applying it to a specific target in area of their interest and applying it in many ways. So that application much more broadly is uniquely suited for this technology, and we're excited about the progress we've made. In parallel, what happens when you have those discussions is those potential partners are actually spending their time and resources to get this in their own hands. So this is new, right? And this is new and very exciting to them. And they want to make sure that what we see is what they'll also see when they apply to their targets of interest. And doing that allows us to then see for the next step, which is a partnership around the target, around a set of targets or maybe even more broad than that. So we're very excited about where we are and a lot more to go. Operator: Your next question comes from the line of Brian Abrahams with RBC Capital Markets. Nevin Varghese: This is Nevin on for Brian. Just a couple from us. So I guess I'm curious to know, based on some of the preclinical experiments that you've done in-house, what you think might be maybe some of the mechanistic hypothesis for why the transferrin modification ends up reducing the ARIA risk. And I guess along with that, do you expect potential lower heme toxicities with this? And then an additional clarification question on my end. Just wanted to see if the transferrin modification to PRX012 would still enable PRX012 to be subcutaneously delivered or if this would be IV administered. Gene G. Kinney: Yes. So good questions around PRX012. So let me start and then maybe, Phil, if you have anything to add, you can do so. I think first, in terms of transfer and how that actually sorts out some of the ARIA events, there are a lot of hypotheses out there. I think the one that both Roche and Eli Lilly have put forward as a more likely mechanism is really the location of transferrin and where that is in the vascular the cerebral vasculature. So this idea that potentially starting to get more penetration into the brain through capillary structures relative to arterial structures may be providing some benefit. And it makes -- it has some face validity in as much as we know that when amyloid deposits in the cerebral vasculature, it tends to do so in the larger arterial structures, particularly in the perivascular space. And so obviously, moving the route of entry into the capillary system could have some advantages in that respect. And so that's one possibility. Another possibility that I think folks talk about in the field from time to time is an idea of the amount of time that the antibody may sit on amyloid in the vasculature and potentially with the transferrin-based approach, you get a transcytosis across the blood-brain barrier, which minimizes that dwell time, if you will. And of course, it could be a combination of things as well. But I think what it points to, and it's a good question, is that we need to make sure that the transferrin-based approach, and obviously, we're taking steps to do this with PRX012 is something that has similar characteristics to those things that we know already work. So -- and again, I think that is a pretty small sample set to date. That's the gantenerumab, trontinemab story that we've been talking about a little bit. So clearly, we're trying to stay as close to that down the fairway approach so that we can be sure that whatever that mechanism is that we're taking advantage of that as well. I think in terms of -- you had some other parts of that question in there. Yes. So some of the subcu part of that question, we have no reason to believe that the addition of transferrin at this point would cause us to change our route of entry. We think subcutaneous is still a viable approach for PRX012 transferrin-based moieties. We think that, in fact, it's the potency of PRX012 that provides us the ability to actually have a biological effect at a lower dose level setting, which obviously gives us the opportunity to have both the pharmacokinetic as well as potency advantage. And I think that's something that you can evidence, for example, in the data set, we talked about the impact of PRX012 parent PRX012 on amyloid reduction and how that was quite robust, particularly at the 400-milligram dose level. I think you can compare that back to some of the earlier gantenerumab data, which maybe was less robust by comparison. So that really speaks to the potency of PRX012, which we have always felt was a key element in terms of making sure that, that is available to a subcutaneous route of administration. And obviously, we continue to believe that to be true. I don't know, Phil or Chad, if you have a comment that you'd like to make on that. Chad Swanson: I might just say one thing, Gene. So you actually touched on the potency, right? So clearly, we see pretty comparable and robust levels of reduction at 18 months with an antibody that is dosed at a flat dose of 400, which is significantly less, I would say, than the 10 mg per kg that's in the clinic. Now because of that -- and obviously, we don't know the answer to this, but I know you had a question about heme toxicity. And because of the potency, it's possible that we could dose at lower levels and see similar effects to what trontinemab saw, for instance. If that's the case, there is potential perhaps to minimize risk in terms of these non-ARIA AEs, i.e., anemia or others. So I think there's potential there, and we just -- we have to do the study. Operator: Thank you, everyone. That completes our question-and-answer session. I'll now turn it over to Gene Kinney, CEO, for closing remarks. Gene G. Kinney: Thank you, operator. And I want to thank you all for joining us on the call today. We appreciate your interest in Prothena and look forward to sharing further updates on our programs. Operator: Thank you for your participation in today's conference call. This concludes the presentation. You may now disconnect. Good day.
Operator: Good afternoon, ladies and gentlemen. Welcome to Workiva's Q4 2025 Earnings Call. My name is Bailey, and I will be your host operator on this call. [Operator Instructions] Please note that this call is being recorded on February 19, 2026, at 5:00 p.m. ET. I would now like to turn the meeting over to your host for today's call, Katie White, Senior Director of Investor Relations. Please go ahead. Katie White: Good afternoon, and thank you for joining Workiva's Q4 2025 Conference Call. During today's call, we will review our fourth quarter and full year 2025 results and discuss our guidance for the first quarter and full year 2026. Today's call will include comments from our Chief Executive Officer, Julie Iskow, followed by our Chief Financial Officer, Barbara Larson. We will then open up the call for a Q&A session. After market closed today, we issued a press release, which is available on our Investor Relations website along with our quarterly investor presentation. This conference call is being webcast live, and following the call, an audio replay will be available on our website. During today's call, we will be making forward-looking statements regarding future events and financial performance, including guidance for the first quarter and full fiscal year 2026. These forward-looking statements are based on our assumptions as to the macroeconomic, political and regulatory environment as of today, reflect our best judgment based on factors currently known to us and are subject to significant risks and uncertainties. Workiva cautions that these forward-looking statements are not guarantees of future performance. We undertake no obligation to update or revise these statements. If the call is reviewed after today, the information presented during this call may not contain current or accurate information. Please refer to the company's annual report on Form 10-K and subsequent filings with the SEC for factors that may cause our actual results to differ materially from those contained in our forward-looking statements. Also, during the course of today's call, we will refer to certain non-GAAP financial measures. Reconciliations of GAAP and non-GAAP measures are included in today's press release. With that, we'll begin by turning the call over to Workiva's CEO, Julie Iskow. Julie Iskow: Thank you, Katie, and thank you all for joining us. We closed 2025 with strong momentum. We delivered another guidance feat that reaffirms our position as a trusted platform in the office of the CFO. Our Q4 subscription revenue grew 21% and total revenue grew 20%, both compared to Q4 of 2024. For the full year 2025, we achieved 22% subscription revenue growth and 20% total revenue growth, well ahead of the guidance that we had set at the beginning of the fiscal year. We also delivered profitable growth. We had another quarter of accelerating margin improvement with a Q4 non-GAAP operating margin of 19%. This was a 160 basis point beat on the high end of the guide and a 1,170 basis point improvement compared to Q4 of 2024. For the full year 2025, we delivered meaningful progress towards our 2027 medium-term model targets. Our non-GAAP operating margin was just shy of 10%. This is 440 basis points above the guidance that we had set at the beginning of 2025 and 560 basis points above full year 2024. Our Q4 momentum reflected broad-based durable demand across our AI-powered platform. It also reflected our customers' deepening commitment to Workiva as they transform how work gets done and how their most critical financial and nonfinancial data is managed. Before I move into a few deal examples from the quarter, I'd like to address a broader narrative that's dominating conversations in the SaaS market. There's an emerging view that as AI changes how work gets done, traditional SaaS platforms become significantly less valuable and in some cases, obsolete. We understand that perspective. Many workflow tools that organize tasks, route information or summarize activity can increasingly be automated or agentized. However, this is not the category Workiva operates in. We operate where data needs to be trusted, traceable, defensible and audit-ready. In an AI-driven world, what matters most to a CFO is an automation. It's confidence in their data. And as reliance on AI increases, trust in that data becomes even more critical, not less. CFOs and finance leaders and risk teams don't just need answers faster. They need answers that they can stand behind with confidence. They need data accuracy, data consistency, data integrity and data traceability. They need to be able to explain and defend any number at any point in time. That's where Workiva is fundamentally different. We're not just a series of workflows that can be automated or AI-ed away. We're a trusted platform where data is controlled, connected, auditable and governed by design. Every number, every narrative and every change is traceable with full lineage and accountability. And more importantly, AI doesn't replace this foundation. It depends on it. And that's why as AI adoption increases, we believe Workiva becomes even more relevant, not less. Customers in the office of the CFO are choosing Workiva's platform because we're not just another app in the stack. Over the past 1.5 decades, we've become not just a system of record, but an essential and trusted system of record, a system of truth. In an era of AI, our customers need intelligence that they can trust within a platform and in an environment where accuracy, accountability and assurance are nonnegotiable. Workiva is just that, a platform of trust. Let's now look at a few specific examples from Q4 that demonstrate how our platform is winning in the market and helping our customers solve their most complex reporting challenges. First, a global fintech and insurance brokerage firm has joined as a new platform customer, purchasing 5 solutions, including controls management, global statutory reporting, management reporting, policies and procedures and SEC reporting. This mid-6-figure deal is part of a finance transformation project focused on eliminating manual workflows and addressing reporting inefficiencies. The deal was a co-sell and will be implemented by a Big 4 firm. Second, a large regional bank and mortgage originator in the U.S. signed a mid-6-figure account expansion deal. A loyal customer for 13 years, this bank increased its annual spend with Workiva by over 150% by adding bank reporting, controls management, management reporting, SEC and carbon and sustainability reporting. This deal was a co-sell with a technology platform partner. And third, a U.K.-based global pharmaceutical leader, who has been a Workiva sustainability reporting customer since 2017, signed a mid-6-figure expansion deal, adding controls management, ESEF and SEC reporting. This investment was made to significantly mitigate reporting risk and drive enterprise-wide efficiency. It included modernizing a manual reporting process involving over 200 collaborators. The deal was sourced and will be implemented by a Big 4 firm. While we're winning larger platform deals, our financial reporting specific solutions also continue to show strong momentum. I'd like to highlight a few of our Q4 deals. First, a global transportation and mobility leader, who's been a loyal customer for 8 years, nearly tripled their annual spend through a mid-6-figure expansion for multi-entity reporting. The business driver for this deal was a critical need to move their complex global entity structure away from high-risk manual processes towards automated compliance. The advanced AI capabilities of the Workiva platform was a competitive differentiator in this opportunity. The deal was a co-sell and will be delivered by a Big 4 firm. Second, a European-based global design and consultancy firm landed as a new customer with a multi 6-figure deal for multi-entity reporting. The primary driver for this deal was to streamline complex reporting across their global subsidiaries. This was a competitive win against a global provider of tax technology and other legacy systems. The deal was a co-sell with a regional technology partner. Third, we signed a multi 6-figure new logo deal for multi-entity and SEC reporting with a Brazilian industrial conglomerate and investment holding company. As a conglomerate, this business holds varying stakes in its companies, ranging from 100% ownership to minority interests. They operate in 19 countries, manage a hybrid of private and public reporting and must comply with multiple accounting standards, all of which lead to significant complexity in financial reporting. The deal was sourced and will be implemented by a Big 4 firm. I'll move on now to highlight 2 deals in one of our vertical-specific solution categories, financial services. First, a global financial services provider offering fund administration signed a 7-figure account expansion deal for fund reporting. This was an eightfold increase in spend. This customer started with Workiva in December of 2024 with a small set of funds on the Workiva platform. The deal expands the Workiva solution firm-wide as they transform their investment reporting processes and transition from manual processes supported by Microsoft Office. The deal was sourced and will be implemented by a regional advisory partner. Second, a U.S.-based professional services consulting firm landed as a new customer with a high 6-figure deal for fund reporting, controls management and tailored shareholder reporting. The driver behind this deal was to provide the firm with greater control over filings, enable faster turnaround for their customers and eliminate their dependency on dated solutions from their financial printers. The deal was a co-sell and will be implemented by a regional advisory partner. We also continue to see strong momentum with GRC. I'll highlight a few of our Q4 account expansions. First, a top 5 Canadian bank signed a mid-6-figure expansion deal for controls management. A Workiva sustainability reporting customer since 2024, this firm more than doubled their spend with us with this expansion. The goal was to replace a legacy GRC platform to manage their SOX processes. Management of SOX at a bank of this size involves up to 3,500 tested controls and a complex set of reporting requirements. This deal was sourced and will be implemented by a Big 4 firm. Second, we landed a multi 6-figure account expansion deal with a U.S.-based industrial technology company for audit management, compliance management and policies and procedures. The driver of this deal was the streamlining of policies, internal audit and user access reviews. This was a competitive win over an enterprise SaaS platform provider. The deal was a co-sell with a global advisory and regional technology firm. And third, a European-based medical supply company purchased a multi 6-figure account expansion for 3 GRC solutions, including audit management, controls management and operational risk management. This company started as an SEC reporting customer back in 2021. This account expansion has nearly tripled their spend with Workiva. This was a competitive win over a GRC platform provider, and it involves the migration of an ERP-based GRC solution. The deal was a co-sell and will be implemented by a Tier 2 accounting firm. I'll turn now to sustainability. Last year, we saw the market navigate a changing political and regulatory landscape. As we've highlighted in past calls, we did see demand for sustainability reporting moderate in 2025 when compared to 2024 highs. As we look forward to 2026 and beyond, we remain optimistic on the strategic value of this market and our strong competitive position to drive growth. We see companies moving forward with more purpose now as they've gained greater clarity on the scope and the time line of regulations. Here are a few sustainability deal highlights from the quarter. First, a top 5 global commercial real estate services and investment firm signed a mid-6-figure expansion deal for sustainability reporting and policies and procedures. This company is navigating several major global regulatory shifts that transitioned from voluntary to mandatory in the last 24 months, including the CSRD, the Australian mandatory disclosures and plans for the upcoming California climate disclosure rules. This company is also committed to be net 0 by 2040 and is strictly governed by the science-based target initiative. Their targets include a 50% absolute reduction in Scope 1 and 2 emissions by 2030 and a 55% reduction in Scope 3 emissions intensity by 2030. This deal was a co-sell and will be implemented by a Big 4 firm. Second, a global diversified industrial company signed a multi 6-figure account expansion for multi-entity sustainability reporting. This 8-year loyal SEC customer has complex sustainability reporting requirements as they operate in 130 countries and across multiple business units, including energy, automotive, agriculture, mobility and data centers. The sustainability reporting drivers behind this deal include compliance with the CSRD, support for ratings reporting to MSCI and S&P Global and the upcoming State of California climate disclosure. The deal was a co-sell and will be implemented by a regional advisory firm. And third, a European-based manufacturing company landed as a new customer with a multi 6-figure deal that included sustainability reporting and Workiva Carbon. The company's sustainability reporting requirements are for an end-to-end sustainability data management platform to streamline CSRD compliance, reduce manual workload and enhance reporting accuracy. This is a replacement for an existing GRC tool that they were using to muscle through their first year of CSRD compliance. The deal was a co-sell and will be implemented by a regional advisory firm. To conclude our solutions section, let's look at the capital markets landscape. Q4 IPO activity was more measured compared to the uptick seen in Q3. We believe that this was influenced by the timing of the government shutdown. Workiva still remained a key partner in this space. We successfully supported high-profile listings and customers continued to purchase our S1 solution as part of their listing preparation process. Despite a tempered market, we continue to see healthy demand from private companies maturing their processes in anticipation of an IPO opportunity over the next 18 months. We believe a robust backlog of companies is waiting for the right conditions, and we stand ready to support them with our AI-powered platform and our purpose-built solutions. Now before I move on to talking about our innovation, I'd like to remind you that Workiva does not have a seat-based licensing model. We've been pricing on value metrics and consumption for many years. Whether it's a customer's AI agent or a human, we charge based on volume and usage, not on who or what is interacting with the platform. As I mentioned earlier in my remarks, Workiva operates where accuracy, defensibility and accountability are required, making our platform even more relevant in an AI-driven world. Our relevancy is critical, of course, but so is using AI to both build, innovate and execute with speed and to ensure our customers have high impact, differentiating AI in our platform to do their most important work. Unlike other companies who are simply bolting on AI, Workiva's AI capabilities are architected directly into the core of our platform. Customer adoption of our AI capabilities continues to grow, and we've accelerated the pace of AI product innovation. This quarter, we delivered several high-impact enhancements across the platform. First, we launched an AI-powered capability that analyzes queries and manages data directly within the Workiva platform. Customers are now empowered to leverage AI across their data, queries and tables to accelerate data preparation and surface insights. Second, we're embedding and scaling additional AI capabilities across our GRC solutions. Newly launched capabilities enable users to automatically ingest, analyze and validate supporting documentation or in GRC terms, evidence for audit, risk and compliance processes. This transforms manual document-intensive tasks into an automated insights-driven process within a secure, centralized environment. And finally, we continue to expand AI capabilities across financial reporting. Since AI is already embedded into the Workiva platform, no add-ins or plug-ins are required. For financial reporting, newly launched AI capabilities can be used to generate narrative insights and summaries for reports, get explanations of data and formulas through natural language interactions and leverage strong conversational querying, explanation and reasoning over data context and logic. All of these platform capabilities have the potential to drive meaningful impact across all of our financial reporting solutions. The market is moving fast on AI, and so are we. Again, as AI adoption accelerates, the demand for trusted connected data will only grow. We believe this shift is a durable long-term tailwind for Workiva. As we roll into 2026, we do so with a few new players on the Workiva leadership team. In Q4, we announced 3 new additions, including Michael Pinto, who joined us in November as our new Chief Revenue Officer. As discussed on our Q3 call, Michael oversees Workiva's global sales, partnerships and alliances and commercial operations. Second, Deepak Bharadwaj joined us in December as our new Chief Product Officer. Deepak most recently served as Head of Product Management for Adobe's Document Cloud, where he led the launch of Acrobat Studio, an AI-driven productivity and creativity hub. Before Adobe, he spent several years at ServiceNow, where he played a key role as a General Manager in launching and scaling their successful employee experience platform. And finally, Barbara Larson joined us in January as Workiva's new CFO. Barbara brings more than 20 years of experience in various finance leadership roles, scaling high-growth public software companies. Most recently, she served as CFO of SentinelOne. Prior to that, she spent a decade in finance at Workday, including serving as their CFO. We are thrilled to have her on our team. Barbara is on the call today, and she'll join us in a few moments to provide a detailed review of our financial performance. In addition to these new executives, in the last week of January, we appointed 2 new members to our Board of Directors. We announced that former Cisco and Autodesk CFO, Scott Herren, and former Workday Co-President, CFO and EVP, Mark Peak, will both be joining the Workiva Board in the coming months. Scott and Mark both bring deep expertise in transforming and scaling high-growth public technology companies. They also have extensive experience, strengthening financial discipline and driving operational excellence. 2025 was a year of strong growth, operational resilience and meaningful performance improvement. I want to thank our employees for their unwavering commitment and their execution. In a volatile market environment, we remain focused on delivering value for our customers. We exited 2025 as a different company than we entered it. We are stronger, more disciplined and more agile. This progress positions us well to enter 2026 with momentum and confidence. Our continued innovation, durable growth, expanding profitability and sustained relevance all reinforce our position as the leading public software company serving the office of the CFO. And with that, I'd like to give a warm welcome to Barbara Larson. She'll walk you through our financial results in more detail and our 2026 guidance. Over to you, Barbara. Barbara Larson: Thanks, Julie. It's great to be here. After spending my first month with the team in the business, I'm energized by the opportunity ahead as we continue to focus on delivering both durable growth and improving profitability. I'll start with an overview of our financial and key metric highlights for the fourth quarter and full year 2025, followed by our guidance for the first quarter and full year 2026. As Julie mentioned, we delivered a strong finish to the year. In Q4, we generated $239 million in total revenue, up 20% year-over-year and beating the high end of our guidance range by $3 million. Foreign currency fluctuations had an approximately 1 percentage point favorable impact on our reported growth rate. Q4 subscription revenue was $219 million, up 21% year-over-year. Both new customers and account expansions continue to contribute to our revenue growth with new customers added in the last 12 months, accounting for approximately 40% of the increase in Q4 subscription revenue, consistent with our expectations. Q4 professional services revenue was $20 million, up slightly versus the prior year. In line with our strategy, we continued to grow our higher-margin XBRL services while we shifted lower-margin setup and consulting services to our partners. Our non-GAAP operating margin for the quarter was 19.1%. This beat the high end of our guidance by 160 basis points, driven by operating leverage from our top line outperformance and our continued focus on operational efficiency and productivity. Moving on to our performance metrics for the quarter. We had 6,624 customers at the end of Q4 2025, an increase of 319 customers year-over-year. Our gross retention rate was 97%, exceeding our 96% target. And our net retention rate was 113% for the quarter compared to 112% in Q4 2024. Consistent with our reported revenue growth, there was an approximately 1 percentage point favorable impact on NRR due to foreign currency fluctuations. During the quarter, 74% of our subscription revenue was generated from customers with multiple solutions, up from 70% in Q4 2024. Growth in our large contract customer cohorts also reflected strong momentum. As of the end of the fourth quarter, we had 2,507 contracts valued at over $100,000 per year, up 22% from the prior year. The number of contracts valued at over $300,000 totaled 592, up 42% year-over-year. And the number of contracts valued at over $500,000 totaled 248, up 37% from Q4 2024. Moving on to our full year performance. Total revenue for 2025 was $885 million, up 20% over the prior year. Similar to Q4, this result includes an approximately 1 percentage point favorable impact due to foreign currency changes. Subscription revenue was $813 million, up 22% year-over-year. At year-end, our current remaining performance obligations were $757 million, up 21% over the prior year. This growth, which reflects the revenue we expect to recognize in the next 12 months includes an approximately 3 percentage point favorable impact due to foreign currency. Professional services revenue was $72 million, relatively flat compared to the prior year. Consistent with our plan, we successfully shifted more low-margin setup and consulting services to our partners, which was offset by higher XBRL services year-over-year. We also had another strong year of international expansion. Total revenue outside the U.S. was 27%, up 300 basis points compared to the prior year. Our full year non-GAAP operating margin was 9.9%, beating the high end of our guidance by 50 basis points. This result is also 440 basis points above the high end of our original full year guide that we set on the Q4 call last year. We have made meaningful progress toward our 2027 operating margin target in the last year, and these results reflect our ongoing commitment to operational rigor as we continue to scale and mature the business. Moving on to the balance sheet and cash flows. As of December 31, 2025, cash, cash equivalents and marketable securities were $892 million, an increase of $35 million over the prior quarter. For the full year 2025, we delivered a free cash flow margin of 15.6%, which beat our guide by 360 basis points and represents a 390 basis point improvement year-over-year. This outperformance was driven by 2 factors; first, favorable working capital timing related to customer payments and tax impacts; and second, improved operational efficiencies across the organization. During the fourth quarter, we deployed a portion of our free cash flow to repurchase 131,000 shares of our Class A common stock for $12 million. This brings our full year total to $72 million under the share repurchase program authorized in July 2024. As of December 31, $28 million remained under the original $100 million authorization. In February, our Board authorized a $250 million increase to this program. This expansion reflects our confidence in Workiva's intrinsic value and the durability of our business model. While we remain focused on investing in growth and innovation, our strong free cash flow profile enables us to return capital to our shareholders while effectively managing dilution through opportunistic repurchases. Turning now to our outlook for Q1 and the full year 2026. Our performance throughout the year and the momentum we generated exiting 2025 sets us up well for 2026. I'm partnering closely with Julie and our leadership team to ensure we execute on Workiva's commitment to delivering both durable top line growth and expanding operating leverage across the business. With that in mind, for the first quarter of 2026, we expect total revenue to range from $244 million to $246 million. We expect services revenue to be relatively flat compared to Q1 2025. And we expect non-GAAP operating margin to be in the range of 15.5% to 16%. For the full year 2026, we expect total revenue to range from $1.036 billion to $1.04 billion. We expect subscription revenue to grow approximately 19% year-over-year. And similar to 2025, we expect total services revenue will be relatively flat year-over-year. We expect our non-GAAP operating margin to range from 15% to 15.5%. This 560 basis point year-over-year improvement at the high end reflects our ongoing commitment to drive operating leverage as we scale the business and make meaningful progress toward our medium- and long-term financial targets. We expect 2026 free cash flow margin to be approximately 19%. For additional details on seasonality and other model assumptions, please see our quarterly investor deck available on our IR website. Finally, the company's 2027 and 2030 financial targets outlined at the Investor Day in September remain intact and unchanged. To wrap up, our 2025 financial results are a direct reflection of our commitment to profitable growth at scale. Our platform continues to resonate with offices of the CFO around the world, and I'm incredibly excited to have joined Workiva at this pivotal moment in our journey. As we look toward 2026 and beyond, we're entering our next phase of growth as a $1 billion revenue company, on track to achieve GAAP profitability this year. My team and I are focused on driving the operational maturity and disciplined execution required to scale the business efficiently and drive durable long-term value for all of our stakeholders. I look forward to meeting many of our analysts and shareholders in the coming weeks and months ahead. Thank you all for joining the call today. We're now ready to take your questions. Operator, please open the line for Q&A. Operator: [Operator Instructions] Our first question comes from Rob Oliver with Baird. Robert Oliver: I had 2 questions. Julie, one for you and then Barbara, a follow-up for you. So Julie, I appreciate your commentary relative to AI and Workiva's positioning. I'd like to ask specifically about some of the new wins, obviously, the contributions to subscription in Q4, but notably the multiproduct platform wins, the 6-figure wins that you guys had in the quarter and called out in your prepared remarks. Can you talk about how AI is playing a role in those discussions, if it's functionality that's being employed today, if it's part of your road map going forward? What are customers looking to you for today on AI as a component of those deals? Julie Iskow: Sure. Thank you for the question, Rob, and good to have you on the call. I think first off, those multi-solution account expansions, large customer wins are happening with the broad-based platform. You're asking specifically around AI's contribution. I will tell you this, of all the customer conversations I have, AI is a topic -- a strong topic of conversation. It they have to happen and they're ready to move in this moment, but they are buying because they know Workiva focuses on innovation, and we have it and we are demoing those. So adoption is increasing simply because now there is a recognition that they can use it in an environment that is safe and secure, and it applies to all of the information across the portfolio of solutions. So it's absolutely playing a role in the buying decisions. I believe I highlighted one on the call today in my remarks earlier that it was a significant reason for the win. The other part of the question was around the -- how it's showing up in the product. And as you know, we adopted a good, better, best model when it comes to pricing and packaging. And we have our AI capabilities in the premium tier, and we have that across all categories on our platform, sustainability, financial reporting as well as GRC. And we're seeing some strong traction in the premium tiers. Robert Oliver: Great. I appreciate that, Julie. And then Barbara, welcome a question for you. Just your comments about efficiency and productivity and the commitment to operational rigor. Just be curious, having had some experience at bigger companies and now stepping in here to the role at Workiva, as you look at the financial targets in '27 and '30, which you've reiterated, looking at the business, where do you see the opportunity for continued progress on that operational rigor and margin side? And what are some of the areas that sort of stand out to you? Barbara Larson: Rob, thanks for the welcome, and thanks for being on the call. I definitely appreciate you calling out the progress. We certainly feel like we're well on our way to achieving those 2027 and 2030 targets. And then in terms of where we expect to see the leverage. It's kind of more of what we have been seeing in 2025, really across the business. And then, of course, we have opportunity to drive more productivity in the sales and marketing side. Operator: Our next question comes from Terrell Tillman with Truist Securities. Terrell Tillman: Welcome aboard, Barbara. Yes, I had a question and a quick follow-up. I was hoping we could touch on Michael Pinto. I know he's still kind of relatively new in the role to really lead the go-to-market efforts as CRO. But I was just curious if we could get just some early observations, maybe some areas where he's focusing and potential timing of impact from some of those efforts? And then I had a follow-up. Julie Iskow: Sure. We are very happy to have Michael joining us on the team with his strong background in transforming and scaling high-growth SaaS companies and certainly to the multibillion where we are headed. His mandate is really multifold. The first thing is just building a strong team that can scale globally. He is also here to help strengthen our partner ecosystem and importantly, refine sales plays in various regions around the world. And focus too, because of his background in AWS and Databricks, focus on our place in the data ecosystem, which is becoming increasingly important. And then overall, just scaling and strengthening our go-to-market machine. And he's been going deep into the business. He's looking around in every function, in every area under the commercial team, and already bringing significant insight and opportunity here. So we're very happy with the progress he's made to date, and we're looking forward to seeing what he's going to be contributing very soon over the coming quarters. Terrell Tillman: That's great. And I guess, Barbara, in terms of anything you can share about NRR directionally in '26 as part of the plan? And then would there be any discernible shift from that new customer contribution at about 40%? Barbara Larson: Thanks for the question, Terry. So for 2026, we're modeling the business at 96% for GRR and 110% for NRR, and we're striving to maintain that going forward. And then your question in terms of the split of the business, more of what we've been seeing, so about 60% new, 40% from expansions, but that can shift -- sorry, opposite, 40% new, 60% expansion. But any given quarter, we can see that shift a little bit. Operator: Our next question comes from Alex Sklar with Raymond James. Alexander Sklar: Julie, first one for you, following up on Rob's question around your growing AI capabilities. What have you seen in terms of usage so far from those initial features you launched with customers that have had access? And how should we think about how incremental your AI road map plans are for 2026 based on some of the prepared comments in terms of the monetizable opportunity there? Julie Iskow: Sure. So we do have a lot of interest in our AI capabilities from customers. And as I mentioned, continue to see increasing adoption and use once they recognize it's in the trusted controlled environment. To date, we've got almost 30% of our customers having enabled AI on their platform. And again, once they enable and adopt, we continue to see increasing use. So we've had great feedback on what we've rolled out, a lot of those features. We announced several of them at our customer conference, Amplify, the last quarter last year and continue to work with the customers just to expand their use of our AI capabilities. And importantly, we're learning what capabilities bring the highest value and deliver AI that's actually going to drive impact. And as we do that, we can put our investments in that direction. And certainly, we're able to put those in the upper tier of our offerings and ensure that we're getting our value for the value that we're bringing them. And we're going to continue to do that. And yes, ultimately monetize our AI capabilities. So thank you for the question. Alexander Sklar: Okay. Great. And then maybe for you or Barbara, but on the strong bookings exiting the year, if you had to disaggregate some of the drivers, how much do you think is already coming from some of the go-to-market changes that you started on a little over a year ago? How much is coming from the new packaging efforts or from partners or just from broader multi-solution sales? Like how would you stack rank some of the biggest contributors to the bookings growth? Julie Iskow: I will take that one off and just say -- it is broad-based around solutions. As Barbara mentioned, the mix of the new logos and expansion, we're focused on both. So it's coming from, again, our multi-solutions across the platform, and it isn't 1 or 2 standouts. And the changes that we have been making to increase operating leverage and increase productivity have been continuing on and progressing. So much of it is around our own execution. Our partner ecosystem continues to strengthen. So it isn't one thing. It's broad-based. It's all the actions we've been doing to get stronger ourselves, build our teams, get higher profiles of individuals out there with feet on the street, those who sell with partners, focusing on the platform play because that is resonating in the market. So just going after our opportunity in a stronger way with the full breadth of our platform is really what it is, just getting better. Operator: Our next question comes from Adam Hotchkiss with Goldman Sachs. Adam Hotchkiss: Julie, I wanted to start on the capital markets environment. I know you mentioned Q3 was strong, Q4, a little bit softer, but some, I think, strong expectations for next year. How should we think about what is contemplated in 2026 from a guidance philosophy perspective around capital markets? And then I had a quick follow-up. Julie Iskow: Sure. One of the fun topics we get almost every call, what's happening with cap markets. When will it come back? Is it back? And we did see a moderation of IPO activity in Q4 relative to a stronger Q3. But we're really encouraged by the number of companies that we've been speaking to that are considering IPF -- IPO activity in 2026. And so the simple answer is, yes, we've incorporated into our guide. We're anticipating some growth this year, but we also recognize there are just a lot of factors and market variables that might impact that rate of growth. So I'll say is we're optimistic about the IPO momentum as we kick off 2026, but there are a lot of macro dependencies to sustain the growth throughout the year. And I can name a few, we have a new Fed chair, economic instability, those kinds of things. So they're all weighing new valuations in technology companies is one. So a number of factors, but we do feel very optimistic from the customer conversations that we've had. Adam Hotchkiss: Okay. Fantastic. And then as we sort of look at the margin progression, it does feel like you're progressing a little bit ahead of schedule on the margin side relative to the 2027 guidance. Barbara, I realize you're early into the role, but any early observations on how that's going? And maybe even Julie, given you've been involved on the operational side, just learnings as you've been going through the margin expansion piece, anything that surprised you or been encouraging through that process? Barbara Larson: Yes. I'll start that out. We're really pleased with the pace of operating margin expansion we've been able to deliver in 2025 as well as what we're guiding to 2026. So we've definitely shown our ability to drive operating leverage, and we're confident that we will continue to do the same and meet those medium- and long-term targets. Operator: The next question comes from Steve Enders with Citi. Steven Enders: I guess to start, I just want to ask on, I guess, the guidance philosophy and Barbara, I appreciate you coming on board to an already established team. But any kind of change in how you approach the guide and what's being, I guess, contemplated here from -- versus prior periods? Barbara Larson: Steve, thanks so much for the question. Our guidance philosophy hasn't changed. It continues to reflect our best view of the business at a specific time. I've inherited a very strong finance team. I've been working closely with them as well as with Julie and the rest of the leadership team, and there's clear continuity in how we approach our outlook. Steven Enders: Okay. Perfect. That's great to hear. And then maybe just on the updated pricing model and the good, better, best. Just I guess, what have you seen so far from customer uptake of, I guess, that program? And kind of, I guess, what are the assumptions that you're making moving forward in terms of how that kind of plays out in converting customers up to higher tiers? Julie Iskow: We -- as I mentioned, we're seeing uptick in our more premium tiers. We're putting in advanced capabilities, and we've seen a lot of traction, and it is contributing to the momentum that we're seeing that we exited 2025 with. So we're very optimistic, a good way to get more of our value to the customer and again, get value on our end. So we've, again, rolled it out for GRC, for financial reporting and sustainability. And it's also a good way for us to take some learnings from AI that we put in those tiers, and we see the customers focusing in certain areas of the platform and certain capabilities, so we can take that to build even more valuable offerings for the customer. So it helps in both ways, getting value, but also helping us understand more what will resonate with customers and bring even more value. Operator: Our next question comes from Daniel Jester with BMO Capital Markets. Daniel Jester: Welcome to the call, Barbara. Look forward to working with you. Maybe just on the verticals piece, Julie, you talked about financial services. And I think you talked about financial services throughout a lot of 2025. Can we just spend a moment there sort of regauging kind of where we are in that opportunity? And as we think about 2026, how do the verticals stack up relative to the other growth opportunities you have? Julie Iskow: Sure. Well, I will mention financial services, Dan. Thank you very much for the question because I love to highlight is why I highlighted on the remarks earlier. We just continue to land both large new logos and account expansion deals in financial services. We co-sell with partners in this vertical, and we have a lot of regulatory use cases in addition to, of course, our horizontal solutions. It's just been a great story for us, a great growth story. It includes mid 6-figure and 7-figure deals with our fund reporting solution shown strong performance this year. And just in general, the trends are multi-solution large deals focusing on regulation and of course, our partners. I gave a few deal examples, too. And I do -- this has been our strongest vertical to date. And we're going to continue to move into verticals. We have a few others that we're increasing our investment in as well. So a good area for the Workiva platform. But our horizontals go in every sector of the economy, and that is front and center, of course. Daniel Jester: Great. And then maybe, Barbara, just on the guidance, FX has been impacting the business for the past couple of quarters, including sort of the big impact on RPO and cRPO this quarter. What's embedded in terms of FX in terms of the guidance? And is there anything you'd sort of call out for us as we update our models? Barbara Larson: Yes, absolutely. So our guidance for 2026 assume that our FX rates remain consistent with January 2026 rates. So that's the same approach the team has used historically. And then consistent with our standard reporting, we'll provide the specific FX impact on our actual results. Operator: Our next question comes from Allan Verkhovski with BTIG. Nicholas Dannewitz: This is Nick Dannewitz on for Allan here. Just one question on my end. You guys are doing a really good job adding multiproduct customers. And I was just wondering what kind of role does that play in increasing NRR? And how should we think about the ceiling for multiproduct customers as a percent of your subscription revenue base? Barbara Larson: Sorry, can you repeat the question, Nick? We couldn't understand it. Allen, sorry. Nick on for Allen. Nicholas Dannewitz: Yes, no worries. So you guys are doing like a really good job adding multiproduct customers. I was just wondering like what kind of role does that play in increasing your NRR? And how should we think about the ceiling there for multiproduct customers as a percent of your subscription revenue base? Julie Iskow: I assume you are talking about margin -- or excuse me, account expansion is what it sounds like? Nicholas Dannewitz: Yes. Julie Iskow: So I think we can just talk about new logos first, right? Again, 45% of our customers have -- or excuse me, 2 or more solutions. And when we do expand -- so we have a lot of opportunity still in the 55% that have -- only have one. So we're focusing there. And then we, of course, continue to expand with the new logos as well. But the account expansion is a key focus of effort on our end. There's just a tremendous amount of opportunity to go after. We have a lot to sell a couple of dozen solutions. And as I just mentioned, in financial services, it's an area where we're seeing significant account expansion. Operator: Our next question comes from Brett Huff with Stephens Inc. Brett Huff: Can you hear me? I'm getting some feedback. Do you get me okay? Barbara Larson: Yes, we can hear you. Brett Huff: Okay. Great. And welcome to the slate of new team members. So I hope things are going well. Two questions. One, to follow up on the helpful 30% of customers are using AI in some way, and they seem to be increasing usage. You mentioned monetization, but as you might expect, it's on the tip of the tongue of all of the investors with whom we speak. Can you remind us or maybe fill out your views on kind of mix of monetization, be it -- you mentioned getting folks into premium additions. Can you talk a little bit about any consumption-based pricing as folks worry a little bit about gross margins and things like that? So that's question one. And then the second question is on GRR. As you all do more bigger deals and you do more multiproduct deals, are you far enough into that motion to see what I suspect are positive impacts on GRR yet? Julie Iskow: So I'll take the pricing question. And as I mentioned, we don't have seat-based licensing. We're already usage-based, whether it's a number of controls, a number of entities, number of connections and integrations that our platform connects with. So the seat-based is not an issue for Workiva. We've been usage-based now for 6, 7 years. And the other way we've been pricing is also, again, the good, better, best model, putting more feature and capability in the more premium offering. So that's how we've been handling our pricing and the packaging. Barbara Larson: And I'll just comment on GRR. We continue to have strong GRR, and we're building that into our model going forward. Julie Iskow: Great. Thank you. Operator? Operator: This concludes our question-and-answer session. Thank you for attending today's presentation. The call has now concluded. You may now disconnect.
Operator: Hello, and welcome to Newmont Fourth quarter 2025 Results and 2026 Guidance Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Newmont's Group Head of Treasury and Investor Relations, Neil Backhouse. Please go ahead. Neil Backhouse: Hello, everyone, and thank you for joining Newmont's Fourth Quarter 2025 Results and 2026 Guidance Conference Call. Joining me today are Natascha Viljoen, our President and Chief Executive Officer; Peter Wexler, our Interim Chief Financial Officer and Chief Legal Officer; and Francois Hardy, our Chief Technical Officer. They will all be available today to answer your questions at the end of the call. Before we begin, please take a moment to review our cautionary statements shown here and refer to our SEC filings, which can be found on our website. With that, I'll turn the call over to Natascha. Natascha Viljoen: Thank you, Neil, and thank you all for joining today's call. At the beginning of this year, I transitioned into my new role as Chief Executive Officer of Newmont. And I want to be clear that the priorities that guided me as Chief Operating Officer and that contributed to Newmont's success in 2025 remain firmly in place. As CEO, I will continue to focus on the following key areas. Firstly, ensuring that safety remains the highest priority across the organization, embedding efficiency, including cost and capital discipline into everything that we do, demonstrating that we are the best owners and operators of our assets by driving continuous improvement and greater operational consistency; developing the highest return projects in our portfolio, ensuring our business has the runway to operate for decades to come; and enhancing shareholder returns by improving our per share metrics and returning capital to shareholders in a predictable manner, which we believe will support stronger price performance over time. Together, these priorities position us to strengthen our business, enhance returns and building gearing value for all of our stakeholders. Turning now to our results. The fourth quarter of 2025 marked a strong finish to a year of continued progress at Newmont. We achieved our full year guidance, improved our operational performance and strengthened our financial position, reflecting disciplined execution across the business. Our consistent focus on operational delivery, combined with a deliberate and patient approach to balance sheet management has positioned us to continue returning capital to shareholders while improving our financial resilience. Building on that momentum, today, we are introducing an enhanced capital allocation framework structured to be sustainable through the cycle. At its core is a dividend designed to grow on a per share basis, supporting by ongoing share repurchases that permanently reduce our overall share count. As the first step, we have increased our quarterly common dividend by 4%, with predictable future growth potential. With that in mind, on today's call, we will review our full year 2025 results, and then walk through Newmont's 2026 guidance and the enhanced capital allocation framework. But first, I want to take a moment to acknowledge the tragic loss of one of our team members, Matthew Middlebrook, following a fatal incident at our Tanami operation earlier this month. Our thoughts and deepest sympathies go out to his family, friends and colleagues, and we are focused on supporting them however we can during this very difficult time. An investigation into the circumstances that led to the incident is underway, and we are committed to fully understanding what happened and taking the necessary actions to strengthen the systems and controls we have in place to ensure that everyone who walks through our gate go home safely every day. Turning now to our operational performance in 2025. We successfully achieved our production and cost guidance for the year. We produced 5.7 million ounces of gold from our core portfolio as well as 28 million ounces of silver and 135,000 tonnes of copper. We benefited from the cost savings and productivity initiatives implemented last year which helped us mitigate pressures associated with a higher gold price environment and supported further margin expansion. In addition to achieving our absolute and unit cost guidance for 2025, we were able to meaningfully improve our G&A guidance for 2026 by $100 million, which equates to a 21% improvement. This operational and cost discipline contributed to record earnings and free cash flow on both the quarterly and annual basis, generating $2.8 billion in free cash flow in the fourth quarter and $7.3 billion for the full year. We also generated $4.5 billion in proceeds to date from the successful completion of our noncore divestiture program. And notably, we returned $3.4 billion to shareholders through dividends and share repurchases. Finally, at the end of 2025, we achieved commercial production at Ahafo North, bringing over 300,000 ounces of gold production into the portfolio this year. Over the last few years, Newmont has been on a transformational journey aimed at curating a world-class portfolio of operations with complementary gold and copper growth opportunities. In 2024, that transformation accelerated as we integrated new assays, began divesting noncore operations and improved our understanding of the potential of our portfolio. And in 2025, this focus shifted to stabilization and optimization with a deliberate emphasis on cost control, productivity improvements, project execution and expanded exploration activities. At the beginning of last year, we indicated that Newmont would benefit from a more stable production profile, and that is exactly what we delivered, demonstrating both the strength of our underlying portfolio and the capability of our people. And as I'll discuss in a moment, we continue to advance value-accretive growth options including the initiation of a mine life extension program at Lihir and the expected completion of Newmont's feasibility study for the Red Chris block cave in the second half of the year. Underpinning this portfolio is the industry's strongest reserve and resource base, providing long-term visibility and confidence. And with this, I will turn it over to Francois to review our 2025 reserves and recent exploration success. Francois Hardy: Thank you, Natascha, and hello, everyone. Today, we announced that our gold reserve base stands at 118 million ounces, supported by an additional 149 million ounces of gold resource, together, representing approximately 40 years of production life with meaningful near mine upside potential at many of our operations. In addition to holding the industry's largest gold reserve and resource base, Newmont also has one of the largest copper endowments within the gold industry, providing significant organic optionality to further diversify the portfolio over time. Following a thorough review, we have increased our reserve price assumption for 2025 from $1,700 per ounce to $2,000 per ounce. Even with this increase, our reserve price assumption remains conservative at more than 20% below the 3-year trailing average and well below spot. And our reserve grade remained unchanged year-over-year when adjusted for the assets divested in 2025. It is worth noting that while our reserve price assumption may not change every year, we conduct a disciplined annual review process to ensure it remains appropriate and reflective of evolving views on near- and long-term price. While the divestment of noncore assets was the primary driver of the year-over-year change in reserves, there are a few additional movements worth highlighting. At Yanacocha, we reclassified approximately 4.5 million ounces from reserve back to resource following the decision to indefinitely defer the Yanacocha Sulfides project, better aligning the reserve base with our updated development strategy, as we prioritize other opportunities at and around the sites and continue advancing closure activities in nonoperational areas. This was partially offset by several meaningful reserve additions unrelated to gold price or cost escalation, including at Tanami and Lihir. And in the Brucejack, where we are seeing significant exploration success, converting approximately 740,000 ounces from resource to reserve. Our exploration activities also delivered promising results at Ahafo South, where we added approximately 2 million ounces to resource in 2025. Exploration remains one of the most strategic levers to extend mine life, grow reserves and create long-term value, which I'll expand upon as we turn to the next slide. Newmont's exploration program is tightly integrated across our 12 managed operations with approximately 80% of activity focused on near-mine and brownfields programs, which are designed to replace reserves, extend mine life and leverage our deep ore body knowledge to unlock future upside. The remaining effort is targeted at select greenfield opportunities that provide longer-term optionality for Newmont. While we're seeing encouraging results across the portfolio, I'll focus today on Brucejack and Ahafo South, where the work underway clearly demonstrates the strength of our approach. At Brucejack, our focused near-mine drilling guided by extensive ore body knowledge delivered a meaningful result in 2025. So in addition to the reserves I mentioned earlier, drilling activities also delivered new resources adjacent to where we're currently mining. And importantly, we have made a new discovery in the Dozer zone as highlighted on the slide, with several significant intercepts, including 20.9 meters at 154 grams per tonne downhole, representing another potential high-grade mineral zone and a key focus of our 2026 growth program. Together, these results reinforce the value of targeted exploration around existing infrastructure. They increase our confidence in Brucejack's longer-term potential and highlight the broader district scale opportunity within the golden triangle. Shifting now to Ahafo South, exploration beneath the Subika and the Apensu open pit continues to point to the next phase of high-grade underground growth. Based on current results, which are indicating grades higher than the current mine average, we anticipate exploration activities will deliver approximately 4 million to 5 million ounces of new gold reserves in 2026. This would meaningfully extend the life of Subika underground mine and support the potential development of a new underground mine at Apensu, both leveraging the existing surface infrastructure and processing capacity at Ahafo South. Looking at our broader portfolio, we're also seeing encouraging exploration developments at Merian, which we plan to provide a more comprehensive update on later this year. I'll now turn the call back to Natascha. Natascha Viljoen: Thank you, Francois. 2025 was a milestone year for projects, punctuated by the successful commissioning of Ahafo North, a major achievement that now enables the mine to begin delivering an average of 300,000 ounces per year, and we are pleased to report that the total capital spend for the project is expected to come in at the lower end of our estimated range at approximately $950 million. Building on this strong momentum, we continue to advance our 2 other major projects in execution towards completion. Beginning with the second expansion at Tanami, with the 1.5 kilometer concrete shaft lining now complete, we are shifting focus to equipping the shaft and completing construction of the underground crushing and associated materials handling system. Construction for the headframe and mechanical work is expected to be completed in late 2026 with full project completion still on track for the second half of 2027. At Cadia, development for both panel caves continues, and we are progressing towards cave completion at PC2-3 in the fourth quarter of this year as planned. In addition, I'm pleased to announce that in December, we fired the first drawbell at PC1-2, making an important milestone for this project and initiating the next critical phase of cave development. And we continue to advance tailings work at Cadia while progressing the necessary government approvals to support continued operations beyond the current facilities for decades to come. In addition to these major projects in execution, we received full funds approval for the nearshore barrier mine life extension at Lihir, which involves the construction of an in-ground concrete water seepage barrier, unlocking access to over 5 million ounces of low-cost ounces from the Kapit ore body and extending Lihir's mine life to beyond 2040. And we continue to advance the feasibility study at Red Chris for the block cave expansion project with full funds approval targeted in the second half of 2026 when we plan to provide a more fulsome update. With the strong progress made in 2025, we are well positioned to continue delivering value from our world-class portfolio in 2026. Now I want to take a look now at 2026. And as with 2025, we are providing high confidence 1-year guidance within a plus or minus 5% range, along with a few of the key drivers supporting longer-term production growth. Beginning with production. Our 2026 guidance remains consistent with the indications provided on our third quarter call with total attributable production of 5.3 million ounces, including 3.9 million ounces from managed operations and 1.4 million ounces from non-managed operations. This outlook reflects the year-on-year changes from the planned mine sequencing at Ahafo South, Pe asquito and Cadia as well as the production impact from the Boddington bushfires in December. But we are pleased to report that the recovery following the fires is going well, and our team has successfully repaired the critical water supply infrastructure and processing operations have now restarted at full levels. This guidance also incorporates lower-than-expected ounces from Nevada Gold Mines and Pueblo Viejo as indicated by the managing partner. And importantly, through a careful assessment of our mine plan at Yanacocha and in light of the current gold price environment, we have identified a highly capital-efficient plan, which leverages current infrastructure to continue mining operations through 2026 and into early 2027, adding additional low-cost ounces that are expected to benefit our production profile in early '27 with further potential upside. For the full portfolio, we expect production to be relatively evenly weighted throughout the year with a modest second half weighting of about 52%. And as previously indicated, 2026 represents a trough in our production cycle due to planned mine sequencing across several operations as we position the portfolio to return to production growth in 2027 and beyond, maintaining our longer-term outlook of approximately 6 million ounces of gold and 150,000 tonnes of copper annually. Turning now to our cost outlook. As mentioned at the start of the call, we have made great strides towards improving and managing the cost within our control, and this will remain a key priority in 2026, especially when operating in a volatile macroeconomic environment. Last year, we committed to measuring the success of our cost and productivity program by our ability to control absolute cost. And in 2026, the only expected increases to our cost applicable to sales are those directly linked to timing impacts and higher gold prices, including production taxes, working participation costs and third-party royalties. Importantly, even with these price-linked impacts, all-in sustaining costs are expected to be more than $100 per ounce lower than they would have been without the cost savings initiatives launched last year, demonstrating the structural improvements we've made to our cost base. As previously indicated, we are providing guidance on a byproduct basis going forward, consistent with our industry peers while continuing to report both by-product and co-product cost for comparability. On that basis, 2026 all-in sustaining costs are expected to be approximately $1,680 per ounce. This assumes a $4,500 per ounce gold price, a $60 per ounce silver price and a $5 per pound copper price. And for every $100 increase in gold price, we expect a $6 increase in our all-in sustaining costs due to taxes, royalties and profit-sharing payments. Beyond the macroeconomic impacts, the year-over-year change is primarily driven by the reasons we addressed on our third quarter call, including lower gold production from planned mine sequencing, changing in inventory at multiple sites and the timing shift of sustaining capital from 2025 to 2026. But without the $150 million shifting from 2025, we now expect sustaining capital of about $1.95 billion in 2026. Of that, roughly 52% is weighted to the second half of the year, primarily related to tailings work at Boddington and Cadia to support production capacity and future mine life as well as the advancement of the ventilation work at Tanami, which is expected to be completed this year. Turning to development capital. We expect to invest about $1.4 billion in 2026 as we advance our major projects in execution, continue the feasibility study work at Red Chris and progress the mine life extensions at Lihir and Cerro Negro. We expect 55% of total spend to be weighted to the second half of the year, primarily due to the start of the work on the Lihir nearshore barrier. We also expect a modest step-up in exploration and advanced project spend to about $525 million this year as we continue to invest in value creating near our existing assets, including Brucejack, Ahafo South and Merian, as Francois previously touched on. Reclamation spend for 2026 is expected to be around $850 million, in line with 2025, primarily related to the construction of water treatment plants at Yanacocha, which are expected to be completed in 2027. Once complete, we expect total reclamation spend to return to more normal levels of between $300 million and $400 million in 2028. In the first quarter of 2026, we expect to make over $1 billion of tax payments, primarily due to accruals made in 2025. As a result and in addition to normal working capital seasonality, we expect first quarter free cash flow to be lower than the fourth quarter of 2025. Looking ahead, our longer-term production growth profile is supported by several clear and executable drivers. The continued ramp-up of Ahafo North, delivering new low-cost ounces beginning this year, the completion of the Boddington stripping campaign in 2026, enabling access to higher gold and copper grades beginning in 2027, the completion of Tanami Expansion 2 in the second half of 2027 as planned, the ongoing development of the Cadia panel caves extending mine life into the middle of this century and access to low-cost ounces at Lihir following the completion of the nearshore barrier, extending mine life well into the 2040s. Together, these opportunities provide a clear path to renewed production growth, supported by disciplined capital allocation and a portfolio designed to deliver value through the cycle. I will now turn the call over to Peter Wexler to walk through our enhanced capital allocation framework. Thank you, Peter. Peter Wexler: Thank you, Natascha, and hello, everyone. Our capital allocation priorities and commitment to discipline remain unchanged and supported by our focus on maintaining financial strength and flexibility, reinvesting in our business to ensure long-term sustainable free cash flow growth on a per share basis and returning capital to shareholders in a consistent and predictable manner. With that in mind, our enhanced capital allocation framework begins with net cash from operations and then prioritizes that cash be allocated first to sustaining capital and our dividend, which are intended to be commitments that will remain consistent throughout the commodity and investment cycle. Second, cash will be allocated to development capital and our balance sheet targets, which may flex based on our needs and priorities. Third, excess cash available after these priorities are met will be allocated to share repurchases. Starting with the two priorities designed to be consistent through the cycle. We will continue to allocate free cash flow to strengthen the longevity and integrity of our portfolio through targeted investments in critical infrastructure, which may entail elevated sustaining capital over the next few years as we work to maximize the long-term value of our portfolio. We will also pay a sustainable cash dividend of $1.1 billion per year, creating significant per share growth potential for multiple metrics as ongoing share repurchases continue to reduce our overall share count. For the fourth quarter 2025, we have declared a dividend of $0.26 per share, reflecting the per share growth potential embedded in this new approach. Following these consistent commitments, development capital spend and our net cash position may vary over time to reflect portfolio needs and broader macroeconomic conditions. We will invest development capital to advance our current projects and prepare for the next phase of growth with a clear focus on responsibly advancing our highest return opportunities while maintaining strict capital discipline and a clear commitment to value creation. At the same time, we will maintain a resilient balance sheet, anchored by a $1 billion net cash target plus or minus $2 billion and underpinned by a minimum cash balance of $5 billion. This provides the flexibility to return capital to shareholders while funding our capital programs through the commodity price cycles and driving sustainable production growth and operational efficiency. Once these priorities are achieved, we intend to deploy excess cash on a ratable basis to share repurchases. This approach is expected to drive sustained per share growth in our dividend and provide shareholders with greater exposure to the strong free cash flow generated from our portfolio, even with the recent increase in our share price. Our shares represent an exceptional value given our world-class portfolio of long-life operations and our deep pipeline of gold and copper projects. With that, I'll turn it back to Natascha for closing remarks. Natascha Viljoen: Thank you, Peter. In closing, 2025 was a year of execution and follow-through as we achieved our full year guidance, finished the year strong with a strong financial position, optimized our cost structure, advanced project capability, delivered meaningful exploration success and returned capital to shareholders, reinforcing the solid foundation we have built and the potential of this organization. Building on that, we are well positioned to drive margin expansion and generate robust free cash flow from our world-class portfolio of operations, projects and exploration opportunities. Our scale, asset quality and project optionality allows us to capture upside in favorable markets while remaining flexible through the commodity cycle. And finally, we are anchored by a resilient balance sheet and a disciplined capital allocation framework, which has enabled us to implement our enhanced approach to return capital, delivering predictable and sustainable returns to shareholders with a clear path to per share growth. As we look ahead to the rest of 2026, while we are operating in a rapidly evolving geopolitical and macroeconomic environment, our confidence comes from a clear understanding of our portfolio, a disciplined, responsible approach to investment, focused on delivering results and long-term value for our shareholders. Just before I turn to Q&A, I want to briefly address the recent announcement by our Nevada Gold Mines joint venture partner. At this time, the only information available to us is what has been publicly disclosed and as stated in our recent press release. Our primary focus remains on working with a managing partner to improve performance of these assets and generate long-term value for Newmont shareholders. As disclosed in our 10-K, we have issued a notice of default to our joint venture partner related to operational performance and management of Nevada Gold Mines. We do not have any additional information to share at this time and confidentiality provisions in the joint venture agreement prevent further comment on the notice of default. With that said, we look forward to addressing any questions about Newmont's operational and financial performance. I will now hand it back to the operator to open the call for questions. Operator: [Operator Instructions] Our first question comes from the line of Lawson Winder with Bank of America Securities. Lawson Winder: Very solid result. Nice to see for the end of the year to wrap it up strongly. If I could ask about CapEx and the -- and I apologize for that siren in the background. Just the CapEx as it sounds like there could be some potential upside through Red Chris and Merian. Could you just talk to those two projects and the update that we're going to be getting on those later in the year and whether that could lead to higher CapEx than what's currently been guided? Natascha Viljoen: Lawson, it was a little bit noisy, so I'm going to just reframe your -- repeat your question to make sure. You're asking about CapEx and whether CapEx would increase with the Red Chris project and Merian. Is that what you asked? Lawson Winder: Exactly. Natascha Viljoen: Thank you, Lawson. Firstly, Lawson, we are on track to talk a little bit more in detail on Red Chris project towards the second half of the year. Our capital guidance, as we have stated it, is on average, the $1.8 billion on sustaining capital, $1.3 billion on development capital. And we did say that, that would be average over a period of time. The capital allocation framework also allows us to -- within the context of setting that guidance, allowing us to make decisions on value-accretive projects as they come along, and we will be disciplined in how we allocate any capital to further development projects. The Merian example that Francois has spoken about is certainly a future opportunity that we will be able to share more information upon later in the year. Lawson Winder: Okay. I look forward to that. And then if I could, just on a separate issue with your JV partner, Nevada Gold Mines, Barrick. Have the two entities had any further discussion on Fourmile and a potential mechanism for vending that into the joint venture? Where does that currently stand? Natascha Viljoen: Lawson, our current discussions have been predominantly around the improvement of the performance of Nevada. And I think a very constructive relationship to work together to improve that performance and -- which we believe would be in the best interest of all of our shareholders. Operator: Our next question comes from the line of Josh Wolfson with RBC. Joshua Wolfson: Just going back to the long-term growth targets of 6 million ounces. Is there any time frame that can be disclosed on when that target is expected to be achieved? And maybe what are the larger drivers for that? Natascha Viljoen: Josh, thank you for that question. As I think as we've indicated over the last while is that we'll continue to give you 1-year guidance. We have completed our asset reviews. We just completed all of our long-term plans. And as we conclude this work and it builds to maturity, we will be able to give you a better guidance of what that profile would look like. And we certainly expect to be able to do that towards the end of this year. Joshua Wolfson: Got it. And I guess I can't ask about NGM directly, but maybe indirectly related to some of the speculation in the media about M&A. Could you clarify maybe what the company's views are on M&A today and maybe just how this plays into the current gold price environment? Natascha Viljoen: Josh, a really good question. Firstly, we're really happy with our portfolio of assets and our pipeline of projects. And as we do the work with -- on the back of all of our asset reviews, certainly enough potential in our own portfolio. We continue to evaluate our portfolio of assets, and that's just the right thing. We believe it's the right thing to do. It's part of the continuous work that we need to do. And as we find value-accretive opportunities to make any changes to our portfolio, we will do that, but it will happen in a disciplined way and within the context of our capital allocation framework. Operator: Our next question comes from the line of Daniel Major with UBS. Daniel Major: First one, just to be clear on the capital allocation waterfall that you provided, should we be reading that in terms of the commitment to the buyback that if you were to go above the threshold, so $1 billion plus or minus, you would -- we should assume in our models that 100% of free cash flow would be returned to shareholders through buybacks? And if that is the case, would that be done during a quarterly period or an annual period? Natascha Viljoen: Thank you for that question, Daniel. So your assumption is accurate, and I think that's why we -- in the cash flow waterfall, we've set it out with clear expectations of where we want our cash to be, all driven to a resilient balance sheet. As noted as a reminder, share buybacks will be ratable. And as we come to the end of a program, and you would know that at the moment, we still have $2.4 billion left on our $6 billion approved program, we will go back to our Board for approval for any additional buyback. Daniel Major: Okay. That's clear. And then a follow-up on the cost guidance, and you've changed the sort of headline guidance from co-product to byproduct. So on a like-for-like basis, your $1,935 co-product guidance for AISC. First, is it -- what is the like-for-like for CAS as well? Natascha Viljoen: We don't guide CAS, Daniel, but it is -- would be in the order of $1,430. Daniel Major: Okay. And then maybe just a follow-up on that cost dynamic. On Slide 16, you provided the drivers of the inflation through the year. If we look at those buckets, inventory change, working capital and volumes, would it be fair to assume those would reverse in the subsequent 1, 2 years? Natascha Viljoen: Yes, Daniel, probably worthwhile to just quickly step through that. In the prepared remarks, we spoke about volume, and I've given you the underlying drivers that will reverse the volume. Sustaining capital, you remember that a portion of that is sustaining capital that we've moved from 2025 into 2026. And we will see an elevated level of sustaining capital whilst we're still busy with Cadia and Boddington tailings. The changes in inventory, you are right, it's predominantly driven this year by the fact that we are treating stockpile material at Pe asquito and that we are not adding any stockpile material at Lihir. And then we will see a change at Yanacocha going forward as well, where we're not mining anymore and putting material. So those changes of inventory are purely just a factor of where we are on our normal mining cycle. I think what is important, I want to highlight that our cost applicable to sales has stayed constant year-on-year. And I just want to direct you towards that as well and the work that we've done last year on making sure that we can keep what is in our control on cost stable year-on-year. Operator: Our next question comes from the line of Tanya Jakisonik with Scotiabank. Tanya Jakusconek: I'm going to start, Natascha, just on Nevada Gold Mines. I'm interested in your views on -- as you've had time to spend time on the property and look at what needs to be done to maximize shareholder value. Can you review with us what you think we need to tackle to maximize shareholder value and how long that's going to take? Natascha Viljoen: Tanya, thank you for that question. I will kick off the question, and I will ask Francois, who led the team who was there to add anything as he sees fit. Firstly, we have -- we welcome the approach that we've seen from our JV partners with the change in leadership to work together to improve the Nevada Gold Mines' performance. And to that extent, we used the same kind of methodology that we've used for our own operations by really understanding district potential and working our way through opportunities, really thinking about the entire Nevada operations as a district and working it back all the way to near-term and short-term productivity improvements. And so it's exactly the same that we've done at Nevada. Francois? Francois Hardy: Sure. Thank you, Natascha, and thank you, Tanya, for the question. I think just to build on what Natascha said, the opportunity is to fill the mill effectively and use a portfolio approach to how we do that and also to blend the different types of material that is available there. I think there's also some short-term opportunity in terms of optimizing plans across the portfolio rather than on a site-by-site basis. But those are probably the main drivers for our potential there at NGM. Tanya Jakusconek: And sorry, the implementation, how long do you think all of this takes? Francois Hardy: Yes. Look, it's an ongoing partnership at the moment with our JV partners. We did a review in December, and we continue to work through the action plan accordingly. Tanya Jakusconek: Okay. And then my second question on still on Nevada Gold Mines. Just want to confirm, I understand that you have on, I guess, February 3, notice of default to Barrick. Can you just provide us just the process from this default and how we go forward and if it's not resolved? I just want to know the proceedings of what happens. I know there's a time period of where you try to resolve it. And if not, there's a court. I'm just trying to understand the timing of that and if the court is in Nevada, if there's no resolution. Natascha Viljoen: Thank you, Tanya. I'm going to hand that question over to Peter Wexler. Peter Wexler: Thank you, Tanya, for your question. I think you're absolutely right and you have access to the agreement, which was publicly filed, and it sets out detailed time lines for both how any disputes between the partners are resolved as well as the jurisdictional where it would be decided. So -- or if it ever gets to that stage, but you have that all right in front of you, actually. Operator: Our next question comes from the line of Hugo Nicolaci with Goldman Sachs. Hugo Nicolaci: Two questions from me, please. Look, the first one, I appreciate the emphasis on share repurchases as the key use of excess operational cash flow, but it appears that some of the more medium- to longer-term growth projects seem to have lost their emphasis a little bit such as the Red Chris cave and indefinitely deferring Yanacocha sulfides and some of the other resources like NovaUni n, Norte Abierto, Galore Creek, Conga, Laurentina, Wafi-Golpu, to name a few, they don't seem to be priorities for this decade. Do you see room for further divestments of resources from the portfolio? Or conversely, should we take the comment that you're exploring more opportunities in the region around Yanacocha that you're actually still acquisitive from here? Natascha Viljoen: Yes. Hugo, there's lots in that question. So let me just see how I can unpack that. Firstly, we've built -- deliberately built this portfolio of assets with the intent to develop and grow it, first point. Second point, we will do that in the disciplined manner that we set out in our development -- in our capital allocation framework. So important to note. Your question around Peru. Peru remains centered to and key to our portfolio. You shouldn't read the fact that we have walked away from the Yanacocha Sulfides project as any indication to the potential that we have in the [indiscernible] project and the Conga project in Peru. As we've concluded -- as I mentioned earlier, and we've concluded the asset reviews and developing the profile going forward, all of these projects are under review. We've got a very clear framework in which we review these projects to sequence them appropriately in the project. The Red Chris project specifically benefited from the unfortunate incident that we had last year when we had the failure in the decline, but it benefited us in highlighting just the areas of opportunity to improve design. And there's no other indication than just an opportunity to improve design at Red Chris. Hugo Nicolaci: Got it. And then a follow-up then maybe on costs. Great to see the cost savings initiatives you worked on last year coming through. Are you able to just provide some more detail on the magnitude of those cost savings that are hitting that 2026 outlook number? And then any further cost-out targets you're looking to try and deliver this year? Natascha Viljoen: Yes. Probably a couple of ways that you can look at that, Hugo. The first thing is, as I said earlier, cost attributable to sales stayed constant year-on-year. So we've basically offset inflation. Another way that you can think about it is that savings allowed us to reduce $100 per ounce from our cost. So that is a good other way of doing it. So our all-in sustaining cost would have been $100 per ounce higher if we didn't have that. I also want you to point you to the G&A reduction. In the prepared remarks, we've spoken about a 21% reduction in G&A from guidance to guidance, and you will see that our G&A is well aligned last year with this year. So just a couple of markers that you can look at. We also -- as we've done -- as we've retired debt and repurchased shares, we've also seen a reduction in cost of about $230 million between those two elements. As we go forward, some of those -- we had two focus areas for cost reduction, headcount and non-headcount reduction. The headcount reduction has been completed and the future continuous work that we have through operational productivity and discipline, all goes back to the continuous non-headcount reduction, and we've made some significant progress to embed our savings in our cost structure. Operator: Our next question comes from the line of Anita Soni with CIBC. Anita Soni: I just wanted to ask about the Tanami expansion too. Just seeing the total spend to date is about $1.3 billion, and you're spending about $3.5 -- sorry, $350 million, $330 million this year. And the project total is $1.7 billion to $1.8 billion with still a significant amount of time to go. So will you hit that $1.7 billion to $1.8 billion? Or will you be near the upper end or slightly above that? Natascha Viljoen: We are right on track to hit those targets, Anita. Anita Soni: Okay. My other one is a somewhat quick one. On the capital allocation framework, you said plus the net cash position of $1 billion, but I see plus or minus $2 billion. I think maybe someone else mentioned plus or minus $1 billion. I want to clarify that, but -- and then also ask, it seems like a pretty wide range. Like how do you make that decision that we're going to keep an extra $2 billion of cash instead of buying back shares at this point? Peter Wexler: Anita, that's a very good question. That was a very disciplined approach by the Board to take a look at the ability for the company to withstand volatility across commodity cycles and ensure that our fixed dividend is always payable and we can meet our commitments. It can flex up and down depending on where we are in both the cost cycle, the price cycle as well as the other needs for some of the nearshore projects that we might want to execute on that would be cost accretive with our financial discipline fully in focus. So that's how it was arrived. It was a very thoughtful process with the Board of Directors and -- to ensure the long-term resiliency of the company. Natascha Viljoen: And Anita, it is $1 billion plus or minus $2 billion. So it is clearly set out in Slide 10. So the detail is really set out there for your reference. Anita Soni: Yes. I just thought I heard someone say $1 billion plus or minus $1 billion. So I just want to clarify that. But I did see the slide, it says plus or minus $2 billion. Operator: Our next question comes from the line of Daniel Morgan with Barrenjoey. Daniel Morgan: My question is gold and copper at all-time highs, you have some of the best assets in the industry. Is there an opportunity to do a bit more on debottlenecking, brownfield expansion? Is this something that should be worthy of greater consideration? I mean if I look at a lot of the messages today, you've got a new capital allocation strategy, which appears to speak to a focus on returning cash rather than growth. Can you just talk about that? Natascha Viljoen: Thank you, Daniel, and a really relevant question and something we continuously evaluate. So Daniel, firstly, we make sure that the baseline of our production remains sustainable through the cycle. I think that's an important evaluation. So that is [indiscernible]. Then we continue to look at short-term opportunities. In my prepared remarks, I referred to Yanacocha specifically, where we have seen an additional cut in the pits that we will be taking. So the really near-term opportunities we are focusing on are those where we have low capital investment because the moment you start to talk about capital investment, there's time associated with it. So low capital investment means quick to market. It considers constraints like tailings dam capacity because we do need to consider the cost and the time to ensure that we've got long-term tailings capacity. So that needs to be considered as part of the economic evaluation. And then the next constraint would be our processing plant. So we have no constraints, and we can make sure that it comes to market quickly with low risk, we are absolutely pursuing every opportunity. So a very good point. Daniel Morgan: And are there -- I know you've got Red Chris this year, but I mean, maybe you can just cast the market's eyes to potential assets across the portfolio, which have those opportunities for debottlenecking where there's a plant that has very capital-efficient expansion or ample tailings? Or what are the assets where if we thought creatively about growth beyond, say, Red Chris that we should be thinking about? Natascha Viljoen: Daniel, you're now talking just brownfield expansion, right? Daniel Morgan: Correct, correct. Natascha Viljoen: Yes. Okay. So a couple. Ahafo South, we definitely -- and Francois mentioned in his prepared remarks on -- and we're actively pursuing that development, underground development that goes hand-in-hand with the exploration work that we're doing. Ahafo North as a brownfields expansion, there's a potential for us to basically duplicate what we've done at Ahafo North to date. So that's a definite opportunity for us. If we look across and we look across to Lihir, we've just concluded 14A. So we will have access to high-grade ore there and the nearshore barrier will give us access to further high-grade material. If we go to Tanami, as we complete Tanami, there's certainly opportunities there for us. I'm just thinking through -- I think I've touched on all of the main ones. Brucejack, of course, Francois just reminded me here of Brucejack. Brucejack, there's two opportunities. The one would be that we are looking at stope sizes that is easy to -- easy for us to do to develop our stope sizes slightly larger, capturing the value of just what the ring around the current stope sizes, slightly lower grade, but we do have the capacity in both the plant and in the tailings dam. And then I'm going to quickly jump over to Argentina at Cerro Negro. We are pursuing an open pit that we should be able to access and start mining on towards the end of the year. And then at Cadia, just a reminder that PC2-3 basically will be up and full -- up and running by the end of the year and PC1-2 following closely after that. So a number of opportunities for us, some of which we've touched on already, but some of them not necessarily remarked on. Operator: Our next question comes from the line of Martin Pradier with Veritas Investment Research. Martin Pradier: My first question is related to Newmont and the relationship with Barrick. So there is this news about you having a Right of First Refusal. Could you confirm that you have that Right of First Refusal? And what does it mean? Can Barrick do an IPO without your consent? Or that will be violating the agreement? Natascha Viljoen: Thanks, Martin. Peter Wexler will take your call. Peter Wexler: Thank you, Martin, for the question. The rights for both parties are spelled out in the agreement. We don't have any other information than you do on the IPO and anything else would be a theoretical exercise. So we'll let you and as I noted to Anita to review the agreement and make that determination for yourself. Martin Pradier: Okay. And in terms of Yanacocha, how much is in book value of Yanacocha still there? I mean I know you're stopping the development and you did some impairment, but I'm assuming there is quite a bit more there in the book value. Natascha Viljoen: So on sulfides, book value was in the order of $78 million, Martin, and Conga is in the order of about $900 million. Martin Pradier: So $900 million in Conga and how much in the other one? Natascha Viljoen: $78 million. And yes, the $78 million in sulfide is predominantly in the equipment that's still there that we will be putting up for sale. Operator: Our next question comes from the line of Levi Spry with UBS. Levi Spry: Just one quick one back to Tanami. Can you just confirm the status there currently? And what's imputed in your guidance for this year and the rest of the ramp-up? Natascha Viljoen: Sorry, Levi, I don't think we've heard you properly. Would you mind repeating? Levi Spry: What's happening right now on site at the Tanami and what's imputed in your guidance this year and next? Natascha Viljoen: Okay. And Levi, I assume you are asking in relation to the fatality that we had? Levi Spry: Yes. Is it currently operating? And when will it turn back on? Or when do you expect it to turn back on? Natascha Viljoen: All right. Thanks for that, Martin -- Levi. I just want to make sure I'm clear on your question. The operational side of Tanami has been up and running within about four days after the incident. After the incident, we shut down the entire site. We made sure that all of our colleagues are looked after and that everybody is getting assistance through our EAP process, and we wanted to make sure that people's focus is on operations so that it can be safe and didn't want to distract their attention. So operation is fully up and running. The project other than the shaft infrastructure. So we stopped all work on the shaft infrastructure, but development for the ventilation underground infrastructure is back to normal operations. And the shaft infrastructure, we will start up as soon as we've completed our internal investigation and make sure that we understand the root cause of the incident and make sure that it doesn't happen again. So what has been included is our normal production at Tanami. That's what's been included in our guidance. Operator: Our final question for today will come from the line of Adam Baker with Macquarie. Adam Baker: I'm just wondering from a corporate perspective, how you considered to lift your reserve and resource assumptions, noting that your resource gold price assumption is now $2,000 an ounce and your reserves at $1,700 an ounce. Why did you determine to do this? Do you think this is still too conservative? And I guess, how did the team land on that number? Natascha Viljoen: Thank you, Adam. I'll ask Francois Hardy to answer that question. Francois Hardy: Yes. Thanks for your question, Adam. I think we go through quite a rigorous process in terms of how we define our gold price assumptions. And we look at many different market assumptions and direction. And the one we tend to align with reasonably closely is the 3-year trailing average. And at the time of setting our 2026 gold price assumption for reserves, we were just above 80% of the 3-year trailing average, which is typically we like to be in the low 80s -- low to mid-80% of the 3-year trailing average. And obviously, it shot up since then. We don't believe it's too conservative. We have a rigorous process that we look at our total portfolio and we look at how we structure and look at our long-term mine plans and the like. So at this stage, the $2,000 is the right number for us, but we continue to evaluate short-term opportunities and the like. And I'll just point to reminding you that the mine plan assumptions and the reserve and resource assumptions that we make are two different numbers that we optimize against. Operator: This concludes the question-and-answer session. I would now like to turn the conference back over to Tom Palmer for any closing remarks. Natascha Viljoen: Thank you so much, operator, and it's still Natascha Viljoen here. And thank you for everybody for joining our call today and looking forward to our next quarterly call. Thank you. Operator: That concludes today's call. Thank you for your participation, and you may now disconnect your lines.
Michael Judd: That's what we're building Opendoor for. It's why the results we're sharing today matter because every number behind them represents a homeowner who got to focus on what comes next instead of what comes with selling. I'm Michael Judd, Opendoor's Head of Investor Relations. Welcome to Opendoor's Fourth Quarter 2025 Earnings Live stream. Details of our results and additional management commentary are available in our earnings release, which can be found at investor.opendoor.com. The following discussion contains forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact are statements that could be deemed forward-looking, including, but not limited to, statements regarding Opendoor's financial condition, anticipated financial performance, business strategy and plans, market opportunity and expansion and management objectives for future operations. These statements are neither promises nor guarantees, and undue reliance should not be placed on them. Such forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those discussed here. Additional information that could cause actual results to differ from forward-looking statements can be found in the Risk Factors section of Opendoor's most recent annual report on Form 10-K for the year ended December 31, 2025, and other filings with the SEC. Any forward-looking statements made on this webcast, including responses to your questions, are based on management's reasonable current expectations and assumptions as of today, and Opendoor assumes no obligation to update or revise them, whether as a result of new information, future events or otherwise, except as required by law. The following discussion contains references to certain non-GAAP financial measures. The company believes these non-GAAP financial measures are useful to investors as supplemental operational measurements to evaluate the company's financial performance. For a reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP metric, please see our website at investor.opendoor.com. With that, let's get into the open house with Kaz and Christy. Kasra Nejatian: Good afternoon, everyone. Early in my career, I used to write a plan that told my team what we were going to get done during any given cycle. Then at the end of the cycle, I would go through the dock and color every sentence of the plan, green, yellow or red, based on whether we had done what we said we would do and if we were on track to go where we wanted to go. I kind of always found it useful to write things down so you can hold yourself to account. With that in mind, I'd like to remind you of the last financial open house. In my first open house, I told you that we had a 4-step plan to turn Opendoor around with renewed energy. Let's go back in time and listen to what I said. So here's our 4-step plan to channel that energy. First, by the end of next year, we will drive Opendoor to breakeven. We think about this in terms of adjusted net income on a 12-month go-forward basis. That means Opendoor will start generating cash and will never be forced to raise equity ever again. Second, we will drive significant positive unit economics while increasing the velocity at which we transact in homes. This includes launching financial services like mortgage. Third, as we increase our unit economics, we will change the company's focus from primarily building channels to transacting directly with buyers and sellers. We're also going to focus on reducing our days in possession rather than arbitrarily increasing spread, which has had genuine significant negative consequences for us. Fourth, once we've accomplished the first 3 steps, we're going to focus on allowing buyers and sellers to transact on Opendoor without having to buy or sell from Opendoor. This is going to significantly lower our capital risk, but more importantly, it's going to give folks options they want. Today, I want to grade Opendoor against these 4 steps. And then I'll give you some details. Here's the bottom line. We did what we said we would do. But let's go through this line by line. So we're on track for our first step. We're driving Opendoor to be adjusted net income positive by the end of 2026 on a 12-month go-forward basis. The goal is simple, start by generating cash and never be forced to raise equity ever again. Second, since September, we've increased our acquisition velocity by 300%. We bought 537 homes last week alone. In the last -- the third quarter, we did only 128. And we grew while we drove significant positive unit economics. This improvement is a result of deliberate change to our product, our pricing strategy and our operations. Most importantly, our October 2025 cohort, which is the first full cohort under Opendoor 2.0 and it's the first one with enough sell-through data is performing really well. I'll get back to this in a second. Third line, we grew our DTC acquisition contracts while reducing our average days in possession. Comparing this last week to the last week of the third quarter, we've grown our DTC acquisitions by almost 700% and reduced our days in possession by almost 25%. Fourth, we've made it easier for sellers to choose the path that works best for them. And increasingly, they're choosing our capital-light product, Cash Plus. In the last week of Q3, Cash Plus was about 19% of our total contracts. Last week, it was 35% of a much higher volume. To give you a sense, Cash Plus was over 600% bigger last week than it was in the last week of Q3. This is the first step towards our goal of allowing buyers and sellers to eventually transact directly with each other. Christy is going to go through all the details of all the financials. But before she does, I want to say this. We laid out a plan for you. We're going to turn this company around, and we laid that plan out during Opendoor 2.0's first open house. That plan is working. We're green all across. We're already delivering results and are on track to deliver against our mission. In a minute, I'm going to tell you a lot about our product changes and all the things we've done since Q3. I'm really proud of how fast our team is moving and how much we're shipping. And the list I'll tell you about is a public CEO's dream. It sounds good in the script and it looks amazing in a pitch deck. But look, I know what this sounds like. New products, expanded TAM, ops improvement, pricing efficiencies and a bunch of business school words like strategic operationalization of North Star paradigm shifts with best-in-class synergy. Oh, flywheel. Look, I get it. Every public company does a stupid dance that pretends, folks can't look at the slope of a graph. One of my favorite investors, -- Sir John Templeton, used to say the 4 most dangerous words in investing are this time, it's different. So I'm not going to sit here and say random school words and ask you to believe that this time is different. This time, I'm going to show you. Our October acquisition cohort, which is the first cohort of Opendoor 2.0 that has had reasonable sell-through data is on track to be the most profitable October cohort in company history. Again, when it comes to the key metric that matters, our contribution margin, October 2025 is on track to be the most profitable October since Opendoor was incorporated. And we achieved this in the middle of the most aggressive market expansion in Opendoor's history. Given that this isn't really the strongest housing market, this performance, I think, shows a structural shift in how we operate, a shift that I genuinely think will be durable across macro cycles. We are no longer a prop desk. We're now a market maker. And I want to put a finer point on this cohort. What makes this cohort significant isn't just the margin level. It's the shape of the cohort. From 10% to 50% sold through, our margin degradation relative to home price appreciation has been the lowest of any cohort in our history, not any October cohort, any cohort period. That the October cohort is going so well is not a plan. It's a proof point. The product launches I'm going to talk to you about aren't promises of things that might work. They're the explanation for why October happened and why it's repeatable. Now look, because we're committed to transparency, let me get ahead of a couple of things. October was not our largest cohort by volume. But it was about double the size of what we were doing just a few months ago. We're not getting lucky on a few homes in a friendly market. And given how the past few weeks have gone, I believe we're on track to significantly increase our acquisition size as we said we would do. What October shows is that the structural changes we made under Opendoor 2.0 are working. And then we're compounding those learnings into every single cohort going forward. We have a lot left to prove. I know that. But for the first time, we're not asking you to take our word for it. This is a new company. Look, the way I think about my job is that my job is to build Opendoor as those product. Just like Tesla builds robots that build cars, my job is to build the tools and the systems inside Opendoor that help us build a great product. In the last few months, we've made a great deal of progress on this front. I don't want to spend a lot of time talking about this, but I kind of want to take a second to talk about the most important part of it. As Vinod Khosla says, the team you build is a company you build, not the plan you make. Today, 18 people report to me at Opendoor. Of those 18, 10 didn't even work at Opendoor a year ago. Our 10-K filing has a list of our executive team, and you can take a look at it. Not a single one of those people on that list was in our last filing. Since I joined Opendoor, we have a new Chief Operating Officer, a new CFO, a new President, a new Chief Growth Officer, a new Chief People Officer and a new Chief Business Officer. This is a world-class leadership team that I would put up against any other tech company. And on top of this, Opendoor 2.0 is the single most AI-pilled company in the public market that I know of. Let me give you an example. Not that long ago after we bought a home, someone on our team would set their desk and manually pull up data from 5 different systems, things like property records, inspection notes, HOA docs, pricing history, contract terms, stuff like that. And they would copy these things field by field into a seller disclosure PDF. It took hours per home, every single time. Last week, someone at Opendoor shipped an AI workflow that does all of this kind of automatically with no humans in the loop. It queries our data warehouse, cross-references inspection history and generates a plain English disclosure summary, fills a compliance PDF and then sends it up for review. But here's the best part. Other companies talk about how AI native their engineers are. The person I just talked about, that person is a non-engineer. He works on our ops team. He built this in his spare time in a week, no ticket field, no sprint planned. No one asked them to do this. He understood this simple fact. It's war time. And our primary weapon is our ability to prompt machines to create a new world. And he's not the only person doing this. Our ops team, sales team, compliance teams, they're all building their own tools now. Now if this is what our ops team does, I want you to imagine what our engineers are up to. So when I say we default to AI, I don't mean engineers use Copilot. That's not what I mean. Opendoor is a different type of company. It's a company where everyone, everyone is learning how to think like an engineer. Okay. With that, let's talk about what we built. We shipped a lot in Q4. I'll try to move through this fast, but I want you to see how what we shipped caused the October results. We shipped across 3 fronts, better products, bigger markets and stronger margins. And we did this, well, faster. First, we made our products better for buyers and sellers. For years, years, Opendoor's product was a one-size-fits-all product. You want to sell a home, here's an offer, take it or leave it. But look, all sellers are not the same. Someone with 80% equity in their home doesn't have the same needs as someone with 20%. But under the old model, both of these folks paid the same fee, which means that we're taking on risk and neither side wanted. The seller didn't need it and we didn't want it, but the product forced it. That's not a pricing problem. It's not an underwriting problem. It's a product problem. So we fixed it. We now put the ability to change the offer that fits your needs into your hands. You choose how much cash you want upfront and the fee adjusts, take less upfront, pay less fees, often a lot less. Every dollar that a seller does not need upfront is a dollar that we don't need to put at risk and a dollar that they don't need to pay for. So they pay less and we make more. It's a win-win. And it also allows us to serve customers that we could have never served before. This risk reduction, it allows us to do something else, too. It allows us to tighten spreads on our core cash product. It's early, but from best I can tell, this is working. We're seeing demand that we would have never seen before. And because we're seeing a lot of extra demand, we also launched our self-assessment app. With our self-assessment app, the seller takes pictures of their home and AI does the assessment work. No humans needed. And because there are no humans in the loop, in January, we nearly doubled the number of homes that we assessed compared to September. And so far this month, about half the homes we've assessed have needed 0 people to show up at your doorstep. On top of this, we expanded our buyer products, Opendoor Checkout. As of this morning, it is now live in 40 states. Opendoor Checkout embeds mortgage preapproval directly. It also supports Opendoor's Euros home credit where we give the brave men and women of America's Armed Forces $4,000 towards closing costs of a home. Opendoor Checkout also includes the Opendoor guarantee. It allows for free cancellation, warranty and early move-in. We also launched our seller guarantee. When a seller sells us a house using Cash Plus, they now get the chance to make sure they like how we are selling the home. If they don't, they can just undo the transaction and pick the home back by paying us a low restocking fee. Okay. That was a core product. Outside the core product, we also expanded our growth levers. To start, we dramatically expanded how many people we could serve by expanding our geo coverage and our buybox. It took Opendoor from 2015 to 2025 to become available as an option for about 1/3 of the homes in the U.S., 10 years. Opendoor 2.0 almost tripled that in about 10 weeks. Thanks to AI, our product went from being available to about 1 to every 3 homeowners to being available to nearly every homeowner in the Lower 48. Now you would expect that, that kind of rapid expansion would reduce risk, sloppy underwriting, margin compression, operational blowups. We saw the opposite. You'll hear Christy talk about our margin guide points in a bit, but the new system is working, and it's already generating thousands of incremental qualified leads per week with 0 incremental marketing spend. Making this work well required us to build across almost 200 MLS data sets, coordinate over 100 brokerage regions and expose 150 standardized attributes. This was hard work, but we believe software should not be limited by ZIP codes. And as we expand our product, we also significantly improved our data ingestion. We now have a nearly real-time data ingestion with over 1,000 pipelines. They serve our new market-agnostic pricing tools, and we also have a new ML model that predicts customer conversion propensity at the time of underwriting. It uses like a dozen different data points, so we can best target our sales and marketing efforts. And because we have all these new potential customers, we also focused on making sure we can grow profitably. I want to tell you something a little counterintuitive. Usually, CEOs get in front of investors and say, we're focused on cutting costs. And usually, that doesn't work and actually, it increases costs. So we didn't do that. We didn't focus on cutting costs to improve margins. We focused on improving the product and taking pride in our code and the costs started disappearing kind of on their own. Look, products frequently get better by removing things, not adding them, by deleting code, not writing it. So we deleted a lot of things. They just weren't needed. Last quarter, I talked to you about the actual debt that was weighing down the company. We're now focused on a different kind of debt, but one that is just genuinely equally pernicious. There's a concept in engineering called tech debt. It's the accumulated cost of every shortcut, every extra layer, every micro service that was added for no good damn reason. This tech debt across the entire stack is a reason that it's 2026 and connecting an office printer still feels a little like diffusing a bomb. And honestly, before the recent changes, Opendoor wasn't that much better than your printer. We weren't just carrying tech debt. We're also carrying organizational debt and the interest payments on these bad decisions were just killing us. So we started paying this down and the results are just wonderful. When Opendoor entered 2025, our annual run rate costs on hosting was $12 million a year. Exiting 2025, Opendoor 2.0's cost and hosting infrastructure is less than $5 million a year. We haven't just significantly cut the cost of providing our products to our customers. We've also made the product better. We also significantly increased the sample set used in our valuation model while decreasing our cost. This means that the run time in our model was reduced by about 50% from 12 hours to 5.5 hours. The entire pipeline can now run in a script that's about 50 lines of code and the feature building Dags are now 90% cheaper. This saves us at least $1 million a year. We also replaced third-party tools with in-house vision models for thinking through home conditions. Not only did this save us a few million dollars in backfill costs for large-scale experiments, it also brought a core AI capability fully in-house and cut the processing time for 100,000 listings from 34 hours to just 4, cheaper, better, faster. On top of this, we also cut over $1 million in cost by replacing SaaS tools with more cost-effective and genuinely better AI alternative. And we stopped paying for tools we barely used. Land and expand SaaS no longer works inside Opendoor. And we didn't just cut costs and focus on better infrastructure. We also invested in advanced ML models and data-driven pricing strategies. They're improving our margins per home while maintaining or actually improving our conversion rate. Our home sale pricing is now powered by our new ML model that avoids Opendoor's previous policy of just blanketed price drops. The model now helps us make targeted pricing decisions for every single home. We also built a new home level days in possession model using real demand signals. I think this is going to increase our dispersion by about 2x. Okay, that's a lot. Let's take a step back. Look, I opened this call by grading Opendoor against the plan that we laid out last quarter, green, yellow, red. We're not caring. We're going to keep doing this every single quarter. You can track our acquisition contracts and our progress in real time at accountable.opendoor.com. We're going to revisit this every single quarter just like we did right now, and we're going to make it reflect our path to profitability. As we learn more, we'll tell you more. You can see the results of our work, what we ship and whether it moves the needle. Please hold us to it. We're asking you to hold us accountable because this matters. There are millions of families in this country where the experience of buying or selling a home is so bad, so slow, so uncertain that people who want to do it just don't. This is a hard problem, but we're going to fix it. And for the first time, we have the team, technology and the proof points to actually do it. If you have questions about anything, DM me on X, seriously, DM me on X, I'll try to answer your questions. We're not hiding behind consultants or scripted callbacks. That's not how we operate. Christy is going to walk you through numbers, but to steal a bit of her thunder, the numbers are good. Christy? Christy Schwartz: Thank you, Kaz. Bottom line, we're executing. Last quarter, we laid out 3 goals: scale acquisitions, improve unit economics and resale velocity and build operating leverage, and we delivered on all 3. We increased acquisitions 46% from the third quarter. Our October 2025 acquisition contract cohort is over 50% sold through or in resale contract. This represents over a 2x improvement in resale velocity compared to October 2024 and a roughly 50% improvement from October 2023. At 50% sold through, this cohort is yielding the highest contribution margins for an October acquisition cohort in company history. And we delivered all of this while reducing fixed operating expenses and holding trailing 12-month variable operations expense flat as a percentage of revenue. Our fourth quarter results reflect the early days of Opendoor 2.0. While we implemented the operational changes Kaz described, it's important to note that 94% of the homes we sold in Q4 were acquired before October. We were clearing the old book while building the new one with higher quality homes. In the fourth quarter, we purchased 1,706 homes, an increase of 46% from Q3. This marked an important inflection point as we shifted from the high spread posture of the first 3 quarters to a more tailored approach. We provided stronger offers for higher-quality homes with greater expected resale velocity and maintained higher spreads for lower-quality homes with elevated risk and slower resale clearance expectations. We delivered revenue of $736 million, representing a 20% quarter-over-quarter decline, meaningfully better than our guidepost of a 35% quarter-over-quarter decline. We sold through more aged inventory than initially forecasted, a direct result of the resale velocity improvements we've made. As anticipated, our margins face near-term pressure as we work through legacy inventory. GAAP gross profit was $57 million in Q4 compared to $66 million in Q3. GAAP gross margin was 7.7%, up 50 basis points sequentially. Contribution profit was $7 million and contribution margin was 1% compared to contribution profit of $20 million and contribution margin of 2.2% in Q3. This sequential decline reflects the continued clearing of older, lower-quality inventory acquired during the prior high-speed strategy and Q3's historically low acquisition volumes, leaving us with minimal new inventory to improve the mix. Adjusted EBITDA loss was $43 million compared to $33 million in Q3 and exceeded the favorable end of our guidance range of a high $40s to mid-$50 million loss. Net loss for the fourth quarter was $1.1 billion compared to $90 million in Q3. This included a $933 million noncash loss from last quarter's convertible note refinancing. Adjusted net loss, which excludes that item, totaled $62 million compared to $61 million in Q3. Turning to our balance sheet and capital structure. We ended the quarter with $962 million in unrestricted cash and $133 million of equity invested in homes. We held 2,867 homes at quarter end, representing $925 million in net inventory. Our nonrecourse asset-backed borrowing capacity remains robust at $7.2 billion, with total committed borrowing capacity of $1.6 billion. These facilities built over years of partnership with our lenders provided us the flexibility to scale as we execute our growth plan. Last earnings call, we announced the refinancing of the majority of our convertible notes with equity, eliminating a near-term repayment trigger. We reduced our cash interest burden, and we issued the warrants dividend to align our shareholders directly with the upside we're working to create. The foundation is set for Opendoor 2.0 operating model, and now we're focused on delivery. As we introduced last quarter, we are executing against 3 management objectives we believe are key to reaching profitability. The table in our earnings release shows our progress against each objective. Let me walk you through the highlights. First, scale acquisitions. We increased homes purchased by 46% quarter-over-quarter from 1,169 homes in Q3 to 1,706 homes in Q4. Last week, we signed 537 acquisition contracts, up from 236 contracts at the time of our last earnings call. You can continue to track our weekly progress on our dashboard at accountable.opendoor.com. Second, improve unit economics and resale velocity. We made significant progress on resale velocity this quarter. The percentage of Opendoor homes on the market for greater than 120 days decreased from 51% at the end of Q3 to 33% at the end of Q4, an 18 percentage point improvement in a single quarter. This reflects the operational changes we've made to move homes faster, better pricing, more robust monitoring system and an improved buyer experience through products like Opendoor Checkout. In addition, the margin performance and resale velocity of the October acquisition cohort demonstrates the improvements we've made in pricing and selection. I also want to be clear about what this means for our go-forward strategy. October's margins thus far have come in above our long-term target range. That's a good problem to have, but you should not expect every quarter to look like October on a margin basis. You should expect us to reinvest that spread advantage into growth, faster turns, broader coverage and more competitive offers, while we aim to maintain contribution margins within our target range. You can track our product, feature and partnership launches on accountable.opendoor.com to see how we're continuing to build velocity into the business. Third, build operating leverage. On our last earnings call, we committed to holding fixed operating expenses flat and trailing 12-month operations expense, the variable component of our operating expenses, flat or down as a percentage of revenue. We achieved both goals. Fixed operating expenses were $35 million in Q4 2025 compared to $37 million in Q3 2025 and $43 million in Q4 2024, down $2 million quarter-over-quarter and $8 million year-over-year. Our trailing 12-month operations expense as a percentage of trailing 12-month revenue held steady at 1.3% in Q4. As we scale acquisitions from this lower cost base, we expect meaningful operating leverage to emerge in 2026. These 3 objectives remain the foundation of our path to profitability, and we're executing against them with discipline, transparency. As I said last quarter, you can't build a great business in a spreadsheet. You build it by shipping product, operating with discipline and learning from the market. Now let me give you some guideposts for Q1 and the year ahead. Acquisitions. Our profitability framework remains unchanged. We're targeting approximately 6,000 quarterly home acquisitions as we exit Q4 2026. As we've learned more in production, we're refining our acquisition trajectory to be more weighted to the back half of the year. We're investing Q1 and Q2 in improving how the funnel operates to scale more efficiently. This means refining conversion, sharpening pricing and developing adjacent services to bolster unit economics. You'll also notice we've updated how we present accountable.opendoor.com. We replaced the cumulative projections chart with a single view that shows weekly actuals, a fitted trend line with its slope and a projected range for where we plan to be. Cumulative charts can mask what actually matters, whether we're accelerating and whether we're progressing towards our year-end targets. This view shows you both. We'll update the projected range each quarter as we learn more. On revenue, we expect a decrease of approximately 10% quarter-over-quarter. This is a direct function of entering Q4 with low inventory levels due to the prior high spread acquisition strategy and the successful clearing of aged inventory in Q4. We're focused on scaling acquisitions throughout Q1 to rebuild inventory with higher quality homes that underpin our improved unit economics. Contribution margin. The mix of old inventory versus fresh inventory drives margins and Q1 2026 will reflect this shift. We made a concerted push in Q4 to clear legacy inventory. The homes we're selling in Q1 2026 are more representative of our new model, higher quality and faster turns. Our contribution margin bottomed out in September and has been improving every month since. We expect to exit Q1 with the highest contribution margin we've posted since Q2 2024. Finally, on adjusted EBITDA, we expect Q1 2026 adjusted EBITDA loss in the low to mid-$30 million. This represents continued sequential improvement as we maintain cost discipline while simultaneously investing in automation and product velocity. Last quarter, we showed you the blueprint. This quarter, the house is going up. Our goal remains adjusted net income profitability by the end of this year on a 12-month go-forward basis. We have a lot of work ahead of us, but the proof points are building, and we intend to keep earning your confidence every quarter. With that, Michael, I'll turn it over to you for questions. Michael Judd: Great. Thanks, Christy. Okay. We've had a handful of questions that center around a common theme. We grab 2 of them. First, Zach H. asks, where is Opendoor at currently compared to expectations and profitability and where would you like to be? And Ryan Tomasello from KBW asks, according to your accountability dashboard, acquisition contract volumes are running at or below the low end of your targets. Aside from seasonal factors, what are the primary macro or pricing drivers preventing a faster ramp? Kasra Nejatian: Yes. Thanks for the questions. Look, to be blunt, we're right where we need to be. We're on track. If you had told me 3 months ago that we'd be here, I would have told you you're being a little too optimistic. Last quarter, we laid out a 4-step plan, and I think we're green across all 4 steps. We did what we said we would do, and it's working. Our contribution margin bottomed out in September, has improved every single month after that. We're going to exit Q1 with the highest contribution margin we've had since Q2 2024. Look, it's early, but things are going well. And to be clear about it, this isn't the macro helping us. This is us helping ourselves. So -- to answer your question, the reason we said our goal was adjusted net income profitability at the end of this year on a 12-month go-forward basis is because that is what needed to make sure Opendoor starts generating cash and doesn't need to raise equity ever again. That's our goal. But just like Google Map find different routes to get home, we're finding the best route to get home. And actually, let's take a step back before that. Before we become ANI profitable, we're going to become adjusted EBITDA profitable. Now I think adjusted EBITDA is not the best metric for measuring our business, and I'm not about to give you guidance. I think our lawyers have very particular feelings about me saying guidance. But to be transparent about it, the plan I have on this laptop right now has us being adjusted EBITDA profitable on an annual basis starting in Q2, right? So things are going well. Things change and company building is a little messy, but things are going really well. Now I think there's a question behind the question. There's like an actual hard question here, which is, why are you at the bottom end of your acquisition goals? Let me say 2 things. First, I reserve the right to wake up smarter every single morning than I was yesterday. I want to learn. And I've learned a lot in the last 3 months. I've learned that the levers we have at our disposal are generally working faster than I expected. And we've discovered we've had levers that I didn't think we would have. So if we wanted to hit the top end of the range, we could do it very easily. But that would come at a cost. And I want to tell you about the cost, okay? So in a product company, you always basically have 2 choices. You can invest in product or you can invest in growth. That's the back and forth, right? Engineers are your most precious resource, and they could usually work on 1 of 2 things. And like here's what I mean by this, like when you invest in product, you're putting fuel in the tank. When you invest in growth, you're spending that fuel. And this is actually key difference between product companies and not. Right now, I want to invest in having the best product we can before we go and invest in growth again. So I'm choosing to work on the funnel rather than the number that just happens to come out at the end of the funnel. Let me give you an example. This actually matters. So early in January, we took 4 engineers aside, and we asked them to work on our mortgage product. Those engineers could have worked on the Opendoor app. And I think the Opendoor app is genuinely bad and fixing it would be good and it would lead to growth. But we bought 500 homes last week and growth is going well, and we have lots of levers. So we chose to work on our mortgage product and our infrastructure over the Opendoor app. And because of that, we're going to launch our mortgage product in beta this week. Okay. Let me be blunter. We built a mortgage product in less than 10 weeks. People told me it would take at least a year. We did it in 10 weeks. This is genuinely better for the long-term growth of the company than hitting the top end of the old accountable range. What matters to us is profitability, -- and in order to get there, the thing that matters is the pace by which we exit this year, what Christy just said, 6,000 last quarter. I am very confident in the levers we have and the levers we have built, and we can hit that pace. I'm very confident when I was 3 months ago. That's why I'm so comfortable that we can take a moment to spend time investing in product to put fuel in the tank so we can burn it later. I promise I will never ever sell the future growth of our company at a discount. We're going to do the right thing and focus on the things that matter. Look, our October results proved something. They proved that what we are doing is working. The bets and the actions we've taken are the proof points we need to get to profitability. So we're going to invest in product and then growth. Michael Judd: Great. Our next question comes to us via video submission from [ Anthony Pompliano ]. Unknown Analyst: Hi Kaz. I hope you and the Opendoor team are doing great. My question today is about artificial intelligence. Obviously, this has become really pronounced in the market. But what are you guys using it for internally? And how should that change the customer experience in the Opendoor product moving forward? Kasra Nejatian: Thanks, [ Ben ]. I think the best example I can give you for AI use is what's happening at Opendoor in underwriting. Give me some rope. I love football. I think it's a great support. But I hate the fact that in any given football game, there's about 11 minutes of football and 3 hours of not football dressed up as football. And when I got here, Opendoor's Workday was kind of the same, like a lot of not work dressed up as work, a lot of toil that humans should not do anymore. Now look, -- every company says AI. It's like the buzzword of the day. And honestly, a lot of it sounds to me like yes. Look, real estate is basically the last industry that is untouched by technology, where we pretend humans have a better sense of what an asset is worth than a model that's been trained on decades of data. And for a long time at Opendoor, we pretended that was true, too. But machines are better at something than humans. Look, humans do taste. Machines do ETLing data, creating documents. machines do math. Here's my principle. Humans do humans work and machines do machines work, right? And -- but human work is the work that machines cannot competently do yet. So what can't they do yet, for example? The last mile of our work they can't do yet. So the house that backs onto a highway, the machines are bad at valuing the asset. That's where human judgment comes in. Our problem at Opendoor was never that we had humans in the process. The problem we had was that we had humans doing the wrong part of the process. So what have we changed, right? Our analysts are no longer doing valuations today. They're auditing what AI has prepared. They are working on evaluating the output rather than doing paperwork to prepare the input, right? Go back to football, is this one. AI kind of lets us run a no huddle offense faster and more efficient, but the [ QB ] still calls the place. So I think you asked what should investors expect? I think initially, what customers should expect first because that's actually more important. Customers should expect a fair and fast offer with fewer errors. Investors should expect declining operational expense as a portion of our revenue like we talked about and a company that doesn't move as slow as the San Francisco part. So -- and there's also a separate thing. I think there's a key thing folks don't appreciate about AI. AI constitutionally destroys some businesses and improves others, right? If you're a point solution selling SaaS, I feel sorry for you. But if you deal with a real world where the primary problems are pricing and operational complexity and variance, AI is basically like manna from heaven. It's the thing we need to make the business work. Michael Judd: Great. Our next question comes to us via video submission from [ Catherine Ann ]. Unknown Analyst: I'm [ Catherine Morgans ] from Portland, Oregon. I became a shareholder in Opendoor in 2021. I was inspired to invest in the company following my experience using Opendoor to sell my home. It was the most streamlined and painless home selling experience that I've ever had. And I cannot imagine should I ever need to sell a home again in the future using any other option. I've been following the progress of Opendoor mainly via the Datadoor Discord. And it's been very thrilling over the past 6 months to see all of the innovation, especially with the improved implementation of AI to enhance operations and sharpen modeling. So as far as I'm concerned, things are looking very good on the, let's call it, the software front. My question has to do with, let's call it, the human front or the customer front. And that is, how do we get to the point where sellers think, I'm going to try Opendoor first before even considering going via a realtor. How do we turn that corner where Opendoor becomes the default first option that people try when they're ready to sell their home? Kasra Nejatian: Yes. That's a great question. Defaults are like incredibly powerful and usually, folks talk about defaults the way they talk about brands. You use a [ Kleenex ], I then my friends. I put a Band-Aid on my kids legs basically every night. I want you to Opendoor your home. But brand is just another like word for reputation and reputations are earned backwards, not forwards, right? You can't spend your way into having a great brand. Otherwise, all of you, all of you would be watching me right now on [ Quibi ]. Look, selling your home is one of the most important financial decisions for average American families. Selling a home is -- it's an act of trust, right? And historically, folks have placed that trust in people, not software. Opendoor exists to build software worthy of that trust. And to become trusted, you need to have lots of people use your product, lots of people be delighted by your product, right? So my favorite example of this is like Jeff Bezos and Sam Walton, right? The best marketing is a product that delights you. Jeff Bezos didn't spend money on advertising. He spent money on making the product there fast. Same with Sam Walton. So for us, if we want to be the first place people go to, we need to kind of earn that same level of trust. And that for us starts with the offer. The offer is a product. It needs to be accurate, fair, reliable. It needs to feel great. And if I'm being honest, we're not the default yet, but we're on the right track. Like I know we're on the right track. Let me tell you why. In markets that we've been operating for a while in our mature markets, 20% of folks who go on to list their home before they call a person, they try opendoor.com. That's the beginning of looking like a default, right? As we expand more markets, we'll get there. But so how do you -- like how do you become a default? That was your question, I think. I realize I've been talking for a really long time. So in order to become a default, you have to do a few things. First, you have to be available. At the end of last quarter, Opendoor wasn't available everywhere. So we expanded all over the Lower 48. We're available to almost everyone right now. Second, you have to remove every point of friction, right? Opendoor needs to make a fair offer, a good offer, a real offer fast. Trying Opendoor needs to be a delightful experience for our sellers. And last, you need to consistently deliver value. You need to be a fast transaction, better pricing, great services, including an amazing mortgage product. And our new unit economics help us do that, right? Better unit economics means better offers, better offers build a trust. Defaults follow trust and trust follows great products. Michael Judd: Great. Our next question comes to us from [indiscernible]. With the stock down significantly since your tenure began, how should investors assess progress? What key metrics best reflect operational improvement? What is the strategy to restore market confidence? Kasra Nejatian: I mean, look, I just like ask your question a bit personally first. I am very highly motivated to see Opendoor's stock price go up, right? My family is the most levered family in the world on Opendoor stock. My salary is $1 and unless stock levels see levels they haven't seen in years, I don't get paid. So I don't want you to take what I'm about to say the wrong way, but I just want you to -- let me say this. I don't manage the stock price. I manage the business and look at what we're building. Now my responsibility is to create shareholder value. That's literally my job to create value for our shareholders whom I deeply appreciate. But I fulfill that. I fulfill my responsibility by not looking at the stock price every day. I fulfill it by building something people want and value. The stock price will follow. It literally always does. My favorite book, one of my favorite books is a book called the score takes care of itself. I have it on my desk. It's in our library at Opendoor. It was written by Bill Walsh. Look, Bill Walsh didn't win Super Bowls by telling his team to focus on the scoreboard. This is a football-themed earnings call. His whole philosophy was simple, like execute the right way, take care of everything, the score takes care of itself. And I'm pretty sure he won more than 82 games. The stock is not the company, right? Jeff Bezos didn't become a worst CEO when Amazon stock dropped 90%. I bet you. I bet you, he didn't even flinch. He kept building. And the stock eventually reflected the business, not the other way around. Now I've been here for 4 months. In that time, we've demonstrated clear evidence that the model we are building is working and the business is structurally improving, right? But how should you judge our progress? I think that was the question. I don't think you should do it by where the stock is today, but you should think about whether the underlying business is getting structurally better. I've given you how I would grade us, but I genuinely honestly think you should find a way to do that, too. You should build your own model on us. But I want to be transparent about this. My job is to build a company that can host a product that people want. My job is to improve the economics of that business. And everyone here, everyone who works at Opendoor is focused on executing. The score will take care of itself. Michael Judd: Great. Thank you. Next, Victoria B asks, if home prices drop another 5% to 10% nationally, what happens to your margins and inventory risk? How prepared is Opendoor for that scenario? Christy Schwartz: Thank you for the question, Victoria. It is the right question to ask. Opendoor 2.0 is built to move homes, not hold them. The longer you hold when the market turns, the more it hurts. So the whole game is turn faster. And here's what's genuinely different now. We have more tools than we've ever had. Previously, the primary lever was spread, price conservatively enough to absorb a market move, and that works, but it's blunt and it has terrible adverse selection. We now have a broader toolkit. First, selection. Under Opendoor 2.0, we are a more tailored approach. We offer strong prices on high-quality homes where we expect faster resale velocity, and we maintain wider spreads on homes with more risk or slower clearance expectations. Second, velocity. We reduced homes on market greater than 120 days from 51% to 33% in a single quarter. Our October cohort is clearing at 2x the velocity of October 2024. A home we own for 45 days has fundamentally different risk exposure than one we own for 180 days. And as we grow volume, the goal isn't to hold more homes, it's to move more homes. Scale and velocity compound together. Third, cash plus. This is an underappreciated as a risk management tool. When a seller opts in, they're retaining more of the price risk, and we earn fees with less capital at risk. That structurally shifts our exposure. Are we immune from a 5% to 10% decline? No, nobody is. But the question isn't whether it hurts, it's whether Opendoor is structurally positioned to navigate and withstand it. The October cohort is a great example of this. Over the past 5 months, national home prices came down roughly 300 basis points. During that exact period, our contribution margins on that cohort held steady or slightly improved. That's not hope or an expectation that happened. Michael Judd: Great. Our next question comes to us from Andrew Boone from Citizens, who's wondering, there's some testing of a mortgage product with Lennar. Where is Opendoor in extending the services opportunity? What should our expectation for 2026 be for Opendoor to be able to attach more adjacent products to transactions? Kasra Nejatian: I feel like I'm now on a football thing, so I need to find a football analogy. I just don't have one. Okay. Look, like I said, we started building our mortgage product in January, and we're going to launch it in beta this week. I showed it to Christy last night. I'm very, very bullish on this product. I think it's going to be good. It's going to take us a second to get all the right things because that's how products work. But I'm very bullish, and we're going to have more news on this soon. I think there was a part of the question that was about unit economics. Let me hand wave because I think the unit economics of the mortgage space are like relatively well understood. We're going to do some special things about them, but let us tell you about them when we do those things. So I think the primary unknown question is this. what will be our attach for mortgage and adjacent products, right? How many people who buy or sell a home from Opendoor take a mortgage from us? I have a hypothesis, but not a good answer. I've done this a couple of times, but we're going to underpromise and overdeliver here. But separately, I think there's very likely that there is a world where we have partners, especially our homebuilder partners that use some of the software we're building. We're building a new stack with the help of some partners, and it will be more finely tuned to people who own assets they're selling than a typical mortgage stack. I still don't have a football analogy. Michael Judd: We can come back. Our next question comes to us from Dae Lee from JPMorgan asking, what has stood out to you so far about the quality and profitability of the homes you're buying since ramping up acquisitions? Any surprises as you pick up the pace and have those led to any changes in your approach? And looking ahead, what are the key factors or milestones you're watching most closely to gauge progress toward your current profitability and margin targets? Christy Schwartz: Thank you for the question, Dae. As you may have noticed, the October 2025 acquisition cohort is something we've been paying a lot of attention to. And that is because that's the first cohort where we had the offers, the contracts, the acquisitions and now 50% of the resales are under the Opendoor 2.0 model. So it is a very important source of data for us. The performance of this cohort isn't just one thing. It's everything working together for the first time. So I talked earlier about selection and spread dispersion, but we are targeting higher quality, higher velocity homes so that we can turn them faster and get better selection. When you have better selection coming through the door, that really improves our operations. Those are homes that we can get relisted faster and have less variance in outcomes. And then it comes to the resale systems and our ethos. We, as an organization, fundamentally believe that it's better to identify a margin-optimized clearing price than to wait around for the perfect offer to come along. And so our machine learning pricing model, it has meaningfully improved the precision of pricing decisions, better demand signals, better timing and better calibration at the individual home level rather than blanketed spread reduction or price reductions. The result, resale velocity in our October cohort was 2x what it was in October 2024 and with margins that exceeded our expectations. And so that puts to rest the idea that speed and margin are a trade-off. We've shown the answer to both can be yes in a market that, frankly, no one would characterize as particularly strong. To answer your question about surprises, I think what surprised us was how quickly some of the changes we put in place showed up in our results. For example, the degradation. And so when you have a cohort of homes that you buy, you expect the homes that you sell right upfront to probably perform a little bit better than the homes later in the cohort. But in this last October cohort, we saw that from 10% to 50%, our margins basically held flat. They were actually up about 18 bps, and that was during a tough market. And so seeing that flat degradation was very promising. Finally, you asked about looking ahead. And I guess I would just bring us back to our management objectives, scale acquisitions. We've said we want to exit the year with 6,000 acquisitions per quarter, and that will set us up well for our adjusted net income profitability. As a reminder, we're now available through the Lower 48, and we'll start leaning into marketing in Q1 as we expand to reach those markets. Objective number two is improving margin and resale velocity so that we return to our 5% to 7% targeted CM. And objective 3, build operating leverage as we rescale. Fixed operating expenses flat or down and trailing 12-month operation expense flat as a percentage of revenue or down. Michael Judd: Great. Our next question also comes to us from video submission and will be answered by Brad Bonney, Opendoor's Chief Business Officer. Brad Bonney: Opendoor. My name is [indiscernible]. I'm here with my daughter, Eva, and we're in Ohama from Hawaii that relocated to Tennessee. We purchased with Opendoor a few months ago because of the convenience. We tried the traditional way many times, and we stumbled upon Opendoor. It allowed us just unlimited access to the property we're looking at. Speed of response, and it's just the easiest way to work with. We didn't need any rotor. We didn't need our attorney to help us. It was just us and Opendoor. And we're promoting Opendoor a lot to our whole [ Ohama ] because this is new to us. This is a new way of buying and selling or relocating. And because of that, that's what got us to also invest into the company because we saw something brand new, something convenient and something totally different that goes against the traditional way of buying and selling. My question to cause is, as you know, I'm a veteran. A lot of military people have to move. We come on orders really quick. And I see this being a great platform for a lot of military people, veterans, active duty. What is Opendoor doing? -- to help our community. I really appreciate the time [indiscernible] Talk to you guys later. Unknown Executive: Thank you Brad. Thank you for your question, and thank you for your service. As a fellow veteran, you spent more than 7 years in the Navy serving primarily out of nuclear submarine. I know what it means to raise your hand and say, I will go where you need me, when you need me for as long as you need me. That commitment makes the American dream possible for all of us, and it shouldn't come at the cost of the dream itself. Nearly 400,000 service members PCS every year. That's almost 0.5 million families navigating a home sale on a time line they don't control. The traditional real estate process wasn't built for that reality. Opendoor was. Fast offers, close dates you control and certainty in an otherwise uncertain transition. Here's how we're helping. We've already launched the Heroes Home Credit. This is a $4,000 credit towards closing costs for active duty service members and veterans buying an Opendoor home. That's not just some marketing gimmick, that's Opendoor recognizing that military families already absorb significant out-of-pocket expenses every time they move. They shouldn't have to sacrifice when buying their next home too. We're building from there. We're working hard to make sure VA loans work seamlessly with Opendoor because that's how many military families buy. These are some early steps, but we really need to continue to build trust with the military community. Trust doesn't happen with ads. It happens through word of mouth. One soldier tells another how easy it is to sell their home. On sailer tells her shipmate how they seamlessly moved their family across the country. And each time, it's Opendoor who made it happen. That means the most important thing we can do is exactly what we've always said, build a product that actually works for the people who need it most and deliver on every promise we make. Every military family we help becomes an advocate and every advocate helps spread the word. Coupa, your question today is exactly what this looks like. Thank you, and thank you again for your service to our country. Michael Judd: Great. Thanks, Brad. I think we have time for one more. And Zach H is wondering, where do you expect to see Opendoor in 2 years? Kasra Nejatian: That's a great question. It's actually my favorite question. Before I answer that question, I want to say something. One of the things that makes me deeply proud of working at Opendoor is the number of veterans that work at Opendoor. We deeply recognize that freedom isn't free. So thank you, genuinely thank you. So where will it be 2 years from now? And what do I expect? Well, 2 years from now, I expect to be sitting in front of you telling you that we delivered exactly what we said we would do. 2 years from now, I want Opendoor to be the default that we talked about. I don't want to have to choose anymore between margin and volume. 2 years from now, we're going to get both. Two years from now, the AI infrastructure we're building right now is going to have a compounding effect across our cohorts. We're no longer going to be talking about the model. We're going to be talking about scaling it and how we can serve as many people as we can. And we're going to be okay with the people who doubt us now, taking credit for our work 2 years from now. But the most important question for me generally is where homeownership is going to be 2 years from now. Will a teacher living in Kansas City be able to afford a home on her salary so that her kids can grow up in a home owned by their mom and dad. Today, the answer to that question is no. 2 years from now, I hope can stand in front of you and say the answer to that question is yes because then our work will have mattered. Okay. Thank you. Thank you. Thanks for putting up with us. We'll see you in 3 months. Cheers.
Operator: Good evening, and welcome to the Texas Roadhouse Fourth Quarter Earnings Conference Call. Today's call is being recorded. [Operator Instructions] I would now like to introduce Michael Bailen, Vice President of Investor Relations for Texas Roadhouse. You may begin your conference. Michael Bailen: Thank you, Krista, and good evening. By now, you should have access to our earnings release for the fourth quarter ended December 30, 2025. It may also be found on our website at texasroadhouse.com in the Investors section. I would like to remind everyone that part of our discussion today will include forward-looking statements. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. We refer all of you to our earnings release and our recent filings with the SEC. These documents provide a more detailed discussion of the relevant factors that could cause actual results to differ materially from those forward-looking statements. In addition, we may refer to non-GAAP measures. If applicable, reconciliations of the non-GAAP measures to the GAAP information can be found in our earnings release. On the call with me today is Jerry Morgan, Chief Executive Officer of Texas Roadhouse; Mike Lenihan, our Chief Financial Officer; and Keith Humpich, our Chief Accounting and Financial Services Officer. Following the prepared remarks, we will be available to answer your questions. [Operator Instructions] Now I would like to turn the call over to Jerry. Gerald Morgan: Thanks, Michael, and good evening, everyone. 2025 was another successful year as revenue grew to nearly $5.9 billion, and all 3 brands delivered positive sales and traffic growth. We also just completed our 60th consecutive quarter of comparable restaurant sales growth, excluding 2020. That's 15 years of sales growth going back to 2010. 2025 included a number of company milestones and accomplishments. We opened our 800th system-wide restaurant and acquired 20 of our franchise locations. Over 70% of our restaurants set both daily and weekly sales records. We completed the rollout of our digital kitchen and upgraded guest management systems. We also solidified our home in Louisville by purchasing our support center buildings. Our operators continue to serve their communities by raising over $40 million for local schools and nonprofit organizations through their dedicated Dine to Donate fundraisers. And finally, we remain proud to honor those who have served our nation by providing 1.2 million meals to veterans and active military in honor of Veterans Day. On the development front, in 2025, we added 48 restaurants to our company-owned restaurant base. This included 28 new store openings and the previously mentioned acquisition of 20 franchise restaurants, and our franchise partners opened 4 restaurants, including 3 international Texas Roadhouses and 1 domestic Jaggers. For 2026, we continue to expect approximately 35 company restaurant openings across the 3 brands. 2026 will also benefit from the acquisition of 5 California franchise restaurants, which occurred on the first day of the fiscal year. Our outlook for franchise development also remains unchanged with the expectation of opening 6 international Texas Roadhouses and 4 domestic Jaggers. For 33 years, our mission has been legendary food and legendary service, with a focus on high-level hospitality and value. This will remain the same in 2026 and beyond. While commodity inflation will continue to be a headwind this year, our operators remain committed to driving growth over the long term by providing a legendary experience to every guest. We just completed menu pricing calls with our operators. As always, maintaining our value proposition was a big topic of conversation. Based on these calls, we will be implementing a 1.9% menu price increase at the beginning of the second quarter. We will also continue to focus on our lineup of beverages with all of our restaurants offering some combination of mocktails, dirty sodas and a $5 all-day everyday beverage special. Moving on to technology. As I mentioned earlier, in late 2025, we completed the rollout of our digital kitchen and upgraded guest management systems. We are pleased with the results and our technology priorities in 2026 will include the continued integration of these enhanced systems. Additionally, in 2026, we will expand the testing of a handheld tablet that our servers can use to input guest orders at the table. As our attention shift to 2026 and beyond, we will remain relentless in our commitment to driving top line growth, providing high-level hospitality in everyday value to our guests and remaining a people-first company. Finally, I want to welcome Mike Lenihan, our new CFO, to the Texas Roadhouse family. For purposes of today's call, Mike is on for introductory purposes only. I will tell you that we are extremely excited to have Mike on the team. He's been getting to know us and beginning next week, he will start his operations training at each of our brands. Mike, please share some thoughts on your experience so far. Mike Lenihan: Thanks, Jerry. I'm honored to have the privilege of joining Texas Roadhouse. As a member of the restaurant community for the last 20-plus years, and a longtime resident of Louisville, I have witnessed Texas Roadhouse's incredible journey to become a leader in the industry and our community. Since joining in December, I've immersed myself into the culture of the support center, learning about the incredible hard work, people-first approach and teamwork needed to support our restaurants. I would like to specifically thank Keith, along with the rest of team CFO, who have made my transition seamless and special. It's become clear that we have an incredible team and I look forward to the opportunity to lead it while helping Texas Roadhouse on its growth journey. Finally, as Jerry mentioned, I'm looking forward to spending the next several weeks in our restaurants, learning from the best operators in the industry. And now I'd like to turn it over to Keith for some thoughts on our 2025 performance as well as comments on 2026. Keith Humpich: Thanks, Mike. Along with the rest of the team, I would like to welcome you and your family to Texas Roadhouse. We can't wait to support you further in your Texas Roadhouse journey. Moving on to our results. 2025 was another banner year for top line growth in our restaurants. Same-store sales increased 4.9% for the full year, including 2.8% traffic growth. Consolidated average unit volume exceeded $8.4 million with average weekly sales of over $166,000 at Texas Roadhouse, $122,000 at Bubba's 33 and nearly $73,000 at Jaggers. In addition, despite cost pressures, we still generated the second highest restaurant margin dollars, income from operations and earnings per share in our history. While commodity inflation and the lapping of an additional week impacted our ability to generate earnings growth in 2025, we have not deviated from our strategy of serving more guests and expanding our restaurant base across the 3 brands. We are confident in our long-term strategy and believe we are set up for continued success over the coming years. Additionally, we ended the year with over $130 million of cash, and cash flow from operations for the full year was over $730 million. With this cash flow, we funded $388 million of capital expenditures as well as the acquisition of 20 franchise restaurants for $108 million. We also returned $180 million to shareholders through dividends and another $150 million in share repurchases. Moving on to 2026. Our commodity inflation guidance of approximately 7% remains unchanged with the continued expectation of being above the guidance in the first half of the year and below the guidance in the second half of the year. Beef inflation accounts for nearly all of the expected commodity inflation throughout the year. Our guidance for wage and other labor inflation also remains unchanged at 3% to 4%. We expect the wage component of the inflation should moderate despite state-mandated increases, while cost pressures on insurance and other employee benefits will likely trend higher. Our approach to capital allocation for 2026 remains consistent with our proven philosophy of prioritizing new restaurant development and maintaining the condition of our existing locations. As such, our capital expenditure guidance of approximately $400 million remains unchanged. This amount does not include $72 million paid at the beginning of the year to complete the previously mentioned acquisition of 5 California franchise locations. As part of funding this acquisition, we borrowed $50 million on our credit facility. Also today, we announced a 10% increase to our quarterly dividend, which brings it to $0.75 per quarter. And now, Michael will provide the fourth quarter financial update. Michael Bailen: Thanks, Keith. Before I begin the discussion of results, I want to remind everyone that the fourth quarter of 2024 included an additional week. Lapping the additional week negatively impacted fourth quarter revenue growth by approximately 9% and earnings growth by approximately 12%. My discussion will be based on reported results, which include the negative impact. For the fourth quarter of 2025, we reported revenue growth of 3.1%, driven by a 4% increase in average weekly sales, partially offset by a 0.6% decline in store weeks. We also reported restaurant margin dollar decrease of 15.6% to $205 million and diluted earnings per share decrease of 26.1% to $1.28. Average weekly sales in the fourth quarter were over $160,000 with to-go representing approximately $22,000 or 13.8% of these total weekly sales. Comparable sales increased 4.2% in the fourth quarter, driven by 1.9% traffic growth and a 2.3% increase in average check. By month, comparable sales grew 6.1%, 4.8% and 2.2% for our October, November and December periods, respectively. And comparable sales for the first 7 weeks of the first quarter were up 8.2% with our restaurants averaging sales of approximately $170,000 per week during that period. In the fourth quarter, restaurant margin dollars per store week decreased 15.1% to $22,200. Restaurant margin as a percentage of total sales decreased 309 basis points year-over-year to 13.9%. The year-over-year decline included lapping an estimated 45 basis point benefit from the additional week. Food and beverage costs as a percentage of total sales were 36.4% for the fourth quarter. The 281-basis point year-over-year increase was driven by 9.5% commodity inflation, combined with shifts within the entree category. This was partially offset by the benefit of a 2.3% check increase. Commodity inflation for full year 2025 was 6.1%, which was in line with our guidance of approximately 6%. Labor as a percentage of total sales increased 18 basis points to 33.2% as compared to the fourth quarter of 2024. Labor dollars per store week increased 4.3% due to wage and other labor inflation of 2.9% and growth in hours of 1.4%. For the full year, wage and other labor inflation came in at 3.7%, which was slightly below our guidance of approximately 4%. Other operating costs were 14.9% of sales, which was 4 basis points better than the fourth quarter of 2024. While higher sales continue to generate leverage within some line items of other operating costs, it was almost fully offset this quarter by lapping the benefit of last year's additional week as well as an increase in our quarterly reserve for general liability insurance. These insurance adjustments included $3.5 million of additional expense this year as compared to $2.7 million of additional expense last year. Moving below restaurant margin, G&A dollars declined 6% as compared to the fourth quarter of 2024, and came in at 3.6% of revenue for the fourth quarter. This was primarily driven by lapping approximately $3.7 million of higher expense related to last year's additional week. With our budgeting process for 2026 complete, we are currently forecasting a low double-digit percentage increase in G&A dollars for full year 2026. Our effective tax rate for the quarter was 11.5%, and our full year 2025 income tax rate was 13.8%. At this time, we are updating our forecast for the full year 2026 income tax rate from approximately 15% to between 14% and 15%. Now I will turn the call back over to Jerry for final comments. Gerald Morgan: Thanks, Michael. I want to take a moment to thank our guests and our operators for their continued support of our recent tinnitus fundraiser in honor of our founder, Kent Taylor. This year was our fifth annual event, and we raised over $1.1 million to the American Tinnitus Association. We are proud to raise funds for research, education and awareness for this condition that impacts so many people. Finally, 33 years ago, Kent opened the first Texas Roadhouse. While most milestone birthday celebrations end in a 0 or a 5, at our company, we believe 33 means something special. When we celebrate our birthday, we are also celebrating opportunity, growth and a commitment to operating at a high level. What started as Kent's dream on a napkin has grown to over 800 locations, 3 brands and more than 100,000 Roadies. I'll close with a happy 33rd birthday to Texas Roadhouse and all of Roadie Nation. So on the count of 3, can I get a big yeehaw? One, two, three. Yeehaw. That concludes our prepared remarks. Operator, please open the line for questions. Operator: [Operator Instructions] Your first question comes from David Palmer with Evercore ISI. David Palmer: Congrats on a great year. I wanted to just squeeze 2 questions. And the one is just sort of about that fourth quarter and the fact that the sales slowed down in December, we heard in the industry that there was some weather dislocation in that month. And so a lot of times in when a chain gets caught with slow sales late in the quarter, it's tough to adjust the labor and to sort of save the budget for the quarter, so to speak. And you did have a higher ratio of labor hours versus traffic than normal for you. So I suspect that was something you're not wanting to make excuses, but maybe you could speak to what sort of a drag that, that noise or even just the fact that, that happened late in the quarter might have had on your earnings that quarter. And then I'm just wondering also bigger picture question is just the long term, when it comes to beef inflation, it feels weird this cycle where it's not getting better fast in terms of the number of battle head out there, and the demand is remaining strong. So it feels like the relief might not be as fast as it was the last time we saw one of these cycles. And I'm just wondering if you're thinking, is there things that you could do besides have food costs get down to 34% to get back to 17% plus? I mean you talked about the handhelds, but is there anything that you're thinking about on the labor side and effectiveness there to really offset some -- what might be longer -- higher for longer on beef? Michael Bailen: David, it's Michael. I appreciate the question. Hopefully, I can touch on all the topics. You are correct, for the fourth quarter, that labor hours ratio was 68%. For October and November, it was sub-50% and that slowed down. The entire industry saw in December certainly resulted in an elevated number there. I can tell you so far, in the first quarter, we are back to sub-40%. So that does feel like it was a little bit of an anomaly given the results from December. And again, December was impacted by both holiday shifts and weather. So for 2026, I think we believe that we can continue to run in that sub-50% level. As far as beef inflation, yes, we're going to have that pressure here in '26, Far too early to start predicting what may happen in '27. But I think the industry would say that it will be certainly a little early to see the herd beginning to expand before late '27. So in periods like this, we focus on the dollars and growing the top line, and that's what flows through. And certainly, more dollars can help you leverage labor, can help you leverage other operating. We're going to stay true to who we are, and that's really going to be our approach to the business. Operator: Your next question comes from Andrew Charles with TD Cowen. Andrew Charles: Maybe just first, just if you just quantify, if you can, the impact of [ Fern ] on the quarter-to-date, obviously, a very stellar number, but just curious with weather, how much that impacted it. And my real question is really around now that you're focused -- now that you fully rolled out the digital kitchen. How does it allow you to go on offense in 2026? Can we expect more advertising around carryout, could a market test a third-party delivery potentially be something you're focused on? I'd love to learn more about now the digital kitchen is over, what this allows you to do? Michael Bailen: Andrew, it's Michael. I'll certainly start with the question on Fern. It definitely -- on the first 7 weeks, it had about a 2.5% negative impact. Now we were lapping some weather from last year that offset some of that. So I would say the net impact of weather on the 7 weeks was about 1.5% negative for us. And then when it relates to the digital kitchen, maybe I'll start there and see if anybody else wants to join in. Certainly, it has led to that calmer, quieter restaurant -- excuse me, kitchen experience. And I think it does free us up to do more to-go business. And I think we've seen that over the last several quarters. Don't know what else will change fundamentally about how we do the business. But I do believe that our operators know that it allows them to do some more to-go. Gerald Morgan: And Andrew, this is Jerry. I would tell you, we will continue to learn as we now have the whole concept on the digital kitchen, what all it can do for us other than create a very calm environment that our cooks are really enjoying and just how we execute in the back. So it will not lead us to looking at delivery service at this time. Operator: Your next question comes from the line of Sara Senatore with Bank of America. Sara Senatore: Just, I guess, first housekeeping. Could you just let me know what price was for the quarter? And also, I know you talked about taking 1.9% in 2026, at least the first price. So can you -- what should we expect for pricing? What does that mean on a quarterly basis pricing looks like? And then I do have a question. Michael Bailen: Yes, Sara, it's Michael. So we had 3.1% pricing for the fourth quarter. We'll have that same 3.1% here in the first quarter. And then with the [ 1.9% ]rolling on, that means we'll have 3.6% in the menu for the second and third quarters before we have conversations about what we may do at the beginning of the fourth quarter. Sara Senatore: Okay. Great. And then I guess, as I think about the sort of price cost dynamic, I know typically you price just for sort of structural changes. But I guess, as I think through the year ahead, I guess, is your sense that part of the reason the traffic growth has accelerated so much is because you've maintained your pricing kind of substantially below the competitive set? Or I guess trying to understand like how you think about that elasticity because certainly, the quarter-to-date trends, again, including weather, were very impressive. Just a sort of philosophy as you think about the year ahead. Gerald Morgan: Thanks, Sara. This is Jerry. I'll start it off a little bit on the pricing. We continue to try to be very conservative. We believe that the full-service dining segment, we are still well underneath that. So we continue to have great conversations with our operators. We look at it from the lens of our guests and our business and our shareholders and try to find a solid balance. We also know beef is a challenge, and we will continue to look at it. But we focus on a great experience, value in our menu that's built in throughout everything that we have. And it's been a great strategy. And I believe we don't skimp on any of our portions. We really focus on nothing has changed. All we try to do is get a little bit better for our guest experience. Operator: Your next question comes from the line of Jim Salera with Stephens. James Salera: I wanted to ask around tax refunds. There's been a lot of conversations around that potentially driving some incremental consumption, particularly in, I guess, more in the second quarter. Do you have any historical precedent for years where there's a larger-than-expected tax refunds? Do you see kind of an immediate flow through into the restaurants and more engagement? And if so, does that show up just purely in transactions? Or do you maybe see higher attachments? Any comments you could provide there would be helpful. Michael Bailen: Jim, it's Michael. I would say historically, if the timing of the refunds moves around, I think we can see it a little bit in our numbers. So I do think refunds do have the potential to be a tailwind for us, whether this time around and who may be getting these refunds will result in a benefit for us to be determined. But typically, yes, when people are getting a larger than normal refund, I would say it may result in them looking to spend some of that. Operator: Your next question comes from the line of David Tarantino with Baird. David Tarantino: Michael, just a clarification on the recent comp trends. Did you have a calendar impact in December from the shift of New Year's Eve? And if so, can you quantify the impact of that on Q4 and on Q1 quarter-to-date? And then I have a follow-up to that. Michael Bailen: Yes, David, definitely, we had a negative impact from Christmas shifting and also the timing of our year-end. Those two on the quarter had about a little under -- when you combine in Halloween shifting as well, all of those had about a 1% negative impact on the fourth quarter. The first quarter -- or I'm sorry, the first 7 weeks is benefiting from having New Year's Eve in the first quarter, and that's had about a 1 -- a little over 1% benefit to our first quarter -- first 7 weeks, excuse me. David Tarantino: Great. That's helpful. So if I net all the impacts from the calendar and the weather, it does look like Q1 has accelerated pretty meaningfully on the traffic side. So I just wanted to get your thoughts on why that's occurred. I guess I know there's a lot of cross currents in the economy. But I guess what are your thoughts on what's driving the recent strength? Gerald Morgan: Well, thanks, David. This is Jerry. I do know there was some weather in that time line, but I really do believe that it's just about us operating at a high level. Our operators are out there hustling. We're continuing to provide a great experience for the guest. And we benefited a little bit from some of that. It would be hard to measure exactly what it is, but I just think we're out there hustling, we're trying to make sure our employees have a great experience coming to work, and our guests are having a great experience dining with us, and we are very appreciative of their business. Operator: Your next question comes from the line of Brian Harbour with Morgan Stanley. Brian Harbour: Can you comment on just where you are with commodity contracting at this point? And then is your expectation that inflation in the first quarter could look similar to 4Q and then it sort of comes down ratably from there. Could you help us a little bit on that? Michael Bailen: Sure, Brian, it's Michael. I would -- as far as locked, we're certainly more locked our fixed price in the first half of the year, probably about 65% locked in first half of the year and only about 25% in the back half of the year, and that's probably not abnormal over the more recent years from that standpoint. As far as the cadence of the commodity inflation, I would -- we mentioned that the first half of the year would be probably above our 7% guidance. I'd say within that, Q1 is probably in line with the guidance. And Q2 is probably where we expect to have our highest commodity inflation of the year, and that could be in the very high single-digit level. And then it should start to come down in the back half of the year. Operator: Your next question comes from the line of Peter Saleh with BTIG. Peter Saleh: Great. Jerry, I wanted to ask real quick on the expanding test of the handheld ordering in 2026. I think you guys have been testing this for -- since 2024, I think it was in about 40 restaurants. So can you maybe a little bit talk about what you're seeing, how much this test will expand and what you expect to see? And then, Michael, if you could just comment on the G&A and how that goes throughout the year? I think you said a low double-digit increase. So any details you could provide there would be helpful. Gerald Morgan: Yes. Thanks, Peter. This is Jerry. On the handhelds, we are -- we did absolutely have a test out there. We have pulled back on it just a little bit to rewrite some software. We have had it in a store right before the holidays and learned a lot of things. We paused it for a minute. We now have it back in that store, and we've just got a couple of more tweaks to make before I think we can offer it up to the operators. There's no doubt that the handheld and technology side of it doesn't make us a little bit quicker when it allows the server to take the order at the table to press send, and obviously, from an order accuracy standpoint. So there's a lot of things that we really like about it what we have to have is it to be reliable. And so we're just working through a few more things. We'll continue to get it out there and test and then I think later on in the year, we should be ready to kind of offer it up for our operators to opt in if they want to do that. But we have made a lot of progress, and I feel good that a lot of focus on it right now. Keith Humpich: And Peter, this is Keith. On the G&A, I think we guided to low double-digit increases, and I think you can pretty much see that throughout the year, evenly throughout the year. Operator: Your next question comes from the line of Jeff Farmer with Gordon Haskett. Jeffrey Farmer: You did touch on it, but with all the moving pieces, how should we be thinking about the restaurant level margin for the full year 2026? Michael Bailen: Jeff, this is Michael. Obviously, there are a lot of moving pieces. I would say with 7% commodity inflation and that's where we end up and with the pricing that we're talking about, taking and assuming that some of that, not all of it flows through the check, I think it's going to be a challenge to get leverage on the cost of sales line. Now I do believe there is opportunity on the other components of restaurant margin, but that may not fully offset. So it is certainly possible that restaurant margin percents remain under pressure. But the restaurant margin dollars certainly have a path, both on an absolute and a dollar per store week basis to go higher, and that's really where more of our focus is right now during this cattle cycle. Operator: Your next question comes from the line of Jeffrey Bernstein with Barclays. Jeffrey Bernstein: Jerry, just curious your updated thoughts on Bob is, obviously, it's taking on a bigger role in the unit growth. And needless to say, when you're big brothers, Texas Roadhouse, your results probably won't look as good in the short term. I'm wondering if you can, just because it is in a different category, do you think that one day, if you do the same focus on Bubba's that you do on Texas, it will have the same level of resilience that Texas has had or probably maybe in a different category in a different position where it will never achieve something similar? Just trying to get your sense on Bubba's outlook, obviously, you're accelerating that growth for the next few years, but how you vision that brand long term relative to Texas? Gerald Morgan: Thanks, Jeff. Yes, I mean, I see Bubba's. I really like to compare it to the competitive set that it goes in it. Obviously, 6.4 million average unit volume. We have a lot of confidence in what Bubba's is doing and who it's competing with. And so we are very excited about it. We've got a great team over there. We've got great people, great operators executing at a high level. So we continue to lean into it and how we can support Bubba's to be as successful as they can be and I am really proud of where we're at from that. We have done a lot of great things getting some of the cost out of the building to make it a little more profitability or profitable for our operators as we go forward. We'll continue to look at ways to offset some of the inflation and other sides of it for that business. But yes, we'll ramp up the growth on it. We'll get to approximately 10 this year, and that's what's on schedule for the following year. And we believe that it will continue to add a lot of value to our company as we go forward from a sales and profit standpoint. Operator: Your next question comes from the line of Jake Bartlett with Truist Securities. Jake Bartlett: Mine is about mix, and there's 2 kind of mixes here that I want to ask about. One is on COGS. Your COGS have been higher than we would think or one would think given the pricing and the commodity inflation. You mentioned that's a shift towards stake. I think that differential increased in the fourth quarter. So the question is, what should we expect from that dynamic in '26? I mean is there a possibility that, that reverses out? Should we continue to expect maybe an increased pressure on COGS from that dynamic. And then if I look at just a mix within check, it increased in the fourth quarter. So a little bit kind of confusing. Have that increased or get more negative yet the COGS impact getting bigger. So the question on mix, what is driving the negative mix within same-store sales? And should that continue? What are the dynamics there going into '26? Michael Bailen: Thanks, Jake. This is Michael. First on that mix within our food cost, it was lower in the fourth quarter than it had been in the third. It probably was 30, maybe 35 basis points of pressure where it had been over 50 basis points in the third quarter. From what we're seeing so far this year, it does seem like we have lapped a lot of that trade up to the state category. That doesn't mean that it couldn't reaccelerate. But right now, my assumption is maybe 10 to 15 basis points of pressure coming from that, call it, usage line within the cost of sales. As far as the product mix, you are right, it did step up a little bit in the fourth quarter. And we saw that trend higher as we move through the last several months of the quarter. And some of that, I think, more of that came from the to-go side of it and the growth of our to-go putting a little bit of pressure, more pressure on that line. As I've looked at the beginning of this year, some of that pressure has abated, alcohol is still negative but not as negative as it was at any point last year. So some encouraging signs within our mix. We continue within the dining room to see positive mix in entrees, appetizers, soft beverages mocktails. But when the to-go business is growing at a slightly faster rate and that comes with a lower average check, it does continue to put a little bit of pressure on mix. Operator: Your next question comes from the line of Jacob Aiken-Phillips with Melius Research. Jacob Aiken-Phillips: So I just wanted to ask about share gains. And you've shown super consistent traffic strength and peers have shown less so. I mean restaurants, food, fast casual, QSR, et cetera, what portion of the traffic outperformance do you view as structural share gains versus like people trading between channels or in and out? And how should we view that durability if the consumer weakens further? Gerald Morgan: Yes. Jacob, I can start. I mean it's hard to predict all of that. I mean we open up our doors and we serve our guests and represent our communities all across America in the world. And I think the guest has to make a choice, and their choice is where do they get quality food, where they get great value and where do they get hospitality at a high level? And I do believe that that's where we continue to win and that reputation that we have in the industry for consistently providing great service, great food and what we call legendary food and luxury service and that just resonates with our consumer. And they want to spend money, but they want to spend money where they're getting a great product with value. And I believe that's where we settled in nicely. Operator: Your next question comes from the line of Dennis Geiger with UBS. Dennis Geiger: Great. Welcome, Mike. Just wondering if you guys could break down that -- the G&A guidance, the G&A increase a bit more. Is that increase coming from? Is it a compensation dynamic? Is it related to the acquisitions? Anything more you could say there? And then, I guess, longer term, has anything changed on how you think about G&A beyond this year? I know you've kind of given some targets in the past for the long term as a percent basis. Keith Humpich: Dennis, it's Keith. Thanks for the question. Yes. So in December, we completed our 2026 budget process that included finalizing our incentive plans for the year. So as part of that, we did increase our G&A forecast. And this was mainly due to the new long-term management equity grants that we announced in late December and then also some higher forecasted incentive compensation. I can tell you that when we look at G&A as a percentage of sales, though, I think we see it coming in very similar and consistent to what our recent years have been, and we're comfortable with that level. Operator: Your next question comes from the line of Andy Barish with Jefferies. Andrew Barish: One question and a quick follow-up. Just can you give us a little better sense on sort of what the guest management software is potentially driving this year? Is it table yields or wait time quotes? Or how is that kind of up and running? Gerald Morgan: Thanks, Andy. This is Jerry. I think it helps in all categories. To be able to manage your floor plan with the amount of consumers that are on the wait list and for them to be able to navigate a little bit on their own to get on the wait list and allowing us to -- if folks aren't there. So there are so many components that can help us be faster, not only in managing how table turns work, how we get guests on the list, how we get them set and then how do we accurately quote them when we're on longer waits. And we just went through a tremendous weekend over Valentine's Day and what a success. And I think it all contributes to the ability to handle that kind of volume. So we believe that there are so many things that you -- just little things that all add up to additional success. So it's about all I can share on that, but it's about really being bigger, faster and stronger and getting more people sat accurately from that standpoint. But thank you, Andy. Andrew Barish: Yes. Very helpful. And then on the headquarters acquisition, is that -- I assume that's a benefit to G&A this year versus last, but maybe I'm thinking about it wrong. Keith Humpich: No, Andy, this is Keith. Yes, you are correct. It will definitely be a benefit for us this year. Operator: Your next question comes from the line of Jon Tower with Citigroup. Jon Tower: Jerry, just a quick question for you. The past year, 1.5 years or so, you focused a lot of -- some time on innovating around and focusing on beverage in the menu, I think mocktails, dirty sodas are a couple of things, and then having the $5 draft on tap and messaging that to the guests. Is there anything else on your menu that you see today as an opportunity, either you're not currently -- it's not either on the menu today or it's something that's underperforming your internal expectations? Or anything you're hearing from your operators that says, hey, this would be a nice area we should be focusing more on? Gerald Morgan: Well, thanks, Jon. Yes, I think on the beverage side, I mean, obviously, mocktails have become very popular out there, dirty sodas, the 5-day $5 all day every day. It is about the beer, but it's really also about that margarita and really, Roadhouse was built on ice cold beer and a legendary margarita. And having that $5 10-ounce margarita back in the system has been really, really popular. And on the food side, I mean, we're always looking at some innovative ideas in talking with our operators about trying different things, whether it be a menu item, whether it be the ability to add on a different kind of smother or even a sidekick of some sort. So we are constantly out there looking at things. We have some things that are out there in test. We'll continue to monitor and look at them and make a decision down the road if we think it goes regionally or nationwide could be impactful. So yes, we're constantly kind of testing and looking and talking with our operators about what we might look at on the menu. We don't have a lot that underperform at the level that they would be replaced. So it would be a tough one for us to take anything off. It really have to be a superstar to get added to it. Operator: Your next question comes from the line of Andrew Strelzik with BMO Capital Markets. Andrew Strelzik: Going back to the beef topic, and I appreciate some of the color you gave on the cattle cycle dynamics. There's been some optimism, I guess, around beef inflation easing at some point in '26 because of demand destruction at retail. So I guess I was curious if you've seen any evidence in any of the data that you've looked at or any of your discussions around that dynamic that maybe does offer a little bit of optimism as the year progresses. Michael Bailen: Andrew, it's Michael. Thanks for the question. I mean I think we've certainly seen at retail some trade away from beef over the last several quarters to whether it be pork or chicken or other proteins. And so that has been in effect. So the level that, that may or may not continue, it is hard for us to know. We aren't trying -- in our forecast, we aren't trying to predict what the demand side might be. So if there was a further, call it, demand destruction or trade away from beef, then maybe there is some potential for our numbers to come down. But a lot of things to learn about there. What we do know is what's going on with the size of the herd and what that takes for a rebuild. So the demand will really play into how things fully play out. Operator: Your next question comes from the line of Rahul Kro with JPMorgan. Rahul Krotthapalli: Can you update us on the build cost inflation and how it is tracking at both Roadhouse and Bubba's and especially how you're thinking about cash-on-cash returns for both these concepts as we go forward? And I have a follow-up on the company versus franchise mix. I've seen this slowly pick up over time from low 80s company mix to the high 80s we are currently. Is there a conscious goal to get to a certain level over time? Can you share some of your thoughts here? Michael Bailen: Yes, sure. This is Michael. I'll start with the investment costs. So on the Roadhouse side, we are expecting our average all-in investment cost that includes 10x rent factor will be increasing to around $8.9 million. We think we're around $8.3 million to $8.4 million here in 2025. Some of that increase is coming from higher rents. Certainly, it is not getting any cheaper to build a building. But we -- and we also have a handful of restaurants in California that we will be opening in '26 and that probably adds a few hundred thousand dollars to that cost for Roadhouse. On the Bubba's side, the opposite is expected. We're expecting to see maybe a little more than $0.5 million reduction in our investment costs going from around $9 million down to $8.5 million, $8.4 million for 2026. We've done a lot of work on the building and getting the prototype to where we want it to be. And we also have a handful of conversions that we are going to be doing. So taking an existing building and turning it into a Bubba's. We've done 2 of those so far that have opened and definitely seen some cost savings by doing that. So we are hopeful and expecting that, that can continue with some more of these conversions. And as far as returns, we look at it more as an IRR. We're targeting a mid-teen IRR for our new restaurants. And I'd say we are achieving or exceeding that expectation as an overall portfolio. Operator: Your next question comes from the line of Brian Vaccaro with Raymond James. Brian Vaccaro: Most of mine have been asked, but just 2 nitpicks, if I could. Within the other OpEx line, I'm curious what you're seeing just from an underlying inflation perspective within that line? And any changes in the outlook related to utilities or other areas we should be mindful of? And on the acquisition of the 5 units for $72 million, was there acquired real estate within that acquisition price? Michael Bailen: Yes. Brian, I'll just start with the second one first. There is no acquired real estate within that acquisition price for those California stores. As far as the other OpEx, I think, certainly, there is an expectation that utility costs will continue to go higher. But I do think there is still opportunity to get some -- potentially to get some leverage another op in 2026, probably low single-digit growth in dollars per store week is probably the best guidance I can give you. I don't think I have an inflationary percentage to throw out at this time. So we do think we're going to continue to see some cost pressures, but nothing other than utilities too out of the ordinary. Operator: Your next question comes from the line of Gregory Francfort with Guggenheim. Gregory Francfort: Maybe sticking with expenses, just labor inflation running under 3% this quarter. I guess is there anything that maybe there were less overtime hours just given the sales? Or I guess I'm trying to figure why that might ramp next year or, I guess, this year in '26? Michael Bailen: Yes. I mean there are several components. We talk about wage and other inflation. And so the wage components, certainly, we have seen that trend down and stabilize, and that's kind of the expectation that we have into 2026. But we do think that there's still going to be some pressures on insurance costs and other components within labor that may be a little bit higher than what we saw in 2025. So we guided the 3% to 4% wage and other. I think the underlying wage component is probably down year-over-year and the overall could be a little bit down versus 2025. Operator: Your next question comes from the line of Jim Sanderson with Northcoast Research. James Sanderson: I wanted to talk a little bit more about pricing. Given the 3.6% you'll have in the second quarter, how you see yourself positioned with respect to top competitors if you feel that your value gap is just as strong and compelling? And maybe if you have any consumer feedback about how the consumer perceives the brand on a value basis, if that's improving? Gerald Morgan: Thanks, Jim. Absolutely, we will keep our close eye on any conversation that comes up. But obviously, after these first 7 weeks as we continue to roll. But again, we're built on a conservative approach to pricing. We still believe we're well under our competitors and full-service dining average 12 months rolling. So we will continue to look at that. But if we get feedback, we absolutely will consider and talk with that but we really feel like we've got such a great value, and we're continuing to operate at a high level, and that's the approach that we'll continue to take, and we feel great about it. Operator: And that concludes our question-and-answer session. I will now turn the conference back over to Jerry Morgan for closing comments. Gerald Morgan: Thank you all for your time with us tonight. And to Roadie Nation, stay focused on high-level hospitality. Let's go to Roadhouse. Operator: Ladies and gentlemen, that does conclude today's conference call. Thank you for your participation, and you may now disconnect.
Operator: Good day, ladies and gentlemen, and welcome to Universal Display Corporation's Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is Sherry, and I will be your conference moderator for today's call. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Darice Liu, Senior Director of Investor Relations. Please proceed. Darice Liu: Thank you, and good afternoon, everyone. Welcome to Universal Display's Fourth Quarter Earnings Conference Call. Joining me on the call today are Steve Abramson, President and Chief Executive Officer; and Brian Millard, Chief Financial Officer and Treasurer. Before Steve begins, let me remind you today's call is the property of Universal Display. Any redistribution, retransmission or rebroadcast of any portion of this call in any form without the expressed written consent of Universal Display is strictly prohibited. Further, this call is being webcast live and will be made available for a period of time on Universal Display's website. This call contains time-sensitive information that is accurate only as of the date of the live webcast of this call, February 19, 2026. During this call, we may make forward-looking statements based on current expectations. These statements are subject to a number of significant risks and uncertainties, and our actual results may differ materially. These risks and uncertainties are discussed in the company's periodic reports filed with the SEC and should be referenced by anyone considering making any investments in the company's securities. Universal Display disclaims any obligation to update any of these statements. Now I would like to turn the call over to Steve Abramson. Steven V. Abramson: Thanks, Darice, and welcome to everyone on today's call. We are pleased to report record 2025 revenue of $651 million. Operating income was $249 million and net income was $242 million or $5.08 per diluted share. These results reflect strong execution across the business and the continued expansion of OLED adoption throughout the industry. Brian will share additional financial details shortly. In 2025, we continue to drive value as OLEDs proliferated across the consumer electronics landscape, including wearables, smartphones, tablets, laptops, monitors and TVs. At the same time, we remain focused on the long term. We expanded our R&D efforts, strengthened our intellectual property framework, broadened our global infrastructure and deepened engagement with customers across the OLED ecosystem. These investments are designed to support the next phase of growth for both the OLED industry and for us. As we look to 2026 and beyond, it's worth reflecting on how the OLED industry has evolved and how Universal Display has helped shape that evolution. For decades, the industry was largely centered around a single dominant architecture, single-stack OLEDs. Universal Display has played a defining role in this technology's advancement. Our phosphorescent materials unlock higher efficiency, longer lifetime and better performance, helping to enable OLEDs to scale into mass market products and transform display technology worldwide. Today, the OLED industry is entering a new phase, marked by broader applications, higher performance expectations and a more diverse set of device architectures. We remain at the forefront of this evolution. Our materials and technologies continue to play a central role in OLED innovation, supporting scale and helping define the performance benchmarks that will shape the industry's next chapter. While single-stack OLED is the dominant commercial architecture today, the road map is becoming increasingly multidimensional. Performance targets continue to rise and energy efficiency matters more than ever. New applications from foldable devices to automotive and IT displays introduce new requirements. As a result, multiple device architectures are now being explored and deployed across the industry, including tandem OLED structures, phosphorosensitized fluorescence or PSF-based approaches and other emerging hybrid architectures. Across all these architectures, one element is foundational, the phosphorescent material. In PSF and other hybrid architectures, our phosphorescent materials are designed to work alongside fluorescent emitters within the OLED stack. This design helps balance efficiency, lifetime and color performance while giving manufacturers greater flexibility in meeting application-specific requirements. As OLED structures grow more complex and efficiency demands intensify, our OLED materials, along with our long-term technology leadership and deep know-how become increasingly central to enabling performance, scalability and the next wave of OLED innovation. That leadership is grounded in decades of deep materials and device level expertise as well as a long history of exploring architectural concepts at the leading edge of technology. Early research included SOLED, our stacked OLED concept as well as PSF-based architectures, which expanded our technical foundation. More recently, we completed the acquisition of intellectual property assets from Merck KGaA that included PSF and related OLED technologies. Collectively, these efforts broaden our technology platform and expand the architectural design space within our portfolio as OLED design continues to evolve. At the core of our company is an R&D platform that has been built, refined and scaled over decades. And today, that platform is more active and more critical than ever. Across red, green and blue emissive layer materials, our pipeline is exceptionally robust, reflecting the expanding OLED industry road map. As applications proliferate and architectures diversify, the performance envelope continues to be pushed forward. Different form factors, different lifetime and efficiency targets all require continuous materials and device innovation. One of the most important evolutions in our R&D platforms is our increased investment in our in-house materials discovery, device modeling and characterization capabilities anchored by a deeply experienced R&D team. This hands-on foundation remains the engine of our innovation, whether advancing next-generation reds and greens or moving blue along the path to commercialization. In concert, AI and machine learning tools are emerging as powerful accelerators for our research engine. By combining AI-driven insights with our proprietary data, device expertise and decades of OLED know-how, we can explore broader design spaces more efficiently, shorten development cycles and make better, faster, smarter decisions about where to focus our efforts. Together, these capabilities strengthen our platform to support multiple architectures, customer road maps and end markets while continuing to push the boundaries of performance. One area where this platform approach is gaining particular traction is blue. With strong and growing interest in our phosphorescent blue, we are deeply engaged with multiple customers and collaborating across the industry to support multiple architectural and strategic paths. Our confidence in blue remains unwavering. Breakthroughs of this magnitude are rarely linear. Once adopted, we believe our phosphorescent blue can enable up to a 25% improvement in OLED panel energy efficiency, delivering a meaningful step change benefit for customers, consumers and the industry. Looking ahead to 2026 and beyond, the opportunities for OLED continue to broaden. The market is evolving from being primarily mobile and TV-centric to more diversified landscape with IT applications emerging as one of the strongest drivers of near and midterm growth. According to Omdia market research, global OLED shipments are projected to surpass 1.4 billion units by 2030, driven in part by accelerating adoption across tablets, notebooks and monitors. OLED smartphone shipments are expected to grow from 810 million units in 2025 to 967 million units by 2030, while OLED IT shipments are forecasted to more than triple from 27 million to 92 million units over that same period. In automotive, OLED is emerging as a strategic enabler of both design freedom and brand positioning. Adoption is gaining momentum among luxury OEMs and Chinese new energy vehicle manufacturers as displays play a growing role in shaping the in-vehicle experience. Omdia projects automotive OLED shipments will increase from 3 million in 2025 to 14 million units by 2030. At the same time, foldables are poised for renewed momentum as leading OEMs prepare to introduce a new wave of products. OLED-enabled form factor innovation is becoming a powerful catalyst for differentiation, expanding user experience and driving architectural advancements across multiple product categories. Market forecasts indicate that 2026 marks the beginning of a broader inflection point with foldable OLED unit volumes expected to increase more than 250% from 19 million units in 2025 to 71 million units by 2030. From a manufacturing perspective, the OLED industry has entered into a new multiyear phase of capacity expansion. Between year-end 2023 and year-end 2025, installed OLED capacity measured in square meters increased by approximately 10%. Looking ahead, we expect an additional 10% increase in installed capacity between the end of 2025 and the end of 2027, driven primarily by the introduction of Gen 8.6 capacity to support expanding IT and automotive OLED adoption. Importantly, 2026 marks a significant industry milestone with the world's first Gen 8.6 OLED facilities, Samsung Display in Korea and BOE in China entering mass production. As utilization tightens and new applications scale, we anticipate additional OLED fab investment announcements further expanding industry capacity and reinforcing the long-term growth trajectory of OLEDs. On that note, let me turn the call over to Brian. Brian Millard: Thank you, Steve. 2025 ended on a strong note with record fourth quarter and annual revenues that were in line with our expectations from November. For the year, our revenue was $651 million. Material sales were $353 million. Royalty and license revenues were $275 million. Adesis revenues were $23 million. Our 2025 revenues included a cumulative catch-up adjustment of $14 million compared to $11 million in 2024. Total gross margin for 2025 was 76% compared to 77% in 2024. Operating expenses for 2025 were $248 million compared to $260 million in 2024. Operating income for 2025 was $249 million, translating to an operating margin of 38%. This compares to $239 million or 37% operating margin in 2024. Net income for 2025 was $242 million or $5.08 per diluted share compared to $222 million or $4.65 per diluted share in 2024. We ended the year with $955 million in cash, cash equivalents and investments. Turning now to our fourth quarter results. Revenue for the fourth quarter of 2025 was $173 million, up 7% from $162 million in the fourth quarter of 2024. Fourth quarter 2025 results included a cumulative catch-up adjustment of $10 million compared to $5 million in the fourth quarter of 2024. Material sales were $96 million compared to $93 million in the fourth quarter of 2024. Green emitter sales, which include our yellow green emitters, were $74 million compared to $67 million in the fourth quarter of 2024. Red emitter sales were $21 million compared to $25 million in the fourth quarter of 2024. As we've discussed in the past, material buying patterns can vary quarter-to-quarter. Royalty and license fees in the fourth quarter were $73 million compared to $64 million in the prior year period. Adesis revenue for the fourth quarter of 2025 was $4.8 million compared to $4.6 million in the same period in 2024. Cost of sales in the fourth quarter was $41 million, resulting in a gross margin of 76%. This compares to $37 million and a gross margin of 77% in the fourth quarter of 2024. Operating expenses, excluding cost of sales, were $64 million in the fourth quarter compared to $72 million in the fourth quarter of 2024. Operating income for the fourth quarter of 2025 was $67 million, translating to an operating margin of 39%. This compares to the prior year period of $52 million and an operating margin of 32%. The fourth quarter 2025 income tax rate was 13.5%. Net income for the fourth quarter was $66 million or $1.39 per diluted share. This compares to the fourth quarter of 2024's $46 million or $0.96 per diluted share. Now turning to our 2026 outlook. We expect our 2026 revenues will be in the range of $650 million to $700 million. We estimate that our ratio of materials to royalty and licensing revenues will be in the ballpark of 1.3:1. Total gross margins are expected to be approximately in the range of 74% to 76% as a result of higher raw material pricing. R&D and SG&A expenses are both expected to grow in the mid- to high single-digit percentage year-over-year as we continue to invest in our technology and R&D engine. 2026 operating margins are expected to be in the range of 34% to 37%. We expect the effective tax rate for 2026 to be approximately 19%. And lastly, we continue to prioritize returning capital to our shareholders. During the fourth quarter and thus far in Q1, we have repurchased approximately 454,000 shares of common stock for $53 million. When combined with our dividends, this represents a total capital return to shareholders of approximately $139 million over the last 12 months. Additionally, our Board of Directors has approved an increase to our quarterly cash dividend. A dividend payment of $0.50 per share will be paid on March 31, 2026, to shareholders of record as of the close of business on March 17, 2026. The dividend increase reflects the confidence in our robust future growth opportunities, expected continued positive cash flow generation and commitment to return capital to our shareholders. As we enter the new year, we are highly profitable, operationally agile and well positioned for continued growth, supported by a strong balance sheet that enables ongoing investment in our people, infrastructure and innovation. With that, I'll turn the call back to Steve. Steven V. Abramson: Thanks, Brian. What lies ahead for OLED is both expansive and compelling. Product road maps are broadening, new capacity is coming online and adoption continues to extend well across the consumer electronics landscape. With decades of leadership in phosphorescent materials and OLED innovation, we are supporting our customers as they bring to market the next generation of OLED products and reinforcing the industry's long-term growth trajectory. I would like to thank each of our employees for their drive, desire, dedication and heart in elevating and shaping Universal Display's accomplishments and advancements. We are committed to being a leader in the OLED ecosystem, achieving superior long-term growth and delivering cutting-edge technologies and materials for the industry, for our customers and for our shareholders. And with that, operator, let's start the Q&A. Operator: [Operator Instructions] Our first question is from Brian Lee with Goldman Sachs. Brian Lee: I guess just bigger picture, this is the outlook quarter. You're giving us the view here for '26. I know you're still quite constructive on the outlook for blue without quantifying it. But can you kind of give us a sense at the start of the year, where the bottlenecks to blue are and then kind of the visibility to updates on progress there moving through 2026? Brian Millard: Sure. Brian, on blue, as Steve said in his remarks, I mean, we continue to feel like we're very much on the right path. We've been working with multiple customers now for a while on their development efforts in terms of getting our phosphorescent blue material into a commercial product for consumers. We continue to feel like we're on the right path there, Steve. Also mentioned the various architectural approaches that our customers are pursuing for blue, which I think, is even greater evidence of the fact that this material is very beneficial for them and for the industry and getting it designed in, in various approaches is very critical for them. And so in terms of the path forward, we continue to support them, but it's really much of the progress here forward is in the customers' hands in terms of getting it into a commercial device for the market, while our work continues in terms of developing and inventing new materials that help open more doors for them as they go through that process of commercializing products with blue. So the work continues, but the path that we're on and the enthusiasm we have for the product continues to be very strong. Brian Lee: Fair enough. And then I guess just a follow-up on blue. I mean, it sounds like visibility is still somewhat limited even though there's activity across multiple customers. But if we just look at kind of the developmental revenues since you started first breaking them out in 2023, they're kind of down, right? They've just been hanging around $4 million to $5 million a year, and it was actually down in '25 versus '24. I think at one point in time, you kind of directionally had said you expect blue revenue to grow. Is there any, I guess, visibility this year as to kind of blue from a sampling and activity perspective where you would expect that number to grow and maybe be a bit of a leading indicator to kind of what might be the commercialization pathway over the next few years? Brian Millard: Yes. I think certainly, the blue revenue figure that's reported, it was, as you said, $800,000 for Q4 and $4.3 million for the full year of '25. It's an interesting data point, but I think that there's evidence we can clearly see that a little bit of material can go a very long way in the development efforts. And so I don't think it's necessarily the only or the primary way that progress can be measured. And in terms of what we expect this year for blue revenues, it's still going to be developmental in nature. So I think modeling kind of around the zone that we've been for the last few years is a reasonable place to go. Brian Lee: Okay. Great. Maybe just a couple of modeling ones, and I'll pass it on. Just big picture thoughts on inventory trends across key geos, especially China and maybe seasonality expectations for this year, given you had a little bit of lumpiness last year? And then just from a modeling perspective, it did seem like you had the big increase in cumulative catch-up payments in Q4, which you outlined, it was up year-on-year. Is there anything to read into that? I mean it's like the second straight year where you've had double-digit millions of revenue catch-up at the end of the year and the reasoning being out in your forecast are being taken down. Maybe just what the implications are of demand kind of coming in and how we should expect that to trend going forward? Brian Millard: Yes. So on your first point on inventory in China specifically, I mean, I think we've -- at this point, we kind of feel like most of that tariff buying has kind of worked its way through as we exit '25. And on seasonality for this year, we are expecting more of a return to our historical pattern, which is the second half being stronger than the first half. As you know, last year, '25 was a bit of an anomaly with the tariff-related buying that happened in the first half by our Chinese customers. And in terms of the forecast and the cumulative catch-up revenue, we rely on third-party data, market research firms that track the display industry for those out-year estimates that we use in our revenue process. And recently, over the last quarter or so, there have been some revisions to those forecasts, and that's what drove the cumulative catch-up in the fourth quarter. So we go through that process on a quarterly basis. Sometimes it's very minimal, sometimes it swings the other direction. But as we closed out '25, there was a cumulative catch-up that did result in additional revenue. Operator: Our next question is from James Ricchiuti with Needham & Company. [Operator Instructions] James Ricchiuti: I wanted to ask about the capacity adds, particularly the new 8.6 Gen lines. What I'm wondering is how soon would you anticipate seeing benefits from these starts? And maybe looking at capacity builds. Is this something that you would anticipate in as early as Q2? And is that also embedded in your thinking around '26 guidance as we think about the second half being more weighted. I assume that also has something to do with some of the new product launches. But I wonder if you could just comment on the capacity situation. Brian Millard: Thanks, Jim. On the capacity adds, certainly, these new fabs from both Samsung and BOE coming online this year are adding significant new capacity for the IT market. And Samsung's fab is not expected to come online till sometime in Q2 and BOE's shortly thereafter. So we really aren't going to get a full year of operations from out of those 2 fabs but they are incorporated in our overall guidance for the year and to some degree, are weighing on that second half orientation. But there's also, as you know, a heavy product cycle orientation in the second half that also drives the reason for the revenue being more second half weighted. James Ricchiuti: Okay. I want to ask about the competitive environment in China from local players. And just looking at some of the revenue concentration with your large customers, it looks like revenues in -- with one of your large customers in China has declined year-over-year for the last 2 quarters. And I'm just wondering, how do you view their market activity with some of these new local players, maybe even from a longer-term perspective? Brian Millard: Yes. There certainly has been an increased competitive environment over the last few years, especially in China. China remains a critical market and a growing market for us and for the industry, and we're continuing to support our customers in China and work with them on all their development needs. Also, as a company, we are making additional investment in the Chinese market. We've added additional folks to our team there. We're in the process of opening a new lab in China as well. So making sure that all the local support that we have on the ground is at the right level for what we need to support our customers there. But certainly, there is a competitive environment. But when you look at our materials, the quality of our materials, the patent position that we have with more than 7,000 patents that are very global in nature, we continue to believe that we'll have the dominant position in the OLED materials market going forward. James Ricchiuti: Maybe one final quick one. Is there any update that you can provide on the contract talks with LG? Brian Millard: Yes. So we've been working with LG, as you know, for more than 2 decades at this point, continue to have a very strong relationship with them, and their contract did expire at the end of last year. We're working through the details of a new contract with them. So nothing to announce today, but things are progressing as we'd expect there, and we have no concerns about getting a new deal put in place. Operator: Our next question is from Mehdi Hosseini with SIG. Mehdi Hosseini: Just want to go back to your calendar '26 revenue guide, the midpoint implying 4% year-over-year growth. I want to better understand the underlying assumption. Are you looking at the smartphone units, notebook and TV and rolling up? Or are you looking at the Gen 8 and just the panel production? And the reason I bring this up is we're all struggling to figure out how higher cost of component is adversely impacting end market demand. And essentially, I want to know if there is some conservatism from that or from that variable dialed into your guide? And I have a follow-up. Brian Millard: Mehdi, the guidance at the midpoint and overall really is in line with the industry growth that's projected in terms of area. So that mid-single digit, roughly the midpoint of our guidance and the mid-single-digit growth aligns very closely with the square area growth that's projected for the OLED market this year based on the firms that publish estimates for that. And to your point, this year -- and to your question on what we're taking into account, we're taking into account everything across smartphones, IT, TVs and other markets. So it's a total view of all the various end markets where our material ends up. And on the potential downside, as you said, there are concerns about memory pricing and availability this year that are factoring in on the downside. There's also on the upside, the opportunity for stronger IT demand as well as foldable demand that's coming out this year. So that's -- those are the various factors that we weighed in coming up with the $650 million to $700 million range. But the midpoint is very closely aligned with the area of growth that's projected for the industry this year. Mehdi Hosseini: Okay. And then the follow-up has to do with royalty and how should we model this for '26 as you renegotiate your contract with LG? Should we just make some assumption from the past couple of years and use a ratio? Or would there be a greater variability impacting the royalties from that particular customer? Brian Millard: We're expecting overall across our total business for the ratio of materials to licensing this year to be around 1.3:1. So that's the best way to model it. Operator: [Operator Instructions] Our next question is from Martin Yang with Oppenheimer & Company. Martin Yang: I have a follow-up to the catch-up -- cumulative catch-up figure in 4Q. Is there any more context you can give us on where the adjustment is happening? Is the relating to certain product categories or certain customers? Brian Millard: Martin, so the cumulative catch-up was across all of our customers. So there's some that are positive, some that are negative, but they netted out to that $10 million cumulative catch-up figure in the quarter. And it's not end market specific. It's more of a total number because the way that we recognize revenue is based on our total business with each of our customers, and we are recognizing an average ASP over those contract terms. So it wasn't specific to any particular end market or application. Martin Yang: Got it. Just a quick follow-up on that. So can you confirm that some customers, the figures were adjusted up and some were down. So it's not directionally in the same direction? Brian Millard: To varying degrees, yes, each quarter, we typically see some going one way and some going the other as we have to go through that re-estimation process. And it's a combination of for the next 12 months, we use our own internal forecasting processes. And then for the later periods, we do rely on that third-party data. So typically, each quarter, the number we report, which is a net number. Within that, there's certain customers that are moving one direction and certain another. Martin Yang: Got it. And then last question on the guidance. So you talked about error growth according to third-party research at the midpoint, do you also incorporate your own view regarding how end market such as smartphone shipments would trend this year? Or is this the error growth as the sole anchor for the midpoint of the guidance? Brian Millard: Yes. So the foundation of our guidance is also really our customer forecast, right? So meeting with our customers, understanding what they're hearing from the OEMs in terms of demand for the year across all the various end markets that they supply. And when we -- so we certainly are within our range in terms of the customer forecast and where that rolls up. The midpoint of our guidance also happens to align closely with the data that many of the industry firms are publishing for what they project this year. And then looking beyond '26 into the next few years, we do expect the growth rate to increase significantly off of what's projected this year, but '26 does have more mid-single-digit growth associated with it based on what we're hearing from our customers as well as what those market research firms are projecting. Operator: Our next question is a follow-up from Jim Ricchiuti with Needham & Company. James Ricchiuti: Brian, I just want to go back to the comment you made about gross margins. I think you talked about higher raw material costs. And I was wondering if you could elaborate on what you're seeing, specifically what materials. Brian Millard: Yes. So we have certain raw materials. Iridium is one that is a key raw material for many of our products. And it has fluctuated in price over the last few years, and we do expect to sell products this year that have some higher cost iridium in them as well as other raw materials as our materials continue to get more complex and increase their performance characteristics, there's also a different quantity of raw materials required as well as type of raw materials that also can drive an increase in cost. So that's having some impact on us that caused us to revise the gross margins to be 74% to 76% as the guide for this year. James Ricchiuti: If you were to just quantify that versus what -- maybe what we saw this past year, how much of a headwind is it? Is it -- I'm not sure if it's entirely the increase that you're seeing in some of these material costs or if there's something else? Brian Millard: Yes. On the pricing side, we really aren't expecting any significant adjustments in pricing in '26. It really is coming down to raw materials being a key driver of the decrease -- slight decrease off of where we were in '25. Operator: Our next question is from Woo Jin Ho with Bloomberg Intelligence. Woo Jin Ho: And just another follow-up on the gross margin. Look, at the end of the day, gross margin has been sliding from the 80s all the way to the mid-70s with the latest guidance. I'm just curious if there's anything else outside of the raw material costs. Curious how -- if you're able to pass through some of the good development work that you've done to at least stabilize gross margins going forward from here. Brian Millard: Yes, so part of what's caused gross margin over the last year to decrease modestly is volume pricing. So as the industry has grown and matured, our volumes have increased significantly over the last number of years. And therefore, there has been a slight decrease in ASP just as volume and scale has increased in the industry and therefore, in our business as well. In terms of costs and conversations about those with customers, certainly, when we sit down with our customers to talk about new long-term agreements, our cost structure and changes in it since we last negotiated a deal are certainly front and center as part of those conversations and factor into the ultimate outcome that we reach with our customers. Operator: We have reached the end of our question-and-answer session. I would like to turn the call back over to Brian Millard for any additional closing remarks. Brian Millard: Thanks very much for your time today. We appreciate your interest and support. Operator: Thank you. This does conclude today's conference call. You may now disconnect.
Operator: Greetings, and welcome to the Floor & Decor Holdings Fourth Quarter 2025 Conference Call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the conference over to our host, Wayne Hood, Senior Vice President of Investor Relations. Thank you. You may begin. Wayne Hood: Thank you, operator, and good afternoon, everyone. Welcome to Floor & Decor's Fiscal 2025 Fourth Quarter and Full Year Earnings Conference Call. Joining me today are Tom Taylor, Executive Chair; Brad Paulsen, Chief Executive Officer; and Bryan Langley, Executive Vice President and Chief Financial Officer. Before we begin, I want to remind everyone of the company's safe harbor language. Comments made during this call contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statement that refers to expectations, projections or other characterizations of future events, including financial projections or future market conditions is a forward-looking statement. These statements are subject to risks and uncertainties that could cause actual future results to differ materially from those expressed in these forward-looking statements for any reason, including those listed at the ending of the earnings release and in the company's SEC filings. Floor & Decor assumes no obligation to update any such forward-looking statements. Please also note that past performance or market information is not a guarantee of future results. During this call, the company will discuss certain non-GAAP financial measures. We believe these measures enable investors to understand better our core operating performance on a comparable basis between periods. A reconciliation of each of these non-GAAP measures to the most directly comparable GAAP financial measure can be found in the earnings press release, which is available on our Investor Relations website at ir.flooranddecor.com. A recorded replay of this call and related materials will be available on our Investor Relations website. Let me now turn the call over to Tom. Thomas Taylor: Thank you, Wayne, and thanks to everyone joining us today for our fiscal 2025 Fourth Quarter and Full Year Earnings Conference Call. During today's conference call, Brad, Bryan and I will be walking through the key highlights from the quarter and the full year. Then Bryan will share how we're approaching fiscal 2026 and the priorities that are shaping our outlook. We're pleased to deliver fiscal 2025 fourth quarter diluted earnings per share of $0.36, which was in line with the midpoint of our earnings guidance provided on our third quarter earnings conference call. For the full fiscal year, diluted earnings per share was $1.92 compared with $1.90 in the prior year. As a reminder, last year's results include $6.8 million or $0.05 per share of net benefit related to the derivative litigation settlement in the fourth quarter of 2024. Our fourth quarter sales increased 2% and to $1.130 billion, while comparable store sales declined 4.8%. For the full fiscal year, sales grew 5.1% to $4.684 billion and comparable store sales declined 1.8%, which was near the low end of our expectations. I'm incredibly proud of what our teams accomplished in 2025. Despite pressure on comparable store sales driven by softness in existing home sales activities and shift to smaller flooring projects, we expanded our market share, navigated tariff complexities, increase our gross margin rate, opened 20 new stores and delivered year-over-year earnings growth. This performance reflects our unwavering commitment to disciplined execution and strategic investment in our future. It also reinforces our confidence in our long-term strategy and in the opportunities ahead for our customers, our associates and our shareholders. With that said, let me now turn the call over to Brad. Wayne Hood: Thanks, Tom. I want to begin by also recognizing our more than 13,500 associates across the company. Their customer-focused commitment throughout 2025 enabled us to execute effectively in a complex and challenging environment and delivering exceptional customer experience. We are proud to have achieved record Net Promoter Scores in 2025 and which underscore and validate our associates' efforts. The progress we made by expanding our footprint, strengthening our capabilities, controlling expenses and gaining market share demonstrates the strength of our operating model and the discipline of our teams. As we enter 2026, we have a clear set of initiatives designed to further grow our market share and drive sales and profitability in any economic environment. Our priorities are aligned with the areas where we see the greatest opportunity. New store productivity will remain a major focus. We opened 20 new warehouse-format stores in 2025 and plan to open 20 more in 2026. Ensuring these locations ramp efficiently and deliver stronger early results is a top priority, and I'll speak more about the actions driving that performance in a moment. We are investing in initiatives that deepen customer loyalty and translate directly into greater wallet share with our Pro customers. The key priority is accelerating our Pro market share by advancing our supply house capabilities in key categories such as installation materials, and by relaunching an enhanced Pro loyalty offering. In fiscal 2026, we will focus on the design, development and testing required for a Pro Loyalty 2.0 relaunch in early 2027, which is expected to introduce a differentiated Pro experience with expanded personalization capabilities. To further strengthen our supply house value proposition, we are piloting enhancements to Pro pricing supported by an improved delivery offering for this customer segment. Together, these and other initiatives build long-term capabilities that are expected to significantly increase switching costs and deepen our strategic advantage with Pro customers. Maintaining strong gross margin performance will continue to be a priority in fiscal 2026. We are prepared to take modest retail pricing actions to help offset the expected impact of tariffs and to manage both margin rate and dollars. As a reminder, we have made meaningful progress in diversifying our product sourcing. China represented 3% of our fourth quarter receipts, down from 12.5% in the prior year. Our teams have consistently executed well in navigating difficult environments, and we remain confident in our ability to manage through these dynamics with discipline and success. We are building a scalable, strategic account-driven B2B foundation that supports the phase expansion of our regional commercial account managers. This team, which totaled 67 at the end of 2025 and operates outside our stores, enhances our ability to capture additional commercial market share through our stores in key markets. Collectively, we believe these asset-light growth investments will increase engagement, improve retention and expand lifetime value among our highest value commercial customers. Driving annual supply chain productivity improvement is a top priority over the next few years. We are piloting an initiative over the next several months that is designed to deliver a meaningful reduction in distribution center to store lead times by improving network responsiveness, inventory flow and store service levels. This work is expected to strengthen our ability to move product through the network more efficiently, support better in-stock performance for our customers and increase inventory turns. These are just some of the initiatives that give us confidence that we can continue to grow ahead of the market even in a year when industry demand may face ongoing headwinds. Our priorities remain clear: stay disciplined; invest where we have structural advantages; and execute with even more operational rigor. Let me turn to our new warehouse store expansion. In the fourth quarter of fiscal 2025, we opened 8 new warehouse stores. For the full year, we added 20 new locations and closed 1, ending the period with 270 stores, an 8% increase from 251 a year ago. We remain on track to open 20 new stores in fiscal 2026 with development primarily concentrated in markets where we already have a presence. Our pipeline reflects a strategic mix of store sizes and market type based on market potential thresholds. In fiscal 2026, we expect the vast majority of openings to be in Tier 1 and Tier 2 markets, which positions the class for a meaningfully stronger first year volume. For example, we plan to open a store on Staten Island, New York in 2026, which we consider a Tier 1 market, whereas our Fayetteville, North Carolina opening in 2026 would be an example of a Tier 3 market. Additionally, we expect more than half of 2026 openings to occur in the first half of the year, compared with 35% last year, providing more operating weeks and further supporting stronger first year productivity. Looking ahead, we expect to have a footprint in every major U.S. market by the end of the first quarter of fiscal 2027, positioning us for continued share gains and improved operating leverage. We're steadily advancing toward our long-term goal of operating 500 warehouse-format stores across the United States and retain the flexibility to adjust our store opening cadence as market conditions change. Relatedly, we are pleased to have made meaningful progress in reducing our overall new store construction costs. Capital spending per store for our 2025 class of new stores was $10.2 million, which is $1.2 million or 11% lower than our fiscal 2023 class. Our 2026 class of new stores will benefit from our efforts over the past year to reduce costs and optimize the store size and achieve noncustomer-facing cost reductions as well as from a greater number of second-use sites in the pipeline. We are managing these costs diligently while continuing to invest in our stores, store experience and associates to drive returns as industry conditions improve. Turning to our fiscal 2025 fourth quarter full year and early fiscal 2026 sales performance. Comparable store sales declined 4.8% in the fourth quarter. For the full year, comparable store sales declined 1.8%, which was at the low end of our guidance of down 2% to down 1%. As a reminder, our fiscal 2024 fourth quarter benefited by approximately 110 basis points from Hurricanes Helene and Milton, creating a tougher comparison for fiscal 2025. This dynamic was a key driver of the expected decline in fourth quarter comparable store sales. We are pleased to see our better and best categories continue to outperform, reflecting customers' strong appetite for quality, technology, innovation and trend forward design. On a monthly basis, comparable store sales decreased 1.5% in October, 6.1% in November and 6.7% in December. On a 2-year stack basis, the decline in comparable store sales sequentially improved each quarter in 2025, providing some context to the underlying momentum in the business. From a geographic standpoint, our West region continued to outperform the company average for both the quarter and the year, highlighting the continued relative strength and resilience of that region. Turning to early fiscal 2026. We were pleased with the broad-based improvement we saw in January. Comparable store sales increased 0.4%, marking our first January increase since 2022 and reflecting a meaningful step forward in underlying demand, consistent with the gradual improvement we saw in existing home sales in December. That said, early fiscal February sales have been meaningfully impacted by the severity of winter storm fern that disrupted operations across more than half of our stores and our Baltimore distribution center. In the markets where weather was not a factor, we continue to see sustained momentum, particularly in the West, underscoring the strength of underlying demand where operating conditions remain stable. We are pleased to now be working our way out of the disruption through the remainder of the first quarter and the pace of recovery is improving as conditions normalize across the network. That said, the improvement will take time. January existing home sales declined 8.4% sequentially and 4.4% year-over-year to 3.91 million units, and we do not expect to fully recover the sales lost during the storms within the first quarter. Our fiscal 2026 first quarter-to-date comparable store sales declined 3.5%. Turning back to our fourth quarter performance. Comparable store sales reflected a 4.2% decline in transactions and a 0.6% decline in average ticket. Transactions were at the lower end of our expectations, while average ticket finished below our expected range. For the full year, transactions declined 3.5% and average ticket increased 1.8%. By comparison, fiscal 2024 transactions declined 4.7%, while average ticket declined 2.5% from the previous year. In the fourth quarter and full year, connected customer sales rose approximately 2% from last year and represented about 18.5% of total sales. Connected customer average ticket continued to grow, while transactions remained under pressure. Fourth quarter sales to Pro customers grew slightly year-over-year and 9% for the full year, continuing to represent approximately 50% of total sales. We are pleased to see further evidence that our focus on understanding Pro needs is paying off as total and comparable store sales in installation materials, a critical Pro category, grew in the fourth quarter and for the full year. This performance reflects the success we are having in expanding Pro wallet share in an important category and demonstrates the strength of our supply house strategy with Pros. Turning to Tile, where both Pros and homeowners look to us for industry-leading elevated aesthetics. We continue to invest in trend forward designs in more realistic visuals that differentiate our assortment in the market. The successful launch of our USA-made Vetta Elements Luxe collection in 2025 is a strong example of this strategy. Vetta is a mix and match porcelain system that enables cohesive, high-end design across floors, walls and outdoor areas. This line is designed to serve homeowners, designers, builders and commercial customers. We will continue to build on the success of Vetta in 2026 with an expanded assortment, which expands the collection with additional color options, 2 new stone inspired series, limestone and linear travertine and new paper options. These innovations enhance finished spaces and help Pros deliver more premium outcomes for their customers. Growing our market share with Pros remains a top priority in understanding their evolving needs across categories is essential. While smaller and fewer project types have been the norm for some time, contribute to broader pressure across the vinyl industry, we are seeing a subtle shift toward greater value in the category, even when that means choosing products with lower specifications. We believe this shift towards value reflects rising wages, higher operating costs, and tighter project pipelines that are putting more pressure on certain job level profitability. Not surprisingly, some Pros are looking for ways to stretch budgets without compromising project outcomes. We see this as an opportunity to accelerate our market share gains, particularly among independent flooring retailers by staying ahead where demand is moving and proactively implementing strategic actions that meet Pros needs. To that end, we are introducing a set of compelling offers, including new SKUs and targeted special buys designed to deliver immediate meaningful value to our Pro customers. By placing these offers in high-visibility off-shelf locations, we are making it easier for Pros to quickly find cost-effective solutions that support the economic pressures they are managing. These initiatives strengthen our ability to deliver the right products at the right price points, ensuring we remain an essential partner as they navigate tighter economics in evolving project requirements. Finally, let me discuss Spartan Surfaces. Despite a volatile operating environment, including significant tariff pressures and continued softness in commercial multifamily housing, Spartan Services delivered strong performance. Fiscal 2025 sales increased approximately 13% to $243 million, surpassing our expectations and reinforcing the strength of the platform and the value it brings to our commercial business. We continue to strengthen our commercial footprint outside our stores through Spartan services, expanding our presence across health care, education, hospitality and senior living commercial segments. These market segments demand highly specialized products and deep partnerships with A&D firms, capabilities that extend well beyond what our stores alone can provide. In these segments, product specification and trusted A&D relationships are essential and Spartan Services positions us exceptionally well on both fronts. Our strategy is to accelerate growth by expanding our representative headcount, both organically and through targeted acquisitions to deepen these relationships and broaden our reach nationwide with a particular focus on the Western United States. Let me now turn the call over to Bryan. Bryan Langley: Thank you, Brad. As we wrap up fiscal 2025, our financial performance underscores the resilience of our business model and the effectiveness of our financial discipline despite ongoing pressure in the hard surface flooring category. I'm extremely proud of how the entire company continued to effectively manage our profitability, inventory, cash flow and balance sheet, playing a key role in supporting our financial performance in 2025. Importantly, we were able to maintain this discipline while continuing to invest in expanding our capabilities to support long-term growth. Now let me discuss some of the changes among the significant line items in our fourth quarter and full year financial statements as well as our outlook for 2026. We continue to be pleased with our gross margin performance, our fourth quarter gross profit increased by $9.8 million or 2.0% compared to the same period last year. Our gross margin of 43.5% was flat year-over-year and up 10 basis points sequentially, landing within our expected range. Gross margin benefited from favorable product margin, inclusive of higher duties and tariffs starting to impact us offset by the expansion of our distribution center network in Seattle and Baltimore, which as anticipated, at a gross margin pressure of approximately 90 basis points year-over-year. These distribution center investments position us to support the next phase of growth with greater speed, efficiency and reliability. While they create some near-term gross margin pressure, they meaningfully strengthen our long-term operating capabilities and enhance the value we deliver to customers. For the full year, gross profit increased $115.7 million or 6.0%, driven by 5.1% sales growth and a 30 basis point improvement in gross margin to 43.6% from the same period last year. Our gross margin expansion was driven by favorable product margin due to lower supply chain costs partially offset by higher distribution center costs. Our distribution center investments impacted gross margin by approximately 70 basis points, consistent with our expectations. Turning to operating expenses. You'll notice in today's press release and 10-K that we've consolidated operating expenses into a single selling, general and administrative line for the quarter and the year. This allows us to conform to industry peers and reflects the way our business is evolving and the way our leadership team manages performance day-to-day. As we transition to this new presentation, I will provide both our new and historical breakouts, so you can compare our results to prior periods. This bridge is designed to support year-over-year analysis during the changeover and ensure continuity as we move to a consolidated SG&A line going forward. With that context, let me walk you through the fourth quarter and full year SG&A performance. Our fourth quarter selling, general and administrative expenses increased by 4.0% to $439.2 million from the same period last year. The increase in SG&A expenses was primarily driven by the 8 new stores that we opened during the quarter. SG&A expenses for noncomparable stores increased $24.4 million and for comparable stores decreased $14.2 million. As a percentage of sales, SG&A deleveraged by approximately 80 basis points to 38.9%, primarily due to the addition of new stores and a decline in comparable store sales, partially offset by a decrease in preopening expenses. SG&A expenses also included approximately $3 million of expenses related to our ERP implementation. For the full year, selling, general and administrative expenses increased by 6.1% to $1.7738 billion from the same period last year. The increase in SG&A expenses was primarily driven by the 20 new stores that we opened during the year, which increased compensation costs, occupancy costs and depreciation and amortization expense. SG&A expenses for noncomparable stores increased $126.8 million and for comparable stores decreased $24.8 million. As a percentage of sales, SG&A deleveraged by approximately 30 basis points to 37.8%, primarily due to the addition of new stores and a decline in comparable store sales, partially offset by a decrease in preopening expenses. SG&A expenses included approximately $9 million of expenses related to our ERP implementation in line with our expectations. For comparability, here are the historical breakout of operating expenses. Our fourth quarter selling and store operating expenses increased by 3.8% to $360.7 million from the same period last year. As a percentage of sales, selling and store operating expenses increased by approximately 50 basis points to 31.9% from the same period last year. For the full year, selling and store operating expenses increased by $107.1 million or 7.9% to $1.4695 billion compared to last year. As a percentage of sales, selling and store operating expenses deleveraged by approximately 80 basis points to 31.4% from last year. The deleverage of these expenses in the fourth quarter and the full year period is primarily due to the addition of new stores and a decline in comparable store sales. Our fourth quarter general and administrative expenses increased by 10.7% to $70.9 million from the same period last year. As a reminder, 2024 fourth quarter benefited from $6.8 million or $0.05 per share related to the derivative litigation settlement. 2025's results include onetime costs associated with our efforts to streamline the organization and enhance long-term operating efficiency. As a percentage of sales, general and administrative expenses deleveraged by approximately 50 basis points to 6.3% compared to the same period last year. For the full year, general and administrative expenses increased by $10.9 million or 4.1% to $277.0 million compared to last year, driven primarily by higher personnel expenses and the comparison to the $6.8 million benefit from the derivative litigation settlement in 2024. As a percentage of sales, general and administrative expenses leveraged by approximately 10 basis points to 5.9% from the same period last year. Our fourth quarter preopening expenses decreased by 28.6% to $7.6 million from the same period last year. As a percentage of sales, preopening expenses leveraged approximately 20 basis points to 0.7% compared to the same period last year. For the full year, preopening expenses decreased by $16.3 million or 37.3% to $27.3 million compared to last year. As a percentage of sales, preopening expenses leveraged by approximately 40 basis points to 0.5% from the same period last year. The decrease for the fourth quarter and full year is the result of a decline in the number of new stores that we opened compared to the same period last year. Those expense breakouts reflect the historical presentation are intended to support year-over-year comparisons during the transition. Let me now touch on our effective tax rate. Our fourth quarter effective tax rate increased to 24.0% from 19.9% in the same period last year. Our fiscal 2025 full year effective tax rate increased to 21.8% from 18.8% in the same period last year. The increase for the fourth quarter and full year was primarily due to a decrease in excess tax benefits related to stock-based compensation awards. The year-over-year effective tax rate change impacted 2025 by $0.08 per share. Turning to the balance sheet and liquidity. Our financial position remains a core strength of the company. Net cash provided by operating activities was $381.8 million in 2025 compared with $603.2 million in 2024. The year-over-year decline was driven primarily by changes in trade accounts payable due to the timing of inventory receipts. As of December 25, 2025, inventory totaled $1.1 billion, essentially unchanged from the same period last year. 2025 capital expenditures, including amounts accrued at the end of the period were $300.4 million, down from $376.3 million in 2024, which was at the high end of our guidance. The decrease from last year reflects fewer new store openings and fewer future construction projects underway. We ended the year with $249.3 million in cash and cash equivalents and $198.2 million in debt associated with our term loan facility. Unrestricted liquidity at year-end was $909.8 million consisting of $249.3 million in cash and cash equivalents and $660.5 million available under our ABL facility. This level of liquidity provides meaningful flexibility to navigate the current environment, support working capital needs and invest in our growth initiatives. As we look ahead to 2026, we expect the U.S. housing and hard surface flooring markets to continue to be shaped by the same macroeconomic forces that have influenced the industry since late 2022. We are encouraged by the trend towards lower mortgage rates, but housing affordability and economic uncertainty remain key constraints on large discretionary purchases. Compounding this the severe winter weather in the early first quarter makes it difficult to clearly assess the underlying demand until we are further into spring. As conditions normalize, we expect visibility to improve. Before we discuss our fiscal 2026 guidance, I want to remind everyone, fiscal 2026 includes a 53rd week, which will be reported at the end of the fiscal fourth quarter. I will highlight the 53rd-week contribution we have incorporated into our guidance. Sales are expected to be in the range of $4.880 billion to $5.03 billion or increased by 4% to 7% from fiscal 2025. The 53rd week is expected to contribute approximately $65 million to sales. Comps are estimated to be down 2% to up 1%. Comp average ticket is expected to increase low single digits and comp transactions is expected to decline mid-single digits to low single digits. Gross margin is expected to be approximately 43.5% to 43.8%. SG&A as a percentage of sales is estimated to be approximately 37.7% to 37.8% with the first and fourth quarters being the most pressured from new stores. Interest expense net is expected to be approximately $5 million. Tax rate is expected to be approximately 21.5% to 22.0%. Depreciation and amortization expense is expected to be approximately $245 million. Adjusted EBITDA is expected to be approximately $560 million to $590 million. The 53rd week is expected to contribute approximately $11 million to adjusted EBITDA. Diluted earnings per share is estimated to be approximately $1.98 to $2.18. The 53rd week is expected to contribute approximately $0.08 to diluted EPS. Diluted weighted average shares outstanding are estimated to be approximately 109 million shares. Our fiscal 2025 capital expenditures are planned to be in the range of $250 million to $300 million, including capital expenditures accrued. We intend to open 20 warehouse format stores and begin construction on stores opening in fiscal 2027. Collectively, these investments are expected to require $160 million to $190 million. We expect our new store CapEx to be approximately $7 million to $8 million for the class of 2026 compared to $10.2 million for the class of 2025 due to optimizing the size of the stores and utilizing more second-use facilities. We intend to invest approximately $60 million to $70 million in existing stores and existing and new distribution centers. And finally, we plan to continue to invest in information technology infrastructure, e-commerce and other store support center initiatives using approximately $30 million to $40 million. I'd like to thank our associates for their continued focus and execution. Our 2025 performance is a direct result of their attention to operational detail, productivity and customer service. That consistency and discipline remain critical to supporting our confidence in the durability of our model and driving our long-term growth. I will now turn the call back to Tom. Thomas Taylor: Thanks, Bryan. Let me offer a few closing remarks before we take your questions. With Brad stepping into the CEO role, he'll now be leading these calls going forward. and I'm excited for you to hear from him in that capacity. As I transition into the executive chair role, I will remain closely involved in the business focusing on the long-term strategic initiatives Brad and I have been developing to support our growth. I'm energized by the opportunity to concentrate even more on these long-range priorities and the work that will drive our next chapter. Brad and I are fully aligned on our long-term vision, our culture and the associates who make this company exceptional. Floor & Decor has been a meaningful part of my life, and I look forward to continuing to contribute to the work that will shape its future. Operator, we'll now take questions. Operator: [Operator Instructions] And your first question comes from Peter Keith with Piper Sandler. Peter Keith: All right. Thank you very much. Well, Tom, good luck to you in your new role. You've done a nice job of building a category killer in the space. I did want to pivot the first question over to Brad. So Brad, as you're moving into the CEO role now and you're in the chair, you mentioned a couple of initiatives around Pro loyalty and supply chain, but I'm curious what you think of some of the biggest areas of opportunity perhaps to drive some acceleration or operational improvement? Bradley Paulsen: Thanks for the question. I would say I've been really over the course of the last 11 months or so, really, really impressed with the operational capabilities and discipline of the team. I think there's no better example of that when you look at the service scores that we were able to deliver in 2025 despite 30% of our stores being on minimum hours. And that's kind of a 1 team effort to make that happen. But you're right, we certainly see opportunities for us as an organization. We are laser-focused on getting the core of our business growing again. And a key component to that is improved new store performance. And I know we had a pretty detailed description in our prepared remarks on how we're going to do that. But again, the organization is fully focused on delivering meaningful improvement over what we've seen from a kind of first year sales performance relative to our last 3 years. I'd say that would be number one. Number two, and I've talked about this in past calls, I think digital experience for us is a real opportunity. At the highest level, we want our customers to have the same great experience on our digital platforms that they have in our stores. And today, that in some cases, just doesn't happen. The good news is we've hired a new leader over that part of our business. She's got a compelling vision and a very practical plan on how we're going to make that happen. And you'll certainly hear more about that on future calls. And then supply chain. Yes, supply chain is certainly an opportunity. And the way that I frame that as an organization, we're at a maturity level now where that's got to be a priority. And the priority is delivering improved productivity across our entire supply chain every year. And the way that I would frame that is it's very much a singles and doubles approach at this point. And I say that, because it doesn't require transformational investment, it's really process and people and just saying that's going to be a priority for our business. Operator: Your next question comes from Zach Fadem with Wells Fargo. Zachary Fadem: So let's start with the comp guide. Any thoughts on cadence of the year? You mentioned low visibility in terms of demand right now. I'm just curious what you're embedding in terms of the shape of the year of comps and particularly if there's a Q1 guide that we should anchor to? And then separately, any thoughts on the impact of some of those key markets like Texas and Florida versus other markets? And any change in spread between those 2. Bradley Paulsen: Sure. I'll start first and then hand it off to Bryan, so he can give a little bit more detailed answer. But at the highest level, when we think about our guidance, as you all know, we need to cover a range of outcomes. When we think about our recent performance, Q4, a little bit softer demand environment than we expected. We knew it was going to be a tough quarter for us, but a little bit softer, especially in November and December. Really, really pleased with the performance that we saw in January on the heels of a nice December existing home sales report. I'd say our January performance was really the last 3 weeks of the month, because the first week of the month was wrapped around the holiday. So those 3 months were really, really solid. Unfortunately, we had a buzzsaw with what I consider a 2-week weather event in February. And when we kind of dig our way out of a weather event like that, unfortunately, you don't see that demand come back immediately. It takes time. And I know we shared that in the prepared remarks, it's going to take this quarter and more to get that demand to come back into our business. So when we think about the last 3 years and how we've guided, what we know today -- and 1 piece I left out, obviously, January's existing home sales was a step back from December. February probably looked very similar to that. So as I was saying, with the information that we know now, it was best to be very prudent and thoughtful and coming up with the guidance that we did. Bryan, why don't you go ahead and just kind of walk them through some of the details that he asked for. Bryan Langley: Yes, good question, Zach. So 2026, we expect second half comps to be better than the first half, with Q3 being the high mark for the year. on a 3-year stack. That's the way I look at it because it removes the noise from the hurricanes. We expect sequential improvement each quarter on both the low and high end of guide. And then to give a little bit of clarity, as Brad was talking about the February storms, those storms impacted approximately 55% of our stores and contributed almost 200 to 300 basis points of quarter-to-date pressure on comps or $12 million to $18 million. So going into the year, our initial model assumed Q1 comp will be slightly negative prior to those storms happening just because we are lapping the 100 basis points benefit from hurricanes, Milton and Helene coming into this year. So all of the pressure we've seen early on has really been transaction-based. We feel really good about what's happening with quarter-to-date average ticket. Zachary Fadem: Got it. And then on the Pro strategy, curious to what extent you think the EDLP strategy has been a headwind for your Pro business, considering no incremental discounts. And as you think through the next iteration of Pro loyalty, curious to what extent you'd consider tweaking the pricing architecture to perhaps better incentivize the Pro? Bradley Paulsen: Great question. Maybe I start on why the Pro is so important for our business. We've shared that Pro sales are right around 50% of our overall sales. When you think about the remaining 50% of our sales, we think the Pro influence is up to 20 points of that 50 points. So there's no customer that we serve that's more influential than the Pro customer. We really, really like the Pro experience that we have. And I generally divide that into 3 components: service; assortment; and price. When we think about what we do in-store to support the Pro from a Pro desk dedicated pickup location. We'll store their product for up to 7 days, I feel like we've got a very differentiated offering for that individual. From an assortment perspective, we're very proud of our assortment, particularly when you think about our supply house strategy that we have in installation materials and the ability when a Pro comes to our stores, they have a level of confidence that they're going to have the job lot quantities they need to walk out of the store to be able to do the job that they're headed to. The price piece, I think EDLP has been obviously very successful for us. We built a multibillion-dollar Pro business based on it. But when we look at the competitive landscape on both sides, on big box and independents, they've got a different pricing strategy where our Pros are able to get some form of rebates and discounts. And why that is important is because certain Pros, not all Pros, but certain Pros use that gap between what we call shelf price in the kind of net price as profit for their business. So when you factor in, there's a financial switching costs and generally a long-standing personal relationship with independents, it's certainly something that we've looked at for a period of time and said, "Hey, we need to figure that out at some point in time. We were really intentional on the script saying that we're going to take all of 2026 to develop a plan because it does touch all parts of our business. And the way we view that opportunity is a chance for us to develop a deep relationship with that Pro across all 3 of those aspects that I mentioned. So we're excited. We think this is going to be a a meaningful step forward for our business, but it's going to require a lot of work, a lot of thought and a lot of testing before we're ready to go national with it. Operator: Your next question comes from Chris Horvers with JPMorgan. Christopher Horvers: So my first question is a follow-up to the prior question, which is that improvement that you saw in January, was that sort of equally spread across regions. So for example, did California hold serve? Or did that actually accelerate? And then importantly, in those southern markets where home prices are under pressure currently. Did you see relief in those markets and to what extent? Bradley Paulsen: Yes. The good news is we saw really broad-based improvement in January. And what I like to say all geographies in all categories. The only merchandising category that had a little bit of pressure was laminate and vinyl, and we touched on that in the script. But we were really pleased outside of a market or 2 where we had pretty heavy cannibalization, we saw a nice kind of year-over-year improvement. Christopher Horvers: And then, I guess, 2 quick follow-ups. One is, I mean, to be up 0.4% in all in the past 3 weeks, it would seem like those last 3 weeks were maybe up low single digit, not trying to parse it too closely, but I think that's interesting. And then on the SG&A side, if you look at your expenses per average store, that number has been coming down for a few years and it stepped down again in the fourth quarter. What is driving that? Is it where the opens are? Is it optimizing the labor model? And then as we think about an environment where you start comping positively, again, what does SG&A growth or SG&A per average store look like? Bryan Langley: Yes. I'll do my best to kind of answer all of those questions. You're right. Look, over the last 3 years, we've taken almost $67 million out of our comp stores. I think this past year, we took out about $24.8 million. You're right. The majority of that is flexing trans -- labor with transactions. So it's just simple modeling when it comes to that. We have also put pressure on some of the discretionary spend that we have within the stores. Just trying to spend wisely in this environment. So when you think about longer term, when sales start to come back and we see comps start to improve, we don't need to layer in. There's not a significant amount of cost that we have to put back in. They should flow in with the model that we've always said, which in this environment should flow through in the high 30s. So any sort of beat to our model should flow through in the high 30s, just given where our margin rate is and just standard cost increases. So there's not a deferred cost that we've been pushing along and kicking the can. For us, it truly is just optimizing the spend that we have today. And you're right. Look, Brad mentioned it, we were really pleased with January's comps at positive 0.4%. When you think about February, we have improved every single week since we stepped away from the storms a little bit. So when you're trying to think about those in the impact, it has gotten better as we progress, and you'll continue to hopefully see that as we move throughout the quarter and exit Q1. Bradley Paulsen: And I know I've said this once already, but I'm going to say it again. I mean, despite all the actions that we've taken, really, really proud of the service scores that the teams have been able to deliver. Operator: Your next question comes from Michael Lasser with UBS. Michael Lasser: Tom, if we asked you 3 years ago, whether you saw a 3-year downturn would have led to significant market share gains for Floor & Decor, both because of the strategies that have been deployed as well as the prospect of independents and regional players going out of business. You probably would have said, your market share gains would accelerate meaningfully over that time period, yet as we look at the same-store sales performance in the fourth quarter, it's probably similar, maybe a little bit lower than the performance of the flooring market overall. So how have your share gains not accelerated? And how does that inform, how you think about the go-forward as the recovery unfolds, especially as you might experience more cannibalization with more of your stores in infill markets. Sorry, that was a long-winded question. Thomas Taylor: I thought I was done with this, Michael. This is -- let me try to parse that question out just a little bit. So yes, we have -- I believe we have taken share during the last 3 years. I think we can debate how much share that we've taken, how you want to measure that on total growth versus same-store sales. We've continued to grow throughout the downturn through new stores. And so I believe that we've taken it -- should we have taken more -- certainly a good question. I believe that we've executed pretty well, the innovations within the store, the innovations within the product the pricing spreads as we watch them from shelf to shelf have been good. I think a key for us to continue to take share and maybe take it at a faster rate as we look forward at some of the initiatives that Brad has taken on with kind of rethinking about our loyalty program, rethinking about kind of our tier system for our Pros and the way that we make them a little bit more sticky. I think the new or the new addition to our team and between Brad and her, I think they're looking at it in a very good way, and I think that benefits over the next few years. So I'm hoping this long term I thought you were going to ask me if I thought 3 years ago that this downturn would last this long. And my answer has quickly been, absolutely not. I don't think we'd be still kind of hovering around this $4 million and less annualized home sales. So hopefully, that what we saw in December, we see as the weather clears and what we saw in January, and our business continues to go, and that's a good indication that we are taking share. Bryan Langley: Michael, 1 point of clarification. I just want to let you guys know, we do anticipate cannibalization to meaningfully decrease as we get into 2026. When we were opening 31 -- 32 stores a couple of years ago, 30 stores. Last year, we opened 20 and it's really the cannibalization effect of those 20 stores. So even though we're opening more infills as we get into 2026 and beyond, the amount of cannibalization should actually decrease just because of the amount of stores that we're opening. So again, that should help benefit as we move forward. Michael Lasser: Okay. Very helpful. My follow-up question is there's a lot of moving pieces between your gross margin and your ticket. There was a 90 basis point headwind from the DC, so your gross margin was flat. So presumably, product margins were up around 90 basis points. Perhaps price was a lever that you used to offset some of the cost increases yet ticket was negative. And then you're also commenting that there is a bit of a price sensitivity that's prevailing in the market you're trying to appeal to that. How do all of those pieces come together and inform how you're thinking about what's going to happen over the next couple of quarters, not only on ticket, but also within product margin? Bradley Paulsen: Yes, Michael, I'll do my best to answer that. So when you think about 2025, the tariff impact was actually minimal. So when you think about what actually came in just because we're on moving weighted-average cost and our [ churns ] are a little bit slower just over 2x, the tariff impact was minimal. And so we think about it from a gross margin perspective, there was just a little bit of pressure as we were in Q3 and just a little bit in Q4. As we get into 2026, it assumes modest cost increases due to tariffs. Again, it's -- we laid it out last year, but because of our merchandising team's efforts to, one, to negotiate with our current vendors and then two, to further diversify, it's only a modest amount that it's going to increase. We were able to kind of mitigate a lot of that exposure. That's going to build as we get throughout the first half, and it should be fully embedded as we get into the second half. So again, I'm just -- I'm going to talk about it a couple of ways. So when you think about the second half, our gross margin rate will be under a little bit more pressure than the first half. Since you've got that piece of it. But when you think about average ticket, when you step into Q4, if you remember when we talked about it last year, average ticket benefited the most because of the hurricane impacts of Helene and Milton. So a lot of the pressure that you saw in average ticket in Q4 had to actually do with lapping the hurricane benefit, not necessarily pressuring gross margin. And so those 2 get decoupled in Q4 because of that a little bit. So again, as we exit this year and we get into next year, we do think that the first half should outperform a little bit compared to the second half when it comes to gross margin rate. And so again, just modest price increases, and that's how we think about it from a retail perspective as well embedded in that average ticket guidance of up low single digits, and that should be kind of consistent as we think about all 4 quarters, just up low single digits as we move throughout the year in average ticket. Unknown Executive: And maybe just a quick thought for me on the pricing sensitivity piece. We said pretty consistently, we feel really good about how we've navigated through the tariff environment. The team has done a nice job of running pricing tests over the year. So we have a pretty good sense of how the structure -- line structure works together. We did have a specific call out in the script around some sensitivity in laminate and vinyl. And what you're seeing there is a portion of that customer base moving down to a certain quality spec and generally a price point below $2. So when we think about our ability to take square footage share, we're very focused on that. But we do expect that category to be sensitive and pressured in 2026. That being said, when we think about pricing action that we've taken to start the year, we're encouraged because as Bryan said, we've had to take some modest price increases in certain categories. We've been really surgical. And up to this point, we've had success in passing our price on to customers in those categories. Operator: [Operator Instructions] Your next question comes from Steven Forbes with Guggenheim Securities. Steven Forbes: Brad, just a quick one on commercial. So nice to see the growth at Spartan Surface is -- I'd be curious if you could just expand on what are the drivers there? And I guess, how the performance of that business has informed your plan to build out the commercial [ RAM ]? Because correct me if I'm wrong here, the number of [ RAMs ] has sort of been stable for quite some time now. So curious on just sort of how you're thinking about the build-out? Bradley Paulsen: Yes. We're -- I should say, we continue to be excited about the long-term potential to grow in the commercial space. Our relative share there is pretty small relative to what we've done in the retail side of things. Our strategy has been really consistent. We've got 2 prongs. One is Spartan. The second is the [ RAMs ]. When I think about Spartan, we've been really, really consistent in saying, we love the platform. We really like the leadership team, and we feel like we've got the structure there to consistently grow faster than market. At the same time, it's a very fragmented space. So when we think about future M&A, there's certainly an opportunity for that at the right time. On the [ RAM ] side, what I shared in really the second half of 2025 is, the first step there was to bring in new leaders. So we brought in 2 new leaders with really deep commercial selling background. Those 2 focus on people, process and technology. And now we're at the point we're investing in talent. As part of that, people, process and technology, we also scope the market to identify where the biggest opportunities are. So you're going to see investment in additional [ RAMs ] through the course of 2026, focused on the big metro areas. And the reason for that, that is where most of the demand sits and our first 2 markets will be New York City and Dallas. And we're well underway with our efforts there. Operator: Your next question comes from Simeon Gutman with Morgan Stanley. Simeon Gutman: Tom so long, it's been good working with you. Question. First 1 on -- well, it will be 2 parts since I only get one. Mature stores, can you talk about the change in their comp as collective versus the spread to immature? And then, Brad, you asked this earlier around pricing. I want to just ask it a different way. The business is running at a peak gross margin. I take it that if you would get more volume at a lower gross margin, that's a trade-off you might be interested, but it just doesn't make sense. Is that a way to think about it? Bradley Paulsen: It's good question. And when you think about some of the initiatives that we've talked about, certainly around Pro pricing, some of the commercial efforts that we have. When we think about the opportunity to grow volume especially through our stores, if it's a slight headwind to gross margin, but accretive from an EBIT perspective, that's certainly a trade-off that we'd be willing to take. Bryan Langley: Yes. And look, on the comp waterfall, obviously, our newer stores are still continuing to meaningfully outperform our mature stores from a comp base. So we still see the comp waterfall intact. As I've said over the last kind of 12 to 18 months, it's compressed a little bit just in the environment that we're in. Just as a heads up for you guys, I know I've given on some calls, but our stores greater than 5 years are still doing approximately $21 million in sales. Last time I quoted that, they were doing about $22 million, but they're still extremely profitable, generating 23% of EBITDA. Operator: Your next question comes from Max Rakhlenko with Cowen & Company. Maksim Rakhlenko: Can you speak to the competitive environment and how your price gaps are trending today versus prior to tariffs taking in? Just curious if you're seeing any notable changes? Bradley Paulsen: I have described the competitive environment as rational. I would say pricing and promotional activity is in line with expectations. Again, the only exception would be the laminate and vinyl discussion that we've had. And on that, it's really the vinyl part of laminate and vinyl where we're seeing that. Our gaps continue to be I'd say, in line with historical trends. We've got a range that we like to be in. Every category is a little bit different. But pricing is an area that Erson leads for us. We'll continue to invest in people and process there and try to leverage the science of pricing as best we can. Operator: And next question comes from Chuck Grom with Gordon Haskett. Charles Grom: New store productivity has been a nice bright spot the past couple of quarters. Is that largely just from opening up more stores in existing markets? Or can we just talk about that? I mean, the prior 6 quarter average is in the low 50s. So moving from the low 50s to the high 80s is a nice step-up. So curious what's driving it and the sustainability? Bradley Paulsen: Chuck, I think, one, it's -- the stores we're opening, we have more conviction in today. But I think it's also the amount of stores that we're opening to, there's been a disproportionate amount of stores that we've opened each quarter. So when you step in and you look at it, I think we opened 8 stores in Q4, 5 in Q3. Before that, it was only 3 stores in Q2 and 4 in Q1. So I think it also is just the cadence of store openings, that's going to drive that new store productivity, if you look at it from a sales contribution perspective. Operator: And the last question comes from the line of Seth Sigman with Barclays. Seth Sigman: I wanted to ask about the earnings outlook. So to your credit, you are able to hit your numbers, at least the earnings in 2025 and grow earnings year-over-year even as sales came in lower than expected throughout the year. I guess just given that the environment is still pretty uncertain, I'm wondering if you have the same flexibility to manage earnings this year if sales were to come in lower, what would the leverage be. Bryan Langley: Yes. Look, it's -- you're absolutely right, there were a ton of levers and we were trying to optimize the business all the way throughout 2025. We're not done. There's still a lot left in 2026, that we can attack. And as an executive team, we can -- we only have 30% of our fleet that are on minimum hours. There's 70% that can still flex with transactions. We'll continue to put pressure on G&A, the way that we have. And we talked about it, we've made a lot of moves kind of later into this year. We'll start to annualize those as we get into 2026, you'll start to see more of the benefits. So there are plenty of levers that we have to achieve the earning earnings guidance that we put out there. But again, we -- we've done a lot throughout this year. Bradley Paulsen: All right. I know script was a little bit long today. I appreciate the patience with that. Thanks for joining the call, and we appreciate your support. Operator, I'll turn it back to you. Operator: Thank you. And that concludes today's call. All parties may now disconnect. Have a good day.
Operator: Good day, and welcome to the Onto Innovation Fourth Quarter Earnings Release Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Sidney Ho. Please go ahead. Shek Ho: Thank you, Lisa, and good afternoon, everyone. Onto Innovation issued its 2025 fourth quarter financial results this afternoon shortly after the market closed. If you did not receive a copy of the release, please refer to the company's website where a copy of the release is posted. Joining us on the call today are Michael Plisinski, Chief Executive Officer; and Brian Roberts, Chief Financial Officer. I'd like to remind you that the statements made by management on this call will contain forward-looking statements within the meaning of the federal securities laws. Those statements are subject to a range of changes risks and uncertainties that can cause actual results to vary materially. For more information regarding the risk factors that may impact Onto Innovation's results, I would encourage you to review our earnings release and our SEC filings. Onto Innovation does not undertake the obligation to update these forward-looking statements in light of new information or future events. Today's discussion of our financial results will be presented on a non-GAAP financial basis unless otherwise specified. As a reminder, a detailed reconciliation between GAAP and non-GAAP results can be found in today's earnings release. Let me now turn the call over to our CEO, Mike Plisinski. Mike? Michael Plisinski: Thank you, Sidney. Good afternoon, everyone, and thank you for joining us on our call today. We ended 2025 on a high note with orders from 2.5D packaging for AI devices more than doubling in the quarter, contributing to a record revenue of $267 million. Financially, gross and operating margins both improved sequentially and we set a record for cash generation of $95 million in the quarter. Overall, great momentum as we look ahead to the new year, where across the industry, the surge in AI investments is projected to drive a powerful up cycle in the semiconductor capital equipment spending. For example, NVIDIA forecasts that global AI infrastructure will grow at a 40% CAGR over the next 5 years, while capital expenditures from hyperscalers are forecasted to exceed $600 billion in 2026. To meet this demand, industry leaders such as TSMC had signaled a multiyear expansion in CapEx with 2026 spending increasing by more than 30%, mostly to support the addition of new factories. As a result, analysts project strong WFE growth in the range of 10% to 20% in 2026, with the pace hinging on how quickly new cleanroom space becomes available. For Onto Innovation, these dynamics are incredibly positive. Recent discussions with customers are increasingly more constructive and include views into longer-term forecasts with several extending into 2027. In fact, we are quite happy to announce a volume purchase agreement from one of our HBM customers covering Dragonfly 2D and 3D bump metrology demand through 2027. This agreement is valued at over $240 million, including over $60 million in systems for 3D bump metrology. This is an example of where our expanding portfolio of technology is putting us in a position to increase the value we deliver to our customers, serving the seemingly insatiable demand for AI. So let's continue with a deeper look into our advanced packaging business, which grew over 25% sequentially, driven by demand for Dragonfly inspection and Iris films metrology and established 2.5D applications. For new and emerging applications, we're supporting 4 separate customer evaluations of our next-generation inspection systems at the customers' facilities. While still early, preliminary feedback on system performance has been positive with customers acknowledging significant improvement in optical performance and higher throughput. The qualification efforts are in preparation to support our customers in 2.5D packaging and high-bandwidth memory, including next-generation hybrid bonding applications where our current generation tools are already being adopted for process control and R&D. In addition to 2D inspection, 3D metrology is becoming more crucial as smaller denser interconnects used in die stacking and fan-out packaging applications require more precision to ensure coplanarity across die and wafer. Our pipeline for 3Di metrology is expanding beyond HBM. And in the quarter, we received additional purchase orders from multiple advanced packaging customers, including an OEM requiring precise metrology for new panel level process development. In fact, we see investment in panel-level packaging growing as enterprise server and AI device designers look for packaging solutions with greater economies of scale through large-format panels. Our JetStep systems are well positioned for the transition to panels, delivering the ability to print large packages without stitching at throughputs that customers need for reliable and repeatable high-volume applications. Customers are also adopting Firefly process control for applications in glass and panel fan-out where yields can be improved by feeding process metrology into the stepper for shot-by-shot adjustments. As a proof point, we are proud to have been awarded orders for JetStep and 8 Firefly systems in the quarter to support an exciting new large panel packaging facility. These orders represent the first of several potential phases of expansion to support planned demand. Finally, as large-format heterogeneous packaging becomes more prevalent, concerns continue to increase about residual charge on die causing yield issues when connected to another die. The surface charge metrology technology acquired from Semilab is a powerful solution to this emerging challenge, and we are pleased to have received our first orders for this evolving market need. With this positive momentum across a broad range of our products in support of AI device fabrication, we estimate advanced packaging revenue to grow over 30% in 2026, resulting in a new revenue record for this market. Rounding out our specialty devices and advanced packaging markets, power semiconductor revenue was strong in the fourth quarter but is expected to decline seasonally in the first quarter. For 2026, we expect power semi revenue to decline around 10% based on weakening demand for EVs and slowing infrastructure spending. Semilab will likely experience a similar decrease from our original planning as we work to pivot from opportunistic sales to longer-term market opportunities across our broader customer base. Now turning to advanced nodes. Our revenue in 2025 more than doubled from a year ago. With less than 3% of revenue coming from China, this growth was driven by our strong position in OCD at leading global manufacturers in both logic and memory. Expanding on this position, our recently announced Atlas G6 is being adopted for new critical applications in both gate-all-around and HBM4 DRAM, which we expect will add to growth in 2026. Complementing our OCD technology, our films metrology and integrated metrology both achieved record revenue in 2025. Adding to this momentum in integrated metrology, we are expanding beyond the strong position in memory to now include 2 logic customers to support leading edge processes expected to ramp in 2026. To summarize, with both advanced packaging and our advanced nodes businesses strengthening, revenue for the first quarter is now expected to be in the range of $275 million to $285 million. We expect demand to continue to increase in the second quarter with revenue exceeding $300 million. This represents a further acceleration in the core business for the first half of 2026 to 12% to 14% as compared to the second half of 2025. Our backlog has nearly doubled over the last 3 months to a new record level of approximately 2 quarters, adding support for this strong growth. We expect continued growth in the second half, and we are working closely with both customers and suppliers to manage tightening capacity and the gradual extension of lead times. With that, now let me turn the call to Brian to review our financial highlights and provide first quarter guidance. Brian? Brian Roberts: Thanks, Mike. Good afternoon, everyone. We delivered a strong fourth quarter as revenue, gross margin and operating margin all met or exceeded expectations. We reported record revenue of $267 million, representing a 22% increase from Q3. For the full year, revenue finished at $1.005 billion, also a record for Onto Innovation. Gross margin for Q4 improved by about 50 basis points to 54.6% from Q3. Operating margins improved to 25.2% in the fourth quarter, an increase of 410 basis points from the third quarter. Adjusted diluted earnings per share in Q4 were $1.26. Overall, the team is executing well as we delivered more than 50% of our tools in Q4 from our extended factories, completed the acquisition of Semilab in mid-November and implemented a more robust forecasting and spending control process as part of our annual planning exercises. Let me dive a little deeper into Q4 and full year 2025 revenue. Advanced packaging and specialty devices in the fourth quarter of approximately $145 million represented slightly more than half of our revenue as sales from our 2.5D packaging business doubled as compared to Q3. Additionally, approximately $9 million of revenue related to the Semilab acquisition is included in this category. For the full year, advanced packaging and specialty devices together totaled $504 million of revenue. Advanced nodes more than doubled in 2025 to $308 million, driven by growth in both DRAM and logic, which together represent about 75% of the total. Advanced nodes revenue grew sequentially by slightly over 30% to $72 million in Q4, primarily due to pilot line sales related to a new gate-all-around customer. We generated a record level of $95 million of cash in the quarter for a cash conversion of approximately 150% of non-GAAP net income. In the fourth quarter, we adopted the One Big Beautiful Bill Tax Act, which allowed us to accelerate the expensing of certain R&D costs from a tax perspective. The adoption of the new Tax Act results in cash tax savings of $19 million in 2025 and an additional estimated $14 million in cash savings in 2026. Finally, upon the close of Semilab on November 17, we paid $445 million in cash and issued 641,771 shares of our common stock. Now turning to our outlook for the first quarter. We currently expect revenue of $275 million to $285 million as demand continues to strengthen across advanced packaging and advanced nodes. As Mike noted, revenue in Q2 is expected to surpass $300 million, which will result in 12% to 14% core growth in the first half of 2026 as compared to the second half of 2025. While too early to provide more specific numbers, our current levels of backlog, continued customer confidence and the recently signed VPA lead us to expect higher revenue in the second half of '26 over the first half of this year. We remain focused on converting higher levels of revenue and a meaningful improvement in both our gross and operating margins in 2026 with an expectation for continued margin expansion each quarter this year. At the Q1 revenue midpoint, we would expect approximately 50 basis points of gross margin improvement from Q4 levels as we mitigate tariffs and incrementally ship more from our extended factories. Operating expenses in Q1 should approximate $80 million as we realize a full quarter of Semilab costs. Operating margins are expected to improve to approximately 25.5% to 26.5% in the first quarter. Earnings per share for the quarter is expected to be in the range of $1.26 to $1.36 per share, assuming an estimated tax rate of approximately 16% and about 49.9 million shares outstanding. And as a reminder, beginning here in Q1, we are moving to a calendar quarter and fiscal year-end of March 31, June 30, September 30 and December 31. And with that, let me turn it back to Mike for some closing thoughts before we take your questions. Mike? Michael Plisinski: Thank you, Brian. In summary, this quarter underscores the strength and breadth of our execution across the company. We delivered record quarterly revenue, advanced our product road maps and expanded our position in both advanced nodes and advanced packaging. At the same time, our operational discipline is creating meaningful shareholder value from accelerated offshoring activities that improve scalability and profitability, the smooth integration of Semilab and more disciplined forecasting and spending controls, which together will provide consistent gross and operating margin expansion through 2026. As evidenced by our backlog doubling over the last 3 months, visibility for 2026 has dramatically improved as customers plan for sustained investments in advanced nodes and advanced packaging capacity to support the rapid expansion of AI. Our team is playing a pivotal role across this ecosystem as we work to scale and bring new innovative solutions to help our customers solve their greatest challenges. Our multiple new product platforms highlighted by our next-generation inspection tools, which we believe will set the bar around combined high-resolution optics and faster throughput are examples of how we are setting the pace of innovation for this rapidly evolving and scaling industry. This gives me great confidence that Onto Innovation is well positioned to outperform in 2026 and beyond. And now, Lisa, let's open the call for questions from our covering analysts. Operator: [Operator Instructions] We'll take our first question from Blayne Curtis with Jefferies. Ezra Weener: Ezra Weener on for Blayne. Just the first, can you talk a little bit about what you see for the market outlook for the year? You've had some peers talk about packaging up to 40% growth, but there's been a pretty large range. Can you talk about what you're seeing for the year? Michael Plisinski: We mentioned we would expect to see our advanced packaging grow over 30% this year. Ezra Weener: And then for WFE as well, sorry. Michael Plisinski: WFE is harder to track because first, advanced packaging is only now just starting to be added to some WFE numbers, some not. And then you have all the construction costs also in there. So I think we're seeing certainly broad-based demand, broad-based expansions across both IDMs, the large device manufacturers as well as OSATs as well as other smaller players looking to provide new innovative solutions such as the customer we mentioned in panel that are providing alternatives to some of the more traditional advanced packaging solutions being used today. So given all this growth, I think the end customers, the AMDs, et cetera, are looking for alternatives as well to make sure they can scale and grow. Ezra Weener: Got it. And then in terms of follow-up, you talked about expanding lead times and increasing visibility. Can you talk a little bit about what that backlog looks like? And in the best case scenario, what your capacity is in terms of growth? Michael Plisinski: So we've said historically, our capacity, we're set up to be able to serve a $2 billion run rate. That's only improved as we bring up the extended factories. That was with our existing factories, which are, of course, still here. So I think when you look at multiple shifts, the extended factories, $2 billion number is certainly no issue for us right now. We are in the middle of ramping up the extended factories. So of course, there's a transition period that we're working through over the next couple of quarters. But I don't see capacity being a big issue for us. It's more on the supply chain side. The rapid development, the rapid increase in orders, the customers wanting to pull things in, that's putting a strain on some of our suppliers, especially in the area of precision optics and things like this, where lead times are relatively fixed. So we're working very closely with our supply chains and our customers to make sure we're getting the forecasted demand they require and we're working with our suppliers to make sure we can deliver. Operator: [Operator Instructions] We'll go next to Craig Ellis with B. Riley Securities. Craig Ellis: Mike, congratulations on the good execution in the quarter. I wanted to follow up on the view for 30% year-on-year advanced packaging growth. Can you just talk about some of the expectations you have around the contour of that growth through the year? And then in addition to that, just some of the more notable programmatic wins that may be included or that would be additive to that if they were secured later this year. Michael Plisinski: Good question, Craig. In fact, we expect our advanced packaging revenue to be relatively stable throughout the -- between the first half, second half. So it's pretty strong. Demand is strong. It shifts from different customers, of course. But overall, it's relatively stable. Now you asked also about what kind of puts and takes or upside. I think the adoption of G5 and how strongly -- how strong that adoption is or the rate of adoption, that could certainly add even stronger upside for the second half, which might change some of that trajectory. But in the 30%, we're not expecting a tremendously large adoption of G5. We've taken a conservative approach there, which is why we said over 30% growth in the second -- for the year in advanced packaging. Craig Ellis: And then the follow-up question is related to advanced nodes. So we're being specific with upside on advanced packaging. We're not being specific yet on advanced nodes. Can you talk about from nice $300 million second quarter number, what visibility you do have in the back half of the year in advanced nodes? And what are you expecting to kind of affirm over the next couple of quarters to lock in advanced nodes this year? And it sounds like good gate-all-around in memory growth, but I'll let you fill that in. Michael Plisinski: Yes. Thank you. So I think broad strokes, advanced nodes is expanding, and we can see customer discussions concerned with how quickly can you support our ramp and the demand and being able to meet that demand. So that's a positive sort of sentiment. Now the question becomes timing. So that's where we're having more of a little bit of uncertainty and where we're hedging ourselves a little bit. There are several factories that are expected to open up. Many we're getting some of the orders now in that helped drive some of our business that we're expecting for the first quarter. But overall, I would say -- and then there's the timing for DRAM in the second half. And several of the discussions we're having with customers are tied around BPAs right now, which will give us better insight as those get more solidified into what the magnitude of the advanced nodes growth will be. That said, I would expect us to at least perform in that range of the 10% to 20%, so 15% plus in that range for advanced nodes. And hopefully, as we close some of these additional VPAs, we'll be able to refine that number. Operator: [Operator Instructions] We'll take our next question from Edward Yang with Oppenheimer. Edward Yang: I just want to focus on this $240 million VPA that you mentioned for HBM. I'm just a little shocked, I guess, in a good way. In order to just properly size this, again, it seems like a big number because from what I would gather, your total AI packaging revenue for 2025 is around that $240 million, but that includes the 3 HBM customers and the big foundry customers as well. So is that the right way to think about it in that you have one customer coming in with the equivalent of what you made from 4 customers in 2025 and the timing of -- and the cadence of how you would recognize that VPA? And would you expect additional VPAs from the other customers as well? Michael Plisinski: For sure, we expect additional VPAs. So we are in discussions with other customers. That particular customer, remember, it's a 2-year, so it's extending into 2 years. It was more 2027 weighted, so maybe 2/3, 1/3. However, we see some acceleration of the demand. And so we're starting to see this move towards this 50-50 kind of a range. Edward Yang: Okay. And you touched on this a little bit, but G5, your new high-resolution Dragonfly platform, can you discuss or update us in the tone of the conversations that you're having with that big foundry customer, the qualification discussions, better sense on timing, pricing and et cetera? Any color? Michael Plisinski: Yes. I won't speak specifically to a specific customer, but generally, the tones have been -- the tone from many customers has been positive. Yes, I won't go into specifics. But I will say that things are progressing either ahead or according to what we expected. The changes or let's say, there is no change to the time lines we've provided in the past, where we expect these accelerated evaluations to end in the Q1, Q2, the first half of the year with hopefully starting to catch ramps in the second half of the year. Operator: And we'll go next to Charles Shi with Needham. Yu Shi: Mike, I think previously, when you talked about packaging, you're more talking -- I mean, on a more narrowly defined part of your packaging business being the AI packaging, 20% more opportunity in '26 versus '25. This time, you're talking about overall packaging 30% higher than last year. I wonder if you can give some color on the narrowly defined AI packaging. What's the expected number for this year? And I have maybe one more follow-up. Michael Plisinski: So it's getting very difficult to keep those separations as the market has expanded and the number of customers serving, let's say, the AI device manufacturers increasing. For instance, I believe I mentioned in my prepared remarks that the panel customer is serving AI applications. So traditionally, that wouldn't have been included in what we call AI packaging. So now we see many OSATs, several other specialty packaging customers all getting into this supply chain. So we're not -- we're no longer really separating it. It's quite difficult to do at this point. So the 30%, I would say the vast majority of that 30% growth is all tied to supporting the strong demand in AI. Yu Shi: Maybe the follow-up since you actually mentioned about panel. It has been a while since I think [indiscernible] being mentioned on earnings calls and glad to hear that and hope to hear that more often going forward. So it sounds like the litho business has -- maybe have turned the corner. It sounds like that's what's happening. And can you give a little bit of color what's happening right now? And is there some competitive displacement going on? Maybe if you will, because we -- I believe a lot of us have basically modeled 0 for your litho revenue for quite a while, but what's the expectation for this year? Michael Plisinski: Not 0. Fair question. I don't know that we're going to break out the litho business at this point. I think we can later as the year progresses and we get a little more color. There's a lot going on in litho right now or in the panel market. We've talked over the last, I don't know, year about the increased engagement with our PACE lab, the number of customers we're running samples through for our PACE lab and that the industry, which had a tremendous amount of overcapacity was starting to see utilizations pick up and that kind of thing. So we still think that's the case. That's the trend we're on. We're now starting to see proof of that with customers beginning to resume orders. We expect that's going to increase into 2027 and forecast starts to -- at least the data that we've seen suggests that 2027 will be in supply-demand where there's just not enough supply to meet the demand, which is a good thing. Operator: We'll go to our next question from David Duley with Steelhead Securities. David Duley: I was wondering, when you look at your CoWoS inspection business and your HBM inspection business, maybe you could help us understand what your relative guess is for the growth rates of the 2 segments are in 2026? Michael Plisinski: I would say no, they're relatively similar to be honest. When I looked at some of the data here, from amount of capacity being added, it's relatively similar. So I think that -- and the complexities, of course, of the CoWoS are higher, so the capital intensity is higher. But we have to also see how much more of the applications we gain with the Dragonfly G5, which is a variable that we didn't bake into much into our number. We took a conservative approach there. So that could drive some upside and swing the answer to be more on the CoWoS side. But right now, I'd say they're relatively similar. And you can tell with the large VPA we just announced. Memory is definitely expanding, and we have a good position in memory. David Duley: Okay. And then just as a clarification, I think Charles was referring to it on his previous question. The whole -- I think you mentioned the advanced packaging business was $504 million for the year. Is that the base level that you think is going to grow 30% or higher in 2026? Or is it just part of that number? I just wanted clarification. Brian Roberts: It's part of that number. To be clear, the advanced packaging and specialty devices was the $500 million for 2025. David Duley: Okay. So it's just -- it's the CoWoS and HBM inspection business that you expect to go greater than 30% in 2026? Michael Plisinski: It's OSATs, it's panel. It's all of advanced packaging. We expect to grow greater than 30% for the year. Operator: And we'll go next to Vedvati Shrotre from Evercore ISI. Vedvati Shrotre: The first one I had was, could you remind us like where the Semilab contributions come in for like 2026, like what your expectations are for revenue there? And then excluding that contribution, like in terms of organic growth, do you expect to outperform that WFE growth of 20%? Brian Roberts: Yes. I'll take the first part. And for Semilab, we've talked about since the close, they did about $9 million of revenue contribution in Q4 after the close in mid-November. For 2026, as Mike noted, we've initially said somewhere low $100 million to $110 million was kind of the revenue. We do expect that power semi, which is a significant portion of their business may, given the market cycle, be a little bit more challenged in '26 than we originally thought. But certainly have high expectations for that business. Vedvati Shrotre: And then for the growth rate maybe without Semilab, do you think you outperform the WFE growth of 20% for 2026 as total revenues, but [indiscernible] contributions? Brian Roberts: Yes. I mean in Mike's prepared remarks, we talked about WFE and the 10% to 20%. Certainly, there's a lot of different estimates that are out there. I think we'll go back to the comments we made around, as we said, advanced packaging, looking at 30% plus growth. And as Mike said, advanced nodes, probably somewhere mid-teens as those orders kind of firm up over the course of time and let you guys kind of do the rest of the math. Operator: And we'll go next to Brian Chin with Stifel. Brian Chin: Maybe circling back to the VPA that you announced. I guess is there a reason maybe it's just a timing thing in terms of the timing of back end versus front-end investments, but is there a reason it doesn't include both front and back end? And maybe what kind of toggle or optionality exists within the VPA to ship Gen 5 as opposed to Gen 3? Or is the expectation that most of this will be Gen 3? Michael Plisinski: You're talking about Dragonfly. I was thinking HBM. Yes, sorry, I was getting confused. There's a lot of options built into the VPA. It's Dragonfly inspection for sure, we're ramping now. So it's G3s now. There could be some upgrade options that the customer may choose to take may not. They're being offered. But it's primarily the current products that have been qualified now for their aggressive ramp. Brian Chin: Got it. And then Mike, maybe I didn't hear a lot of discussion of some of the new products and applications, 3DI, critical films. Those are probably also tailwinds for you in advanced nodes and maybe elsewhere. But maybe ballpark, how much do you see that contributing to the growth rates on an annual basis this year? Michael Plisinski: For this year, the new products as far as their contribution to growth rate this year? Yes. So I think you asked in total. So I would say we've got the HSIR. We've got some of the Atlas G6 that's coming in. I'd say on a relative basis, these are early penetrations. So you're talking maybe 10% of the business, maybe a little less, but certainly growing into 2027. So when you look at just the adoption cycle. We're going to get insertions. We're going to get some initial ramps this year and which we're already seeing. You can see that with the 3D business. And then as the customers continue to expand, that gets much bigger in 2027. And many of these are opening up new applications for us. So they're actually expanding our SAM and expanding our growth opportunities into 2027 as well. Brian Chin: Got it. Maybe to sneak in just one quick last one. There's been discussion that there's a fair bit of FinFET spending mixing in with kind of gate-all-around this year, maybe off of more than one customer. Just how are you thinking about that in terms of your revenue this year versus last year in advanced nodes, foundry logic? And do you view maybe more gate-all-around spending in '27 as kind of more of a tailwind for your business? Michael Plisinski: Well, I think that our business is really driven by the hardest, most difficult challenges, and that will be in the gate-all-around nodes, and that's where we're seeing the strongest demand and nearly all the demand. So if you go 5-nanometer and above, the attach rate for OCD was much less. Films was -- we didn't -- I don't -- and we maybe we were just introducing films at that time. So no, it's really all around gate. It's really all driven by gate-all-around. Operator: And there are no further questions in queue at this time. I'll turn the conference back to the speakers for any closing or additional comments. Shek Ho: Thanks, Lisa. We will be participating in a number of investor conferences throughout this quarter. We look forward to seeing many of you there. A replay of the call today will be available on our website at approximately 7:30 Eastern Time this evening. We'd like to thank you for your continued interest in Onto Innovation. Lisa, please conclude the call. Operator: And ladies and gentlemen, this concludes today's call. Thank you for your participation. You may now disconnect.
Operator: Hello, and welcome to the Repsol's Fourth Quarter and Full Year 2025 Results Conference Call. Today's conference will be conducted by Mr. Josu Jon Imaz, CEO, and a brief introduction will be given by Mr. Pablo Bannatyne, Head of Investor Relations. I would now like to hand the call over to Mr. Bannatyne. Sir, you may begin. Pablo Bannatyne: Thank you, operator, and good morning to everyone joining us today. Welcome to Repsol's Fourth Quarter and Full Year 2025 Results Presentation. Today's conference call will be hosted by Josu Jon Imaz, our Chief Executive Officer, with other members of the executive team joining us as well. At the end of the presentation, we will be available for a Q&A session. Before we begin, let me remind you that during this presentation, we may make forward-looking statements based on estimates. Actual results may differ materially depending on a number of factors as indicated in our disclaimer. With that, I will hand the conference call over to Josu Jon. Josu Jon Imaz San Miguel: Thank you, Pablo. Good morning, and welcome to everyone. 2025 was a year of strong execution for Repsol, underscored by solid strategic delivery and progress on our path of disciplined growth. In a complex geopolitical and macroeconomic backdrop, we continue to advance our strategic priorities, enhancing the returns to our shareholders, strengthening the portfolio and maintaining a consistent approach to capital allocation. Operating in a lower and volatile oil price scenario, performance remained robust across all 4 divisions. In the Upstream, we continue to improve the business by bringing new growth projects on stream and optimizing the portfolio. In the Industrial division, we continue advancing on the transformation of our sites, developing a scalable low-carbon platform within our Iberian hinterland. Our positive refining momentum, especially in the second half, helped us to overcome the disruptions generated by the Spanish blackouts in the first part of the year. In Customer, we leverage our brand, scale and integration to develop an ambitious multi-energy offer, grow electricity retail and reinforce profitability. And in Low Carbon Generation, we continue to execute our business model for renewables, rotating assets to crystallize value and limit our exposure. All of this, combined with the achievement of our key decarbonization targets for 2025 as set in 2021, delivering a 15% reduction, the carbon intensity indicator. Other targets such as methane emissions intensity and routine flaring reduction were met as well. Our capital allocation framework continued to prioritize shareholder remuneration, underpinned by a strong balance sheet and the delivery of disciplined and transformational CapEx. Last year, we increased the dividend by 8.3% to EUR 0.975 per share. Total shareholder distributions were EUR 1.8 billion, comprising EUR 1.1 billion in cash dividends and EUR 700 million in share buybacks to reduce capital, placing us at the higher of our strategic cash flow from operations distribution range. As we look ahead to our Capital Markets Day next month, the same key strategic principles will guide our update road map to 2028. Ensuring a predictable and growing dividend complemented with buybacks will remain fundamental to the strategy. Let me underline this point. For 2026, under our planning scenario, distributions will continue improving with the cash dividend growing around 8% to EUR 1.051 per share and buybacks in line to 2025. Moving on to results. As detailed in the documents you have in your hands released this morning, Repsol has implemented a new group reporting model by business segment. I know that, that is complex, but let me say that the aim is to be fully transparent and adapting this reporting model to a new perimeter where we have [ minoritarian ] shareholders in some of our businesses, and that is pushing us to change, to give you in a transparent way, the more simplified information we can. The revised framework aligns our reporting with how the company currently manage and evaluate business performance, reflecting both the incorporation of strategic minority shareholders in 2 of our divisions and the increased relevance of joint ventures within our business model. In addition, the company seeks to align all its financial information with the financial statements prepared under IFRS, which are not impacted. The reporting segments remain unchanged. However, under the new model, the contribution of joint ventures previously integrated by proportionate consolidation is now recognized using the equity method. Upstream production and reserves will continue to be reported based on Repsol's effective interest in its joint ventures. The main measure of segment performance is the adjusted net income presented net of the income attributable to minority interest and excluding special items. For 2025, adjusted net income was EUR 2.6 billion, a 15% decrease over the comparable figure in 2024. Cash flow from operations was EUR 5.4 billion, 8% higher year-over-year. Net CapEx stood at EUR 2.7 billion, which compares to a EUR 5.1 billion net investment in 2024, including the rotation of Outpost announced in December and cash in this month in February, net CapEx was EUR 2.5 billion. Net debt closed at EUR 4.5 billion, a EUR 0.5 billion increase over 2024 and a EUR 1.2 billion reduction over the third quarter of 2025. Excluding leases, net debt closed at EUR 1.6 billion, so roughly a 5% of the capital employed of the company. Gearing ratio stood at 14% by year-end, as I mentioned now, 5.5%, excluding leases. Under the previous reporting model, full year cash flow from operations reached EUR 6.1 billion, slightly ahead of guidance announced in -- last time in October and 13% higher over 2024. Net CapEx was EUR 3.5 billion under the previous reporting model, so the former one, in line with guidance at EUR 3.3 billion when we are including the Outpost rotation that, as I mentioned, was cash in this month in February. Looking briefly at the evolution of the main macroeconomic indicators in 2025. Brent price averaged $69 per barrel, 15% lower year-on-year, driven by OPEC production increases, geopolitical uncertainty and commercial tensions. The Henry Hub averaged $3.4 per million BTU, 48% above 2024 figures, driven mainly by the continued ramp-up of our North American LNG exports. And in Europe, the TTF reference was 12% higher, mostly due to better demand and tighter inventory levels. Repsol's refining margin indicator increased 20% year-on-year, mainly due to stronger middle distillate differentials. On the exchange rate, the dollar weakened against most major currencies, including euro, averaging $1.13 per euro, a 5% depreciation versus 2024. Continuing with Upstream performance. 2025 saw a strong delivery across the business as we continue to high-grade the portfolio with new projects and optimizing our legacy assets. Full year adjusted net income was EUR 957 million, 7% lower year-over-year, reflecting lower oil realizations, weaker dollar divestments and a lower contribution from equity affiliates, partially offset by higher gas prices. Production averaged 548,000 barrels equivalent per day at the higher end of guidance and 4% lower than in 2024. The higher volumes in Libya and the U.K. were more than offset by divestments and natural decline. Excluding disposals, 2025 production was 2% higher year-on-year. In Libya, the stabilization of the country allowed us to reach our highest production level since 2012, exceeding 300,000 barrels per day in gross terms. In unconventional, representing around 30% of our volumes, we continue to accelerate activity in Marcellus and Eagle Ford as the markets evolve into a more bullish outlook for U.S. gas. Development activity across the portfolio focused on the efficient delivery of projects for which we took FID in recent years. In [ Trinidad and ] Tobago, the Cypre and Mento projects reached first gas in April and May, respectively. In the Gulf of America, Leona and Castille delivered first oil in September. In Brazil, Lapa Southwest is nearing completion and is expected to start up before the end of this quarter. And in Alaska, development of the first phase of Pikka is close to full completion and expected to begin production in March. This flagship project with meaningful growth potential will contribute to reverse the great state of Alaska's production decline. Together, these [ G5 ] projects are expected to contribute 80,000 barrels of low breakeven, low CO2 intensity barrels in 2027. With respect to portfolio management, we continue to strengthen our fundamentals through active management of our assets, making the business more resilient, transparent and profitable. Last year, we completed our exit from Indonesia and Columbia consistent with our strategy to concentrate operations in more material and better margin geographies. In the U.K. we completed strategic agreement with Neo Energy to combine our assets in the North Sea. And in December, the partners agreed to incorporate TotalEnergies U.K. to the venture. Repsol will own a 24% stake of the resulting entity to be called Neo Next Plus and the new company is projected to produce around 250,000 barrels a day in 2026. This alliance will allow us to unlock value by combining operational synergies with disciplined financial execution. Completion of the deal is expected in the first half of this year, 2026. In our upcoming CMD, we will have the opportunity to discuss in detail our next steps in this division. For 2026, our focus will be on Alaska's ramp-up to ensure we'll reach 80,000 barrels of gross production by the third quarter, the preparation for the liquidity event and the resumption of operations in Venezuela. In this regard, last week, the U.S. administration issued new licenses that provide the legal framework we need to resume our oil and gas operations in the country. Continuing now with Industrial, full year adjusted net income was EUR 963 million, EUR 484 million below 2024, mainly due to a lower contribution from refining, chemicals and the trading business. The blackouts that impacted the Iberian Peninsula in April had a material impact on results. In the Refining business, uncertainties around tariffs deteriorated the margin environment in the first part of the year. Stronger diesel, gasoline and naphtha spreads supported the gradual recovery of margins towards year-end with indicator reaching in November its highest level in more than 2 years. Repsol's margin indicator averaged $79 per barrel, $1.3 higher than in 2024. The premium over the indicator was $0.7 per barrel. The utilization of distillation capacity averaged 83%, which compares to an 88% rate in 2024, negatively, as I mentioned before, impacted by the consequences of the blackouts and conversion units operated at 95%, which compares to a 100% utilization rate in 2024. In 2026, the indicator has averaged $5.5 year-to-date. We expect margins to remain healthy, supported by improved economic activity, higher structural gasoline demand and low inventories. In Chemicals, Repsol's margin indicator was 20% higher than in 2024, mainly driven by lower feedstock prices. Even so the business incurred a loss as market conditions remain challenging in Europe with flat demand, higher relative cost comparing with some other regions in the world and large product imports. On this environment, we remain committed to our strategy of reducing breakevens and expanding margins through differentiation. In this direction, the expansion of Sines in Portugal is expected to start operations in the second half of 2026. With regard to the transformation of our facilities, we continue to drive key initiatives in renewable fuels. Starting with Puertollano, the retrofitting of our former gas oil unit to produce HVO is expected to commence operations next quarter. This facility will join our advanced biofuels plant in Cartagena to reach 0.5 million tons of production capacity per year between both plants and a total of 1.5 million tons biofuel capacity at group level. A potential new retrofitting project is currently under evaluation. In Tarragona, construction of the Ecoplanta received approval at the beginning of last year, 2025, and the project moves ahead towards starting production in 2029. Repsol has already secured its first offtake contract for the renewable methanol to be produced in this facility. Finally, in renewable hydrogen, we took the final investment decision for our first 2 large-scale electrolyzers to be constructed in Cartagena and Bilbao with a capacity of 100-megawatt seats and construction of a third large-scale electrolyzer in Tarragona progresses towards FID approval in coming months. Moving now to Customer. Full year adjusted net income was EUR 754 million, 17% over 2024, thanks to a higher contribution in all business segments. EBITDA reached EUR 1.4 billion, a 20% improvement year-on-year. This implies achieving our 2027 strategic target 2 years in advance, reflecting the resiliency of our core legacy business. And also, let me underline the increasing contribution from power and gas retail and our multienergy offer to our customers. In Mobility sales of road transportation fuels were 11% higher than in 2024, being now at the level of the pre-pandemic sales. The non-oil business delivered a robust contribution margin growth in Spain, up 12% year-on-year. And in aviation, results benefit from sustained demand growth. Let me add that approximately 60% of our Spanish network already provides multienergy solutions with more than 1,500 service stations offering fuel that is 100% renewable. The number of digital clients reached [ 10.8 million ] by year -- by year-end, I mean, in December, a 16% increase over 2024, contributing to an increase of business to customer sales in service stations. Waylet app, that is our app leading the Spanish retail businesses keeps on growing in new sales and in transactions, reaching 89 million transactions in 2025, 10% above 2024. Finally, in Power and Gas Retail, we add more than 0.5 million customers, reaching a record figure of 3 million clients by December. Repsol has maintained a steady growth trend since we entered in this business in 2018, almost multiplying by 4 our customer base since the acquisition that year of Viesgo. Turning to Low-Carbon Generation. We continue to execute our renewable strategy, bringing new projects into operation while rotating assets to crystallize value, maximizing returns and limiting our financial exposure. The adjusted net income reached EUR 53 million, EUR 77 million higher compared to 2024, supported by higher low carbon production. The average pool price in Spain was EUR 66 per megawatt hour, 4% higher than in 2024. The power generated by Repsol reached 11.6 terawatts hour, 49% higher year-over-year. Renewable generation was 7.7 terawatts hour, 34% higher year-on-year. We add 2.2 gigawatts of new capacity under operation this year, 2025, achieving our objective for 2025 and bringing total capacity to 5.9 gigawatts by year-end. As of today, installed capacity has reached 6 gigawatts of renewable power. We were able to rotate 1.8 gigawatts through 3 different transactions in the U.S. and Spain. In the U.S., we divest a stake in a solar portfolio that included Frye and Jicarilla and reached an agreement to divest a stake in outpost solar farm, including around EUR 200 million tax equity. In Spain, we divest a participation in a 400-megawatt renewable portfolio in the first part of 2025. And let me say that since 2018, Repsol has developed and brought 5.1 gigawatts of wind and solar capacity into operation. 100% of more than 3 gigawatts fully commissioned have already been successfully rotated with an average equity IRR above 10%. To date, EUR 2.7 billion of capital has been captured through a combination of asset level debt, tax equity investment and value-accretive asset rotation strategies. Of the remaining capacity, 1.4 gigawatts are close to commercial operation date, around 79% is currently at an advanced stage of negotiation. And to finalize, let me highlight that last year, we had a new 805-megawatt wind pipeline to our Spanish portfolio with the aim of hybridizing production at our combined cycle in Escatron in Zaragoza securing the power supply for the future data center to be built in this area by a third party. Regarding our outlook. In our Capital Market Day, we will provide the regular guidance for the period together with projection to 2028. For 2026, our planning assumptions are based on a Brent price of $60 to $65, a Henry Hub of $3.5 to $4 and a refining margin indicator between $6.5 and $7.5 per barrel. In the Upstream, we are expecting a higher production in a range from 560,000 to 570,000 barrels per day. Under this scenario, shareholders distributions will continue improving, including cash dividends and share buybacks. The first buyback program was approved by the Board yesterday for up to EUR 350 million and will start in coming days. Regarding our decarbonization pathway, having delivered on the short-term commitments set for 2025, we will modulate medium-term goals while keeping long-term objectives according to the current regulatory and business framework. To summarize, 2025 proved to be another year of solid delivery for Repsol with strong progress across the priorities defined in our previous strategic update 2 years ago. And let me enumerate some of these progresses. First, between 2024 and 2025, we have allocated a total of EUR 3.8 billion to remunerate our shareholders at the higher end of our cash flow from operations distribution range. We have increased the dividend per share by 39%, and we have reduced our capital by 9%, canceling 112 million shares. We have evolved our E&P portfolio into a more profitable business, which is now more resilient and predictable, and we have transitioned to more normalized CapEx levels. In Industrial, we are accelerating efficiency and competitiveness, reinforcing the role of free cash flow generating trading business and building an advantaged low carbon platform to reinforce our leading position in Iberia. In the commercial side, we are developing an ambitious multienergy proposal that will strengthen Repsol's competitive position in our core markets. And in renewables, we continue developing our pipeline, rotating assets in early stage of production to deliver required rates of return under the principle of a limited capital exposure to this business. Considering the significant progress towards our targets and in light of changes to the macroeconomic, regulatory and geopolitical backdrop next month in March, we will refresh our strategic framework. The core principles are growing predictable remuneration, a strong balance sheet and disciplined growth will remain at the basis of our plan. We will share with you further details in less than 3 weeks, so see you then. With this, I'll turn it over to Pablo as we move on to the Q&A today. Thank you very much. Pablo Bannatyne: Thank you, Josu Jon. Before opening the Q&A, I anticipate there is a lot of interest on the details of the Capital Markets Day to be unveiled in March. As you can imagine, at this point, we cannot share details, so please adjust your questions accordingly. I would also kindly ask participants to limit yourselves to a maximum of two questions. If time permits we will try to cover more in a second round. To begin would like the operator to remind us of the process to ask a question. Please, operator, go ahead. Operator: [Operator Instructions] Our first question comes from Michele Della Vigna at Goldman Sachs. Michele Della Vigna: I'm looking forward to the Capital Markets Day. It looks like quite a few countries that have been difficult to operate in are offering better fiscal terms and opening up more to companies. You certainly had the example of Venezuela of Libya. I was just wondering if you could lay out what you think could be the opportunities there in Venezuela to get paid for your normal activities, which I think would be around EUR 250 million, but also to potentially ramp up production and in Libya, if you're seeing an opportunity to grow production there? Josu Jon Imaz San Miguel: I mean, let me say that Venezuela now is in a significantly better situation that Venezuela was 2 months ago. I think that a new window opportunity for a better future is opening in Venezuela. And it's also, I mean, let me say, a better situation for our sector in that country. And I think that it is now time to help consolidate this improvement, strengthening the social stability and the economic development in the country. You know Michele, because we have talked about that for years that Repsol has consistently been a responsible operator in Venezuela. Our commitment to the country's future has been clear. And now we are fully dedicated to contributing to this brighter future. You know that we were support by the licenses over the last days that are going to assist and allow Repsol to work in this framework. We appreciate the American support and the American approach to our role and our operations. And we are working also closely with Venezuelan authorities and our partners [indiscernible] to move all that in a positive direction. But let me say that our initial contribution, and we are -- of course, we have, let me say, and we received this open flag 5 days ago. So now we are preparing everything to restart and to resume our operations in a direct way in the country. Our initial contribution will be to continue supplying gas to stabilize the country, providing the gas that the national power system needs. We will resume a regular dynamic in gas supply and the process of lifting contractual condensates and oil cargoes will restart to pay for the gas supply. So we are preparing everything to start lifting the contractual cargoes. At the same time, we are also preparing debottlenecking project to increase gas production in Venezuela to a plateau of 640 million cubic feet per day from the current 580 million cubic feet per day. So an increase of 10%, roughly speaking. Regarding the oil production, we will also restore normal operations. That includes -- and we are starting to engage our team in the operations, investing in production facility renewal, such as pumps and some other facilities, considering the introduction of a rig in the area and working to reverse the decline in oil production. And simultaneously, of course, we will restart the commercial lifting of oil cargoes within the framework of our contracts in Petroquiriquire, exporting oil from Venezuela to Spain, the U.S. or any other suitable destination that is allowed by the license framework. Additionally, we are also preparing a plan for the Petrocarabobo oil field where also we see potential to increase this quick win initial production leverage in the existing infrastructure. So it's early perhaps Michele, to provide specific figures because, as I mentioned, we are in the first days of this new dynamic. But let me say that my view is optimistic about Venezuela, about the country, about the evolution of the political, social and economic environment in the country and optimistic about the hydrocarbon sector that has to play a significant role in this stabilization and growth of Venezuelan society and Venezuelan country. We see now that we could be able to increase oil gross production in Venezuela by more than 50% over the next 12 months. We have the ambition, and we see plenty of room to get this target of multiplying by 3 the production within 3 years. But I think that what is important is to put the focus in the short term. So a 50% of oil increase -- oil production increase in coming 12 months. And we are confident that the cash flow from normalized commercial activities that is going to be resumed in the short term under the 16 contractual framework is going to finance this effort. So we are confident that a normal commercial relationship will be able to finance this win-win approach because, I mean, the country is going to get more production, more revenues coming from royalties and from taxes. We are going to have more cargo -- more cargoes to pay for this operation. And of course, we remain open to exploring other opportunities for the future. And I mean, as Pablo said, I understand that you want to have all the figures about that. But as I said, step by step, it's probably too early and further details will be provided in 3 weeks in the Capital Market Day event. But again, let me say that I remain optimistic that I see that a new opportunity is opening in Venezuela, and we see room to start a normalized operation and commercial activity pushing in the direction of increasing the oil production in the country. And Repsol is fully committed to this pathway that was open 5, 6 weeks ago. Going to Libya, I mean, I also have a positive view. I mean, we rely on Libya. We see that it was stable. We see more security on the ground. As I mentioned in our last call, I think that -- I mean, we underline the important contribution of Marshal Haftar and the Libyan Army in this positive evolution of the country, thanks to the force deployed over the last years to combat terrorism that is important, of course, for Libya, but let me say that it's also an important contribution of the Libyan Army to the European security that has to be recognized. And I mean, over last year, 2025, we have a production that -- I mean, in the quarter average a figure above 300,000 barrels a day gross. That could be 39,000 barrels net Repsol. But the production, thanks to new wells that were explored in 2025, 27 wells achieved a maximum peak of 326,000 barrels at the end of the year. We are continuing with this infill drilling campaign, and we expect to have a production at the end of this year, 2026, close to 350,000 barrels a day. That roughly speaking, will be a figure close to 40,000 to 43,000 barrels a day net Repsol. But I mean, we also rely on the future of the country. We go on in the exploration campaign. We are exploring the 2 areas, the NC115 and the NC186 areas. On top of that, you know that in February, we were awarded with 2 new exploration blocks. One of them is onshore in the Sirte area, and the other one is offshore in the north part of -- I mean, in the northern part of Benghazi. So positive evolution in social and economic terms in the country and in security terms, production growth and the full commitment of Repsol with the country. Pablo Bannatyne: Our next question comes from Alessandro Pozzi at Mediobanca. Alessandro Pozzi: I have 2. The first one on cash flow guidance for 2026. I'm not sure if you want to keep some guidance for the -- at the Capital Markets Day, but I was wondering if you can perhaps give us some color on the moving parts under the new reporting model for cash flow from operations and CapEx. And the second question also always on cash flow is on asset rotation. I was wondering if you can maybe share us your thoughts in terms of asset rotations for 2026 and maybe a potential preparation for the liquidity event for your U.S. assets. We have heard about potential combination with another American players. But I was wondering if you can give us your thoughts on the progress there? And maybe a final question, if I can squeeze in a last one. Customer has grown a lot, the gap between Customer and Industrial or Upstream, not as much -- not as big as in the past. Can you give us your thoughts about the growth potential for customers? Josu Jon Imaz San Miguel: Alessandro. I mean, believe me that Pablo is looking at me and saying don't enter in the cash flow guidance for 2026. But I mean, I'm going to break a bit my deal with Pablo. So I'm not going to talk about the '27, '28 path. But I think that it's fair to talk about the guidance for 2026. So under the assumptions I mentioned before, Alessandro, in the speech, that means a Brent price something in between $60, $65 a barrel, a Henry Hub $3.54 per million BTU and a refining margin, something in between $6.5, $7.5 a barrel, the cash flow under the new metrics of the new reporting model expected as guidance for this year 2026 will be in the range EUR 5.5 billion and EUR 6 billion. Let me say that this figure compares with under the same reporting model metrics with EUR 5.4 billion in 2025. And let me also remind you that in 2025, the metrics in terms of commodity prices and environment were higher. So higher Brent price and higher refining margin. That means that in an environment that is not going to be so good as it was in 2025, we see that the cash flow from operation is going to be significantly higher this year in 2026. Why is that? Because, I mean, it's not something magical. It's because, first, in the E&P, we have new production, more production and more projects. I mean, Leon-Castile, Alaska and so on. In the Industrial side, we have the chemical business improvement with Sines with high molecular weight polyethylene plant of Puertollano that is going to start operations in the second quarter of 2026. We have significantly better margins for biofuels, and we have a higher production of HVO comparing with 2025. On top of that, as you mentioned in your last question, Alessandro, the Customer business is improving its position comparing with 2025. And I mean all that is behind this cash flow production. On top of that, the renewable power production is also contributing to this cash flow growth, and that is what is behind. Going to the CapEx, and again, sorry for, I mean, comparing both reporting models and so on, but I will try to be clear, simplifying things. If we consider and we take the net CapEx figure in 2025 under the new IFRS model, EUR 2.7 billion, what we expect in CapEx terms this year, net CapEx terms in 2026 is the same figure, EUR 2.7 billion. Let me say that I think that last year, the gross CapEx under these figures was EUR 4.1 billion in 2025. And this year, the gross CapEx is going to be lower. That means that this year, we rely a bit less on disposals. I mean clearly speaking, there are not any significant disposal in our budget this year. And what we have is a normal dynamic in terms of rotation of our renewable assets under this principle of contained financial exposure to this business. I mean growing in some way, being self-financed by the dynamic of the business. In this sense, let me underline that we already had a cash-in of EUR 230 million in February coming from Outpost. And now we are in the last part, in the advanced last part of the process to dispose, overtake, better said, 700 megawatts in Spain. So we are comfortable with a figure of EUR 2.7 billion as net CapEx figure under the new reporting model for 2026. Going to the liquidity event. I know, Alessandro, that probably I'm going to be boring, repeating the same message I launched in the last call. But now it's even clear than before. I mean our Upstream today is better than the Upstream we had 3 months ago. And 3 months ago, the Upstream was better than the Upstream we had 6 months ago. So why? I mean Venezuela is crystal clear. We could understand that, that is a clear upside to the figures I mentioned before because let me say that we are not including Venezuela in the cash flow from operations I mentioned before. I mean we are not that -- probably we could, I mean, check some figures before the Capital Market Day, but Venezuela will be an upside for the figures I mentioned before. And let me say in this sense that, I mean, we are not in a hurry to prepare or to jump, better said, into this liquidity event. We are preparing the company. We are going to have in coming weeks, next month, Alaska in operation, Leon-Castile, the production is growing. Before the end of this quarter, we are going to achieve 20,000 barrels a day net production in the Leon-Castile project. We are going to work hard to have the ramp-up of Alaska, producing 80,000 barrels a day gross by the third quarter. So we are, in some way, improving our portfolio, improving our Upstream. And let me say, the later, the better in some way. So open, of course, to this improvement of our Upstream. These potential opportunities we could have in the -- for the liquidity event. But again, as I mentioned, improving this business. And I think that the customer growth potential for this year, I already answered your question, Alessandro. Perhaps for coming 3 years, we will talk about that in the Capital Market Day. [Foreign Language] Pablo Bannatyne: Thank you very much, Alessandro. Our next question comes from Alejandro Vigil at Santander. Alejandro Vigil: In line with the previous comments and also very interesting to understand the net debt position of the company because looking at '25 versus '26, which could be the moving parts. And also to understand that in the reporting, we have some data about the net debt level in the subsidiaries, 6 billion in the Upstream and 3.2 billion in the Low-Carbon business. If you can elaborate in the whole picture of the company in terms of net debt? And the second question is about refining. I see you relatively, or I would say, constructive about refining margins, looking at the scenario you are discussing this morning. If you can elaborate in the moving parts as well in this view. Josu Jon Imaz San Miguel: Alejandro, thank you. I mean going to the net debt position, I mean, again, to compare your figures at the beginning, better said, at the end of 2024, the net debt of the company was EUR 4 billion under -- including leases, of course, under the new reporting model. At the end of 2025 is EUR 4.5 billion. So vertically an increase of EUR 0.5 billion. Let me elaborate to say that this net debt has been flat over the year. I'll try to explain that because we have 2 financial effects that are not really associated to our net debt change over the year. First, remember that after the closing of NEO NEXT, we had an increase of the financial debt in EUR 1.1 billion. I mean because that goes formerly in the decommissioning commitments of the company in our balance sheet that due to the new structure passed to be part of the financial debt. So an increase of EUR 1.1 billion. And because the combined effect of hybrid, remember that we issued a hybrid in the last quarter, EUR 700 million, EUR 725 million I had in mind, minus the purchasing part of EUR 100 million of a former hybrid. So all in all, we improved the net debt in [ EUR 600 billion ] because this financial hybrid effect. I mean these 2 effects, they had an increase of net debt of EUR 500 million. That is exactly the figure of the increase of net debt over the whole year. So for that reason, I elaborated in some way that we are going to -- we have a flat debt over the year. Saying that, we also expect, I mean under the assumptions I explained before, that at the end of the year, we are going to have, roughly speaking, a debt that is going to be probably flat comparing with the debt we had at the beginning of '25. Going to the subsidiaries. I mean let me stress the fact, Alejandro, that the debt of the company is the debt I mentioned now. What we try to do, of course, is to try to optimize in financial terms, the debt that every company subsidiary in the group could have as a debt in its structure. But all this combined debt is included in the total debt of the group, in the total debt of the company. So the figures are the figures I mentioned before. Of course, we try agreeing with our partners in every business to optimize the debt of these subsidiaries we have, in some cases, in the Upstream to ensure the investment grade of the vehicle as we demonstrated in the emission of bonds in summer and so on. And in the E&P business, we are also preparing the business for the liquidity event, and that is quite logical, taking into account the target I mentioned before. Going to the refining margins. So crystal clear about what is happening today. As of today, the indicator has been $5.5 this year, 2026. Comparing with last year, 2024, that in this period was $5.4 a barrel, the indicator. These days, the margin is at $6.5 a barrel. The premium over the -- you remember that we have in our budget, $1.4 a barrel as a premium for the refining margin for the whole year. As of today, the premium is at around $2.5 a barrel. That means that the margin capture as of today over this year 2026 is at $8 a barrel in our refining margin. Saying that, I mean, we have a probably positive view about refining margins for the year. Why? First, I mean, if we go to the fundamentals, what happened over last year, what has happened, sorry, over the last year. First, the shutting down of refineries in the whole world were at around 1 million, 1.1 million barrels a day of capacity, mainly Europe, U.S., Japan and Australia and China. New capacity has been at around 1 million, 1.1 million barrels a day. The increase of demand worldwide is at around 800,000, 850,000 barrels a day. So there is some kind of pressure coming from the demand on that capacity that is not growing. If we go to the current capacity, I mean, my view is that Dangote in Nigeria is going to achieve in coming months a normal production, I mean fulfilling expectations they have. So this part, in some ways included in the increase. In Olmeca in Mexico, probably they are going to need more investment in infrastructures to be able to get the expected production they forecast. If we go to the fundamentals, the demand and pressure on gasoline margins is very high in our markets in Europe. And going to the diesel, we see that because the shortage we have in Europe, this diesel is very dependent and has a strong upside depending on 2 factors. The first, the sanctions enforced for products coming from Russia and refined in some other parts of the world entering European market. So that's, in some way, putting a pressure on diesel margins. And because this, let me say, lack of strategic autonomy in Europe related to diesel, any geopolitical event has a direct impact on diesel margins in Europe. So I don't have to elaborate today the potential geopolitical risks we are seeing in the world. So for all that, I mean being prudent, we are quite comfortable with the refining margin indication. We are guiding, forecasting or elaborating. [Foreign Language] Pablo Bannatyne: Thank you very much, Alejandro. Our next question comes from Guilherme Levy at Morgan Stanley. Guilherme Levy: I have 2, please. Firstly, if we could with refining, could you comment on the fire that you had in the Cartagena refinery this year. How quickly do you expect the Topping unit that is currently down to return? And what should we have in mind in terms of financial impact related to this incident? Apart from the lower utilization impact itself, is there any sort of CapEx that needs to be made for it to be active again? And then secondly, a few in the downstream theme. In January, we had the announcement that 2 of your downstream competitors in Iberia are starting a potential merge of their refining and distribution operations. And I was keen to pick your brain on the potential impact that, that transaction could have to your marketing business in Portugal and Spain. And if it comes to a point in which they are requested to sell down some stations in Portugal, would you be interested to further increase your presence there? Josu Jon Imaz San Miguel: [Foreign Language] Going to the Cartagena fire, I mean, I don't know if everybody knows what happened. But we had on January 25, 2026, a leak in atmospheric crude distillation unit in one of them, in Cartagena, that -- I mean affecting the bottom part of this distillation unit. We had a fire, and the fire was fully extinguished using internal resources and with no personnel injuries reported. I mean let me say that the rest of the units of the refinery, except in this distillation unit, worked and are working in a normal way. So that means that the conversion units are fully operational in Cartagena. We are going to have an effect in terms of the repairing of this distillation unit that is going to last at around 8 months because we have a combined and integrated system, and you know that our distillation is not at the 100%, it's not usual. What we try is to cover and to fulfil the conversion units we are solving in logistic terms, the normal operation of the conversion using the products from other refineries. That of -- so from the point of view of the market, from the point of view of conversion, from the point of view operation, the situation was fully normalized in the first days. And there is an economic impact, as you mentioned, because of logistic costs and so on. Roughly speaking, the cost is going to be at around EUR 6 million, EUR 8 million per month during 3 months because all the rest is covered by insurance company and so and so. We could have something in-between EUR 18 million and EUR 25 million all in all as an impact of this incident. That's -- roughly speaking, that is with a better -- sorry, with the best information we have today, the impact of that event we had on January '26. On top of that, I mean, let me say that this merger first is indicating the attractiveness of the Spanish and Portuguese markets for this business, and that is a positive. And let me say with my whole respect, both of them, they are good competitors and having a strong competitor and a good competitor in our market, I think that is good news for the market and it's good news for Repsol. We like competition. And let me say that probably, it's too early to talk about what could happen after the closing of this merging process and so on. But I think that is positive to see a dynamism in the service station market in Spain and Portugal that is in some way fruit of the positive momentum and experience we are seeing in our markets in commercial terms. Thank you, Guilherme. Pablo Bannatyne: Thank you, Guilherme. Our next question comes from Irene Himona at Bernstein Societe Generale. Irene Himona: Congratulations on a successful year in terms of your asset rotation program. In the Upstream, you exited, you sold assets in Indonesia and Colombia last year. You also reported a CO2 emissions reduction of nearly 300,000 tons. I wanted to ask if you can give us a sense roughly what proportion of that emissions reduction was organic, if you like, versus emissions sold, please? And then my second question is on capital allocation priorities. And thank you for guiding on 2026 CFFO and net CapEx at your new scenario. And I don't know if you want to leave these for the CMD, but I wanted to ask about 2026 upside and downside to your base case given the near impossibility of getting the commodity rights. So the balance sheet is strong. In a higher $70 Brent scenario and in a lower $50, let's say, stress scenario, should we assume that your key lever would be the share buyback? Or would you also look at change in gross capital expenditure? Josu Jon Imaz San Miguel: Thank you, Irene. I mean first, let me elaborate that because in the reporting of Scope 1 and 2 emissions, we only consider operating assets. The inorganic disposals in the Upstream, I mean, Indonesia and Colombia, they don't have any impact in this Scope 1 and Scope 2 emissions reported. So the improvement comes mainly from the continuous efficiency effort coming from the industrial area, refining and chemical, that in some way has been offset this year, partially by the increase of the activity of the CCGTs, the combined cycles in Spain. You know that after the blackout of April 28, the Spanish power grid operator, Red Electrica, dramatically changed the operation rules, opening or giving more role to the CCGTs to avoid frequency and tension volatility in the grid. And for that reason, I mean, the operation level of our CCGTs since April has been higher than before. So the net is an improvement with a real improvement coming from more efficiency in our refineries and chemical plants and more emissions coming from the CCGTs because the activity for this operational move in the Spanish electric system has been higher. So if we go to our capital allocation priorities, but first, let me say that when we talk about Brent, our central scenario goes from $60 to $65 a barrel. As of today, the Brent has been over this year at $66 a barrel as average. And today, the price is around $70, $71 a barrel. So I see more room for -- with the current information, of course, things could change as you perfectly know, Irene. But I see more room for upside than downside. As I mentioned before, we have upsides that are going to come for this Brent price probably. Secondly, from Venezuela, as I mentioned before, I mean, the metrics of cash flow from operations in Venezuela are not -- this potential improvement is not included in the range I mentioned before. We have to look at the impact that the extremely cold winter, January and part of February in North America, is having on our gas business, gas downstream business in North America, plus the Henry Hub price because remember, the indication of price I gave before. And in case of having, let me say, $50 a barrel in the stress scenario that -- I mean now is not the central scenario that, of course, could happen. I mean you know that we have the capacity in the oil side of unconventional to reduce a bit the CapEx. In the gas side, of course, it's going to depend mainly from the Henry Hub. And let me say that our distribution guidance and our distribution priority is going to work under any scenario, positive or ACID scenario. Thank you, Irene. Pablo Bannatyne: Thank you very much, Irene. Our next question comes from Biraj Borkhataria at RBC. Biraj Borkhataria: Looking forward to the CMD. Just 2 questions. The first one is on asset rotations. You mentioned the smaller gap between gross and net CapEx this year. Is that a function of your view on the market and when it's best to transact? Or is this a function of you having done a lot in the last couple of years and so there's less assets going through the system? And then the second question is on the customer segment, marketing. That business has done exceptionally well over recent years. You've sold -- this is more for the CMD, but you've sold minority stakes in the Upstream and renewables in order to provide those sort of value markers. Would you consider doing something similar for that segment? Josu Jon Imaz San Miguel: Thank you, Biraj. I mean going to, as you said, the shorter gap between gross CapEx and net CapEx, the main reason is that in the E&P, I mean we are not forecasting or seeing disposals in our portfolio. I mean that could happen, of course, disposals or acquisitions, depending on the dynamic of the market. But remember that we have a clear target in the first years of this plan to reduce the countries where we were present in the E&P business. And now with 10, 11 countries, we are comfortable with. So we don't -- we are not factoring any disposal coming from the E&P business. And if we go to the Low-Carbon or Renewable Generation business, I mean, our comfortability comes from 2 sides. First, because in Spain, as I mentioned before, we have, at the end of the road, a rotation of 700 megawatts that, I mean, is in the final part of the process. So we are comfortable with. We already rotated in the U.S. Outpost and the cash-in came -- the taxes came just here, but the cash-in coming from the partner came this month in February. And I mean, that is the main reason for having, let me say, a shorter gap. First, the answer, we are not considering any minority divestment in this segment of marketing or customer centric business. I mean we see that -- I mean we are in the Iberian Peninsula with our industrial and customer businesses. They are, in some way, fully integrated. We have a common view about our leadership in the Iberian Peninsula in energy terms. And what we are seeing is that there is room for growth in these customer-centric business. So we'll talk about that in the Capital Market Day, but we anticipated 2 years, the growth forecast by 2027 in 2025, but we are going to go on in this growth road map. Our mobility business including the non-oil part is growing and is going to go on in this sense, growing in results. Our retail power business is clearly growing in number of customers and in cash flow from operation. Our lubricants is also performing the right way and growing. The aviation segment is very positive. I mean let me say that, that is a quite interesting reference because, I mean, it's, of course, the work of our team and the good performance of our team and also taking advantage of a place where we are. This year in '25, we sold the 10% of the total SAF sold in Europe. And that is -- I mean first, because we have a strong position in Iberia, that because Iberia has a strong position in aviation terms in Europe and in the world. We received, last year, 100 -- more than 100 million visitors, tourists in Spain, I mean the second country in the number of visitors after France and the second one in revenues after the U.S. So I mean, all that is pushing our mobility businesses up and that is going to go on in coming years. So in this context, we prefer to go on in this advantage we have. We are leading in terms of brand, in terms of digital support for these businesses with this multi-energy offer and we are going to go on growing. In this business, now let me say, that is quite hidden because we are always talking about E&P, refining and so on. And that is okay. But if you check the figures and the figure I have in mind, perhaps I'm wrong, but this business had a free cash flow of EUR 1 billion in 2025. I mean that's -- and growing. So not -- we don't have any intention of consider any minority divestment in this segment. Thank you, Biraj. Pablo Bannatyne: Thank you, Biraj. Our next question comes from Ignacio Domenech at JB Capital. Ignacio Doménech: Two questions for me. The first one is just wondering if you could provide an update on North America Upstream. What are the plans for 2026 in terms of adding rigs, okay, in North America? And my second question is related with the blackout in Spain in 2025. I was wondering if the company is planning or what is the possibility that the company could receive a compensation from the economic loss of the blackout in the industrial operation? Josu Jon Imaz San Miguel: Ignacio, thank you. I mean Upstream North America, mainly 3 parts of the portfolio, Alaska. Alaska is going to start first oil this quarter in March. And as I mentioned before, a ramp-up, achieving 80,000 barrels a day gross. You know that we retain a 49% of the stake in this project by the third quarter. So -- and on top of that, I mean, I'm not going to elaborate now. But remember that in Alaska, we have Pikka 2, we have Quokka, we have a clear possibility of growth in this state. And of course, we are working in the direction of the FEED and so on about the analysis of a potential future FID for Pikka 2. But now fully focused on the production. Second, the Gulf of America, there, we have the productions we already had before that are Buckskin and Shenzi. And we put in operation the Leon-Castile project. I mean perhaps I have a mistake, but today, we have 3 wells connected. I think that we are going to connect the first one in May, June, and connecting the first one in May, June, we are going to achieve the net Repsol of 20,000 barrels a day. Going to the unconventional, we put in operation a rig in Marcellus in September. This rig is operating, and it's going to stay the whole year, 2026. And in Venezuela -- sorry, in Eagle Ford. I was thinking -- I mean after so many questions about Venezuela. In Eagle Ford, we put in operation a rig in October, I think, September, October, and we are going to stay there until the second quarter of this year because oil price is not exactly at the point that the cash price is always. And again, someone could think that perhaps we could be more aggressive, putting more rigs and so on. I mean remember the history of the unconventional. If you are prudent, if you are fully focused in maintaining your high productions and so on, you could be clearly free cash flow positive in these assets. If you start increasing in a dramatic way your CapEx, the risk of having inflation of cost in the area and so on, it's always there. So we have a fully positive view that in the framework of this financial prudency in the area. The blackout, you know that there is still an ongoing investigation led by the regulator, CNMC. I mean I prefer not to enter in the public debate about the origin of the blackout because I prefer to read this important analysis about what happened that day. You know the consequences for Repsol. Let me split because remember that in April, May, June, we talk about 3 different events. One of them, nothing to do with the blackout. That was a problem with the distributor in Puertollano. And we have a secondary event in Cartagena that could be related to the origin of the blackout, but it's a different event. Going to the blackout, the big black out of April 28, the potential claim only of this event is around EUR 125 million that we consider recoverable, not about the rest of events. And I mean, we are waiting for this report to have more clarity about the potential responsible of these events. But in any case, we are going to start a claim in legal terms before the end of April, in the time where in legal terms, this claim is allowed. I mean I don't know what is going to happen because I don't have a crystal ball. But let me say and let me remind you, Ignacio, that there was a resolution taken by the Spanish Supreme Court in 2022, ratifying a full compensation to Repsol's affiliate, Petronor with EUR 18 million for those 12 minutes of blackout that we suffered at that time in Petronor in one of our refineries that, of course, provoked the full blackout and the shutdown of the refinery for days, and we were fully compensated. So roughly speaking, EUR 18 million is a figure very close to the impact of every of our refineries of the blackout we suffered in April because we have to consider that we have 5 refineries plus 3 chemical sites, Puertollano, Tarragona and Sines in Portugal. So we are preparing this case, waiting for this report that -- attentive to that. But in any case, we are going to work in legal terms to have a fair compensation for this impact on our industrial plants. [Foreign Language] Pablo Bannatyne: Thank you very much, Ignacio. Our next question comes from Fernando Abril at Alantra. Fernando Abril-Martorell: [Foreign Language] A few questions, please, if I may. First on Upstream production, you closed the year with 544,000 barrels and you guide to 560,000 to 570,000 barrels. My question is how should we think about the production ramp up through the year? And where do you expect output to stand by year-end '26? Second, on refining margins. You've mentioned the very strong refining margin premium year-to-date. So what are the main drivers? And how sustainable are them? And additionally, what is the potential upside you see from the possible recovery of Venezuela and crude cargoes? And last recent press reports mention about the favorable Supreme Court ruling for Galp, and I think BP as well regarding the regional hydrocarbon tax in Spain. I don't know if you have similar claims. I don't know if there could be also a material financial impact or recovery for you as well. Josu Jon Imaz San Miguel: [Foreign Language] Fernando, thank you. Going to the Upstream production, I mean, the main increase is going to come from, as I mentioned before, the ramp-up of Leon-Castile that today could be the Leon-Castile in a production of net 12,000, 13,000 barrels a day. And as I mentioned before, it's going to go up to 20,000 barrels a day. Alaska, clearly speaking, is going to be one of the drivers of this growth. We have a positive impact that could be at around 10,000 barrels a day, roughly speaking, in U.K. due to, first, the effect of the merger with Hitec creating NEO NEXT last year, plus the pre-emption process of calling the gas asset production that could have a production at around 40,000, 45,000 barrels a day, roughly speaking, gross, and was incorporated to the JV at the end of the year. So on top of that, of course, you are going to see some natural declines and so on. And at the end of the year, we could have, after these ramp-ups, a production closer at around 580,000 barrels a day and the average of the year because, as I mentioned before, a part of this growth. Alaska, Leon-Castile and so on is going to happen over the whole year. So you have to take the average of the year. The average of the year is going to be at around 560,000, 570,000 barrels a day. Refining premium, main drivers, of course, again, and take, Fernando, please, as an indication my comment because I don't have a crystal ball. But there are 2 solid fundamentals for this increase in the premium and for the sustainability of the premium. First is that we have seen that in the market. So that is not -- it's not something that is going to happen in the future. It's going to be increased in the future, but it's happening today is the supply of heavy oil in the Atlantic Basin. And Venezuela is going to change the game in this sense. So more heavy oil in the market means, first, a capacity to fulfill our conversion units, mainly cokers that is higher. So a higher utilization of our conversion units, plus, I mean, more pressure on prices, pushing prices down, discounts, increasing discounts in the case of heavy oil. So that is very important for our system and it's very important for the premium we could capture. On top of that, buyers. Remember that last year, I can't remember the exact figure, but we could have a figure in average close to $550, maximum $600 per ton as a margin of HVO minus UCO for the HVO and bio's production. We're seeing for the whole year a figure close to GBP 850 -- $850 per ton this year. But reality is that as of today, the figure is at around $1,200 per ton. That means that, that is supporting also a higher premium. So on top of that, we have energy efficiency, we have good operation and many things, but the main drivers for this, let me say, premium momentum are both I mentioned before. And for that reason, not having a crystal ball, I see them quite sustainable for the year. The potential upside for a recovery of Venezuela, as I mentioned before, I mean, the fundamentals are clear, are evident. We have had and we appreciate the full support of the American government and American authorities to push our activity in the framework of the licenses we received. And that is, I think -- that's a very positive step that I want to underline and to recognize. Secondly, we have a clear dialog and a positive dialog with the government of Venezuela in terms of taking the contracts we have in the country to support these operations we are going to increase, and the potential upside in figures terms, we talk a bit more, as I mentioned before in the Capital Market Day. But the first upside is that we are going to enter in a normal commercial relationship. That means that, I mean, we are going to be paid by this product -- or for this product, sorry, we produce. And secondly, that we are going to have a clear commitment to invest in our production to increase the oil production of the country because we think that, that is important for the social and economic development of Venezuela, for the political stability of the country and it's also very important in terms of building a win-win dynamic where more oil means more royalties, more taxes, more production for Repsol and a better future for Venezuelan people. So we are fully committed in this dynamic. And as I mentioned before, the upsides are not included, sorry, in the figures, in the guidance -- in the economic and financial guidance I mentioned before. All that is upside. Going to the Supreme Court ruling. Yes, I mean, you know that, as you mentioned, there were some Supreme Court decisions regarding as non-legal, the autonomic hydrocarbon tax in the past. We have a very similar claim, probably, I mean, I'm not a lawyer, I'm a chemist, but I think that in legal terms, it could be the same. And as happened in the case of Galp, BP and some others, there was a first resolution also for Repsol coming from what is called in Spain, the Audiencia Nacional, that was dismissed, negative related to our claim. And we are now waiting the Supreme Court decision, and the Supreme Court decision was positive for Galp and BP. I can't anticipate what is going to be the decision of the Supreme Court for Repsol because I mean, it's not in my hands. But I mean, let me underline that the claim is almost the same or very similar. So I prefer to talk about recoverability on how to do these kind of things in the future because now, I think that we have to wait for a legal decision of Supreme Court about that. [Foreign Language] Pablo Bannatyne: Thank you, Fernando. Our next question comes from Matt Lofting at JPMorgan. Matthew Lofting: You've covered a lot of ground. I'll just ask you 2 quick follow-ups. On Venezuela, I just wondered if there's any next or additional fiscal regulatory steps that Repsol thinks is required to support you putting forward the activity and investment that you talked about earlier on the call and how you're thinking about how prudently capital allocation towards Repsol needs to be managed within the sort of the group balance sheet. And then secondly, what, aside from the sort of the recent outage that you talked about at Cartagena, what sort of kind of planned maintenance schedule you're anticipating on the refining system for 2026 within your guidance? And any sort of notable weighting on that within the quarters? Josu Jon Imaz San Miguel: Thank you, Matt. I mean again, as I mentioned before, I'm a chemist, I'm not a lawyer. But let me say that in general terms, and I'm going to add some comments later. But in general terms, the contractual framework we have today in Venezuela for our operations in gas and in oil is fully valuable and is fully supported by the American government and the licenses we received. Saying that, we have to adjust small things in the framework of these contracts. And what is positive is that what we are seeing are full cooperation behavior coming from the Venezuelan government to do that because, I mean, they are fully interested on that. We have a close relationship with them. And we have the full support of the energy dominance group in the White House and the full support of the Secretary of Energy and the Secretary of Interior in the U.S. to support our activity and support our operations in Venezuela. So our operational people and our lawyers, they are working together with them in order to adjust some small contractual terms. But I mean, roughly speaking, the Supreme Court is fully valuable and is fully supported by the licenses we've received from the American government. At Cartagena, the maintenance scheduling of refineries for this year is a year with, let me say, medium, low turnaround program. This quarter, we have a conversion turnaround program that probably is going to enter some days in the second quarter in the smallest of our refineries in Coruna that is going to impact mainly in the FCC and the coker, so the main conversion units of the refinery. We have small units in Tarragona, so the visbreaker that is producing fuel. So it's not, let me say, nuclear, if not core in the refinery in the first and the third quarter. The coker of Petronor, 26 days this quarter. And I'm checking everything. I think that there is a catalyst change or something like that in Tarragona in the second and in the third quarter. So I mean, in general terms, it's quite medium, low maintenance year. And on top of that, I mean, we have mainly concentrated in the first part of the year. And I mean, with small reformers, hydraulic separation units and some small units over the whole year. But I mean, nothing more significant I mentioned before. Thank you, Matt. Pablo Bannatyne: Thank you very much, Matt, for your questions. Our next question comes from Henri Patricot at UBS. Henri Patricot: Two questions, please. The first one, I'll come back to Venezuela. You mentioned earlier that you anticipate this preparing to lift cargoes again for payment for the natural gas production. Would that be just for kind of current production? Or do you expect that you'll get payments for the past production for which you were not paid over almost the past year? And then secondly, on the cash tax payment, which was quite low in the fourth quarter and the full year '25 as a whole. Just wondering as we look at the 2026 cash flow guidance that you mentioned, what sort of cash tax payments have you assumed? Josu Jon Imaz San Miguel: [Foreign Language] In Venezuela, I mean my approach now is step by step. I think that now it's time, first, to recover a normal commercial operation, so being paid by the production we have. That will be a significant step. I think that it's time to use a part of these proceeds to invest in the country and to increase the production. I think that the future of Venezuela is important, of course, for Venezuelan people, mainly, but I think that is also important for the operators that we are in the country, and Repsol been there for years. And we have to be part of the recovery of Venezuela. So to do that, we are fully focusing recovering and normalizing or resuming the normal commercialization framework to invest, to increase the production in a quick way in Venezuela. I mean, I personally even took a public commitment in our statement that we are going to multiply by 3 in 3 years, the production in Venezuela. That was not blah, blah, blah. It was fully checked with my team, was fully analyzed, and we see also room in the short term to increase 50% of production in 1 year in Venezuela. That is now our priority. I think that if we enter in a win-win dynamic, if Venezuela recover a normal production, if the economic development of the country is evolving in the right way, I'm sure that we are going to find frameworks and solutions to talk about the past, but now it's not the priority. The priority is to recover a normal framework of operation and commercialization of the products in Venezuela. So that is not now on our agenda in the short term. It's, of course, in our balance, and that is all right, but that is not in our agenda. And as I mentioned before, we are not including these figures now, and we talk about that in the CMD. Cash tax payments that we are assuming in 2026, I mean the figure could be something in-between the 15% or 20% over the -- I mean, refer to the cash flow from operations, I mean, as some kind of guidance of the volume of these tax payments, that, of course, is before the cash flow from operations. I mean between the EBITDA and the cash flow from operations, but as a guidance, it could be a figure close to a figure I mentioned before. [Foreign Language] Pablo Bannatyne: Thank you very much, Henri. Our next question comes from Paul Redman at Exane BNP Paribas. Paul Redman: Just one question. Your Upstream operating income is down around 50% quarter-on-quarter. I just wanted to see if you could talk me through the main moving parts and then how we should think about that as we look into 2026? Josu Jon Imaz San Miguel: Thank you, Paul. I mean it's true that there is a reduction of the operating income in the Upstream last quarter, and there are 2 factors for that. And when you analyze quarter after quarter, it is the Brent price evolution that is -- it goes -- I mean, clearly lower. That is the main reason. Then secondly, I mean, you also have to take into account that there are 2 disposals, Colombia and Indonesia. And probably what is more important is that there are EUR 80 million, roughly speaking, of exploration costs in the last quarter that are influencing the result of the Upstream. So the main reasons. I mean that is, I mean the explanation. I mean oil price, Indonesia and Colombia disposal. And probably what is the most important fact in numeric terms in the last quarter, that is that EUR 80 million of exploration costs that we used to -- I mean because we don't have any expectation of developing these projects, we pass this cost or factor this cost in our P&L. Thank you, Paul. Pablo Bannatyne: Thank you very much, Paul, for your questions. That was our last question today. With this, we will bring our fourth quarter conference call to an end. Thank you very much for your attendance.
Operator: Greetings. Welcome to the Cengage Group's Third Quarter Fiscal Year 2026 Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Richard Veith. Sir, you may begin. Richard Veith: Good morning, and welcome to Cengage's Fiscal 2026 Third Quarter Investor Update. Joining me on the call are Michael Hansen, Chief Executive Officer; and Dean Tilsley, Chief Financial Officer. A copy of the slide presentation for today's call has been posted to the company's website at cengagegroup.com/investors. The following discussion and the earnings materials contains forward-looking statements within the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as believe, expect, intend, may, could, should, will, estimate, likely or similar words and are neither historical facts nor assurances of future performance and relate to future results and events, and they are based on Cengage's current expectations and assumptions. Forward-looking statements relate to the future and are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Forward-looking statements are not guarantees of future performance, and you should not rely on any of these forward-looking statements. Many factors could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements. Any forward-looking statement made during this discussion or any earnings materials is based on currently available information and speaks only as of the date of this discussion and the date of the earnings materials. The company disclaims any obligation to publicly update or revise any forward-looking statements, whether written or oral, except as required by law. On today's call and in our slide presentation, we will refer to certain non-GAAP financial measures. Definitions and the rationale for using these measures and reconciliations to its most directly comparable GAAP financial measure are provided in the legal disclaimer and in the appendix to the slide presentation. I'll now turn the call over to Michael for an update on the business, followed by Dean, who will take you through the third quarter and year-to-date details before we open the call for questions. Michael? Michael Hansen: Thank you, Richard, and good morning, everyone. Our third quarter results reflect strong momentum across our major businesses and continued progress executing our strategy. Q3 adjusted cash revenue increased 10% with meaningful growth across nearly all segments. U.S. Higher Education outperformed expectations, driven by robust digital and institutional sales, reinforcing the strength of our platform strategy and customer relationships. Our Work segment also delivered solid growth, led by the advanced career certificate programs and continued momentum in career and technical education. These gains were partially offset by federal regulatory headwinds and immigration-related impacts on our cybersecurity and Beauty and Wellness business. During the quarter, we announced new partnerships and products that strengthen the connection between education and employment and help learners build career-ready skills. We deepened our AI partnership with Amazon Web Services to deliver scalable, trusted AI solutions that personalize instruction, save educators time and better prepare learners for the workforce. By combining AWS' AI capabilities with our expertise in learning design, we are embedding AI readiness across programs in health care, business and many other fields. We also partnered with LinkedIn Learning to expand access to 20 expert-led courses in AI, machine learning, security and threat intelligence, helping address the AI skilled confidence gap among graduates and working professionals. Our AI strategy is deliberate and course specific. Rather than building a stand-alone model, we leverage leading LLMs and embed them directly into our platforms to deliver targeted value within the flow of instruction. This ensures educators receive support when and how they need it and students learn in alignment with instructors' intent. Engagement with our AI tools remain strong. We are expanding availability of student assistant and seeing increased adoption with measurable improvements in learning outcomes among active users. Following a successful beta, we launched Instructor Assistant in January and will broaden access over the coming year. Our AI road map continues to focus on strengthening career alignment, evolving assessment for GenAI world, improving platform usability and supporting diverse learning preferences. In higher education, we launched Introduction to Artificial Intelligence: A Business Perspective. And we are developing a GenAI guide to the humanities, added AI modules across introductory computing and introduced an AI primer throughout our business school curriculum. Well beyond AI, we continue to enhance platform usability and guided experiences. In our school segment, we launched Explore, our unified K-12 digital learning platform designed to engage every student and personalize instruction. Explore is a key step in transforming our school business into a predominantly digital model. Consistent with our operating model, we are unifying all businesses under a single Cengage brand. This simplifies our go-to-market approach, strengthens institutional partnerships and creates additional cross and upselling opportunities. In closing, our third quarter results demonstrate strong operating performance and continued progress against our strategy to connect education to employment. I want to thank our customers for their partnership and my colleagues for their dedication to serving learners around the world. I will now turn the call over to our CFO, Dean Tilsley, for more details on our third quarter financial performance. Dean? Dean Tilsley: Thank you, Michael. As you have heard, the company is making impressive progress in terms of innovation, speed of execution and financial performance. I'm now going to walk through the specifics of our financial results, including highlights by segment and our continued improvement in leverage. Q3 was a very strong quarter for the company with adjusted cash revenues up $22 million or 10% year-on-year and adjusted cash EBITDA up $21 million to positive $18 million for the quarter versus negative $3 million reported in the same period last year. These results were led by the continued strong performance within our key Higher Ed and Work segments, which account for almost 70% of our revenues. They grew 14% and 6%, respectively, in Q3, supported by return to growth for our Gale and international businesses. On the cost side, the management team remains focused on implementing our new operating model to ensure we achieve our margin goals, improve the profitability of the business while better allocating capital to invest in focused areas of growth such as AI, ed2Go and digital-first strategies. Operating expenses were down year-on-year for the quarter and flat on a TTM basis, net of key investments, representing an improvement in our operating leverage and ensuring enhanced flow-through of revenue to EBITDA. Moving to our consolidated financials. TTM adjusted cash revenues came in at $1.53 billion, up $41 million or 3% year-on-year as reported, driven by growth in the key U.S. Higher Ed and ed2Go businesses, which were up 10% and 26% year-on-year, respectively. TTM adjusted cash EBITDA came in at $532 million, up $29 million or 6% year-on-year, improving from the 4% year-on-year growth reported in Q2 as cost discipline adds to revenue growth. This represents a 71% flow-through of revenue growth into EBITDA. Year-to-date results, both adjusted cash revenues and EBITDA report significant improvement from the first half of the year due to continued growth in Higher Ed and Work plus stabilization of our international and Gale businesses. Year-to-date adjusted cash revenues reached $1.1 billion, a slight increase year-on-year with Q3 performance helping lift year-to-date performance from the 2% decline reported for the first half of the year. Year-to-date adjusted cash EBITDA at $362 million represents a small decline of 2% year-on-year as reported, but flat when normalizing for a single nonrecurring $6 million ELL contract. This is a significant improvement from the 8% year-to-date decline reported for the first half of the year as we continue our upward trajectory. Moving to the quarter, where I'll also provide some segment highlights. Q3 adjusted cash revenues came in at $245 million, up $22 million or 10% year-on-year. Q3 adjusted cash EBITDA grew $21 million year-on-year to positive $18 million for the quarter. This compares to a reported negative $3 million as reported for the previous year. reflecting the continued impact of our new operating model. By segment, Higher Education, which represents nearly 50% of our business, leads in our digital-first strategy and is leveraging strong tailwinds within its key U.S. market. Q3 Higher Ed adjusted cash revenues grew 15% year-on-year and 3% year-to-date, primarily driven by the U.S. market, but helped with returns to growth for Gale and international markets. Q3 U.S. Higher Ed, the largest business within the segment, grew 20% year-on-year for the quarter, driven by 9% growth in digital sales and strong institutional sales. Institutional sales at circa $250 million year-to-date grew 23% year-on-year and now represent 56% of U.S. Higher Ed sales. As I said, Gale returned to growth with both renewals and demand for content beginning to normalize as we get past the uncertainty in federal funding for research universities that impacted the first half of the year. Adjusted cash revenues were up 8% year-on-year for Q3, following a 7% decline in Q2 and a 15% decline reported in Q1. International adjusted cash revenues, including Canada, grew 5% year-on-year in Q3 as this business stabilizes, helped by go-to-market improvements implemented for key markets. Turning now to the Work segment. Work is a key investment focus for the company in terms of both revenue and EBITDA growth due to our strong market position within this very large and growing TAM for work-based skills certification. Q3 adjusted cash revenues were up 6% year-on-year and 4% year-to-date, powered by ed2Go. Ed2go delivered 24% growth for the quarter and 26% growth year-to-date. Ed2go growth was driven by pricing initiatives, investment to improve pipeline conversion and triple-digit growth in our emerging employer sales channel. We continue to drive investment in this business with plans to expand the number of courses, institutions, geographies and languages that we operate in as we continue to build growth and scale for this key business. The other large revenue line within work, Career and Technical Education, or CTE, grew 14% year-on-year and as a company focused for continued future growth and new investment. The smaller InfoSec and Milady businesses remain challenged due to federal headwinds impacting enrollment. In line with expectations, they are down year-on-year with the near-term outlook still looking challenged. We are, therefore, managing costs within these businesses to reflect this expectation. Moving to our K-12 focused businesses. Just to remind everyone, 2026 is a low adoption year for our two K-12 focus segments, school and English language learning or ELL, with no large state adoptions in '26 versus the $50 million of large state adoption signed in 2025. School improved Q3 performance with adjusted cash revenues up 17% year-on-year for the quarter, really driven by the positive early Gale renewals and stabilization of this business following market headwinds earlier in the year, plus retaining strong win rates within open territories. I do want to note that Q3 is a quiet sales period for K-12. So whilst it's great to see this improved momentum, the key focus remains on the large adoption years in 2027 and 2028 with updated platforms, content and go-to-market capabilities. ELL, our smaller segment, reported Q3 adjusted cash revenues up 1% year-on-year. Year-to-date revenue comparisons are impacted by a single nonrepeating $6 million Caribbean deal. Normalized for this, ELL adjusted cash revenues would be down 5% year-on-year, reflecting the low adoption year in the U.S. Turning now to cash flows. Improvement in working capital reflects strong collections in Q3 as we get past the invoicing issues experienced in the first half of the year due to the new ERP system that was rolled out last April, plus growth in institutional sales and lower reimbursements to Big Ideas Learning as it relates to the new partnership deal. The improvements in working capital flows, coupled with lower interest payments, flow through to improved leverage free cash flow by $10 million versus the same period last year. Note, this past January, we successfully repriced our term loan, lowering our borrowing cost by 50 basis points, resulting in an incremental $8 million of annual interest savings going forward, bringing total savings from debt repricing to over $20 million since March 2024. Net cash taxes increase reflects improved profitability. And as a reminder, an additional preferred equity dividend payment was made in 2026. Finally, our liquidity position remains strong with net leverage down 0.2x to 2.5x. We remain on a continued path to lower leverage as we move forward. We expect this position to continue to strengthen as cash collections ramp up in Q4 and restructuring costs decline. Cumulative deleveraging over the past 24 months reinforces Cengage's prudent and proactive management of liquidity and provides capacity to navigate macro challenges while executing growth and transformation strategies. In summary, the Q3 strong performance without normalization reflects the culmination of management's efforts to build a sustainable and scalable cost structure that delivers both top line growth and enhanced profitability. Our key Higher Education and Work segments continued to deliver strong growth in the third quarter and on a TTM basis, supported by improvements in the Gale and international businesses. School and English Language Learning, our K-12 focus segments, year-on-year performance reflects the known low 2026 adoption year, but we continue to make the key investments to position us for the large adoption years in '27 and '28. We continue to implement our new operating model across the company to deliver improved efficiencies, productivity and profitability to free up capacity for focused investments while still improving margin. We will continue to improve our free cash flow and strong financial trajectory to generate value for our shareholders. We are now happy to take your questions. Operator: [Operator Instructions] Your first question for today is from Nick Dempsey with Barclays. Nick Dempsey: So just quickly, in terms of the competitive dynamic, I can see that both McGraw-Hill and yourselves have performed very well in this quarter in U.S. higher education. I can see that inclusive access is a big part of that for both of you in terms of your commentary. To what extent do you think that you're gaining share of adoptions and that that's also helping your strong growth? Michael Hansen: Yes, Nick, it's Michael. Good to hear your voice. You know, I mean, you followed this sector quite a while. You know that the source of data for real adoption share gain, the official source is NPI data. Based on the NPI data, we are seeing that we are actually gaining share. It's not clear from whom from that data. Obviously, that is not being disclosed. And based on our internal CRM system, we would also -- we are also able to confirm that we're gaining share. So yes, there is share gains, adoption share gains as part of that as well. Operator: Your next question is from Jon Kovacs with Diameter. Jonathan Kovacs: I'm glad to see the good billings results across the business. My question was also on the higher education side. It's obviously pretty atypical to see double-digit billings growth even if it was a single quarter year-over-year that we're talking about here. But can you just elaborate like how you guys actually achieve that? It sounds like there is some nominal share gain from your response to the last question. We know enrollments are probably up, call it, low single digits. But how do we get from there to like a double-digit increase in billings? Is there a timing involved in that, pricing? Or what are the other steps upwards, please? Michael Hansen: Yes. John, so I think, first of all, I think your -- the underlying assumption in your question that we should not assume double-digit growth in this sector every single quarter, I think, is correct. But what we are seeing is very robust growth that goes way beyond enrollment. And the simple reason is that we have now fully turned the corner away from print into digital. And what we are seeing with digital units is that they're growing because the market as a whole is not as digital as we are from a revenue perspective. So our revenues are approaching almost 90% digital and so does our large competitors. But if you think about number of seats, number of courses being taught in the United States, roughly about 90 million, only about 50% of them are really taught with digital platforms. So we still have substantial growth opportunity from that, that comes from courses that are currently being taught with print and that we're gaining share with digital platforms. And we expect that also to continue, particularly as we are leveraging AI to make the platforms even more powerful and more personalized. Dean Tilsley: And Michael, if I could just add to that, there's no timing issues. There's no balance sheet adjustments that is a real year-on-year growth. And obviously, with institutional sales, to support Michael's point, it does improve our sell-through rate or the amount of ability to monetize students who are using our content is significantly enhanced by the growth in institutional sales and digital sales versus the traditional print textbook sales. And these trends will continue for the foreseeable future. Jonathan Kovacs: That's helpful. And it seems like the, I guess, the acceleration, which is the part that I'm still a little bit confused on was mostly driven by a continued transition away from print to digital, which you guys are obviously ahead of the curve on. But that's not really new. Like that transition has been happening for years now. And I think you guys have always been a step ahead of the competitor. So what was it about this quarter that kind of stood out as an acceleration? Michael Hansen: Well, John, I think it's basically simple math in the sense that our print sales used to be a much higher portion of our total sales. They are now de minimis. And they are declining, still continue to decline, but they're overpowered by the digital sales, which are growing robustly, as Dean was pointing out. So part of it is just the simple math of print being so de minimis at this point. Dean, any other observations that would be helpful for John. Dean Tilsley: Yes. Yes. So John, like print, look, I'm 12 months in here, but print just several years ago was $120 million annualized just in U.S. alone. It's down now to something just in the $40 million range. So print has been declining by about deliberately and intentionally been declining by about 28%, 29% year-on-year. Well, that's now 29% of a much, much smaller number. So you're getting -- that's been a drag on the growth historically over the last few years, including the first half of this year. That's now sort of significantly gone away. And again, that drag going forward will go away as print continues closer to trend towards 0. I think also Q3 is not the biggest quarter for U.S. Higher Ed. So to Michael's point, are we going to do this growth rate every quarter? Probably, probably not. Q4 is the second highest sales season. So whilst we're seeing -- we've got very good expectations for Q4. A little bit of also Q3 is a relatively quiet period for Higher Ed. So again, you get a function of the math around that. Jonathan Kovacs: Yes, that's certainly helpful. Those are both very good points. I appreciate you clarifying. So I think if I were to take something away, the very, the biggest driver of improvement here is there's no longer a significant drag from print, which has been declining in the past. Dean Tilsley: You got it. Absolutely. Absolutely. And I'll say some of your competitive question, McGraw-Hill historically have been a little more aggressive on pricing than we have. But as we continue to roll out our AI functionality tools, digitization, clearly, we're always -- we are assessing what is the appropriate pricing strategy for ourselves. Operator: Your next question for today is from Alexey Tilataz with JPMorgan. Unknown Analyst: Can you please share some color what you see on the ground in K-12 biggest markets like California and Texas? I appreciate it's early days in the cycle, but you have some early wins or competitive dynamics so far that you can share? Michael Hansen: Yes. It's -- I would say it's still early, as you said. The signs that we're seeing are encouraging, but we would need to continue to see this encouraging signs for the next few weeks and months, but early indications are positive. Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
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: Good afternoon, everyone. Welcome to the JAKKS Pacific Fourth Quarter and Full Year 2025 Earnings Conference Call with management, who will review financial results for the quarter ended December 31, 2025. JAKKS issued its earnings press release earlier today. The earnings release and presentation slides related to today's call are available on the company's website in the Investors section. On the call this afternoon are Stephen Berman, Chairman and Chief Executive Officer; and John Kimble, Chief Financial Officer. Stephen will first provide an overview of the quarter and full fiscal year, along with highlights of recent performance and current business trends. Then John will provide some additional comments around JAKKS Pacific's financial and operational results. Mr. Berman will then return with additional comments and some closing remarks prior to opening up the call for questions. [Operator Instructions] Before we begin, the company would like to point out that any comments made about JAKKS Pacific's future performance, events or circumstances, including the estimates of sales, margins, earnings and/or adjusted EBITDA in 2026 as well as any other forward-looking statements concerning 2026 and beyond are subject to safe harbor protection under federal securities laws. These statements reflect the company's best judgment based on current market trends and conditions today and are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected in forward-looking statements. For details concerning these and other such risks and uncertainties, you should consult JAKKS' most recent 10-K and 10-Q filings with the SEC as well as the company's other reports subsequently filed with the SEC from time to time. In addition, today's comments by management will refer to non-GAAP financial measures such as adjusted EBITDA and adjusted earnings per share. Unless stated otherwise, the most directly comparable GAAP financial metrics has been reconciled to the associated non-GAAP financial measure within the company's earnings press release issued today or previously. As a reminder, this call is being recorded. With that, I would now like to turn the call over to Stephen Berman. Stephen Berman: Good afternoon, and thank you for joining us. As 2025 draws to a close, we were proud of what the organization has accomplished and what we ultimately viewed as a defining year in our company's history. While tariff policy created visible pressure on near-term financial performance, we remain disciplined and focused on long-term value creation. Beneath the surface volatility, we made meaningful progress across the areas that matter most, deepening and broadening our relationships with the key factories, licensors and retail partners through a truly global lens while also expanding our strategic relationship portfolio in preparation for a significant new initiatives launching in 2027. Importantly, we maintain transparency with our shareholders regarding market dynamics and the challenges we faced, and we delivered on our commitments, refusing to pursue short-term top line growth at the expense of bottom line margin integrity. At the same time, we completed our first full year as a cash dividend payer returning $1 per share back to shareholders while preserving our debt-free balance sheet. We exit 2025 stronger, more resilient and better positioned than we entered it, and we are energized by the opportunities ahead in 2026 and beyond. Globally, our Toys/Consumer Products net sales were roughly flat in fourth quarter and $118 million, down 0.2% from the prior year and down 0.7% from 2023. Costumes were down, although in one of its smaller quarters of the year, but enough to bring the total company sales down 2.8% from prior year to $127.1 million or roughly flat to our 2023 fourth quarter sales of $127.4 million. Our fourth quarter U.S. business in total was down 7.8% to $86.2 million. Our domestic sales were down, which we attribute to higher tariff burden retail prices resulted in slower second half sell-throughs and by extension, lower fourth quarter replenishment. Fourth quarter FOB sales to the U.S. were positive versus prior year to somewhat offset the downside. In the Rest of World, our fourth quarter sales were up 9.9% to $41 million. Europe was roughly flat in the quarter, and Latin America was up significantly making up the lost ground from Q3. On a full year basis, our total Rest of World business was $154.1 million, up 5.5% from prior year and slightly ahead of 2023, led by a 14% increase in Europe to $81.4 million. For the full year, our Toys/Consumer Products business was down 19% as our Evergreen, Action Play, Dolls and Role Play business, in particular, suffered from tariff impacts on customer order patterns and higher consumer prices. All 3 of our Toys/Consumer Products division were down ranging 9% to 23% on a full year basis. Our Costume business was down 10% for the full year with a slight increase in international offsetting the U.S. results. Syndicated data suggests both retail dollars and units were down compared to the prior year, while average prices increased for both children's and adult costumes. Although Halloween is always a holiday with a surge of the last-minute shoppers, we felt that the surge was even later this year to the benefit of brick-and-mortar customers more than online. We did maintain and, in fact, extended our market leadership position for the season. This past month, we proudly debuted our first fully integrated JAKKS and Disguise showroom at the Nuremberg Toy Fair, marked a significant milestone in how we present our global portfolio to the marketplace. The response from customers and partners was overwhelmingly positive as they experience firsthand the full breadth, depth and quality of our offerings, powered by best-in-class licensing relationships from around the world. This successful debut reinforces our confidence in the strength of our strategy and our ability to win across multiple categories and regions. We see a substantial runway for integrated growth across Europe with particularly strong momentum as we expand further into Eastern Europe and the Middle East. With a unified go-to-market approach, deep retail partnerships and a world-class product pipeline, we are well positioned to build sustained leadership and capture meaningful share in these high-growth markets throughout the season and beyond. 2025 has certainly been a disappointing year when we think of what could have been but I remain pleased by how we adapted, evaluated and reacted without overreacting to a volatile operating environment. We executed in a year and perhaps more importantly, at the same time, remain focused on creating new growth opportunities for the company. We protected our core business by not chasing top line at the expense of margin, while prudently controlling discretionary spending. We finished the full fiscal year with a gross margin of 32.4%, our highest full year level in over 15 years. Our gross margin dollars were up in fourth quarter year-over-year through a combination of better costing from our factories and improved inventory management. On a full year basis, our SG&A expenses were down 1%. This is a business where upfront investments are made over 12 to 18 months with the goal of future sales volumes and scaling driving larger profits. Although volumes were not as originally planned for the year, we nonetheless managed to reduce our fourth quarter adjusted EBITDA loss to $3.8 million versus $10.2 million in the same quarter last year. That increased our trailing 12 months EBITDA to $35.4 million for the full year of 2025, down from $59.3 million in the prior year when we generated $120 million more in sales. I will now pass it over to John for some comments, after which I will come back and share a bit more about where we're focused moving forward. John? John Kimble: Thank you, Stephen, and hello, everyone. A decent quarter here to wrap up a mostly in decent year from a financial perspective. As Stephen mentioned, sales stabilized a bit with the tariff shocks of Q2 and Q3 behind us. Q4 benefited from FOB shipment of our product for the Super Mario Galaxy film, which led our Action Play & Collectibles business to a 19% year-over-year increase with growth from both North America and international. Beyond that, I'd say that most of Q4 sales results ended up being the squeeze from whatever happened or didn't happen in Q3 and didn't really suggest any meaningful change in trend or customer behavior. Gross margin dollars grew by 11% versus prior year, driven by a slightly better margin percentage. This result is a good outcome and generally consistent with prior quarters in 2025. Full year gross margin ended at 32.4%, better than last year's 30.8% and a bit more consistent with 2023's 31.4%. Product costs were held in check through persistent and consistent collaboration with our long-term factory network, along with tighter management of inventory, reducing our obsolescence expense. Royalty expenses crept up a bit. Significant sales reductions have driven some minimum unearned royalty payments along with some mix impact. We paid roughly $12 million in U.S. tariffs in 2025, which we feel we recovered through increased pricing. Higher price accompanied by a 1:1 cost addition has the math impact of a lower margin percentage, but that amount was not really material on an enterprise level. Tariffs were far more impactful in reducing sales. We estimate that our U.S. FOB customers paid nearly $50 million in tariffs on JAKKS and Disguise product in 2025. We feel that $50 million would have otherwise been allocated towards more actual product and by extension, generate more JAKKS revenue in any other year. That amount would be in addition to the additional reduction in units sold compared with our original plans as customers understandably derisk their year. That gives you a bit of insight into the financial implications of last year's actions on our company, although it may not be readily apparent simply looking at the financial statements. Moving on to more controllable parts of the P&L. Q4 benefited from our actions taken earlier in the year to keep SG&A spending on a tighter leash. Selling expense ended the year down 8% and G&A roughly flat. With the strength and flexibility of our balance sheet, we did this without handicapping any of the product development or new initiatives we have been working on for 2026 and 2027. Our operating loss and adjusted EBITDA for the quarter were both improvements versus prior year, but not enough to overcome the financial carnage of Q2 and Q3. Full year operating margin dropped to 2.5%, down from 5.7% last year. Adjusted EBITDA margin was 6.2%, down from 8.6%. It is a significant focus as we start the new year to revisit our processes to continue gross margin expansion while containing SG&A. We know we have the potential to do better from a margin perspective without relying on top line improvement. The ambition would be to do both, which would, by extension, generate meaningful value. A moral, if not economic victory of note, to offset our margin challenges, calendar year 2025 was the first year our interest income exceeded our interest expense for a very long time. Remembering that in 2020, we paid $21.6 million in interest expense with a full year adjusted EBITDA of $28.1 million helps to put 2025 in context a bit. These results all tally to an adjusted quarterly loss of $0.18 per share, an improvement from a $0.67 loss in Q4 2024, but nonetheless, still dragging down our full year adjusted EPS to $1.62, down from $3.79 for full year 2024. The diluted share count is based on roughly 11.5 million shares. Turning to the balance sheet. We finished the year with $54 million in cash, down from $70 million last year, obviously impacted by the drop in sales. Our inventory was up slightly at a bit less than $60 million, up from $53 million last year. That change is driven by our expanded distribution footprint in Europe and Mexico. Our U.S. held inventory was actually down 18% year-over-year to the lowest level we finished a year in over 10 years. Inventory management remains a focus and opportunity for us. Broadly speaking, we feel we read the second half of the year in the U.S. about as well as we could have hoped in terms of forecasting consumer and customer behavior. The hottest of product continue to move fast as hot products do with the bar essentially raised for everything else with more lukewarm results. We don't feel we missed sales in Q4, and we feel good about our U.S. inventory on hand. We also obviously feel good that imported product from China is now taxed to 20% compared to the 30% we were paying for a lot of the year, and we didn't have to import any more of that higher cost than we did. The company remains committed to the path of being a meaningful and consistent dividend payer. Despite a somewhat soft year financially, we did manage to generate over $8 million in cash flow from operations while also funding $11.2 million in common dividend payments. As mentioned in our release, the Board approved a Q1 payment of $0.25 per common share, payable at the end of Q1. The record date is February 27, and the payable date will be March 30. I think the pressures of the past year have pushed us to find new areas for incremental improvement, and that will be a lot of our focus this year to see what we can figure out. In a company of our size, we have the ability to make decisions faster and by extension capture opportunities sooner, so that's what I hope we can do. And now back to Stephen for some more comments about the year ahead. Stephen Berman: Thank you, John. The biggest story for us at the start of this year is certainly the theatrical release of the Super Mario Galaxy movie from Illumination. We are extremely excited for this new product launch, which will be available for purchase late February. The best-selling [indiscernible] scale figures are back in line along with new scale of many figures, new Playsets, Plush and more. The film releases April 1, and our line gives fans of all ages the chance to recreate their favorite film moments in the movie. This is a follow-up to the Super Mario Brothers movie, which went on to generate the largest theatrical box office of 2023. So you could imagine we're beyond thrilled to be back in the mix again here supporting this launch. Our Sonic DC crossover product launch received a great response in fourth quarter with exclusive retailer launches in both the U.S. and in Europe. Distribution of that line is going wide in the new year with new items like the DC Sonic [ Batmobile ] being added at key retailers. Sega is celebrating the 35th anniversary of Sonic all year with various activations. We are participating by launching special packaging, commemorating this event along with some exclusive items. We have other exciting news and plans around Sonic in 2026, but we're not ready to share those today, but stay tuned. Moving over to our Disney Doll business, we'll leave the Holiday season and Toy First season with solid momentum behind Disney Darlings, our latest homegrown Disney IP and the strong position of Style Collection and Disney's ily. For those of you unfamiliar with Disney Darlings, our launch in the nurturing doll category, similar to our ily line, these are not simply caricatures in figural form, but an approach we've developed in a partnership with Disney to bring new and innovative ways for our consumers to engage with the Disney brand. The intent is to spark the emotional response consumers feel when engaging with Disney. The joy and happiness when engaging experiences a bit of the Disney magic. These are truly beautiful dolls delivered with premium quality. And what's even more magical is that unlike other baby dolls, they are 100% joyful and happy, and there's no tears and no crying. Our soft launch of this line sold through well in fall, leading us to expand listings in the U.S. this year as well as a lot of interest and commitments internationally coming out of this past month's Toy Fair. We've seen enough positive feedback to feel that we have a winner here that can steadily build this year and into the next and to being another solid foundational piece of business for us. Congratulations to the team on this one. We're also supporting the live-action theatrical release of Moana in early July this year. Moana has been a steady part of our business for over the past 10 years going back to the original animated release in 2026 (sic) [ 2016 ]. We're happy to be able to bring back some of the most popular toys we've created over the years as a new audience engages with the story this summer. Our focus items include Moana's Necklace, Maui's Fish Hook, all the more aspirational with The Rock reprising his role to the film, our Hei Hei the screaming chicken and our super popular Moana large dolls. We also have a couple of additional exciting developments coming on our Disney Doll front later this year. In the other part of our Doll division, we continually steadily build our private label business with major retailers in the U.S. and expanding into Europe. It's an extremely broad array of dolls, Role Play toys and related subcategories that allow the retailers to make additional margin while the consumers get a high-quality, on-trend design product at a much lower price. In this area, we have several new launches that we will discuss in the following quarters that will be launched during the fall holiday season. In 2025, the company saw momentum across its Action Sports portfolio with Element emerging as a powerful growth engine in the second half of the year, expanded distribution and deepened retail partnerships most notably with Walmart, Amazon and Academy Sports and outdoors, significantly increased brand visibility, strengthened shelf presence, and drove meaningful gains in sell-through during the critical holiday period. These results reflect the company's disciplined execution, strategic product innovation, and unwavering focus on aligning with leading retail partners to deliver compelling value within the Active and Early Play category. Looking ahead, we are highly encouraged by rising retail confidence and growing consumer engagement across Action Sports as the industry builds towards the 2028 Summer Olympic Games. Skateboard sales trends are once again approaching elevated levels seen in 2020 and '21, figuring the renewed demand and sustained category momentum. This strengthening trajectory across skateboards and the adjacent Action Sports segments positions the company to further accelerate investment in innovation, expand strategic partnerships and drive durable long-term brand growth and shareholder value. With our Disguise business, we supported a wide range of new theatrical releases, we're excited to support Toy Story 5, which debuts in late June as each installment of this franchise has been great for the costume business. Also from Disney will be the Moana release and the latest Ascendant's installment, Wicked Wonderland. The second half of this year also has new movies coming from Minions as well as PAW Patrol. We will have some exciting new additions to the lineup coming from some new licensor relationships we've been busy establishing. So keep an eye out for these announcements coming soon. Finally, Halloween is once again on the weekend in 2026, Saturday, to be specific. So ideally that drives more energy and activity beyond traditional trick-or-treating. Those give you some highlights we're seeing coming into the market in the first half of the year. We remain very focused on some additional launches that we will have more in 2027 impact. Even if we can drop in some initial exclusives before the end of this year. Although a lot has changed in the past 12 months, we feel we are stronger in position today with more paths to grow than a year ago. Currently, we see this year as a low to mid-single-digit top line growth year with a continued focus on expanding margins, while we set up to maximize the potential of several potentially impactful new launches in 2027. There's still a lot of work to do, but I'm pleased with our progress to date and been able to share more publicly about some of the exciting things we've been working on. And with that, we'll take a couple of questions. Operator? Operator: [Operator Instructions] And our first question comes from Eric Beder of Small Cap Consumer Research LLC. Eric Beder: A lot going on here. Let's talk a little bit about the whole FOB model. When you look -- obviously, that got disrupted last year with the tariffs and other pieces and ramping it back up. When you look at that model and your retailers are seeing for '26 and beyond, is it back to the way the model was? And what kind of tweaks are you doing? If not and it's not what kind of tweaks are there being done in the model in terms of how the retailers and yourselves are handling the FOB model? Stephen Berman: Firstly, thank you, Eric. We're continuing to focus on an FOB first business that's been since inception. Last year, we stayed very focused on it as well, but we had to adapt based on where we manufactured, whether it was in China, Indonesia, so on and so forth in Southeast Asia. So we had a slight decrease in FOB, but not materially. Back into 2026 and '27, we will be moving forward again on an FOB first basis. At the same time, a lot of the major retailers in the U.S. have a first cost of sale program that we work with them to have the impact of the tariff be less of an impact to them and ourselves at the same time. So we're working through some of the major customers and secondary customers on a first sale basis. So we've learned a lot through this tariff, call it, congestion and confusion throughout last year, but we have a pretty good handle on it with our retail partners who we've worked extremely closely with. And our sales teams that are really entwined with our major retailers have worked very hand-in-hand with the buyers as well as the financial side of our retailers. To make sure that we stay focused on an FOB basis because it behooves both the retail for them to make more margin, behooves JAKKS as a sense of cost of capital, and it allows hopefully, the consumer to have a little bit lower price and bringing it in on a domestic basis. Eric Beder: How should we be thinking about the international opportunity with FOB? I know that you mentioned the inventory rose a little bit, primarily because of the international players. And some of them aren't, I guess, physically -- or physically big enough to do this. What's kind of the thought process there? Stephen Berman: Again, as a company and whole, not just in, call it, North America, but worldwide, we are a primarily focused FOB company. But in order for us to expand and see the growth that we are achieving, both in Latin America and EMEA and now new focuses -- additional focus is Southeast Asia. We do need to have distribution centers across strategic areas in order for us to achieve the customer base that is less the size of the major retailers that you see. In Europe, there's a lot of smaller customers that make up a lot of the business. So we have a mix on an FOB basis first and then follow up with domestic inventory in order for us to achieve growth as required in those territories. Many of the customers are not large enough to do an FOB and order a container or so on and so forth. So we adapt to that and work with them by each of the segments in which we're in, whether it's the Disney segment, the boys segment, seasonal and so on. So where appropriate, we work correctly with the retailer on the size of the product, pricing of the product and the bulk of the item in order to have the best shipping cost for them and price points to them. So we have warehouses of 5 different parts of the EMEA. We have it in Latin America. And we've now, as you see, at the end of this year, we brought in inventory to help us grow those areas with an FOB first basis as well as the backup inventory on a domestic basis. Eric Beder: Okay. Obviously, this year was tough for the entire toy industry. You guys managed to maintain your cash -- no debt basis, lots of cash. How have you -- have you been able to lever that? It sounds like you have based on '27, how are you able to deliver that in terms of adding new licenses, expanding the relationship and kind of moving up the ladder in terms of kind of the licensee of choice going forward? Stephen Berman: One thing, being healthy and clean and having a strong balance sheet. The licensors appreciate it very much. There are always in companies that have financial issues, and they don't want to take the risk of someone ruining their opportunities within their owned IP. So we, with that, have been very focused, not giving away top line revenue and to erode our profit, we took what was the right approach with retail, retail inventory and our own inventory to not push for higher sales and have that erode margin. We focused on margin with healthy sales. And as you can see, I think we were up 380 basis points for the year, for the quarter, as for -- I'll go back to give you the exact numbers. But we focused on the margin enhancement and retailers and licensors like that. At the same time, we've done an expansive amount of traveling worldwide, working on new initiatives, and we have some really exciting initiatives coming forward, and we'll be excited to talk about as soon as some of these deals get all accomplished. But during this period of time, we have focused on building '26 and '27 aggressively, and licensors have all fallen in line with us and are very supportive. Eric Beder: Okay. I know you don't give financial guidance, but just conceptually, Q1 last year was an extremely strong quarter. It was also a quarter, I believe, where you had a significant amount of product that was shipped early because people wanted to get in front of tariffs. How should we be thinking given that the flows in the quarters are so up and down last year, just conceptually in terms of how this year is going to flow? John Kimble: Yes, I'll jump in on that a little bit. To your point, Q1 was a really robust quarter for us this year -- this past year. And on one hand, we have some momentum, shipping product for Super Mario Galaxy as we pointed out in the call. But at the same time, too, is long-time listeners know, Q1 is always our smallest quarter. And so I've made the comment in the past. Q1 for us or maybe for everyone in the industry is like a Q1 of a basketball game, don't get 3 files at the end of the first quarter, and you'll kind of be okay. So really, we're probably thinking more first half, second half. And as to where the line gets drawn at the end of Q1, to be honest, we're not really overly fixating on it. Operator: And our next question comes from Gerrick Johnson of Seaport Research Partners. Gerrick Johnson: So one on POS. What was that in the quarter? How did it trend and evolve through the quarter? And then inventory at retail, what does yours look like? But also more broadly, the industry, is there any pockets of inventory that could clutter and affect the industry that way? John Kimble: Yes. So I'll take the first part of that, and Stephen can circle back on the inventory piece. From a POS point of view, you can read into the fact that we weren't bragging about it. It is that we weren't thrilled with it. But as we mentioned on the call, the super hot, like new launch items blew through in a way that we were happy to see and gave us confidence that broadly what we're doing. But I think broadly speaking, with where we saw higher retailer prices, that slowed down POS for those segments. So notwithstanding all the other kind of hair on the topic of POS in terms of what is the underlying margin for that POS, I think that's kind of what we'd have on that. From a retail inventory point of view, Stephen is a little bit closer to that. I'll let him... Stephen Berman: So I'll go through some of the two major retailers in the U.S. We're down at one of them, down 21% year-over-year and down about 4% on another. So our inventory at retail is very tight for us, which is good. We did -- again, as I said earlier and Eric asked the question, is we did not want to chase top line and worry about the inventory levels after the holiday season. So we really focused on shipping what was appropriate and focusing on profitability. And to answer what I did -- I mentioned earlier, I just want to make sure I clarify. We were 380 basis points higher in margin for fourth quarter than the year prior. I just want to make sure I got that out there. Gerrick Johnson: Yes. No, that's impressive. And so how would you describe the promotional activity and perhaps sales allowances in the fourth quarter? Stephen Berman: For us, they were quite normal or a little bit less than normal for I think a lot of the major -- our competitors put a lot of heavy in discounting and promotional. But to me, looking at what we've seen throughout the year, it was a very cautionary year because of the tariffs and not knowing what the consumer kind of appetite was. So again, we're pretty close to what we do. We sit with the factories, we sit with the retailers. So we did hear there's a lot of promotion activity that was done heavily in November, December. But for us, there wasn't much. Operator: This concludes our question-and-answer session. I'd like to turn it back to Stephen Berman for closing remarks. Stephen Berman: Ladies and gentlemen, thank you for today and finalizing and finishing 2025, and we are extremely excited for '26 and '27 and look forward to our next call. Thank you again. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Welcome to IDACORP's Fourth Quarter and Year-end 2025 Earnings Call. Today's call is being recorded, and our website is live. A replay will be available later today and for the next 12 months on the IDACORP website. [Operator Instructions] I will now turn the call over to Amy Shaw, Vice President of Finance and Compliance and Risk. Amy Shaw: Thank you. Good afternoon, everyone. We appreciate you joining our call. The slides we'll reference during today's call are available on IDACORP's website. As noted on Slide 2, our discussion today includes forward-looking statements, including earnings guidance, spending forecast, financing plans, regulatory plans and actions and estimates and assumptions that reflect our current views on what the future holds, all of which are subject to risks and uncertainties. These risks and uncertainties may cause actual results to differ materially from statements made today, and we caution against placing undue reliance on any forward-looking statements. We've included our cautionary note on forward-looking statements and various risk factors in more detail for your review in our filings with the Securities and Exchange Commission. As shown on Slide 3, also presenting today, we have Lisa Grow, President and CEO; Brian Buckham, EVP, CFO and Treasurer; and John Wonderlich, Investor Relations Manager. Slide 4 shows a summary of our full year financial results. IDACORP's diluted earnings per share were $5.90 compared with $5.50 last year. This made 2025 our 18th consecutive year of EPS growth, as noted on Slide 5. We ended up $0.15 per share above the midpoint of our original EPS guidance for 2025. These results include additional tax credit amortization of about $40 million for 2025 compared to almost $30 million of additional tax credit amortization in 2024. Today, we initiated our full year 2026 IDACORP earnings guidance estimate in the range of $6.25 to $6.45 diluted earnings per share, which includes our expectation that Idaho Power will use less than $30 million of additional tax credit amortization to support earnings. These estimates assume historically normal weather conditions throughout the year and normal power supply expenses. Now I'll turn the call over to Lisa. Lisa Grow: Thank you, Amy, and thanks to everyone for joining us today. As we look back on 2025, it was a particularly busy and exciting year for IDACORP. Our employees continue to shine, achieving strong results for our customers and owners. Our company produced its 18th year of consecutive earnings per share growth, as Amy mentioned. We sold a record amount of energy to our retail customers, broke ground on the B2H transmission project and recorded among the best reliability scores in company history. And we did it all while staying true to our core values of safety first, integrity always and respect for all. We also settled our general rate case proceeding in Idaho with a constructive outcome for our company and our customers. I want to again thank -- extend my thanks to our outstanding employees for their hard work and commitment to helping us build a secure energy future that powers our customers' lives and businesses. As you can see on Slide 6, growth remains robust across Idaho Power's service area, outperforming national trends and highlighting our region's economic vitality. In 2025, our customer base grew 2.3%, including 2.5% for residential customers, bringing the number of metered customers we serve to more than 660,000. This growth is happening across most customer classes with extensive residential, commercial and industrial construction continuing throughout our service area. In 2025, Micron's new semiconductor facility continued to advance towards completion. The size is impressive, as you can see on Slide 7. Meta also made significant progress on construction of its data center, which you can see on Slide 8, and that project began taking power last year. Additionally, Idaho Power helped bring several other major industrial projects online, including a Tractor Supply distribution warehouse and a major expansion of Chobani's yogurt production facility. Along with steady interest from our core industries of food processing, manufacturing, distribution and warehousing, we're also seeing increased inquiries from other energy-intensive customers looking to operate within our service area. We work closely with prospective large customers to set realistic and thoughtful time lines to meet their energy needs while ensuring they are not imposing costs on our other customers. The solution to serving load growth from new large customers in our mind has several important elements. We first have to comply with the laws of physics in delivering power. It has to be at a price the customer will pay. We need to procure reliable resources and have them available on the time line we agreed to with the customer. It has to be appropriately derisked operationally and on the credit side through special contracts with the customer, and it cannot be subsidized by other customers. As far as we've been able to find, we're serving the fastest load growth rate in the nation, and we're doing it with a thoughtful and measured approach to ensure there are benefits to our company and its owner, at the same time, mitigate what might otherwise be a risk of cost shifting to our other customers were it not for our growth pace for growth regulatory model in Idaho. Notably, last year, Micron announced it would build a second semiconductor facility in Boise. The load and CapEx projections we're providing today don't yet include this expansion, but we're working through the details with Micron. As we've noted previously and continues to be our practice, Idaho Power's public growth projections only include projects that have signed contracts or large financial commitments for customer-funded infrastructure. With this approach, our growth forecast for large load customers is based only on committed projects. We also have a significant pipeline that includes a diverse mix of prospective large load customers, and that pipeline exceeds our current 4,000-megawatt peak load. But we don't have -- we don't include any of them in our load projections as speculation and hope are not how we like to forecast. Turning to Slides 9 and 10. Affordability continues to be one of Idaho Power's key focus areas. We work hard to keep our costs down and provide exceptional value for our customers, and our rates have increased at a much slower pace than national averages. We believe that even after implementing our 2025 Idaho general rate case outcome, our prices remain well below the national average. We're proud of our low rates and despite considerable infrastructure investment and expansion of our customer base, we expect rates to remain in check with our regulatory methodology in Idaho. Case in point for affordability based on current projections, we're not planning to file a general rate case in Idaho on June 1 of this year. While we anticipate higher depreciation and interest expense associated with growth and infrastructure build-out as well as wildfire mitigation costs, we expect revenues from new large load contracts will help offset those additional costs. And we continue to benefit from our culture of careful and thoughtful spending. We'll watch revenues and cash flow during the year as part of our continuing assessment of the need and timing of a rate case. As seen on Slide 7 -- or Slide 11, we continue to be full speed ahead on our major infrastructure projects. Work is progressing quickly on our B2H project with 80 towers already completed and many more under construction. We expect B2H to be in service by late 2027. Permitting is nearly complete on the SWIP-North transmission project, and we expect construction to begin this year as well. We anticipate the project will be completed as early as 2028. We also continue to work with the PacifiCorp on the Gateway West transmission project. We anticipate a critical section of the line between our Hemingway and Midpoint substations will come online as early as 2028. With those expectations, we should have several new large transmission projects added to our system in '27 and '28. Transmission takes a great deal of time to permit, so we're glad we got started early. Moving to resource planning. We recently received acknowledgment of our 2025 IRP from our Idaho and Oregon Commission. Turning to Slide 12. Idaho Power is adding generation and storage resources that will help it maintain excellent reliability as demand grows. In 2025, the 200-megawatt Pleasant Valley Solar project came online as part of our Clean Energy Your Way program, and we added 230 megawatts of battery storage to the resource portfolio. Additional projects are underway to help us continue meeting growing customer demand, including 250 megawatts of batteries and 125 megawatts of solar, which are both set to be in service later this spring. Idaho Power has announced plans to construct 167 megawatts of natural gas fuel generating capacity next to the existing Bennett Mountain Power Plant in 2028. We're proud that this company-owned project was the most cost-effective resource in the RFP. As we've mentioned on prior calls, we're working hard to solve the generation needs in '29 and '30, which is a deficit of around 200 megawatts of incremental firm capacity needed each year. We expect to procure additional resources to solve for those deficits. The additional gas plant near Bennett Mountain as well as other resources we expect to construct are included in our CapEx forecast that Brian will discuss. We filed a request for a CPCN for the capacity addition next to the Bennett Mountain plant, and we plan to file requests for CPCNs for other new resources in the relative near term. You'll see those requests on the Idaho Commission website when we file them. In other news on generation resources, in 2025, Unit 1 of the Valmy coal-fired power plant was converted to natural gas, and we also burned the last of our coal at our other Valmy unit, which is currently being converted to natural gas. We expect that conversion to be completed this summer. I'll end by discussing this morning's announcement regarding our Oregon service area. We've entered into a definitive asset purchase agreement with the Oregon Trail Electric Cooperative for the sale of our distribution system and some transmission assets in Oregon. After the transaction, we'd have no regulated retail operations in Oregon, so we provide power to OTEC for some period of time under a power purchase agreement. The base purchase price for the transaction is $154 million, which is subject to various adjustments. Completion of the transaction is subject to a number of conditions, including approval by the Idaho and Oregon Public Utility Commission and from FERC. Oregon represents a small portion of our overall service area, projected to be less than 3% of our total sales by 2030. We're confident OTEC will provide a strong local focus and dedicated service for Eastern Oregon, while Idaho Power concentrates on supporting rapidly growing Idaho communities. If the sale is approved, Idaho Power's 20,000 customers in Oregon will transfer to OTEC service. While Idaho Power would no longer directly serve Oregon electric customers, it would retain ownership of its Oregon generation facilities and a large majority of its Oregon transmission assets, including B2H, which will help serve Oregon residents and businesses. We're working closely with OTEC to prepare for a smooth transition and make the appropriate regulatory filings to support the sale. It's too early to determine, but we expect regulatory approval could take 10 months or longer. And with that, I will turn the time over to Brian. Brian Buckham: Thanks, Lisa. I'm going to start on Slide 13, which has our usual reconciliation of year-end results. And just running through the table, IDACORP's net income increased over $34 million compared to 2024 and higher operating income at Idaho Power from the January rate increase and from customer growth combined for a roughly $75 million benefit. Usage on a per customer basis decreased operating income by $6.5 million, and that was because temperatures were milder in 2025 versus the prior year, though both years did have above-average cooling free days. O&M was another offset, albeit smaller than we originally anticipated. Total other O&M expenses increased less than $10 million, mostly from increased labor-related costs. We ended up the low end of our O&M guidance range for the year. So good outcome there. Depreciation and amortization expense increased nearly $28 million for the year, which was expected with the increase in system investments we've made and the assets that have gone into service. In the second quarter last year, a new leased battery storage facility began operations, and that modestly increased expense due to amortization of our related right-of-use asset. So something new on our financial statements for last year. Other changes in operating revenues and expenses decreased operating income by a net $3.8 million, and this was because of the year-over-year impact of the conclusion of property tax litigation in 2024 that resulted in refunds that year. Also, the timing of recording and adjusting regulatory accruals and deferrals positively impacted 2024 results, but those items didn't recur at that level last year. Those items were partially offset by recovery of costs of the new battery finance lease through the power cost adjustment mechanism. The expense for the new battery financing lease hit interest expense and amortization, but they're offset in the power cost adjustment mechanism. So ultimately, it's a near zero impact to operating income. The decrease in power supply expenses that weren't deferred also provided a benefit when compared to 2024. Nonoperating expense increased by about $23 million. That was mainly driven by an increase in interest expense because our long-term debt balances increased. Interest on the new finance lease also contributed to the increase, though, as I noted before, this is offset in the power cost adjustment mechanism. Partially offsetting those items was increased AFUDC from higher construction work in progress balance, which we predict will be sustained for the next several years. Idaho Power amortized $40.3 million of additional tax credits under the Idaho mechanism to reach the 9.12% floor level of Idaho return on year-end equity. That was only an increase of $10.5 million compared to the prior year. And also related to taxes, the $20.4 million relative decrease in income tax expense, excluding the additional ADITC amortization was primarily driven by income tax return adjustments for state taxes and then standard plant-related flow-through items. That's it for the recon table. And moving to Slide 14, we've updated our 5-year CapEx forecast as promised. You can see that it increased considerably. We're currently forecasting spending $1.4 billion per year on average over the 2026 to 2030 forecast period with a total 5-year CapEx amount of around $7 billion, and that's a doubling of our average annual actual spend of around $700 million for the past 5 years and near our current market cap. And to give you some perspective on our update, our 2026 to 2030 forecast is a 26% increase in CapEx compared to the 2025 to 2029 forecasted CapEx that we shared at this time last year. If you look at the CapEx graph, the bars are shaped a lot like they were at this time last year, but the difference is in the scale on the left side of the chart, it's much different in terms of magnitude. And as usual, the last 2 years in the chart probably have some upside that might materialize as we refine our plans and projects for that later time span. And some of that upside to our forecast results from the fact it doesn't yet include the resources that are needed to serve Micron's second fab or some of the other expected load growth. Amidst all of this investment, I think it's important that we reiterate the importance of affordability for all of our customers. We're fortunate that our regulatory processes and rules ensure that the new large load customers Lisa discussed, they have fair share of system costs and aren't subsidized by existing customers. As we look at the possibility of not filing a rate case this year and also the estimated potential magnitude of cases in the future, we see a future where affordability remains achievable, notwithstanding the significant magnitude of our investments. We also need to keep the utility financially healthy, meaning we need to convert our capital investments into rate base and provide returns to our debt and equity holders funding our growth. On Slide 15, we roll forward our rate base forecast for the 2026 to 2030 period. Our total system rate base coming out of our 2025 Idaho general rate case was $5.3 billion. It was $4.6 billion coming out of the 2024 Idaho limited scope rate case. So a big upward reset for our base year. We forecast that by 2030 rate base could reach over $11 billion, which is more than double our 2025 rate base. That's an incredible amount of growth in rate base. And case in point, we project it to be a 16.7% rate base growth CAGR for the 5-year period from 2026 to 2030. Last time this year, our forecasted rate base CAGR was 16.1% for 2025 to 2029. And today's higher CAGR is even after rolling forward to the considerably higher base year that I mentioned. If you look at the cash flow statement, you'll see additions to PP&E in 2025 were nearly $1.2 billion. And QIP on the balance sheet is over $1.7 billion. And I think that illustrates how busy we've been over the past few years as a company. And amidst this increasingly long growth cycle, it's obviously important that IDACORP and Idaho Power keep their balance sheet strong. As part of that, we continue to target an average 50-50 debt equity capital ratio and a simple balance sheet. We don't have any holding company debt or any particularly sizable maturities coming up, and our capital structure has just medium-term notes and common stock in it right now. And I'd say there's great elegance in that simplicity. Moving to Slide 16. You can see the net cash flow from operations is funding over half of our CapEx needs in the 2026 to 2030 window. We'll still need growth capital, which we estimated at $2 billion in equity and $2.9 billion in debt to stay at our target 50-50 capital ratio. But we need to dig a little deeper on that. We've already executed on over $600 million of equity through forward sales agreements that will settle in 2026, which leaves a lesser net amount of $1.4 billion of net equity sales to occur through 2030. That equates to our future capital markets transactions being comprised of about 2/3 debt, 1/3 equity. And it's an average of less than $300 million of equity per year for the full 5-year forecast period if you exclude equity already sold on forwards, which is within a reasonable ATM issuance range for us, and that gives us a lot of optionality on how we raise our equity growth capital. Cash flows from operations are expected to increase as we move through the forecast window, particularly with large load revenues coming in with greater volumes over time. And it's important to note that any additional CapEx needed to serve additional load would require additional financing. If that were the case, additional funding would likely be more heavily weighted to the back end of our forecast. Lisa already mentioned the execution of a definitive agreement to sell Idaho Power's Oregon distribution assets. I'll just add that from a financing perspective, we look to offset some of the equity needs I talked about with the net after-tax proceeds of the transaction. That transaction would give us business simplification, as Lisa noted, but also another source of capital to fund our rapid growth-related investment in Idaho. In the financing table, we haven't applied any proceeds from the prospective sale. We estimate the onetime gain from the asset sale would be immaterial, and that's not the thesis for it. We expect the asset sale to be only slightly accretive -- earnings accretive in the year it closes, but also provide an ongoing benefit to EPS from lower dilution. On Slide 17, cash flows from operations eclipsed $600 million for the first time in company history. Customer growth, the benefits of the general rate case outcomes and moderate power supply costs all helped to achieve that milestone. The strong cash flows also helped moderate our financing needs and leaves IDACORP with a strong cash position as of today. What I'll end with today is to reiterate something I noted at this time last year because it still rings true. Over the forecast window we talked about today, we expect to see what we believe to be among the leading actual earnings growth and earnings quality profiles in the industry. I think it's important to note that when you do your analysis, our expectations are on a GAAP basis and basing off a long string of 18 years of consecutive GAAP earnings growth. So we baseline our growth expectations off of a very strong year with no non-GAAP exclusions or exceptions. Again, elegance and simplicity. We're mindful of those providing the debt and equity capital for our growth and recognize the importance of generating returns for them. We're focused on the things that matter to them. Strong risk mitigated execution and already in-process infrastructure build-out, sustained affordability for customers, actual rate base growth from permitted and in-flight projects, real near-term earnings accretion, customer revenue diversity and long-term durability of our earnings growth and returns. That's the paradigm we've been working under and what I know you've all come to expect from us. And with that, I'll turn it over to John. John Wonderlich: Thanks, Brian. This marks my 1-year anniversary of conference calls in my IR role. So Brian asked me to give a new fun fact about myself. Last year, I noted that I was an assistant coach for a third grade basketball team, and I'm happy to let you know that I was promoted from the role of assistant to the head coach to a full assistant coach this year. And I moved up the ladder to fourth grade basketball. Turning to Slide 18, you can see our 2026 full year earnings guidance and key operating metrics. This guidance assumes normal weather throughout 2026 and normal power supply expenses. We expect IDACORP's diluted earnings per share this year to be in the range of $6.25 to $6.45. The midpoint of this range reflects an 8% EPS growth rate over 2025 actual results, premised on what we would consider a conservative set of assumptions. We expect that Idaho Power will use less than $30 million of additional investment tax credit amortization in 2026, so less than the amount in 2025. We expect full year O&M expense to be in the range of $525 million to $535 million. And I'd like to provide some context on that range. The largest driver of the increase over the prior year is wildfire mitigation costs, which are offset by revenues from the general rate case. So it's not apples-to-apples comparison between 2025 actuals and the 2026 estimate. As we continue to expand our system to accommodate growth, we do expect to also see higher O&M expense. We also continue to experience inflationary pressure on labor and professional services, but our culture of spending wisely to help ensure affordability for our customers is very much intact. We continue to focus on keeping costs as low as possible while keeping the system safe and reliable. We anticipate spending between $1.3 billion and $1.5 billion on CapEx in 2026. As the 5-year forecast showed, we continue to expect higher CapEx numbers as we respond to strong growth in our service area. Finally, given our current forecast of hydropower operating conditions, we expect hydropower generation to be within the range of 5.5 million to 7.5 million megawatt hours for the year. With that, we're happy to address any questions you might have. Operator: [Operator Instructions] Your first question comes from the line of David Arcaro of Morgan Stanley. David Arcaro: Look, I was wondering if you could give an update on maybe your customer load pipeline. What are the latest discussions you're having in terms of either expansions of current large load customers? And how is the pipeline shaping up for new companies coming into your service territory? Lisa Grow: Well, I'll get it started. We certainly -- it just continues to -- we get a lot of inquiries, a lot of folks that are very interested, some big than others and really from across many industries. So it isn't focused on just one. I'll let Adam give a little more color. And it's true, too, that we have NDAs, so there's some things that we can't talk about. Adam Richins: Yes, I feel like a little bit of a broken record -- this is Adam, saying the same thing. The inquiries continue to be strong. it's kind of a diverse amount of inquiries, everything from data centers to manufacturing. For example, we have a data center that's looking at a service territory that has a conditional use permit called Diode, it's the Gemstone Technology Park. We have Idaho National Lab that's growing. We obviously have Perpetua that is a mine up north that's looking at starting operations there, too. So it's pretty robust. Again, a lot of them are under confidentiality. So I can't get into the details, but feel like the growth is strong. Brian Buckham: And David, just one thing I'll add is the last time you've seen a formal load growth update from us was associated with the 2025 IRP. So that was from quite some time ago. We do plan to update that the load growth at some point during the year, usually towards the end. But there's a lot of customers that we've talked about that just aren't in that 8.3% load growth update or load growth number that we have out there as of right now. We should see an update later this year. Adam Richins: And maybe I'll add that of those customers, a lot of them aren't just inquiries. They're actually doing construction studies, generation studies. We have energy service agreements that we're looking at for a fair amount of megawatts. So when we talk about inquiries, a lot of times it goes beyond just people kind of touching and feeling and actually going to the next stage of looking at what it looks like to come to our service territory. David Arcaro: Got it. I appreciate that color. That's helpful. I wanted to also just ask about on the equity needs side of things with the refresh here. Maybe there are a couple of moving pieces, but I was wondering if you could just give a sense for what the rule of thumb would be, Brian, maybe just on -- for incremental CapEx, how do you think about the funding split in terms of external equity from where we stand now, given your latest operating cash flow kind of outlook here? And maybe in the context there, I was curious, any repairs tax impact from the guidance there. Brian Buckham: Yes, David, sure. On the repairs tax side, the assumptions that we use in our forecast tend to stay relatively stable. It does adjust from time to time each year, but not a major update in our repairs tax deduction. On the equity needs side, any incremental CapEx that we add to the forecast is probably financed 50-50 debt equity, at least beyond what we have now and the update that we provided this morning. What I will say, though, is in a lot of instances, these large load customers come with large load cash flow, and that can certainly impact ultimately what our need is. And if you look at the equity number that we put in our estimate right now, it does have some conservative assumptions about what cash flow will look like. If you look at the incremental increase in cash flow in the bar chart for our financing waterfall February of last year versus February of this year, you can really see -- you can see some movement there. And that's to fund a significant incremental amount of CapEx that we have in the forecast. So some of the adjustment that you see in that waterfall is a result of what cash was on the balance sheet and where forward drawdowns were on our equity programs at any given time. So that gives you a little bit of a skewed view of not apples-to-apples comparison year-over-year on equity needs. So the number does move around, certainly with cash flows. It could be impacted, like I noted, by the sale of the Oregon territory. So there's a lot that can move the equity number. I'd say it's pretty conservative at this point. And so even the 50-50 debt equity split could be somewhat of a conservative approach on how we would look at our equity needs over time. Operator: Your next question comes from the line of Michael Lonegan of Barclays. Michael Lonegan: So obviously, you mentioned your current capital plan does not include Micron Fab 2. Would you be able to help us understand the size of that investment opportunity in the latter part of your plan? Lisa Grow: We're just working with Micron to determine that. So we don't have anything to share in terms of size today. So more to come as we work our way through the path. Adam Richins: Yes, Michael, this is Adam. They haven't given publicly a load ramp. The size of their first fab is public, but they haven't come out with the second fab yet. So when we are able to share that, we will. Michael Lonegan: Okay. Great. And then secondly for me, obviously, a sizable CapEx increase with today's update, modest increase in equity content needs. You're on track for significant cash flow generation increases, like you said, with the large customer ramp-ups. Just wondering, where did you end 2025 on FFO to debt? And where do you anticipate being over the course of your plan? And do you think there's an opportunity for Moody's to take your rating off negative watch? Adam Richins: Yes, Michael, thank you for the question. I think the answer to that is yes, I think there is an opportunity for that, though we do have a pretty substantial capital investment. And so we are maintaining a very strong simple balance sheet, as I mentioned, of 50-50. And I think that's been a good factor from a rating agency perspective. We have -- at the end of 2025, I'd say on Moody's, I think we were at about 14.3% at Idaho Power. And on S&P, we were just barely sub-14%, if I remember correctly, on FFO to debt. Our threshold at Moody's is 13% and S&P is 14%. So as of right now, we're somewhat navigating that floor level. We expect to come out of that with large load revenues, as you mentioned, and the cash flows to support it. But again, we're maintaining a really strong balance sheet. The outcomes of our rate cases helped the rate case that we did in 2025 had a result that will help credit metrics in 2026. So I could see us being at or near those levels again in 2026 before we make a gradual move up off of those numbers. But again, we usually do better than what our internal forecast suggests. And so I think Moody's and S&P both understand that. And we'll be meeting with them in March actually to have a conversation about where things are headed. So we don't have, as I mentioned, holding company debt that helps. We don't have anything on our balance sheet that all call an exotic for lack of a better term. And we don't have any upcoming maturities through 2030 other than $160 million pollution control revenue bond this year to refinance. So from a balance sheet perspective, we're sitting very strong, and I think the rating agencies will recognize that. Operator: Your next question comes from the line of Shar Pourreza of Wells Fargo. Whitney Mutalemwa: This is Whitney Mutalemwa on for Shar. So you currently have precedent for large load arrangements, including a certain tariff that's tied to -- I think it's tariff Schedule 33 tied to a special contract. Do you expect to move towards a standardized large load tariff rather than negotiating special contracts case by case? And if so, what would drive that decision? Lisa Grow: At this point, we don't have plans for that. Each customer really comes with their own unique needs. And so we really try to make sure that we understand them and meet them. So they really are tariffs of one, if you will, that are very catered to the customer. Whitney Mutalemwa: Okay. So nothing in the near term? Adam Richins: That's correct. Yes. Nothing in the near term from our perspective. Operator: Your next question comes from the line of Julien Dumoulin-Smith of Jefferies. Brian Russo: Yes, Brian Russo on for Julien. You mentioned the downward slope in CapEx in the outer years and you take a conservative approach to what you include. What could be upside there? Is there anything left on the '28 and '29 RFPs that would be additive? Or is this, say, another RFP that would be needed for the post 2030 time frame? Adam Richins: Yes, Brian, this is Adam. Yes, we are looking at an RFP in the post 2031, '32 time frame. As you know, we had one for 2028. We had one for 2029. The 2029 and later RFP really only provided natural gas project. That was the project that -- [ Bennett ] that you've heard us speak about that's getting built right now. We're actually moving that project into 2028. And so as we look at 2029 and 2030, we're going to have to evaluate some options to increase power production there, and we hope to give you an update on that here relatively soon. I think Lisa mentioned it in her opening comments that we do have some options there, and they will go public here in the near future. Brian Russo: Right. Is one of those options brownfield development, I think it's Peregrine... Adam Richins: Yes, Peregrine 1, yes, absolutely. We have an energy site there. And just as a quick reminder, too, we don't have any generation resources for Micron Fab 2. Fab 2 is not in the load resource balance nor is Diode. So you would see additional CapEx there as long as well as additional generation resources to meet that growth. Brian Russo: Okay. Great. And then the less than $30 million ADITC usage in '26, notable, as you mentioned earlier. Would that be like the inflection? Or with the likely stay out this year of filing a rate case, how should we look at post 2026 support for earnings? Lisa Grow: Well, certainly, that -- as the large loads start to come online, we start to see those revenues help push out the need for rate cases and hopefully lower the need for the use of ADITCs. And so far, we're keeping on schedule, and we're optimistic. And so we -- I don't know that I would call it an inflection point necessarily, but certainly, we are starting to see some of that revenue come in. Adam Richins: And Brian, what I would add is I think one way to look at this is take a look at the rate base growth slide that we talked about today on the call. And you can see that 2026 and '27 have significant rate base growth. But when you look to '28, there's a very large amount of growth. So there's still -- the company still will earn based on rate base over time in addition to large load customers. We are at a point though where we have to look more closely every year as to which one is the better outcome. Brian Russo: Okay. And then just lastly, obviously, not surprising the assumption on the hydropower forecast. But could you just talk more or just share some thoughts on what the current hydro conditions are and drought conditions, understanding that you've got very strong mechanisms, but I'm just curious with the dynamic with irrigation sales as we move into the spring. I mean is there a high probability of a dry and hot irrigation season? Lisa Grow: Yes. It's really interesting. If you're a skier out west, it's been kind of a bummer of a winter. But what our hydrologists are telling us is that we actually in the -- on the east side of our system, we're actually really at normal levels. And that's where we get the most generation from because it flows through all of our hydro resources. And then certainly at lower levels, there is less snow than we historically see, but it's been actually quite wet this winter, so it didn't necessarily become snow at the lower levels, but that also helps keep those soils wet so that the runoff from the higher elevations make it to the river. So overall, we're actually pretty optimistic. I will also tell you that yesterday, it looked like Christmas here. So we're starting to see some storms. So ain't over till it's over, I guess. So we aren't necessarily done with the snowpack accumulation. But of course, we live out west, so we're pretty used to having fluctuations. There are drought cycles that happen. And yes, we have mechanisms. And then we also work very carefully as we prepare for summer operations, knowing what we're -- with the conditions as we go into those operating seasons. And Adam, I don't know what you would add. Adam Richins: No, I agree. You covered it. I think the range reflects that. We've been much lower than that 5.5 over the last 5 years. I think in 2021 and 2022, we were below that 5.5 number. So we're actually feeling somewhat optimistic that it's higher than what you would think, and that's why the range is what it is. Operator: Your next question comes from the line of Chris Ellinghaus of Siebert Williams Shank. Christopher Ellinghaus: So if you're going to forgo the middle year rate case for this year, would you expect to stay on a similar midyear cadence going forward? Lisa Grow: Well, that's sort of been our cadence historically, but we are constantly looking at our financial situation and make a determination then. So if something changed and we needed to do it sooner or later, we would do it at that time. We do have a requirement that we have to give notice when we're going to file. So we can -- we tell people before we do it. Anything you would add, Tim? Tim Tatum: Yes. Chris, this is Tim Tatum. The only thing I would add is, in the past, we have filed general rate cases in the fall, targeting a June 1 effective date. So we would have the opportunity there. We look at June 1 because that coincides with our annual power cost adjustment updates and our fixed cost adjustment update. So that's another time that we could look at to file. We'll keep monitoring and certainly only file if we absolutely have to, but that's a potential option as well. Christopher Ellinghaus: Okay. The customer growth continued sort of a little more moderate in the back half of the year. Do you have any better sense today what's affecting residential growth that -- is it the interest rate environment or whatever you might know about? Lisa Grow: I mean those are always the key drivers. It does seem like there's been a little bit more activity, if you will, of buying and selling. It kind of was frozen up as people were kind of stuck in their homes and interest rates, and that seems to have been relieved a little bit. I don't know if people just got used to it or needed to do something for other reasons. But I don't think it is necessarily -- I mean we still have good growth. And so whether it sort of ebbs and flows with the seasons or what drives it, we don't necessarily know. But overall, we still think it's pretty strong, and there's lots of subdivisions that are getting flatted and getting ready to be built, if not already under construction. So some really massive subdivisions sort of to the East and to the West. So we're excited about that. And certainly, with some of these big employers like Micron, they're going to need places for their employees to live. So that's really driving a lot of this growth as well. Christopher Ellinghaus: Yes. I wanted to say, given the large new employers, is there going to be some lumpiness to what the residential customer growth looks like for the next 5 years? Lisa Grow: It very well could. You know, it's never perfectly matched. So it looks like people are gearing up to provide housing for sure. Christopher Ellinghaus: Okay. Brian, do you have any estimate for what the weather impact was for the year? Brian Buckham: I don't have a specific number. I can show you the way I would look at it from a sales volume perspective. If you look at a 1.5% year-over-year sales growth on a weather-adjusted basis, it's 2.3%. So weather did certainly have its impact on the year. We had a great third quarter as a result of some of the, say, drier conditions and very hot conditions. But again, cooling degree days in both of the last 2 years were high and that impacted our sales. If you look at, say, November, December, they were very warm months. What I would note, though, is the FCA does have some impact on the outcome of that or the impact of weather on our results. But again, no, I would say there are parts of the year that were more moderate conditions that had an impact on those sales numbers. Christopher Ellinghaus: Okay. Do you have an estimate for your large load growth for 2027 that mitigates the large CapEx and equity dilution and whatnot. Have you got an estimate for what 2027 looks like? Lisa Grow: In terms of financing? Christopher Ellinghaus: No, in terms of large load growth. Adam Richins: But we can tell you, Chris, that that's when a lot of that growth is going to start to ramp up when you're going to see a lot of these in-service dates for Micron and others. But I don't think we have an exact number unless you guys do. Brian Buckham: No, we don't. We just have the 5-year CAGR out there as of now. And I think as we've mentioned, that number has been there for a while, somewhat more back-end loaded, but I would include 2027 as one of those larger ramp years '25 or '26, '28, '29 and out into the 2030s actually being pretty significant ramp years for us. Christopher Ellinghaus: Okay. I'm just checking because 2027 looks like a big year by my calculation. So with acceleration in the CapEx and AFUDC and the rate case, does that -- should that lead us to believe that 2025 was peak ADITC usage? Adam Richins: I would say not necessarily. I wouldn't assume that. There's a few different factors that influence ADITC usage. One of them is just a book equity number at the end of the year is what the calculation is based on. So that's impactful. Other things can be what's the amount of depreciation and interest expense that's unrecovered that's not offset fully by AFUDC and whether or not we file rate cases is another aspect of that. So it's not linear in any given sense that ADITC usage would go down. What we're seeing this year, though, if you think about even into 2027, you could see something similar. It's a little too far out to know for now. But in the further out years, when you look at some of that rate base growth we've talked about, that does have to be financed. And with our hybrid test year or our historic test year, depending on how you want to look at it, there is lag that sometimes has to be covered by ADITCs. And that's really why in the rate case, it was important to us to have that as an element of the settlement is to smooth out some of those years where ADITCs may be a little higher. Christopher Ellinghaus: Sure. I just don't see the big sag in the ROE that would require it to be much bigger than last year thus far. So also, you sort of reduced the dividend payout target with the dividend increase in September. Can you give us any thoughts about what do you see as a minimum that's -- can you -- do you feel like you can dip below 50%? Is there really a range that you're wanting to maintain at a minimum or a minimum growth rate, if you got any insights there? Lisa Grow: We're always looking at that certainly. We're just trying to make sure that we're not issuing equity to pay dividends and rather it's been sort of the consensus that it's better to invest in the company and get the returns there. But I don't really know that we have -- we do have that stated range, but we sort of take it as we go through this time period and try to make recommendations to our Board that makes sense. Operator: Your next question comes from the line of David Arcaro of Morgan Stanley. David Arcaro: Just one more that I wanted to check in with you on. I was wondering, just any thoughts on the prospect here for depreciation and interest expense tracker just going forward from a regulatory standpoint, whether that's something you might seek again in the future? Lisa Grow: Well, certainly something that we have looked at and talked about. And when we looked at our forecast for this year and sort of determined that we don't need to go in for a rate case immediately, we didn't see that we -- there was a need this year, but it's definitely something that we will keep a close eye on because as you know, with this big capital program that those are significant impacts to our financials. So we are interested in that. We'll continue the dialogue on that. It's just not something that we're working on right this minute. Operator: [Operator Instructions] With no further questions, that concludes the question-and-answer session for today. Ms. Grow, I will turn the conference back to you. Lisa Grow: Thank you again to all of you for joining us today and your continued interest in IDACORP and John's basketball career -- coaching career, and we hope you all have a great evening. Thank you. Operator: This concludes today's conference call. You may now disconnect.
Operator: Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Moncler Group Full Year 2025 Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Elena Mariani, Group Strategic Planning and Investor Relations Director. Please go ahead, madam. Elena Mariani: Good evening, everyone, and thank you for joining our call today on Moncler's Full Year 2025 Financial Results. Let me introduce you to the speakers of today's call, Mr. Remo Ruffini, Moncler Group's Chairman and CEO; Luciano Santel, Chief Corporate and Supply Officer; Roberto Eggs, Chief Business Strategy and Global Market Officer; Gino Fisanotti, Moncler Chief Brand Officer; and Robert Triefus, Stone Island's CEO. Before starting, I need to remind you that this presentation may contain certain statements that are neither reported financial results nor other historical information. Any forward-looking statements are based on group current expectations and projections about future events. By their nature, forward-looking statements are subject to risks, uncertainties and other factors that could cause results to differ even materially from those expressed in or implied by these statements, many of which are beyond the ability of the group to control or estimate. I also remind you that the press has been invited to participate to this conference in a listen only mode. Finally, I kindly ask you during the Q&A session to speak to a maximum of 2 questions per person to give all participants the opportunity to ask questions. Let me now hand it over to our Chairman and CEO, Mr. Remo Ruffini. Mr. Ruffini, over to you. Remo Ruffini: Good evening, everyone. In 2025, even in a difficult environment, our group delivered a solid performance, EUR 3.13 billion of revenues, a strong acceleration in Q4 at both brands with Moncler DTC up 7%, Stone Island DTC up 16%, an EBIT margin of 29.2%. Net cash, EUR 1.5 billion, and our sustainability effort valued by key ranking globally. Strong results that demonstrate the quality of our operating execution and the resilience of our business model. But as usual, as always, what I'm mostly proud of is how we reached this result, investing in creativity, preserving our identity and moving forward with clarity in our long-term strategic direction. At Moncler, we are working to make the brand stronger across all seasons and all geographies, focusing on where we have room to improve our brand awareness. We also continue to build unique brand experiences and moments. After the strong success of Warmer Together, which become way more than a simple campaign, we opened 2026 with an emotional Grenoble event in Aspen. And we are back to Winter Olympics by sponsored the team Brazil and its athlete, as Lucas Pinheiro Braathen, in a relevant, unique and meaningful way. This moment are only the beginning of a year of full initiative. As Stone Island, we keep moving with focus and discipline. We are working hard to reinforce the brand in the areas that matter most, improving our collections, elevating the customer experience and making operation more solid and relevant, growing with intention rather than just scale. As we grow, we decide to make our organization even stronger. The arrival of Leo Rongone as the Group CEO in April is a natural next step in our evolution, which will bring new energy to our already solid structure. Something my leadership team and I have been considering for a while. But let me be clear, I'm not stepping down. And I'm stepping back. I will be Executive Chairman, continue to lead our creative direction and set the strategic direction of the group. I will be fully involved every day with the same passion and the same commitment. Let me close with something that feels very important to me. We grow only when we stay true to who we are, to our curiosity, to our uniqueness and to our courage to evolve because I believe that only companies that understand when and how to embrace change are able to succeed. Thank you. I leave the floor to Gino. Gino Fisanotti: Okay. Hello to everyone. Good afternoon. I hope everyone is having a good day. I just want to take the opportunity on the back of the message of Mr. Ruffini to share how happy we are with the strength of the Moncler brand right now. I think we are not just happy because of the good and the great results we've seen and the opportunities we have, but equally excited and happy about the opportunities and the potential of this brand towards the future. I think 2025 was not only a special year, was a year where we've seen our biggest year yet in terms of -- not only in terms of brand awareness and reach, but especially in terms of the brand engagement we have seen all around the globe, proving again that we are just way more than just big events and sometimes the seasonality or just a specific product. If we go to the next page, when we talk about Warmer Together, I think this was -- I want to start here. This was a quarter of records. A lot of records have been broken and we are happy to share some of them. I think the first one is Warmer Together, Mr. Ruffini just mentioned that it was more than just a campaign. In that sense, became the biggest campaign in the history of Moncler. This campaign wasn't just about product or wasn't just about celebrities, was about sharing the values about who we are and where we stand for. And I think nobody better than representing that than Al?Pacino and De?Niro, who are, for the very first time doing something together as a marketing campaign. I just want to say that this is the first time we even have issues to count the amount of coverage we're having and the amount of reactions we're having around the globe for this campaign, including markets like in Asia, like in China, where not necessarily the 2 celebrities were as known as the rest of the globe. Again, last but not least, on this campaign and the incredible results we were able to get, I think, as Mr. Ruffini said when we started this campaign, Moncler never been just about buffers and winter. We've always been about want and love since the very beginning. If we go to the next page, we will talk about Grenoble. And again, in December, we were able to launch the campaign on the back of the collection we presented at the beginning of 2025 in Courchevel with a pretty spectacular event. And again, another record breaking. This has been our biggest campaign in terms of Grenoble ever and especially since that we said that we started 3 years ago. This was a special campaign that was featuring our incredible Lucas Pinheiro Braathen, Vincent Cassel, model Amber Valletta, and of course, the most awarded snowboarder Chloe Kim. So again, incredible results there. And then on the back of that, I think we just mentioned, I think, was an opportunity for us to go back and celebrate our roots. We were not back into the Winter Olympics season since 1968. And in December, we announced the partnership with the Brazilian Federation, something that I'm sure we will cover in the next call, but I'm sure you've seen already regarding the opening ceremony and the incredible trajectory of Lucas during this Winter Olympics just a few days ago. So again, another great season not only for the brand, but specifically for this very important dimension of the brand, Moncler Grenoble. Last but not least, as we always talk about our 3 brand dimensions, Moncler Collection covered by Warmer Together, Moncler Grenoble with this campaign and the work done around the announcement for the Olympics. We have Moncler Genius, 3 very important drops during Q4 for us. The first one was an anticipated drop of Moncler Genius and Jil Sander. The second one was the reissue of a product that came a few years ago with JW Anderson, a very small capsule collection that we reissued with drop and was immediately sold out. And then last but not least, our partnership with ASAP Rocky, something that went way beyond the product collection we launched it. We were part of the partnership of his anticipated new music track after multiple years. And at the same time, we launched a very special Maya 70 jacket in December just for few destinations around the globe in DTC, and we were happy to see that product perform extremely well despite the limited units and the high price on that. So with that, I want to pass to Robert to share some of the great news from the Stone Island side as well. Robert Triefus: Thank you, Gino. Good day to everyone. I'm pleased to give you some highlights for this quarter. It's been a quarter, as Mr. Ruffini said, that we can be pleased about. It is a quarter that demonstrates the commitment we're making to focus on the values of Stone Island, the principles of Stone Island. And the campaign on the left featuring [indiscernible] is a continuation of a campaign that we've been investing in now globally for 2 years. It's a campaign that brings members of the Stone Island community to life to underline our commitment to product, the lab, the commitment to research, innovation and materiality, but also the life of our community. And this campaign, I think now, as I say, in its second year, is showing the consistency and the coherence of our brand positioning strategy. In the second column, you see Dave, a musician from the United Kingdom, who has also appeared in our lab and life campaign. We celebrated an album that he released. Dave reaches a very active part of our community. We call them the explorers, those customers who are accessing the brand for the first time, and he is a great representation. In the third column, you see a collaboration with Porter, the Japanese brand well known for accessories. We have a long-standing relationship with Porter. Accessories is not a large category for Stone Island, but it is a category of future potential. And both Porter and Stone Island stand for a commitment to research in our respective categories. And last but not least, Stone Island has a long association with soccer. Of course, this year with the World Cup, soccer will come under a particular spotlight. And in the fourth quarter, we continued our important strategic collaboration with New Balance, celebrating the sport of soccer. Thank you. Roberto Eggs: Thank you, Robert. Roberto speaking. Happy to share the positive results of both Moncler and Stone Island for Q4. As anticipated by Mr. Ruffini, we closed the quarter very positively for our business in Moncler with a plus 6%. The growth was on both channels regarding the Americas, both for wholesale and our D2C business. In Europe, the result of the third quarter was slightly negative, but locals were positive. So we were impacted by negative trend on tourism, especially with American, Korean and Japanese. Regarding Asia, all the regions grew positively during the last quarter of the year with a total result at plus 11%. I will be able to illustrate more in details in case you will be interested later on. If you move to the next chart with the results per channel, we were -- we have positive results or reverting trend on the wholesale. This was mainly due with this plus 2% on reorders for the fall/winter, strong reorders. So we're happy about the end of the year results. And regarding the D2C business, it was a strong growth at plus 7%, especially thinking that, as you know, Q4 has always been a strong role for Moncler. So we had a base of comparison over the past 3 years that was very strong. So the plus 7% is even more meaningful in that sense. If we move to Stone Island, there are also positive double-digit results in all the regions, Q4 at plus 16%. We had the Americas growing at plus 26%, also growing on both channels. The results on Europe were strong with a plus 12%. Both channels were positive. And similarly, also, we grew plus 22% with Asia. So strong performance also in all the regions in Asia. Regarding the results by channel, we had a plus 17% on wholesale. This was also due to the fact that there were some shipments that were due to be sent in Q3 that were postponed into Q4. So this was why we had a negative result in Q3, but we recovered in Q4 with this plus 17%. And you see the positive results with a strong retail KPIs that we had with this plus 16% for Q4 in our D2C channels. Regarding the opening, as you know, we tried with Moncler to open most of our stores with the start of the fall/winter season. So usually during Q3, we still had one opening in Korea in Galleria, Gwanggyo. We had for Stone Island, 3 openings. One was a conversion in Paris with [indiscernible] and we have 2 openings in the U.S. with Costa Mesa and Yorkdale. If we want to go quickly and swap through the picture, you see the opening of Gwanggyo that we illustrated here in Seoul. We put also a picture of our most important store on the Hainan Island that was where we doubled the surface at the end of the year. The opening took place in December and with very positive results for the year-end and for the Chinese New Year. And you see also one of the latest openings that we have had with Stone Island with South Coast Plaza with our OMA concept that we are now deploying in all the network. Pass the word to Luciano. Luciano Santel: Thank you, Roberto. Hello, everybody, and thank you again for attending our call today. We are now at Page 23, where we report our profit and loss for the fiscal year 2025 with an operating profitability of 29.2%, slightly, slightly, behind last year, but substantially in line with last year when we reported 29.5% with selling expenses slightly higher than last year due to the negative minus 1% comp as Roberto mentioned before, with a good control of G&A and with the usual 7% in marketing expenses as last year. So quite a good EBIT margin. Let me make one comment below EBIT on financial expenses that show an increase from EUR 6.5 million to EUR 26.2 million due to higher interest expenses on lease liabilities by the IFRS and the lower level of interest income this year as compared with last year. Let's move now to Page 24, where we report CapEx. CapEx totally in line with our plan with what we anticipated to the market in July of last year, 6.9% higher than the 6% we reported the year before due to a couple of important projects. One is about the new corporate headquarter and the other one on the distribution network, the big, very important new project in New York Fifth Avenue store. For the 2026, just to let you know, we expect to go back to a 6% incidence of CapEx on revenue. Page 25, net working capital, 9.7% against the 8.2% we reported last year, higher due to a higher level of inventory. But let me say, a healthy inventory, a result of a strategic decision we made about 7, 8 months ago to invest in one of our most important strategic raw material, which is down due to the volatility we faced last year in that sector. And so in order to be safe, we decided to buy more down than what we normally do. So everything still totally under control as well as credit and of course, payable. Page 26 now net financial position, close to EUR 1.5 billion against the EUR 1.3 billion we reported last year after a distribution of dividends last year for about EUR 350 million. Important to remind you as we report in the notes on this page, we expect actually the Board will propose to the shareholder meeting a distribution of EUR 1.4 per share in May of this year on the earnings of fiscal year 2025 with a payout ratio of over 60%. Page 27 balance sheet, nothing important to comment. Page 28, cash flow statement that reports a free cash flow of EUR 529 million behind the EUR 587 million last year. But of course, there is an FX translation impact of about EUR 20 million. And on the top of that, important to reiterate the higher change in net working capital due to the inventory level I mentioned before and higher -- significantly higher CapEx than last year with a total financial position again of EUR 1.5 billion and the cash generation of about EUR 150 million. Page 29, we report, as usual, our strong commitment on sustainability. And let me say, the strong results we have achieved this year. Okay. We are done with the presentation and ready now for your questions. Thank you. Elena Mariani: Thank you, Luciano. We will hold for a few seconds to gather questions from the audience. [Operator Instructions]. Operator over to you. Operator: [Operator Instructions] So the first question is from Melania Grippo, BNP Paribas. Melania Grippo: This is Melania Grippo from BNP Paribas. I've got two questions. The first one is on the current trends. If you could comment on what are you seeing year-to-date in retail compared to what you delivered in Q4? And my second question is on product diversification. I would like to understand if you're happy on how this is proceeding. And if you could please give any granularity on some of the categories, for example, shoes, knitwear and also on spring/summer. Roberto Eggs: Melania, thank you for your question. Happy to answer it. I will give some highlights on Q4 first before answering to the question regarding the current trading. We had, as it was presented, a strong Q4 with an acceleration towards the very end of December. We had a good month of October, November, a month of December that started a little bit more flattish, but then an acceleration from mid of December that we have continued to see in January and also in February. To be more specific on the different regions, they are all going positively with a strong performance on our Asian countries, but also on the U.S. for both channels, both retail and wholesale. I must say that Korea, especially had a very good rebound after Q3 that was a little bit less good, and we continue to see this growing trend, also thanks to the return of the Chinese on the Korean market. Chinese that have been missing a little bit on the Japanese market, but we have seen them back both in APAC and in China, and they are consuming both in China Mainland and outside in other region in Asia. So very happy about the start of the year with an acceleration that we have seen in these last few weeks. Gino Fisanotti: Melania, Gino here. Thank you for the second question. So a few things here. I think we already discussed this probably for the last 12 months. I think -- regarding product classification, I think there's a few things just to highlight. The first one is, of course, beyond outerwear, something I will come back later, we have been doing specific efforts regarding everything that is knitwear and cut and sound, something that we are really happy to see the progression of this business, especially on the knitwear side, we're seeing a really strong consumer reaction for the past 12 to 18 months. And then, of course, we're seeing good positive as well results regarding the efforts that we're starting to put around footwear, specifically in the last quarter with the new launch of the new Altive Mid boot as well as some of the work that we are doing on soft accessories. I think as we always mentioned, of course, we -- I think the other aspect that is important to keep in mind is when we talk about outerwear, we're talking about the evolution of a business that now has a strong impact, especially in everything that is more about lightweight and something that we call seasonless. It's more like lightweight solutions and lighter versions of our product as well, which is performing very well as well. So I will say we will continue on the diversification of the weight of outerwear as have been growing over the past 2, 3 years, and we will see that continue as we go into the next seasons. Regarding spring/summer, I think if you ask us, we are happy with the results of Spring/Summer '25 despite all the, I would say, the macro environment of the industry as a whole. That said, I think what you will see as we discuss is spring/summer specifically more on the back of spring and summer per se. We always said over the past probably 2 years that we were working relently in terms of improving the product offering before we were moving to do any type of a specific even bolder communication. The only thing I will just probably slightly anticipate before we discuss not to share much is that you will see an evolution in terms of the efforts that we'll be putting specifically from 2026 onwards. We are very proud of the effort that the team have been doing over the past 2 years, especially from design and product development, and we believe that we are ready to go to the next level when we talk about spring/summer. So more to come in the next probably few months, but this is an important aspect as well that we wanted to highlight to your question. Roberto Eggs: Melania, just maybe one last point on my side regarding the current trend and the current trading. I've commented on Moncler, but just to confirm that we are seeing a continuous momentum as the one we have seen on Stone Island in Q4, also at the start of Q1. Operator: The next question is from Ed Aubin, Morgan Stanley. Edouard Aubin: Okay. So I will stick to two questions from [indiscernible]. But before I do so, ask my question, if you can allow me to wish good luck to Roberto in his new adventures. So Roberto, it was very enjoyable to hear and you share your views on Moncler. So you're living on a high. Congratulations, and I'm sure we are going to hear from you soon. So moving on to the questions. I guess the first one is for Gino, and apology because it's a bit of a big picture question, so it might be difficult to answer in a short time frame. But Gino, what makes you confident that the brand desirability will continue to increase? I guess it's multidimensional in terms of advertising campaign events, shows, collaboration and retail excellence and all of that. So I know you don't have much time, but if you could comment on that, I'd be curious to have your views. So that would be question number one. And then question number two on to Luciano, I guess, is on the margin sensitivity. So I guess Moncler retail was up 4% for the full year at constant FX, and you had a 30 basis point kind of EBIT margin dilution. Is that a good rule of thumb to keep in mind for the future? And then what would make you translate to kind of a neutral margin trajectory going forward? And just related to that the Luciano, if you could update us on the FX impact you have in mind, assuming, obviously, FX would not change up until the end of the year for 2026. Gino Fisanotti: Ed, thank you so much for the question. I think, again, as you mentioned, probably, it's a longer answer that we can potentially, hopefully, we see each other and take it. But I think there's a lot of aspects for us to think why we believe that we have almost -- we always say this about this idea that this is a brand that has unlimited potential with always as every company specific resources. So we are always trying to be very focused on the few things we really want to be really good at as next steps. If we think about this, I think the things that make us super confident is not only seeing the results we're getting -- we are sharing with you today and more importantly, the reaction from customers around the brand is, first of all, is we have opportunities when we think about Grenoble. I think we strongly believe that there is a big opportunity for the brand to go further and deeper on that. We believe that there is -- as we always discuss and I just mentioned the answer before, an incredible opportunity for us awaiting us to become a more all year-round brand with spring/summer. We believe, as you know, and you start seeing the efforts in '25, and Luciano mentioned some of the investments we're doing in the U.S., specifically as we go into this mid-to long-term approach into this market. And that make us believe on all this. On the back of that, again, I think the opportunity regarding product is real, right? I think when we talk about there's 2 aspects on product that is working in a way for us, which is in one way, we keep elevating the proposition we have in terms of product offering, while we are protecting the core as well. And I think these two things make us relevant at the very mid-high-end part of the luxury industry while we are able to connect with the aspirational customer as well. So again, and this allow us what I believe is the other big part for us is we still have a lot of opportunity for acquisition, for customer acquisition that they are at the very end, the ones who allow us to keep investing and keep growing as a brand. So of course, we can elaborate a way more, but hopefully give you 5 to 6 answers to that question. And some of those, especially the ones I mentioned around renewables, Spring/Summer, the U.S. and the opportunity to keep better on Park and the way we connect emotionally with customers are the things that we are obsessing every single day as we keep moving forward and allowing us to showcase today the results that we're showcasing with you. Luciano Santel: Ed, thank you for your question. About the margins, in 2025, we reported, let me say, better than what our rule of thumb, as you said, would expect of 29.2%. This was because Q4 after Q2 and Q3 that was -- were both quite disappointing. Q4 was very good for both brands, as Roberto said. And also because in the mid of last year, when the business trend was not particularly strong, as you may remember, we decided, of course, we needed to react to that business trend, implementing some cost saving initiatives that allowed us to control and to report quite good G&A and also selling expenses without touching, of course, marketing that is, let me say, the blood for our brand and for our business. Talking about FX for this year, for 2026 based on what we know today that may be different from what may happen tomorrow based on the current FX, we expect a 4% impact on the top line, a decline of the top line due to FX. Talking about the margins, of course, we try to do whatever we can to protect our margins, reacting to the FX trend, negative trend right now with a pricing policy that is expected to offset the FX trend. So for margin-wise, the impact of FX on margin is expected to be, let me say, negligible. And this is what I can tell you right now. Of course, there are many other impacts, but your question was about FX. Elena Mariani: And Ed, let me allow you to add one small thing. When he talks about the impact of FX on top line, he said 4 percentage points for the full year. Keep in mind that for the first quarter, it will be bigger than that. It will be around 6 percentage points of impact on the top line. So it will be bigger in the first half of the year and a little bit less starting from Q2. Operator: The next question is from Erwan Rambourg, HSBC. Erwan Rambourg: I hope you can hear me. Congratulations on a very impressive 2025. And yes, specifically for Roberto, congrats on a great track record over the past 11 years and all the best for what's next. So the two questions. First of all, on China, I think you're one of the first companies to report during this Chinese New Year. So I was wondering if you had any initial faith on this Chinese New Year and possibly if you can share the split of sales to Chinese citizens onshore versus offshore and how you see this evolve this year and in the future? And then secondly, just wondering if you could give us a few metrics. I'm thinking about the average selling space, sales per square meter, UPT, anything worth looking at in terms of '25 versus '24? Roberto Eggs: Erwan, thank you for your comments. It was a pleasure working with you over the past 11 years. Regarding your question on China and Chinese New Year, I think we are still in the middle of the Chinese New Year. So we'd rather prefer to comment on the general trend with Chinese inside and outside China. And what I can comment is that we have been growing double digit, both inside and outside China. Maybe, you usually don't report data on -- and I see our team getting a little bit nervous now. But on the like-for-like, we usually don't comment per quarter, but I wanted to restate that Q4 was positive for us. So we start seeing again like-for-like growth towards the end of the year, and this is confirmed for the time being for the start of Q1. So Chinese positive inside and outside double digit. The rate of -- the share of consumption of Chinese inside and outside China is roughly the same that what we have seen in the second half of 2025. So a 70% internal consumption and 30% outside of China. I think that this trend, it could vary. It could become 1/3, 2/3, but we are not going to get back, as you can imagine to the 50-50 that we had pre-COVID because for a very simple reason, there is a repatriation of consumption in China. And on top of that, a lot of brands, Moncler included and Stone Island included, have been doing dramatic efforts to increase the footprint on the China market, even if we see still potential to have better-looking location, larger stores, and we are working already for this year on some relocation and expansion on the market. But there is this willingness also of the Chinese government to repatriate part of the consumption. So we have been working on both. We take advantage of the Chinese traveling. Japan is probably the country that has been suffering the most, but this is more linked to political tension than anything else. We have seen Hainan performing well. We have seen Korea performing extremely well. Hong Kong has been performing well also. And we have seen positive results in Europe, even if we are not at all at the same level of Chinese consumption in Europe compared to the pre-COVID. So this is something that has been confirmed. Regarding the metrics and also what we have in the plan for 2026, we have a similar number of openings than back in 2025. So you can expect similar impact this what we usually say mid-single-digit impact in terms of additional square meters that are going to drive additional sales on the market. And the other metrics on, let's say, retail excellence, they have been positive. So we have seen some traffic back in the stores, good conversion. UPT is not the name of the game usually towards the end of the year because we tend to push more on the high price value item, especially with Grenoble and UPT is more the battle that we are having in Q2 and Q3, especially for men, but the metrics have been good at the start of the year. Operator: The next question is from Chung Huang, UBS. Chris Huang: Congratulations on the results. The first one, maybe just a clarification on the cluster. So I think, Roberto, you commented that European locals in the quarter were positive. I'm just wondering if you can give a little bit more color in terms of is it more low single digit, mid-single digit and also other nationalities. I think you said that American tourism is a bit softer in Europe. But if we take the whole American cluster, how is the performance in Q4? And on Chinese, I think last quarter, you already had a very positive trend with the Chinese consumer. So just looking at the quarterly trends in Asia, it does seem like Chinese is growing around mid-teens, if you can confirm my calculation. Secondly, on the moving parts of 2026, I mean, if you can give us an update on the pricing plan for both brands. I think space already commented, but also if you can provide a refreshed wholesale guidance. I know there's some timing impact for Stone Island, for example, but just wanted to hear your latest thoughts on those metrics. Roberto Eggs: Okay. Let me clarify on Europe, and thank you for your question, Chris. Regarding the European nationalities, they have been flattish. We have had a positive impact of Chinese tourism, but on the low single-digit part for Europe. And we have been negatively impacted in Europe by Americans that were down, by Korean that were down and Japanese that were down. So this is for the global context, then we have seen also positive growth with -- even if it's not as important as from some other brands, but we have the Middle East that has been growing. So our client in Middle East and our business is developing well there and also when they are traveling to Europe. Regarding the other nationalities, you were asking regarding the Americans, they have been in the high single-digit positive cluster overall, but their performance has been mainly a local performance. So the result that we have seen in, let's say, in Q4, they are confirmed also at the start of the year, so positive performance locally, less when they are traveling outside. And regarding the other nationalities, we have seen at the end of the year, Korean going back to positive single-digit result after a negative Q3. So this was something that was very positive for us. And Japanese locally have been positive also. So the performance that we see on Japan is mostly driven by the good performance of the locals to a lesser extent on the Chinese because we have seen a decrease in the Chinese. What we have seen is, if I may say, the Chinese that are coming to Japan are there. They're spending more than before, but they are much less than before. So you have seen probably the trends that have been published also by duty-free data that are showing a minus 40% on flights, but we see an impact on the business that is much lower than that because the ones that are coming are really wanting to spend. So it has been, in a way, counterbalanced. Maybe something on the wholesale, you were asking on some of the trends that we are seeing for the wholesale. I think most of the cleaning for both brands have been done in the past couple of years. So we see a business for Moncler that is going to stay flattish for 2026. And we see an improvement on the results for the wholesale with Stone Island. I'm not saying positive, but clearly an improvement compared to what we have had in 2025. Chris Huang: Sorry, I just wanted to come back to the Chinese comment in Q4, if that's possible. Roberto Eggs: No, the performance on the Chinese, as I mentioned, was positive double digits, both in China and outside of China. So this is, generally speaking, the way we have seen the results. The cluster has been growing double digit, both in and outside China. Luciano Santel: Chris, about your last question on pricing for 2026, we expect a price increase for both brands in the region of low single digit, let me say, 3% more or less for both brands, Moncler and Stone Island. Operator: The next question is from Daria Nasledysheva from Bank of America. Daria Nasledysheva: Congratulations on very strong results. This is Daria from Bank of America. I have two. Can I please ask about your thinking on the cost base into next year? You exhibited very careful cost control in the second half, as you already elaborated on. But how are you thinking about your marketing spend next year as a percentage of sales? And if you can share with us the pipeline of activations for the coming year, that would be very helpful. And the second one is on Stone Island. Really a nice progressive improvement has continued that started realistically in Q3. How are you thinking about growth opportunities from here, given it feels like efforts on product and communication are really having an impact? What is the focus for you at the brand now? Luciano Santel: Okay. Daria, let me start and then I will let Gino to elaborate better. The answer about overall our cost base. Of course, we try and we tend as much as we can to be more and more efficient year after year. And this has allowed us, and I hope we will allow us to be flexible, reactive and to develop a lean organization, of course, with the head of the technology, automation, artificial intelligence and whatever. Talking about marketing, of course, our effort on marketing budget is totally unchanged. You saw that in 2025, we spent exactly what we have spent in the past and what is, let me say, our golden rule, that is 7%. And so for this year, for sure, we don't expect to spend less, no more, but not less than the 7%. And which -- I'll let Gino to elaborate better how we will spend this money. Gino Fisanotti: A little bit -- no less from Luciano. Daria, thank you for the question. Again, I think if we follow history of the past, 3,4 years, I think we have been evolving very much the way we're approaching. I would say our marketing team and our brand organization in terms of not only depending on big moments once or twice a year, but being the continued orchestration of a calendar that allow us to have real impact on both the brand and the business, right? And I think within that, of course, we are the ones who became extremely famous, not only for the creativity we bring to the market, but even for these big experiences or events, as you call them. I think 2025 for us was a very important year to prove ourselves that we are not only dependent on that, but sometimes like think about this. I just mentioned the incredible results we got this year in terms of reach engagement, et cetera. And we were coming from comping a year where we were doing 2 big events that we did in San Moisè and in China with Genius. Therefore, I think the campaign we did with Warmer Together was as big or more impactful than some of those moments. So in a nutshell without giving much of the details because I can't right now, I think, trust us that we will keep evolving the way we work, that we are focusing on incredible orchestration that allow us to, not only have big moments, but have the in-between moments powerful as well to make sure that we keep building this brand. And I think now I can say that we are a lead testament that we are able to do that and to push things forward as we did in the past few years and especially in 2025 as well. Robert Triefus: Daria, this is Robert Triefus. Thank you for the question. As you correctly highlighted, the momentum that we're beginning to see for Stone Island first emerged in Q3 has obviously picked up more steam in Q4. But this is really the result of a long-term strategy. A couple of years ago this month, I presented the key pillars of the Stone Island strategy, which are focused on product, the architecture of our collection to make sure not only that Stone Island is recognized for what it has always been recognized for product innovation, material research, particularly in the categories of outerwear and knitwear, and I'm very happy to say that, that is being recognized by our customers as we see in our retail KPIs. In addition, we want to make sure that, that product architecture is reaching a broad community. Stone Island has always been known for a broad community, both in terms of generations, but also geographies. So again, I'm very happy to see that we're seeing dynamism across customer segments and across geographies which showed that Stone Island continues to have this broad appeal. In terms of the second pillar, which is distribution, we said that we would focus on DTC, not in terms of a dramatic expansion of our footprint, but instead a focus on the organic growth of the existing footprint. I'm happy to say that the results are beginning to be seen. That focus has been manifested in relocations of key stores in what we consider to be our lighthouse cities, for example, in New York, in Paris, but also in improving the way that we've seen in wholesale. We've done this through the selective distribution approach that Roberto referred to that obviously Moncler has followed. And in terms of that selective distribution approach, I'm happy to say that we have developed very strong partnerships with key wholesale partners. Of course, it goes without saying that wholesale has played a very important part in the history of Stone Island, particularly in European markets, but it is through those partnerships that we're now able to show up also with the OMA store concept that we're rolling out in our own stores, but also strategically in partner stores. You made a reference to marketing having an impact. I'm a great believer in building brands over time. Rome wasn't built in a day and great brands weren't built in a day either. What we're beginning to see are the fruits of all the efforts that have been made in terms of building greater awareness of Stone Island, but awareness that is also built on deepening the engagement with our customers. That comes from an implementation of retail excellence where our client advisers are doing a better job, a storytelling around the brand. And again, that is being seen to have impact across regions. And of course, the metrics you might ask, how do we measure the impact of our marketing activities. We are seeing greater traction in terms of search. We're seeing greater traction in terms of engagement on social media. We have just been recognized in the last 2 quarters within the Lyst Index, which I think underlines how that traction is building momentum. Of course, we are very pragmatic. These are the early signs of brand momentum, business momentum, gaining traction, and we are very committed to carry that forward into 2026 and beyond. Operator: The next question is from Luca Solca, Bernstein. Luca Solca: One question about your strategic vision on retail. If we look back, we see that the retail development of Moncler and now Moncler and Stone Island, has changed quite significantly in the early days. You had relatively small stores. The size of the average store has continued to go up, you will probably reach a peak with your new store in New York. I wonder -- and at the same time, the retail network has been continuing to expand. I wonder how productivity has been playing out on a per square meter sense? And how do you see the future of this retail growth driver? If you feel that from a number of stores you point, you're more or less where you should be and if the average size can continue to go up productively. A similar question, which is on dynamics of how you see volume, price and mix going forward, we've seen quite a significant improvement in mix and like-for-like pricing, we've seen the wonders of Grenoble. But I wonder, going forward, if you feel that there's going to be a continuing push on mix and price? Or if you believe instead, that there's a need and focus to recapture some of the volume and grow through volume as well as the other 2 elements and how you see the interplay of these 3? Roberto Eggs: Luca, thank you for the first question on the strategic vision on the retail side. I think Robert just clearly mentioned the current focus on Stone Island that is very much on improving the productivity and fixing the model. And we have seen that this has been starting to really play positively on our results. Regarding Moncler, we are clearly compared to Stone Island in a phase that is a different one. When we see our project, the one we are managing, we have something that is very much balanced today between relocation, expansion and new openings. We have, this year, a focus on the U.S. We start this focus on U.S. already a couple of years ago. We have seen events in Aspen. There will be the big event of the opening of Fifth Avenue. You mentioned this would be the peak in terms of size, most probably, yes, our intention has never been to start building big stores everywhere. I think there are a few capital cities in the world where having a larger space allows you to show and showcase the brand and the experience we want to convey in our store in a much richer way. So I'm thinking about cities like Paris, like London, Milano, Beijing, Shanghai, Hong Kong, I think those cities, they deserve -- Tokyo, they deserve to have this type of flagship. But the, let's say, the format that is fitting the best the performance and the retail KPIs of Moncler, they are more around 300 square meter, which is not huge compared to what you see with the other player on the market. And I believe that with this type of format, and we don't have yet all our stores on that format, because our average size worldwide is roughly around a little bit more than 200 square meters. So we still have some stores that are smaller, but we would like to, let's say, elevate in terms of in-store experience for our clients, in terms of retention and so on. And we have seen that this format around 300 square meter is working well. So the ambition that we mentioned a few years ago on where we want to drive the sales density is still there. We said at the time that we would like to see due to the importance of Europe, China is back at the same level of 2019 so pre-COVID, which is not yet the case. So we are balancing out, but the metrics that we are currently seeing, they are there and they are improving. This year, we are going to have a similar number of projects that in the past. Clearly, in the future, we'll have much more relocation and expansion rather than new openings. But this is going to be seen year after year. Luciano Santel: Luca, this is Luciano. About your question, volume price -- volume price mix in 2025 and needless to say, volume somewhere down. But let me say that in Q4, they been getting closer and closer to flattish, so quite encouraging quarter also from the volume point of view, talking about the future price mix. I mean our strategy will still be what we said in the past, and I am sure you know very well, I mean, to keep elevating the brand, increasing our collection, increasing the high end of the collection, exploring higher prices. Right now let me say that our top prices are in the region of EUR 2,500. We see opportunities with our current customer base to increase the offer over that level. But we also believe that we can generate more volume by expanding the base of our collection, introducing a larger offer in the enterprise. Of course, enterprise for our outerwear category is expected to be in the region of EUR 1,200 more or less. So of course, it's a rich price, consistent with our pricing position. But this is the strategy. Of course, for 2026, it's still too early to anticipate what the volumes may be even at the beginning of the year, as Roberto said before, was quite -- and it is still quite encouraging. Luca Solca: Roberto, I look forward to seeing you here in Switzerland and learn about your next step in the meantime. Congratulations on a great chapter at Moncler. Operator: The next question is from Oriana Cardani, Intesa Sanpaolo. Oriana Cardani: Thank you for taking my 2 questions. The first one is on the evolution of the gross margin. Do you expect it to stabilize at the level of last year? Or do you see room for expansion? And my second question is on the price gap level between Europe, America and China, if you can give us an update? Luciano Santel: Thank you, Oriana. About your first question, talking about gross margin expansion. I hope there will be an expansion. But seriously, I mean our gross margin and our gross margin expansion has been driven since the beginning, mostly by the channel mix. Of course, right now, I mean, our DTC business is way higher than they were saying. So any expansion of the DTC business is not expected to be so important as it was in the past. But since we expect for 2026, let me say, solid wholesale business, but not in expansion and an expansion of our DTC business, for sure, from the space point of view, but hopefully also from an organic point of view, we do expect, based on this mathematics, the gross margin to expand a little bit. Please consider that we are now over 78%. And let me say that the maximum gross margin, I can expect right now, not for this year, but should we go 100% DTC, is about 80%. So at this level of development of our gross margin is becoming, let me say, more difficult to keep expanding the gross margin as much as we did in the past. Roberto Eggs: Regarding the price gap between the region, as you know, we are working on a bi-monthly basis to channel on our pricing committee, and we have been working together for the past 11 years to reduce the price gap between Europe and the other region. I must say that currently, it's probably the lowest price gap we have ever had between the region, not completely where we would like to be, but getting very close to that. So we have our American the price gap with the Americas that is below 30%. We have China around 30%, depending on the fluctuation of the currency between 28% and 30%. And we have today, China, Korea, that are more around 26%, 27%. So there is a small price gap between China and Korea to favor also the travelers inside of Asia also regarding Hong Kong, it's the same. We try to favor this 5%, 6% price gap between China and the neighboring countries, so just to favor and push sales for travelers, Chinese travelers. Operator: The next question is from Thomas Chauvet, Citi. Thomas Chauvet: I have 2 questions. The first one on categories. Could you comment on the performance of Moncler brand down jacket business relative to other category last year? What was its share of total business now. And maybe could you take this opportunity to give your thoughts on the broader down jacket market dynamics. We've seen a fair amount of competition at the entry level, at the high end, great progress on technology, sustainability-led products. Any color on that would be useful. And secondly, on inventories, and the 15% increase or EUR 70 million, if I understand correctly, that's largely due to advanced purchase of raw material of down. Are you seeing any kind of unusual inflation in the sourcing of top quality down and what is down typically as a percentage of cost of goods? And just finally congrats to Roberto for a great career for a decade at Moncler and all the best in your future projects in Switzerland or abroad. Gino Fisanotti: I will take it. I think Normally, we don't share again, the performance of the different segments. I think I will go back and repeat a few things we shared before. I think, of course, outerwear is part, of course, of the core of our offering in our business. I think what you will see specifically there, just to give a bit more context is the diversification we have been doing, especially in the past 3 years in terms of the offering, right? It's like not just the traditional outerwear, but all the different segments between seasonless, lightweight versions for travel retail, et cetera, and the demand we're seeing, especially on over shirts and that kind of style. So -- the outerwear business is way larger than it was before. And I think we are seeing specific traction in certain markets. We always talk about the Sunbelt of the U.S. where average temperature is around 18 to 22 degrees. We're seeing some markets in Asia where these performed extremely well. So I would say when we think about outerwear and the size of it, despite that we're growing other segments and other classifications within the business, this -- there was an expansion over the past few years. I think the other aspect that you are discussing is on one hand, outerwear as the same of the different product proposition is going through this process of elevation on one side in terms of how much value we can put in design and in the fabrics we use for certain products. On the other side, there is an innovation place that, of course, we know will take central place for this. I think I don't know, but we can look at what just happened in Aspen literally 15 days ago. In the latest collection we presented for winter 2026 or we can go into for winter '25 or the now 2-year spring/summer evolution of Grenoble, and you will see a lot of different innovation apply to ski work, to no work, to upper ski and even to some of our summer propositions regarding shirts or 3 layering systems. So I think there is a real evolution, I would say, especially on materials, applications on Grenoble, but we will keep fostering this idea of high style and high performance as we keep doing this segment of the business. But again, just to round this answer, outerwear is bigger as a classification than just a traditional view on a winter jacket only, and this is something that have been helping us to not only grow that part of the business at the same time as we keep growing other classifications within. Luciano Santel: Okay, Thomas. About your question about inventory, first of all, let me say it again because it's very important and nothing unusual on our inventory level. Nothing unusual means that our inventory is all good inventory, current season inventory and everything that is to be considered also it has already been written off. So what you see in our net working capital is only good inventory. It is higher this year because we decided to invest more than usual in down last year due to the volatility of the price in that moment. And of course, I mean, when we perceive price increase trend in the market, we decided to anticipate and to buy more down than what was needed normally. Of course, let me say something obvious, and I'm sure that is very clear for you. But we only buy top quality down, we never may decide to buy lower quality down in order to save money, so just to make it clear for everyone. And so the top quality down last year saw a peak in price opportunity. We bought down when the prices were still lower. But of course, this was not at all for speculative reasons, but simply because down is the essence of our DNA. So we needed and we wanted to be safe and to have even more down than needed then to run the risk to have a shortage of down. About the contribution of down, I don't have a number. Honestly, it's not meaningful in quantity, not meaningful in percent of our cost of goods sold. But again, is the essence of our DNA. Gino Fisanotti: Thomas, I forgot -- I think one thing, Thomas, I forgot to -- I think you mentioned about competition. I just want to give one second of an answer because I realize I didn't answer about that. Again, regarding competition, I think we always -- every year or every 2, 3 years, we talk about different aspects of competitors and things like that. We are, of course, in a segment where there's different players. I think the only thing I will tell you is, of course, we always remain very humble enough to look at what competition is there, what competition is doing, what the customers are doing and what's working, what's not working. I think at the same time, we do that. And we see, of course, when you talk about outerwear and you talk about different innovation solutions, there's a lot of different players, even a lot of luxury brands trying to play there. We always observe and try to learn, but more importantly, become better. I think on the other side, we always -- and I think Mr. Ruffini mentioned this at the opening speech, remaining true to who we are and our DNA and more importantly, to deliver strong product solutions for customers that look for a very authentic and meaningful brand. I think Grenoble, again, is a perfect example on top of what we can say about Moncler collection, about a segment of the brand that is delivering incredible product. And we strongly believe that despite competition as well, there's no other luxury brand as authentic as we are in terms of coming from the outdoors and delivering incredible innovative solutions for customers. Operator: The next question is from Charles-Louis Scotti, Kepler Cheuvreux. Charles-Louis Scotti: I have 2. The first one on the U.S., where you are still relatively underpenetrated. Have the Warmer Together campaign and the Aspen event increased your confidence in the brand's growth potential in the U.S.? And today, Moncler generate EUR 1.5 billion in APAC, nearly EUR 1 billion in EMEA. Do you see a similar EUR 1 billion revenue opportunity in the U.S. over time? Second question, could you please comment on the recent trends in the e-commerce channel and remind us your exposure to online across both brands? And some of your peers have pointed to an improvement recently, suggesting for them a gradual return of the aspirational customers. Do you see similar trends in your business? Gino Fisanotti: Thank you for the question. I think regarding the first one in terms of the U.S., I mentioned this before. This is one of the areas where we strongly believe we have an opportunity to do better. I think -- I will -- of course, I will mention in a second about Warmer Together or Aspen, but this is just singular aspects of a bigger plan, right? I think we strongly believe in this idea of an end-to-end approach towards the market. I think Moncler proven case from Europe to China in the past few years about -- it's not about just retail, it's not about just marketing, it's not about just CRM. It's about everything we are trying to do together and the orchestration of those efforts. I think what you started to see in 2025 between some specific launches we did with Genius, with Mercedes-Benz and legal campaigns regarding Moncler Collection with Penn Badgley, U.S. ambassadors in Grenoble campaign, going to the Met Gala for the first time, Aspen, Warmer Together, all these things are the beginning of something that we believe is a journey, right? I think this will not -- I think Robert just talked about building brands, right? And this is not about something that will have a silver bullet that will work overnight. We believe that, that journey already started in 2025. '26 is a major year for us to keep building towards that potential we have in the U.S. We not only have just did Aspen. I think we are going to open Fifth Avenue later in the year and many other things that will come that will help us to start bringing that potential we see. I think you mentioned something regarding revenues. I will not comment on the size of our revenue. The only thing I will always comment is on the philosophy we have where we always say that revenue is a consequence of what we do. So we strongly believe that we're able to do the efforts that we believe we're putting in place for the U.S. and we drive this end-to-end offense. We strongly believe that the revenue as a consequence will come and we will build long-lasting growth in that market as we are able to do in other geographies as well. Roberto Eggs: Just to complement the answer of Gino on the U.S., we never set targets that are -- we are never driven by purely on turnover and additional business. We always believe that if we do the right things for the brand, results will be a consequence of it. So clearly, now in terms of attention, we are fully focused on the U.S. I think the elements that we just mentioned that were mentioned by Gino, the Fifth Avenue is going to be one of the key elements, the campaign Warner Together has. The fact that we had an event on Aspen. Also, we opened also a very successful -- already very successful store in -- second store in Aspen dedicated to Moncler Grenoble. We had a fantastic receive with clients before -- just before and after the show. So we believe that we are currently doing the right things. We need to elevate also the level of operational excellence and the Fifth Avenue will be a catalyst of this new energy we want to bring also in our team locally. So I think you need to give us a little bit of time. It's going to be a journey that already started, but we are confident. Remo Ruffini: Charles, I think your second question was regarding the online business. Again, I think here, again, regarding online, I strongly -- we believe in this idea that the online experience have been evolving, at least for us in the past 2 years. And this is why one of the reasons that we set our .com in terms of the experience and the look and feel on the second half of 2025. I think we are leveraging more and more .com to attract customers and to more importantly, educate as a more product-centric experience. This is something that took us a bit of time to evolve, but we are happy to see that evolution and see how we can engage product to that front. I think clearly, the online channel have been underperforming through the physical part of the DTC in Q4. I will say within that, EMEA was the one that we were struggling a bit the most compared to the rest of the markets. But again, we believe that there is a kind of an evolution, not to use the word revolution in terms of how customers today are searching, how the searching engines that they're using and how they interact and they leverage platforms not only to just to purchase but to interact with brands, and this is something that we will keep evolving as we just did in September this year. Robert Triefus: Just a couple of words in answer to the e-commerce question for Stone Island. You may recall that around 18 months ago, we internalized the site from YNAP. We took advantage of that moment to launch a new front end and equally to be able to launch omnichannel services through localized warehouses. All in all, these actions have been very productive for the brand in terms of visibility, storytelling, product, narration. And we've seen and we are seeing a very strong trend in organic traffic to the website. So the e-commerce channel is a channel that we see with great potential. Operator: The next question is from Andrea Randone, Intermonte. Andrea Randone: The first one is about the recent interview held by Mr. Ruffini. He talked about the increasing attention of Chinese people towards outdoor activities as a possible tailwind for Moncler. Can you elaborate on the level of maturity of this trend? And the second question is about the internal production. I mean, what is the contribution of internal production on your current business? Is this a possible driver to make your products even more unique in the future or it is not? Gino Fisanotti: Andrea, Gino here. Thank you for the first question. I will take that one. Again, regarding the attention specifically from the Chinese people, as you said, on market regarding other activities, I think we have been saying over the past probably 2 years that we are seeing kind of a momentum towards outdoor activities, especially in Asia after COVID, especially '22, '23 and especially the buildup of first resorts for the outdoors, both summer and winter. This is something that is always happening in the U.S. but got reinforced, especially in the past 3 years as well. Reality is that what we are seeing is definitely the opportunity. We believe that opportunity is being started to being captured by Moncler Grenoble. Moncler Grenoble is performing pretty well across markets, but I would say has a really strong reception in the Asian markets or in China, but not only just in Fall/Winter, especially with the Spring/Summer collection. So this is something that is a testament a bit of what you were saying, and I think what you were alluding when Mr. Ruffini was mentioning about the more avid potential participation or activities of Asian markets, specifically in China regarding the outdoor. So this is something, as you can imagine, that we are monitoring as we go. We are looking forward not only in terms of the winter results, but the activities that are happening to our customer during summer. And we are trying to, of course, make sure that Grenoble is at the center of this conversation. Remo Ruffini: Yes, Andrea, about your second question on our internal production. Internal production for this year is expected to be in the region of 30%, 3-0 percent of our total production. Of course, most of this production is made in Romania, in our big industrial hub in Bacau, where we have 2 big buildings to produce outerwear. But we also produce outerwear ourselves in Italy in 2 different buildings in the region of Trebaseleghe where we have our headquarter. Furthermore, as you probably know, I'm sure you do, last year, actually end of the year before, we opened a brand new building for the production of knit only, quite a big building that allows us to make the weaving of all our knit production or more than 50% of our knit. And why we did that? Why? In 2015, we made a decision to open our own production in Romania because we realized and of course, it was extremely important that we needed to own our technology. And by owning our technology is the most important and essential way to develop and improve the quality of our product and not only improving the quality of the existing product because in Romania as much as in Italy, in Trebaseleghe. But I didn't mention Milan, but also here in Milan, we have a small industrial laboratory, not for production, but to develop prototypes, thanks to the proximity with our design team. This is the only way to improve, not only the quality, but to keep developing and researching new technologies for our product. So again, this is strategically very important. It was strategic in the past, and it is becoming more and more important also as a way to emerge in the market. Operator: The next question is from Chris Gao, CLSA. Chris Gao: Congrats on the great results. This is Chris Gao from CLSA. I have 2. So the first question is regarding Chinese consumers, especially the aspirational consumer spending trends. So basically, in the past few quarters, we're very happy to see queues coming back for Moncler and also for some other luxury peers, though we reckon that the general middle class may still take some time to recover, right? We are also very happy to see that you are both exploring higher price segmentation and also introducing more entry-level products at the same time together. So my question is, in the past few quarters, from a number perspective, do you see aspirational customers of Chinese have been sequentially contributing more to your growth than before? And how would you see the outlook of Chinese aspirational customer spending to Moncler brand? Do you expect it to gradually come back a little bit more as a growth driver? The second question from me is a follow-up on e-commerce. So basically, right now, we see some luxury peers introduce the AI-empowered e-commerce platform. And just wondering how would AI impact your omnichannel consumer experience in the future? Do you have any plans on that front? Roberto Eggs: Thank you for the question. We'll answer on the first one regarding our Chinese consumer. We haven't seen big differences between -- in terms of recruitment and percentage of younger, more aspirational customer or the top end of the pyramid for Moncler. Basically, in China, we have been growing with both and I believe that this is very much linked to the strong momentum that the brand is experiencing on the market since a lot of quarters or a lot of years because it's 3 years in a row that we have been performing well. You remember, we had also a Genius event a couple of years ago in Shanghai, and this was back in 2024, and we were afraid that the year after not having these events, we will see a slowdown in the momentum in China, which has not at all been the case. And I know it's a little bit abnormal because some of the peers are suffering on the market, but we haven't seen a slowdown, both on the aspiration and the top of the pyramid. Clearly, Grenoble is helping us also to grow on that part and what we call the Edit collection. So the more -- the one with less logo. So we are both growing on the very technical part of Grenoble, but at the same time, also with products that are less logo-driven and that are more, let's say, sophisticated. At the same time, our bestsellers, the one that we usually don't have on display, the Maya and so on continue to perform extremely well. And the difference transitional -- seasonal product like the knitwear, it's also a category that has been driving a lot of new customers into the brand. And as you know, those clients that are entering through this category, they usually upgrade themselves into outerwear later on. Remo Ruffini: Chris, thank you. Again, just last comment on what Roberto was saying. I think you mentioned this. I think it's important, and we said it before. I think for us, it's important that as we keep elevating our product proposition, we keep protecting the core. So while we acquire new customers on the more high end, we keep protecting and providing access to our customers. So this is a very important part of our product strategy. Regarding -- you mentioned about online and AI, I will give you a short answer there because this is something we communicated when we launched the new .com in early September. When we launched the new .com we announced our partnership with Google that we have been used as a partner that using the Veo AI platform with them. And what we are trying to leverage there is on the .com experience on part of the recommendation we do with customers based on their journey, we have been leveraging, of course, part of content. And then the last part is we're leveraging that as part of the service in terms of leveraging product as a system address. So there are certain areas today that if you go, for example, into Moncler Grenoble part of .com you can see and understand how the different parts of the product connect to each other for a better performance from mid-layers to under layers to top layers. So again, all the things are trying to be more effective and more efficient in the usage of our partnership with Google and their AI platform. Operator: [Operator Instructions] Gentlemen, there are no more questions registered at this time. I turn the conference back to you for any closing remarks. Elena Mariani: Thank you very much for participating in this call. Let me just give you a quick reminder of the next release. Our Q1 2025 interim management statement will be released on April 21, post market close, and our quiet period will start on March 23. Thank you again. For any follow-ups, feel free to contact me or the IR team any time. And of course, I will see many of you on Monday. Thank you again. Have a great evening. Operator: Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.
Carolina Velásquez Zuluaga: Good morning, everyone. Thank you for being here with us today to discuss our fourth quarter results. My name is Carolina Velásquez. I am Cementos Argos' Investor Relations Officer, and I will be hosting today's call. On the call today are Juan Esteban Calle, our CEO; Felipe Aristizabal, our CFO; María Isabel Echeverri, VP of Legal Affairs; Carlos Yusty, VP of the Colombia Division; Gustavo Uribe, the Leader of Central America; and Jason Teter, the newly appointed CEO of Argos Materials. First, I would like to ask you to carefully read the legal disclaimer that is currently being projected on the screen, which is also available on the presentation that is posted on our website. Please consider that all the discussions of the financial and operational results held during the call will be based on the adjusted figures, excluding nonrecurring and noncore operations. For a detailed reconciliation of the adjustments, please refer to the annexes of our presentation. Today, after the initial remarks, there will be a Q&A session. [Operator Instructions]. We will record this session and upload it to our web page. It is now my pleasure to turn the call over to Juan Esteban. Juan Esteban Calle Restrepo: Thank you, Carolina, and welcome to everyone joining us today. 2025 was an exceptional year for us and I would like to highlight 3 key achievements. First, our LatAm operations, which showed remarkable resilience in overcoming challenges across core geographies, emerging stronger and more efficient to capture future opportunities. In other markets, we leverage favorable dynamics, deep industry expertise and long-standing client relationships to deliver a differentiated value proposition. As a result, we delivered an EBITDA of COP 1.28 trillion, achieving a 25% margin 1 year ahead of schedule. This accomplishment was supported by a highly sustainable operation reflected in our score of 86 out of 100 in the 2025 S&P Corporate Sustainability Assessment, a rating that positions us among the top performers in our industry. We feel immensely proud of this result as a reflection of the unparalleled execution capabilities of our teams. Strategically, we are well positioned for continued growth across the region, including Venezuela's recovery, where our brand already enjoys strong recognition. In preparation for a transition in Venezuela, we started positioning our brand in the market since 2023. Today, we export nearly 1,000 tonnes of white cement each month and are ramping up the exports of gray cement to about 900 clients, covering 23 states and districts of Caracas with the goal of exceeding 5,000 tonnes per month very soon. We are convinced that with our proud operational experience in the country and the pending legal claim that we have for the expropriation of our cement assets in 2006, we are in a prime position to take advantage of the eventual reconstruction of the country. Second, for our shareholders, 2025 was a record year in distributions with over COP 3.5 trillion return through dividends, buybacks and the spin-off of Grupo SURA shares, boosting total shareholder returns to over 700% in U.S. dollars since the launch of the SPRINT program through January of 2026. Third, our U.S. expansion. We reentered the market through the launch of our aggregates platform, successfully advancing the first phase of our growth strategy. Our first shipment of 47,000 tonnes are already in Tampa, and we secured 2 additional positions on the Southeastern Coast of the U.S. A key milestone was the appointment of Jason Teter as CEO of Argos Materials, LLC. Jason brings extensive leadership experience from Vulcan Materials and Lafarge USA with a prudent track record in strategy and business development, operational excellence, disciplined growth and commercial strategy in the U.S. aggregates sector. We are thrilled to have Jason on our team. With this brief overview, I would now like to invite Jason to introduce himself and share his perspective on our U.S. strategy. Jason Teter: Thank you, Juan, and good morning, everyone. It is with great pleasure that I today joined my first earnings call as part of the Cementos Argos team. As I have said, it is an honor to assume the role of CEO of Argos Materials at such a relevant moment for the company. Cementos Argos has a clear vision, a strong culture, strategic assets and an exceptional team. I'm excited to build a world-class team to lead this new phase and contribute to creating a differentiated platform that delivers high quality, high-impact solutions for our customers in the United States. I want to start this short intervention by reminding everyone of the great opportunity that lies before us. Aggregates is a large industry in the U.S. They are the backbone of concrete, asphalt and infrastructure projects. Its production is closely related to the population base and follows population growth. Combined, construction aggregates made up over 50% of the total U.S. industrial minerals value surpassing cement that represents around 16% of all other segments. Its main attribute is the constantly compounding growth of its price throughout the last 24 years with an average growth rate per year of 4.9% between 2000 and 2024. This performance is supported by 4 drivers: scarcity of reserves, market dynamics that enable the formation of micro markets shaped by logistics, operational characteristics and high barriers to entry. Argos has the right capabilities to capitalize on this opportunity with premium source assets in Central America and the Caribbean, a unique firepower to acquire and develop synergistic assets in the U.S. expertise and robust network at imports' sources and a strong reputation and extensive experience in the U.S. market. It is strongly positioned to become a relevant market player and generate value to its shareholders. We have a goal of building a business in the next 5 years that will earn more than $200 million. The strategy is a hybrid approach, combining organic and inorganic growth with an aggregates platform focused on imports and local supply capabilities. We will give further details on the business plan soon and keep all the market informed about our advancements. Thank you. Juan Esteban Calle Restrepo: Thank you, Jason. Now I would like to invite Felipe to walk us through the performance of our SPRINT program. Felipe Aristizabal: Thank you, Juan, and good morning, everyone. 2025 and the first few weeks of 2026 have been extraordinary for SPRINT. By the end of January, we achieved a cumulative total shareholder return of 764% in dollars since the programs launched in February 2023, reaching $1.2 billion in shareholder distributions. We believe this momentum will continue, supported by the strategic objectives outlined in the fourth edition of the program and our strong position as an issuer poised to benefit from the emerging markets cycle already underway. We'd like to introduce SPRINT 4.0 and provide detail on its pillars which now extend over a 2-year period to incorporate initiatives requiring longer execution time lines. In the first pillar, in terms of financial results, we are already operating at a top-tier industry level in terms of margins and return on capital. We acknowledge that presidential transitions in key markets such as Honduras and Colombia may challenge further margin expansion in the short term. Our goal is to maintain profitability between 24% and 26%, enabling us to deliver an EBITDA between COP 1.3 trillion and COP 1.4 trillion by 2027. We also expect to sustain ROCE above 16% over the next 2 years. For the second pillar related to distributions to our shareholders aiming to boost the TSR, we rely on 2 mechanisms: dividends and share buybacks. For dividends, we are considering an ordinary dividend of COP 430 per share, representing an 11% increase vis-a-vis the ordinary dividend paid in 2025, distributed in 4 equal installments and an extraordinary dividend of COP 150 per share payable fully in April. For buybacks, we are proposing to roll over the program and top it up to COP 450 billion for the next 2 years. These distributions underscore our commitment to delivering tangible value to our shareholders while preserving ample flexibility to advance our growth agenda. Our third pillar consists of our share liquidity. We remain highly optimistic about the inclusion in the MSCI Emerging Markets Standard Index in the near future as our share has exhibited a strong performance this year. We surpassed the highest nominal price in the company's history and closed January at COP 13,820, a 30% year-to-date return. Moreover, our average daily trading volume increased by 13% vis-a-vis the 2025 average, a clear reflection of growing investor interest, market visibility and LatAm equities momentum. To further strengthen liquidity and support both existing and new investors, we are implementing a dual market maker model, in which 2 independent firms with differentiated strategies will operate simultaneously. Finally, under the fourth pillar of this new face of SPRINT, aligned with our strategic priority to expand in the U.S. market, we are introducing key milestones to enhance visibility and enhance monitoring of progress across both organic and inorganic initiatives, as Jason mentioned. For organic growth, we reaffirm our target of generating approximately $100 million to $150 million in additional EBITDA by 2030 with investments of less than $500 million. The milestones enabling these include securing DOT certification in all operating states, enhancing logistics efficiencies through the development of a proprietary port in Dominican Republic and obtaining 2 additional marine terminals in the U.S. Southeast Coast, scaling production from our Dominican Republic and Panama quarries to exceed 3 million tons dispatched by 2027. And finally, achieving a positive EBITDA by the end of 2027. In our inorganic strategy, we aim to complete a medium-sized acquisition that provides local use presence along with more than 3 bolt-on transactions, seeking to generate an additional $100 million to $200 million in EBITDA by 2030. Additionally, in 2025, our cash holdings generated an average return of SOFR + 17 basis points, totaling around $100 million, through a strategy executed with global asset managers under the parameters set by our Board of Directors. In conclusion, with our clear strategy, a strong balance sheet and disciplined execution, we are well positioned to capture opportunities and generate long-term sustainable value. Juan Esteban Calle Restrepo: Thank you, Felipe, for your intervention. I would like now to comment on our consolidated results. Since the beginning of the year, our core markets such as Colombia and Panama, exhibited signs of complex dynamics. We had to rapidly adjust our business model for these conditions. In this short but profound reinvention process, we found ourselves developing key operational and commercial capabilities and strengthening our relationship with main stakeholders. Today, we feel proud of the results achieved and moreover of the solid foundations we have built for growth when the time comes. During the entire year, we dispatched 9.3 million tons of cement remaining flat versus 2024 as a result of mixed performances with a particularly sharp decline in exports from Colombia due to our decision to shut down kiln #3 in Cartagena in August of 2024 and a contraction in demand from the U.S. last year. In ready-mix, we dispatched 2.3 million cubic meters of ready-mix, which represented a decrease of 12%, mainly driven by the slowdown of the housing segment in Colombia and still affected by the lack of housing subsidies from the Ministry of Housing and the transformation in this business line strategy in Panama. However, fourth quarter volumes went up year-over-year, both for cement and ready-mix with growth rates of 3% and 2%, respectively, reflecting an improved environment. We achieved full year revenues of COP 5.2 trillion and adjusted EBITDA of COP 1.3 trillion expanding 6.6% versus last year and aligned with the upper limit of our full year guidance. This EBITDA performance was complemented by an adjusted margin of 25%, which meets our guidance one year ahead and [indiscernible] expansion of 215 basis points versus last year. The fourth quarter consistence on profitability focused initiatives was key for the consolidation of the results as we delivered COP 347,000 million of EBITDA, representing a 27% margin. Moving into the regions, we find positive results overall. We have seen a clear recovery of the industry in Colombia that ended up with a solid growth despite sharp first month decreases, strong economic fundamentals driving up consumption in Honduras and Guatemala and a still robust demand in the Dominican Republic. Now I would like to invite Carlos to discuss further on the financial and operating results for Colombia and our market strategic perspective. Carlos Horacio Yusty Calero: Thank you, Juan, and good morning, everyone. Since May 2025, we've seen a clear recovery in the Colombian cement market, with volumes trending upward after 7 months of contraction. Industry demand reached 12.7 million tons, up 5% year-over-year. And as we mentioned in our last call, the retail segment has been the main driver, growing 11% year-over-year, fueled by self construction. Our total cement volume for the year reached 3.9 million tons in the local market and 1.2 million tons in exports. The decline in exports versus 2024 was driven mainly by lower dispatches to the U.S. affected by the weakness in demand in this country. And ready-mix in line with the industry recovery observed since September, we had our first positive quarter of the year, contributing to a total of 2.1 million cubic meters for 2025. Quarterly revenues came in COP 735 billion with an EBITDA of COP 226 billion, representing a 9.3% increase year-over-year and a 30.7% EBITDA margin. In addition, I'd like to emphasize that fourth quarter delivered the best historical EBITDA per ton whichever recorded, reaching $53 per ton. This underscores the consolidation of our profitability strategy, supported by strong operational reliability and the positioning of our value proposition, which continues to deliver top level products and services to our clients. For the full year, revenues reached COP 2.8 trillion and adjusted EBITDA of COP 812 billion, up 3.6% versus 2024 with margin expansion of 182 basis points, reaching 28.4% despite a challenging start of the year to capture efficiencies across the value chain by approximately COP 70 billion, focused mainly on fixed costs, delivering positive consolidated results and building a solid foundation to leverage the ongoing market recovery. Our free cash flow conversion ratio reached 76% of EBITDA, underscoring the strength of our cash management strategy. This together with our EBITDA margin and return on capital employed are the highest levels in the last decade, reinforcing the strength of our results. Looking ahead, we expect cement and ready-mix market to continue the recovery path driven by demand in major cities and further momentum from self-construction. In the midterm, we remain optimistic supported by housing sales growth of 25% year-over-year and a robust pipeline of more than 100 projects, including Túnel de Oriente [indiscernible] and Metro de la 80. Regarding the recent minimum wage increase, we are conducting a thorough review of our operations to identify efficiency initiatives that can offset this impact and we already obtained encouraging results. Nevertheless, we foresee some short-term impacts derived from the higher-than-usual increase. We have developed a best-in-class operation and are confident in our ability to further strengthen performance and enhance profitability by capitalizing on market upside, operating leverage and potential pricing traction with the goal of reaching an overall EBITDA increase of $60 million in the next 3 to 5 years. Juan Esteban Calle Restrepo: Thank you, Carlos. We would like to invite Gustavo to comment on the result of Central America and the Caribbean. Gustavo Adolfo Uribe Villa: Thank you, Juan, and good morning, everyone. In the region, cement volumes showed solid growth, reaching 1 million tons in the quarter and 4.3 million tons for the year. This represents a year-over-year increase of 12.6% and 8.6% with most of our operations outperforming their markets. In ready-mix, the downward trend continued aligned with industry contraction and our strategic decision to scale back this business line in Central America. Fourth quarter revenues were $132 million, bringing the full year to total of $554 million, a slight decline versus 2024, mainly due to Panama's contraction. EBITDA reached $34 million in the quarter and $141 million for the year with margins of 25.6% and 25.4%. The 30 basis point margin expansion was driven by the Caribbean where the Dominican Republic and Puerto Rico delivered record profitability. Now let's turn to Central America. Cement volumes in the fourth quarter rose 8.4% (sic) [ 18.4%] to 441,000 tons, supported by strong demand in Guatemala. Revenues reached $59 million with EBITDA of $19 million and a margin of 33.1%, while slightly lower than last year, this margin remains the highest among our regions. Breaking it down by country, Honduras, despite the kiln stoppage in the first half, volumes recovered, ending with 1% growth and margins above 30%. Operational excellence initiatives reduced clinker used to 45% and maintain our kiln OEE above 90% and cut carbon emissions by nearly 20%. In Guatemala, the market grew 18% by November, supported by strong remittances and higher cement prices. We captured record EBITDA and continued positioning ourselves as local alternative to imports. In Panama, industry volumes and prices declined. However, efficiency measures offset the impact. We reduced fixed costs by $1 million and SG&A by $2 million, while expanding contributions from premixed materials, aggregates and terminals, driving 10% operating EBITDA growth. Now let's move to the Caribbean. Cement sales reached 376,000 tons in Q4 and 1.5 million tons for the year, up 4.1%. Revenues were $67 million in the quarter and $275 million for the year, aligned with the volume growth. EBITDA margin stood at 19.7% in Q4 and expanded to 21.1% for the year, thanks to efficiencies across the value chain. By country, in the Dominican Republic, volumes grew 7% despite currency evaluation and increased competition. EBITDA reached record levels, supported by a 30% capacity expansion completed early in the year. In Puerto Rico, industry growth slowed, but we achieved a 20% EBITDA increase and reinforced market leadership with capital-light model. In our Caribbean operations, Haiti moved from negative to positive EBITDA, while Suriname quadrupled its 2024 result. Together with French Guyana, and the Antilles, these markets contributed over 10% of the regional EBITDA. To wrap up, 2025 was a year of portfolio optimization and operational rightsizing. We consolidated the best models to serve each market and strengthen our leadership position in the region. Looking ahead, we are confident that these foundations will support continued positive performance. Juan Esteban Calle Restrepo: Thank you, Gustavo. Thanks to the strong country-level results and corporate initiatives, we successfully met all the objectives outlining our 2025 guidance. Building on these achievements and considering the near-term outlook for the markets where we operate, we are presenting the following guidance for 2026. EBITDA margin, we expect to maintain a margin between 24% and 26% within the next 2 years supported by the consolidation of our commercial, operational and logistical efficiency initiatives across our geographies. Profitability, we aim at further enhancing profitability target a ROCE above 16% for the next 2 years. CapEx. In 2026, we plan to invest between $80 million and $100 million in LatAm with at least $65 million allocated to maintenance CapEx and around $80 million to $100 million in our growth plan in the U.S. Adjusted EBITDA. We project adjusted EBITDA to a range between COP 1.3 trillion, COP 1.4 trillion or the equivalent of approximately $350 million. Representing a midpoint increase of 6% compared to our 2025 results. Net debt to EBITDA, taking into account our current cash position, we have set a midterm target of 2x net debt to EBITDA, which we expect to reach within the next 3 to 5 years as our growth plan advances. We remain confident about the road ahead and reaffirm our commitment to meeting our midterm targets. This outlook is supported by improving market conditions, the effective execution of our optimization strategies and our disciplined focus on sustainable high return investments that will secure long-term growth. Carolina, we can now proceed with the Q&A section. Carolina Velásquez Zuluaga: [Operator Instructions] Please note that Jason has recently joined and is currently reviewing the business plan for the U.S. Therefore, any detailed questions in this regard will be addressed in future sessions. First question comes from Alejandra Obregon from Morgan Stanley. Alejandra Obregon: I guess I have two. The first one is on the ADR listing. I was just wondering if this is contingent on any particular milestone of your strategic path? And what's the timing for these? Or what do you have in mind here? . And the second one is, so you mentioned that this first phase of your strategic review will become EBITDA positive by 2027. So I was just wondering if you can perhaps walk us through the cadence of investments and the path to EBITDA growth in the earlier years. And what are sort of like the key milestones and the gating factors in the process for these aggregates or exports platform. Juan Esteban Calle Restrepo: Thank you, Alejandra. Even though, I mean, Jason is just in the onboarding process, I mean, he's more than ready to take your second question. So I would like Jason to start by answering your second question. Jason Teter: Alejandra, nice to meet you, and thank you for the question. In terms of the cadence of investment, we're -- as Carolina said, we're currently and I'm currently going through the plan and adjusting that. But I would expect in terms of the import platform for the majority of the capital to be spent probably in the second half of 2027 and in 2028 and maybe a little bit in 2029, but all that is subject to change based on engineering and timing of permits and all those kinds of key milestones as you talked about. In terms of the key milestones, as you know, we've already put on shipment into Tampa. We're currently commercially working on that. And then throughout this year, we will have a few more shipments likely into Houston, New Orleans and also Tampa. So I think those are the early key milestones that we're looking to achieve. And then internally, we're working on, obviously, the detailed engineering plans and permitting work in the Dominican Republic. And so those will hopefully happen, and we'll have clarity on all of that later this year. Juan Esteban Calle Restrepo: And just to add to Jason comments. I mean, the operation will get EBITDA positive once we have the ports and terminals in place in the Dominican Republic. I mean, as you know, we will start using some ports that are not our long-term ports. We will build a private port in the Dominican Republic, I mean, because the volume that we are expecting to handle is significant. So the first couple of years, we will be using 2 alternatives which are not ideal from the standpoint of our long-term competitive plan, Alejandra. And Felipe will take your first question regarding the ADR. Felipe Aristizabal: Alejandra, thank you for your question. As you mentioned, potential ADR listing is subject to the progress on the [indiscernible] business plan. We expect that -- I mean, we will be ready to pursue that path in around 2, 3 years. But that is -- I mean, the end game of this whole strategy is to pursue that path and have the market recognize the full value of that business plan. Carolina Velásquez Zuluaga: Next question comes from Gordon Lee from BTG Pactual. Gordon Lee: Two questions, both related to the U.S. business, and one is a little bit of a follow-up on Alejandra's question. But you mentioned the cadence of investment, but I was wondering if you could share with us what you expect the total investment to be from -- including with the $80 million to $100 million that you disclosed for 2026 through 2030 to produce that platform. That would generate the $200 million to $300 million in EBITDA. And the other question I had is I was wondering if you could share with us in your EBITDA guidance for 2026, what is the EBITDA drag from the U.S. business? In other words, can you share what you expect the EBITDA loss to be from the U.S. business in 2026? Juan Esteban Calle Restrepo: Sure, Gordon. And I can take, I mean, the first one. I mean, the total CapEx that we are foreseeing for the first phase of the aggregates platform is $500 million to get us to probably $150 million of EBITDA, which is going to be Phase 1. We will complement that as we have been explaining with bolt-ons in the U.S. and greenfields as well. So this Phase 1 is $500 million in CapEx and we expect that CapEx to get us to $150 million of EBITDA by 2030. And Felipe will get your second question regarding the drag and the deployment of this new business plan for [indiscernible]. Felipe Aristizabal: Gordon, and thank you for your questions. EBITDA drag for coming from the [indiscernible] business for 2026 is expected to be $6 million. Gordon Lee: Perfect. If I could just have one quick follow-up. Just to the CapEx, the $500 million that you mentioned, sorry, how much of that CapEx has already been expensed through 2025? Juan Esteban Calle Restrepo: It's just a small portion of that. Felipe Aristizabal: 2025, we probably invested around $3 million -- $3.5 million. Carolina Velásquez Zuluaga: Next question comes from Marcelo Furlan from Itau. Marcelo Palhares: My questions are three. The first one is just a follow up on the U.S. division. So if you guys can share a little bit, you mentioned that bolt-on acquisitions would be in the pipeline for the next months and years about the U.S. growth. So I guess... Juan Esteban Calle Restrepo: You are not sounding that clear, Marcelo. Can you repeat your question, please? Because we can't hear you well. Marcelo Palhares: Can you hear me better now? Juan Esteban Calle Restrepo: A little bit better. Marcelo Palhares: Okay. So my first question is a follow-up regarding the U.S. division. So if you guys can just share a little bit regarding the potential bolt-on acquisitions in terms of size. So what will be the size you expect for these future M&As? And my second question is related to the Colombia division. So if you guys can share what is implied for 2026 in terms of the milestones for the division. So if you guys are still working on cost efficiency and so forth. And the third question is related to be included in the MSCI Index. So if you guys could just give more details regarding what are the next steps or what is the current stage of being potential included in the MSCI Emerging Markets Index. So these are my questions. I hope you guys could hear me. Juan Esteban Calle Restrepo: Thank you, Marcelo. So Jason will take your first one. Jason Teter: Marcelo, nice to meet you. In terms of M&A and the size, I think that's going to vary both in size and in timing. Over time, as you know, that ends up being opportunistic in nature. But I can tell you, we will have a very robust pipeline and already have some potential targets in our pipeline that we will be diligently working on. In terms of the size, as you know, we have significant, I'll call it, firepower from the liquidity event with Quikrete. And so we will be looking to deploy that capital in M&A over time. Juan Esteban Calle Restrepo: Regarding Colombia, we're extremely happy with how the year ended up, strong fourth quarter, as you saw in our remarks, very strong margins, good volumes and 2026 started the same way. So I would like Carlos Horacio to give you a little bit more color on our milestones for 2026. So go ahead, Carlos. Carlos Horacio Yusty Calero: Marcelo, like Juan was mentioning, the idea is to continue in the same line that we ended the 2025. And we are delivering now some different strategies in terms of sales in the different regions of Colombia. We are capturing really a very good volume in the [indiscernible] segment. For that reason, we are expecting a very good first quarter and for the rest of the year in the same thing, working as well and continuing as well in the line of capture more reliability or more synergies in our operations. Juan Esteban Calle Restrepo: Thank you, Carlos. Now Felipe will take the question on the MSCI. So go ahead. Felipe Aristizabal: So honestly, we were somehow somewhat taken back by the announcement. Last week, we were expecting to be upgraded to the standard section of the MSCI based on our calculations. I mean we're very close to reach the overall market capitalization and float-adjusted capitalization. We are probably the most liquid stock in Colombia when compared to float-adjusted capitalization. So I mean, we would expect to -- for this upgrade to happen in 2026. We are right there. We're very committed to delivering on this promise. And this is still something that we really want to achieve in the context of the SPRINT program. Carolina Velásquez Zuluaga: Next question comes from Gabriel Pérez from CrediCorp Capital. Gabriel Pérez: I have three questions, mostly for the Colombian segment. The first would be that over the last 2 quarters, EBITDA margins in Colombia have been around 30%. How do you expect to sustain these high margins, particularly considering the impact that higher minimum wages could have on the sector? Also in line with the higher minimum wages. What do you expect the impact to be in the cement demand taking into account that higher construction costs could affect the construction recovery expected for 2026? And finally, in the earnings report, you mentioned that the absorption of [ Grupo Argos ] will be pursued to achieve additional operating efficiencies. So could you elaborate on how this transaction will translate into these efficiency gains, please? Juan Esteban Calle Restrepo: Sure, Gabriel. I would like Carlos Horacio to answer your two questions. So Carlos, go ahead. Carlos Horacio Yusty Calero: Starting with the first one, we are expecting pretty similar EBITDA margin for the 2026. Obviously, we have some impact from the increase of the minimum wage. But we are working from January 4, how to mitigate this impact in our cost, really working more in efficiencies. But obviously, that is -- it was a real impact, but we are working on it. In terms of the impact because of the minimum wage in the demand in the 2026, we have to split it to probably in the retail segment. Probably the volume increase because there is more [indiscernible] in the street and probably impact positive in the demand in the retail segment. In the construction segment, more in the housing sector, we are still analyzing or the sector is still analyzing what will be the impact in terms of the cost in the construction. But as well, what will be the impact because the increase in the mortgage rate. Really now it's not so clear how big could be the impact in the next months. And the third one is what about the merge the Cementos into -- [ Grupo Argos ] into Cementos Argos. Really, it will give us some efficiencies. The principal or the most important efficiencies is because we sell cement for Cementos Argos legal entity to [Grupo Argos ] legal entity. And when after the merge, we optimized the [indiscernible] industry commercial vehicle in the case of Colombia, you know very well. [indiscernible] transaction within the same legal entity and as well some other efficiencies in terms of optimizing the transaction between these 2 legal entities. Obviously, it will help us. But this -- the capture of these efficiencies will be more for the 2027. Carolina Velásquez Zuluaga: Next question comes from Marianne Goni also from CrediCorp Capital. Mariane Julie Goñi Tadeo: I have two questions. My first question is related to Venezuela. I see that the company is targeting a 2%, 3% market share this year. But given the country's economic context, what demand signals are you currently seeing that support expanding operations at this stage rather than taking a wait-and-see approach? My second question relates to the impairment recorded this quarter. Could you clarify if it's related with the Panama or the Puerto Rico operations? Additionally, should we expect further impairments over the course of the year? Juan Esteban Calle Restrepo: Thank you, Marianne. Thank you for your questions. I mean, regarding Venezuela, the reality is that we are extremely bullish about Venezuela. Yes, the market has decreased in a significant way. I mean, from a 10 million tons market per year to probably 1.5 million tons last year. But the reality is that, in our opinion, the reconstruction of the country, starting with the oil and gas sector plus the electricity sector will need significant volumes of cement and concrete. And we consider that we will have a first mover advantage. As you all know, we have a pending legal claim with the Venezuelan government for the expropriation of our cement plant in 2006. And we are completely sure that Venezuela is going to become one more significant market in Latin America. On top of that, I mean, what we have been doing since 2023 is just repositioning our brand in the market. So far, the product is getting a lot of traction, and Carlos can expand a little bit more about our current strategy. But the reality is that we have foreseen a future in which Venezuela is going to be an important part of our footprint. And we are like being extremely active with the U.S. government and in Venezuela in order to be that first mover in the cement industry. The reality is that the cement industry will have to be rebuilt and we see ourselves as the natural players to make that happen. So a lot of hope and optimism regarding Venezuela. And then Carlos, can you explain a little bit more, I mean, so far from a commercial standpoint, the traction that we are getting in Venezuela to complement? Carlos Horacio Yusty Calero: Okay, Juan. Marianne, we started with the export to Venezuela about 2 years ago, like Juan mentioned. And we started just exporting white cement. Since the last part of 2025, we started with the export of gray cement, really the reliability of the plants in Venezuela are really low. The current plants in Venezuela that are operating are really low. For that reason, we are taking advantage of that situation. And we established a very good relation with a very good client in Venezuela that has a big network of customers across the 23 states there and we are increasing month by month, both products, the white cement and the gray cement and as well giving us -- not just exporting the product but as well [ hope to apply ] better the product that really we have a very good expertise in technical support. And for that reason, we are very confident that we can increase like Juan mentioned already in the first part of this call that the idea is to take -- export to Colombia by the end of the year, about 3%, 3% to 4% of the local market there. We are seeing a very good opportunity for us because our quality, the reliability of our products and the technical support that we are -- our value proposition really is very, very strong to take a very -- to gain market share there. Juan Esteban Calle Restrepo: Thank you, Carlos. And now Felipe will take your second question, Marianne. Felipe Aristizabal: Marianne, regarding the permits that we have announced during 2025, these are nonrecurring transactions. They don't have any impact -- any negative impact on the cash flow generation ability of the company, on the contrary, particularly the impairment in Puerto Rico, given the existence of certain capital taxes in Puerto Rico. This impairment actually reduces the tax burden in cash terms going forward. So yes, we would expect a positive impact coming from these impairments, and we are not expecting any further impairments going forward in any of the businesses. Mariane Julie Goñi Tadeo: Just a follow-up question. So the impairment recorded this quarter is from Puerto Rico, not from Panama. Felipe Aristizabal: Okay. So in Panama, in particular, that impairment refers to clinker inventory that was acquired and has a cost that is above the current market price. So it is not currently economically feasible to exploit that inventory. So we are writing down the value of that inventory to account for that reality. This is an inventory that was acquired a few years ago. And given the evolution of the market, we believe that the most sensitive approach is to write it down and then wait for market conditions to maybe change in the future. And eventually, that clinker inventory might be economically feasible to exploit and commercialize in the market. Juan Esteban Calle Restrepo: Just to complement, Felipe, Marianne, it was the result of a take-or-pay contract like 10 years ago that we had to take some additional clinker because we didn't met the volumes -- required volumes. And it will be used. I mean, now with the write-off, the reality is that we create a full incentive for the plant to consume the clinker because it will be more cost efficient for them to start consuming that clinker as an addition to cement than to add limestone. So the reality is that it is an economic decision to create incentives for Panama that would not have like any impact in our cash flow. But thank you for the question. Carolina Velásquez Zuluaga: Next question comes from David Gomez from [indiscernible]. Unknown Analyst: My first question is, this year, what's your goal of production or shipping [indiscernible] this year? And the second one is, are you exploring to arrive to new countries in this year? Juan Esteban Calle Restrepo: Thank you, David. I mean, like the forecast for the export to, in general, out of Cartana close 1.2 million tons. That is basically the capacity that we have for exports. They will go mainly to Puerto Rico, the U.S. and the Caribbean. So that is our forecast of export for 2026. And the reality is that we have defined the north of Latin America as our target market. But currently, we are foreseen to continue putting our operations in all our current geographies. We have been having a very good performance in Guatemala, and we are looking at some options in that market. And as I mentioned a little bit earlier, Venezuela is the other geography that, in our opinion, will start becoming important in our footprint. So those are our plans for Latin America in 2026. Carolina Velásquez Zuluaga: Last question comes from [indiscernible] from Bancolombia. Unknown Analyst: I have two questions. First one is considering the pressures facing the contrition sector in Colombia at the end of 2025, what you think will be the main challenges for this year? And the second one is about the decline in the cement export segment in Colombia. Could you give us more details about that decline recorded in the quarter. Juan Esteban Calle Restrepo: Thank you, Javier. Just I'll take the second one first. I mean, we shut down a wet kiln in Cartagena in 2024 -- in August of 2024. So the reality is that we lost a little bit of capacity for export, but it was the right economic decision. So the only explanation is that one. We are using our full capacity to export out of Cartagena, but it decreased with a shutdown of kiln #3. And second, in Colombia for 2026, we are extremely optimistic. I mean, the reality is that we see all the investors looking at Colombia as a significant opportunity. And hopefully, politically, we will have a good change in the current situation and the country has a significant potential. You saw what happened with a little bit more volume with our numbers in the fourth quarter of the year. And once the demand starts the trend that it was having in the past that the reality is that we see that Colombia is full of opportunities. And consumption, as Carlos mentioned, will continue to be a significant driver of demand, especially during the first half of the year. Going forward, the reality is that what will drive demand will be all the fundamentals in Colombia. I think that there are plenty of investment waiting for a better political situation. Carolina Velásquez Zuluaga: Thank you all. Juan, there are no more questions. Juan Esteban Calle Restrepo: Okay. So once again, thank you so much for your interest in Cementos Argos and we continue to be extremely bullish with the future of the company. Thank you so much, and have a great day.
Operator: Hello, and thank you for standing by. Welcome to Materialise Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Harriet Fried of Alliance Advisors. You may begin. Harriet Fried: Thank you for joining us today for Materialise's quarterly conference call. With us on the call are Brigitte de Vet, Chief Executive Officer; and Koen Berges, Chief Financial Officer. Today's call and webcast are being accompanied by a slide presentation that reviews Materialise's strategic, financial and operational performance for the fourth quarter of 2025 as well as the year 2025 as a whole. To access the slides, if you have not done so already, please go to the Investor Relations section of the company's website at www.materialise.com. The earnings press release issued earlier today can also be found on that page. Before we get started, I'd like to remind you that management may make forward-looking statements regarding the company's plans, expectations and growth prospects, among other things. These forward-looking statements are subject to known and unknown uncertainties and risks that could cause actual results to differ materially from the expectations expressed, including competitive dynamics and industry change. Any forward-looking statements, including those related to the company's future results and activities, represent management's estimates as of today and should not be relied upon as representing their estimates as of any subsequent date. Management disclaims any duty to update or revise any forward-looking statements to reflect future events or changes in expectations. A more detailed description of the risks and uncertainties and other factors that may impact the company's future business or financial results can be found in the company's most recent annual report on Form 20-F filed with the SEC. Finally, management will discuss certain non-IFRS measures on today's conference call. A reconciliation table is contained in the earnings release and at the end of the slide presentation. And with that, I'd like to turn the call over to Brigitte de Vet. Brigitte, can you go ahead, please? Brigitte de Vet-Veithen: Good morning, and good afternoon. Thank you for joining us today. We're very pleased to present our fourth quarter and full year 2025 results to you today. You can find the agenda for our call on Slide 3. First, I will summarize the business highlights for the fourth quarter of 2025. Then I will pass the floor to Koen, who will take you through the fourth quarter financials. And finally, I will come back and explain what we expect 2026 to bring. When we've completed our prepared remarks, we'll be happy to respond to questions. On November 20, 2025, we rang the bell at Euronext Brussels. With this step, we completed our -- we complement our existing listing on NASDAQ with an additional European listing. The dual listing provides us with access to broader investor audience in Europe and increases the company's operational flexibility, including the option to initiate ADS and/or share buyback programs. Our NASDAQ listing remains integral to our global strategy. As a reminder, no shares were offered and no capital was raised in connection with the listing of shares on Euronext Brussels. We will trade under the same ticker symbol, MTLS as on NASDAQ. We have also announced a share buyback program of up to EUR 30 million. This program has started from January 26, 2026. And to date, we have acquired a total of 187,500 shares for a total amount just below USD 1 million. Looking at other business highlights of the fourth quarter. In Medical, as you know, our aim is to bring personalized solutions to as many patients as possible. In the fourth quarter, we surpassed the historical milestone of 700,000 patients treated with Materialise personalized solutions. More than 17,000 patients have been treated in 2025 alone. This represents a significant milestone in our journey towards mass personalization. Also, we released the new version of Mimics Flow, our Mimics platform that is a work of software solution for companies that want to develop their own personalized solution. With this new release, users benefit from enhanced functionality, a new licensing system and the new pricing structure. Let me briefly elaborate on all 3. First, as far as functionality is concerned, the users will now be able to fast track their work for high-volume applications, thanks to additional AI algorithms on the platform. They will also benefit from improvements that will make 3D planning easier and that will make case discussions with colleagues efficient in one unified platform. Second, the new licensing system gives the users more control and will reduce licensing overhead, thanks to the new end user portal where users can easily rehost, activate and deactivate licenses as needed and get uninterrupted access with little administrative burden. Third, this Mimics release enables true subscription pricing models, more closely aligning our success with that of our customers. We will gradually introduce the new models in specific markets and applications. We're convinced that the new functionality, the future-proof licensing model and the new pricing models will enable our customers to achieve our common goal, giving more patients access to personalized approaches. In Software, we have taken the next step in our open and secure software strategy, introducing 3 tailored CO-AM solutions and new enabling technologies to address the industry's growing need for workflow automation and interoperability. As you know, we have been investing in additional software capabilities beyond preprint to cover the end-to-end additive manufacturing workflows of our customers. The 3 new CO-AM offerings will address specific market segments. CO-AM Professional will deliver workflow automation and building traceability for high mix, low-volume additive manufacturing. CO-AM NPI accelerates new product introductions and qualification for series additive manufacturing parts. CO-AM Enterprise combines CO-AM Professional's expert AM preparation with full production execution and order management, also called manufacturing execution systems, delivering end-to-end workflow management for advanced users. As discussed in our Q3 earnings call, we also introduced CO-AM Brix at Formnext. CO-AM Brix is a new low-code node-based automation technology, integrating over 1,000 proven algorithms from Materialise and SDK suite and providing the possibility to incorporate external tools and libraries. Brix is part of the CO-AM platform and puts our extensive software expertise in the hands of every user. It makes it easy to automate complex recurring processes and eliminate repetitive manual work without requiring advanced programming skills. By combining real-time visualization with powerful automation, even nonprogrammers can easily build custom workloads, instantly see the impact of the design and production decisions and act on them immediately. The result is higher productivity, faster response times and ultimately, broader adoption of AM technologies. We've seen the impact of CO-AM Brix firsthand in our own production of fixed insoles, our custom 3D printed robotics. In producing these insoles, CO-AM Brix enabled us to automate almost the entire process from order to print. Nesting time dropped from 45 minutes to just 1 minute. Bill processing became 20x faster. Total build time fell by 15% and error rates fell from 10% to under 0.1%. CO-AM Brix was referred to by US build, the [ 3Dprint.com editor ] as its favorite thing at Formnext 2025. Turning to manufacturing. We continue to face headwinds in Q4. At the same time, we made progress in expanding our position in high-growth certified industries. We merged our 2 online platforms, iMaterialise and Materialise Onsite and consolidated both into a single streamlined platform. This step reflects our strategic focus on the professional 3D printing market. iMaterialise has been an important part of our history, helping to democratize 3D printing and empower designers, makers and small businesses. But as the market evolves, consolidating under Materialise on site is a natural next step to focus on our core segments and to align with the needs of professionals in the industry driving additive manufacturing forward. We have also made progress in key strategic verticals such as aerospace and defense. Today, I want to highlight 2 key projects we have been awarded in the fourth quarter. First, Materialise has been invited to join the SONRISA project as a key enabler of this funded aviation initiative led by Liebherr-Aerospace. The project aims to make quality assurance with metal 3D printed aircraft parts more reliable, repeatable and easier to certify. The consortium brings together leading aerospace and technology players, including Boeing, alongside industrial and research partners. Materialise's role is to develop data-driven quality assessment concepts that merge production and inspection data, such as images, temperature data and CT scans to support automated acceptance decisions as well as virtual testing tools that help assess manufacturability early in the design phase. Second, the Defense and Space division of Airbus awarded us the production of the Environmental Control Systems for the Eurodrone project. The Eurodrone is the first remotely piloted aircraft system natively designed for safe and reliable flights in nonsegregated airspace, giving Europe its own sovereign capability in this field. Production of the first aircraft will be in 2027 with a go-live of the parts requested from Materialise end of 2026. This order represents a significant step forward for us in this key vertical. I will now hand over to Koen for an overview of the financial results. Koen Berges: Thank you, Brigitte. Good morning or good afternoon to all of you on this call. I'll begin with a brief overview of our key financial results as shown on Slide 6. I'm pleased to share that in the fourth quarter, our consolidated revenue grew by 6.8% year-on-year, reaching EUR 70.2 million. Our gross profit margin increased further to EUR 40.8 million, representing 58.1% of our revenue. At the same time, we delivered an adjusted EBIT of EUR 4 million, representing a high margin of 5.7% of revenue, demonstrating our ability to convert top line into strong operational results. Net profit came in at EUR 6.2 million for the quarter. Thanks to a positive free cash flow, we also strengthened our balance sheet, improving our net cash position to EUR 70.8 million, an increase of more than EUR 3 million compared to the prior quarter and EUR 10 million above the level at the end of 2024. In the following slides, I will elaborate further on these results. As a reminder, please note that unless stated otherwise, all comparisons in this call are against our results for the fourth quarter and full year of 2024. Now moving on to the consolidated revenue on Slide 7. In the final quarter of the year, our revenue reached a EUR 70.2 million, up nearly 7% compared to the same period in 2024. Materialise Medical continued its strong double-digit growth trajectory, increasing revenue by more than 16% and setting once again a new quarterly revenue record. Revenues in Software and Manufacturing stabilized with a slight decline of respectively, 1% and 2% compared to prior year. At the same time, unfavorable foreign exchange effects, primarily from a weaker U.S. dollar continued to weigh on our top line. As shown in the graph on the right, Materialise Medical accounted for 53% of our consolidated revenue in Q4, with manufacturing contributing 31% and software 16%. This further shift towards medical reflects the different growth rates across our segments. For the full year 2025, revenue totaled EUR 268 million, essentially flat compared to 2024. Medical represented 50% of total annual revenue, manufacturing 35% and software 15%. Our deferred revenue balance for software maintenance and license fees coming both from medical and software increased by EUR 3.5 million in Q4, consistent with the seasonal pattern, ending the quarter at EUR 48.8 million. Over the full year, deferred revenue related to Software license and maintenance rose by EUR 1.9 million with the total deferred revenue reported on our balance sheet at EUR 60.9 million at year-end. Let me now move on to profitability, where our disciplined cost measures and operational efficiencies have delivered notable improvements. On Slide 8, you can see that our consolidated adjusted EBITDA and adjusted EBIT results for both the fourth quarter and the full year 2025. In Q4, consolidated adjusted EBITDA reached EUR 9.5 million, more than double the EUR 4.3 million recorded in the same period of last year, with an adjusted EBITDA margin now of 13.6%. Adjusted EBIT improved sharply to EUR 4 million compared to a loss of minus EUR 1.2 million in Q4 of 2024, delivering now a strong adjusted EBIT margin of 5.6% -- sorry, 5.7%. These improvements were driven by higher revenue, increased gross margin percentage and lower operating expenses when adjusted for nonrecurring costs. For the full year, adjusted EBITDA rose to EUR 32.4 million, representing a margin of 12.1%, while adjusted EBIT increased to EUR 10.6 million with a margin of 4%. With revenue stable year-on-year, this enhanced operational profitability reflects the shift in focus towards key markets, disciplined cost control and the impact of targeted cost reduction measures implemented throughout the year. These results demonstrate our ability to strengthen profitability even in challenging macroeconomic environment. Let's now review the performance of our individual business segments, starting with Materialise Medical. As shown on Slide 9, you will notice that revenue grew by 16% in the fourth quarter to EUR 37 million, another quarterly revenue record. The strong performance was driven by a 23% increase in Medical Devices and Services revenue, supported by growth in both our direct and partner channels. Medical Software revenue remained stable compared to a strong Q4 in 2024 and is further up from prior quarters of 2025. In line with the top line growth, adjusted EBITDA rose to EUR 13 million from EUR 9.5 million of last year, delivering a robust margin of 35%, fueled primarily by scaling effects. For the full year, Medical segment revenue increased by 15% to EUR 134 million, with adjusted EBITDA reaching EUR 43 million and an annual margin of 32%. Throughout 2025, we further intensified our R&D investments to support future growth of this business unit. Slide 10 summarizes the results of our Materialise Software segment. In the fourth quarter, software revenue held steady at around EUR 11 million despite the impact of unfavorable ForEx effects and our ongoing transition to a cloud and subscription-based business model. Compared to earlier quarters, the segment continued its steady upward momentum, delivering successive quarterly revenue increases. Recurring revenue from software maintenance and license sales, including CO-AM, grew by 4% year-on-year in Q4, while nonrecurring revenue declined by 19%. Even with a stable top line, disciplined cost management enabled us to significantly improve adjusted EBITDA to EUR 1.7 million, resulting in an adjusted EBITDA margin of 15.5%. For the full year, the Software segment revenue totaled EUR 41 million, down 7% from 2024 with adjusted EBITDA at EUR 5.5 million and a margin of 13.4%. Recurring revenue accounted for approximately 82% of total software revenue in 2025, up from 74% the year before, demonstrating the progress in our business model transformation, which we anticipate to complete in 2026. Lastly, for our segments, let's look at manufacturing on Slide 11, where macroeconomic headwinds continue to pose challenges, but strategic wins are paving the way for future growth. In the fourth quarter of 2025, the performance of our Manufacturing segment remained soft, with revenue declining 2% year-on-year to EUR 22.2 million. Persistent macroeconomic headwinds continue to weigh on demand, particularly in prototyping. We also experienced further growth in our strategic markets and in series manufacturing. Notably, the successful closure of several major commercial contracts in aerospace and defense at year-end, as also mentioned already by Brigitte, will support our ongoing transition and will contribute to the results in coming periods. Given the lower top line, adjusted EBITDA for the quarter ended negatively at minus EUR 2.2 million. For the full year, manufacturing revenue declined by 13% to EUR 92.5 million with adjusted EBITDA of minus EUR 4.2 million, representing a negative margin of 4.6%. With the segment results covered, Slide 12 outlines our consolidated income statement, showing the drivers behind our improved quarterly profitability. In Q4, gross profit reached EUR 40.8 million, representing a strong gross profit margin of 58.1%. For the full year, the gross margin was 57.1%, up from 56.5% in 2024. Operating expenses in the quarter were stable at around EUR 39 million, while 2025 included significant nonrecurring items, which were primarily related to our Euronext listing. These one-off costs amounted to around EUR 750,000 in Q4. For the full year, operating expenses increased by just 1.5% compared to 2024, with the main increase driven by higher R&D investments. Net operating income was with EUR 1.3 million in the quarter, consistent with EUR 1.4 million of last year. For the full year, this figure was EUR 3.8 million versus EUR 4.2 million in 2024. As a result of these factors, our operating result in Q4 was also positive at EUR 3.1 million compared to a loss of minus EUR 1.3 million in the same period of last year. Full year operating results came in at EUR 8.9 million versus EUR 9.4 million in 2024. In Q4, our net financial income was EUR 2.4 million, reflecting currency exchange results, interest income from our cash reserves, offset by interest expenses on our debt. Income tax was also positive at EUR 0.7 million, in line with last year. Altogether, the net profit for the quarter was EUR 6.2 million or EUR 0.11 per share, more than double last year's EUR 2.9 million or EUR 0.05 per share. For the full year, net profit totaled EUR 7.7 million or EUR 0.13 per share. Finally, let's review our balance sheet and cash flow position, which remains a key strength for Materialise. In Q4 of 2025, our balance sheet remains solid. Cash reserves at year-end increased to EUR 134 million, while gross debt amounted to EUR 63.1 million. This resulted in a net cash position of EUR 17.8 million, an improvement of nearly EUR 10 million since the start of the year, driven primarily by strong free cash flow. Compared to the balance sheet at year-end 2024, net working capital components increased by EUR 3 million. Total deferred revenue income stood at EUR 60.9 million, of which EUR 48.8 million was related to deferred revenue from Software license and maintenance contracts, as mentioned earlier. In Q4, cash flow from operating activities was positive at EUR 5.3 million, slightly below the prior year's quarter as higher P&L contributions were offset by negative working capital movements. Capital expenditures totaled EUR 4.4 million, including EUR 2.1 million in nonrecurring investments. Repayment of a convertible loan by Fluidda, together with received government grants for investments contributed further to a positive free cash flow of EUR 4.5 million in the quarter. For the full year, our operational cash flow was more than EUR 25 million with the variance versus last year mainly driven by working capital movements. Lower investment levels improved free cash flow significantly to over EUR 15 million in 2025. Over that same year, CapEx totaled EUR 16 million, around 6% of our revenue, split between recurring and nonrecurring investments. Nonrecurring CapEx fell to EUR 9 million in 2025 and included investments in ACTech's new facility and additional solar panel installations at various production sites. The recurring CapEx of EUR 7 million was primarily focused on machinery, printers and upgrades of our IT landscape. And with that, I'd like to hand the call back to Brigitte. Brigitte de Vet-Veithen: Thank you, Koen. Let's turn to Page 14 for a quick review of our financial guidance. Looking forward at 2026, we see our 3 segments evolving at a different pace. We remain confident that our Materialise Medical segment will continue growing at a double-digit pace. Our Materialise Software segment will complete the transition towards a cloud-based subscription business model in 2026 and will continue its investments in a broader AM software ecosystem. Our Materialise Manufacturing segment will intensify its ongoing shift towards series manufacturing and dedicated focus sectors. But we expect macroeconomic headwinds in the industrial market segment to persist throughout 2026. As a result, we expect revenue for 2026 to land in the range of EUR 273 million to EUR 283 million. We will continue investing in our Materialise Medical and Software segment while maintaining disciplined cost control and optimization, in particular in our Materialise Manufacturing segment and in our overhead. As a result, we expect our adjusted EBIT to reach EUR 10 million to EUR 12 million for fiscal year 2026. At the same time, we will continue to actively pursue strategic M&A opportunities with EUR 134 million of cash and cash equivalents on our balance sheet, an improved net cash position and consistently positive operating and free cash flow, we are financially strong and well positioned to further drive innovation and capture emerging market opportunities. This concludes our prepared remarks. Operator, we're now ready to open the call to questions. Operator: [Operator Instructions] Our first question comes from the line of Troy Jensen with Cantor Fitzgerald. Troy Jensen: Congrats on the nice results. I guess I want to focus on the Manufacturing business. I think the math implies this, but are you assuming that Manufacturing is going to be down this year on a year-over-year basis? Brigitte de Vet-Veithen: Can you repeat the question because the line was not very clear. Troy Jensen: Yes. I guess the math kind of implies if Medical is growing double digits, that Manufacturing is going to be flat to down, would you confirm that? Brigitte de Vet-Veithen: Yes, that's a correct assumption. So we assume that the current trends that we see driven by the weaker industrial climate, in particular in Europe, will continue to weigh on the manufacturing results, in particular on the prototyping segment. Troy Jensen: Okay. Brigitte de Vet-Veithen: At the same time, we do expect the opportunities in those focus segments that we have been developing not only in the last quarter of 2025, but throughout the year, will continue to show growth. So aerospace and defense, in particular, are segments, as you know, that we're focusing on. Now 2026, we will not see full results of those investments in those focus segments yet because those sectors take a little bit of time to develop. So that's also why we remain a little cautious in our outlook for manufacturing in 2026. Troy Jensen: Yes, that's fair. Any estimate on what percentage of manufacturing is for prototyping applications for you guys? Koen Berges: That's a percentage, Troy, that we haven't disclosed yet. We're looking into that if we can do that at some point. Nevertheless, I think numbers and the decline we show in prototyping indicate that it's still material part or a significant part of our business. It is going down quarter after quarter. We're picking that up in our new segments and strategic segments, but that transition is taking time. And for now, it still represents a fair share of our manufacturing business. Troy Jensen: Okay. Understood. I guess then my question underneath all this is, I guess I know a lot of other 3D printing and CNC machine shops that are nicely EBITDA profitable at lower revenue levels. Is there more you guys can do to like take out costs and that EUR 90 million in annual sales, can you get to an EBITDA breakeven in the Manufacturing business? Brigitte de Vet-Veithen: So the strategy that we have is to focus on those segments where we see not only growth in the longer term in terms of additive. But at the same time, those are sectors where we believe we can differentiate and we have unique capabilities to offer. Now why do I mention this to your question? Well, that implies that we believe a stronger margin will be generated in those segments because we are just more uniquely positioned. So that's one. At the same time, undoubtedly, we will continue to work on cost optimization, I would call it, in our manufacturing segment and overhead across the company. Troy Jensen: Okay. And then my last question is for Koen here. The OpEx, I want to ask about. In Q4, if you add all the 3 line items for OpEx, it was about EUR 39 million. In Q3, it was EUR 36 million. So we had like a EUR 3 million sequential increase in OpEx. Was there anything onetime-ish in Q4? Or is that the type of OpEx? Should we be modeling about EUR 39 million in OpEx in Q1? Koen Berges: No. Q4 is distorted to a certain effect with the -- mainly the nonrecurring costs related to the Euronext listing, and that is an amount of around EUR 750,000. So that is certainly an amount that you should take out of the baseline. And I think for the rest in general, we see typically our general operating costs a bit higher in the fourth quarter. So if you make a full year projection, I should not base entirely only on the fourth quarter, but level it out a bit across the multiple quarters of the year. Operator: Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Brigitte for closing remarks. Brigitte de Vet-Veithen: Thank you, and thank you all for joining us today. We look forward to continuing our dialogue with you through investor conferences or in one-on-one meetings or calls. And I'm also looking forward to meeting some of you in person at the upcoming AMS conference and the AOS event in the U.S. In the meantime, please reach out if you have any questions. Thank you, and goodbye for now. Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good afternoon. My name is Sherry, I will be your conference operator today. At this time, I would like to welcome everyone to Southern Company Fourth Quarter 2025 Earnings Call. [Operator Instructions]. I would now like to turn the conference over to Mr. Greg MacLeod, Director of Investor Relations. Please go ahead, sir. Greg MacLeod: Thanks, Sherry. Good afternoon, and welcome to Southern Company's Fourth Quarter 2025 Earnings Call. Joining me today are Chris Womack, Chairman, President and Chief Executive Officer of Southern Company; and David Poroch, Chief Financial Officer. Let me remind you that we will make forward-looking statements today in addition to providing historical information. Various important factors could cause actual results to differ materially from those indicated in the forward-looking statements, including those discussed in our Form 10-K and subsequent securities filings. In addition, we will present non-GAAP financial information on this call. Reconciliations to the applicable GAAP measure are included in the financial information we released this morning as well as the slides for this conference call, which are both available on our Investor Relations website at investor.southerncompany.com. At this time, I'll turn the call over to Chris. Christopher Womack: Thank you, Greg. Good afternoon, and thank you for joining us today. 2025 was an outstanding year for Southern Company, and the operational and financial results we delivered are a testament to the dedication of our nearly 30,000 teammates across this company. We achieved adjusted earnings at the very top of our EPS guidance range in 2025, and it is clear that our commitment to putting customers and communities first, while leading the way to a stronger, more resilient energy future is delivering exceptional value to our customers and investors. And this terrific execution across all aspects of our plan over the last year has substantially strengthened our outlook for 2026 and beyond, ultimately driving higher long-term earnings expectations. David, I'll now turn the call over to you for more details on our financial performance for 2025. David Poroch: Thanks, Chris, and good afternoon, everyone. As you can see from the materials we released this morning, our reported strong adjusted earnings per share of $4.30 for 2025, which, as Chris mentioned earlier, was the very top of our 2025 guidance range and represents 6% growth from adjusted earnings the prior year and 9% average annual growth from 2023. This also represents adjusted earnings results at the top of or above our annual guidance range for the 11th year in a row, combined with delivering improving credit metrics and a remarkable dividend track record over the last 78 years, including dividend increases every year for the past 24 years, we are delivering on our objectives of regular, predictable and sustainable financial results and superior risk-adjusted long-term returns for investors. The primary drivers for our performance compared to 2024 were continued investment in our state-regulated utilities, customer growth and increased usage in our electric businesses and growth from wholesale, electric and other revenue sources. These positive drivers were partially offset by higher operations and maintenance expenses, depreciation and amortization and interest costs. A complete reconciliation of our quarterly and annual adjusted earnings is included in the materials we released this morning. Turning now to electricity sales. Weather-normalized total retail electricity sales for the year were up 1.7% compared to 2024. The electric sales growth in 2025 is substantially higher than the growth we've seen in recent history. To put this in perspective, 1.7% year-over-year retail sales growth in 2025 is more than double the cumulative growth we saw over the last decade. Each of our electric operating companies saw positive weather-normal sales growth for the year with Georgia Power growing 2.5% from 2024. In fact, all 3 customer classes were up for the year, demonstrating a strong and resilient economy in our Southeast service territories. Commercial sales were particularly strong, led by increased usage from existing and new large load data center customers, which were up 17% year-over-year for the second year in a row. 2025 was another strong year for residential customer growth with the addition of 39,000 new electric -- new residential electric customers and 25,000 new customers across our natural gas distribution businesses. Electricity sales to industrial customers also demonstrated continued strength, growing 1.4% in 2025 over the prior year with 4 of our largest industrial customer segments showing gains, including the primary metals, lumber, paper and transportation segments. These trends across all 3 customer classes highlight the broad strength we continue to observe across our electric service territories. Chris, I'll now turn the call back over to you to kick off our long-term business update. Christopher Womack: Thank you, David. Looking back, I'm convinced that 2025 will stand out as a transformative year for Southern Company, one in which we achieved milestones that will propel the future of our business and customers for generations to come. We're in the midst of a watershed moment for the energy industry and our nation, and Southern Company is extraordinarily positioned to capture and serve growth in a way that delivers value for both customers and investors. Economic development activity at our utilities is robust and provides a tremendous foundation for sustainable growth. Over the past year, more than 120 companies either made the decision to locate new facilities or announced expanded operations in our electric and gas service territories. These projects are expected to support over 21,000 new jobs, further highlighting the economic strengths of the regions we proudly serve. Our companies have proven to be attractive partners for a diverse mix of new customers, including the large technology companies known as hyperscalers, who have made significant investments in our service territories. In addition to data centers, some of the larger announcements over the past year were in the manufacturing, automotive, aerospace and metals industry, with familiar names that include General Electric, US Steel, Duracell and Mercedes-Benz. Our model is continuing to prove well suited to serve customers' growing needs while also enabling our local communities to thrive. Recall, our 3 electric utilities, Alabama Power, Georgia Power and Mississippi Power operate in vertically integrated markets where we provide a one-stop shop for customers because we own the generation, transmission and distribution networks to reliably serve their needs, even at significant scale for large load customers. The orderly, transparent and constructive regulatory processes in which our utilities operate are designed to reliably and sustainably serve growth while helping to ensure that all customers benefit from that growth. And this design is proving effective. We are demonstrating the value of this approach through approvals for a significant investment in energy infrastructure while also providing rate stability over the next several years and into the next decade. Our scale, balance sheet strength and wherewithal in large construction projects further bolstered the necessary execution that would be critical for this ongoing expansion. Our 4 gas utilities, also known as local distribution companies, or LDCs, proudly serve over 4 million customers across Illinois, Georgia, Virginia and Tennessee. This summer will mark the 10-year anniversary of the acquisition of what is now called Southern Company Gas. Since that acquisition, Southern Company Gas has exceeded all of our expectations, and we're extremely proud to have added these growing businesses. These 4 state-regulated LDCs have continued to work constructively to make significant investments in safety-related pipeline replacements and other modernization efforts, which have combined to triple their authorized rate base since the acquisition while increasing customer value. As we look to future growth opportunities, it's important to recognize that our LDCs operate in 3 of the top data center markets in the country and are active in discussions with several large customers on solutions to directly or indirectly serve this potential growth. Southern Power, our competitive power business has an industry-leading portfolio of assets with both technology and geographic diversity. Substantially all its assets are under long-term contracts with creditworthy counterparties, and we don't take meaningful commodity risk in these contracts. In total, Southern Power's portfolio has over 13 gigawatts of capacity across 55 generating facilities in 15 states, including over 7 gigawatts of natural gas generation in the Southeast. The burgeoning need for reliable, dispatchable energy provides significant opportunities for Southern Power. First, as contracts on our existing natural gas fleet come up for renewal beginning in the early 2030s and becoming more meaningful in the mid-2030s, there are significant opportunities for improved upside pricing. The market demand for capacity has increased pricing roughly 2 to 3x higher than where many of these assets are currently contracted. And by 2030, Southern Power has an opportunity to remarket approximately 1,000 megawatts of natural gas generation capacity. Second, we're in late-stage discussions to move forward with up rates of up to an additional 700 megawatts of capacity for Southern Power's legacy natural gas fleet to meet future projected market demands. And lastly, Southern Power is exploring opportunities to add new natural gas generation at its existing plant sites in the Southeast as well as options for new generation resources in other markets to serve data centers and other large load customers. We are very pleased to have successfully developed this incredibly valued business as it represents a tremendous opportunity to support sustainable growth well into the next decade. We are also excited about the growth opportunities we're seeing at some of our smaller subsidiaries, including PowerSecure and Southern Telecom. PowerSecure specializes in providing utility and energy solutions, including bridge power to commercial, industrial and load-serving customers, and it is uniquely positioned to grow as demand for customer-sided solutions increases, including in response to extreme weather events, utility distributed energy resource programs and bring your own generation mandates. Southern Telecom in partnership with our electric utilities, deploys fiber optic infrastructure that serves as an important and attractive additional product offering, enhancing the appeal to data-intensive customers to locate in our Southeastern service territory. David, I'll now turn the call back over to you to discuss our strategy and incredible portfolio support the durability of our further strengthened financial outlook. David Poroch: Thanks, Chris. Starting with our sales forecast, we project retail electric sales to grow at least 3% across our 3 electric operating companies in 2026. On average, from 2026 through 2030, we project annual electricity sales growth of 10%, an increase of 2 percentage points from our prior long-term sales projections. Georgia Power's total retail electric sales growth is projected to be approximately 13% over the same period. Our long-term sales forecast is supported by robust interest from a wide range of large load customers, including hyperscalers. And as we continue to see momentum grow in Alabama and Mississippi, our total large load pipeline has increased to over 75 gigawatts. This tangible interest and growing momentum have materialized into 26 signed contracts representing 10 gigawatts of fully contracted electric service agreements today, which is 2 gigawatts higher than what we reported last quarter and 4 gigawatts higher than a year ago. These 26 customer projects, nearly all of which are currently under construction include load ramps totaling 8 gigawatts by the end of our 5-year planning horizon, ultimately ramping up to 10 gigawatts beyond 2030. Importantly, in addition to these signed contracts, we are in late-stage discussions for another 10 gigawatts of load, 3 gigawatts of which are working through final reviews and are highly likely to progress to an executed contract in the near term. Based on the timing of the associated load ramps for the projects in our risk-adjusted forecast, including the contracts we have signed, we project sales growth and the associated revenues to accelerate into 2027 with an even more pronounced expansion in 2028. Considering the composition and strength of our large load pipeline, we project commercial sales, which currently comprise roughly 1/3 of our total retail sales to more than double, growing roughly 20% annually through the end of the decade. The framework and methodology under which we approach contracting with large load customers are, we believe, one of the best in the industry and are uniquely designed to benefit and protect existing customers and investors. Across all our electric jurisdictions, our regulatory frameworks allow for bilaterally negotiated contracts for large load customers rather than the use of a standard tariff. This provides each utility with the necessary flexibility to appropriately price large load customers in a manner designed to more than cover the incremental cost to serve them, helping to ensure this growth can immediately benefit existing customers. Our contracts include a robust set of terms and conditions. Contracts carry minimum terms of at least 15 years for data centers with some going out even further. Over the term of the contract, there are fixed or minimum build provisions similar to take-or-pay structures that factor in the customers' requested load ramps and are designed to cover at least 100% of the annual incremental cost to serve, including the necessary generation and transmission investments, incremental O&M and our cost of capital. These contracts also include strong protections in the form of termination payments tied to the incremental cost to serve over the life of the remaining contract with significant collateral requirements tied to the termination payments to provide additional layer of security and protection for our retail customers and investors. Our disciplined approach to pricing these large load contracts is already translating into significant benefits and tangible savings for existing customers. Largely as a result of their ability to sustainably capture growth, Georgia Power and Alabama Power, our 2 largest subsidiaries, worked constructively last year with each of their public service commissions to implement multiyear rate stabilization agreements. As we deploy significant capital to serve this extraordinary projected growth, we're working with our public service commissions to help ensure existing customers benefit as this growth serves to support rate stability. In December, as a part of its certification process for new generation, Georgia Power was able to quantify at least approximately $1.7 billion of benefits that will help to lower cost to serve existing customers from 2029 through 2031. This customer benefit is directly attributable to the value created by our approach to contracting and serving new large load customers. Recall, our approach to large load contracts includes minimum bill provisions designed to offset other costs throughout our business, ultimately providing savings to customers while helping to ensure that we deliver on our financial commitments. Combined with continued constructive regulatory outcomes in our states, our unique approach to serving projected growth from large load and data center customers is delivering mutual benefits to all stakeholders. In addition to our recent large load customer outcomes, earlier this week, Georgia Power made filings for its storm and fuel cost recoveries that, if approved, would collectively lower rates for customers starting this summer. Turning to our capital plan. Our base capital investment forecast is $81 billion over the next 5 years, 95% of which is at our state-regulated utilities. This represents an $18 billion or approximately 30% increase from our forecast just 1 year ago. The main drivers of this capital plans increase are related to new generation facilities, most of which were announced or approved in 2025 and the approved Integrated Resource Plan, or IRP, in Georgia, which included incremental investments in existing infrastructure. These investments include up rates for more capacity at existing natural gas and nuclear facilities as well as modernization of hydroelectric dams. Through 2030, we expect to invest roughly $42 billion or over half of our total 5-year capital plan to reliably serve projected growth through the combination of new generation, enhancements to existing generation assets and expansions of our transmission and interstate pipeline systems. Our capital investment plan supports projected long-term state-regulated average annual rate base growth of approximately 9%, a 2% increase from our forecast 1 year ago. Our base capital investment forecast reflects an approach to capital planning that is consistent with our approach in the past. We do not include capital placeholders nor do we include potential capital investments, which remain subject to regulatory processes. Beyond our base forecast, there are several opportunities for our capital plan to continue to grow. For example, Alabama Power and Georgia Power have either begun or expected to begin request for proposal or RFP processes to procure generation resource needs forecasted in the early to mid-2030s. These RFPs could represent several gigawatts of additional new generation. In addition, as we've highlighted before, there are also potential natural gas pipeline investments either through our FERC-regulated interstate pipelines or through midstream-like investments at our LDCs to directly or indirectly serve projected growing energy needs. Similarly, we have not included the opportunities Chris mentioned earlier for Southern Power in our base capital plan. Ultimately, based on our traditional disciplined planning methodologies, combined with the additional opportunities we see to serve projected growth as we get more line of sight on specific projects, it is reasonable to expect that our capital forecast could continue to increase. The updated financing and equity plan we provided supports our base capital plan and continues to fund the business in a credit supportive manner. Preserving our long -- preserving our strong investment-grade credit ratings continues to be a priority. As we believe that to be a premium equity investment, a company must also be a high-quality credit. There is no greater evidence of our commitment to credit quality than our actions in 2025 to proactively address $9 billion of equity needs. In addition to our internal equity plans and issuances of junior subordinated notes, which received 50% equity treatment from the rating agencies, our recent actions included pricing $4 billion of equity through our at-the-market or ATM program with forward contracts that settle through 2026. Additionally, in November, we issued $2 billion of equity units through a mandatory convertible, which will settle in shares in 2028. Importantly, in our forecast, nearly all $9 billion of the equity we have already addressed is expected to be issued or settled by 2028. Consistent with our increased capital investment plan, we project a remaining need for equity or equity equivalents of approximately $2 billion through 2030 to continue supporting our long-term credit objectives. We plan to remain proactive in our approach as we seek to sustain or improve upon current credit metric profile of roughly 15% FFO to debt through 2027 as we continue to deploy significant capital investment to serve our forecasted growth. Beyond 2027, improved projected cash flows from large load customers and the broad growth we project across our businesses, along with the completion of several large capital projects in our base plan, credit metrics are projected to improve and ultimately position us to achieve credit metrics consistent with our continued objective of approximately 17% FFO to debt by 2029. To the extent incremental capital opportunities materialize, our credit quality objectives will remain consistent. Accordingly, we would expect to finance incremental capital investment above our current plan with approximately 40% equity or equity equivalents. We expect to continue to be flexible and to use the same shareholder-focused discipline we have demonstrated historically when it comes to sourcing incremental equity or equity equivalents. As I mentioned earlier, we have a remarkable dividend track record as Southern Company has paid a dividend that is greater than or equal to the previous year for 78 consecutive years with consecutive increases over each of the last 24 years. For decades, our dividend has been an integral part of our value proposition for shareholders. While future dividend increases are subject to approval by our Board of Directors, we project continued modest increases in the dividend over the next several years. This should serve to lower our dividend payout ratio into the low to mid-60% range in the latter portion of our forecast horizon. As we balance our equity needs, we fund the growth we are projecting. At that point, subject to Board approval, we will be in a position to reevaluate the pace of dividend growth, potentially increasing the rate at which we grow annual dividends to shareholders. Turning now to our earnings guidance for 2026 and beyond. Our adjusted earnings per share guidance range for 2026 is $4.50 to $4.60 per share. Our adjusted guidance range represents 7% growth from the top and bottom of our 2025 adjusted EPS guidance range. The estimate for adjusted EPS for the first quarter is $1.20. As we've highlighted today, execution and the achievements across our businesses over the prior year have meaningfully strengthened our outlook, and we are positioned for exceptional growth. Over the next 3 years, we expect to grow adjusted earnings per share 8% to 9% from 2026 through 2028. In recognition of the timing, visibility and confidence associated with projected growth during this period, we are establishing initial guidance ranges for each of these years. In addition to the 2026 range I provided, our initial guidance range for 2027 is adjusted earnings per share of $4.85 to $4.95, which represents approximately 8% growth from 2026. For 2028, we project adjusted earnings per share to grow approximately 9% from 2027, resulting in an initial guidance range of $5.25 and $5.45. Longer term, we expect adjusted earnings to grow approximately 7% to 8% from our 2028 guidance range. This projected earnings growth trajectory provides for an average annual adjusted earnings growth profile of 8% from the 2026 guidance midpoint to 2030. We expect this outlook to be durable, supported by a large and growing portfolio of large load contracts, a robust capital investment plan and visibility on an efficient equity and debt financing plan that is designed to support credit quality and customer rate stability. With the potential for continued momentum on growth above our base plan and the incremental capital deployment opportunities that would be required to serve it as well as the success we expect in repricing portions of Southern Power's capacity through the next decade, we believe there could ultimately be upside to our long-term outlook beyond what we laid out today. With that, I'll now turn it back over to Chris for closing remarks. Christopher Womack: Thank you, David. We are clearly in a phase of execution. The planned large-scale build-out across our electric system in the Southeast over the next several years is tremendous and Southern Company's experience, expertise and scale support the necessary execution. We secured the labor and equipment for these projects through early EPC agreements and reservation payments well in advance and are leveraging relationships across our vast supply chain. We have unique experience with large construction projects, recently completing the only 2 new nuclear units in 3 decades, showing we can do hard things. The lessons learned from completing Plant Vogtle Units 3 and 4, along with other recent generation projects have helped inform our robust set of project controls and tools to assist our team's efforts and help ensure we are well positioned for timely execution. Our focus on operational excellence extends into every facet of how we serve customers, including through even the most extreme weather conditions. Over the last 2 months, the daily lives of millions across the Eastern United States, including those in the territories we are privileged to serve, have been impacted by extreme cold weather temperatures and severe weather conditions. I'm incredibly proud of the way Southern Company's electric and gas teams safely performed under these harsh conditions for our 9 million customers. Events such as Winter Storm Fern in January, where our system served the second highest winter peak electric load of over 39,000 megawatts demonstrate the value that our vertically integrated system brings to our customers and the importance of continued strategic investments in resilience and expansion of energy infrastructure. Our team's exceptional performance, providing reliable energy and quick response to service interruptions throughout these events also speaks to the thorough preparation and commitment of our employees. Innovations such as recently deployed AI tools that helped our leaders preposition crews to be ready to safely and quickly respond and self-healing networks that allow transmission and distribution lines to isolate outages and reroute power highlight the value that our continued infrastructure investments provide to accelerate restoration efforts and support delivery of the energy on which our customers depend. Our energy-leading innovation, our focus on resilience and our deep commitment to the people and communities we are privileged to serve are but a few key drivers of why Southern Company was recently recognized as the #1 electric and gas utility in Fortune Magazine's list of -- most Admired Companies for 2026, an honor we are proud to receive and a standard we endeavor to earn each and every day. As we conclude our discussion today, I want to emphasize how excited we are about the future here at Southern Company. We are experiencing incredible growth, and we are making investments in all parts of our business to recognize the value of the extraordinary opportunities in front of us while ensuring that rate stability and reliability and value to customers remains our top priorities. Southern Company was built to serve growing economies and to foster economic prosperity in the territories we serve. I am proud of how we are leading the way with this mission and working to ensure that enduring impact from this extraordinary growth opportunity is unquestionably positive for all stakeholders. While the size and velocity of this growth is arguably unprecedented, the discipline and customer-focused approaches investors expect from our company remain evident in both our outlook and our execution, whether it's the long-term stability of our customer rates, the economic benefits we're capturing for existing customers, our measured risk-adjusted approach to load forecasting, the high priority we place on balance sheet strength and credit quality or our focus on the long-term durability of EPS guidance. We endeavor every day to be the premier must-own utility and to deliver regular, predictable and sustainable results and superior risk-adjusted returns to investors over the long term. Thank you for joining us this afternoon, and thank you for your continued interest in Southern Company. Operator, we are now ready to take questions. Operator: [Operator Instructions]. Our first question is from Nick Campanella with Barclays. Nicholas Campanella: So I guess you've always been a pretty conservative company, and you've taken 5% to 7% to 7% to 8%. I know it takes a lot to go there. I appreciate the new outlook. Maybe just wondering how you're kind of trending in the beyond '28 time frame at the base level, just acknowledging your comments that you kind of said that the Southern Power repricing might put you higher maybe at the top end. So is this plan really built for the midpoint in '29 and 2030? And what would kind of put you lower or higher in the range based on the range of outcomes? Christopher Womack: Nick, I mean, I think you got to go back to your initial comment. I mean you know us. I mean you know how disciplined we are, you know how thoughtful we are in terms of setting expectations. And so as we look forward in terms of the execution around these 10 gigawatts of projects and what we see, the 3 gigawatts in final stages of 7 gigawatts in late stages and looking at the pipeline of some 75 gigawatts. I mean, that gave us confidence to make the changes and the adjustments that we've announced today. And not only here through '26, but as we speak to additional growth in '27 and '28, I mean, this work -- this activity we see supports what we've outlined. I mean we've also announced the economic expansion that we see all across the company, 120 companies locating in our territory, 21,000 jobs, the 17% year-over-year data center growth, sales growth this year of 1.7% and what we've spoken to going into the latter part of the decade. So we see the strength we see -- as we talked about, the potential upside from Southern Power. So yes, I mean, we're very confident. And we -- as we talked about earlier in years past, it was important for us to see that the durability, the long-term focus for us that we thought was necessary to make this adjustment. David Poroch: And I might add on to that, that we put guidance expectations out there, and they're a target for us to go get. And we'd be pretty disappointed if we didn't achieve near the top end of that. Now 2028 is a long way out, but we do see opportunities out there that provide upside and there's potential to be higher. Nicholas Campanella: And then maybe just as we think about the 3 gigawatts that you highlighted on the load side, which seem to be much more near term, just would that be served entirely with gas and -- can we do the math on what that CapEx would be if it's all new build? Or how are you kind of thinking about sourcing the generation for that? Christopher Womack: It continues to support our all-of-the-above strategy. Clearly, I mean, I think there's -- as we talked about in our plan, there's a lot of gas in the plan, but you're going to continue to see battery energy storage, I mean some of the opportunities that we have. I mean, we'll look at all the resources in terms of how we meet this growth opportunity going forward from an all-in above approach. Operator: Our next question is from Steve Fleishman with Wolfe Research. Steven Fleishman: Thanks for the very extensive update. And a couple of questions. So first on the -- you mentioned the 3 gigawatts that are in late stage, highly likely. Just would those impact the current plan? Or would they come on afterward? Just how do we think about the timing of the investment for that? Is that part of your kind of potential upside comment? David Poroch: Yes, Steve, those contracts, I mean, they're very near term, and they're working through our counterparties' approval process, Board approvals, all that. So we see those contracts being signed imminently, and they are baked into our forecast today. Keep in mind, these have ramp rates that move out beyond our planning horizon right now. But they are baked in. And keep in mind, we also have a very conservative risk-adjusted approach to modeling our loads and those load models then drive into our revenue expectations and projections, which bake into our plan. So they're in there, but they do go beyond. They do extend beyond our planning horizon, and they just help us with the confidence in what we're trying to achieve. Steven Fleishman: Okay. So just maybe I didn't understand this. So the current plan that you laid out for 2030 includes the 10 gigawatts that are signed plus this 3 gigawatts that are highly likely? David Poroch: Correct. Steven Fleishman: Okay. And -- but that's it. The stuff beyond that is not included. David Poroch: Correct. Yes. Steven Fleishman: All right. Good. And then when you talk about the upside to the growth rate, is that within the plan to 2030? Or is it thinking like beyond 2030 or both? Because you kind of talked about Southern Power and a lot of those drivers, I think you talked about are kind of 2030 and beyond. David Poroch: Yes, Steve, great observation. It really is kind of both. I mean we see the opportunity to grow at that 7% to 8% trajectory beyond 2030. I can't necessarily commit that, that's indefinite, but it certainly goes beyond our planning horizon right now. And everything we see in front of us with the contracts that are near term, the contracts that we've signed, what we've been able to accomplish on the regulatory front, just give us a lot of confidence in where we're looking. Steven Fleishman: Okay. Two other quick questions. First, just on the data center growth in Georgia. Just there's been, I think, generally more noise in a lot of states, but also in Georgia on data center siting and zoning. Just how do you feel about the 13 gigawatts, I guess, in your plan on that? Are they all pretty much zoned and the like? And how are you thinking about that issue? Christopher Womack: Those 13 -- I think the 10 gigs are under construction. So we feel very confident about the projects that -- the numbers we're talking about across Georgia, Alabama and Mississippi, we feel good about those projects. And yes, there's a lot of conversation, but these projects continue to advance and progress across our states. Operator: Our next question is from Julien Dumoulin-Smith with Jefferies. Julien Dumoulin-Smith: I'll pick it up where Steve left off, honestly. As you said, it's reasonable to expect CapEx increases, right? And you've alluded to this Alabama Power RFP for 31 and 32, Georgia Power's own further RFP for 32 and 33. Can you speak to what you're seeing at the leading edge on those? Rather than talking about the demand side, let's talk about the procurement side and try to feather that against how you would think about that increase in CapEx even through 2030. What's the total scope? And then also, maybe in light of the latest quarterly large load update, I think that increased by 15 gigawatts in the latest update, I think, from last week. How does that impact the scope of that RFP when you think about what could credibly get done here? David Poroch: Yes, Julien, great question. The portfolio grows across all 3 of our electric -- the opportunities grow across all 3 of our electric companies. And last couple of quarters, we talked about growing momentum, conversations, spreading to the west, and we're really seeing that. What you noticed in the Georgia Power large load update is just normal churn coming in and out of the pipeline. And we actually look at that being really healthy in terms of getting the highest opportunities to contract to the top of the list. And as we get closer in terms of contracting in these negotiations, our counterparties really start to refine and sharpen their pencils about what their needs really are. And so I think you pointed out a good observation that, that kind of short end of that pipeline has contracted a little bit, but that really brings more precision to us, and we're really pretty excited about getting those better opportunities to the front of the line. In terms of opportunities beyond what we have in the capital plan, if you think about a rough rule of thumb, I would think you could probably maybe estimate $2 billion for a gig of incremental generation. I think that's kind of what we're seeing in the marketplace and what our expectations might be. Julien Dumoulin-Smith: Yes. That's pretty sizable in turn then. And then maybe if I can, right, the release last week flagged the potential pivot in the near term, right, the energization ramp, if you will, for '28, '29, slight downtick in that period of time. What exactly are customers doing? Are they deferring initial energization dates? Are they starting at lower utilization? Are they restructuring the ramp profiles? And then maybe in terms of earnings impact, you guys provided this latest update. How do like the minimum bill protections in your contracts potentially insulate earnings from these -- what seemed like every quarter, some slight fluctuations in the near years of this ramp? David Poroch: There's a lot in there, Julien. Let's start to unpack some of that. So in terms of the way we design the contracts, we talked about the minimum bills and what that looks like. And so we have the opportunity to negotiate exactly what our counterparties ask of us. And like I mentioned before, as you make your way through the pipeline and we start having conversations about your needs and have those negotiations, counterparties are really sharpening their pencils about what they need. Keep in mind, as we have those conversations, counterparties are also posting collateral. So they're really having to put up some assets backing up their asks. And so that kind of motivates people to sharpen their pencils as well. And so in terms of what we see out in the future, we look through these things moving through our pipeline and are really excited about the ability to close on these contracts. Christopher Womack: And Julien, one thing I'd add, I mean one of the things we're experiencing as we see these existing data centers come online, we're learning about their profiles, their ramp rates. And so like the past 2 years, we've seen 17% year-over-year. I mean, so we're learning how this is playing out and that factors into the plan, but we know it will be -- it may be variable to some extent, but it's a great learning that we're experiencing through these existing data centers that we already have online. David Poroch: Yes. And those learnings really drive into how we shape the outlook and how we formulate the load forecast and that translates into how we drive our revenue expectations. Operator: Our next question is from Carly Davenport with Goldman Sachs. Carly Davenport: Maybe just on the data center outlook in Georgia and just some of the noise around affordability. There's been some legislation introduced on moratoriums or other regulations around data centers. So could you just provide your views on how much [ do ] you think some of those pieces of legislation have and if it's kind of coming up in any of your conversations with prospective customers? Christopher Womack: Yes. I mean there's a lot of conversations and activity around data centers all across the country, as you know very well. The thing that we're excited about here is that the projects continue to advance. The pipeline continues to grow. We continue to bring these data centers online, continue to reach agreements, with projects that we've talked about with projects that are in final stages and late stages. The momentum here will continue. Yes, I think there will be continued conversations around what will be the impact on pricing. I think we have to continue to tell the story about the benefits to all existing customers because of these projects. And also, the thing that I also get excited about is some of the data center partners that we have, their involvement in the communities across the state, making charitable investments in these communities to show the benefits that they bring to those communities. So I think support for communities, also how we price these projects in terms of support for lower cost and also the value they bring. I mean those are stories we got to tell. And I think we'll continue to see strong support across our territories for these projects. Carly Davenport: Got it. Great. And then I think you had mentioned in your prepared just some opportunities on on-site or sort of bridge power solutions at PowerSecure. Could you talk just a little bit about demand for those types of solutions that you're seeing in your conversations and maybe what you think the duration of that opportunity set could be? Christopher Womack: Carly, a couple of things there. I mean I think it's a combination of the conversations that we're in the midst of, but I also think as you look across the entire sector across the country, where there may be a need for temporary power. And so these bridge solutions, I think, will provide great value for these customers, but also these resources can provide some degree of resiliency in latter stages as well. So we think in the near term, there will be continued opportunities for bridge solutions in the market as we see it today. Operator: Our next question is from Stephen D’'Ambrisi with RBC Capital Markets. Stephen D’Ambrisi: Just had a couple of quick ones. Just on the Southern Power opportunity, can you give a little -- it sounded like you said that you have a potential to recontract a gigawatt and capacity prices have moved up 2 to 3x. Can you just give us a little flavor on like what the all like energy plus capacity or how impactful that could be? Because it looks like on the slide, in 2035, you open up a pretty significant amount, almost 4 gigs. And so I just want to understand kind of what that opportunity could be? And then I had a follow-up on the gas expansion and what the hurdle is there. David Poroch: Sure. Steve, it's David here. I'll take a crack at that. Yes, as we look into the next decade, we do see opportunities rising up through the portfolio as these contracts come up for renewal. We're seeing data points and examples in the marketplace that similar capacity is being recontracted at 2 to 3x the rate at which we're in right now. And we're seeing examples in the marketplace of around $20, maybe $25 a kilowatt month. So I think that might be a good rule of thumb to think about what that opportunity can look like out in the future for us. Stephen D’Ambrisi: Okay. That's really helpful. Sorry, is that 2025 incremental? Or is that -- that's the... David Poroch: That's the price. Stephen D’Ambrisi: Yes. Okay. Perfect. David Poroch: And that's what we're seeing. Stephen D’Ambrisi: Yes. And then just on the evaluating new gas expansion at 6 brownfield sites. Just can you talk to, I guess, how big that could be and then what effectively you'd be looking for and your ability to potentially marry those expansions with some of your data center offtakers or provide [ UOG ] solutions? Or just what that opportunity set looks like for you guys? Christopher Womack: I mean we're not going to change the risk profile of Southern Power. We're going to have a long-term contract agreement with a creditworthy counterparty. And right now, we're looking at evaluating some 6 brownfield sites in the Southeast for potential new gas development. And so that's kind of -- in kind of a very disciplined way how we will approach this as we always do. Once again, you guys know us. You know how we work, how we run this company. And so that risk profile will not change. So we'll be evaluating the market, working with customers, understanding their needs, and we will make decisions accordingly. Operator: Our next question is from Jeremy Tonet with JPMorgan. Jeremy Tonet: Just wanted to come back, if I could, towards the guidance and what are some of the parameters that drive the high and the low end? And specifically here, just ROE and equity ratio assumptions. Any color, I guess, what drives the low end there? Or just how we should think about some of those factors? David Poroch: Yes. No, good question. In building these expectations that we've communicated today, our disciplined approach, we run through exhaustive scenarios, all kinds of different expectations and outcomes to try to create bounding exercises, if you will, that we feel good about achieving. And so we've got some durability in there to be able to get to certainly the 7% range. And again, like I said earlier, it's a long ways out, but we do feel good about what we see in terms of the contracts that we're signing in terms of the in-migration of population into our service territories, customer growth and expansion, some of the things that Chris mentioned in the prepared remarks around investment coming into the state, whether it be businesses expanding or relocating into our service territories. All those aspects give us good visibility and durability into those projections. And then some of the things we talked about create upside to achieve top end or perhaps even expand that band in the future. Jeremy Tonet: Got it. That's very helpful. And just want to follow up maybe a little bit more with the affordability questions there. It seems like there's so much growth in front of you. Just wondering how that could impact build trajectory going forward, possible downward pressure there? And any other thoughts you could share on the '29 and '30 period for how build trajectory might look? Christopher Womack: And you've heard a lot from us our focus on rate stability in both Georgia and Alabama in terms of rate stability through '27 and through '28. And then once again, I think as you look at how we price these projects, how we do our large load projects, the opportunities we have for downward pressure on rates for existing customers is a real opportunity that we'll take advantage of. And so we see the opportunity to continue rate stability as we move into the future. And so that's our focus, making sure we continue to provide value to our customers from a service standpoint, but also making sure we have this real disciplined focus on rate stability now and into the future. Operator: Our next question is from Andrew Weisel with Scotiabank. Andrew Weisel: Just a quick one from me. I think you mentioned the potential to accelerate the dividend growth. Could you elaborate? I think that's new commentary from you. I don't remember hearing you talk about that before. Maybe just a little bit more detail on why you talk about that and what you'd be looking for out of it and when? David Poroch: Sure, sure. Thanks, Andrew. As we mentioned before, just historically, we believe that the dividend is a very important part of our value proposition. And obviously, in conjunction with our Board, who obviously has to approve every dividend that we offer, we would look to kind of grow -- our earnings would grow into that rate. And at some point, we want to be able to revisit that and maybe look around the 60%-ish window of dividend payout ratios. But again, that's out on the horizon and just something to think about. But again, like I mentioned before, it's integral to the long-term value proposition that we see in our stock. Operator: Our next question is from Shahriar Purreza with Wells Fargo. Unknown Analyst: It's actually Alex on for Shar. I just want to touch on the 13 gigs that you mentioned that you have in the plan. Can you just remind us what the minimum take is for those contracts? And is that assumed in your current plan? So I guess if you look at it, if customers were to ramp quicker and take on more power over time, would that be accretive to the current plan? David Poroch: Sure. Good question. Yes, keep in mind, these -- all these contracts have minimum bills associated with them that are designed to recover 100% of the cost that we incur to serve. But you're absolutely right. To the extent that ramps are achieved sooner and maybe go beyond the contract, there is upside to that. That pricing is sort of at the marginal cost, once we get beyond the minimum take. But we do feel really good about the way we structure these contracts to protect everybody. Christopher Womack: And Andrew, (sic) [ Alex ] just adding on, I mean, you hear us talk a lot about durability. What you mentioned provides greater durability to our plan going forward. And so those are real upside opportunities as we look into the future. Unknown Analyst: Got it. That's very helpful. I guess just shifting gears here, just look at the regulatory side, obviously, given the growth that you're seeing in Georgia, the rate freeze is in place until at least 2029. So did you see any opportunity where you can extend that rate freeze beyond 2028? And if you could just remind us, do you have to file something with the commission prior to the end of the current terms? Just want to get a sense on what that could potentially look like. Christopher Womack: Yes, Georgia has to file in '28, and we're not going to get ahead of that process. But as we continue to look at the opportunity with the growth that's in front of us, how we price these large load contracts to make sure it provides benefits to existing customers. We think there are real opportunities to continue to have this deep focus on rate stability. And that's something that we're going to continue to be focused on and continue to make sure we pay attention to in terms of providing value to our customers. So yes, that's a major principal focus of us as we look into the future. Operator: Our next question is from Nick Amicucci with Evercore ISI. Nicholas Amicucci: A couple of quick ones for me. So I'm just -- I just wanted to look -- I was kind of drilling down on Slide 39. So it seems like the vast majority of kind of the increased capital investment plan is associated with new generation. And just kind of in the context of Carly's question before when we're thinking about the bridge solution, should we be considering some potential upside just on the transmission side as we kind of think of these new generation assets, maybe kind of being a stand-alone asset currently just to get -- meet the ramp rate and then kind of connecting it at a later term into the broader grid? David Poroch: There's a lot of options at play in that business. And we stand ready to really take care of whatever the needs are of the customer. And that's kind of part of the beauty that our 3 electric companies are operating in, is not necessarily being bound by a static tariff that they have the ability to bilateral negotiations to get exactly what the customer needs when they need it and probably have the ability to partner with -- to bring that -- those services to bear. So yes, your question is dead on, and we want to go and explore those opportunities all over the country. Christopher Womack: Yes. And as we said, I mean, the bridge solutions are very complementary. And yes, I mean, they also -- I mean, as we said, I mean, they're at Southern Power and PowerSecure, those are potential upsides to the plan. Nicholas Amicucci: Okay. Great. That makes sense. And then just as we kind of think about -- we've talked -- we've spoken kind of ad nauseam here about kind of the minimum take on the contracts and kind of the pricing surrounding these large load contracts. Any kind of insight as to -- because I know those last through the duration of the contract. Just any kind of insight into the typical time frame that you guys are seeing on the duration? Is there a minimum there that you guys are seeking? Or is there some type of appetite for -- from kind of the counterparties just on longer duration versus shorter duration? David Poroch: Yes. Great question. And as we're negotiating these things, we're pretty much pegging to a 15-year window or longer. We want to make sure that we've got durability and lasting relationship as we sign these contracts. Operator: Our next question is from Paul Fremont with Ladenburg Thalmann. Paul Fremont: Congratulations on a good showing here. First question, I think it is just a point of clarification. The gas plants on Slide 21, those are all for your regulated utilities, right? So those -- none of that is -- includes Southern Power? Christopher Womack: Correct. David Poroch: You are correct, Paul. Yes. Paul Fremont: Okay. So I guess you talked about 700 megawatts of upgrades and incremental construction. Would that take place in the '31 through '35 time frame? Or when would that take place? Christopher Womack: As soon as '29. David Poroch: Yes. Yes, those are where the opportunities are that we're considering right now, and they'll stretch out over a little bit of a period of time. And those are -- keep in mind, those were some of the upside opportunities that Chris had mentioned related to Southern Power, and they're not included in our plan at the moment. Paul Fremont: Okay. So that would be incremental and it could come in as early as '29. And if you did it, it would be fully contracted when it was completed, right? Unknown Executive: Absolutely. David Poroch: Consistent with the -- yes, business models not changing in Southern Power. Paul Fremont: And then is it safe to say that those contracts would most likely be with like co-ops and other power companies versus, let's say, selling directly to data centers? David Poroch: Yes, that's a very safe bet. Christopher Womack: It would definitely be a creditworthy counterparty. Paul Fremont: Okay. Great. And then do you need regulatory approval if you get some of the additional contracts that you're talking about and you need, let's say, that incremental 3 gigawatts of generation, does that need to go through commission approval? David Poroch: Well, we mentioned that there's -- that all of that would be subject to review. Keep in mind, we just closed in December on 10 gigawatts at Georgia Power. And then we kind of referred to 2 proceedings that just are beginning and then we expect to start between Alabama and Georgia that will probably take us through 2026 and likely see conclusion in 2027. Paul Fremont: Okay. And then last question for me. Any sense on who's going to -- which Republican is going to run for [ Pridemore ] seat on the commission? Christopher Womack: We're not political prognosticators. We have no idea. What we do is we work with whoever is there, and we look forward to you. Operator: Our final question is from Travis Miller with Morningstar. Travis Miller: This is a follow-up, you answered most of my questions. So the '28 and '29 projects, in particular, generation project you outlined, what's the status of the gas supply and then for the battery ones, battery components. And then in addition, anything beyond 2030, what -- are those going to be constraints potentially? Christopher Womack: It's all secured. Travis Miller: Even the physical is secured or just financially? Christopher Womack: It is physically secured. Operator: And that will conclude today's question-and-answer session. Sir, are there any closing remarks? Christopher Womack: Again, let me say thank you very much for your continued interest in Southern Company. Have a great day. Operator: Thank you. Ladies and gentlemen, this concludes the Southern Company's Fourth Quarter 2025 Earnings Call. You may now disconnect.
Operator: Good afternoon. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to Live Nation's Full Year and Fourth Quarter 2025 Earnings Call. I would now like to turn the call over to Ms. Yong. Thank you, Ms. Yong. You may begin your conference. Amy Yong: Good afternoon, and welcome to the Live Nation Full Year and Fourth Quarter 2025 Earnings Conference Call. Joining us today is our President and CEO, Michael Rapino and our President and CFO, Joe Berchtold. We would like to remind you that this afternoon's call will contain certain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ, including statements related to the company's anticipated financial performance, business prospects, new developments and similar matters. Please refer to Live Nation's SEC filings, including the risk factors and cautionary statements included in the company's most recent filings of Forms 10-K, 10-Q and 8-K for a description of risks and uncertainties that could impact the actual results. Live Nation will also refer to some non-GAAP measures on this call. In accordance with the SEC Regulation G, Live Nation has provided definitions of these measures and a full reconciliation to the most comparable GAAP measures in our earnings release. The release reconciliation can be found under the Financial Information section on Live Nation's website and with that, we will now take your questions. Operator? Operator: Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] And the first question comes from the line of Stephen Laszczyk with Goldman Sachs. Stephen Laszczyk: Maybe to kick it off on the outlook for Joe. I wanted to see if you'd be willing to talk a little bit more about the building blocks to the outlook for double-digit AOI growth in 2026. Just curious if you could talk a little bit more about the puts and takes investors should be keeping in mind as they thinks through segment contribution this year. And ultimately, just at a high level, what's giving you confidence as you sit here today looking at the business, ahead for the next 12 months or so to guide for double-digit growth despite some of the headwinds. I think we're seeing Ticketmaster and then some of the preopening expense at Venue Nation on the back of some investment there, just the confidence in the double-digit guide despite some of those factors? Joe Berchtold: Sure. Happy to give you that guidance. So let's just take it by division. So sponsorship straightforward, expected to continue to be up double digits. AOI this year were over 70% booked and running double digits ahead. So I think we've got a pretty good visibility into the pipeline there to give us that confidence. On ticketing, I'd say we're not expecting a lot out of it this year. We've got some underlying mid-single-digit growth we've got some onetime headwinds on secondary and we'll let somebody else ask the question on that, we go into more detail on it. But -- so we're not expecting a lot there even with some underlying health and improvement on the fundamentals. And then it really comes down to concerts, getting some double-digit solid growth out of that, which, as we look to our supply-demand dynamics, we lay a lot of them out in the earnings release on the demand side, where we continue to see extremely robust demand on all aspects of the business globally. On the supply side, we gave you that the large venues were up. AMPs are up versus '24 and '25. We got about 80% of our shows booked. So we're optimistic that we can maintain staying ahead of '24 and '25. Arenas are up double digits in terms of our show count and now, which is largely U.S. driven. Last year, it was really international driven. This year, you got more U.S. driven. And then stadiums were up double digits. We've managed because of the forward planning to get the U.S. to be up a bit, but it's really driven by international being well up on stadiums even after a banner growth last year. U.K. and Europe, in particular, really seeing strong growth in our stadium business. Stephen Laszczyk: That's helpful. And then maybe just as a follow-up, Michael, if you could put a finer point on the outlook for supply in 2026, and Joe mentioned up double digits across a number of different verticals there, but just as you think about the quality of that supply and maybe some of their early demand indicators you're seeing across the footprint, other that stadium, amps or arenas, domestic versus internationally? Any trends or ways to compare what you're seeing play out today looking ahead for 2026, how that might have compared to where you were 12 months ago looking ahead to '25? Michael Rapino: Yes. I think we're continuing on our theme we've seen for multiple years now. It's a global business and continuing markets are growing. So that will be an ongoing theme for many years to come, new markets, extended markets around the world doing more shows, more demand from the consumer from all corners of the globe. #2, you see it on all Venue segments from my club business to stadium. It's all doing more business, more tickets, more shows. So the pie is growing on the complete supply side to fill the pipe and multiple pipes as I said, from top to bottom. So we don't see any new trend that we haven't kind of stated for the last few years that we think this is a continual growth industry on a global basis high single digits on an industry-wide and hopefully, we'll continue to beat that because we do believe that both the supply of the artists, more bands on the road and more fans want to see those artists, those 2 will continue to drive all segments, all geographies over time. Operator: The next question comes from the line of Brandon Ross with Lightshed Partners. Brandon Ross: Maybe switching gears to the DOJ. Yesterday, the judge partially granted your motion on the summary judgment dismissing claims that you're a monopoly and promotion and booking. I guess you're still going to proceed to trial on Venue-facing ticketing and [ AMPs ] time. But can you tell us your opinion on what the dismissal means for a potential breakup of the company and other structural or behavioral remedies? Joe Berchtold: Thanks, Brandon. Yes, we were obviously very pleasantly surprised. We never expected to get much of anything on that ruling, but pleasantly surprised that they're seeing the facts laid out on the table. As you said, the first thing that they determined was that the promotion and booking services are not a monopoly. It's not an accurate market definition, which in our minds, really takes away the breakup of the company argument because the breakup of the company argument was founded on some notion of mutually reinforcing monopolies. And they just found that the promotion and booking side isn't. So we think that, that is critical element takes away that edge risk that some folks had. And then the other key thing that they decided was that the national consumer monopoly market was also dismissed. And so what that means on a practical basis is they need to demonstrate that Ticketmaster's so-called monopoly harms the venues, not that they can just say it harm's fans, which would be a more emotional topic. So we think that also makes the case somewhat more difficult for them. So we're very pleased with yesterday. Brandon Ross: Okay. And switching agencies to the FTC. It's been several months, since the FTC hoopla started and you took a bunch of steps aimed at bad secondary market behavior. You reiterated in your answer to Stephen's question that it's having a real impact on Ticketmaster's secondary business. But can you tell us your view of the impact that your initiatives are having on the broader industry? And then maybe in the wake of the Senate hearing and the secondary price cap legislation that we're seeing. How you see the future of the secondary industry playing out in general? Joe Berchtold: Sure, I'll take the first part and I'll let Michael take the back part. In terms of what we're doing, I would put it in 2 buckets, what we're doing. 1 is -- as it relates to allowing brokers to sell tickets on our platform, we took some immediate action shortly after the FTC lawsuit that dramatically restricts the brokers, who have tickets from selling them on our platform, limiting them to 1 broker account per tax ID and the number of tickets being sold needing to stay within the limits. So the impact of that has been to substantially reduce roughly cut in half the number of tickets that are being listed by brokers for concerts on our platform. Now we think a lot of those are still being sold on the other platforms at this point, pending them taking similar steps. But the -- but we're also taking additional steps to stop the scalpers from getting the tickets in the first place. So we have ramped up our efforts starting with account creation and using identity verification more in account creation. We are increasing the use of various tools, including identity verification for artist sign up and for queues to try to give real fans a better chance than the brokers in terms of buying the tickets we're increasing our use of face value exchange. All of these tools, we think, have been effective in helping shrink the overall industry and keeping the artists with more control over tickets and their relationship with their fans. I don't know, Michael, if you want to comment on legislation. Michael Rapino: I guess, legislation is, obviously, a lot of it's going on a state-by-state level. We've been very clear that we're supportive of giving more control to the artists, we're in support of price caps because we don't seem to be getting more nuanced solutions to give the artists that control, and we'll continue to support that artist agenda. Joe Berchtold: And just to jump in, I'm Joe, on where the -- the Canadian say, where the puck is going. We clearly -- we've been saying this for a few years. There is a momentum in the air around secondary in general on the consumer side. and then from the artist. So we like that. We -- we're doing everything we can to build tools for the artists. We just launched something with Noah Kahan this week to do a better job. It's not perfect, but it's much better identifying -- we've rolled out a program with Kid Rock, worked hard with Kid to figure out how we can help him. I think we have over 100 artists now using face value exchange. So we're liking where this is headed. We believe that artists will continue to gain more control want to find better ways to limit secondary and the company that has more of the tools will win in the end. And ultimately, I think legislation will creep in as it is state-by-state to aid in their fight against secondary? Operator: And the next question comes from the line of David Karnovsky with JPMorgan. David Karnovsky: I guess, first for Joe, it'd be kind of helpful if you could dig in a bit more on the demand side of what you're seeing in terms of the indicators you could parse that by regions or venues or consumer segments, that would be helpful. And then for Michael, you've been quite active in arena acquisitions in Europe over the past few months. So I wanted to see if you can speak a bit more to the playbook there in terms of kind of the investments you're making into those venues and then just how it plays into your broader goals across the continent. Joe Berchtold: Sure. On the demand side, we're continuing to see very strong consistent demand. We gave you on the earnings release, a number of specific points on just the volume of fans that are showing up for artists how tremendously popular they continue to be. It also flows through to festivals. We continue to see strength of demand at the club and theater level. I think, the thing that to continue to remind ourselves to continue to remind you guys is, if you look at the U.S., 75% of the tickets are under $100. Artists are acutely aware of the need to have all of their fans be able to afford to buy a ticket, maybe not the front row, but to buy a ticket and they're very focused on keeping it affordable. So we're not seeing any pullback, any issues whatsoever in demand for any budget conscious fans. Sorry, Michael, you're on mute, if you want to... Michael Rapino: Sorry, I was just jumping in on answering your Venue Nation question. You've seen some announcements we're thrilled with the progress we're making. We outlined in our Investor Day, we have a large pipe around the world in arenas, some amphitheaters, 5,000 seats key markets around the world where we can add into our portfolio. So we're thrilled that division is growing on a global basis, hitting all of our benchmarks, the returns we're looking for and much more to come. Operator: And the next question comes from the line of Cameron Mansson-Perrone with Morgan Stanley. Cameron Mansson-Perrone: 2, if I could. On ticketing GTV growth, I know there was some lighter sports and third-party activity in the first half of the year. But curious how that subcategory grew in the second half of the year and just any kind of forward indications of how those kind of 2 areas of the ticketing business are pacing looking ahead of the '26. And then separately, Spotify, the other week reported facilitating about $1 billion, and I think it was over $1 billion in ticket purchase activity through the platform. I'm curious your thoughts on -- do you think that integration is growing the industry overall? Or is it just shifting the point of discovery. Any kind of feedback on how you view that integration and it's success would be helpful. Joe Berchtold: Yes. Just on Ticketmaster in terms of the GTV. So we ended the year with GTV growing about 6%, which was driven by concerts, really fully 9% increase in concerts with a 1% decline in sports and other third party. So as we look to this year, we expect to see that probably accelerate a bit. I think we'll see some come back on the other pieces over the course of the year. You need to see it play out, but we feel good about the runway that Ticketmaster's on an operational basis. We didn't think the majority of it will come from concerts, but it won't be overwhelming as it was this year. Michael Rapino: On distribution, Cameron, there's almost 2 businesses. There's the superstar stuff that has incredible reach tends to sell out on its own. And we don't need much help on that the artist has such a medium and efficiency. But a lot of the stuff that doesn't sell out around the globe, we love all of our distribution partners, Spotify, the Facebooks, Verizon. We've had lots of different partners, who help us reach bands and some of those shows that the Tuesday Night Show in Indianapolis that isn't sold out, we'll take all of the reach we can to help get to those customers. Operator: And the next question comes from the line of Robert Fishman with MoffettNathanson. Robert Fishman: 2 for Michael or Joe, please. First, I appreciate the extra disclosure on Venue Nation. Just given the preopening costs ramping up in '26, can you help us think about the overall ramp and trajectory for Venue Nation on a total portfolio AOI basis to reach that run rate in '28 and '29, that you called out? And then separately, when you think about the longer-term Venue Nation opportunity, how big of a contributor is international versus U.S. when you're thinking about that going forward? Joe Berchtold: So just first on the specific numbers. So this is the first time we've given you the exact numbers, but I think we've been talking about this concept for a while, which is you've got a bit of a ramp-up costs as we build out Venue Nation and some of those ramp-up costs are going to be large as a percentage of the benefit in your first few years. So you're seeing that $25 million cost this year, ramping up to -- sorry, last year, ramping up to $50 million this year. I don't expect it to continue increasing at that level as we get to more of a steady state. And then we start to get the full mature, when the buildings have been open 2 to 3 years. So I would expect we give you the fan count for both buildings that we opened last year in buildings that we're opening this year and how that is going to a steady state. We've given you the profitability per fan in different forms. I mean you can probably model out how you see the increases. But and then look at that in the context of the Investor Day and what we gave you over the multiyear in terms of the Venue Nation potential. So that should help you triangulate on the rate of increase. Robert Fishman: And just like when you think about international... Joe Berchtold: Yes, in terms of long term, clearly, international is a huge focus for us, both Latin America, Europe Asia, all areas, really, I don't think about it in top cities, more than markets, but you are underdeveloped in the international markets on key arenas because you don't have the NBA, NHL infrastructure like you do in the U.S. So we're seeing tremendous opportunities, whether it's building a new venue. We're going into a market like Paris with lot of fans, tremendous arena, great potential there. Didn't have the full rigging to hang a modern arena show, modern arena production. So after that acquisition closes, we'll do some renovations we expect it will help expand the marketplace, to be able to draw a lot more shows to that market help us grow the overall business. Operator: And the next question comes from the line of Kutgun Maral with Evercore ISI. Kutgun Maral: I had a few more on Venue Nation. First, Joe, to follow-up on what you just said, when we do use all the helpful detail you provided at the Investor Day and try to triangulate the rate of increase in the Venue Nation AOI. It really looks like this year 2026 could be an inflection year. And when you look at the AOI, the fan count build and revenue and AOI. It seems like it could accelerate further in 2027 and 2028. I know you don't provide specific guidance, but is that just the right framework to perhaps think about what's going on underneath the hood with not just Venue Nation and concerts, but maybe on a consolidated basis as well? And second, the acquisition of ForumNet Group in Italy was interesting. I know the heart of the deal was centered on their arena -- but there are 2 other venues in their portfolio as well. So I want to see if acquiring companies that operate in multiple venues could play a more prominent role in scaling Venue Nation going forward? Or was that more of a one-off? Joe Berchtold: Yes. And just in terms of the ramp, I think you will see an acceleration that you would naturally have if every set of venues that you get, if you build one, there's probably a 3-ish year to run rate when you buy them maybe a 2-year to run rate. So as we build that base, you're going to naturally get the benefit of all the pieces. I mean, just to give you a little bit of context. So if you look at how we envision building our owner/operated fan count this year, I'd say it's kind of 20% from venues we opened in '25 about 1/3 from venues we opened in '26 and about half organic. So if you think about that playing out as you add new venues, yes, you're going to accelerate your rate of increase because you just have more pieces that you're adding into that funnel. So I would absolutely expect each year to help grow that base of fans in our operated venues. Michael Rapino: Venue Nation, it's just a one-off. We're not looking to buy venue management companies. We don't love the return on those businesses as much as we like owning the venue and fully taking over the P&L. So in this case, they were added bonuses but not a regular strategy. Operator: And the next question comes from the line of Batya Levi with UBS. Batya Levi: Great. Just a follow-up on the demand side. Can you provide a bit more color on the recent down sale activity and sell-through rates, how they stack up advanced last year into the summer pipeline? And maybe a bit more color on consumers' willingness to pay up against higher ticket prices for the World Cup that we're seeing now? Joe Berchtold: Yes, in terms of the on sales, we're seeing consistent performance with overall demand sell-through levels as we were seeing last year. Obviously, every tour is a little different. We gave you a few at the very high end in the release with Harry Styles and BTS and Bruno Mars showing levels of demand higher than we've ever seen before. But in general, we're still seeing front to back the ticket selling across all the different sizes of venues. And then we're obviously -- we're not involved in FIFA at all. We're not involved in selling their tickets, so we can't really opine on what they're doing. What we do know is for the concerts, the artists are very acutely aware of who their fans are and how to manage that relationship with them and how to manage the brand. And as I said earlier, they're making sure they're pricing their tickets. So all their fans can get in the building and the front of house, where -- they think it's going to end up being somebody buying on secondary, if the brokers take them to get a big arbitrage, they'll take more of that money for themselves. So I think you're continuing to see that same macro story play out. Operator: And our final question comes from the line of Peter Henderson with Bank of America. Peter Henderson: Yes. So I mean, it seems like you're seeing a great international momentum across all regions. But I'm just curious, where you're seeing the best momentum -- is it in Europe, LatAm, Asia Pacific, and sort of what's the mix shift implication for margins and capital needs based on that? And then what's the biggest constraint internationally right now? Is it venues, local partners, regulation or for talent routing? And I have a follow-up. Michael Rapino: Yes. We're seeing all the countries equally have the appetite for that live show. So whether it's Sao Paulo or Milan, the major cities around the world all want to have superstar. Peter Henderson: Great. And then I guess when you -- when Ticketmaster, venue chooses Ticketmaster today, what are the top 2 or 3 differentiators that are consistently closing the deal for you guys? Is it the fact that you have the best technology? Is it the fact that you're investing tremendously in fraud tools or bot prevention. Just curious what your feedback is on why venues choose you so frequently? Joe Berchtold: Yes. I think #1 reason why they choose us is because we just sell more tickets. Empirically a promoter or a manager would tell you, they look at the shows on the tour, the Ticketmaster ones are most effective at helping them sell the most tickets. Getting the highest grosses from their show. So what they can do in terms of using our distribution, using our marketing capabilities in terms of using our pricing tools to make sure they understand what's the right level to get to all the fans. So that's the #1 reason. And then depending on the marketplace in the U.S., where it's more mature, it's going to be more economics driven. In other markets that are less mature, some of the other software tools on the venue level are going to matter more. But selling tickets is the overriding that #1 factor. Michael Rapino: My apologies, the line had dropped, but it looks like you took over, Joe. Thanks. Operator: Thank you, ladies and gentlemen. That does conclude the question-and-answer session, and that also concludes today's teleconference. We thank you for your participation. You may disconnect your lines at this time.
Operator: Good afternoon, and welcome to the Travere Therapeutics Fourth Quarter and Full Year 2025 Financial Results Conference Call. Today's call is being recorded. At this time, I would like to turn the conference call over to Nivi Nehra, Vice President, Corporate Communications and Investor Relations. Please go ahead, Nivi. Nivi Nehra: Thank you, operator. Good afternoon, and welcome to Travere Therapeutics Fourth Quarter and Full Year 2025 Financial Results and Corporate Update Call. Thank you all for joining. Today's call will be led by Dr. Eric Dube, our President and Chief Executive Officer. Eric will be joined in the prepared remarks by Dr. Jula Inrig, our Chief Medical Officer; Peter Heerma, our Chief Commercial Officer; and Chris Cline, our Chief Financial Officer. Dr. Bill Rote, our Chief Research Officer, will join us for the Q&A. Before we begin, I'd like to remind everyone that statements made during this call regarding matters that are not historical facts are forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of performance. They involve known and unknown risks, uncertainties and assumptions that may cause actual results, performance and achievements to differ materially from those expressed or implied by the statement. Please see the forward-looking statement disclaimer on the company's press release issued earlier today as well as the Risk Factors section in our Forms 10-Q and 10-K filed with the SEC. In addition, any forward-looking statements represent our views only as of the date such statements are made, February 19, 2026. and Travere specifically disclaims any obligation to update such statements to reflect future information, events or circumstances. With that, let me now turn the call over to Eric. Eric Dube: Thank you, Nivi. Good afternoon, and thank you all for joining us today. 2025 was an incredible year for Travere, one that was defined by achieving a new high in the number of patients we were able to reach with our approved medicines and clear advancement of our pipeline. This success was driven by focused execution against our strategy, strong commercial performance and an unwavering commitment to bring new medicines to communities that have been waiting far too long. In IgA nephropathy, we saw record demand and strong revenue growth in the fourth quarter, even as additional therapies entered the market. Physician confidence in FILSPARI continues to build as real-world experience reinforces our long-term clinical data and its role as a foundational nonimmunosuppressive therapy that can be used chronically and in combination. These results reflect growing use of FILSPARI in clinical practice, supported by strong execution across access, fulfillment and patient support. We remain confident in our ability to deliver continued growth in IgA nephropathy and reach more patients in 2026 and in the years ahead. We also continue to advance the next phase of growth for Travere. In FSGS, patients face a rapidly progressive disease with no FDA-approved medication today. The acceptance of our sNDA for an FSGS indication for FILSPARI last year marked an important step towards our goal of delivering the first approved medicine for this community. In January, we received notification of a major amendment to our sNDA following additional information requests received before the holidays. As a result, our new FDA PDUFA target action date is April 13, 2026. While the date for an action by the FDA has shifted, our conviction in the clinical profile of FILSPARI as a potential FSGS therapy and the benefit it could provide to the FSGS community remains unchanged. We will continue to work with the agency as they advance their review and with our expanded commercial team fully established, are ready to execute with excellence, if approved. Beyond FILSPARI, we are also advancing pegtibatinase for classical homocystinuria, or HCU, which we believe has the potential to become an important contributor to growth beyond FILSPARI. Pegtibatinase has the potential to be the first disease-modifying medicine to address the underlying cause of the disease. Notably, we have recently resumed site activation for our pivotal Phase III HARMONY study to enable enrollment globally. As we look ahead, our priorities are clear: solidify FILSPARI's foundational role in IgAN; successfully deliver the first approved medicine for FSGS, if approved; advance enrollment in our Phase III HARMONY study; and continue to build a durable growing rare disease company grounded in execution and scientific rigor. We entered 2026 with focus, discipline and confidence in our path forward and most importantly, with a continued commitment to delivering meaningful progress for patients. With that, I'll now turn the call over to Jula to talk more about the advancement of our programs. Jula? Jula Inrig: Thank you, Eric. We are pleased with the consistent nephrologist feedback about the critical role of dual antagonism of endothelin and angiotensin as part of the foundational treatment paradigm to preserve kidney function in patients with IgA nephropathy. As we continue to generate FILSPARI data across a broad spectrum of patients with IgA nephropathy from early after diagnosis to recurrent post-transplant as well as in combination with other therapies, we are hearing consistent feedback from nephrologists that they are aligned with KDIGO and that FILSPARI has the potential to replace the historic role of RAS inhibitors and provide long-term nephroprotection for patients with IgA nephropathy. This support is rooted in data such as our recently published secondary analysis of PROTECT, which demonstrated that achievement of complete remission of proteinuria to less than 0.3 grams per day, of which 80% were treated with FILSPARI, was associated with an annual eGFR decline as recommended by KDIGO of less than 1 milliliter per minute per year, reflecting meaningful preservation of kidney function. Importantly, we believe the convergence of physician conviction and robust clinical evidence positions FILSPARI as foundational care in IgA nephropathy as we look ahead. Turning to FSGS. We continue working towards our new PDUFA date of April 13, and look forward to working with the agency as the review advances. We remain confident in FILSPARI's clinical profile and its potential, if approved, to meaningfully advance treatment for patients with FSGS by protecting podocyte health. This confidence is based on the strength and consistency of the data generated across our Phase II DUET and Phase III DUPLEX studies, which together represent 2 of the largest interventional clinical trials ever conducted in FSGS. Across these studies, FILSPARI consistently reduced proteinuria, a well-established driver of long-term kidney outcomes in this disease. Importantly, the trial data demonstrate consistent proteinuria reduction across a heterogeneous patient population, including both primary and genetic forms of FSGS as well as in pediatric patients. And the magnitude of treatment effect on proteinuria observed with FILSPARI versus active compared to irbesartan translated into a clinically meaningful reduction in kidney failure events, both within the DUPLEX trial and when extrapolated based on external data such as RaDaR. In our ongoing engagements with the nephrology community, we continue to hear strong alignment around the clinical relevance of the DUPLEX data, which is even more compelling given the absence of any FDA-approved medication indicated for FSGS today and the urgent need for earlier, more effective interventions relative to historical standard of care. Many clinicians emphasized the importance of proteinuria reduction as the primary treatment goal and recognize the consistency of FILSPARI's antiproteinuric effect across patient subgroups. Taken together, the totality of the data and the feedback we continue to hear from the FSGS community reinforce our belief in FILSPARI's potential to meaningfully change the treatment paradigm for patients living with FSGS, and we look forward to the FDA's upcoming review decision. Let me now turn to pegtibatinase in classical homocystinuria. Classical HCU is a serious genetic metabolic disorder with limited treatment options. These patients are born with a deficiency in their CBS enzyme that would normally help to metabolize certain proteins in their diet. This deficiency results in a toxic buildup of homocysteine, which can lead to serious and life-threatening thrombotic events such as stroke and pulmonary embolism or deep vein thrombosis in addition to vision and skeletal abnormalities and developmental delays. To put this into context, if untreated, approximately 25% of these patients have an ischemic event before they become a teenager and 50% experience an ischemic event before they turn 30. Pegtibatinase is an investigational enzyme replacement therapy designed to address the underlying CBS enzyme deficiency that drives toxic homocysteine accumulation rather than managing downstream consequences alone. The Phase I/II COMPOSE data demonstrated clinically meaningful reductions in total homocysteine, including normalization for one patient, a clear dose response and a favorable tolerability profile, supporting advancement into Phase III development. In 2025, we achieved key manufacturing process optimizations, an important milestone that positions the program for late-stage development and future potential commercialization. We have now resumed activating clinical trial sites for the Phase III HARMONY study and the long-term extension study ENSEMBLE, which are designed to evaluate sustained total homocysteine control and explore outcomes that matter to patients, including the potential for greater dietary flexibility. HARMONY is a randomized double-blind study of pegtibatinase versus placebo. The double-blind period will follow patients for 24 weeks, which includes the primary endpoint measuring change from baseline in plasma total homocysteine averaged over weeks 6 through 12, with durability of treatment measured as a secondary endpoint to week 24. There's also a 4-week screening period and following initial screening, there is a pretreatment diet stabilization period of up to 6 weeks to help minimize protein intake variability. The total study duration can range up to 38 weeks prior to entering into the ENSEMBLE extension study. We believe pegtibatinase has the potential to become the first disease-modifying therapy for classical HCU and, importantly, to meaningfully improve the day-to-day lived experience for patients and families. Our focus is now on building momentum as the trial resumes, and we expect to reinitiate dosing of new patients in the near future. Across our programs, we're looking forward to presenting new data at medical congresses this year. In IgAN, these efforts are intended to further support FILSPARI's role as foundational therapy. While in FSGS, they're focused on deepening the understanding of FILSPARI's clinical profile and its potential role in addressing the high unmet need in these patients. With that, I'll now turn it over to Peter for a commercial update. Peter? Peter Heerma: Thank you, Jula. I am pleased to share that the fourth quarter of 2025 marked a strong finish to the year for FILSPARI with continued momentum driven by growing physician adoption, robust demand and increasing confidence in FILSPARI's role as a foundational therapy in IgA nephropathy. During the fourth quarter, we saw record demand of 908 new patient start forms for FILSPARI. Notably, we are seeing a strong level of demand continue into the first quarter. The demand in the fourth quarter was driven by both new prescribers and increasing use among established prescribers. Importantly, we continue to see an increasing number of practices treating multiple patients with FILSPARI, which we view as a meaningful indicator of physicians' confidence and experience in the therapy's effectiveness, tolerability and long-term utility. The strong demand translated into robust growth to the end of the year. In the fourth quarter, FILSPARI generated approximately $103 million in net product sales and approximately $322 million for the full year of 2025, representing a 144% year-over-year growth. We believe these results underscore the momentum and the significant growth opportunity for FILSPARI and its ability to continue to perform strongly as the IgA nephropathy treatment landscape evolves with new entrants. We believe FILSPARI's continued success in the fourth quarter was driven by its differentiated profile, simplification of the REMS monitoring requirements and the publication of the KDIGO guidelines. As a once-daily non-immunosuppressive oral therapy, FILSPARI provides a proven and convenient option for chronic use in a disease that requires long-term nephroprotective treatment. In addition, FILSPARI's ability to be used in combination with other therapies provides flexibility for nephrologists as they tailor treatment strategies to individual patients. We are also seeing broad utilization of FILSPARI across the full spectrum of adult patients with IgA nephropathy with increasing adoption in patients with elevated proteinuria levels, but below 1.5 gram per gram. This trend is consistent with the direction of the KDIGO guidelines as they emphasize a lower treatment target and earlier intervention. It is important as while FILSPARI continues to be used in patients with higher levels of proteinuria, we are seeing accelerating adoption in those below 1.5 gram per gram, which represents approximately 2/3 of the addressable IgA nephropathy population. From the patient perspective, feedback indicates that satisfaction with FILSPARI and our patient support services remain high with strong patient compliance and sustained persistence observed over time. Patients frequently cite the convenience of a once-daily oral medicine and the nonimmunosuppressive and nephroprotective profile with long-term kidney preservation as important factors in their treatment experience. In parallel, we have continued to build commercial readiness in anticipation of a potential approval in FSGS. Given the rapidly progressive nature of FSGS and the lack of approved therapies today, we believe our existing relationships, experience in IgA nephropathy and commercial infrastructure position us well to support patients and physicians in this setting. Based on the feedback from the FSGS community, we believe this indication, if approved, could be an even larger opportunity with a more rapid uptake compared to IgA nephropathy, and we stand ready to deliver for this patient community. In summary, the fourth quarter of 2025 demonstrated exceptional commercial execution and performance, evidenced by record demand and revenue. Building on our established commercial foundation and the strong performance amidst additional treatment options becoming available, I am confident in FILSPARI's ability to deliver sustainable growth and long-term leadership in rare kidney disease care. I couldn't be prouder of our commercial team and the impact they make on patients' lives on a daily basis. And I'm excited about how they will continue to support patients and physicians in 2026. Let me now turn the call over to Chris for the financial update. Chris? Chris Cline: Thank you, Peter, and good afternoon all. We ended the year in a strong financial position. This was bolstered by continued net product sales growth, focused investment in key priorities to support our current performance and sustainable growth potential and strategic partner milestones that added to our balance sheet strength. Beginning with revenue. For the fourth quarter, we reported U.S. net product sales of $126.6 million. And for the full year 2025, total net product sales were $410.5 million. This marks significant year-over-year growth in our revenue base. FILSPARI generated $103.3 million in U.S. net product sales for the fourth quarter, resulting in $322 million in net product sales for the full year 2025. Thiola and Thiola EC contributed $23.3 million in U.S. net product sales during the fourth quarter and $88.5 million for the full year 2025. For the fourth quarter and full year 2025, we also recognized $3.1 million and $80.3 million, respectively, in license and collaboration revenue. Moving to operating expenses. Our research and development expenses for the fourth quarter of 2025 were $57.9 million compared to $62.1 million for the same period in 2024. On a non-GAAP adjusted basis, R&D expenses were $54 million compared to $58.6 million for the same period in 2024. Selling, general and administrative expenses for the fourth quarter were $101.7 million compared to $69.5 million for the same period in 2024. And on a non-GAAP adjusted basis, SG&A expenses were $76 million for the fourth quarter compared to $51.6 million for the same period in 2024. The increase in SG&A is primarily attributable to investments in preparation for potential launch in FSGS, including the first full quarter with an expanded sales force, increased amortization expense related to FILSPARI royalties as FILSPARI continues to grow significantly as well as increased investments to support commercial efforts for FILSPARI in IgA nephropathy. Total other income net for the fourth quarter of 2025 was $11.4 million compared to less than $1 million for the same period in 2024. The difference is largely attributable to approximately $10 million in proceeds received as a result of the Renalys acquisition by Chugai that was completed in the fourth quarter. During the fourth quarter, we also recognized approximately $25 million of income from discontinued operations. This resulted from Mirum Pharmaceuticals achieving a sales-based milestone of $25 million that is expected to be paid to Travere in the first half of this year. Net income for the fourth quarter of 2025 was $2.7 million or $0.03 per basic share compared to a net loss of $60.3 million or $0.73 per basic share for the same period in 2024. On a non-GAAP adjusted basis, net income for the fourth quarter of 2025 was $33.3 million or $0.37 per basic share compared to a net loss of $39 million or $0.47 per basic share for the same period in 2024. As of December 31, 2025, we had cash, cash equivalents and marketable securities totaling approximately $322.8 million. This balance reflects the proceeds of the $40 million milestone payment received from CSL during the quarter as well as approximately $10 million from the Renalys acquisition by Chugai. Looking ahead in 2026, we expect meaningful net product sales growth from FILSPARI and IgA nephropathy to continue strengthening our financial position. While we anticipate modestly higher gross to net discounts compared to last year, as Peter mentioned, underlying demand remains strong, and we expect FILSPARI to deliver robust growth as foundational therapy. If approved for FSGS, we believe this represents a meaningful opportunity to build on our momentum from IgA nephropathy and further support potential top line growth. And from an operating expense perspective, we will continue to invest thoughtfully to advance both our current performance and long-term growth potential. We expect moderate operating expense growth versus 2025, primarily driven by the restart and execution of the global Phase III HARMONY study as well as supply for pegtibatinase, continued evidence generation for FILSPARI and commercial investment to support the potential FSGS launch. Importantly, we do not anticipate a near-term need for additional capital to support our current priorities. Our strong balance sheet, coupled with expected revenue growth and a focused investment approach position us to drive near- and long-term value. I'll now turn it over to Eric for his closing comments. Eric? Eric Dube: Thank you, Chris. In closing, Travere is well positioned as we enter the next phase of growth with strong commercial momentum in IgA nephropathy, a meaningful potential opportunity in FSGS as FILSPARI advances through the regulatory review process and a pipeline advancing with purpose. Our strategy is focused. Our teams are executing with discipline, and our balance sheet provides the flexibility to deliver on our priorities. Most importantly, we remain driven by the urgency felt by the patients and families we serve and by our responsibility to deliver meaningful progress on their behalf. Now let me turn the call over to Nivi for Q&A. Nivi? Nivi Nehra: Thank you, Eric. Operator, we can now open up the line for Q&A. Operator: [Operator Instructions] We will now take the first question from the line of Vamil Divan from Guggenheim Securities. Vamil Divan: Great. So just want to dig a little deeper into the IgAN performance. Obviously, strong new patient start forms. I'm wondering now that you've been in the market for a little bit. We also have some new competition obviously in the market over the last year or so. If you can give a little more detail in terms of how and where the product is being prescribed in IgAN, so more of a breakdown between community-based nephrologists and those that may be more academic centers and then also in terms of the treatment paradigm. So where is it being added on? And specifically in combination, are you seeing any issues with providers trying to use 2 branded products at the same time in terms of payers pushback and getting providers to prioritize one over the other? Eric Dube: Vamil, thanks for the question. Peter, I will turn that over to you, and I'll make sure that we capture all the kind of questions that Vamil asked there. Go ahead, Peter. Peter Heerma: Yes. Thank you, Eric, and thanks, Vamil, for that question. And I did capture several components. So let me try to unpack that. And Vamil, let me know if I answered your question to your satisfaction. But first of all, to your point on like what was driving the demand in Q4 and to your point, like a very strong demand quarter with 908 new patient start forms, which was mainly driven by the modification of our REMS requirement as well as the publication of KDIGO and the education of the broader community really allows for the growth opportunity of the market and of FILSPARI in particular, which kind of like built into your second part of your question, like where do you see most of the utilization community relative to academic prescribers. And as we mentioned in the past, I mean, the vast majority of those patients reside in the community and our utilization is reflective of that. So we have more use in the community, consistent to where the patient community resides. I think the last component of your question was regarding in a changing treatment landscape, what is the payer situation. Well, as we have discussed in the past, we have a very strong position in payer formularies. We -- our objective was always to have broad utilization, and we have accomplished that with like over 96% of the patient population have a pathway to reimbursement for FILSPARI. And that remains unchanged in this evolving landscape with new competition coming in. I think I did answer all 3 of your questions, but Vamil, please add if you -- if I didn't. Vamil Divan: No, that's helpful color. I'll jump back in the queue and... Eric Dube: Vamil, one thing that maybe I can just add is that we see a robust level of growth that's coming not just from the dynamics that Peter talked about, but also from new and repeat prescribers. When I think about sustainable growth in terms of the longer-term potential, this is exactly what we would hope to see that we're seeing new physicians start to prescribe as driven by the modification of REMS, KDIGO and the comfort that they're hearing from their peers, but we're also seeing physicians find new patients as repeat prescribers. That is very encouraging and particularly as new treatment options come to these patients, we're very encouraged and I want to emphasize one thing that Peter mentioned in his prepared remarks, which is these trends for strong demand continued in the first part of this year to start out this year very strongly. So we're very excited about the future potential growth for FILSPARI and IgA nephropathy. Operator: Our next question comes from the line of Tyler Van Buren from TD Cowen. Tyler Van Buren: Great to see the progress during the quarter. Can you tell us if you've had more significant data requests from the FDA following the last disclosure in the new year? And if so, what the nature of them were? And maybe just as a kicker here, given the ALIGN IgAN study data with 2.5 years of follow-up that Novartis reported for the Vanrafia last week, can you help us put that into context and compare it to what you've all reported for FILSPARI? Eric Dube: Tyler, thanks for the questions. I'll take the first one on FDA, and then I'll ask Jula to comment on the IgA nephropathy data. So we are continuing to have FDA engage and review our file. Our practice is not to comment on ongoing reviews. We did provide comment on the information request that we got at the end of last year just based on the unusual timing of those. But at this point, I'd say we provided FDA what they've asked for, and we're on track for the April 13 PDUFA date. Jula? Jula Inrig: Yes. And with regards to the ALIGN trial data, we can't really make cross-trial comparisons given there's different trial designs and different time points for the endpoints. But I want to reiterate, FILSPARI was studied for 2 years against a max dose active comparator, which we know also preserves kidney function versus atrasentan was studied against the placebo with an endpoint at about 2.5 years. But let me reiterate what we demonstrated in PROTECT with FILSPARI. First, there was a 3.7 milliliter greater absolute preservation in eGFR at 2 years versus an active control. And this effect was nominally statistically significant. Importantly, we saw an accrual of benefit on kidney function over time, such that at 1 year, there was a 1.8 milliliter greater preservation in eGFR. And as I mentioned, at 2 years, this grew to 3.7 milliliter difference. Lastly, our primary endpoint of total eGFR slope in the preferred FDA analysis, which we have in our label, that was statistically significant with a treatment effect of 1.2 milliliters per minute per year versus active comparator. So in totality, we're confident in the data to support FILSPARI provides superior long-term nephroprotection versus a max dose irbesartan in PROTECT and that's what provides support for its first-line placement in the KDIGO guidelines. Operator: Our next question comes from the line of Laura Chico from Wedbush Securities. Laura Chico: For the FILSPARI sNDA, I'm sorry if I missed this in the earlier response. I'm wondering if you could further elaborate on some of the specific aspects of clinical benefit characterization the agency is focused on. I guess I'm just trying to understand whether this signals any change in the agency's receptivity to proteinuria as an endpoint for FSGS. And then just a separate follow-up for Peter. What proportion of the new 4Q PSFs came from patients with proteinuria less than 1.5 gram per gram? It sounds like it's an increasing proportion. I'm just wondering if you could kind of contextualize that versus the earlier days of launch. Eric Dube: Laura, thanks for the questions. I will take the first one on the sNDA, and then I'll hand it over to Peter on the PSFs. We've not provided the level of detail on the types of information requests that FDA provides. That's our practice just not to comment on that level of detail. What we have said is that all of the information requests we received late last year were focused on clinical benefit. And what I would say is that from what we've seen throughout our engagements with the FDA as well as what other sponsors have commented on in their discussions around proteinuria as an endpoint, we believe that this is the endpoint that could be used as a validated surrogate endpoint for full approval. So we're on track for the PDUFA date, and there's nothing that we've seen that would suggest that they're questioning or walking away from proteinuria as an endpoint. And with that, I'll turn it over to Peter. Peter Heerma: Perfect. Thank you, Eric, and thank you, Laura, for that question. To clarify your question, we still see demand also with patients with proteinuria levels of 1.5 and higher. But if you look at the totality of patient start forms that we are receiving, you see more and more patient start forms with proteinuria levels below 1.5. And if I look at the median, it continues to go down and it's well below 1.5, but we haven't split it out like in percentage-wise. So I can't comment on that. Operator: Our next question comes from the line of Anupam Rama from JPMorgan. Priyanka Grover: This is Priyanka on for Anupam. Can you remind us of the sales infrastructure for IgAN and how this will need to be expanded for an FSGS approval? Eric Dube: Priyanka, thanks for the question, and I will hand that one over to Peter. Peter Heerma: Yes. Thank you, Priyanka. So first of all, I think it's good to realize that the prescriber base for FSGS is very similar compared to IgA nephropathy. I mean in the past, I've called out there is like an over 80% overlap between IgA nephropathy and FSGS. The only real different prescriber base would be pediatric nephrologist. But to the point that you're making, we want to make sure that we continue to deliver for IgA nephropathy patients while also really optimizing the opportunity for FSGS. And so we have expanded our field team for that, and that is fully operational already. Eric Dube: That's right. And we previously commented that we had about 80 field-based personnel and we have expanded that to more than 100 in the field. We've not broken down that, but I think that certainly provides us with a very strong infrastructure to be able to realize strong growth in reaching patients with IgA nephropathy and FSGS, if approved. Operator: Our next question comes from the line of Joe Schwartz from Leerink Partners. Joseph Schwartz: I was wondering if you could elaborate on your commentary earlier regarding gross to net and give us some insight into how we should expect that to evolve over the balance of the year? Eric Dube: Joe, thanks for the question. I will hand that one over to Chris. Chris Cline: Sure. Thanks for the question, Joe. So just in terms of the mechanics for gross to nets, we anticipate the flow of them to be similar to what we've seen in previous years. That being that we would expect that in the first quarter, you're going to see the highest differential in gross to nets or the largest discount, and then you'll see that lessen in the second and third quarters. So a very similar dynamic. I think the thing that is a little bit different this year is that our gross to nets are expected to increase modestly. So this year, we're expecting to be in the mid-20s -- mid-20 percentages for the full year for FILSPARI and that's up a little bit from last year where we ended the year right around 20%. Operator: Our next question comes from the line of Prakhar Agrawal from Cantor. Prakhar Agrawal: Congrats on the strong quarter. So I had 2. Maybe firstly, on FSGS. Given that externally, we have limited information on the nature of these information requests from the FDA. What is your confidence level in getting FILSPARI approval for FSGS based on FDA's level of questioning? And what is driving that conviction? And secondly, on IgAN with the Otsuka's launch of their APRIL blocker in 4Q. It seems like they have got 500 patient start forms since launch. Where are they gaining new patient starts versus FILSPARI? And how much impact from Otsuka's drug and future BAFF/APRIL drugs are you incorporating in 2026? Eric Dube: Prakhar, thanks so much for the questions. I will take the first question on FSGS, and I'll hand it over to Peter for the discussion on the evolving treatment landscape. So with regard to FSGS, again, we've provided information on the nature of the questions, but not specifically. What I can say is that our confidence has only increased in the profile of FILSPARI as a potential treatment in FSGS because not only do we see the data that we've presented and published as part of the New England Journal of Medicine, but all the work that we've done to be able to contextualize in the context of the PARASOL analysis showing how proteinuria has an independent predictive value of longer-term kidney -- risk of kidney failure further strengthened through our review and through our further analyses, some of which was presented at ASN in the fall. So again, our confidence remains very high in the profile. And as Jula mentioned, 2 of the largest studies ever done in PROTECT -- in FSGS, now reflective of some of the conclusions that we saw coming out of PARASOL. Jula, is there anything else that you'd want to add on the data? Jula Inrig: No. Just we continue to feel quite confident in the data that we presented, as you mentioned, as well as what we submitted in our file and presented at ASN. FILSPARI clearly reduces proteinuria, as I mentioned in my prepared remarks, across a broad spectrum of patients with FSGS and we have strong conviction that it should be available for treatment for the high-risk patient population that really has very little other treatment options. Eric Dube: Thanks, Jula. And Peter, why don't you take the question about the Otsuka launch? Peter Heerma: Yes, happy to do so. I think the 500 patient start forms that you were referring to from Otsuka is really indicative of the overall IgAN market growing and the urgency to intervene earlier is reflecting that. And I think KDIGO is really outlining that this is a 2-pronged approach. You need to have kidney-targeted therapies that historically was done with ACE and ARBs and now with FILSPARI as novel superior alternative. They had historically generic steroids and now you have B-cell therapy that could replace that. And what we are hearing so far is that physicians act accordingly. They really see this as replacing steroids in the higher proteinuria patient population. And maybe good to articulate to my earlier comment in the prepared remarks, we see a very nice continuation of demand -- strong demand in the first part of the year, which indicates that we are not seeing any signs of switching and we're not seeing any signs of sequencing B cells before FILSPARI. So I'm very encouraged by what we are seeing right now, and it's very consistent to how we were anticipating the marketplace and very consistent also to the KDIGO guidelines. Eric Dube: Yes. Thank you, Peter. Prakhar, the way that I like to think this -- about this as we take a step back is this is going to be a marketplace that is going to have a real acceleration of growth as there are new treatment options for these patients. And certainly, the KDIGO guidelines outline why that's going to take place. We expect to see therapies that are immune targeted like the Otsuka compound grow in parallel to the growth that we expect to see as we look to replace the traditional role of RAS inhibitors just as they will be replacing the traditional role that steroids play. So there's going to be evolution of innovation that really is going to fuel growth for both sides of the treatment algorithm. Operator: Our next question comes from the line of Mohit Bansal from Wells Fargo. Sadia Rahman: This is Sadia Rahman on for Mohit. So you've been seeing really good traction in the market recently and it sounds like you expect robust growth this year. So just wondering if you can comment on how penetrated the U.S. market is today and how you view FILSPARI's potential, how much further you think this can grow? I think The Street's expectations currently imply that penetration could double over time from current levels, which still seem low. So just wondering if you think that's appropriate given the new competition that's coming? Or do you think FILSPARI's expansion potential might be underappreciated? Eric Dube: Thanks, Sadia. Very insightful and great questions. Let me first start before I hand it over to Peter in saying we're not -- I don't want to provide any type of guidance. But I think what we can talk about is some of the potential and some of the dynamics. And I think, Peter, if you can start with what are we seeing with the estimated penetration, I think then we can reflect on what is the real potential for further growth in our segment of this market. Peter Heerma: Yes. I think that's a good way to start. I think overall, you have to realize this was a market that historically was treated with generic medicine. And if you look at proxies in other disease areas, you see there is a substantial opportunity for branded superior treatment options. And with our data, I think we have a very strong opportunity. I mean if you look at our cumulative amount of patient start forms, we don't even hit yet 10% of the addressable patient population. So I think that allows a very strong growth opportunity ahead of us. I mean if I think about the amount of patients that are still treated with ACE inhibitors or ARBs for IgA nephropathy, while there is a superior treatment available, that's the opportunity we have. And to provide a finer point on that, I think there are 3 categories how I would classify continued growth. I think the first one, to my earlier point, innovation matters. We have that opportunity with a superior product to replace generic RAS inhibition with FILSPARI. The second point is, as we mentioned earlier in the prepared remarks, and Eric was mentioning that in the -- answering the earlier question as well, with KDIGO and with the recognition to treat those patients earlier and more aggressively, we have an opportunity to further build that market and expand the patient population that are yet untreated. And I think the guidelines really allow us to move into that segment as well. And then the third category, building on what Eric said earlier on the Otsuka question, we are expecting that you will see increased combination therapies, in particular with like a more ambitious treatment target. One treatment category may not bring you there, and that's why we are anticipating that you will see a continuation of use of novel foundational therapies like FILSPARI as well as immunosuppressive -- novel immunosuppressive treatment agents like, for example, the B cells or the complement inhibitors. All in all, I feel that this market is going to grow. I think with FILSPARI, we are very well positioned in that foundational treatment category. And I think this -- you will see that this market will continue to grow. Eric Dube: Yes. Thank you, Peter. And just to round out, Sadia, the other aspect is that we have shared that at peak, we believe that IgA nephropathy alone for FILSPARI will be well above $1 billion potential. So real opportunity for further growth in the years to come. Operator: Our next question comes from the line of Gavin Clark-Gartner from Evercore. Gavin Clark-Gartner: I was just wondering what your plans are for communicating with the investor community more broadly as we approach the FSGS PDUFA over the next 2 months or so. Eric Dube: Gavin, thanks for the question. I will hand that one over to Chris. Chris Cline: Thanks, Gavin. We're going to approach this very similar to how we did the last time around, and we're going to enter into a quiet period here at the end of the month. And then once we have a material communication from the FDA on their decision for the PDUFA action, we'll provide an update and make sure everybody is on the same page. But it will be done very similar to before where we'll go into a quiet period, and you shouldn't expect to hear much from us on an incremental basis between now and then. Operator: Next question comes from the line of Maury Raycroft from Jefferies. Maurice Raycroft: You've commented a few times on the demand going into your first quarter. Can you set expectations for first quarter as it relates to new patient starts and how insurance resets or other variables could influence your sales number relative to fourth quarter '25? And then for FSGS, have you had any discussions with FDA on the label yet? And what are your latest expectations on what the label could look like? Eric Dube: Maury, thanks for the questions. Peter, I will have you talk about demand in Q1. And then Bill, if you can take the question on the FSGS label. Peter Heerma: Very good. Well, thanks, Maury, for that question. And yes, indeed, we are very happy with the very strong demand exceeding 900. I think it's too early to say if that would be our new baseline, but I'm encouraged with what we are seeing so far in the beginning of the year. Having said that, I also want to make sure that we realize this is rare disease and that you may see variability quarter-over-quarter. But most importantly, I'm confident to deliver sustainable growth and long-term leadership in IgA nephropathy with FILSPARI. William Rote: And I'll tackle the label question. We're about 7 weeks out from our action date, which is a little bit early for us to be getting the initiation of label negotiation. We expect that to begin as we get a little bit closer. As to what the label should look like, we believe that FILSPARI has broad applicability in FSGS and should be used across all forms. We've submitted a label that matches that intent. And we have seen across all patients used very broad efficacy with a consistent safety profile. So that's the expectation that we have around the indication on the label. Chris Cline: And Maury, maybe just to add one thing on the revenue side on 1Q to answer your question fully. I mentioned earlier on the call that we expect higher gross to nets for the year. But in the first quarter, you see the biggest effect of that. So 4Q going to 1Q, you will see an increase in that discount. So I want to make sure that everybody is taking that into account for their model. Again, same as what we've seen in previous years, but we will see a higher discount in 1Q relative to the other quarters. Operator: Our next question comes from the line of Jason Zemansky from Bank of America. Jason Zemansky: Congrats on the progress. Peter, one for you, if I may. Can you speak to the potential of a halo effect if FILSPARI receives approval in FSGS for IgAN? I know you said the prescriber base overlaps about 80%. But I guess, any opportunities for increased awareness or I don't know, potentially a lowering of some of the friction points that might cause an IgAN prescriber some pause or, I don't know, underlying inertia? Eric Dube: Thanks, Jason. Peter? Peter Heerma: Yes. Thank you, Jason, for that question. And I think it's a very good point that you bring up. Is there a halo effect once you get an FSGS approval and would that have a good reflection on IgA nephropathy as well? Well, to your point, I mean, given that this is largely the same prescriber base, I think you're absolutely right. There will be a halo effect, and there will be some crosstalk between the 2 indications. And yes, I think even more reason to be very excited about the FSGS opportunity, not only for serving this patient community that has been without an approved treatment for far too long, but also how that could reflect then on further confidence in the profile of FILSPARI for IgA nephropathy patients. Jason Zemansky: Got it. Any idea of kind of magnitude or... Eric Dube: Tough to say. I think directionally, we absolutely expect there to be a synergistic effect between the 2. And certainly, as you point out, simplifying the process for these offices that are incredibly busy, particularly community nephrology offices. But I'd say it's too early for us to be able to quantify. But directionally, absolutely, we would expect there to be a synergistic effect. Operator: Our next question comes from the line of Alex Thompson from Stifel. Alexander Thompson: Maybe again on FDA interactions over the last few months related to the FSGS filing. Could you comment on the consistency of interactions among members of the cardio-renal division? Has it been the same group throughout this process? And does it continue to be the same group? Eric Dube: Thanks, Alex. Bill, I'll turn that one over to you. William Rote: Sure. Recently, we've been made aware of some changes within the review team, but I think it's important to note that we also see continuity through the team, especially in those folks that were involved in the PARASOL project, looking at proteinuria as an endpoint for FSGS. Importantly, our recent interactions have also included the division level of leadership, and that leadership has remained consistent and engaged throughout the process. Operator: Our next question comes from the line of Yigal Nochomovitz from Citigroup. Yigal Nochomovitz: I had one on FILSPARI and then one on pegtibatinase. So I was just curious, looking at the quarter-on-quarter trends from 3Q to 4Q, you were up 13% and on revenue and you were up just almost twice that on start forms. So I wonder if you could expand a bit in terms of the lag between the strong growth in the start forms of 25 -- 24%, 25% and the quarter-on-quarter revenue growth? And then secondarily on pegtibatinase. With regard to the study that you're conducting, can you just describe what the -- what you would need to see in terms of reduction in homocystine levels to be Statsig on the primary endpoint? And also, are you looking at some responder analyses, for example, percent of patients that get below, say, 12 micromolar or even lower, say, below 10 micromolar for those part of the analysis? Eric Dube: Yigal, thanks for the questions. Peter, why don't you take the one on demand versus revenue? And then, Jula, if you can take the question on our endpoints. Peter Heerma: Absolutely. Thanks, Yigal. Yes, over the last few quarters, we actually had the opposite. We had strong revenue growth relative to patient start forms. I think the most important point is to the point that you made. There's always a time lag between patient start form generation and revenue recognition. And we saw that same phenomenon after our full approval in September 2024. Too specifics to call out here. One, December was our strongest month. So they will carry over into Q1 revenue recognition. And the second part is something that we highlighted in the Q3 earnings call is that our gross to net will be higher in Q4. Jula Inrig: And then I'll talk about the HARMONY study. We haven't stated externally what treatment effect we need to reach statistical significance, but I'll point back to our COMPOSE study, where we had about -- between 5 and 6 patients per cohort, and we saw a 67% reduction in total homocysteine, which was highly statistically significant with a small number of patients. We're obviously going to a larger sample size. We have about 70 patients that we're planning to enroll for this and are well powered to achieve statistical significance if we even reach something comparable to what we saw or less. And I'll reiterate that we have already looked at long-term durability of treatment effect. Our primary endpoint is 6 to 12 weeks, which is where we saw that 67% reduction in total homocysteine in our Phase I/II study, but we've also seen a durability when we follow these patients from COMPOSE out to even 1 year, where they still maintain a greater than 50% reduction in total homocysteine out to 1 year. So we feel very confident in our study design to be able to achieve our primary endpoint. In addition, you've asked about some secondary endpoints or other things. We certainly will look at clinically meaningful thresholds. I would say you asked about -- a little bit about a responder. Importantly, what we've seen to date with pegtibatinase is everyone has a reduction in total homocysteine based on the mechanism of action and in our study. So we feel comfortable with our study design and that we'll be able to show both a clinically meaningful treatment effect and then different thresholds that we will look at. Operator: Ladies and gentlemen, this concludes the question-and-answer session of today's conference call. I'll hand the call over back to Nivi. Nivi Nehra: Thank you, everyone, for joining today's call. Have a great rest of your day. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.