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Operator: Thank you for standing by, and welcome to the Dropbox Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Peter Stabler, Head of Investor Relations. Please go ahead, sir. Peter Stabler: Good afternoon, and welcome to Dropbox's Fourth Quarter 2025 Earnings Call. As a reminder, we will discuss non-GAAP financial measures on this call. Definitions and reconciliations between our GAAP and non-GAAP results can be found in our earnings release and our earnings presentation posted on our IR website at investors.dropbox.com. We will also make forward-looking statements on this call, including statements about our future outlook for our first quarter and fiscal year 2026 as well as our expectations regarding our business, assets, strategies and the macroeconomic environment. Such statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those described. Many of those risks and uncertainties are described in our SEC filings, including our most recent and forthcoming reports on Form 10-K. Forward-looking statements represent our beliefs and assumptions only as of the date such statements are made. We disclaim any obligation to update any forward-looking statements, except as required by law. I will now turn the call over to Dropbox's CEO and Co-Founder, Drew Houston. Andrew Houston: Thanks, Peter, and good afternoon, everyone. Welcome to our Q4 2025 earnings call. Joining me today is Ross Tennenbaum, our Chief Financial Officer, who joined Dropbox in December. I'll start with a recap of the quarter and how we closed out 2025, and then I'll talk about how we're thinking about the business and our priorities going forward. Ross will then walk through our financial results and outlook. We closed out 2025 on a strong note. Fourth quarter revenue came in above the high end of our guidance and excluding the impact of our FormSwift wind down, constant currency revenue was flat for the quarter and the full year, which is a better-than-expected outcome. We also made meaningful progress on efficiency. Margin performance in Q4 exceeded our expectations, and we generated over $1 billion of unlevered free cash flow. At the same time, through our share repurchase program, we reduced diluted share count by more than 50 million shares in 2025. Taken together, Q4 was a good reflection of what we're working to do consistently, which is execute well, deliver against our plans and steadily improve the underlying trajectory of the business. And in 2025, our priorities were focused on strengthening our core business and scaling Dash in pursuit of returning to revenue growth. We're still executing on these objectives but now have proof points that these changes are starting to work. Coming into last year, our Core FSS business had strong fundamentals and scale, but execution velocity, product experience and our go-to-market motion had not kept pace with customer expectations. So in late 2024 and early '25, we did a leadership reset in Core FSS, bringing in a new general manager and rebuilding key leadership across product, engineering and go-to-market. Since then, we've made significant improvements in how decisions get made, how we prioritize customers and how we deliver value. And we're beginning to see positive signals. The team first focused on improving funnel quality, pricing and packaging, product fundamentals and retention drivers. And as a result, the individuals business saw steady growth across 2025. That matters because it demonstrates that the core product can still respond to focused innovation and better retention and growth are achievable with the right execution. And so our objective for 2026 is to maintain our momentum with the individuals business and return teams to positive net license growth. Work already underway includes simplified pricing and packaging, higher intent trials, reduced onboarding and admin friction and a sharper focus on retention. Some early tests in Q4 showed some promising signs, including improved teams trial conversion rates and higher first week engagement, and we began rolling these changes out more broadly in Q1. But in short, we're not simply maintaining our Core FSS business. Our goal is to bend the curve. In 2025, we delivered proof points and 2026 is about scaling that momentum. Our next focus area is what we call Dash and Dropbox, which represents the most important evolution of the Core FSS experience in years. Dash and Dropbox provides an AI intelligence layer directly inside our customers' everyday workflows with minimal setup and immediate relevance. In Q4, we launched embedded Dash capabilities inside our Teams plans, including semantic search, chat and stacks organization and sharing, and we're rolling it out in phases to eligible Dropbox Teams customers. We're seeing solid early engagement among the initial Dash and Dropbox cohorts. In Q4, over half of these active users returned multiple days per week, which is evidence that Dash is providing value and becoming a part of user workflows. And based on these results, we've begun scaling up our rollout to additional customer cohorts. Dash and Dropbox increases the value of Core FSS. It should further improve retention economics and serves as a natural on-ramp to broader Dash adoption. This is the most credible and immediate way that AI creates value for Dropbox FSS customers today. Now turning to our plans to scale the Dash stand-alone opportunity. And while it's true that we've introduced different iterations of Dash experience over the last 2 years, the sequencing of our rollout was intentional to ensure we build and scale the business and products thoughtfully. First, we focused our investment on building a best-in-class Dash product experience, including investments in its underlying infrastructure and performance. Then we focused on launching 2 growth motions for Dash, the sales-led motion that launched in late '24 and the self-serve version that launched in Q4 of last year. Now we're focused on engagement and adoption before we focus on monetization. The good news is we're seeing positive early signals of demand. At the same time, we're clear eyed that onboarding friction, time to value and the experience around connecting your apps need to improve. So in the first half of '26, we're focused on improving the new user experience to demonstrate connector value from first touch. We're investing in stacks as a sharing-driven growth engine, and we're compressing the time between sign-up and first value in your Dash experience. Next, historically, Dropbox has been primarily a product-led growth company. We have a sales-led motion today, but it needs meaningful improvement given our broader product portfolio. In December, we hired Eric Webster as our new Chief Business Officer. His mandate is to evolve and improve our existing sales-led motion into one capable of selling multiple products with the right funnel, process and enablement. That includes Core FSS, Dash, both stand-alone and bundled, Protect and Control, DocSend and other emerging products. Protect and Control is showing particular promise. As every company works to roll out AI tools safely, admins are confronting critical security challenges with overshared content and improper use of consumer AI tools. We're in a unique position to help these customers. By complementing our Dash offering with Protect and Control, we can both index customer data and use the underlying context engine to power capabilities that prevent authorized sharing and access beyond our secure perimeter. Capitalizing on this emerging demand, we closed a 6-figure international deal for Dash's protect and control features in Q4, and we expect Protect and Control to play an important role across our portfolio in years to come as AI data security emerges as both a stand-alone opportunity and an AI adoption enabler. Stepping back, here's how all this comes together. Our Core FSS business is stabilizing and showing credible paths back to growth. Dash is both a force multiplier for core and a stand-alone AI opportunity, while sales-led growth and AI data security expand our addressable market. Together, these vectors give us multiple paths to drive modest but meaningful growth and enough to shift the narrative to durability and progress. So in closing, 2025 laid the foundation. Now 2026 is about execution, scaling what's working, improving consistency. We're realistic about the work ahead, but confident in the direction, the team and the opportunity in front of us. Lastly, I'd like to acknowledge the many contributions of Tim Regan, our departing CFO, and thank him for making Ross' transition a smooth one. So with that, I'll turn over the call to Ross to walk through our fourth quarter results and our outlook. Ross Tennenbaum: Thanks, Drew, and good afternoon, everyone. As many of you know, this is my first earnings call as CFO of Dropbox. Before I walk through our financial results and outlook, I wanted to share a brief perspective on how I think about the business and the opportunity ahead. What I'm about to share reflects my observations from my first couple of months in the role. It's not a new operating framework, and it doesn't represent a change in how we guide the business. But I believe it's useful context as you assess Dropbox's long-term value creation potential. What initially attracted me to Dropbox was the strength of the foundation. This is a company with a strong global brand and a large and loyal customer base of roughly 18 million paying users and 575,000 paying business teams and products that are deeply embedded in everyday workflows for both individuals and teams. That foundation is clearly reflected in the financial profile, a $2.5 billion revenue business with operating margins around 40%, approximately $1 billion of annual unlevered free cash flow and a 21% 3-year CAGR for unlevered free cash flow per share. That combination of scale, profitability and cash generation has proven to be durable and resilient over time. Our North Star is to grow free cash flow per share over time through a judicious capital allocation strategy. As CFO, my goal is to prioritize investments in the business where we see attractive returns, initiatives that drive sustainable revenue growth and margin. At this time, restoring revenue growth is our top priority. When our shares trade at compelling valuations, repurchasing stock remains a disciplined and efficient use of capital. Reducing share count under those conditions increases free cash flow per share and enhances long-term shareholder returns. What ultimately drew me to Dropbox was the opportunity to grow free cash flow itself, not just optimize the denominator by growing revenue and improving margins. Let me start with our current investment priority, growth. Naturally, since onboarding, I have been most focused on our initiatives to restore growth. While many discussions regard Dash, our opportunities to restore growth in our Core FSS business are also exciting. We recognize FSS operates in a mature and competitive market, and we're realistic about that backdrop. At the same time, over the past year, we've taken meaningful steps to strengthen the organization and evolve the product. In late 2024, we brought in new leadership to lead the core business who are experienced operators from large-scale tech companies. I've been genuinely impressed by both the caliber of talent we've been able to attract and the pace at which they're working to evolve the business across product, pricing, packaging and go-to-market motions. Last year, we focused on simplifying and strengthening our core business, which drove improvements in monetization and retention. That work continues. At the same time, the team has been integrating Dash AI capabilities into FSS, allowing customers to derive more value from the content they already store in Dropbox. From my perspective, this represents the most significant innovation to the Core FSS offering in a long time. Looking at the top of the funnel, one of the biggest surprises to me early on was the magnitude of gross new ARR that Core FSS still generates each year. Today, much of that is offset by churn. But by delivering more value through innovation like Dash and Dropbox, improved pricing and packaging and better end-to-end customer life cycle workflows, I believe there is a real opportunity to improve retention and grow net new ARR over time. Now turning to Dash. I see Dash as a genuinely valuable product and use it regularly in my day-to-day work. More importantly, nearly all Dropbox employees are weekly active users, and we're seeing strong engagement from active users in our early customer trials. We have an impressive engineering team rapidly innovating on an ambitious road map. At a minimum, I see Dash as a highly impactful evolution of our Core FSS offering and believe in addition to all our other efforts, it will help attract new customers, drive upsell and reduce churn. More optimistically, we will also drive adoption and later monetization of Dash as a stand-alone product. Regardless, anywhere along the spectrum, I see meaningful value creation potential for Dash and our AI product strategy. The third growth lever I'll touch on briefly is M&A. I don't view M&A as a silver bullet, and I know firsthand that not every transaction delivers as expected. But I also know that disciplined strategic acquisitions can meaningfully expand a product portfolio and contribute incremental ARR over time. Any acquisition we consider must meet a high bar for strategic fit and financial return. Over time, I see M&A as a lever that can accelerate product road maps, deepen our relevance with customers and complement the organic growth initiatives already underway. Taken together, Core FSS, Dash and M&A, these were the growth vectors I evaluated when deciding to join Dropbox. And after a couple of months inside the company, I see opportunity for each. Let me turn now to margins. The second driver of free cash flow growth is margin expansion. Should we someday decide to curtail our growth pursuits, I believe this business has the capacity to operate at margins meaningfully above current levels. That said, given the growth opportunities in front of us, we believe it's prudent to maintain our current investment levels to pursue growth. At the same time, I do believe that over time, we can be more aggressive on cost discipline. We see the potential for additional margin upside driven by scale, continued cost discipline and productivity improvements. AI, in particular, offers great potential to automate many manual people-intensive processes across all functions, not just engineering or customer support. We believe that when employed, these initiatives will drive significant productivity gains. In addition, we continue to look for opportunities to operate more efficiently through better tooling and geographic mix, shifting more work to lower-cost regions. Taken together, we believe these efforts can generate savings, which we can elect to drive margin or reinvest in growth initiatives. To be clear, these are observations for my first couple of months. There's real work ahead to translate them into execution. So stepping back, this is how I see Dropbox today, a strong brand with a durable financial profile, significant free cash flow generation and multiple avenues for long-term value creation. And as I look at how the business is trending, we're making progress toward returning to growth while optimizing for efficiency. In that context, I see meaningful optionality in the business that I believe is underappreciated by the market, reinforcing share repurchases as an important part of our strategy. With that, let me turn to our fourth quarter financial results and our outlook going forward. In Q4, revenue declined 110 basis points year-over-year to $636 million, but increased 40 basis points year-over-year when excluding FormSwift, which acted as a 150 basis point headwind to revenue. Constant currency revenue declined 160 basis points year-over-year to $633 million, but was roughly flat year-over-year, excluding the 150 basis point headwind from FormSwift. Relative to our guidance, revenue outperformance was driven primarily by retention improvements across our self-serve SKUs. Total ARR was $2.526 billion, down 190 basis points year-over-year and excluding the impact of FormSwift, which was a 160 basis point headwind, ARR was down 30 basis points year-over-year. Total ARR declined 170 basis points on a constant currency basis. We exited the quarter with 18.08 million paying users, a sequential increase of approximately 10,000 paying users. The quarter's paying user growth was primarily driven by momentum in our Simple plan. Average revenue per paying user is $139.68 as compared to $139.07 in the prior quarter. ARPU increased sequentially primarily due to FX tailwinds as well as an overall mix shift from annual to monthly plans. Before we continue with further discussion of our P&L, I would like to note that unless otherwise indicated, all income statement figures mentioned are non-GAAP and exclude stock-based compensation, amortization of purchased intangibles, certain acquisition-related expenses, net gains and losses on real estate assets, workforce reduction expenses and net losses on equity investments. Our non-GAAP income also includes the income tax effect of the aforementioned adjustments. Gross margin was 80.8% for the quarter, down 230 basis points from the year ago period, reflecting higher depreciation associated with our hardware refresh and ongoing data center build-outs as well as increased infrastructure costs associated with the expansion of Dash trials. Operating margin was 38.2%, ahead of our guidance of 37% and up roughly 130 basis points from the year ago period. Operating margin increased year-over-year largely due to lower headcount following our risk in 2024 and elimination of marketing support for FormSwift. Compared to our guidance, operating margin benefited primarily from revenue outperformance as well as lower outside services and marketing spend. Net income for the fourth quarter was $174 million. Diluted EPS for the fourth quarter was $0.68 based on 254 million diluted weighted average shares outstanding compared to $0.73 in the year ago quarter. The decrease was largely due to higher interest expense. Moving on to our cash flow and balance sheet. Cash flow from operations was $235 million, an increase of 10% versus the year ago period, primarily due to payments related to our reduction in force in Q4 '24. Q4 '25 also included $26 million of interest payments, net of the associated tax benefit related to amounts drawn under our term loan facility. Unlevered free cash flow was $251 million or $0.99 per share, up 44% year-over-year. Capital expenditures were $11 million in the quarter, primarily related to data center build-outs. In the quarter, we also added $34 million to our finance leases for data center equipment, marking the end of elevated spend for our hardware refresh cycle. And now I'll provide a brief update on our real estate strategy as we continue to actively pursue subleases across our real estate portfolio. Last month, we executed a sublease of all remaining available square footage in our current San Francisco headquarters, including the portion of the space we were occupying over a 3-year term. We also executed an extension and expansion of an existing sublease. As a result of these 2 subleases, we expect to generate approximately $97 million in total future cash payments over the remaining term of our lease through 2033, net of the cost to lease a smaller San Francisco headquarters, given we will vacate our current headquarters. From a cash perspective, the 2026 impact is immaterial due to lease structure and investments we plan to make later this year in our new San Francisco headquarters. From a P&L standpoint, we expect a modest benefit in 2026. The impact of both of these new agreements has been factored into the guidance we'll provide today. As we move beyond 2026, both the cash flow and earnings benefits become more meaningful as the sublease income builds. Turning to the balance sheet. We ended the quarter with cash and short-term investments of $1.04 billion. In the fourth quarter, we repurchased approximately 14 million shares, spending approximately $415 million. As of the end of the fourth quarter, we had approximately $1.17 billion remaining under our existing share repurchase authorization and $1.2 billion of additional term loan liquidity with $700 million allocated to retire our March 2026 convertible notes. I'll now offer our outlook for Q1 and the full year 2026. For the first quarter of 2026, we expect revenue to be in the range of $618 million to $621 million. Excluding FormSwift, this implies 0.4% growth year-over-year at the midpoint. We are expecting a currency tailwind of approximately $8 million. On a constant currency revenue basis, we expect revenue to be in the range of $610 million to $613 million. We expect our non-GAAP operating margin to be approximately 38% Finally, we expect diluted weighted average shares outstanding to be in the range of 241 million to 246 million shares based on our 30-day trailing average share price. For the full year 2026, we expect revenue to be in the range of $2.485 billion to $2.5 billion. Excluding FormSwift, this implies roughly flat growth year-over-year at the midpoint. We are expecting a currency tailwind of approximately $27 million. On a constant currency revenue basis, we expect revenue to be in the range of $2.458 billion to $2.473 billion. Gross margin to be in the range of 81.5% to 82%, non-GAAP operating margin in the range of 39% to 39.5%. We expect unlevered free cash flow to be at or above $1.040 billion. We expect cash interest expense net of tax benefits of approximately $190 million. We expect CapEx to be in the range of $20 million to $25 million and additions to finance lease lines to be approximately 4% of revenue. Finally, we expect diluted weighted average shares outstanding to be in the range of 227 million to 232 million shares. I'll now share some additional perspective on this guidance for 2026. Excluding FormSwift, we are guiding to a flat revenue year in 2026 while continuing to invest. That reflects a disciplined approach as we validate execution, refine go-to-market motions and ensure that improvements translate into measurable results. Our guidance reflects that balance. We see long-term opportunity, but we are pairing that conviction with near-term prudence. Regarding revenue, following the elimination of marketing support for FormSwift at the beginning of last year, the business has experienced gradual user decline each quarter and will continue to be a modest headwind this year. Further, we have made the decision to sunset FormSwift by the end of the year. For paying users, last year, we offered directional commentary because of strategic decisions we made, including the wind down of the FormSwift business. Looking ahead to 2026, we expect modestly negative net new paying users in Q1, largely due to seasonality and FormSwift headwinds with roughly flat paying user growth for the remainder of the year. On gross margin, we expect modest pressure this year as we scale Dash trials, partially offset by ongoing structural infrastructure improvements. For operating margins, as we mentioned last quarter, we do not expect this to be a year of margin expansion. We remain confident in our ability to execute and believe it is prudent to invest in near-term growth opportunities. Our margin outlook reflects material investment in Dash as we expand trials across both new customers and a larger segment of our FSS user base. We expect these investments to be partially offset by ongoing cost discipline and efficiency initiatives. Regarding finance leases, this quarter marks the end of elevated spend for our latest hardware refresh cycle. And as a result, we expect materially lower infrastructure investment this year with finance lease activity more heavily weighted towards the second half. As a reminder, we typically refresh our infrastructure every 5 years. Regarding CapEx, we expect a slight increase in CapEx as a result of a onetime incremental investment related to the build-out of our new San Francisco headquarters. Excluding that investment, CapEx will be down year-over-year as we have completed our hardware refresh cycle. Our unlevered free cash flow guidance reflects a benefit this year from lower cash taxes related to the One Big Beautiful Bill Act, along with the absence of onetime cash outflows we had in 2025 related to the San Francisco lease buyout and reduction in force. Our interest expense outlook assumes we draw the remaining balance on our term loans. Once drawn, total outstanding term loan debt will equal $2.7 billion. Lastly, we expect our weighted average shares outstanding to decrease to approximately 227 million to 232 million shares, which assumes we exhaust the remaining balance on our share repurchase authorization. With that, operator, please open the line for questions. Operator: [Operator Instructions] Our first question comes from the line of Mark Murphy from JPMorgan. Jaiden Patel: This is Jaiden Patel on for Mark Murphy. It was great working with you, Tim, and welcome, Ross. You've talked about Dash for a few quarters now, goal and pipeline building. Can you give us any quantitative framework around Dash seats, attach rates or ARR contribution at this point? And then looking forward to the guide, again, we've heard some of these strong proof points and very much understand that the focus is first on adoption, but would love to hear any assumptions you're baking into the guide? Andrew Houston: Sure. I can start. And well, I'll start with just like the conceptual framework. I mean we start by focusing on product quality and building the capabilities, the infrastructure to index the known universe of SaaS apps and build a private search index and all the other things that go into building a product like Dash. But then we focus on engagement and make sure onboarding is good and that there's repeat use, then we scale it up to our user base and focus on driving adoption and then monetization. So we'll be able to share more specific metrics and targets and so on as we continue on that progression. I'd say where we are right now, as I shared in my remarks earlier, is that we spent a lot of last year really building that experience and focusing on product quality and building those integrations, the Dash AI integrations natively into the Dropbox experience and also building the self-serve version of Dash, which we need to reach our self-serve Dropbox FSS customers and beyond. And then now we're focused on -- and we've seen a good early signal there. So good repeat use of the integrations within Dropbox. Lots of -- we're focusing on tuning up the onboarding experience. And then now we're turning towards driving adoption in the first half by scaling up the integrations to more of our Dropbox Business customers for the Dash integrations and then rolling out the Dash stand-alone products more broadly in the first half. And then the second half will start to phase in more around monetization. So probably second half will be a better time to share more of the specifics around attach rates and ARR contribution and things like that. Ross Tennenbaum: Jaiden, this is Ross. Thanks for the question. I just wanted to add, I agree with everything Drew said. We are excited for what we're doing around the core business and our ability to do things that drive us to a growth posture as well as for what we can do with Dash. And we are focused very much on engagement adoption this year. And to your guidance question, we leverage all information we have in front of us and just given the size of the core business, you can assume that, that has the most weighting and influence on how we think about our guidance for the year. Operator: And our next question comes from the line of Rishi Jaluria from RBC. Rishi Jaluria: Maybe to start with, I want to continue pulling on the thread of Dash. Look, I'm in total agreement that you have to drive utilization and ultimately, customer value before we can really worry about monetization in a big way. And you've given us bits and pieces over the years. But maybe what sort of metrics can you give us around engagement with Dash, whether that's anything like people spending more time in Dash, percentage of paying business users using it, even like what impact does this have on gross retention? Any sort of metrics you can give us around like engagement and adoption and feedback around Dash would be helpful. And I've got a quick follow-up. Ross Tennenbaum: Rishi, it's Ross. I'll start here. I just -- I know coming on, I'm looking at how all this has played out, and I know we've been talking about Dash for a while, and we've been very focused on investing in building the product, which I think is a great product that gives me a lot of value. I think that what we're focused on now is like, just remember, we launched this in Q4 to the Dash and Dropbox solution into our core. We think that, that is a tremendous evolution of our core product set. It drives a lot of value for our users. We launched it to a small number of users, and we've seen some really good results from that in terms of those core users adopting and using Dash and returning to continue to use Dash week-over-week. And those results exceeded our expectations and has given us the confidence to go forward and accelerate our rollout of Dash to more of our users in this year. So I think we're seeing some nice results on that side. And again, I think that Dash is a significant enhancement of our Core FSS product line and something that we can use to drive value for our users. And then on the self-serve side, and Drew talked about this in his prepared remarks, we've seen some good results in top of funnel in our Q4 launch. There is work that we need to do to just showcase time to value faster for these customers, and we're working on that. But overall, I think we're pleased with where we are with adoption. It's allowing us to accelerate that rollout to our core business. And as we see more adoption and get into the monetization phase, we will talk about it more, and we'll introduce metrics as appropriate to help you track it better. Rishi Jaluria: All right. No, that's really helpful. And then maybe just continuing on Dash, but I want to think about a broader kind of more medium-term strategy. Drew, I know the idea of having kind of this connectivity of knowledge and content has been a thing you've been focused on for a very long time and Dash totally fits in with that. Maybe what's the longer-term opportunity for you to not only leverage kind of this idea of universal search and knowledge attainment, but even get that a little bit more workflow integrated and turn Dash into maybe being more of a platform where your more power users have the ability to actually build content-specific agents on top of Dropbox that can automate a lot of that workflow and actually get a lot of work done given kind of the content you have system of record. Maybe how are you thinking about your opportunity and investments there? Andrew Houston: Sure. I think it's a great question and something we're very focused on. So we talk a lot about building Dash itself, but I think in a lot of ways, what we've really been building and why this investment has been over many years instead of a couple of quarters is because we're building or we've built a completely new generation of technical infrastructure that we internally call our context engine. And so what that is, is shifting the value we're providing at the platform level from basically like really scaled and cost-effective storage to building this context layer for AI that indexes the known universe of SaaS applications, builds kind of a private search engine and then connects -- basically formats all of that content in a way that a language model or an agent can work with it. And we've -- and to your question of like, well, are we going to shift from sort of informational use cases like search or chat to helping people get the work done, you're starting to see us do that across the portfolio beyond Dash. And we'll do it within Dash too. But just to give a couple of examples, part of what really resonates with customers with the Dash integrations in the Dropbox is for the first time, they can talk to their Dropbox in natural language, and it kind of blows their mind. So if they want to find a photo of a red sunset, it doesn't have to be called red sunset.GPG anymore. If someone says red sunset in a video, that search can find it. And increasingly, we'll be shifting on all of our surfaces from kind of informational queries like that to actually automating workflows and helping you get stuff done. Security is another example that I talked about. So every company is trying to figure out how do we roll out AI safely and confront a lot of new issues. The first is overshared content. So to some extent, every company has documents floating around with a broader permission set than it should. And while that's -- and customers have been talking to us about that problem for a few years. And in response, we -- that's one of the reasons why we bought a company called Nira last year and have been building on that since with what we now call Protect and Control. But we find that customers are really struggling how do we deal with this overshared content. And that might have been a theoretical problem a few years ago, but with enterprise search, with these AI tools, suddenly employees can literally just ask for sensitive or bad stuff and find all of it, making it a lot more dangerous. Second, as companies have -- as CEOs or companies have encouraged AI adoption, and tried to hurry that up. What they're also seeing is that something like 30% or 40% of queries that first employees are using consumer AI tools like ChatGPT to answer these questions or at work and like 30% to 40% of those queries have people pacing PDFs or of really sensitive customer or company IP or just sensitive material that they shouldn't be sharing and customers have no way of dealing with that. And then to your point about agents, on the one hand, this whole coding revolution, agent coding revolution that we saw last year is really not only itself kicking into overdrive, but when you look at things like OpenClaw or Cowork or others. Now there's a lot of excitement about, all right, can we bring this paradigm to knowledge work in general. But what you see there is that opens up a whole new -- that kicks these security concerns and overdrive at an even bigger level. And so these are all big opportunities for us beyond just the basics of AI search and chat, and we're trying to strike the right balance because on the one hand, we're as excited as everybody else about all the transformative things you can do with AI as you give it more agency. At the same time, the median -- when I talk to sort of the median Dropbox customer, their biggest pain points are like are still more basic where it's like I have 10 search boxes when I really want one or like, yes, I'm using AI, but when I use ChatGPT, it doesn't know anything about me or my company or my work. And so there's still a lot of low-hanging fruit and just providing these kind of more basic levels of value in addition to the more workflow-oriented and like workflow automation pieces on top. But this and a bit of a longer answer to sort of address the spirit of some of the prior questions, too, is that like we've really been building a new generation of infrastructure that builds on top of 10-plus years of infrastructure before that, which is really tuned for storage. But as a result, when you look at our price points for Dash or other things, we're able to provide a product that really no one else has been able to provide, where it's unlike some enterprise search competitors or similar folks in the space. If a typical Dropbox customer wants to adopt one of those things, they usually are facing a $50,000 setup fee. They have to provision their own custom cloud infrastructure to run it. It's like a 3-month pilot. There's a lot of friction. And so both the opportunity and the challenge we've had to date is like how do we box all that up and put it in a package that anyone can just download with an app and be up and running in a few minutes. And it's really exciting that we're really close to the finish line there. And this half is when we'll really start scaling that up. So really building a next generation of technical infrastructure, lots of manifestations at the application level from better FSS to Dash to security, but I think it's an important kind of framework for how to think about these investments. Operator: And our next question comes from the line of George Kurosawa from Citi. George Michael Kurosawa: I'm on for Steve Enders. It was good to see paid users return to sequential growth. I think you alluded to some improvements in retention. I'd just like to double-click on what do you feel like drove some of those improvements and how we should think about kind of sustainability and maybe further improvements you can make going into this year? Andrew Houston: Sure. Well, as I said in my prepared remarks, I mean, the first thing that has really driven these improvements in a more fundamental way is bringing in a new generation of skilled leadership and who have in turn really elevated each of their functions and leadership teams as well. And I think that what you saw in Q4 is a reflection of a lot of that work starting to pay dividends. So the improvements have been across the funnel. I think last year, you've seen us really continue to drive steady improvements in retention and just improvements across the funnel. The individual business has done well, and you've seen steady growth across 2025. And I think what you -- but the bigger picture of what you see there in addition to the specific gains of different funnel metrics is really that we -- with the right execution and the right leadership, we can demonstrably drive sustained improvements in retention and growth. And then turning to '26, a lot of our focus is on the Teams business, where we faced various downsell pressure over the last couple of years since we launched a price increase a few years ago. But there's a lot of improvements we've been making there, too. So everything from basic stuff like improving churn and downsell directly by redesign and cancellation flows and better communicating the value we're providing, sort of no regrets, things like that, improvements to conversion. So a lot of the pricing -- we're investing a lot in simplifying our plans and tuning pricing and packaging, improving our trial flow. And so we've seen that paired with improving conversion rates on the way in. On the onboarding experience of setting up a new team, reducing just a lot of, again, common sense stuff like just taking -- sanding down all the rough edges and reducing staffs and friction and getting your team up and running, that's been paying dividends. But as you'd imagine, one of the things we're most excited about is just building a better product experience and taking the FSS product, a new generation ahead with the integration of all these capabilities from Dash and being able to talk to your Dropbox and being able to automate a lot of the work that you're already doing there. So we see a lot of room to continue improving across the funnel and across the portfolio. And it's been good to see some of those proof points become stronger in Q4. George Michael Kurosawa: Great. That's helpful color. I also wanted to ask about ARR. The last few quarters, we've seen revenue show good signs of stabilization. It seems like ARR seems to be diverting a little bit weaker, a little bit of a divergence there. Can you just talk us through the mechanics of why we might be seeing that and how we should think about those -- the delta between those 2 metrics this year? Ross Tennenbaum: Yes. Sure, George. This is Ross. I'll take it. I think it's an astute observation. We had some Q4 positives around paying users and ARPU and revenue and ARR was a little bit lighter. I think that they should be moving in the same direction, but I would just let everybody realize that we're talking about like a slight divergence around a neutral middle line. So it's not very far off in either direction around 0. So I think ultimately, those things -- the ARR should move in the same direction. I think in any given quarter, there's some discrepancies. In particular, in Q4, your ARPU and your ARPU metric has FX positives embedded where ARR is on a constant currency basis. And there's also some timing-related differences that impacts those metrics definitely. So ultimately, we're optimistic about the business and return to a growth posture and would expect that those start to move together in the future. Operator: And our next question comes from the line of Matt Bullock from Bank of America. Matthew Bullock: I wanted to ask about the paying user growth assumptions embedded into the guide this year. it's encouraging to hear that we're targeting Teams license growth this year. But maybe help us think about what's embedded in terms of the full year paying user guidance, how we should expect that to evolve throughout the year across individuals and Teams plans and with the sunsetting of FormSwift as well, that would be helpful. Ross Tennenbaum: Yes. Thanks, Matt. I mean -- and just to reiterate for everyone, what we said is Q4, we are very pleased with the result of having positive net new paying users. And I think that, that's because it's the net number is driven by both the improvements we put into place around retention, which we hope will continue this year. And also, we're also targeting the whole customer journey and improvements for gross adds as well as upsell in addition to retention. So we're very pleased with the result in Q4. And as we look forward into 2026, I said earlier that we should expect some seasonality in Q1 such that net new paying users will decline in Q1. That's our expectation. And then for the full year, we expect it to be flat year-over-year in net new paying users, which I think compared to the last several quarters and years, is a positive result. And I think, again, that is a reflection of what Drew talked about, really, what I'm most excited about is like we've got a great team in Core, and they're rapidly iterating on some really cool initiatives that are intended to drive better retention and improvements across the customer journey to return the Core FSS business into a growth posture. And we're excited about Dash. And so I think that's reflected in the guidance around net new paying users. In terms of how it goes by quarter, I would just focus on -- we expect to be negative in Q1 and then make it up for the rest of the year to be flat for the year. I don't want to get too specific on each quarter thereafter. Matthew Bullock: Understood. And then one quick follow-up, if I could. I wanted to ask about potential M&A strategy. Which key areas would you potentially be evaluating opportunities to expand the product portfolio? Just trying to think through potential bolt-ons here going forward. Andrew Houston: Sure. I can start. So I mean M&A has been a really valuable tool in our kit for scaling the company since the beginning and ranging from bringing in talent to bringing in early-stage products like things like Nira that I mentioned earlier and scaling them up to bringing in established businesses like HelloSign or DocSend. So we've had success across all 3, and we have -- and we continue to be very active in looking for opportunity -- M&A opportunities. And I think Nira is a good recent example. There have been others on the talent front where we've been able to bring in some really great AI talent, folks like Mobius Labs who have really deep capabilities in multimodal understanding. So like processing -- they're using AI to process large quantities of images and video and audio. I imagine, is very relevant for us. And then looking ahead, it kind of dovetails with what I said before, we've got this really powerful -- we see the big bottleneck in AI generally as this gap between AI tooling and your company's context. We've been building that missing context layer for AI. We built a whole new generation of technical infrastructure to facilitate that. As the world starts turning towards more agentic capabilities or people having their own agents, then there's a lot of new opportunities for that context engine to help make those agents actually able to connect to your work context, like to connect to your Gmail and your Salesforce and your Dropbox and everything else, not just the local files and your computer, which is the current limitation for a lot of these things. And then security, like securing and building a secure perimeter around your company for rolling out AI safely and agent safely, particularly in areas around content. So across both the infrastructure and the application layer, there's a lot of interesting opportunities, and we'll have more to share as the year progresses. Operator: This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Peter Stabler for any further remarks. Peter Stabler: Thanks, everyone, for joining us today. We look forward to speaking with you next quarter. Have a great afternoon. Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Operator: Thank you for standing by, and welcome to the Qube Holdings Limited FY '26 Half Year Results Investor Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. Paul Digney, Managing Director. Please go ahead. Paul Digney: Hi, all. Thank you for joining this morning's call. I'm joined in the room by Qube's CFO, Mark Wratten; and Head of Investor Relations, Paul Lewis. As usual, I'll kick off the call with a summary of our highlights for the half, followed by some comments on the divisional performance. Then I'll hand over to Mark to discuss some key financial items. And then back to me for -- to go through the full year outlook before taking your questions. Starting on Slide 6, results overview. Qube has once again delivered a solid half year result. The financial performance reflects the strength of our business, reflects a combination of organic growth and the contribution from acquisitions recently completed. Activity levels remain mostly favorable across our core markets. And as you've heard before, the diversity of our operations supported growth and helped offset any challenges. Both Mark and I will talk more about the financial results as we get through this presentation. On to Slide 7. We provide an update of the scheme of arrangements here. As you know, on Monday, we announced that the MAM led consortium have confirmed their offer at $5.20 per share per Qube. We have now entered into a scheme implementation deals with the consortium. This is an exciting milestone in the evolution of our business. And MAM's offer underscores the value of our strategy and the quality of our business and our people, most importantly. I'm confident that this transaction will provide a platform for the business to grow and continue to grow while maintaining a strong track record of enhancing supply chains in the regions that we operate. Obviously, the timing is contingent now on regulatory and other approvals, and we're aiming to have a scheme booklet out to shareholders in May so that shareholders will then have the opportunity to vote on the scheme. Returning to our performance for the half and safety performance on Slide 8. Our positive safety performance was sadly marked by the death of a tire fitting contractor at our Narromine Agri facility in October. Qube and the management team has continued to support investigations into this tragic event. During the period with our ongoing focus on safety, our TRIFR continued to improve, decreasing by 21% compared to last year's result. Our LTIFR and our CIFR also improved during the half. The rollout of our BeSafe program also continued. There are some great safety videos worth checking out on our social media networks. Turning to our key markets, Slide 9. Once again, it's clear that strong performance in some areas helped balance out some challenges in others. In Containers, the Australian logistics operations performed in line. New Zealand container logistics impressively performed better than expected and so did Patrick's, performing better than expected also. In Agri, Agri again made a good contribution, which underscores the value of our trading strategy, and an agile integrated service offering to our customers. More automotive benefit from a full period contribution from the AAT Webb Dock West, which is also known as MIRRAT, but was offset by lower than anticipated storage and quarantine services across all AAT terminals. Forestry was relatively stable despite some softer wood chip volumes in Australia, while in New Zealand, we saw a modest uplift in earnings. The resources business was better than we expected due to better volumes and also with better cost controls, which helped offset a major contract ceasing in the period. Energy once again delivered ahead of expectations, except for some delays in renewable projects. And in general, Stevedoring and the other sections on the slide, this was slightly impacted mainly due to unfavorable volume mix across our port operations in Australia. Now turning to divisional performance on to Slide 11. For the operating division, I won't spend much time on this slide as I'll dive into each BU shortly. As you can see from the slide, logistics and infrastructure was responsible for the lion's share of the growth in the half. Turning to Slide 12, logistics and infrastructure. EBITDA profits jumped around 22%. The addition of Web Dock West helped the performance in the period. However, the AAT terminals performed weaker overall due to a decline in high margins and ancillary services, which I mentioned before. Container and logistics volumes were broadly stable across Australia and provided another solid result. The New Zealand performance was better than expected in the half. And with the Nexus acquisition completed in December, we are expecting further New Zealand upside in the second half. The IMEX continued to deliver improved results and volumes as volumes ramped up. And Agri performed well in the period with grain up almost 50% through our bulk channels in the half. Turning to Slide 13, Ports and Bulk. In the Ports and Bulk business unit, it's fair to say it had some mixed performance across its end markets. The Energy business delivered another strong earnings contribution from the oil and gas activities, including the commencement of decommissioning work getting underway during the period. However, in the energy space, we had profit impacts from our renewable sector due to setup costs in Western Australia and some project delays in Queensland. We saw reasonable volume at Stevedoring across most commodities in our ports operation. However, unfavorable product mix in the half did impact earnings and margins. Overall, forestry was relatively stable with a modest uptick in earnings in New Zealand. The bulk activities in resources sectors was better than we expected. This helped offset the impacts of some major projects ceasing and the delays in some new projects coming on stream. And also, the bulk business did benefit from a full period contribution from the Coleman's acquisition, and the initial contribution from the Albany Bulk Handling acquisition. Now on to Slide 14, briefly looking at Patrick. Patrick was better than we originally forecasted, which is pleasing. Market share was relatively stable at 41%, and the EBITDA improved, thanks to a number of things, higher volumes, favorable volume mix and increasing ancillary revenues. And pleasingly, during the period, the business also extended several key customer contracts. I will now hand over to Mark to take you through some of the key financial information, and then I'll get to the outlook after that. Mark Wratten: Thank you, Paul, and thank you to everyone on today's call for listening in. As Paul has already highlighted, Qube delivered a very pleasing first half set of results. I'll now take you through a few financial slides. Starting with Slide 16, Qube's underlying results. Paul has already covered our Logistics and Infrastructure and Ports and Bulk business units as well as Patrick. A few other points to note include: strong result in our operating division contributed to an increase in group underlying EBITDA of 9.8% over the prior period. Pleasingly, Qube's EBITDA margins, excluding the high revenue, low-margin grain trading business, improved from 10% to 10.6%. As we had guided to earlier in the financial year, this EBITDA improvement was partly offset by an increase in net finance costs which increased by $9 million against the prior period due to higher average debt balances and no interest income on the now fully paid repaid shareholder loans to Patrick. The NPAT share from associates increased by $7.5 million, which was mainly attributable to the great first half result from the Patrick business. At the underlying NPATA line, we delivered $157.5 million, which was an increase of 10.1% over the first half FY '25. On the back of these results, the Board has declared an interim dividend of $0.0535 per share fully franked, which will be payable on the 9th of April. This dividend is at the top end of the Board approved dividend payout ratio, which is 60%. Before leaving this slide, I'll make some short comments on the 2 material nonunderlying adjustments that we reported in our H1 statutory results. The first item is $101.5 million pretax profit on the divestment of our interest in the beverage property, which we announced was sold in December 2025. The second material item of $37.3 million was a reversal of an onerous contract provision relating to Qube's obligations at the time of exiting the Minto Properties, which we divested in January '25. This obligation was successfully resolved during the period, allowing us to now reverse this provision. The original provision was also treated as a nonunderlying item in our FY '25 accounts. Moving to Slide 17, capital expenditure. In first half FY '26, Qube's gross CapEx was $216 million. This is broken down into the 4 major categories on this slide. Qube spent $35 million on 2 small but strategic acquisitions in the first half, being the Albany Bulk Handling business in Western Australia in July and the Nexus Logistics business in New Zealand in early December. The Albany Bulk Handling business has been fully integrated into the Qube, while the Nexus integration is progressing to plan. We also spent $88 million on organic growth-related assets in the category set out in the table below. The major spend was on new bulk storage facilities in Queensland and Western Australia and mobile assets and specialized containers to support new or expanded contracts. The $22 million investment in specialized containers predominantly relates to new contracts with Iluka for the Balranald project and WA Oil for a decommissioning project. In the period, we also spent $88 million of replacement CapEx, mostly on mobile fleet assets and material handling equipment. Finally, we spent $5 million on the 2 Moorebank rail terminals. During the first half, Qube also received proceeds of $163 million from the divestment of assets with a significant amount being for the beverage property, which I mentioned earlier, and some rail rolling stock assets in excess of our business requirements. After all of the above, net CapEx in the first half was $53 million. Taking you now to Slide 18, cash flow. During the first half 2016, Qube's net debt decreased by circa $51 million with the key cash flow items detailed on this bridge. The first half cash conversion, excluding grain trading working capital was 71%, which is a relatively typical result for Qube given the material first half outflows that don't repeat in the second half. Working capital movements for our grain trading business was a positive $29 million for the period to total $117 million at the end of the first half. The first half FY '26 cash flows also included the $53 million of net CapEx that I just spoke to as well as $81 million in distributions received from our associates, mainly from Patrick. Finally, if I can now take you to Slide 19, balance sheet and funding. You will remember that in FY '25 Qube completed a number of capital management initiatives, which together continue to place the business in a strong balance sheet position. During the first half of FY '26, we haven't been required to revisit our debt facility as we have significant available liquidity, which at the end of December '25 was over $1.1 billion. Our average debt maturity is 4.4 years, and we have no facilities maturing in the second half or in FY '27. Qube's gearing ratio reduced to 31.6%, which is at the lower end of the Board's current approved range. overall ore, we retain significant headroom against our bank covenants. Qube maintains investment grade credit ratings from both Fitch Ratings and S&P. That's all for me. Now I'll hand you back to Paul. Paul Digney: Thanks, Mark. And now Slide 21, the full year '26 outlook by key markets. Across our -- the outlook across our key markets for the full year is generally favorable. In containers, we expect Patrick to perform slightly better as well as New Zealand. The outlook for Agri year-to-date has been good, although the remainder of the year could moderate due to global conditions and farmers currently holding on to inventory, which is reflected in the revised outlook for Agri. In automotive, there are some early signs of improvement in the demand for ancillary service in the second half, which is positive. In forestry, we expect that to stay the same as the first half of the year. And while in our resources businesses, we anticipate some improvements, thanks to more favorable product mix and better volumes. This should partly offset that misalignment I spoke about before between contracts ending and new one starting. Finally, in Energy, as I mentioned before, the outlook remains positive for the oil and gas activities However, the new renewable projects will be delayed into next year and will be a benefit to next year's revenue. Now to the final slide, Slide 22, before I take questions. Full year 2026 underlying earnings outlook. The underlying earnings outlook remains positive for the full year, with solid EBITDA growth for the operating division. The outlook for associates also looks positive, largely thanks to the higher contribution from Patrick's. And at a group level, we expect to deliver a solid NPATA and EPSA growth of between 6% and 10% for the year. To summarize, while it's been a very busy half particularly with the Macquarie transaction and the due diligence bubbling along in the background, our half year performance saw us deliver another record result. Revenue improved, margins improved again. Return on average capital employed improved above 10% for the first time and now on its way to our new target plus above 12%. And our earnings per share improved and the outlook remains positive for the full year. Thank you for your time. I now would be happy to take your questions. Operator: [Operator Instructions] Your first question comes from Justin Barratt from CLSA. Justin Barratt: My first question, I just wanted to ask about if you could talk a little bit more about your grain trading business. It looks to be doing a pretty good job of materially improving throughput through your operations? Paul Digney: Yes. Justin, I mean, yes, our strategy has been very successful. A lot of the grain that's moving through our assets is I think more than 50% is our trading arm, pushing that inventory through our terminals and our up-country facilities. So yes, we've been -- we've built a pretty good strategy there. We've kept our product to our customers and through our trading arm fully agile and fully flexible. So Yes. I mean the current conditions, pricing is a bit lower. FX is not working as good as possible for trading, but we're pushing through some good volumes. Justin Barratt: Okay. Great. And then on Ports and Bulk, your guidance for FY '26 now a little bit softer than your previous guidance. And just noting your comment around the timing between cessation of some contracts and ramp-up of new contracts. I was wondering if you could expand on that comment a little bit for us, please? Paul Digney: Yes. I mean some areas -- I mean, we've had. Probably in the wind farm sector, we felt that we probably -- from a profit point of view, we do a bit better. There's probably -- setup costs have been a bit more, but we're setting up for the future in Western Australia. Some of the tail of some of the wind farms that we're finishing off at the moment, before other ones start in 12 months' time or so. It's probably been probably not as financially benefit for us. So there's been some impacts there. General Stevedoring turnaround after the industrial. The IR issues last year have improved, but we felt that they probably might improve a bit better. So we're looking for that improvement in the second half a bit. So we're just being a bit cautious there. Iluka Balranald is delayed probably 3 months into next half. So yes, it sort of swings around about. But yes, we are sort of broadly flat outlook for Ports and Bulk. Operator: Your next question comes from Jakob Cakarnis from Jarden Australia. Jakob Cakarnis: Paul, Mark, just 2 for me, if I could, please. Can you just talk to the drivers of the CapEx guidance change, please, for FY '26. So just interested in your considerations as you've put that together for us today, please? Paul Digney: I'll hand over to Mark. Obviously, there's quite a reduction there. Mark Wratten: Jakob, yes. No, so we spent less CapEx in the first half than we had anticipated and there's an element of that flowing through into the second half. I think we had -- in the initial guidance that we gave in August, we had included sort of what we call, referred to as a CapEx pool. So for acquisitions and we've completed a couple, as I mentioned, $35 million in the first half. We've got a couple that we sort of anticipate may drop in the second half. But overall, we think across the year, it's less than what we sort of had, sort of set as a sort of an amount aside back in August. And then there's just an element of the guide just being very careful around other maintenance CapEx, and we've been not -- I guess, to make sure that we're sweating our assets as much as we could. So I think it's just been a -- it's just maybe an element of first half being a bit too ambitious around when we could spend it. But we've got some really good -- I think some of it goes to what Paul was mentioning earlier around timing. So we've got some project -- really good projects coming up where the CapEx is now more likely to be spent in '27 than it is in '26. Jakob Cakarnis: Understand that maybe you'll be in a different environment as that goes ahead. Just one final question. I appreciate that there's still a bit of water under the bridge. But for those on the call, how do we think about a distribution of any surplus capital if that exists in the business? And how do we think that around timing with your other announcements and maybe the implementation deed, please? Mark Wratten: Yes. So if -- per the announcement on Monday morning and you'll see it in the scheme implementation deed as well. Obviously, the cash price is $5.20 but reduced by any dividends that we pay between now and completion, and that's inclusive of the interim dividend that we announced today, $0.0535. So we can -- for the scheme implementation, we can pay a maximum of $0.40 of dividends overall. And the whole idea around that, Jakob, is to say to try and optimize our franking credits. We've got quite a large franking credit balance and we're trying to get a lot of that to the benefit of shareholders between now and completion. So you'll see that we've got the ability to pay a special dividend within this -- agreed with Macquarie. And we'll seek, per the note -- in the announcement, we'll seek ATO class ruling to make sure that, that's all dot the I's, cross the T's, so to speak, in regards to those franking credits for any special dividend being available to shareholders. Jakob Cakarnis: Mark. So am I right in thinking that, that occurs, sorry, in terms of timing as the deal is closing? Or is there an interim milestone that we need to keep in mind? Mark Wratten: No. So obviously, if the deal dragged into the second half of this calendar year, Jakob, and we do our full year results, you could expect a final dividend, right, if it's sort of -- if not completed before October, say. Otherwise, a special dividend is likely to be paid immediately prior to the actual completion of the deal. So very -- a few days probably before the actual cash component would get paid. So it would be almost simultaneous. Operator: Your next question comes from Andre Fromyhr from UBS. Andre Fromyhr: Maybe just staying on the scheme topic. Wondering if you could give any sense of what are the main regulatory approvals that are going to require you to work on? And what kind of time line you would expect around that? Paul Digney: Yes. So obviously, ACCC and Feb are the key approvals. And so I mean, I think we're working a time frame between up to 4 to 6 months, potentially that. So yes. Andre Fromyhr: Are there any particular parts of the portfolio that you've already identified as sort of more in focus from an ACCC approval? Paul Digney: I mean from our perspective, we don't think there should be any issues. I mean other than actuals around this process. I mean, again, this is not a merger. It's a change of ownership transaction. So there may be a look-through on Port of Newcastle, but the actuals will go through that process. But once they start that process and go through it, they'll understand. The ownership structure and the management structure is totally different. So there's no alignment there. And again, this is just an ownership change. It's not a merger of operations. So from my view, there shouldn't be any issues, but obviously, there's a process we need to run through, and we'll respect that process and so will Macquarie. Andre Fromyhr: Okay. Then back on the operations. I was just wondering if you could talk a bit more about the drivers of the margin in Ports and Bulk? I understand it's a diverse segment. But I guess that margin has been depressed for a few years now and has come down year-on-year again this period. Wondering if you can talk through the role that demand or utilization side has played there? Or is there cost inflation? Or is it a mix issue? Just curious to understand a bit more detail around that. Paul Digney: I think for the period, it's just been, I mean, we did call out that bulk would sort of go into a little bit of a decline because of contracts ceasing and that sort of stuff. That we did call out. Actually, it was better than we expected and the way the guys have managed that process. We haven't really seen much wind farm activity which sits in that sector, which is -- which goes through a lot of fixed costs, and it's reasonably high margin. So we didn't get that. The general Stevedoring business, we had products, we had reasonable volumes, but certain volumes, certain commodities and certain ports make more money than other things, in just the way that mix fell out. Probably it wasn't -- hopefully, the second half better with how that product mix goes. There's some stuff that we're working through in that area. I just think it's the period, it's just sort of a combination of some areas of where we would have impacted margins, and hopefully, we can get that improving in the second half. Andre Fromyhr: Okay. And last one for me is MIRRAT, Wondering if you're able to share what the EBITDA contribution was in the period or even better, like a sense of what a normal annualized run rate is for MIRRAT's EBITDA under Qube's ownership and sort of what your plans are for growing that business? Or is it more just the bolt-on to your existing AAT terminals? Paul Digney: I haven't got a number in front of me, so I can't provide that. I think we provided maybe a number at acquisition. So we were tracking a little bit lower than that this period because of less quarantine and storage services. So -- but we look at MIRRAT as a long-term asset. And so we're very confident where we're at with MIRRAT. Mark Wratten: Yes. Andre, when we -- I think the normalized or sort of what we sort of coming into the year is around $30 million to $33 million of EBITDA. And as Paul said, the first half, which is sort of a little bit -- sort of below what we expected, then that $30 million to $33 million is sort of on a full year basis. And that's sort of at a very I guess, at a sort of very normalized run rate without sort of heavy volumes of ancillary services. Operator: Your next question comes from Samantha Edie from Morgan Stanley. Samantha Edie: Congratulations on the result and the takeover. I just have 2 questions today, please. So just with the first question. So I can see that the resources outlook has improved, which was guided to be a bit of a headwind in FY '26. And you did have a strong first half overall. But I guess, if we're just thinking about the second half earnings in each of the key markets you provided on Page 21 of the preso, are there any key market earnings there that are expected to go backwards half and half? Paul Digney: I think I'll probably called out a little bit cautious around -- just around the Agri volumes. I mean, we've done very well to date in regards to the strategy. And there's a lot of wheat on storage and upcountry and that sort of stuff. So we look to continue to push that through. So we've been a bit more cautious on that. Renewable projects is that's not going to change too much. We're not going to see much of that work, so which we expect it to be better. So there are probably 2 areas. But on the flip side of that, I think as I called out, the auto the storage and quarantine services that we have through AAT terminals looks to be more demand for that coming in the second half. It was very light in the first half. Patrick, New Zealand has been really good for us and looks promising in what we've done there, putting those businesses together. So that's been a good sign in oil and gas. There's probably potential slight upside there to offset any of those other things that might be maybe a bit lighter than we would have expected probably a couple of months ago. Samantha Edie: Okay. That's great. Mark Wratten: Sam, sorry, I mean it just goes about diversity again, right? That's just -- yes, it's sort of self-protect ourselves through the strategy. Samantha Edie: Yes. Great. And then just the second question is around Patrick's Fremantle lease. So I think that lease is meant to expire around 2031 unless that's changed. So is this like still the case? And then is it likely that this will be extended? And then can you also talk through what an extension will look like. So yes, just any color around that, please? Paul Digney: Yes. I think, Sam. The unknown on that is really what happens at Westport and the relocation from Fremantle down to Westport. It's still unclear of time frames on that sort of stuff. So you would assume an extension at Fremont or will occur when that occurs, I'm not too sure. But yes, it will go beyond the current position at this point in time. So I mean, we'll work with the Fremantle Port and the other stakeholders around that and potentially transitioning in the long term, which is a long way away still. There's plenty -- there's still plenty of capacity at Fremantle to operate for decades. So yes, it's -- I think to answer your question, very likely of an extension. I can't give the time frame of when the port would get relocated and when it does and if it does. Operator: Your next question comes from Nicole Penny from Rimor Equity Research. Nicole Penny: One follow-up on grain and the comment that you've moved 57% of New South Wales bulk volume. Could you comment on whether there's it clear change in market share you're seeing or whether the volume remains a function of crop volumes, high and solid crop volumes? And secondly, if you could comment on in addition to farmers holding on to grain that you already mentioned. Are you seeing any other structural changes in farmer selling behavior? Paul Digney: I think just what I called out. I mean, yes, I mean, we've increased our market share, I guess, in the New South Wales market. I'm not to comment about what our competitors do and what we do, but we have done that. I think our strategy has been quite good and quite agile with our customers and what we've built out over the last 2 years. Fundamental changes, I think as I called out earlier, the price of wheat at the moment is a point where -- and I think farmers are holding on for this point in time, but there is abundance of week there. So how it pushes through the system. We'll see how that plays out over the next 6 months. But we're just a little bit -- I guess, we've been able to push grain through. We've been able to source grain, put it through our network, but we're just a little bit cautious with how that's sort of playing out at the moment. So I don't think anything has really changed. I think farmers have decided to not sell as much as they want at this point in time. At some point in time, it's got to push through the system. Operator: Your next question comes from Owen Birrell from RBC. Owen Birrell: Just one first question with regards to that special dividend potential. In your slides, you say you have the potential to pay $0.40 per share dividend with franking credits worth up to approximately $0.17 per share. Can I just confirm that, that $0.17 per share is the level of franking credit balance you have at the moment? And if not, where is your franking credit balance. Mark Wratten: That would be -- we have a franking credit balance is subject to some further work that we're doing, but we believe that at this point in time that we'll be able to fully frank up to the $0.40 that we have agreement with. So yes, we're pretty confident about that. But as I said, we're making sure that -- and you'll see in the little footnote on the bottom of that page that we're going to seek ATO-class ruling, make sure that we pass all of their relevant franking credit integrity rules to make sure that it's fully available to our shareholders or particularly obviously those ones that can benefit from a franking credit. Owen Birrell: Okay. Perfect. I understand that. And just secondly on the -- again, on the ag business. Obviously, it's been a very good success story for you. I just wanted to get a sense of where your export terminals are relative to potential capacity? A 49% increase to the 1.8 million tonnes exported through your terminals. It sounds like a big increase. But if the -- if FX wasn't a headwind, if pricing wasn't a headwind, where do you think you would have been able to get to with that volume? Paul Digney: Good question. I mean we still have got extra capacity to push through our network. So the first half is pretty good numbers. I mean, if you double that and plus another 10% or 20%, that would be getting towards maybe capacity in those terminals, but we're still pushing the limits and we still have the ability to expand a bit of that capacity if needed to. So we're in a pretty good spot there. Owen Birrell: I guess, the origin of my question is that your grain trading activity is effectively running at 0 margin. Actually, it's even less margin than you were doing last year. So you're clearly leaving something on the table. Obviously, you're making it back through your utilization of your physical assets. But at some point, those physical assets get full. I guess the question is, do you then start to take margin through grain trading? Paul Digney: Potentially. It will just matter to the circumstances of the world grain prices, right? So at this point in time, it's quite low. So if prices are higher, yes, there's probably more margin going forward. Operator: There are no further questions at this time. I'll now hand back to Mr. Digney for closing remarks. Paul Digney: Thanks, everyone, for joining the call. I'll be speaking to some of you guys and lady soon. Yes, thanks again for your support, and have a good day. Cheers. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Good morning everybody. Welcome to Vector Limited Conference Call and Webcast to discuss the company's financial and operational results for the half year ended 31st December 2025. [Operator Instructions] I must advise you that this conference call is being recorded. I would now like to turn -- hand over to you Vector's Chair Douglas McKay who will take you through the call. Douglas McKay: [Foreign Language] Hello everyone, and welcome to this presentation. I'm Doug McKay, Vector's Chair. Today, we're going through Vector's results briefing for the half year ended 31 December 2025. Joining me on the call for the first time as our group Chief Executive is Chris Blenkiron. Pleased to have you here, Chris. And we have Chief Financial Officer, Jason Hollingworth. We'll start the presentation with comments from Chris on overall financial performance. Then Jason will look at the detail. Chris will then talk about the outlook for the next 6 months, and then I will come back to talk about the dividend. After that, we'll be happy to take your questions. And I'll now hand over to Chris to start the presentation. Chris Blenkiron: Thank you, Doug. Hello, everyone, and thank you for joining the call. It's great to be speaking with you for my first market update since joining Vector in December. I'll start off by setting the context for these results. The new regulatory period, known as DPP4, began on the 1st of April 2025. At this time, the Commerce Commission increased allowable revenue for all electricity distribution businesses in New Zealand. The changes support the investment that's needed for the country's energy transition. Also, keep in mind that the gray bars on the slides show the impact of businesses that have now been sold and continuing operations are shown in blue. This is to allow for easy year-on-year comparison. With that background in mind, I'll talk through some of the top line results. Vector's group financial performance for this half year has been strong and in line with our expectations. Revenue for Vector Group is up 14%, driven by higher electricity revenue. Higher revenue has flowed through to an increase in adjusted EBITDA to $240 million. This is up 19% over the same period in 2024. Adjusted EBITDA excludes capital contributions, which are paid by new customers for their connections to the network and is how we currently ensure that growth pays for growth rather than cost of growth being spread across all Auckland electricity consumers. Net profit after tax was $113 million, down 4% with the higher adjusted EBITDA offset by lower capital contributions. Gross capital expenditure was $223 million, down 15% on the prior period. However, we do expect capital expenditure to be higher in the second half of the year than it was in the first. In terms of regulatory quality measures, we include SAIDI minutes in our quarterly operating statistics, which were released last month. SAIDI is how electricity distribution businesses are measured by the Commerce Commission for the duration of power outages on their networks over a year. At this stage in the regulatory year, which finishes at the end of March, we are within the regulatory limit. Our focus is on making sure every dollar we spend produces the best value possible and keeping our charges, which are around 1/4 of the total power bill as affordable as we can. I'll now hand over to Jason to go over the detail behind these top line results. Jason Hollingworth: Thank you, Chris. This slide shows the segment contributions towards the adjusted EBITDA figure. Adjusted EBITDA from the Electricity segment was up $48 million, reflecting that HY '26 was under DPP4 and HY '25 was under DPP3. Earnings for Gas were flat on the prior period. Other includes VTS, Vector Fibre, Equalise, which offers cyber services to other lines companies and our group eliminations. It also includes a $9.3 million loss on sale from HRV effective on 1st of August '25. Next slide. Net profit after tax was down $5 million or 4%. This is down on the prior period with the higher adjusted EBITDA being offset by the factors shown on the slide, including lower capital contributions, fair value movements on financial instruments and tax. Gross capital expenditure has decreased from a comparable 2024 period to $223 million, and you can see here some of the detail. Net CapEx after deducting capital contributions was down at $126 million. Capital contributions were down at $97 million. The slide on group debt shows that our debt levels have remained flat with gearing at 37%. The next slide, we'll now look at the segment performance, starting with electricity. Adjusted EBITDA for electricity was higher, as previously mentioned. The higher impact from pass-through costs is the transmission charges we collect on behalf of Transpower. These have increased because of Transpower's own revenue reset that reprice transmission at the same time as distribution. We passed transmission costs on and recover them via our revenues. There are also higher OpEx costs in the period linked to increased maintenance activity and also higher digital costs. Total electricity connection numbers grew by 1.3%. Looking at gas. Adjusted EBITDA for gas distribution was flat at $24 million, with slightly higher revenue in the period, offset by slightly higher costs. Gas distribution volume was down 4.5% compared to the prior period due to lower demand from the residential, industrial and commercial sectors. There has been a 0.4% in total gas connections over the period. These results are consistent with our most recent forecast for the Gas network, which were published last year in our gas asset management plan. We have recently submitted on the Commerce Commission's DPP4 draft Gas decision. This is the 5-year reset for gas distribution networks with the commission's final decision due in May 2026. We welcome the commission's intention to continue to accelerate depreciation given the heightened uncertainty over the long-term nature of gas in New Zealand. And given the difficulty in accurately forecasting gas volumes for the next 5 years, which is fundamental -- which is a fundamental input into setting a price cap, our submission advocates for a move away from a price cap for approach that would share volume forecast risk between both the network owners and consumers. The Commerce Commission is still considering its final decision, so we don't yet know what this will mean for consumer prices. Pipeline costs are just one component of the gas bill; however, most forecasts show that over the long term, these will rise. That's why we're advocating for a managed transition and making sure we recover costs fairly now. This also means keeping the gas network safe and reliable while it's still in use and planning for decommissioning when these pipes reach the end of their life. Next slide looks at Bluecurrent. Our investment in Bluecurrent continues to perform in line with our expectations. Year-on-year, Bluecurrent has increased its revenue, resulting in higher EBITDA, and this is flowing through to higher distributions. In this period, we received $26.6 million of distributions in relation to our 50% shareholding. And I'll now hand back to Chris. Chris Blenkiron: Thanks, Jason. For the 2026 full year results, we are forecasting adjusted EBITDA to be within our guidance range of $470 million to $490 million. We are now forecasting gross capital expenditure within the range of $500 million to $540 million. This forecast represents an increase over our full year 2025 capital investment and at around $0.5 billion shows our commitment to significant investment in Auckland's critical energy infrastructure. We're forecasting capital contributions within the range of $180 million to $215 million for the full year. We've tightened the ranges for gross capital expenditure and capital contributions because we now have greater visibility of project time lines through to the end of the reporting period. Thank you to all of the Vector people, our field partners and suppliers who work incredibly hard for our customers and who delivered these results. We know that for our energy system to be at its best and most affordable, the whole sector needs to coordinate well and work in concert with each other. We're committed to doing this to support the region's role in our national economy and to help our country meet our energy aspirations. I'll now hand back to Doug. Douglas McKay: Thank you, Chris and Jason. The board has determined an interim dividend of $0.125 per share with no imputation. Now that brings us to the end of our presentation. But just before we move to questions, I'd like to thank Chris and his executive team and everyone else at Vector, plus our field service providers and call center for their hard work over the period to deliver for Vector customers and shareholders. Chris, Jason and I are now happy to take any questions. Operator: [Operator Instructions] Your first question comes from Grant Lowe with Jarden. Grant Lowe: Tim, can you hear me okay? Unknown Executive: We can. Grant, Yes. Grant Lowe: Thanks for the presentation. And welcome, Chris. Just around a few for me. The electricity business was a beat on my numbers at both revenue and EBITDA. So I think the revenue was up circa 28%, which is a touch higher than my uplift that I was expecting. Were there any sort of one-offs in that result in terms of inflation catch-up and the like that we've seen in the past? Jason Hollingworth: Yes, Grant, there is still a wash-up balance that we were able to recover in this period. So that is in there as well. That's coming to an end because it has a 2-year lag. Grant Lowe: Yes. Okay. And do you have that number to hand as to roughly how much that was? Jason Hollingworth: I don't have it to hand that I can look it up and get it to you, yes. Grant Lowe: Okay. Yes, great. Thank you. Okay. No, that's good. And then just the -- so the guidance has been held, and we've also got that $9.3 million loss in there. With guidance being held, was that guidance already factoring in the $9.3 million loss and the washup balance that going into that number when you set the guidance at the full year? Jason Hollingworth: I think, to be honest, probably not Grant. So I think we're at the probably higher end of that number. That loss turned up after we set that guidance. So yes. Grant Lowe: Yes. So the washup balance was probably $9 million, that's calculable. But -- so effectively, is this effectively a $9.3 million upgrade to the guidance range. Jason Hollingworth: I think it puts us at the top end of that guidance. We're now saying it would have been at the top end of the guidance. We've held the range. But I think if we haven't had the HRV situation, we would have probably been guiding to the top end of the range rather than sort of leaving the range as it is. Grant Lowe: Yes. Okay. I guess, that's useful. And then just around the dividend payout, it was a touch lower than I had in my forecast, I was forecasting 13% versus your 12.5%. I appreciate it's a free cash flow measure. But obviously, the -- if we just think about the EBITDA for a second, that's up quite materially. How did the Board go about -- think about setting the 1H dividend? And then what are the sort of swing factors around for the full year dividend, what we might expect to see there? Douglas McKay: Yes, it's a good question. To be honest, we didn't pay any attention to -- and we haven't with the interim in terms of its percentage relative to the 70% of the policy. And I understand from Jason this morning, it's lower than that. Jason Hollingworth: For the half result. Douglas McKay: For the half year results. Yes. We don't look at the half in that respect. It's the full year that we will pay consideration to the 70% minimum. So we don't have any reason to think we won't be well within the range at the year-end. Look, part of the decision-making was what was it last year in the interim and what should it be this year, given EBITDA is strong, as you say. And so we uplifted it by 0.5%, and we sort of thought, well, that's a good indication of how confident we feel about the way things are tracking. But if you looked at it strictly versus the policy, but we don't think about the half year in that respect, we could have gone a bit higher. But no, we haven't. Grant Lowe: Okay. So I guess -- I mean, my full year is $27 million versus the $25 million last year based on the free cash flow calculation. I guess what I'm hearing is that there was a touch low on the free cash flow side of things. If everything sort of plays out with respect to guidance and everything else, would it be reasonable to assume that there is a slightly stronger uplift in the second half if everything plays out according to plan? Douglas McKay: If everything plays out, yes, it will, Yes. I wouldn't necessarily agree with the $27 million, but you're at the top end of what I'm thinking of as Chairman anyway. I'm not speaking for the Board at the moment, but we'll see. Grant Lowe: Okay. Yes, indeed. And then last one for me. Just I think last year, you provided guidance on Bluecurrent distributions. Do you have any thoughts on that? I see we've got the half year figure of $26.6 million. Do you have a full year figure in mind? Jason Hollingworth: We do have a number. I don't have it to hand, but you can see the year-on-year sort of increase for Bluecurrent period-on-period. So I think that we expect that to continue into the second half. So I think last period, we got $23.4 million. This period, we're getting $26.6 million, so an uplift. So I expect that to continue as they continue to deploy meters. Operator: Your next question comes from Andrew Harvey-Green with Forsyth Barr. Andrew Harvey-Green: Doug, Chris and Jason. Just a couple of questions from me. First one, just looking at the electricity OpEx line, there was a reasonable increase, I guess, relative to first half last year, but even relative to the second half last year. Is that -- should we be thinking as that the sort of the normal half year run rate for OpEx on electricity going forward? Or are there some sort of one-offs in there that might pull it back for the second half and other periods? Jason Hollingworth: I think there are some one-offs in that, Andrew. I don't think it's actually coming down, but I don't think it's going to keep lifting at that rate. There has been, I guess, an increase in our maintenance spend in this half that's probably going to continue with some change in standards and just some extra activity that we've been doing. We also have a couple of large projects underway that are -- have to be under these new accounting rules now have to actually be expensed rather than capitalized. So our digital costs are sort of running at a higher rate, which I think is probably going to continue while these projects are occurring. So yes, it's mainly those 2 areas that are causing that increase, maintenance spend, which is going to continue and this lumpy digital spend around a couple of key projects that are cloud-based and therefore, have to be expensed. Andrew Harvey-Green: Just a follow-on question around the metering. I noticed, I think that it's been refinanced. So you've got -- expecting lower interest costs going forward. All other things being equal, we should expect that to help increase distributions back to Vector from the metering? Jason Hollingworth: They've refinanced at lower interest rates. Their NPAT number is lower because they've had to write off their arrangement fees from the original facility, but sort of that's noncash, if you like. So the actual underlying cash flow is better because they've got lower interest rates, I think, by circa 30 basis points from memory. So it's a reasonable reduction. Andrew Harvey-Green: Yes. Okay. Cool. And last question for me was just whether we've got a little bit of an update on the strategic review of the fiber business. Chris Blenkiron: Yes, Andrew. No real update, that process continues. And just a reminder that there's no guarantee that the outcome of that strategic review would result in a sale, but the process does continue. Operator: Your next question comes from Phil Campbell with UBS. Philip Campbell: Just a couple from me as well. I just noticed in the half year cash flow statement, it looked as though there was some kind of positive working capital movement. So that was one of the reasons why if you did do a dividend payout ratio calculation, it was a little bit lower. I'm assuming there's just timing issues around that, Jason, and that will probably reverse in the second half? Jason Hollingworth: Yes, that's right. There's nothing there that I'm aware of -- yes that's structural. I think it's timing, yes. Philip Campbell: And then just on the dividend coming back to this kind of $0.27, I think we've got that in our model as well, and we're assuming that the payout ratio declines from last year. I think from last year, from memory, it was 85%. So we've got that coming down. I just wanted to see if that was still the thinking. I think the rationale at the last result was just some uncertainty around what EA is doing in terms of those capital contributions. I just wanted to check if that was still the thinking from the Board? Douglas McKay: 0Yes, it will be lower than 85% this time around. Jason Hollingworth: I think last year,, don't lock that in because that was a sort of one-off to do with sort of transitioning from DPP3 to DPP4 and the fact we only had a quarter in our results. So I think we said, look, we're paying up at this level, but it's not a -- don't bake that into your future numbers. Philip Campbell: And maybe just a question on CapEx. Obviously, like it was a bit weaker in the first half. And obviously, you've tightened the range up in the full year, still a large number. What's the kind of reason for the CapEx number kind of coming down? Chris Blenkiron: Yes, Phil, there's a couple of reasons. I mean 1 is some customer projects were sort of pushed out. It's always difficult with these lumpy capital projects, as you know, to get the timing right. So a few of those have been pushed further out. And that's probably the primary reason. So we do have some confidence going in the second half that, that run rate will certainly pick up. Philip Campbell: Is that data centers or you can't really comment? Chris Blenkiron: We can't comment on the specific projects, but there's a number of them. Philip Campbell: And then maybe just last question for me on metering. I noticed that Neil Williams has left a CEO. I'm just wondering if there's any reason for that and whether you've recruited a new CEO for Bluecurrent? Chris Blenkiron: Not yet. We haven't recruited yet. The Bluecurrent Board is managing that process, and we have 2 representatives on that Board, looking after our interests, Dame Paula Rebstock and Simon MacKenzie. And they're in the process of working with the headhunter now to find the right replacement. Philip Campbell: Great. Awesome. And I just noticed you may not know the answer to this question, but I just noticed in the AFR, there was, obviously, one of the Bluecurrent competitors, I think, potentially a transaction happening there. Just wondering if there's any valuation read-through that you might want to comment on? Douglas McKay: Are you talking plus ES? Philip Campbell: Yes. Yes. Douglas McKay: Well, look, I can't quote the numbers, but I did remember thinking the expectations on value looked very, very high. But I didn't do an earnings multiple or anything. It just -- I think it was $3 billion or something. It was a massive number. So obviously, we're trying to be involved in that process. We are interested strategically in increasing our participation in that market, increasing our number of meters but we'll just have to see how that plays out. If people are at that sort of number, that's a very big number. Philip Campbell: Right. And then maybe just very last one, just on the fiber process. Is there any kind of timetable there? When you say we're no guarantee of sales. Is there any time when bids are due or where about are we in that process? Jason Hollingworth: There is a timetable, Phil. And yes, I think we'll know by year-end, whether we've got a transaction or not. And I guess we won't quite know when it completes. It will depend on what the terms and conditions are. But we'll certainly, I think, have landed a decision by 30 June, one way or the other. Operator: Your next question comes from Stephen Hudson with Macquarie Equities. Stephen Hudson: Morning, everybody, and welcome, Chris. All of my questions have actually been posed, but perhaps just a general one for you, Chris. I know it's early days, but I guess I just -- and I know we'll be meeting with you, I believe, the 1st of March as a community. But any sort of initial observations on the state of Vector in terms of assets, people and strategic direction and where you may, I suppose, differ from sort of the prior thinking, I guess? Chris Blenkiron: Yes, sure. I mean, Simon's left a very strong and good business operating here, Stephen. We've got some very strong people in the right roles, doing some really good work. In fact, I think some of the credit that we will get to keeping the lights on and the infrastructure going in Auckland is probably something that we should get. It's in a strong state. In terms of the strategic direction, I've not contemplated any change in strategic direction. The Symphony strategy remains as focused as it has. I think what we'll continue to do is an ongoing test against the external environment, whether that's the customer side, the regulatory settings, decarbonization pace, technical, we'll continue to test those settings. But my focus at the moment is absolutely on sort of disciplined execution on the work that we're doing as we go into the second half. But it's great to join a great business in really strong shape. Stephen Hudson: Very good. Thanks, Chris. And I look forward to catching up. Chris Blenkiron: Yes, Looking forward to it. Thanks Stephen. Operator: Your next question comes from the line of Grant Lowe with Jarden. Grant Lowe: Another one from me. Just around the meters rollout in Australia. Obviously, the regulatory bodies over there have -- I'm not sure exactly what the terminology is, but effectively mandated 100% penetration by 2030. Is there any sort of commentary you can give around Bluecurrent in terms of either contracts signed or thoughts around the level of participation in that rollout at this stage? Douglas McKay: I don't have any updates, Grant, other than we had a Board meeting here yesterday, and Paul was telling me that things are tracking as they had indicated they would be the Bluecurrent Board. So there's no surprises there. There's incremental increases in our metering network. We don't -- we haven't had any acquisitions of packages of meters or anything like that in this period. So it's all organic at this point in time, and it's steady. Grant Lowe: Yes. Okay. How do you -- just generally, like for the market as a whole, how do you see that rollout playing out? Like obviously, there was a big contract signed here for the rollout in New Zealand. Is it a similar sort of a process? Is that what you're expecting over the next well and you're sort of actively participating in those discussions? Douglas McKay: Those contracts tend to be quite long term. So once you settle into them, you've got a good tenure there mostly. You're not sort of every year or 2 into another process on those same contracts. They require a lot of capital investment. They require a lot of systems and process changes and interactions. So it doesn't move around a lot. Once you land them, it's a reasonably settled market. Grant Lowe: Yes. I guess the question I'm sort of asking is, I think rough guess there were sort of 5 million meters to go or something, you might tell me that's wrong. But are we -- do you expect to see sort of like 1 million meters contract or a rollout of 1 million meters signed in big chunks like that? Is that kind of how you expect this to play out? Jason Hollingworth: The retailers typically bundle them up into reasonably large blocks, Grant, and then sort of tender them out. And we have contracts in place with the existing retailers, and there are still some contracts being let, but we have a number already under contract. It's competitive though, as you imagine, [ Telehub, Plus ES ] are the other 2 big players. And these retailers are sort of good at getting the sharp price out of the market. And yes, so that's it. So we've got a number of already under contract that we're executing on. New Zealand is deployed, so there's not so much going on here. It's really an Australian growth sort of situation. And once you've won those contracts, you still have to execute on them, right? So there's always a risk that if you don't deliver because there's a lot of competition for field service people to install all these meters. So it's not -- one thing to win the contract, you actually got to execute on it. And we're very sort of mindful of that because the opportunity potentially to pick up some extra work if you're the party that's executing well. And we're seeing a bit of that going on at the moment as well over there where some others potentially aren't quite performing. Douglas McKay: And these contract package sizes are often in the order of 200,000 to 300,000 meters. Grant Lowe: Yes. That is useful. Operator: There are no further questions. I would now like to hand it over back to Doug for closing remarks. Douglas McKay: Okay. Thank you. If there aren't any further questions, we'll end the teleconference and the webcast. If analysts and investors have further questions, please feel free to contact Jason. For the media, please contact Matt Britton or call our usual media phone number. Thank you, everyone, for joining us.
Operator: Good evening. This is the conference operator. Welcome, and thank you for joining the Louis Hachette Group and Lagardère 2025 Full Year Results Conference Call and Webcast. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Rapin, Head of Investor Relations. Please go ahead, sir. Emmanuel Rapin: Yes. Thank you. Good evening, everyone. This conference call will be hosted by Jean-Christophe Thiery, Chairman and CEO of Louis Hachette Group; Gregoire Castaing, Deputy CEO of Louis Hachette Group and Deputy CEO in charge of Finance for Lagardère. And joining us for this presentation, we have Pauline Hauwel, our Group Secretary General; Mr. Dag Rasmussen, Chairman and CEO of Lagardère Travel Retail; Frédéric Chevalier, CEO of Lagardère Travel Retail. All these participants will share their insights and key highlights. This presentation will be followed by a Q&A session. I now leave the floor to Jean-Christophe Thiery. Jean-Christophe Thiery: Thank you, Emmanuel. Good evening, everyone. I am delighted to present the results of Louis Hachette Group. Driven by the strength and complementarity of all our businesses, our international footprint and the commitment of our teams, we delivered revenue of EUR 9.6 billion and a record adjusted EBIT of EUR 551 million. This strong momentum also allowed us to continue reducing our debt at a rapid pace. Gregoire will tell you more about the figures in a moment. Lagardère Publishing delivered strong performances in 2025, both in France and in English-speaking markets. A few highlights include, in the United States, Hachette Group became the #3 publisher in the market. Along with a strong release scheduled, our efforts to enhance the value of our catalog paid off with the successful release of Twilight, for example. In Europe, the new Asterix Adventure was a tremendous success across several markets. In 2026, we will celebrate the 200th anniversary of Hachette, the world's third largest publisher. The Bicentennial is an opportunity to reaffirm our mission, making reading and culture accessible to as many people as possible. To mark the occasion, we will host a free literary festival in Paris next month. Lagardère Travel Retail also had a very strong year in 2025, driven by profitable growth as air traffic normalized. A key milestone was the seamless takeover of one of the largest travel retail contracts in history at Schiphol Amsterdam Airport. Within Lagardère Live, 2025 saw the best audience performance in 6 years for Europe, now reaching 2.9 million daily listeners and record attendance at our Arkéa Arena in Bordeaux. Finally, for Prisma Media, 2026 will be a year focused on strengthening our core activities in a rapidly evolving market. In summary, 1 year after the creation of our new company, we have demonstrated the solidity of our strategy as a diversified leader in Publishing, Travel Retail and Media. We are confident in our future and our development prospects. Thank you very much all. I will now hand over to Gregoire. Gregoire Castaing: Thank you, Jean-Christophe, and good evening, everyone. I'm also very pleased to share with you the strong results delivered by Louis Hachette Group this year, the first full year as a listed company. Let me start with the key figures on the Slide 4. And as you can see, Louis Hachette Group's revenues reached EUR 9.6 billion compared to EUR 9.2 billion last year. This confirms the continuation of a solid growth trend in a rather challenging economic environment with an increase of 4% on a reported basis and 3% on a like-for-like basis. Our operating performance was equally robust. Adjusted EBIT rose 8% to more than EUR 550 million. This reflects the quality of our businesses and the disciplined execution of our operational strategy. Cash flow generation was also very strong. You know that this was our priority for this year. I will come back to this point later, but you can already see its positive impact on the balance sheet. In '25, we significantly reduced our net debt by EUR 236 million, and this brings the net debt just below EUR 1.6 billion with a leverage ratio now under 2x, a level that the group has not reached in a long time. Let us now take a closer look at the performance of our different businesses. Starting with the Slide 7 with the Lagardère Publishing activity, which delivered another year of very solid results. Despite a market environment that has generally been trending downward this year, Lagardère Publishing continues to deliver solid growth, supported by its diversified portfolio of activities and geographies. Revenues was up 3% like-for-like basis this year and crossed the EUR 3 billion threshold. The division delivered solid growth across all markets, as you can see, more specifically in France, revenue was up 2% in a market down by 1.5%. The illustrated segment benefited from continued demand for coloring books as well as from the strong performance of the new Asterix Album, Asterix in Lusitania, which sold over 2 million copies as of today. In General Literature, sales were driven by strong new releases, including Dan Brown's, The Secret of Secrets at Lattès, the third part of Pierre Lemaitre's [ series ] and Un avenir radieux at Calmann-Lévy, the Adélaïde de Clermont-Tonnerre's Je voulais vivre, winner of the Renaudot prize published by Grasset, and Nicolas Sarkozy's Le Journal d'un prisonnier at Fayard. The Education segment also benefited from the reform of the sixth-grade curriculum as well as the primary level titles. And regarding the U.S., we are seeing revenue up 3% in a market that was actually down by close to 0.5%. The business benefited from a very strong slate of new releases. Among the top sellers in '25, we had Callie Hart's Quicksilver and Brimstone, Gone Before Goodbye by Reese Witherspoon and Harlan Coben as well as the anniversary editions of Twilight. In the U.K., growth reached a solid 3% in a slightly declining market, supported by the strong performance of several fiction titles, including Onyx Storm by Rebecca Yarros, The Hallmarked Man by Robert Galbraith and Circle of the Days by Ken Follett as well as the continued momentum from Freida McFadden, The Housemade series. The business also benefited from the new distribution partnership with Bloomsbury initiated in '24. In Spanish-speaking countries, Spain and Mexico, revenue was down 6%, mainly due to the curriculum reform in Spain that has started in '22 and that end at the end of '24. Revenue in Partworks was up 6%, a remarkable performance given the trend of this market. This was driven in particular by the successful launches of Warhammer Combat Patrol And Disney Novels. Finally, board games continue to support our other revenue segment and our diversification with a strong 10% growth on a like-for-like basis, supported by the carryover sales of Skyjo with 2 million units sold in '25, along with the successful launch of the new game Flip 7. Now let's have a look to the operating margin of the Publishing brands. On Slide 8, EBITA reached EUR 308 million compared to EUR 289 million in '24, maintaining Publishing's operating margin at a very high level. The high level of margin was driven by the top line growth, of course, and by the favorable sales mix and improvements for the SG&A cost. EBITA also includes the contribution from equity accounted companies, which came to EUR 6 million in '25 compared to EUR 1 million in '24. These favorable effects were partially offset by restructuring costs of EUR 14 million, mainly in the U.S. and in Mexico. Next slide on cash flow. Our strong operating performance translates into steady cash generation. What we show here is the CFFO, the cash generated from the operation, including CapEx before interest and taxes. CFFO came in at a very high level of EUR 361 million compared to EUR 330 million at the end of '24, a solid increase of 9%, considering that '24 was already a record year for the cash generation at Publishing level. This year, this amount included EUR 44 million related to the proceeds from the sale of the real estate asset in Paris rue d'Assas and the sale of a domain name [indiscernible] in the U.S. Let's now move on to Travel Retail on the Slide 11. '25 marks another record-breaking year for Lagardère Travel Retail. First revenue reached EUR 6.1 billion. On a like-for-like basis, revenue increased by 4.4%, driven by a significant number of openings and concession wins across Europe, Africa and the Pacific region. In France, revenue grew 3%, supported by higher air traffic, new concession and strong commercial initiatives in duty-free businesses. In the EMEA, excluding France, revenue was up 7% with solid growth in the U.K., Spain, Poland, Italy and Albania, driven by traffic growth and network expansion. Africa posted strong momentum as well, up 25%, thanks to recent opening in Benin, Cameroon and Rwanda. In the Americas, revenue was up 3%. In North America, activity was supported by network expansion and strong commercial performance in Travel Essentials and Dining, despite stable air traffic. South America delivered a strong growth of 28%, driven by the rebound in tourism and the opening of the new Lima Airport in Peru. Last but not least, in Asia Pacific, revenue declined by 12%, mainly due to North America, which turnaround, by the way, is well on track. This turnaround impacted the group revenue by close to 2% of growth. So long story short, excluding North Asia, Travel Retail revenue grew by 6.5% on a like-for-like basis. Let's now turn to profitability on the next slide. We are also pleased to share this record EBITA of EUR 312 million in '25, up 17% year-on-year. As a result, our operating margin reached 5.1% of revenues compared to 4.6% in '24. Travel Retail achieved a strong performance supported by the top line growth in Americas and EMEA and also with the China restructuring benefits and of course, a strict discipline regarding the costs. EBITA in '25 also includes EUR 23 million in restructuring charges and EUR 18 million in asset impairments, mainly in Asia and Iceland related to closure operation in order to preserve the profitability going forward. Going to the cash flow generation on the next slide. The CFFO of our Travel Retail business stood at EUR 224 million, again, a record level. This amount -- in this amount, we had an unfavorable impact on working capital from the numerous new duty-free concession openings in Amsterdam, Auckland and Cambodia this year that -- and from the -- an increase in inventories in France linked to the opening of a new warehouse. It's also worth noting that CapEx were slightly lower in '25, EUR 35 million lower this year compared to last year. This is not because we intended to slow down our investments, quite the opposite actually. It's rather linked to the very high level reached in '24 and derives from the project phasing from the new concessions. Let's now move on to Lagardère Live on Slide 15. As you know, this [indiscernible] brings together our radio channels, news magazine, ELLE licenses, live venues and artists production business. In '25, Lagardère Live generated EUR 219 million in revenue. Excluding the impact of Paris Match disposal in November '24, revenues continue to grow, up 1% year-on-year. The News and Radio segment delivered a slight increase, 0.3% compared to last year. The continued expansion of European's audience helped offset softer trends in music radio and regarding the advertising market. The Press business also performed well, supported by the launch of Le JDNews and by strong contribution from ELLE International licensing and by the ongoing momentum of our diversification strategy. Our live entertainment activities had a particularly strong year, posting 6% growth, driven by successful concert tours organized by L Productions and a record year at the Arkéa Arena in Bordeaux. Going to Slide 16. Lagardère Live, as you can see, strongly had its operating losses in '25, delivering a EUR 37 million year-on-year improvement, supported, of course, by significant cost-saving measures. The year '25 was still impacted by around EUR 10 million in restructuring costs. These costs relate to reduction of staffing costs as well as efforts to streamline the real estate portfolio inherited from a time when Lagardère Media perimeter was significantly larger than it is today. So as you can see, we remain fully committed to continuously reducing operating costs within this new division. And excluding these restructuring charges, EBITA would, therefore, be closer to a loss of around EUR 10 million. We are not yet breakeven, but as you can see, we are getting closer. The cash flow also improved sharply with cash burn reduced threshold. CFFO came in at minus EUR 11 million compared to minus EUR 43 million the previous year. And before wrapping up our review of the group performance, let me share a few comments on Prisma Media. For the full year '25, Prisma Media delivered revenue of EUR 266 million, down 9% on a reported basis. This reflects both the ongoing contraction of the print press market, the consumption patterns and the shift in digital advertising market. To respond and adapt to these challenging market conditions, we launched 2 restructuring plans, one in June and another one in December '25, covering around 300 employees, more than 1/3 of the total workforce. The aim of this is to, of course, safeguard profitability, Prisma is still profitable. I will come back to this later in '25 besides the restructuring cost. These certain changes in governance were also put in place and the new leadership team initiated several other strategic actions. First, we strengthened our people magazine portfolio with the acquisition of Ici Paris and France Dimanche in December '25, 2 magazines, which are profitable today and less impacted by the market changes that I just mentioned. Second, we decided to refocus on our core businesses and flagship brands with the planned divestment of our luxury magazines. And third, at the same time, Vivendi is expected to take 14% minority stake with a cash consideration. These last 2 transactions are currently under review by the staff representative bodies and are expected to be finalized by the end of this semester. Let's now move to the next slide with a focus on Prisma Media profitability. As you can see, Prisma's EBITA stood at minus EUR 43 million in '25, a decrease mainly reflected the decline in the top line and the impact of the restructuring cost of EUR 49 million. Let me point out again that excluding this cost, this restructuring cost, EBITA remained positive at EUR 6 million for '25. And of course, our aim is definitely to keep Prisma EBITA in this positive territory. Now that we covered the group -- the performance for each division, let me walk you through the financials at group level, starting with revenues on Slide 21. The total group revenue reached again EUR 9.6 billion in '25. As you can see, reported revenue growth was 4%, as I already mentioned it, representing almost EUR 400 million additional revenue in absolute terms. This year, again, organic growth remain the main driver, contributing EUR 310 million across all our businesses. The main scope effects came from the start of the duty-free operation at Amsterdam Schiphol Airport in May '25 as well as the acquisition of Sterling Publishing at the end of '24 and 999 Games at the beginning of '25, offsetting the sale of Paris Match in November '24. Regarding Amsterdam Duty Free, the tender we won in December '24 led to the acquisition of a 70% stake in the new joint venture with Amsterdam Airport, retaining the remaining 30%. So to be clear, this new concession has been accounted for as an acquisition and therefore, is not included in our like-for-like growth. On the negative side, foreign exchange had an adverse impact this year, quite a strong impact with the U.S. dollar being the main currency affecting our revenue, reflecting our strong presence in the U.S., both for Travel Retail and Publishing. Despite this FX impact -- adverse impact, as you can see, the growth is still very strong. Let's move on to EBITA on the next slide, Slide 22. As shown on this slide, we had a solid and steady improvement in '24 and '25. EBITA rose from EUR 490 million in '23 to EUR 551 million in '25, representing more than EUR 60 million increase. We are particularly pleased to see that this high level of EBITA continues to be almost evenly supported by our 2 core activities with, again, EUR 312 million contributed by Travel Retail and EUR 308 million by Publishing. Overall, this reflects a strong and balanced performance across the group's key businesses. Let's have a look now at the rest of the P&L below EBITA after deducting amortization of intangible assets related to M&A and the positive adjustment linked to the IFRS 16, profit before interest and tax reached EUR 429 million, representing a 7% increase year-on-year. Below this line, the finance costs improved by EUR 21 million in '25, driven by a reduction of the gross debt and a lower average cost of debt. Interest expense on lease liability increased by 8%, reflecting new, renewed and amended lease contracts, particularly in the United States, Auckland, Warsaw or Prague. Income tax decreased to EUR 73 million compared to EUR 93 million in '24, mainly due to exceptional items recorded last year. And as a result, net profit rose to EUR 112 million, an improvement of EUR 50 million, supported by lower finance costs and reduced tax burden. The level of minority interest is explained by the increase of Lagardère earnings, of which, as you know, Louis Hachette captures only 66%, also impacted by the decrease of the loss in Asia that are shared with minorities and the fact that Prisma's losses significant this year due to restructuring are fully burned by Louis Hachette Group. Despite that, as you can see, net results group share significantly increased from EUR 13 million to EUR 22 million. On the next slide, you can see the improvement again in terms of cash flow generation. Our CFFO increased from EUR 357 million in '23 to EUR 558 million in '25, a sharp uplift of EUR 155 million in 2 years. This reflects, again, the solid operational momentum across the group. This section on cash flow naturally leads us to the balance sheet and more specifically to the evolution of our net debt on the Slide 25. On this slide, you can see our usual net debt bridge over the last 12 months. And beyond the CFFO that I mentioned, our outflows includes EUR 100 million of tax paid and EUR 96 million in financial interest. Altogether, our CFAIT, that is the cash flow after tax and interest, amounted to EUR 363 million. On the M&A front, the group remained active but reasonable this year in line with our strategy with the acquisition, as I already mentioned, of 999 Game, Sterling Union Square Publishing, [indiscernible] in France by Lagardère Publishing, the first installment payment for the acquisition of the 70% stake in the joint venture operating the Schiphol Travel Retail concession that I already mentioned and also the acquisition of Ici Paris and France Dimanche for Prisma. In the opposite direction, we received also around EUR 40 million from the repayment of a vendor loan granted to Sportfive following the disposal of Lagardère Sport in 2020. In May, we also paid a EUR 0.06 dividend per share, representing a total of EUR 59 million. We also distributed EUR 85 million to minority shareholders, including EUR 32 million to minority shareholders of Lagardère itself and EUR 53 million to minorities at Publishing and Travel Retail level. All in all, these movements bring net debt just below EUR 1.6 billion at the end of this year. At this point, I would like to make a brief remark for those monitoring net debt at Lagardère level. Just like Louis Hachette Group, Lagardère's net debt also improved ending this year at exactly EUR 1.6 billion, which represents a EUR 255 million reduction year-on-year. As a result, Lagardère's net debt ratio fell also below 2x, 1.96x to be accurate at the end of '25 compared to 2.4x a year earlier. We are currently on track and even a little bit in advance with our deleveraging strategy. But of course, we remain fully focused on continuing this effort. And to continue on this topic, let's move on the next slide. As you know, in '25, the Lagardère Group successfully issued a EUR 500 million 5-year bond. The transaction was more than 3x oversubscribed by the market, demonstrating investors' confidence in the group's solid performance. Lagardère also raised EUR 300 million through a private placement structure in euro with a mix of maturity up to 5 years and fixed and floating rates. After these 2 refinancing operations for EUR 800 million, our net debt, as you can see, is now well diversified and well balanced between bank loans, private holders and bonds. And the maturities are also well spread until 2030, as you can see on this slide, and the weighted average maturity is 2.9 years. Let's now move to the conclusion and to sum up the key message for '26. So first, I would tend to say that we will continue to consolidate our leading position by staying fully focused on the solid execution of our strategy across all the businesses. This includes promising release schedule for Lagardère Publishing. Lagardère Travel Retail will also capitalize on major openings completed in '25 and growing air traffic, which all -- which will support growth momentum going forward. Our aim is still to deliver growth to increase margin with a strict cost discipline. And second, we also want to continue to deleverage the group, but we will invest to fuel the future growth. And we will remain attentive to bolt-on acquisition opportunities when they could make strategic sense. Third, regarding the dividend fiscal year '25, we will propose an ordinary dividend of EUR 0.06 per share to be submitted to the AGM in May. The ex-dividend date will be May 7 with payment starting on May 11. So '26 priorities reflect, again, a balanced approach, reinforcing our strategic position, continuing to reduce debt and maintaining a disciplined and predictable shareholder returns supported by strong operational momentum in both Publishing and Travel Retail. Thanks a lot for your attention, and we are now available to answer the questions that you may have. Operator: [Operator Instructions] First question is from Eric Ravary, CIC Market Solutions. Eric Ravary: First question on, could we have a comment on the outlook for full year '26 for both Publishing and Travel Retail, especially at the margin levels? Do you consider especially for Travel Retail that there is still room for margin improvement following the restructuring in China? And also a brief comment on the operating trends for the 2 businesses since the beginning of the year? Second question on Prisma. Do you expect further restructuring costs in 2026? And do you expect that the Prisma could post positive EBIT, excluding restructuring in 2026 following the staff reduction? And last question is on the debt structure. So you deleveraged the company in 2025. Is it a priority for you to continue to reduce leverage in '26? And could you give us an indication of the kind of leverage that you could target at end 2026? Emmanuel Rapin: Thank you, Eric. I think I will hand over the answers to first Jean-Christophe. Jean-Christophe Thiery: Okay, for Hachette. So as Gregoire explained, we had a very strong year in 2025 for Hachette. And for '26 we expect stable revenue despite ForEx potential headwinds with a weak U.S. dollar. Concerning France, we will not benefit from an Asterix release in an even year. And we will face a risk of erosion in coloring sales after outstanding sales in 2025. But on the other hand, we have a very promising publishing program, including new novels by Pierre Lemaitre and Guillaume Musso. For Guillaume Musso including new novel Le Crime du paradis and the trade paperback release of his previous title. We will have to the second year of middle school reform with mass, French LV1, LV2. In the U.K. and in the U.S., activity should remain relatively high after a record year in 2025. driven by a strong publishing program among which a new title by Kali Hart in the U.S. and in the U.K. or [indiscernible] in both countries? We will have Heartstopper #6 by Alice Oseman in the U.K. released by Jung Chang in the U.K., a new novel by Abby Jimenez in the U.S. The results should also benefit from the full impact of the synergies realized by Union Square acquired at the end of 2024. Concerning the EBITDA, we hope to be able to deliver EBITDA roughly in line with 2025 and to maintain a high level of margin ratio. Unknown Executive: Regarding, Lagardere Travel Retail we believe the year 2026, we hope the year 2026 will be materially in the continuity of the last quarter of last year. What we see is a continuous slight increase on the traffic side. And we hope and we believe it will remain like that over the next 10 months. We will continue to benefit of a positive effect in comparison to last year of the Amsterdam integration that Gregoire highlighted started in May 1 last year. This will help us. counterpart of that, we continue the restructuring of China that should continue on the same -- at the same speed along the year, and most of the restructuring should be done by the end of '26 by the end of this year. This is in the context of a very challenging macroeconomic environment and, in particular, FX environment. the evolution of the dollar and the dollar pegged currency is something we take -- we look at very carefully. But for the time being, we're in the range of, let's say, mid-single-digit sales evolution. And regarding margin, EBITDA, we expect in absolute value should grow relatively substantially. In terms of percentage we believe there's still a little bit of room for a slight improvement in the rate marginal one, a result of slowing -- reduction of the losses in China as alluded in the question, but also all the efficiency efforts we're going throughout the world. We're delivering to the world to improve the overall profitability. Gregoire Castaing: Maybe I can take the question regarding the live branch and Prisma for the Q4 and Q1 trend. Regarding the Q4, supported by the European strong audience performance, Lagardere News Advertising revenues held up well with a challenging advertising environment, as you know, declining only by 6%. For Prisma, the decline in digital advertising revenue for this last quarter is broadly in line with the market trends close to 10% in Q4. And regarding the beginning of this year for January, quite soon to say, but January trends are correct at this stage. For Radio, still driven by the European audience. However, the trend for Prisma is unfortunately aligned with what we saw in Q4 '25. Then you had a question regarding the restructuring at Prisma. I can also take this question. As I already mentioned, our target is to keep Prisma EBITDA in the positive territory. It's the case about the restructuring cost in '25. This is clearly a challenge for '26 but this is our target. The restructuring initiated at the end of '25 will, of course, generate savings as early as '26 on personnel costs. As well as in support and marketing functions. For a global amount estimated at this stage between EUR 15 million and EUR 20 million full year effect. But take -- let's be cautious with that number because are to be very accurate for '26 impact since, again, it's still under the review of the staff representative, and we are not completely sure about the timing. These two restructuring plans are already very large, as I mentioned it, more than 1/3 of the workforce. We saw -- at this stage, we don't contemplate other strong restructuring costs for '26, but we could have other costs in lower magnitude. But again, today, we are focusing on the last restructuring launch in December. So this is for Prisma. And then you had a question about the debt and the potential target regarding leverage. As you know, since '24, we have been executing a very disciplined deleveraging strategy. You saw the results. Our leverage ratio improved very strongly from 3x at the end of '23 to less than 2x at year end '25. And again, '26 deleveraging will remain a key strategic priority for the group. We'll continue to apply the same disciplined financial approach with a strong focus on EBITDA, working cap control prioritized investment that supports future growth. And at the same time, we also want to continue our policy of investments of disciplined bolt-on M&A and a reasonable level of dividend. So long story short too soon to give you a precise target for '26. But again, we want to considered the cash generation as a key priority for the group for the next year. Operator: Next question is from Jerome Bodin of ODDO BHF. Jérôme Bodin: A few questions on my side. First one, it's on China restructuring for Lagardere Travel Retail. Where are you exactly in the -- from the starting point? Is it 1/3, 2/3, half of the efforts? And when do you plan to be breakeven for this business, if you plan to be breakeven? That's my first question. My second one is on the Vivendi deal regarding Prisma. So if I have understood well, you are selling some title to Vivendi. Does that mean a cash in for you? And then Vivendi is buying a stake in Prisma. So if you could detail a bit the cash impact? And what's the valuation of Prisma that has been used? And last question on free cash flow. So the CapEx are down this year. Should we consider this level based on the revenues as the new normal? And also second question, so based on the EUR 90 million of restructuring in '25, what has been included in the free cash flow for '25, especially for the Prisma. Unknown Executive: I'll take the Chinese one. First, maybe one point to highlight or to remember to all of you. The situation in China is a very typical situation because what we operate in China is mostly fashion, predominantly, 90% of the business is fashion in domestic airport. So it's a very somehow a typical market in which we operate. Despite all the efforts we did in the recent past, we do not see a clear turnaround of market trends. So we are in the process of restructuring. Depending on the way you measure it. I would say, if you count in terms of number of store closing, we are more than halfway if you count in terms of reduction of the losses, it's higher than the number of store shrink or decline. As I said earlier, most of the restructuring should be achieved by the end of this year. We're still in the red this year. But next year, we can consider we are in the range of 0 of everything, including bottom line. Gregoire Castaing: Thank you, Fabrice. Coming back to the Vivendi deal regarding Prisma, again, this is under the review of all the bodies. So hand December '25, Prisma finalized, as you know, the acquisition of the magazine Ici Paris & France Dimanche and then we launched the 2 restructuring. The transaction again enable Prisma to refocus on its core businesses in a more challenging economic environment. The impacts are not very strong regarding the business of Prisma since the luxury branch represents close to EUR 20 million in terms of revenue and is close to breakeven in '25. Regarding the cash consideration and the cash impact, the consideration is regarding the sale of the Luxury division around EUR 10 million used in cash. And regarding the other part of the transaction since concurrently with the transaction regarding the luxury brands then will acquire a minority stake of around 14% in Prisma Group share capital. The transaction will contribute to EUR 30 million in cash for LSA coming from Vivendi. So this is for Prisma, Vivendi deal. Then you also had a question regarding the CapEx for '26 and is the '25 level. The new normal, actually hard to say. Again, the CapEx in '25 was, we were a little bit lower than expected, so I will tend to say that the target is between '24 and '25. I think it's better to consider the level of CapEx compared to the turnover and particularly regarding Travel Retail, I think that we should have level between, let's say, 3.5% and 4% of the total revenue. I think this is roughly in the long term, what we should target. And then you had a question about the cash impact what was exactly the question. The impact for the restructuring regarding Prisma, and during '25, we had roughly EUR 7 million already cash out for the restructuring plan launch for Prisma, mainly the one launched at the beginning of the year. So the main part of the restructuring costs in terms of cash will impact year '26 and maybe a little bit in year '27 depending again on the timing linked to the review, which is under process. Operator: Next question is from Julien Roch, Barclays. Julien Roch: Yes. The first one is, can you give us some colors on Q1 trends by division? That's number one. Number two, is there any assets in the Live division that you consider noncore? I know for instance, pricing is profitable, but maybe you could give a good price and deliver some more or the venues. So anything in there potentially could be noncore. And then last question is, could you give us some indication on cash flow, either cash flow conversion from EBITDA or some indication, whatever you can say on cash flow generation in 2026. Emmanuel Rapin: So we start again, I think, a little bit summarize what is the trend for publishing with Jean-Christophe? Jean-Christophe Thiery: Thank you, Emmanuel. So the Q1 of '26 should be roughly in line with 2025. despite the unfavorable comparison base effect with the first quarter of 2025, which had benefited from the huge success of Onyx Storm in the U.K. We will have a solid publishing program for the first quarter of 2026. Additionally, we will publish Judge Stone in the U.S. in March, which is a collaboration between James Patterson and the actress Viola Davis. And the activity for the first quarter in France will be driven by the success of Pierre Luminet which is the fourth titled in the series. He began in 2022, and we will have the return of Guillaume Musso who will publish a new novel Le Crime du paradis I mentioned earlier at the beginning of March, along with the simultaneous release of [indiscernible] in trade paper back. Unknown Executive: I guess this is my term. So for regulatory Trade Retail, the month of January was somehow in the continuity of the last quarter of last year. that we find a pretty good result, especially in the context of very adverse weather conditions in Northern Europe, I have in mind Brussels and Amsterdam Airport in particular that were badly impacted by the snow wave. And also in North America, it was an extreme weather event. That affected traffic and therefore, our sales. Having said that, despite this very adverse effect, we maintain a good momentum in the continuity of last quarter, so mid-single-digit sales growth. We continue to be supported by the same effect because I said earlier, until end of April, this will be helping our growth. And this is despite quite painful in January painful FX effect. And that's why I said earlier for the full year, it's something we're going to monitor. But all in all, we're on track with what we were expecting mid-single digit in Jan. Well, that being careful extrapolating January is the lowest smallest months of the year. We believe the first quarter should be equal or slightly better than the month of January. Gregoire Castaing: And I think that I already answered regarding the Prisma and Live trend for the beginning of this year. Coming back to the question that you had, Julien, regarding the assets that you named noncore assets or the Live branch as you know, these assets are definitely not for sale. It's not our plan. We clearly love these assets. It's a very strong portfolio of brand. They are all profitable apart the new activities. And as I mentioned we're targeting to be close to 0 for this news branch. And is clearly the priority for us. I prefer to focus on generation cash through operational improvements instead of planning any sale for good assets of the groups. Regarding the cash flow conversion for '26, of course, we will try to increase again, the cash flow generation for '26 for the next year. I think, of course, the main driver will be the profit and the EBITDA generated next year and the increase of the EBITDA. But just keep in mind that for '25, as I mentioned it, we have a few exceptional items that positively impacted the CFFO. The first one is the sale again, of our real estate asset in rue d'Assas and the sale of the Domain Name both represent together close to EUR 40 million. And we also as I mentioned it, the credit loan for reimbursement for sports for Lagardere Sports for also EUR 40 million. So all in all, we had close to EUR 80 million exceptional impact this year, it was not so easy to deliver these exceptional items to again sell particularly the rue d'Assas at this level. But this is down. And I'm not sure that we will have big exceptional items in '26. So the main driver, again, for the cash generation should be the operating result for '26. Operator: Next question is from Christophe Cherblanc, Bernstein. Christophe Cherblanc: Yes. I had the 3 questions. The first one was on minority interest. I think in the release, you mentioned that the improvement is coming from the lower level of losses in Asia. So it seems to be essentially due to lower losses in Asia. is that the right way to look at it. And if that is the case, EUR 20 million, EUR 19 million increase suggest a very, very strong improvement of the net contribution of Travel Retail Asia. Is that a fair assumption? The second question is just a confirmation, I had in mind that the share of operating profit generated in dollar was about 40%. Just wanted to have an update on that order of magnitude? And finally, on Live, I think, Gregoire, you just said that you were targeting for News to be at 0. Is that an assumption we should -- we can take for all of '26 for the whole of the division Live plus News. Gregoire Castaing: Regarding the minority interest, I just mentioned that this has a positive impact regarding the minority interest at the group level since we share the loss with minorities. And since the loss are lower this year, we have, let's say, lower negative impact for the minority shareholders in the results. As you know, it's always quite difficult to explain in details all the impact for the earning group per share, particularly if you are at the Louis Hachette level. But if you have detailed question about this. We do not hesitate to outside this call, I have a discussion with the AR. They have all the sheets and the figures that help you to go from the net results from Lagardere to the net result from LHE with this clear speed between the group level and the minority level. Then you also have a question regarding the results coming from the U.S. and with the assumption of 40% I think it's quite a good assumption for this year. Again, the U.S. is clearly today our first market. So if you beside your question, the question is could we be also impacted by any change, of course, we could. We already mentioned it. But keep in mind also that we have a part of our debt, which is in dollar. So if we could have a negative impact regarding the FX for the revenue and the operating results, we could also have a positive impact balancing this for the net debt. And then you mentioned the target regarding Live. As I mentioned it, we are close to breakeven, not yet there. I think it's feasible to be breakeven in '26, it of course, depends a lot on the market in the advertising market. So I again prefer to be cautious, but I already mentioned this target 1 year ago, and we clearly want to achieve this level I hope this is feasible in '26, but if it's not the case, this will be for '27, we want to reduce the cost and the and the loss at this level. We are completely focused on this target. Christophe Cherblanc: It was at Lagardere level where you've got that EUR 19 million increase. So you have 23% share of minorities. So if you do the math, that's massive improvement of the net profit of Asia. So I do know that last year, you had... Gregoire Castaing: If you just have a look to the net result at Lagardere level, you have a very significant improvement regarding the net result, group share at Lagardere level. Then we have just to walk you through the net results from Lagardere to Louis Hachette. And again, this is something that we can do outside is no problem to give you all the details. You're right. The net result at Lagardere level improved a lot in '25. Operator: Gentlemen, there are no more questions registered at this time. Emmanuel Rapin: Thank you. Thank you all, and we conclude this conference call, and we hope to hear from you for the Q1 2026 in April. Thank you. Gregoire Castaing: Thank you very much. Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.
Marcin Jablczynski: Good afternoon, ladies and gentlemen. Welcome at our conference with the presentation of our financial results for the fourth quarter and the entire 2025 of Pekao S.A.. We have Cezary Stypulkowski, CEO; Dagmara Wojnar, Vice President, responsible for Finance Division; Marcin Gadomski, responsible for Risk Management Division; Lukasz Januszewski, Vice President responsible for Corporate Banking Division; and Ernest Pytlarczyk, Chief Economist of the bank. Over to the CEO. Cezary Stypulkowski: We've already had the rehearsal of this conference with the media. So probably things will go smoothly, and we might speed up a little bit. I would say that what characterized the entire 2025 and actually we treat it as such an achievement of the bank that's acceleration of credit action and strengthening of the importance of commissions profit. I have already said repeatedly, we used the opportunity that we had built up until 2024 when other banks were under strong pressure. But our market shares were flat. Now they budged a little bit, not sold, but budged a little bit. The second thing is the result on commissions with all the caveats that we need to clarify, probably you will have some questions regarding these, and we will do our best to answer them. But that result is significantly higher corresponding to the declarations that we announced here in this room back in April. Its structure is already encouraging, although it's not so that we have resolved all problems. Nevertheless, we have steadily retained all the necessary ratios. The most important thing is probably the proportions of the entire aggregate. The result is plus PLN 7 billion return on equity more than decent and covering the cost of capital, probably one of not too numerous years where the banking sector was able to cover the cost of capital. And it seems to me that the public awareness is not yet widespread regarding the need for the banks to rebuild the capital. And the demand seems to be disappearing rather than growing. There were some issues related to cost of risks. So probably you will have questions on that. NPL, where we stumbled a little bit on those 5%. And consequently, we restricted dividend flexibility. Now it's under full control. Here, you can see the key areas with our strong dynamics. And this is exactly in those segments in which we wanted to achieve high growth because these are products with higher margins. We've always been a strong bank among large corpo segment, also closely linked to the public segment in Poland. We are now rebuilding our position and the numbers are very attractive. Now you can see a slide with a greater granulation of our profit and the key drivers that had a positive impact, particularly the sale of cash loans grew. It's not so that we had a revolution of our market share, but the bank historically wants to be a deposit-oriented bank rather than loan-based one. But I must say that things are relatively well. We are very happy about the rebound in micro. It was a certain surprise to me when I joined the bank that the micro segment was relatively weak given the 500 branches of the bank across the country. It's not so simple because micro is strongly determined by digitization where we lagged behind. Actually, we do lag behind still. But things are on track, and we are happy about the growth -- relatively happy about the growth. The gap, digital mobile gap that the bank had as the lack of investments during the years is now being made up for. We have Lukasz with us who can give some credibility to our entry and ambitions in the corporate segment because he's responsible for that. And in corporate banking, as I said, the bank had always been a major leader and both the ambitions to be the premier bond house in Poland consolidated in trusteeship services, our services are also developing and ForEx is just bread and butter following the general line of business development. And with regard to the strategy, we can say that all the elements are on track. We are above the targets. However, we should keep our detachment because we formulated our strategy under specific conditions in the first quarter last year with certain assumptions regarding the development of interest rates. The decrease is deeper than we had expected. But it is quite an achievement of the bank that we had managed to maintain interest margin. This is something that cannot be repeated, just to make things clear. But also from the perspective of the structure of our balance sheet and its components, that achievement has to be appreciated, both from the perspective of our treasury and business lines. I could say we have managed to manage that. That will probably be the good description. As I repeatedly stressed, cost-to-income ratio -- maybe if you follow my statements from my previous incarnations, I have always been obsessive about that. And Pekao, we have more leeway in this. But I believe we need to make up for the backlog resulting from the lack of investments in the past. We -- with decreasing interest rates, the figure can be at risk. But we assume that the process of technological revitalization of the bank will take some 3 years. Therefore, the flexibility at that stage will be greater. Current costs and also deferred depreciation. As for dividend, for years, the bank has been the postman delivering pensions regularly when others were unable to do so because they were bound by the rules of the supervisory authority. However, we paid out the dividend, and we don't want to change this more. We will do everything in our power to be able to pay the dividend in the range of 50%, 70%. There are a lot of elements that are structurally linked to our functioning within conglomerate structure. But we keep this track. Over to Marcin. Marcin Jablczynski: Maybe I will briefly announce something that we call decarbonization plan in line with the directive on sustainable reporting, that is transformation plan. It might be misleading. That's why we changed the name to decarbonization plan. For the years 2025 to 2027, we defined our assumptions for ESG. And environment, of course, is a major component, all environment-related issues. Now with -- in accordance with requirements, we published our plan, and we defined 2 major branches or 2 major components of our credit portfolio. That is the funding of energy sector and mortgage loans that are under this plan in terms of targets by 2030. We want to reduce intensity of emissions in those 2 portfolios by about 40%. We are talking about major growth in our plan. And the growth focus on renewable energies, gas-powered power plants. And also in this time horizon, we assume that some portion of funding of nuclear power plant will be there with a decreasing proportion of funding of fuel -- fossil fuel powered plants. This is also in line with energy efficiency of buildings. Here, our portfolio will be funding buildings that are energy efficient to a greater extent. We will also fund renovations aimed at reducing the consumption of energy. The entire document is published on our website. I really want to vent here. I already did that at the previous conference, but I want to stress very clearly our determination to make sure that the goals related to the broadly understood environmental aspects and social aspects. So here, the bank is determined to organize itself around those issues. The doubts that emerged not a long time ago, I talked with a representative of a foreign bank where a single e-mail was enough to cancel the whole problem. We are not in this camp. We will uphold our determination in this regard. But I would also like to share something I have already talked about, a certain excess of discussions about CSRD. I also asked our report to be divided into 2 parts. One is financial, including ESG. And the other part is only focused on ESG. And this is overdone. Of course, there is some thought behind it Omnibus addresses the matter to some extent. But I believe this is the best proof how much intellectual effort is being made to produce pages from 111 to almost 350 versus report on activities, which also includes certain ESG activities, which comprises 100 pages. I would like to see analysts willing to read that. That is the most advanced professional group. Have you read that on Page 207, there is a table with very few numbers. So my point is I'm just bearing my soul. That's my deep need to signal that there is too much form compared to the content. We can achieve a lot without getting engaged, involving people intellect of highly sophisticated individuals that produce material that only Andre is able to read. So I have this urge to express my view here. Now regarding how we organize ourselves, Well, it is with great humility that I have to admit, well, the bank has a lot to -- of catch-up to do in many areas, but there is some success. It has something to do with PZU and the ability to calibrate in a friendly matter these products means that, for example, with reference to mortgages on properties, we have quite a good product, which is quite well received on the market. And we are able to offer it in those 5 outlets that we have. And also binding our mortgage with the PZU product should, in fact, result in better sales. But it is not due to insurance that people go for mortgage, right? There will be perhaps some questions that already were answered in the previous conference. Now the CyberRescue, I could be biased here because this is a structure that was created in my other incarnation, if I can take the liberty to use that term. But the banking sector actually owes its customers some extra effort in terms of CyberRescue. Now in the past, I took part in many initiatives to sensitize customers. They were campaign awareness campaigns, social campaigns to that end. And in the structure of accelerator, the CyberRescue solutions have been developed and it's not just the issue of securities against cyber attacks on banks, but it's also a service that we have implemented and we are proliferating in our bank for individual customers whose goal is to arm our customers whenever they are faced with the cyber threat, not necessarily banking cyber threat to have a contact point. I'm not going to tell you stories. I remember when I, myself, was a victim of such an attack. I realized just how lonesome people are when they are undergoing this situation, CEO of the bank copes because they have people that can call, but an average customer finds it more difficult. That's why I decided to devote more time to it during our first conferences and customers due to GDPR or all the other wonders in the world have legible access to such solutions. And this is what banks can do and CyberRescue serves that purpose, and it's a hub that has competent people that can give some advice 24/7. It might not have to be perfect. It needs more investment perhaps, but the openness to this is meaningful. So it's not a question of 300,000 people giving consent vis-a-vis 5 million who haven't, right? We will have to reinforce the efforts here. We know that bank is behind in the area of digitalization and the self-service zone is something that will be spoken about again. Lukasz will speak about it mainly, but we have some progress here, systematic and inevitable. Most likely, it will be more visible towards the end of this year and next year. And we have an increase in customers in many aspects. Perhaps a few words about our 30% share in creating an infrastructure for family foundations. But what's most joyful to us is that an increasing number of our customers that have a slightly higher profile than those to our competitors are using our mobile banking app. And we have an increasing share in the products that should be sold digitally. Perhaps it's not yet up to our ambition, but it's growing. We might not be showing this, but for example, the idea of selling insurance products, which are perfect fit for this type of sales. So on the right-hand side, you will have a whole list of the solutions available. And, Lukasz, over to you. Lukasz Januszewski: Hello. A warm welcome. I had the pleasure to join the Management Board on the 1st of September. So over the next few slides, some information that I'm going to share with you. We will intertwine these facts with the corporate banking division that I'm responsible for. And then also with the division of Robert Sochacki, we cooperate very closely our areas intertwined to make sure that we are client-centric because the way we establish, report and build relationship varies between the 2 sectors, but the banking platform and the synergies that can be achieved, especially from the point of view of technology and product are really worth having a joint outlook on these issues. In 2 years' time, the bank will be 100 years old. So we know about banking. We know about products. But what we believe in and what we were betting on in 2025 is the knowledge of industries because in the corporate business and what customers are facing in a transformative economy, a growing economy like ours are a number of challenges. And in order to be able to find the right solutions, you just need to know your business. And that's where we're investing. We are going to ensure further on to make sure that our people other than main bankers also do understand the corporate businesses they deal with. And the enterprises, the sectoral specialization expertise is important. We can deliver this knowledge, this expertise and this discussion in various manners. We are talking sometimes about hundreds of millions of financing, but we will be having a different conversation when we're talking about several hundred thousands PLN or a few million PLN. But the problems remain the same. And the answer to those is digitization, webinars, making sure we can use the technology to be able to share and multiply the know-how and democratize this knowledge, we have made some investments to that end already. On the other hand, our local presence matters. We might not be the biggest country, but we are quite vast in terms of geography. So hence, our specialists are located in 74 corporate centers, which shows the scale of our operations. Thanks to that, we remain close to our customers. Now relationships will remain the foundation of our growth. And this is a strong pillar, I must say. We have achieved a significant increase in terms of customer acquisitions, both in SME and the mid-market sector. Now for the mid-market sector, we have customers with a turnover over PLN 50 million. And we have acquired 1,013 customers. That's the data from last year, which illustrates really well the fact that, well, customers like banking with Pekao SA, and they do want to cooperate with us. So the financial leg is very important in the growing economy. But on the other hand, what Cezary has spoken about room for improvement is digitization. And this has a few dimensions. First of all, our ambition is to grow faster than the market, and we have a 2-digit growth on the market. So we need to renew quite a lot of our portfolio in corporations every year and then new acquisitions are added on top of that. So the simplification of processes will be focusing on processes that have to do with financing. On the other hand, we need to be cautious in terms of cost generation. We don't want this to be head-in-head parallel to the growth of our employees. It's not just a question of cost, but it's also a question of quality. If we want to be the leader of understanding industry, we need to invest in our employees. It's very important. In 2025, we used AI, especially for the purpose of preparing meetings for our customers. And we have prepared advisers to face our customers during meetings. And we can see that this application of AI technologies is doing really well. On the other hand, we are also using quite important events. We take our logo, Bison logo, to the stock exchange, and we bring this idea closer to our entrepreneurs who are thinking, considering expansion, and we're bringing them closer to various methods of getting capital equity or getting financing. So there's a whole area of advisory services that we have spoken about. So the digitization that I wanted to refer to, it has this leading motto. Cezary speaks about this often, and that's the technological debt that we have in Pekao. We want to return it in the currency of time. We want to provide these constructive conversations about challenges. And we want to give it back to our customers to make sure that the relationship they have with the bank is convergent whenever we talk about important things such as development, expansion, diversifying exports, structuring their financing, et cetera. These are issues that entrepreneurs really want the bank to be able to talk to them about, not necessarily issues that you can deal with yourself via electronic banking or something else. So these are issues that we are going to be investing in strongly. Now economic transformation and enterprise transformation is also happening in the public sector, especially municipalities, communes, cities, agglomerations. And here, Pekao SA happens to be the leader in terms of this cooperation. So both the energy transformation and all the aspects that we have touched upon in the area of environment is something that we strongly support. So my speech has been a little bit generic so far. But on the other hand, well, 2025 kind of illustrates all that in the current growth of credit volumes, customers are responding really well to our proposals. We increased our market share, both in corporate and enterprise sector. Our market share has exceeded 15% also for large corporations. We have reached almost 14%. Like I said before, we have -- we acquired customers both in SME and mid sector. And what we wanted to share with you is something that you might have noted already is that our factoring company has reclaimed its leadership in the rank, thanks to PLN 100 billion turnover and the year-by-year growth is 21%. I wanted to stress that because it's not just a question of implementing the strategy that we perceived as comprehensive for our group because we put the factoring offer and the leasing offer under one umbrella, but this also has another dimension, and that is of addressing potential bottlenecks or challenges in the flow of payments or receivables. And we are really, really proud of reclaiming this #1 position here. On the other hand, our leasing has noted some growth as well. We are #5 still, but it had a 2-digit growth in volumes, which is good news to us. Volumes have also grown in the more granulated sectors and that is financing micro entrepreneurs, an area where we were undervalued before. And some selected transactions here in which our bank has had a significant role to play. This is a selection, and you will find us, I'm sure, in a majority of significant transactions from last year. Something that has had significant media coverage lately was the launch of a first since decades, Polish ferry on the seawaters, we've had quite a contribution to this. So from the point of view of enterprise banking, it's very important to stand on 2 legs, right, to have the large strategic players in your portfolio. But on the other hand, some of the SMEs. And we can see quite clearly that this allows us to see the flows in the economy. And at the end of the day, it also allows us to better assess the risk. Dagmara will be talking about our financial results more clearly. Other than the growth in assets, we are happy to see that our outcome also has 2-digit dynamic in terms of commissions. So the growth in acquisitions plus the focus on customer relationships translates to higher product rates, better transaction rates, and we are looking to see further growth in our results in this trend. So I would end here and give the floor over to Ernest. Ernest Pytlarczyk: So a quick macro update. For sure, already in 2025, which is the subject of this presentation, a lot of trends were outlined already in the last quarter. We had an increase in GDP. This year, it's likely to be 4% up. The structure of investments, the growth of investments may reach even 10%. 2026 and '27 we'll see accumulation of the absorption of funds from the resilience and recovery program. Those investments will regard mainly large companies and large exposures. But will also have an impact on consumption and labor market. This is probably one of the aspects that differs us from the consensus. We see that the labor market is loose. It's not going to exert an inflationary pressure or an excessive pressure on pay rise. We had 6.1% remuneration dynamics, which is much below the consensus. We think we will go below 5%. This sheet is a summary. We could see 5% for pay rise, then there was an inflation and 2 with double minus is, again, inflation. Inflation is going to be very low, below the target. It consists of salaries, which slow down and cheap exports from China and the extension of the energy shock. There is an oversupply of many energy resources. And also regarding GDP, there is a lot of investments. In consumption, the dynamics is much lower than in previous years and the labor market is kind of loose. We do not expect a significant increase in unemployment rate. No, definitely not. But in certain respects, it is a major variable regarding the general sentiment, social mood. And as for dynamics of interest rate, something that is very important for the banking sector, we expect 2 or 3 cuts. It's hard to say yet how many exactly. But probably the growth in volumes is likely to compensate any loss resulting from lower interest rates. The volumes are going to grow aggressively, in particular, in corporate segment. Dagmara Wojnar: Good afternoon, ladies and gentlemen. My colleagues have given you a business overview, and I will tell you in greater detail how we embedded that in numbers and what our results for 2025 are. Starting with loans. These grow in general 8%; retail 5%; corporate 11% up. In retail, it is worth noting that we had a growth in cash loans, which was up 13%. It is also important that we are going to transform. The cash loan is sold through electronic channels. Almost 90% of agreements regarding this loan are sold through electronic channels. As for corporate loans, mid and SME are growing, corporations are growing, micro is growing. And here, we see 2-digit growth. Lukasz has already mentioned the clients. The acquisition of new clients is important to us. And if we look at 2025, the acquisition was good, about 1,100 new clients in mid segment were acquired. To sum up the credit loan side, we said in our strategy that we wanted to grow in key areas. And those key areas were defined as cash loans, micro, SME and mid. These were the areas where Pekao historically had not been properly balanced because in corporate segment, it had historically and continues to have a good position. In 2025, we consolidated our position, our shares, market shares in those segments that are important to us. Loan credit side, 4% growth in deposits, both in retail and in corporations. It is worth noting here the role of TFI investment funds. We have 20% year-on-year growth on assets under management. Apart from deposits, we are opening new accounts, almost 500,000 new accounts were opened. And a large portion of those new accounts, about 35% of these were accounts for young people up to the age of 26. When we talk about liabilities, it is worth talking about issues. We had 2 issuances for MREL, one Tier 2. It is worth saying that we had a significant almost threefold oversubscription and the issuance offered excellent conditions. The conditions bring us close to major players from Western Europe. And if we look at 2025, we see that in our portfolio, we had over 100 new foreign investors in debt issuances. Foreign investments now. 2025 saw intense decrease of interest rates. 3-month WIBOR dropped year-on-year 7%. And our interest margin remained, as you can see in the slide, on the same level. It is worth detailing how we did that. On the one hand, as you have already heard, one driver was the growth of volumes. The growth of volumes in segments that generate higher margins. Therefore, the structure of the balance sheet and the structure of loans changed somewhat in 2025. Then on the side of liabilities, we reacted very soon to the fall of interest rates, decrease of interest rates and the policy of managing deposits helped us to stabilize this margin. There was also a change in the profitability of our portfolio of securities. In 2025, we repriced old COVID papers with lower profitability to new debt papers with higher profitability. We also have hedging that is growing in 2025. If we look at our sensitivity, 15 basis points versus 100 basis points decrease in interest rates. As you can see in the fourth quarter, our NIM dropped to 4.7%. And if we look at how we start 2026 and if we keep in mind the upcoming interest rate cuts, keeping this for at the front will be a challenge. If we move on, a few words about our result on commissions. This is something we are happy about. That is another quarter in a row where we have a 2-digit growth. Year-on-year, the growth is almost 11%. This is also something that we communicated in our strategy. Historically, in the commissions, we grew at 1%, 2%. And we said we wanted to change this. But this actually happened in 2025. We treat this profit on commissions as a stabilizer of our income. Taking into account the decrease in interest rates, this is an element that does stabilize results a little. If we look at 2025 as a whole, each component of the result on commissions contributed to this overall growth. There was a growth in commissions on loans, cards, brokerage services. This element was quite significant there. Let's remember that in 2024 and in 2025, the profit on managing brokerage assets and services contained an element of success fee that takes into account the results of our investment funds. So that is a major element of our success here. If we move on to costs, we also declared that on the one hand, we would try to keep personnel costs under control. And on the other, we needed some space to increase depreciation and fixed costs. Personnel costs decreased year-on-year. Let's remember that in 2024, at the end of the year, we announced a program of voluntary retirement or voluntary leaving of the company. We had 5 people who took advantage of this program of voluntarily leaving the company. On depreciation, we have 17% growth. We had an increase in IT, telecommunications, a little marketing and advertising depreciation and amortization also growth because projects that we started contribute to it as well as activities, investments we announced in our strategy like modernization of our branches, modernization of the call center. These are the elements that we started implementing in 2025, and we will continue over the space of the strategy. Now the cost of risk, over to Marcin. Marcin Gadomski: Thank you, Dagmara. The cost of risk, as you can see, is at a low level, 39 basis points, which is significantly lower than the strategy assumptions at 65, 70 basis points. In the fourth quarter, the cost of risk in the retail segment was even negative. And throughout 2025, it was close to 0. That resulted from an excellent situation in the labor market. There were no signs of excessive loan rate among our clients or in post society at large. We have a good loan repayment rate. And also in the second quarter, we reassessed, reevaluated risk parameters that we use to make write-offs for impaired value. Also, the result on nonworking loans, non-repaid loans throughout the year. As for costs in corporations here, these are more normalized. In 2024, we had a situation where some companies that a lot of energy intensive experienced problems resulting from energy prices. Now the situation is stabilized. So there are no systemic factors that contribute to losses in this portfolio. It is more about individual problems of individual companies that they have some issues regarding their operations, then they are more exposed to possible perturbations. As for systemic factors, for sure, in some segments, we have competition from Asia, also related to customs and shifts in customs. However, these are not elements that would have a major impact on the overall situation in corporations. Low cost of risks, combined with restructuring allow us to stabilize NPL. It is even decreasing slightly. In the corporate part, it is higher because, unfortunately, on the major issues if there is something like several dozen million worth, such cases continue for years. And this ratio has a major inertia. But in retail, as you can see, it is at a much lower level. This is a ratio that allows us to pay the dividend in line with our dividend policy. Also, there is also the ratio of sensitivity of interest result that is something that we meet. This is imposed by the regulator, Financial Supervision Authority, but we are on track here. And back to Dagmar. Dagmara Wojnar: Capital position. As Marcin has said, from a regulatory perspective, we meet the criteria for dividend payment. We assume the strategy payment at the level of 50% to 75% of net profit. Talks are underway on this now. CET at 15%. This CET does not contain profit for the second half of 2025, only 25% from the first 6 months of the year. If we move on MREL, we meet the MREL requirements with a surplus. In 2025, we had 2 MREL issuances, one in Tier 2. And it should be said that these were broad spectrum, green senior preferred senior. And the only thing that is still missing in our range of instruments for capital management is an instrument for AT1 management, and we will want to have an issue like that. To sum up, we end 2025 with the highest to date profit achieved by Bank Pekao. I could say that we are accelerating both in volumes as most of our volumes grow at a 2-digit rate, we're also gaining market shares. Our result is stabilized by the component of the profit on commissions. And in spite of the issues that I have mentioned, costs are kept under control. We have a safe risk level. This was not discussed broadly, but we are -- we continue to be bank #1 in stress tests by EBA. And all that translates into building value for our shareholders. Thank you very much, and over to Cezary. Cezary Stypulkowski: Well, I will not be boasting too much about the awards if you want, you will read about this, but we have been given a few. And one thing that Marcin has whispered into my ear is that I made a Freudian slip actually. I confused the 2 names. So it's either a confusion or contamination of names, one of our friendly banks, which still means that we have some problems with calling things by their names. So it looks as though this is so deeply rooted in our conscious, where it happens on such a level. So we have a structural problem, which we will be trying to address. One more to add, not much is there really. Okay. Let's give our audience a chance and take questions. Thank you for visiting us. Our conference is always a hybrid event, so -- but you can still show up if you like. Cezary Stypulkowski: Question from the audience. Unknown Analyst: To make sure that I'm seen in the audience, I'm from [indiscernible]. I wanted to ask you about the mortgage market. I understand that it is not your core market and that this strategy really allows for growth in other segments. But you are an important player on this market anyhow. What is happening there? Because we do -- we are guessing that there is a significant share of refinancing, but we don't have a lot of data here. We are mostly based on feel. The scale of prepayments or overpayments could be something to think about given the interest rates, which perhaps is not very encouraging to do so. But also, does the -- the big proportion of mortgages doesn't really translate into a growth in the purchase of real estate, which doesn't seem to be so big. So what's really happening in the mortgage market? Lukasz Januszewski: Okay. A few points. Definitely, the reported sales is higher than what is actually new money on the market of -- on the real estate market. Now in our case, the early repayment would account for about 1/5 of new products. But from what we can see on the market, it's probably a little bit more than that. Talk about estimations. But you need to also take into account the phenomenon which is getting more and more visible now is that some of that production is not seen because if a bank reacts to what's happening in the market and then annexes the contracts, thereby lowering the interest rates, you don't see it as new products, but the outcome is similar. So that means somebody has lowered their interest rates. And this is a phenomenon that is not yet visible on a mass scale as it is on mature markets, but the market is picking up on that. So -- as a result, I think it is good for thought in terms of how this mortgage product presents itself here. Other than the legal issues, we are looking at a product where the fee for early repayment is very much limited, which creates the situation where the interest rates are dropping, they are variable. But when they are growing, it's fixed. We are -- we have been learning that. We have been forecasting that. And in our hedging policy, we have been trying to address it. Still, the standard of coping with this challenge will perhaps get a better shape after this decrease in interest rates because it's not yet been harmonized. Cezary Stypulkowski: Yes. Well, I am reticent regarding mortgage product, not because I believe it's unimportant. It is very important, especially from the point of view of customer relationship, depending, of course, on the customer groups. This is mostly a trend driven by demographics. But it is a product where the Polish banking sector has been losing money systematically as a result of lack of regulatory security and the public noise that has been part of this deal. And we are subject to some regulations and some disciplining measures. We are accountable for the deposit part of it. And I would be cautious. We don't know what can happen to us in this area. But every year, there is a surprise. Well, if we were to continue the account for mortgages, I think it's worth doing an exercise, right, with the fixed rates, et cetera. Well, most -- the most reasonable conclusion is that the banking sector has been losing money on mortgages recently. So we live in a world where this product from the point -- from the professional point of view is very difficult to defend. So well, you need to find your way forward in it. My mantra would be that it's a product that essentially you should sell to your own customers that are loyal and they have a specific age profile. However, the market has gone a different way. There are some intermediaries on the market who make money on that. And they don't take any risk upon themselves, but they take a fee. So my impression is that there is no holistic look on this market regardless of the narrative that's visible here, which means that some more loosening of the market dynamics. Some believe that the long-term mortgage is a very valuable project in the long term. I generally agree. But well, the only thing that's certain in the long term is the fact that we will die. The same economist also said that people would be working 3 days a week in 2000, and that never came through. But the fact that we will all die is definitely correct, and he was right about that. Unknown Analyst: You mentioned that your strategy was created in a different environment. Investments are speeding up. You are repaying the technological debt from what I've heard with some outcome towards the end of this year and the beginning of next year. Have you thought about updating your strategy before the 100th anniversary? Cezary Stypulkowski: Our strategy was written up to 2027. It was a short-term strategy. There have been banks that announced a 10-year strategy. So we were pretty much in kindergarten. We assumed we had a short-term assumption, and we updated it to test what the bank could do if it was -- if it had slightly more discipline and it was better managed. And some goals were set. The volume development and that has been a success. It remains to be seen how lasting the success will be. Fast growth often leads to a fast fall. So we've seen that happen. So we're on a trajectory, but we need to still consolidate our path. And the other one is a question of commissions. How do we manage that to make sure that the growth has a reasonable pace here. And these 2 components have been successful. 2027 was included as the end of the strategy. 2029 is our 100th anniversary. So the effort is going to be to make sure that we route our strategy slightly deeper. And that's going to happen 2027 onwards, right, seeing 2029 and after as a perspective. Marcin Jablczynski: Right. Some of the questions were probably already answered during the speeches, but over to Kamil, please, who always finds something. Kamil Stolarski: Santander. Let me just ask about dividends. Is it going to be closer to 50%? Or are you comfortable with 75%? Dagmara Wojnar: The comfort is within the scope. Kamil Stolarski: From the point of view of the results, everything seems to be clear. There will be some detailed questions about the reorganization of PZU. Please, can we have a status update? Cezary Stypulkowski: Well, we believe that we managed to develop over a few months a potential scenario for this transaction, what it could look like, assuming that there is a willingness from the side of shareholders to go forward with it. And indeed, this is also linked to how the PZU Group itself and its insurance section should transform so that such a transaction can take place. And after many months of work, we have developed a market scenario, which is not quite so complicated, which links us to the developed scenario. So PZU is working on splitting its structure into holding and operations and work is underway as far as I know, to keep it going. And I'm appealing to my colleagues in PZU to give a more precise answer. Now furthermore, we have some aspects here that go beyond our competence, professional or technical that are linked with what we all know, some political background, which is quite sharp at the moment. It could be perhaps -- it could perhaps be linked to some discussions that could go beyond what I can predict in my professional capacity as far as the market conditions for this transaction are concerned and it goes beyond my capacity to interpret that. But as has been said many times before, the prerequisite of that is that the laws are adopted also from the point of view of PZU's capacity to divide and to isolate its holding inside the structure regardless of the transaction of the deal. And this will probably materialize in the form of some argumentation. But in the near future, it will probably gain more shape. Marcin Jablczynski: Any further questions? If not, thank you very much. 30th of April, first quarter report. Thank you so much for your presence and see you soon. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
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: Good afternoon, everyone, and thank you for joining us today for Ategrity's Fourth Quarter Fiscal Year 2025 Earnings Results Conference Call. Speaking today are: Justin Cohen, Chief Executive Officer; Chris Schenk, President and Chief Underwriting Officer; and Neelam Patel, Chief Financial Officer. After Justin, Chris and Neelam have made their formal remarks, we will open the call to questions. [Operator Instructions] Before we begin, I would like to mention that certain matters discussed in today's conference call are forward-looking statements relating to future events, management's plans and objectives for the business and the future financial performance of the company that are subject to risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements. The risk factors that may affect results are referred to in our press release issued today, our final prospectus and other filings filed with the SEC. We do not undertake any obligation to update the forward-looking statements made today. Finally, the speakers may refer to certain adjusted or non-GAAP financial measures on this call. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is also available in our press release issued today, a copy of which may be obtained by visiting the Investor Relations website at investors.ategrity.com. And with that, I will now turn the call over to Justin. Justin Cohen: Good evening, and thank you all for joining Ategrity's fourth quarter earnings call. This is Justin Cohen, and I'm joined here today by Chris Schenk, our President and Chief Underwriting Officer; and Neelam Patel, our CFO. Ategrity once again delivered record results in Q4, demonstrating strength on both the top and bottom line. Gross written premiums grew 30% year-over-year, exceeding our guidance of outperforming E&S industry growth by 20 percentage points. Our 84.9% combined ratio in the quarter is a new record for the company. We continue to profitably grow our market share in the small and midsized E&S space because of the 3 key factors. First, in our core specialty verticals, we have identified market gaps and built targeted products around them, producing structural growth while maintaining strict technical discipline. Second, we have grown our distribution network of nearly 600 partners. Through tight alignment of product and execution, we have driven strong submission volume, including nearly 90% year-over-year growth this quarter. Third, we have engineered our workflows and automation to deliver speed with precision, responding quickly to brokers while maintaining rigorous standards at scale. Together, these factors have driven both growth and margin expansion in a moderating E&S market. Turning to additional dynamics from the quarter. In property, we grew 18% year-over-year with strong sequential acceleration in stark contrast to the overall property market, which contracted as a whole. By focusing on small- and medium-sized attritional risks where we have an underwriting advantage, we positioned ourselves away from the more cyclical large account catastrophe-exposed market. Our 84.9% combined ratio reflects favorable loss experience, business mix and operating leverage. Net earned premiums grew 25 percentage points faster than operating expenses net of fees, driving a 6.1 percentage point improvement in our overall expense ratio even as we continue to invest in growth initiatives and technology. On technology, in recent weeks, the capital markets have focused on the risks of AI to the specialty insurance industry. At Ategrity, over 2 years ago, we developed a clear road map for integrating AI and made critical investments in that direction. Those investments have now been operationalized, and we will provide some additional context later in the call. Finally, stepping back to broader E&S market dynamics, while industry growth has decelerated, it is less the case in our small and midsized segment. Competitive intensity increased marginally again this quarter, but we continue to stand out through our business model and execution, driving growth in our market share. With that, I will turn it over to Neelam to discuss the financial results. Neelam Patel: Thanks, Justin. We delivered another strong quarter with adjusted net income of $25.4 million, up from $22.7 million in the same quarter last year, driven by top line growth, improving margins and continued strength in our investment income. Our gross written premiums were up 30% in the quarter, and the growth was broad-based. Casualty premiums grew 38% and property premiums grew 18%. Net written premiums increased 44%, which reflects higher retention year-over-year. Net earned premiums were up 34%, which is less than net written premium growth because of the natural lagged recognition of our growth trajectory. Net earned premium growth accelerated sequentially due to our expanded premium base and the impact of the reduction in our quota share reinsurance in 2025. Our fee income was $2.3 million compared to $0.4 million a year ago, reflecting standard policy fees implemented in 2025. Our underwriting income for the quarter was $15.5 million, up 160% year-over-year. That translates into a combined ratio of 84.9% compared to 92.3% last year due to reductions in both our loss and expense ratios. The loss ratio came in at 57.1%, down 1.2 points year-over-year driven by strong underlying results in our property business. We again had no prior year development. Catastrophe losses were 3.2% of net earned premium, down from 3.7% last year due to very few catastrophe events in the fourth quarter. On expenses, the overall expense ratio improved 6.1 points to 27.8%. Operating expense was 10.5% of net earned premiums, down 2.4 points year-over-year and lower than Q2 and Q3 of 2025. That improvement was driven by earned premiums growing faster than operating expenses, along with the benefit of higher fee income. Policy acquisition costs as a percent of net earned premiums declined to 17.3% from 21%. The improvement was primarily mix driven as growth has been concentrated in lines of business carrying lower acquisition costs and higher ceding commissions. Moving on to investment results. Net investment income was $11.6 million, up from $6.3 million last year, reflecting a larger investment portfolio. Realized and unrealized gains were $6.7 million, supported by strong results in our utility and infrastructure portfolio. Our effective tax rate was 20.2%, bringing net income to $25.3 million. Adjusted net income was $25.4 million or $0.51 per diluted share. Turning to the balance sheet. Cash and investments increased by $45 million from the third quarter to $1.1 billion, reflecting strong operating cash flow. Book value increased by $26 million, driven by retained earnings. Our book value per share ended the quarter at $12.78, up 21% since the IPO. Overall, the quarter reflects strong growth, underwriting discipline and operating leverage. With that, I'll turn it over to Chris to discuss underwriting and operating performance. Chris Schenk: Thanks, Neelam. With 30% growth and an 84.9% combined ratio, this was another record quarter for Ategrity. Core operating metrics, including retention, hit ratios, submissions and rate change were in line with or above our plan. And our cost of product indicators, including frequency and severity signals, continue to track favorably. These results reflect the strength of our productionized underwriting model, which is built on vertical specialization, deep expertise and structured underwriting. I want to highlight 3 drivers behind our results. First, we have capitalized on growth opportunities that have been overlooked by peers. These are differentiated pathways for growth that we can uniquely identify because we specialize in specific verticals and micro segments. Approximately half of our growth this quarter came from strategic initiatives like Project Heartland, retail trade and our multifamily developer product. In Property, we exited 2025 with premium growth and renewal rate increases. We grew 18%, while many peers contracted. This growth came from states that are often overlooked like North Dakota, Ohio and Nebraska. In property, we also achieved full year rate change in the high single digits. Turning to Casualty. There, we grew 38% and achieved low teens full year rate increases. Our management and professional liability lines were strong contributor with premium more than tripling despite broader softening conditions. Second, we achieved greater wallet share with our partners. Notably, our 2023 and 2024 distribution cohorts delivered over 100% same-store growth. These partners had strong renewals and increased new business placement with Ategrity. Meanwhile, our 2025 cohort added 25% more new partners to our distribution network, and we are seeing strong early signs of engagement. Our submissions increased roughly 90% year-over-year. We achieved premium growth by quoting more business from a larger opportunity set while maintaining pricing discipline. Third, our underwriting platform is driving speed and operating leverage. We are delivering fast, predictable and market-ready quotes without diluting technical rigor. In our brokerage channel, policy count increased 3.5x along record high transaction volumes. Our underwriting efficiency more than doubled. We produced record high quotes while reducing turnaround times. Process standardization and tech automation allowed us to absorb that growth while driving operating leverage. This contributed to a 2.4-point reduction in our operating expense ratio year-over-year. Looking ahead to 2026, we are executing on initiatives for the next wave of growth. This includes intensifying our regional strategies. In Florida, we launched a brokerage package product supported by a dedicated underwriting team. It is one of the few products of its kind in the market. In New England, we are stepping up to fill a market gap with a playbook for older buildings and dense mixed-use exposures. And in the Midwest, we are doubling down on Project Heartland with a comprehensive branded product. These growth pathways are unique and should allow us to continue to outpace the market. Finally, I want to build on Justin's earlier comments on AI. We have been executing on a distinct road map for over 2 years now. AI has already been deployed in our back office, improving risk qualification, data preparation and parameter optimization. In 2026, we are now embedding AI capabilities directly into underwriting workflows with solutions that were built by our in-house innovation lab. Our underwriting model is perfect for implementing AI because it is structured and built on technical pricing with clear risk selection criteria. And the way we select risk and deviate from technical rates is very prescriptive. And as such, we can integrate AI with disciplined guardrails and extract real economic value. We see this as a step change for the company. Much of the heavy lifting has been done, but we are taking a responsible approach and we'll be testing and ramping deployment over the course of this year. We expect this to drive our expense ratio lower once it is fully deployed this year. With that, I'll turn it back to Justin for closing comments. Justin Cohen: Thanks, Chris. This was a strong quarter by any measure. We grew top line, expanded margins and continued to deepen distribution relationships, all while maintaining underwriting discipline in a moderating market. Our performance reflects a purpose-built model that is being executed with rigor. With that context, let me turn to our outlook. Our guidance for Q1 '26, consistent with last quarter's guidance is for a growth rate that is 20 percentage points above E&S market growth, reflecting more market share gains and the strength of our approach. Further, we are anticipating a combined ratio just below 90%. One last item to cover. Today, we filed an 8-K announcing a share repurchase program, and we are happy to address any questions on that in the Q&A. With that, we thank you for your time listening. And operator, can you please open it up for questions? Operator: [Operator Instructions] All right. It looks like our first question today comes from the line of Hristian Getsov with Wells Fargo. Hristian Getsov: My first question is, can you parse out the rate environment you're seeing, particularly in casualty and property separately relative to loss trends? And is it safe to assume just given the current rate environment, we should see your mix continue to shift towards casualty in 2026? Justin Cohen: Chris? Chris Schenk: Yes. So I'll start with casualty. The rating environment there is still strong in our verticals. There's a good deal of demand. We're seeing that come through in submission flow, and we're holding firm on pricing. Our technical rates are on a prospective basis. So we have achieved rates above trend, and we don't see that slowing down in the short term. However, given market dynamics and given where we're competing, we have left the flexibility to protect our renewals if there's a shift in the market on all of our lines. So there should -- if there's anything that will -- if there's any slowdown in rates, that will be from that source. On property, we are playing in a very -- on a very differentiated play field -- playing field in the Midwest. We're not seeing a lot of competition going after the type of business we're winning. So we are able to get the rates that we require for that. We have priced in for tariffs and other factors that are affecting severity. So we are rate adequate on property also. And we have achieved rates above trend. Justin Cohen: And on mix, to your question on mix, we said in the past that 60% to 70% casualty is the target range for where we expect to be on casualty. We were at 67% this quarter, and we will continue to be within the range, and we wouldn't -- shouldn't expect us to deviate from there. So around where we are is a strong expectation for mix. Hristian Getsov: Got it. And then on Project Heartland, I guess, can you guys quantify how much runway there is in expanding distribution? And any quantification of how much this initiative has added to premium growth in the year? Chris Schenk: Yes. So there's 2 parts to Project Heartland. It is -- there's an appointment component, adding more partners, and we are nearing the end of that phase. It's more about getting more wallet share from partners. So we're just at the beginning of that phase. That is a -- we feel like the investments we have made in the Midwest along -- not just in distribution, but in terms of developing products and really making a unique play for -- in our verticals is really what's allowing us to stand out. So we see a huge runway for growth. As I mentioned in the comments, we are launching a Heartland product that will allow us to stand out in the market. It's really a marketing tactic, but it's also a way for our coverage and our offering to be instantly recognized. That's going to be the next phase of our efforts there. It does present to us much more -- a longer runway for growth. Operator: And our next question comes from the line of Pablo Singzon with JPMorgan. Pablo Singzon: So many other insurance companies, some of them are quite large with well-established platforms have shown a strong interest in small commercial E&S and have publicly disclosed growth metrics that are quite impressive. So the question is, do you see any evidence of them showing up in the markets where you compete in? Justin Cohen: You're asking it, have there been new players coming in? Pablo Singzon: Right. And I'm thinking specifically without naming names, like large companies that have an intense interest in small commercial E&S. Justin Cohen: We have not experienced any pressure from that and have not seen that. You saw some of our metrics as they emerge from this quarter, and I think it demonstrates that we are gaining traction ourselves, and we have not experienced that type of competition. Pablo Singzon: Okay. And then second question, just on the guidance. Last I checked, I think E&S market is running high single digits. So your 20-plus-percent guidance suggests a high-20s growth rate for 1Q, Justin? Is that a [indiscernible] Justin Cohen: Yes. We've been very deliberate about shifting our guidance to a growth rate above the market. That's because we don't forecast the market. That's not how we spend our efforts, and we don't think that's -- that would be productive for us to describe our guesses on that. But I think, if you think about where we -- based on what we've heard and seen in the market, we think that maybe mid- to high single digits would be an appropriate place to benchmark that. Operator: And our next question comes from the line of Andrew Kligerman with TD Securities. Andrew Kligerman: 84.9%, you mentioned that it was your record combined ratio. And I'm wondering, you've put up some pretty good numbers for the last few years. Could you -- and you had no prior year development as well, I think Neelam said on the call. Could you talk a little bit about your reserving methodology? How much, if any, conservatism you're putting in those numbers? Are there -- maybe talk a little bit about that. Justin Cohen: Andrew, our reserves are in a very strong position overall, both in property and casualty. You heard Chris mention in the prepared remarks that the early indicators for the recent years are coming in very strong. And so we are highly confident in our reserves there. And then in addition, we really had a low quarter of losses and frequency and severity in property, but we have booked losses -- we have booked reserves in anticipation of maybe late reporting. So we think that both property and casualty are in strong position. Andrew Kligerman: That's very helpful. And I want to talk a little bit -- I'm on the road, so I did not see the 8-K. It's great to hear about a buyback authorization. Could you talk about the amount and the -- the want to administer it to really utilize it? And then just in general, could you size up redeployable capital? I know you have de minimis leverage. Do you have the capital on balance sheet to meet this really robust growth of 30% a quarter? Justin Cohen: Yes. So Andrew, the size of it is $50 million. And the rationale is that we have a -- we're a company that has increased its book value per share since the IPO of about 21%. We trade at 9x consensus forward, and we've generated excess capital in just the quarters that we've been talking about -- in the last 3 quarters that we've been reporting to you. So we believe we're supposed to buy the stock here. I will say we are committed to increasing the float over time. It will just be at a different price. So in terms of excess capital, if you look back to the amounts that we have generated in just the past 3 quarters, that's actually a fairly sizable number, and it positions us well for deploying the capital in a buyback as well as continuing to grow. So the capital outlook and the growth trajectory with respect to deploying capital has not changed. Operator: And our next question comes from the line of Matthew Heimermann with Citi. Matthew Heimermann: A couple of questions. One would be just with the AI in the back office already implemented. I'd be curious with respect to the claims organization, if that has been helping at all -- excuse me, LAE costs, whether allocated or unallocated? Justin Cohen: With respect to AI, we have seen the opportunity set, first and foremost, for us on the underwriting side. So we have not deployed it in a meaningful way yet in the claims side, if you're referring to that. Did you have a follow-up there? Matthew Heimermann: Yes. So well, let's -- I have 2 follow-ups to that. One would be just on the -- what are, do you think, the use cases for your company on the claims side? And I'd be curious about that. And just part of that is just maybe my own confusion around what's more back office versus front-of-the house function. So maybe you could actually roll through what you consider to be in back office just so we can maybe level set with that as well? Justin Cohen: Just on claims, one of the things that's clear is there is a processing component to incoming claims. And so deploying it there as we do on our intake process in submissions that is -- that will ultimately be an easy win. But we're not, on this call, going to describe how we're going to be deploying claims in AI. Chris, do you want to talk a little bit about where you're at? Chris Schenk: Yes. Just on what's back office in the context of my comments, we consider that to be everything that happens before an account gets to an underwriter's desk. So intake to data prep to prequalification. So we have been using AI for prequalification. That allows us to screen out accounts that are not in appetite. The next phase is with risk assessment once the account is on the underwriter's desk. So there, there's a spectrum of utilization. It could range from everything from full automation for simple accounts to partial automation of the risk assessment. So this is an individual account level underwriting, where we assess for a specific criteria. Because our model is structured, we are able to identify use cases that are very value-added in multiple ways, one, in making a clearer assessment, a more quantitative assessment; and two, in driving a better quality decision if it's not a purely quantitative automated assessment. If it goes to the underwriter's judgment, [ sort of ] guiding that judgment is the second and third use case there. Operator: All right. Thank you so much for the question, Matt. And that does conclude our Q&A session for today. So I will now turn the call back over to Justin for closing remarks. Justin? Justin Cohen: Well, we thank you all very much for listening and for those questions, and we look forward to seeing you in the weeks and months ahead. Thank you very much.
Operator: Thank you for standing by, and welcome to the PWR Limited Half Year '26 Results Call. [Operator Instructions] I'll now like to hand the conference over to Mr. Matthew Bryson, acting CEO. Please go ahead. Matthew Bryson: Good morning, I'm Matthew Bryson, acting CEO of PWR Holdings Limited; and I am joined by Sharyn Williams, PWR's Chief Financial Officer and incoming CEO. Today I am pleased to present PWR's half year results for the financial year 2026. This presentation will provide an overview of our financial performance, strategic priorities and outlook. Turning to Slide 4. Following a transitional year for the company in FY '25, the first half of 2026 demonstrates clear earnings momentum underpinned by volume growth and the early emergence of operating leverage as the significant investments in capacity and capability begin to scale. Group revenue growth of almost 28% was weighted to a stronger second quarter as operational disruption associated with the final stages of the factory move and temporary power arrangements was removed, enabling improved execution and higher throughput. With the transition complete and stable infrastructure in place, the business is now operating on a far more consistent and scalable footing. NPAT growth of 38% to $5.7 million outpaced revenue growth, supported by higher utilization of our expanded labor base and improving operational efficiency as throughput increased. Strong cash conversion at over 100% remains a core characteristic of the business, supporting continued strategic investment. Net debt at period end is modest and already reflects deleveraging from peak levels earlier in the half. We expect further deleveraging in the second half. A major milestone in the half was the completion of our transition to the new Stapylton headquarters in February. Delivered in line with budget, the new facility materially increases capacity and enhances operational capability, positioning the business to execute on larger, more technically complex opportunities. Importantly, we successfully completed recertification to AS9100 and NADCAP following the relocation, ensuring no disruption to our aerospace and defense credentials and positioning us to capture further program opportunities. This facility underpins our ability to scale over the medium- to long-term. We're seeing strong momentum in the order book, supported by improving mix and structural drivers in the key markets we serve. There is growing adoption of next-generation technologies across high-power motorsports and aerospace and defense applications. This is driving both market share gains and profitable growth. The structural shift towards increasingly advanced and technically complex cooling solutions aligns directly with PWR's core strengths in engineering, vertical integration, and quality. We're also seeing increased A&D program activity, broader customer diversification, and early repeat activity, which is strengthening the quality and visibility of the order book as the pipeline matures. With the Australian facility now scaled, we have capacity to support long-term growth well into the next decade. In the U.S., we've progressed key accreditations and production capability for A&D products, expanding our ability to service customers locally. Additional investment across the U.K. and the U.S. enhances flexibility and de-risks supply for global customers. Capital allocation remains disciplined. We're balancing growth investment with financial conservatism, ensuring the business is positioned to deliver sustainable returns as operating leverage continues to build. Overall, half 1 reflects a business that has completed a significant investment phase and is now beginning to translate that scale into earnings momentum, with a stronger platform to capture growth across our key markets. On Slide 5, we outline the progress made in the half in service of our 4 key strategic priorities. The relocation of our new Australian site is now complete, a significant milestone for the company and one we are extremely proud to have delivered. We continue to strengthen our aerospace and defense platform. We've also expanded our position as an approved supplier, now covering all key defense primes including Tier 1 players. This materially broadens our addressable opportunity set. Growth in the half was strong and profitable. Operationally, we continue to build a more resilient global model. Finally, we have implemented a more scalable global operating structure, positioning the business to support continued growth across our global footprint. Turning to Slide 6, where we break down revenue by market sector. As evidenced in the revenue bridge, the key drivers of growth this half were motorsports and A&D. Motorsports growth of 40% exceeded our expectations, in part reflecting race testing for Formula 1 commencing 2 to 3 weeks earlier, and increased uptake of our technical services. This result also reflects a broadening customer base across categories outside of Formula 1 and increased customer adoption of PWR's unique core constructions. This increase in market share is driven by improved thermal performance, packaging, and aerodynamic advantage that our solutions provide our customers. Aerospace and defense delivered over 30% growth on PCP, reflecting contributions from defense, commercial aerospace including eVTOL, and the developing MRO or maintenance, repair, and overhaul segments. Following delays caused by customer design changes, 75% of the U.S. government project was recognized in Q2, albeit production spanned Q1 and Q2. Lastly, we exited the half with strong year-on-year growth in backorders. In OEM, the strong revenue growth reflects the cycling of a softer PCP that was marked by the completion of 2 concurrent high-volume, high-complexity OEM programs. This half was supported by the maturing of new programs into production phases, and we expect this to underpin stable second-half revenue on half 1. Automotive aftermarket revenue declined due to a deliberate revision of discount structures to improve margins. To this end, we streamlined the historical catalog to concentrate on high-volume vehicle opportunities. The external environment is challenging for discretionary spend, but demand for our premium aftermarket products is resilient. I'll now hand over to Sharyn to run through the financial performance in greater detail. Sharyn Williams: Thanks Matt. I'll walk through the key parts of our financial performance on Slide 8. We delivered strong revenue growth during the half, particularly the second quarter, with uplift in aerospace and defense and motorsports of 31% and 40% respectively. In our trading update provided at the October 2025 AGM, revenue for the first quarter was up 6% as the business settled into the new Australian facility. During the first quarter, we undertook production work in preparation for the U.S. government order. This groundwork supported stronger execution and revenue recognition in the second quarter. Raw materials were broadly in line with PCP as a percentage of revenue. We did have some increase in costs, both direct and indirect, associated with U.S. tariffs. These are being actively managed through increased production in the U.S. facility, supply chain adjustments, and our pricing strategies. Employee expenses increased in absolute terms, reflecting higher revenue volumes, and declined as a percentage of revenue, improving margins. This reflects operating leverage with the existing platform and headcounts supporting higher throughput without scaling proportionally in line with revenues. Average headcount increased by circa 5% versus PCP. This single-digit increase reflects early benefits from the implementation of the scheduling and capacity planning system. In addition, labor availability across some skill sets has tightened, leading to a higher number of vacant roles. Wage inflation ranged between 5.5% to 7% across Australia and the U.S. respectively, with the U.K. being approximately 2%. During the half, we increased provisioning for incentives and recognized an accelerated expense in relation to the Chairman's performance rights, which will remain on foot until their original vesting date. As flagged previously, the relocation to the new factory has resulted in a step-up in our fixed cost base, particularly across occupancy and right-of-use expenses, and depreciation and debt finance costs. This has temporarily diluted return on equity. As capacity utilization increases and margins progressively normalize, we expect returns to improve over the medium-term. Notwithstanding the step-up in fixed costs, NPAT increased 39% versus the PCP. Finally, a fully franked interim dividend of $0.03 per share has been declared and is payable in March 2026, equating to a 53% payout ratio. This is consistent with our proportional payout policy of between 40% and 60% of net profit after tax. We remain disciplined in our capital allocation decisions, balancing shareholder returns with investment in growth. Slide 9 speaks to working capital and cash flow. Our working capital increased by $2.5 million since June 2025, driven by an increase in inventory to support stronger revenue and A&D programs. Cash conversion remains strong at over 100% on a rolling 12-month basis. Free cash flow was negative for the period, reflecting the final stages of the investment cycle as we completed the new factory construction, particularly the controlled environment areas. FX remains an important consideration, particularly as our A&D revenues increase, which are largely denominated in USD. Consequently, we have commenced disclosing a constant currency growth rate to enhance transparency. As a net exporter, a weaker AUD benefits us, especially against the USD and the pound. A key advantage of our global manufacturing strategy is the natural hedge that it provides, with a proportion of our costs denominated in those currencies. Moving into FY '27, we will continue to actively manage FX risk, maintaining hedges to provide budget certainty and to act as shock absorbers when FX rates fluctuate. Moving on to Slide 10. Strategic investments in CapEx and the Australian factory are essential for supporting growth and enhancing production capacity and our ability to deliver more technically complex programs. This investment positions the business to support the increasing demand for our products and deliver sustainable long-term growth. CapEx for the first half was $12.7 million. This investment was predominantly focused on the completion of the Australian facility and installing new equipment to expand capacity and capability, while improving automation, compliance, and business continuity. The investment facility facilitates a step change in scalable production capacity that was simply not possible in the previous footprint. For the full year, we estimate total CapEx of $22.5 million. This slight increase relates to specific production equipment that produces direct revenue benefits by increasing our capacity. Specific investments during the period include the Stapylton electrical connection upgrade and substation, where energy infrastructure requirements added an incremental $2 million. This connection occurred in late September, allowing our investment in solar power to reduce our reliance on grid electricity and help offset the higher energy requirements of a larger factory footprint. Further investments include a step change in our controlled atmosphere environments, new materials capabilities, and software for our scheduling and planning system to enable realization of efficiency gains. This completes the Stapylton factory upgrade, extends our U.S. A&D capabilities, unlocks some capacity constraints in the technical services area, and our emerging technology capability. We have incurred modest one-off costs of $0.8 million to relocate our controlled atmosphere production to Stapylton, and additional energy costs due to running on generators for the first quarter. This new site has lifted our cost base in 3 areas, as can be seen in the first half profit and loss. Firstly, increased right-of-use depreciation and interest due to the new 15-year lease with AASB16 front-loading lease expenses, meaning we will see a $2.2 million increase in lease expenses per year from FY '26. Secondly, leasehold improvements and equipment depreciation. The new equipment and fit-out unwind in our depreciation expenses, estimated at $1.2 million per year. The other area is occupancy expenses related to increased outgoings of circa $1.1 million per annum. In FY '27, our investment focus will shift towards targeted efficiency initiatives and leveraging our global operating model, particularly as we expand A&D activity in Europe and with a view to increasing production flexibility. Turning to Slide 11. We are pleased to have moved past our peak debt period and have already reduced net debt to $13.4 million at 31 December. The balance sheet remains strong, with cash of $10.6 million and undrawn facilities of $18.5 million. Importantly, we have maintained a conservative leverage position while completing a significant investment cycle. As the Group's expanded capacity and capabilities come online, we are seeing the signs of those investments translating into revenue growth, particularly through new technical capability and R&D-driven opportunities. Since listing, the Group has pursued growth with discipline. Strong cash generation has funded reinvestment, resulting in modest leverage and preserving balance sheet flexibility. We remain committed to maintaining financial discipline as we pursue the opportunities ahead, with a clear focus on generating appropriate returns on invested capital. Matt will now talk through the outlook for the Group. Matthew Bryson: Thanks Sharyn. Turning to Slide 13. PWR is extending its global leadership position in high-performance thermal management, leveraging our motorsports innovation capability into aerospace and defense and other mission-critical applications. Underpinning this momentum are 4 structural competitive advantages. First, vertical integration across Australia, the U.S., and the U.K. provides geographic flexibility, operational resilience, and control over quality and delivery. Second, we are technology agnostic. We select the optimal cooling solution for the application rather than forcing customers into a single process, enabling higher performance, application-specific outcomes as our key competitive advantage. Third, we maintain a structural lead time advantage. Vertical integration and in-house capability allow us to quote materially shorter lead times, often around 50% of industry norms, which is increasingly decisive for defense programs to simplify the supply chain or offer responsiveness when operating under tight schedules. Finally, our defense-grade quality systems and accreditations position PWR as a credible, approved supplier to major primes. Collectively, these advantages are resonating with motorsports and A&D customers and are translating into tangible demand growth. Turning to Slide 14. We see 4 clear structural drivers underpinning long-term demand for advanced thermal management. Collectively, these structural trends underpin our confidence in the medium-term outlook for aerospace and defense. Importantly, these trends directly align with PWR's core competitive strengths. Turning to Slide 15, PWR's strategic priorities continue to focus on 4 key areas: innovation; profitable growth; sustainability; and investing in our people. Our strategic priorities will be led by our experienced leadership team, as outlined on Slide 16. Slide 17, OEM and emerging technology motorsports. We're currently tracking 37 discrete programs across financial year '26 to financial year '28. Current financial year programs are up approximately 54% versus the PCP, reflecting improved program momentum and forward visibility. Our motorsports product development in emerging technologies remains strong, and we continue to be encouraged by the outlook for the balance of 2026 and beyond. The new Formula 1 regulations represent a technical shift of unprecedented complexity. And we have seen in the past new regulations drive rapid innovation cycles within the teams and their critical supply chain partners, such as PWR. We expect ongoing optimization and performance development through the second half and into financial year '27 first half, as learnings from the current cars are transferred into FY '27 designs. Early Formula 1 power unit track testing has initially exceeded mileage expectations. This reinforces confidence in the long-term viability of the new hybrid formula and the increasingly technically complex both power unit and chassis cooling systems. Adding to this, our engagement in LMH and LMDH classes continues to strengthen, supported by new manufacturer participation in premier endurance racing categories. We're also seeing increased activity in European and U.S. off-road racing markets, including Dakar and the U.S. Trophy Truck programs. The number of programs we supply to OEM, and whilst our revenue for this sector has recently declined on prior year due to high-end program completions, our presence in niche OEM opportunities continues to expand, with new program engagements offering volumes such as the 800-vehicle hypercar referenced on this slide, and with the supporting commencement of the Ford Mustang S650 program late in financial year '26. Our future focus in OEM is not exclusive to automotive, with industrial and marine sector leads giving confidence in new opportunities for PWR advanced cooling and emerging technology adoption. Turning to Slide 18. Our aerospace and defense pipeline continues to strengthen, with a broadening customer base contributing to improved order book resilience. As shown in the slide, of the total top 40 programs identified out to financial year '28, 33 are already secured in financial year '26. Importantly, approximately 38% of the top 40 programs represent new customers, demonstrating deliberate diversification of the revenue base and reducing concentration risk. Pipeline momentum continues to build. Current financial year secured programs are up approximately 10% versus the prior comparable period, and we now have 51 approved supplier relationships covering all key defense players, including Tier 1 primes. That uplift in approved supplier status continues to underpin program access and order book durability. Turning briefly to the key segments on the right-hand slide. The demand backdrop remains supportive. U.S. defense spending continues to increase, with a growing proportion directed towards advanced platforms aligned to PWR's cooling capabilities. NATO commitments reinforce a multi-year demand outlook. A follow-up U.S. government order of USD 9.1 million was received in Q3. With delivery scheduled across Q4 in FY '26 and into FY '27, this reinforces execution capability and strengthens our position for future program participation. Commercial air and MRO remain strategically important segments. MRO typically represents 60 to 70% of total aircraft lifecycle costs and provides longer-dated, repeatable revenue streams once qualified. We continue to expand our presence here, supporting diversification and improving stability of A&D revenue base over time. Overall, the aerospace and defense outlook remains supported by increasing program scale, broadening customer relationships, and a shift towards longer duration, high-visibility revenue streams. Turning now to the outlook on Slide 19. Outlined on the left-hand side of the slide are our revenue expectations by market sector. Firstly for motorsports, we expect strong but moderating second-half revenue growth based on the current pipeline. FY '27 is expected to be in line with elevated regulation-driven FY '26 revenue. For A&D, continued momentum is expected to support a broadly even first half, second half revenue split. Financial year '27 revenue is expected to be supported by the follow-on U.S. government order with aggregate growth dependent on the timing of pipeline conversion. OEM, the medium-term pipeline is rebuilding momentum. Consequently, we expect a broadly even first-half, second-half revenue split, with modest growth expected in FY '27. Lastly, in terms of our aftermarket business, we continue to expect muted FY '26 revenue growth due to the continued reshaping of the sales mix towards higher-value, higher-volume programs. At a Group level, our expectation for modest statutory NPAT margin improvement in FY '26 is unchanged. This is driven by higher volumes with improved operating leverage and early productivity gains, partly offset by investment in the Australian factory, incremental costs of $5.5 million as outlined on Slide 10, a U.S. cyber accreditation, and some one-off costs relating to the factory move and CEO transition. Over the medium-term, we continue to see a pathway to NPAT margin recovery. The step-change investment in capacity and capability is now largely complete. That expanded platform positions us to scale without a corresponding increase in fixed costs. Going forward, investment remains a fundamental part of the business, particularly in technology, capability, and accreditations, but at a more normalized level. As volumes continue to grow across motorsports and aerospace and defense, we expect operating leverage to progressively rebuild margins towards FY '24 levels over a 3 to 5-year period. That concludes our presentation on the first half results, but before handing back to the moderator, I would like to acknowledge and thank our team. This last period has been a demanding period for the entire organization, with the completion of the factory transition alongside continued delivery to customers across all markets. That level of execution evidenced in the result today is a credit to the capability and professionalism of our people. I'm incredibly proud of the way our team has stepped up during this period of transition. On behalf of the Board and the management team, I'd like to thank our global team for their effort and ongoing commitment to PWR. Thank you. Operator: [Operator Instructions] Your first question today comes from Alex Lu from Morgans Financial. Alexander Lu: Can I just start with motorsports revenue please. I know you've given some guidance there around the second half revenue growth, but historically you've had that skew to the second half. Yes, it looks like you've had some pull forward of demand into the first half, particularly the second quarter. So should we still expect a second half skew this year, but maybe just not as big as previous years? Matthew Bryson: Yes, Alex, I think you've interpreted that correctly. But yes, definitely we saw an effect of the new regulations, clearly in terms of opportunity, which is obviously reflected in the results. But also timing, because of the scale of regulation change, a lot of the work was done a little earlier in regards to the releases of new season designs. With all teams, it was brought forward, and testing of the new Formula actually commenced in January, whereas historically that testing would commence in February. So what you're seeing there is both an increase in the, I guess, base going forward, but also there is also influence in starting some of the new season work a little bit earlier, which will change the shift between first and second half a little bit more than what we would have historically seen, but we still see a very strong result for the second half as well. Alexander Lu: Okay. And can I just clarify the one-off costs for FY '26 please. So it looks like you had the $1.2 million related to the factory relocation, the generator, the CEO transition. So was that $1.2 million all in the first half, and is there anything in the second half and also FY '27 that we should expect? Sharyn Williams: Alex, all in the first half, that's correct. $800,000 relating to the factory expenses and then the remainder to the CEO transition. No large one-offs expected in the second half, besides calling out the CMMC is predominantly second half weighted. Alexander Lu: Okay. So that $0.8 million, most of that is going to be second half for the CMMC, Sharyn? Sharyn Williams: About 75% in the second half for CMMC, that's right. Alexander Lu: Okay. And just lastly, can you just talk about that CapEx for increased capacity and extended capability into new materials. So yes, just interested on what types of new materials and what you're looking at, and I guess for what applications they're for please. Sharyn Williams: Yes, sure, happy to talk to that, and Matt will likely build on my comments. So we're really looking at other materials that we'll be able to use across the business. So whether that be in additive, brazing, et cetera., we think there's real opportunity in that space. We do focus our R&D in terms of looking at new materials, et cetera. So this CapEx largely helps us progress that capacity. Matthew Bryson: Yes, and Alex, that is really capitalizing on new materials opportunities in key markets like aerospace and defense space applications, also some hydrogen. So in particular investment in equipment and processes to expand on stainless steel and Inconel product, which is a key opportunity, particularly in the MRO space for supporting our A&D growth. So yes, see some areas of investment we've commenced on that already, but there is obviously future work. Operator: [Operator Instructions] Your next question today comes from Sarah Mann from MA Moelis Australia. Sarah Mann: My first question was just on the aerospace and defense pipeline. Just wondering if you could give us a bit more of a qualitative update on how the MRO opportunity is progressing, specifically, I guess, how much contribution was in this half and how we should think about it in terms of the makeup of the pipeline. Matthew Bryson: Yes, sure. Not actually disclosing the percentage of contribution there from MRO, but needless to say, we are very pleased with the contribution that it has started to make to PWR's A&D pipeline, and for sure it will be a significant driver of A&D growth going forward. It's not of the scale yet of our programs the likes that we've announced for the U.S. government, but it's seen as a key opportunity for PWR because it's work that PWR can influence the speed at which we enter that market more so than we can the contract-based business of A&D. So at the moment, I would say it is a good contributor to A&D, and it will continue to build as we grow the opportunity with existing customers and new customers as we continue to explore that market. We've attended several trade shows over the last 12 months that are specific to the MRO business, and we continue to gain further optimism in PWR's opportunity to grow this business. So it's only a relatively new addition to the pipeline, not long ago it was a very, very small acorn, but it has grown to be a meaningful contributor to the results discussed today, and we're quite buoyant with regards to its opportunities going forward. But like everything that PWR does, we will always take a measured approach to our entry, and the speed at which we take that up, ensuring that we're always seen as a high-quality supplier, always looking to deliver against customer expectations. So the opportunity is substantial, but it will be responsible growth into that space to ensure that we maintain a strong reputation within that business, and we set a foundation for the long-term. So it is a good contributor to the result there today, and the potential going forward is undoubtedly substantial. Sarah Mann: Excellent. And then on the defense side I suppose of A&D, like you've had really good success so far in the U.S., but it feels like the world's kind of spending more on defense, particularly in Europe and Asia. Just curious if your pipeline reflects this as well, or is the focus more just on the big opportunity that you have in the U.S. at the moment? Matthew Bryson: Yes, yes. Look, it's fair to say that the current pipeline is probably more reflective of U.S. opportunities, because that's where the business has initially focused its early attentions and certainly its relationship building with key primes. We are absolutely now starting to explore European opportunities. It's been several years behind, I guess, the majority of the commencement in the U.S. That probably also speaks to the strategic entry to market that PWR has always traditionally held, not wishing to find ourselves in a situation where we're overpromising against our ability to deliver. But for sure, there is shift in that space at the moment, there is greater interest within the European sector for them to be able to build more, and be less reliant on the United States, and that's certainly going to create further opportunities for PWR to grow our European A&D base as well. Operator: There are no further phone questions at this time. We'll now pause briefly before addressing any questions from the webcast. Your first question from the webcast today is from Chris Savage. Chris asks: Are employee expenses expected to rise in the second half relative to the first half? Sharyn Williams: Yes. As an absolute dollar, yes, wages will increase given we're seasonally stronger in the second half in terms of revenue. But we do expect it to reduce slightly as a percentage of revenue to reflect the leverage we have in that space as revenue grows. In terms of growth on prior year, I will draw out that we did reduce head count prior year significantly. So any modeling you do, please focus on the first half and build from there in terms of the '26 numbers. Operator: Your second question from the webcast today is also from Chris Savage. Chris asks: What capacity are you now operating at in the new Stapylton facility? Matthew Bryson: Yes. Thanks Chris. Yes, look I would probably say in terms of the floor space, we're probably in the order of about 70% of the floor space now currently spoken for. Certainly with respect to constraints, it's now about people. The business has always been about people. We have a strong history of investing in tremendous new technologies and that will continue, but the skill base of the people is always what has made the difference, capitalizing on that technology investment. So I would say as far as the team is concerned at the moment, we're probably up around high 90s in terms of 100% utilization of our people, there is more expansion to come from investment in the team. But in terms of machinery and equipment, yes, we would probably only be at 50% utilization of the physical equipment within the new facility, lots of opportunity to continue to flex on that. Operator: We do have another question from the phone. The question comes from Evan Karatzas from UBS. Evan Karatzas: Just one for me. I'm taking your outlook comments for FY '26 for the aerospace and defense, what sort of implies like around that $36 million of revenue setting a good, at least $10 million from last year. Is this a typical type or a minimum type of dollar revenue growth cadence we should be expecting for A&D? Just trying to get a better idea of how you're thinking about the growth cadence for aerospace and defense in FY '27 and beyond. Sharyn Williams: Yes, certainly our strongest growth area. We are conscious that we have been growing at 30% this year and last year. I do note though growing on a higher base each year does get more challenging to keep those percentages up. So we're very -- we're recognizing the strong opportunity we've got in that space. It is dependent as we said in the outlook on when some of that pipeline converts and we are conscious there's a lead time for that. So very happy with the growth rates we've been getting, expecting solid growth rates to continue in that space. Evan Karatzas: Okay. And just a minor one again around that lead time as well. So when you need to start winning or announcing contracts that can help support the '27 and '28 type growth pipeline as well? Sharyn Williams: Sorry, when will we be announcing? Evan Karatzas: No, no, sorry, just around the lead time that's required for some of these A&D type contracts and projects. Matthew Bryson: That is a very difficult question to answer based around very program specific requirements and obviously complexity of parts and supply. So it can be in some instances operating at motorsport type lead times. But more typically you would probably say that aerospace lead times are expected to be in the order of magnitude twice that of motorsport and you're generally talking months to possibly even out to 6 months depending on the complexity of product that's intended to be supplied. Operator: [Operator Instructions] Your next question comes from Kieran Harris from E&P. Kieran Harris: Just wanted to unpack that comment you made before about your cost base and particularly the employees piece. So just to clarify you said that we should expect that to increase in the second half. And I suppose just wanting to get a bit more color around some comments around the overtime that you had to push through to make those motorsport orders in the first half. Sharyn Williams: Sure. So as Matt pointed out, team constraints in terms of skilled team members is becoming more prevalent now. So we did use a fair bit of overtime in the first half. However, that was really offset by vacancies that we had as we were still seeking team members. So in terms of the second half, we're confident the percentage of revenue for wages does come down in the seasonally stronger second half. But where we will be increasing head count would be in production roles to deliver stronger revenues in the second half. And also in areas that drive growth such as our tech sales and engineers, managing a lot of programs, particularly in the A&D space, doesn't equate to revenue straight away. So we really need to, as we're getting more and more approved supplier status with people, make sure that we've got the team there to help manage that through to revenue realization. So we'll be very moderate with our head count increases, but seasonally second half stronger revenues does mean an absolute higher wage dollar in the second half. Kieran Harris: Okay. And just on the guidance comment for a modest NPAT margin improvement. Appreciate you can't give specifics but anything just to, I guess, help us understand the magnitude of that would be useful and whether that's been moderated I suppose since coming into the full year. Sharyn Williams: Yes. Certainly no change to our comments 6 months ago. We are looking for margin expansion over the next 3 to 5 years that won't necessarily be linear. And the reason it's more subdued in the earlier phases is because to drive our revenue growth we certainly need those growth driver investments such as in R&D and that head count I spoke about earlier. So when we talk about modest NPAT margin improvement, we're referencing the FY '25 underlying base of around 9.5%. So when we look at FY '26, modest margin improvement -- you are talking low single digit modest margin improvement. We're very serious about investing where we need to make sure we can generate revenue growth through FY '26 and FY '27 and from there the linear momentum in margin then starts to pick up as those revenues come into play. We certainly see strong operating margins flow through as we outperform on revenue, we do see that flow through to the bottom line. So there's no change to our comments from last time, it's really around how that realizes itself over the next few years. Operator: We do have another question from the webcast. The question comes from Jeff Rogers. It reads: Has there been any significant interest from the AI/data center market? Matthew Bryson: Yes. Yes, there is certain interest from that market. But what I would say to that is, typical to our key opportunities in aerospace and motorsport, it's typically around the areas where there are packaging constraints. You're looking for high-performance, lightweight, low-volume applications. So in instances where there are maybe mobile applications and the likes, where packaging space is critical, that's where PWR's real skill set is required. Mass production of heat exchanges for data centers that don't have those technical limitations mean that sometimes relatively cheap and low-cost and low-technology solutions are able to be utilized to provide the thermal management. So undoubtedly opportunity, and PWR is engaged in that space, but no different to I'd probably liken it to automotive and our work with niche prestige manufacturers. The same would be very much true in this space, where we don't seek to be producing millions of radiators for mainstream automotive, that's not our space. Our space is where there's real high technology and requirement for PWR's engineering expertise to deliver the solution. So it's an opportunity, but it needs to be considered scaled, probably likening it to automotive. Operator: There are no further questions at this time. I'll now hand back to Mr. Bryson for any closing remarks. Matthew Bryson: Well, I'd like to thank everybody for your time this morning, and certainly thank you for your interest in PWR, your interest in PWR both now and in the future. We're excited about our future and capitalizing on the new foundations that we've built within our team and our operations. So thank you again for your time this morning. It's been a pleasure to present, and we're looking forward to the direction of this business. Thank you. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Welcome to OET's Fourth Quarter 2025 Financial Results Presentation. We will begin shortly. Aristidis Alafouzos, CEO; and Iraklis Sbarounis, CFO of Okeanis Eco Tankers, will take you through the presentation. They will be pleased to address any questions raised at the end of the call. Matters that are forward-looking in nature will be discussed, and actual results may differ from the expectations reflected in such forward-looking statements. Please read through the relevant disclaimer on Slide 2. I would like to advise you that this session is being recorded. Aristidis will begin the presentation now. Aristidis Alafouzos: Thank you. Since August of last year, the large crude tanker market entered the freight cycle that we've been waiting for and prepared for all these years. This is a unique opportunity to have exposure to a fleet that is on the water and able to capitalize today. For a shipping investor, on the water exposure is critical in the current circumstances. As our conviction strengthened after the summer, we executed 2 opportunistic transactions and acquired 4 resale Suezmax newbuildings from Korea. The first 2 have already delivered, one has loaded her first cargo and the other one is about to load, while the remaining 2 will be delivered in the next 2, 3 months. We have already had a structurally strong freight market with strong asset values. But we added the Venezuelan barrels coming back to normal fleet and the new trade flows that creates, India materially reducing Russian imports, the Iranian question looming, and likely, most importantly, Synacor consolidating the VLCC market in a manner that has not been done before. They are currently owning and operating and waiting to be delivered a fleet of around 150 VLCCs. As a result, our NAV has been consistently and rapidly increasing and our NAV premium attempting to continue to catch up, but it has somewhat compressed, especially given these absolutely unique fundamentals in our market. We currently have no additional opportunistic transactions in play. Our focus is clear, disciplined outperformance and maximizing shareholder returns through both dividends and sustainable share price appreciation. We will catch up later, and I'll hand you over to Ira right now. Iraklis Sbarounis: Thanks, Aristidis. Let's dive into it. Starting on Slide 4 and the executive summary. I'm pleased to present the highlights of the fourth quarter of 2025. We achieved fleet-wide time charter equivalent of about $77,000 per vessel per day. Our VLCCs were at $92,000 and our Suezmaxes at $53,000. We report adjusted EBITDA of $79 million, adjusted net profit of $60 million and adjusted EPS of $1.78. This is basis our average share count for the quarter. Continuing to deliver on our commitment to distribute value to our shareholders, our Board declared a 15th consecutive quarterly distribution in the form of a dividend of $1.55 per share. With visibility on very strong Q1 fixtures and our outlook on the market, that figure represents 102% of our net income, i.e. on our current fully diluted share count post our recent equity transactions. Total distributions over the last 4 quarters stand at $3.32 per share or approximately 95% of our reported net income for the period. In November, we executed a successful and accretive equity raise of $115 million in gross proceeds against the acquisition of the Nissos Piperi and Nissos Serifopoula that were delivered by the yard in early January. This quarter, we did another similar transaction, bringing the total amount of gross proceeds raised to $245 million, acquiring at the same time, another 2 recent Suezmaxes, which are expected to be delivered to us in the second quarter. Moving on to Slide 5. Since our IPO in Oslo, we have distributed over 2x our initial market cap with over $461 million in dividends paid. Since we have had a fully delivered fleet in 2022, we have paid out 92% of our reported net income, clearly demonstrating our commitment to distributing value to our shareholders. On Slide 6, we show the detail of our income statement for the quarter and the full year 2025. TCE revenue for the year stood at $265.4 million. EBITDA was almost $204 million and reported net income was about $130 million or $3.77 per share. Moving on to Slide 7 and our balance sheet. We ended the year with $122.5 million of cash. That included a portion of the equity earmarked for the acquisition of the Nissos Piperi and Nissos Serifopoula a couple of weeks after. We also had at the end of the year, approximately $85 million in trade receivables. Our balance sheet debt was $605 million, and we subsequently drew $90 million for the 2 Suezmaxes. Our book leverage stands at 46%, while our market adjusted net LTV basis latest broker values and pro forma for the acquisition and recent transactions is around 35% . Slide 8, looking at our fleet. I'm pleased to show the addition of 4 modern and high-spec vessels. We have a total of 16 vessels on the water, 8 Suezmaxes and 8 VLCCs with an average age of only 6 years, which will further improve once we get delivered in Q2 of our 2 Suezmax resales currently under construction in South Korea. With the initial sequence of seeking of dry docks out of the way in Q4 of last year, our only dry dock for 2026 is that of the Milos 10-year survey. Slide 9, moving on to our capital structure. I have been very pleased with how our capital structure has been shaping up with the recent refinancings and new financings for the recently acquired vessels. Our margin has improved by about 140 basis points with meaningful further reduction expected once we decide how to refinance the Nissos Rhenia and Nissos Despotiko. The Piperi and Serifopoula were financed by the Greek market at record terms at 130 basis points over SOFR for 7- and 8-year terms, respectively. The debt financing market continues to be open and extremely competitive for us as we're exploring our options for the 4 vessels in the second quarter. Slide 10. We wanted to spend some time going through the 2 transactions we executed since our last quarterly update. In November, we raised $115 million at $35.5 per share, priced at roughly 1.25x our NAV at the time. In January, we followed with $130 million at $36 per share, priced at approximately 1.2x our NAV at the time. Both transactions were heavily oversubscribed executed a significant premium to NAV and were completed with third-party vessels locked on [indiscernible]. That combination is extremely rare. Very few companies, particularly in shipping, have been able to raise equity at a significant premium to NAV, secure modern tonnage, execute cleanly and immediately create value for shareholders, and we managed all 4. And here's the most important one. Since those 2 raises, shareholders have generated more than 20% return plus dividends. That is not theoretical accretion, that is realized value. We view it as a very strong statement of our shareholder aligned capital allocation discipline. We do not raise equity to grow for growth's sake. We decided to raise equity when it is accretive. It lowers breakeven, it strengthens the balance sheet. It enhances per share value and increase company share trading liquidity. Both transactions met such parameters. Slide 11, walking through the mechanics for the first transaction, vessel acquisition price was $97 million each. Imputed price taking into account the NAV arbitrage on the equity portion of the funding of the transaction implies $85.5 million. On the second transaction in January, vessel acquisition price $99.3 million. Imputed price after the NAV arbitrage implies $88.5 million. We effectively acquired recent vessels with [ promt ] delivery at the cost of a newbuild as a pure capital markets arbitrage. Above NAV [indiscernible] funded asset purchases at or below NAV, resulting in immediate NAV accretion. But it didn't stop there. And as I briefly mentioned before, the raise has also increased free float and liquidity, expanded and diversified the shareholder base, strengthened capital markets credibility and reduced fleet-wide breakeven levels. And importantly, we executed while asset values were rising. So not only did we have -- did we buy accretively, we bought ahead of further appreciation. We consider this a textbook example of shareholder-friendly execution. Growth only makes sense when it improves per share economics, and that is the filter we apply. I will now pass over the presentation back to Aristidis for the commercial market update. Aristidis Alafouzos: Thank you, Iraklis. Again, we had another great quarter. Q4 was a fantastic quarter with a consistent strong freight market and appreciating asset values. We positioned our fleet to take advantage of the seasonal strong quarter, and this year, it worked out for us quite well. The market dipped aggressively right after Christmas on the VLCCs, but we're lucky to have limited exposure during this brief window. Fleet-wide TCE came in around $76,700 per day with $92,000 on our VLCCs and 53,100 on the Suezmaxes. And we achieved 100% utilization across the fleet. Q4 looked like it would be a strong quarter since August when rates in the spot market and future started moving in a period that is usually quiet. On the Suezmaxes, as usual, we tried to minimize waiting time, fix shorter voyages as the market was going up through the quarter and triangulate as best as possible. We were penalized by dry docking our 2 2020-built Suezmaxes in China. The freight rates to move out East were actually at a discount to the local Western voyages, while the backhauls were also below round trip economics. We have a Suezmax requiring dry dock this year, and we are strongly considering putting her into dry dock in Turkey, which is slightly more expensive as a dry dock cost, but we'll be able to earn a lot more as we do not have to position her and reposition her outside of our preferred trading areas. On the VLCCs, we were quite pragmatic. On our Western positions, we fixed long voyages to go east and capture the front haul economics. And on the vessels in the East, we minimize waiting time to optimize time -- TCE, time charter equivalent, while also fixing a couple of backhauls when we're able to find the cargo offer dates and achieve a triangulated outperformance over the equivalent round voyage. The Nissos Rhenia was lucky to fix a voyage loading in the AG and discharging in the U.S. Gulf. Her next voyage had no ballast passage. This was the first quarter where our VLCCs outperformed our Suezmaxes since Q2 2024. Q1 started with a bang. We already had an excellent structural setup in crude tankers. Then as the New Year's gift and Christmas gift as well, 2 developments reinforced the market. Venezuelan barrels returned exclusively to the compliant fleet and Synacor aggressively consolidating the VLCC market, controlling over 90 ships and now operating roughly 150 vessels. We will elaborate on both shortly. We think that our Q1 guidance is strong. We have very strong fixtures from Q4 flowing into Q1 and even stronger fixtures getting concluded in Q1. We fixed a 12-month charter at $91,140 on the Nissos Nikouria. While I strongly believe our spot vessels will outperform this over this year, we still have another 15 to 17 spot ships, and we deemed it prudent. In addition, the previous batch of fixtures in the mid-70s were quite low, and we took the opportunity to set the bar higher, which has now been set even higher with multiple fixtures done at $100,000 per day for 12 months. At the moment, we do not have any interest to fix further ships on TCE. But with the volatility and rapidly appreciating market, this could change, even though we really like and want to continue our current spot exposure. As of today, we have 67% of our VLCC spot days fixed at $104,200 per day and 64% of our Suezmax days fixed at $84,600 per day, giving us a fleet-wide average about $94,800 per day on the fixed portion, roughly 2/3 of the quarter. On the VLCCs, we fixed a combination of longer and shorter voyages in order to structure their next fixing -- cargo fixing windows. The Suezmaxes have also been performing wonderfully with many opportunities for them to earn over $100,000 a day. Take note that our Q1 guidance also includes repositioning our 2 newbuild vessels from South Korea into the West where we like to trade our ships. We secured crude cargoes on both vessels from West Africa, where now they're going to move up into our preferred areas. CPC Black Sea volumes have resumed at full force as the SPM that was damaged earlier is back in use. This is a great support on the Suezmax market as we see around 40 cargoes a month from that port alone. While recently, we have seen these barrels also getting sold into the East, which has not been the case for months. This is very supportive ton miles as a vast majority of the flows usually go into Europe. Another large factor in the strength of the market and our earnings has been the Venezuela being back in the open market. But again, we'll talk about this signed for and sanctions in the following slides. We were able to capitalize on many opportunities in this quarter and look to do so going forward. On Slide 15, apologies for the repetitive slide, and I'll keep this one brief. Since Q4 '19, we've generated approximately $235 million of cumulative outperformance versus our peers. So this is a 22% outperformance on RVs and 39% outperformance on our Suezmaxes over a 5.5-year period. This reflects consistent commercial execution, not just one strong quarter. On the following slide, we look a little bit at the order book and the fleet structure. The order book has grown on the VLCCs since our Q4 report, but context matters. If we consider the 20-year mark is the end of the useful life of a normal fleet vessel, the fleet is declining year-by-year. We saw an interesting development of how a change in sanctions affects oil flows and shipping flows with Venezuela. Oil sanctions are lifted, flows resume in the normal market. The world's best traders and oil managers get involved in the trading and production. What else do we see? That the ships that were sanctioned or engaged in this dark trade remain isolated. They will not be coming back to compete against us. As we look on the next weeks to Iran, is this how it plays out there. Eventually, when the Ukrainian conflict comes to an end, is that again the same pattern? I strongly believe that sanctioned and dark fleet tainted ships do not come back to the normal market. The only window potentially for some to return are those owned by national oil companies, whether it's the National Iranian Tanker Company or [indiscernible]. But this is a very small number in the overall dark fleet. And looking at our fleet, we are sitting exactly where investors want to be. We have a young eco-designed, fully scrubber-fitted fleet and most importantly, in the water, earning today. In our opinion, what does the shipping investor want? Exposure and returns today. This is what OET delivers. And now for the more exciting slides, we have over 20% of the fleet of large tankers sanctioned and even more engaged in the trade tainted but not yet sanctioned. Against all oil analysts and traders predictions, we do not have a massive oil blood in the market. What we see instead is an inability for sanctioned barrels to find a buyer and a lot of floating sanctioned cargoes. This inability has stretched the dark fleet, increased freight rates for them and forces them to absorb more tonnage, which further restricts the size of the normal fleet. The result is simple, fewer ships available for the compliant market. That is structurally bullish. Against this, we have 3 main noncompliant trades, Venezuela, Iran and the non-price capped Russian business. Today, Venezuela is gone. The oil exporting from Venezuela is only on the normal fleet. Every single barrel from Venezuela is a cargo that wasn't around in 2025. This is extremely positive for tanker ton-mile demand as the market settles and the trade grows, it will become even more pronounced. Another sign on the tightening enforcement of sanctions, which many respected oil and political analysts gathered was Trump's ability to impact oil flows, but he succeeded and India has materially decreased their purchases of Russian crude. So instead, we are seeing constant market quotes from the Arabian Gulf, from West Africa, from Brazil, from the U.S. Gulf and even flows from Venezuela. Again, every cargo from these places is a new cargo from the compliant fleet that's replacing the Russian crude. And the final and most bullish part of our 3-slide tanker dream section is the massive unprecedented consolidation in the VLCC sector by a privately owned non-trader. Synacor has or will take control of over 85 ships since Christmas. Their total fleet footprint should be around 156 ships. This is just unbelievable. They control 17% of the total fleet, while almost 40% of the smaller part of the pie of the fleet which we actually compete with in the spot market. They have been very effective at pushing up the market. Hats off and congratulations to Synacor for this. They have done the heavy lifting and let the rest of the market reap the rewards. The market must understand that this is a seismic shift and the biggest owner-operator of tonnage is not a charter or a state oil company. They are not trying to protect their own oil trading P&L. They're only trying to maximize freight for themselves. Looking at utilization on Slide 22. When I started my career, a good friend and a highly respected broker, Chuck Monson, always told me that as you move forward -- as you move toward the high end of the utilization curve, rates don't increase linearly. They move exponentially. And that's exactly what this slide illustrates. When the market tightens at these levels, even a small shift in utilization can translate into a very meaningful move in earnings. With how fast the market has moved recently, I suspect that as we give this presentation, we are most likely out of the light blue box and perhaps one click to the right. This is precisely where modern, fully spot exposed fleets like ours benefit the most. And if this trajectory continues, I look forward to making our Q1 presentation even more exciting. Thank you for joining us today. Operator: [Operator Instructions] Your first question comes from the line of Even Kolsgaard with Clarksons Securities. Even Kolsgaard: So you mentioned it yourself as well, but I'm interested in your take on the VLCC market versus the Suezmaxes because I think the market today is mostly focused on the VLCCs. The rates are good and you have the Synacor event. But as you mentioned, the VLCC market has finally begun to outperform the Suezmaxes reversing basically trend we've seen for the last few years. So how do you think about the Suezmax versus VLCC market going forward, both for earnings and values? Aristidis Alafouzos: Even, thanks for your question. I mean, even in Q4 and potentially look -- I mean, at least through our guidance in Q1, on a dollar per metric ton or on a relative basis, the Suezmax is still outperforming the VLCC. So I mean, obviously, it's a cheaper ship, but the delta between price and earnings isn't still justified. So we think that the Suezmax is a really attractive asset. And as the VLCC market continues to tighten, and charters do their best to find ways to reduce the cost of transporting the oil from A to B. We think that the Suezmax will become a very versatile asset in order to do it. So we could -- I mean, there are some trades which will never make sense on the Suez instead of the VLCC or rarely. And this is like the really long-haul business, U.S. Gulf to China or a lot of the AG business to China. But a lot of the voyages WAF med or backhauls and the shorter runs, Suezmaxes can easily jump in and find a lot of opportunities to do backhauls or nontraditional Suezmax cargoes, which we would consider like a triangulated bonus over the normal Suezmax market. So for this reason, we think that the strength in VLCCs will be equally beneficial to the Suezmaxes and for savvy owners can give them even more opportunities to creatively trade their ships in this market. Even Kolsgaard: Got it. And just a follow-up. I guess you said you don't want to get take on any more time charter contracts at these rates. So you're pretty bullish towards the market. But when it comes to Synacor, it seems like they're bidding for VLCCs from basically every owner. Have you been tempted to sell some of your ships to Synacor? Aristidis Alafouzos: In [indiscernible] And my personal view is that Synacor will be successful in what he's trying to achieve. So I think that the exposure to the spot market and in the future, potentially TCE market or sales market is what we want to have today. Now going forwards, once things continue to reprice higher, I can't tell you what's the best choice for us to do. But I think right now, there's a lot of upside left in what's happening in the market. And right now, we've seen rates move up 20 points, a little bit more this week. And I still feel like that's just the beginning of the current spike that we're entering. So at the moment, no, we haven't seriously considered selling our Okeanis vessels to Synacor. Operator: Your next question comes from the line of Liam Burke with B. Riley. Liam Burke: You're generating a lot of cash at this level. You've got a nice hefty cash balance to support the acquisition of the 2 new Suezmaxes. Is your capital allocation strategy going to change from how it has been in the past? It's here. Iraklis Sbarounis: Liam, it's Iraklis here. I don't think it has changed. I mean it has been for some time, a key priority for us to distribute as much value as possible to shareholders. The transactions that we did were structured in a way where that was not jeopardized by any means. And this quarter and the distribution we're giving is indicative of such strategy. So not really, we're trying to give out as much as possible, and we're just focusing on extracting as much possible -- as much value as possible from the market to deliver that to shareholders. Liam Burke: Okay. Just a follow-on, on the market. In the prepared comments, the spot market is still continuing to move, I mean, exponentially at this point. But is there any thought to taking some money off the table and moving some vessel or more vessels to term charters? Aristidis Alafouzos: Liam, we answered that during the presentation as well. At the moment, the answer is no. I think what we want is to have a vast majority of the fleet in the spot market, especially as we feel that there's a lot more upside to spot rates and to the charters and owners' expectations of spot rates over the next considerable period. So I think for now, we need to keep our ships in the spot market, so we have all the optionality we need. And then in a few months, we look at it again. But for the time being, the answer is clear no. Operator: Your next question comes from the line of Fredrik Dybwad with Fearnley. Fredrik Dybwad: Congratulations with the strong results and strong bookings. I was just trying to circle a bit back to Synacor. I was a bit interested in hearing your take on how -- can you guys hear me? Aristidis Alafouzos: Yes, you got cut off right when you're asking the question. Fredrik Dybwad: Okay. Okay. Yes, I was just circling back to the Synacor stuff. How -- interested in hearing your take about how in practical terms, how is he going to be able to corner the market as we know, he hasn't fixed that many ships yet, has fixed a couple. And then lastly, how long do you think that can last if he's successful? Aristidis Alafouzos: I think that's a better question for Synacor then or [indiscernible]. I do see that his ships have been fixing. And I mean, I think that he has -- the company has stated where they think the market should be, and they will fix at those levels, and they've been very consistent with that. So I assume once rates get to the levels that they want, they'll fix some ships, they'll assess where the market is, and they'll continue to raise their expectations and put the rates higher and continue pushing this market higher. So I don't know. Again, the specific strategy of the company, and it's a question for Synacor. Operator: Your next question comes from the line of Clement Moll with Value Investors Edge. Climent Molins: First of all, congratulations on the 2 accretive offerings you pursued in recent months. I wanted to start by asking about where you see your maximum fleet size, say, on VLCCs and on Suezmaxes, where you can still capture this kind of premium you've been able to realize in recent years? Aristidis Alafouzos: Thank you for the question and being on the call. I think we answered it on a previous call as well that we would be comfortable for the fleet to continue to -- on a theoretical level, we'd be comfortable if the VLCC or Suezmax fleet was slightly larger, and we could still capture the same earnings. But what I can tell you for sure is that the fleet is the right size today for us to continue doing so. So it's not just about fleet size. It's also about the team and personnel and the technical manager. So it's -- there's many facets to how we hope -- how we have and hope to continue outperforming. But I can tell you that currently, our fleet size is perfect for us to keep doing so. Climent Molins: Makes sense. And this one is a bit more on the modeling side, but you mentioned you were thinking about potentially doing a dry docking in Turkey. Could you talk a bit about the delta between doing that in Turkey versus, say, in China? Aristidis Alafouzos: Yes. I mean I think that depending on the type of paint specification you want and maybe you have an expectation of like $0.25 million to $0.5 million more expensive [indiscernible]. But in a strong market, you save way more of that by being able to keep your earnings higher and not repositioning all the way out there and all the way back. Some owners prefer to trade in the East. Historically, as a company, we've always -- we started off on smaller ships as well like before we were public on Aframaxes and our strongest relationships are in the West and with the more Western-based oil companies and traders. So we really feel that this is the area that we can outperform. And if we have a ship that goes in the East for dry docking or she gets, a Suezmax gets an option declared out there, we never think, okay, let's trade in the East. It's always about bringing her back home into the West. And by dry docking in Turkey, we can avoid the whole positioning out there and repositioning her back. Now I think at times, this can be easier. So let's say now like CPC Korea is $9.5 million in freight to go around the cape. So those are great earnings to position your ship out there. But the CPC volumes that I mentioned during our call aren't always flowing east. Sometimes they flow only into Europe. Now I assume that with Venezuela and all the knock-on effects of the Venezuelan oil and what places what and down the line, perhaps that has something to do with why we see more CPC going east. But it's not something consistent. And then you also have the issue of the backhaul. And before the war started -- before the war in Gaza started, the Suezmaxes would be easy to go through the Suez Canal as well. And that was a way to have a backhaul that it was always at a discount to the front haul, but because you're going through the Suez Canal, it wasn't such a long voyage. Now being forced to go around the cape both ways, it becomes an extremely long voyage. So you kind of -- you lengthen those lower rate economics, which is something that we don't prefer for the next dry dock. Climent Molins: Yes. Makes sense. The opportunity cost is simply too high. Operator: There are no further questions at this time. I will now turn the call back to Iraklis for closing remarks. Iraklis Sbarounis: Thanks, everyone, for attending this call. We look forward to touching base in May for our first quarter update. Aristidis Alafouzos: Bye, everyone. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Welcome to Mativ's Fourth Quarter and Full Year 2025 Earnings Conference Call. On the call today from Mativ are Shruti Singhal, Chief Executive Officer; Scott Minder, Chief Financial Officer; and Chris Kuepper, Director of Investor Relations. Today's call is being recorded and will be made available for replay later this afternoon. [Operator Instructions] It is now my pleasure to turn the call over to Mr. Chris Kuepper Sir, you may begin. Chris Kuepper: Good morning, everyone, and thank you for joining us for Mativ's Fourth Quarter and Full Year 2025 Earnings Call. Before we begin, I'd like to remind you that comments included in today's conference call include forward-looking statements. Actual results may differ materially from these comments for reasons shown in detail in our SEC filings, including our annual report on Form 10-K and our quarterly reports on Form 10-Q. Some financial metrics discussed during this call are non-GAAP financial metrics. Reconciliations to the closest GAAP metrics are included in the appendix of the earnings release, which, along with the accompanying slide deck is now available on our website at ir.mativ.com. With that, I'll turn the call over to Shruti. Shruti Singhal: Thanks, Chris. Good morning, everyone, and thank you for joining our call. We appreciate your continued interest in Mativ and are pleased to have this opportunity to share our outstanding results for the fourth quarter and full year of 2025, marking a period of remarkable success and progress. As I reflect on the past 12 months, I am incredibly proud and inspired by the unwavering commitment, agility and perseverance the Mativ team has demonstrated. 2025 was not just another year, it was a transformational journey for our company. We faced a convergence of external headwinds from anemic demand in certain industrial sectors to a dynamic and often unpredictable trade and macroeconomic environment. Yet it was also the year we proved that Mativ is built to navigate these challenges and emerge even stronger. We not only overcame these obstacles but also showcased Mativ's strength and determination to thrive and grow. Our fourth quarter results were a powerful culmination to this exceptional year. We delivered year-over-year improvements in sales, adjusted EBITDA and adjusted EBITDA margin. The metric that best showcases our operational discipline was free cash flow. We generated record free cash flow for the full year, more than double compared to the prior year. This is the direct result of an enterprise-wide focus on disciplined execution, prudent inventory management and aggressive expense control. Early on in 2025, our mandate became clear: improve the company's performance and build a foundation for sustainable profitable growth. I can confidently say today that we have made significant progress towards that goal. Over the past year, a cultural transformation has been underway at Mativ that fundamentally reset our trajectory. It fosters agility, speed, and accountability. By streamlining decision-making and bringing our teams closer to the customer, we have shifted from a reactive stance to a productive, growth-driven approach, confidently shaping our future. We also moved from a defensive posture, reacting to market volatility to an offensive one, where we drive our own destiny through focused execution. We established a strong foundation built on 3 strategic pillars: driving enhanced commercial excellence, strengthening our balance sheet and optimizing our portfolio. Let's start with the first pillar, commercial excellence. In a global environment characterized by weak end market demand, driving top line growth requires more than just serving the current market. It requires share growth and value maximization. Capping off this year, Q4 net sales grew to $463 million, with organic sales up 1.9% compared to prior year. These results validate how our unified sales force is collaborating across segments, leveraging the full Mativ portfolio to expand our growth pipeline and deliver innovative solutions to both existing and new customers. The resilience of our results also underlines how our portfolio of highly engineered technical materials is instrumental to our customers' success. We are partnering with customers to solve their most complex challenges, supporting their global operations with a reliable and localized supply chain and cutting-edge products. In the second pillar, strengthening our balance sheet, operational and working capital efficiencies was central to achieving this objective. Recognizing in early 2025 that volume leverage would be a challenge during the year, we focused on what was within our control, our pricing, our cost structure, our capital investments and our inventory levels. We successfully drove pricing execution with precision to carefully manage our price versus input cost performance, ensuring coverage of our raw material inflation while we captured additional value through innovation and supply chain excellence. In 2025, our cost-cutting efforts yielded savings across the business of nearly $20 million. The results were evident throughout 2025, culminating with Q4's adjusted EBITDA growing 19% to $53.5 million and margins increased by 180 basis points compared to prior year. This margin expansion is clear evidence that our determined initiatives are taking hold and driving value. Another principle of this pillar is cash flow. I am pleased to report that we generated record free cash flow of $94 million in 2025, increasing nearly 140% year-over-year. In 2025, with a focus on inventory efficiency, we intentionally lowered our inventory levels by $26 million versus 2024, while supporting full year organic sales growth of 2.5% and not compromising customer service levels. We also lowered our annual capital expenditures by $15 million while prioritizing safety and growth projects. The additional free cash flow allowed us to reduce our net debt by over $60 million and advance towards our target leverage range. This continued focus on cash flow generation provides us with liquidity and flexibility to navigate future uncertainties while continuing to invest in our highest return opportunities. Finally, our third pillar centers around optimizing our portfolio. Over the past 3 quarters, we have performed a comprehensive portfolio review, including assets, product categories, facilities and support functions. In 2025, we took decisive steps in closing an underperforming facility in Wilson, North Carolina, and we further optimized our supply chain support infrastructure. We streamlined SKUs and optimized R&D resources by prioritizing efforts and expenditures to better leverage resources while minimizing impact to our commercial pipeline. Portfolio optimization remains a top priority for 2026. We are harmonizing our go-to-market strategies to match customer needs and demand trends. aligning our broad portfolio with areas of strongest growth. This approach will guide innovation, manufacturing, supply chain and sales resources, ensuring capital is deployed where it can deliver the greatest impact. With that, let's turn to our segment results for the quarter. Our Filtration and Advanced Materials segment, or FAM, had an outstanding quarter and built on its momentum from last quarter. This marks the second quarter of sales and adjusted EBITDA growth since the merger. Net sales were up more than 5% versus prior year. with notable growth in all categories, led by double-digit growth in transportation and industrial filtration, paint protection films and erosion control netting. In our Sustainable and Adhesive Solutions segment, or SAS, sales were down slightly on an organic basis, driven by lower-than-expected volumes. SAS growth in key categories was led by health care, cable tapes as well as commercial print, more than offset by headwinds in labels, automotive tapes and release liners, partly in Europe. We remain optimistic about overcoming these pockets of softness and are confident in our ability to adapt effectively as market conditions evolve throughout 2026. Before I turn to our outlook, I'll provide a few thoughts on the macro environment, how it affects Mativ and how we drive value. We are operating in a world of heightened complexity with dynamic trade movements and pockets of significant geopolitical instability. These realities require us to remain agile and adapt our business. Mativ is uniquely positioned to navigate this constantly evolving environment. Our global footprint allows us to be close to our customers in over 100 countries, mitigating single region risks. Our diverse supply chain and procurement strategies have proven resilience, ensuring that we can deliver for our customers on time without interruption and at a fair price. To demonstrate our strategy and full range of capabilities and how they drive value, I'll share a brief overview of our value proposition. We engineer surfaces and substrates through coating, saturation, extrusion and adhesive technologies to unlock material performance in some of the most demanding customer applications. Our harmonized global network consistently delivers continuous tight tolerance, highly complex profiles from development through high-volume production. Our global supply chain scale delivered through localized assets and service capabilities guarantees efficient execution and dependable fulfillment. These capabilities are at the core of our customer relationships. Mativ wins when our customers win in their markets. This builds long-lasting relationships on a foundation of trust that drives sustained demand and value creation. We are committed to growing these strategic imperatives in the years ahead. Looking ahead, I'm encouraged by the opportunity to build on the foundation we established in 2025. Scott will walk you through our underlying assumptions for 2026, but I want to leave you with a key takeaway. As we continue to strengthen our performance, I want to emphasize our unwavering focus on profitable growth and confident execution. The improvements we made in 2025, strengthening our balance sheet, rightsizing our inventory and optimizing our cost structure, provide the foundation for future growth and resilience against uncertainty. We have and will continue to transform Mativ into an agile, more capable entity, one that can better navigate dynamic environments to achieve profitable growth and increased cash flow generation. In 2026, our cost-saving efforts will remain a focus with Wave 2 expected to deliver additional $15 million to $20 million of realized savings throughout 2026. Another important priority in 2026 will also be leveraging AI as a foundational enterprise capability. We are strategically pursuing a dual approach to AI, balancing return on investment, use cases like sales lead generation, advanced production scheduling and predictive maintenance with return on employee initiatives that boost productivity, such as AI-powered data analysis and contract management. These applications will be embedded across commercial, operational, supply chain, finance and workforce functions to drive sustained performance and long-term competitive advantage. To sum up, I'm proud of our team's execution in the challenging 2025 demand environment. In both segments, we focused on factors within our control and drove tangible results. As a result, our consolidated adjusted EBITDA margins improved by 180 basis points versus prior year. This strong performance is a testament to the dedication and expertise of the entire Mativ team, who also improved our company-wide safety metrics by almost 10%. I extend my deepest gratitude for their outstanding contribution and efforts. With that, I'll turn the call over to our new CFO, Scott Minder, to provide a more detailed overview of our financial performance. Welcome to the team, Scott. Scott Minder: Thanks, Shruti, and good morning. Let me start by saying that I'm excited to be part of Mativ's dynamic team. The company strengthened its foundation in 2025. And in 2026, we're accelerating progress toward our strategic objectives. Turning to our financials. 2025's results were solid, and we ended the year with a strong quarter. Mativ's full year 2025 net sales were just under $2 billion, up 2.5% organically and up modestly on a reported basis, both compared to prior year. On the positive side, volume mix increases in both segments, favorable selling prices in our SAS segment and favorable currency helped to drive this growth. These benefits were partially offset by sales from closed or divested plants and unfavorable selling prices in our FAM segment. 2025's adjusted EBITDA was $225 million, up 3% versus prior year, a favorable price to input cost ratio and lower SG&A expenses provided an $18 million benefit. Increased distribution costs due to cross sourcing of certain products that would have been subject to tariffs, higher manufacturing costs and unfavorable volume mix provided partial offsets. Adjusted EPS were $0.70 versus $0.62 in the prior year. Turning to Q4. Mativ net sales were $463 million, increasing year-over-year by nearly 2% organically and 1% as reported. Favorable currency and selling prices were partially offset by lower volume mix. Adjusted Q4 EBITDA was $53.5 million, increasing 19% versus prior year. A favorable price-to-input cost ratio, along with lower manufacturing and SG&A expenses were partially offset by unfavorable volume mix and higher distribution costs. Looking at our segments, FAM net sales of $177 million were up over 5% versus Q4 2024. This growth was driven by favorable volume mix and currency translation. These benefits were partially offset by slightly lower selling prices. FAM's adjusted EBITDA of $33 million increased by 26% year-over-year, while margins of 18.7% improved by 300 basis points over the same period. These gains were led by favorable prices net of input costs, improved volume mix and lower SG&A expenses. Increased manufacturing costs partially offset these gains. In our SAS segment, net sales of $285 million were largely flat year-over-year on an organic basis and were down roughly $5 million on a reported basis. Favorable currency and selling prices were more than offset by lower organic volume mix. As Shruti mentioned, this was driven mainly by lower-than-expected volumes in labels, automotive tapes and release liners in part due to European markets. SAS's adjusted EBITDA of nearly $39 million increased by more than 8% year-over-year with margins of 13.6%, improving by 130 basis points. Earnings benefited from lower manufacturing costs and a favorable price-to-input cost ratio. This was partially offset by lower volume mix and higher distribution expenses. Looking at corporate items, unallocated expense of roughly $19 million increased by $1 million versus prior year due to the timing of employee-related transition costs. Other expenses of roughly $3 million compared to other income of approximately $9 million in 2024. This change was driven by asset sale gains and favorable foreign currency movements in the prior year. Our Q4 2025 tax rate was a benefit driven largely by the impact from reductions in our valuation allowance. Interest expense of $17 million decreased by 14% versus prior year, primarily due to lower debt balances. Throughout 2025, we've updated you on strategic initiatives to improve our cost structures and generate increased cash flow. As Srudhi highlighted, in year 1 of our 2-year cost savings focus, we generated nearly $20 million of realized benefits in 2025's P&L. In Wave 2, we expect to continue this progress, executing on multiple cost savings initiatives to yield an additional $15 million to $20 million of P&L benefits in 2026. We'll keep you updated as we make progress throughout the year. 2025's free cash flow of $94 million was the highest since the merger in mid-2022 and more than doubled 2024's result. It was driven by operating cash flow of nearly $134 million, which increased by more than 40% compared to prior year. Disciplined capital expenditures of $40 million, as we previously guided, also supported this strong result. At the end of 2025, net debt was $934 million, reducing by $61 million or by more than 6% year-over-year. We closed the year with ample available liquidity of $515 million. Our net leverage ratio, as defined in our credit agreement, was 4.2x. While we made progress deleveraging in our cash flow utilization priority continues to be on debt reduction. In 2026, we expect to make progress toward our leverage goal of 2.5 to 3.5x. Since arriving in January, I've worked with the team to understand our capital structure and develop a plan that thoughtfully addresses our debt maturities on a timely basis while maximizing flexibility and cost efficiency. More to come on this topic as we progress throughout the year. Now I'll share our Q1 and full year 2026 outlook. Similar to 2025, we're navigating an anemic end market demand environment in the first quarter, one that is impacted by tariffs and macroeconomic policies. As a result, demand signals into our business remain soft. We anticipate this to negatively impact our volume growth and operating efficiencies in the quarter. We're working diligently to offset these manufacturing impacts in the near term by streamlining workflows, debottlenecking processes and eliminating waste. As a result of these efforts to offset the impacts from soft demand, we expect Q1 adjusted EBITDA to increase by 15% to 20% versus prior year, driven by a slightly favorable price-to-input cost ratio, operational improvements and SG&A savings. Both of our business segments proved resilient while navigating a similar environment in 2025, and we're confident in our ability to manage through this landscape in early 2026. While we don't provide formal full year guidance, I'll give you some drivers for cash flow and expense. In 2026, we expect to invest $45 million in capital expenditures, increasing from 2025's restrained level. These investments are split roughly 50% on growth projects and 50% on efficiency and safety projects. Additional 2026 drivers include onetime cash costs between $5 million and $10 million to fund savings initiatives, a $10 million investment in net working capital to support volume growth, depreciation, amortization and stock-based compensation of $90 million combined, interest expense of roughly $74 million based on current market conditions; and finally, $8 million in annual fees for our accounts receivable securitization facility. Looking at our raw material costs, we expect a $20 million to $25 million headwind, mainly driven by forecasted market price increases for resins, polymers, pulp and paper. These increases are weighted towards the second half of the year. As you saw in 2025, our commercial teams successfully implemented pricing to offset the impact from rising input costs. We expect to leverage this capability in 2026, maintaining a healthy balance between the timing and magnitude of pricing to offset the expected input cost increases. I'll conclude by highlighting our key financial imperatives for 2026. Cash flow generation and disciplined deployment remain key focus areas. We expect to make progress toward our target leverage range of 2.5 to 3.5x. Rigorous cost discipline remains a focus with an additional $15 million to $20 million in cost savings expected within the year. These efforts, combined with several working capital efficiency projects are expected to drive meaningful free cash flow generation again in 2026. The team made great progress in 2025, and we intend to build on that in 2026. With that, I'll hand the call back to Shruti for his closing remarks. Shruti Singhal: Thank you, Scott. What you should take away from today's call is that Mativ has effectively ignited a comprehensive transformation. 2025 marked a pivotal juncture where we demonstrated the capacity to deliver robust financial results despite a complex macroeconomic landscape. Our performance characterized by year-over-year improvements in sales, adjusted EBITDA and margins serves as a clear validation of our operational strategy and business resilience. Our progress is underpinned by a disciplined adherence to our 3 core pillars: enhanced commercial excellence, balance sheet strengthening and portfolio optimization. By rigorously managing factors within our control, we generated record free cash flow, more than doubling prior year's levels. This fiscal discipline has enabled us to materially reduce net debt and realign our leverage profile, thereby securing the operational flexibility required for future value creation. Looking towards 2026, Mativ is now structurally positioned for sustainable, profitable growth. We have the requisite leadership, strategy and capital discipline to deliver long-term shareholder value. We remain fully committed to delivering for our customers, improving our leverage and balance sheet by generating significant cash flow and capturing volume and share gains that validate our go-to-market strategy. I am excited for our path ahead as we continue our increased pace of execution to drive value for Mativ, our customers and our shareholders. Thank you for joining us this morning. Operator, please open the line for questions. Operator: Our first question is from Daniel Harriman from Sidoti. Daniel Harriman: I've got a couple for Shruti and then one for Scott today. But Shruti, you kind of talked about the headwinds within SAS, and I was hoping you may be able to provide a little bit more detail on the specific businesses that are being pressured there. And then whether you see any potential catalysts that could support improvement as we move through 2026? And then we've been really impressed with the progress within FAM. And I'm just curious if you could talk to how sustainable you think that momentum is given the current demand backdrop. And then, Scott, we look forward to working with you. Welcome to the team. And I'm just curious if you could talk about the cadence of free cash flow in 2026, if we should expect that to kind of mirror the quarterly cadence from 2025. Shruti Singhal: I'll start. Thanks, Dan, for that question. I appreciate it and your kind words. Regarding SAS, the good thing about our portfolio is its ability to offset demand that's in weak in some markets with growth in the others. So specifically, we saw some weakness in automotive labels or automotive tapes, sorry, and industrial labels and particularly in release liners in Europe. But what we are doing is we are focusing on share gain opportunities in Europe. And in North America or beyond Europe, we're looking at our overall release liner portfolio and capitalizing on the better free trade agreements to be able to be competitive in the market in North America and also enabling share growth. So I am very optimistic on release liners here going forward, especially in the second half of 2026. Regarding your question on FAM, really outstanding quarter. As we have mentioned in the past, this is an area we focused our investments, our resources, changing leadership and we are seeing the results of that. We are seeing growth in -- despite the markets, growth in transportation and industrial filtration. We are seeing growth in our netting, which is the erosion control market. That we mentioned before, we are benefiting from the tariff that were implemented. And the films business, where we made significant investment, both capital as well as resources, we are seeing an improvement year-on-year and closing that gap. So overall impact is very favorable for FAM in Q4, and I expect that trend to continue in Q1. Scott, over to you. Scott Minder: Yes. Thanks, Dan. I appreciate the comments and looking forward to working with you as well. Really, I'm going to split your question into 2 parts. And I think we'll start with free cash flow and how that dovetails into leverage. The team did a really good job in 2025. We generated record free cash flow of $94 million. That more than doubled our 2024 result. And efforts were broad-based across the board, right, improved profitability by reducing costs. We increased margins. We reduced inventory, and we really showed CapEx discipline. So we'll continue to push in these areas in '26, and we expect meaningful results. We talked about additional cost savings of $15 million to $20 million, ongoing CapEx discipline with some additional focus on growth investments. And we're going to continue the working capital focus. We'll need to fund some growth as we talked about. So if you put all that together for the full year, we do anticipate a small decline from 2025 record levels, but that's primarily to fund growth. We talked about $10 million in working capital, and we talked about an additional $5 million in CapEx. But we also have opportunities to build on our working capital efficiency and continue to improve our profitability. You asked about a cadence. So from a cadence point of view, I think we're going to follow our normal kind of seasonal pattern. We'll have some outflow in Q1, hopefully improving on prior year. And we do that generally to rebuild inventory. We expect strong generation in the middle part of the year and a positive finish to the year. So for me, the bottom line here, I've seen over what I've talked to folks and as I've come in, we really evolved the culture at Mativ to be more cash flow centric. And we expect this to produce good results in 2026 and great results over the long term. So that's free cash flow, and I think it dovetails pretty nicely right into leverage. You're going to see some similarities in my answer because the topics are related. So again, I think the team did a great job here in 2025. From peak to where we ended the year, we reduced leverage by 0.5 turn, ended the year at 4.2, which was the low point for the year. And really, it was enabled by improvements across the financial statements. We increased profitability. We improved working capital. We stayed disciplined on our capital spending, and we focused that benefit on leverage reduction. We reduced debt by $60 million. That discipline is really built into the business. So our primary focus remains on leverage reduction in 2026. We expect to continue to make progress towards the goal we've given you of 2.5 to 3.5x, and we should end the year in 2026 as we see now in the mid- to high 3s, and we're going to keep you posted on that as the year progresses and we make progress toward that. Operator: Our next question is from Lars Kjellberg from Stifel. Lars Kjellberg: I'm just looking at or thinking about your guidance for Q1. Of course, you're looking up against a very, very easy comp from 24% last year and talking about up 10%, 15%. It kind of seems to be slowing progress on an underlying basis a bit. So can you talk to us a bit what you're seeing in the market? And if the seasonally weak quarter is sort of from an underlying perspective, low point and how you build through the balance of the year? Because again, if you look at the EBITDA essentially, you're ending up below where you were in '24. I appreciate there's been some corporate changes, but sort of the progress seems to be slowing a bit. So if you can provide any color on that, that would be of interest. Shruti Singhal: Yes. Maybe I can start off, Scott, and please feel free to comment. So Lars, thanks for that question. Again, good to hear from you. For Q1, I think what Scott mentioned is the guidance of 15% to 20%. And we see some weakness in demand on top line, especially in the categories I mentioned in our SAS segment. But even in that -- in SAS, we are seeing other categories performing well, and I expect them to continue to perform well beyond Q1 and going into the remainder of the year. And as I mentioned, in our FAM category, while remember that FAM because of our presence in filtration is also in Europe, in automotive, the demand is weak there and especially in Q1. But the actions that we have taken and as that pipeline continues to flow, I expect the FAM segment to perform well in Q1 and also as we go into the remainder of the year. So starting off on a positive note in Q1, while navigating through the weak demand. But as we build our pipeline and commercialize those opportunities for the remainder of the year, both in SAS and FAM, I'm optimistic on our performance. Scott, feel free to add anything else. Scott Minder: Yes. Lars, good to meet you. I think Sri said most of it there. But top line, we expect probably very low single-digit volume growth rate, reflecting that soft demand environment. We're going to continue working on our pricing initiatives to help offset those input costs. Where we see the leverage coming through is really on the EBITDA. So while top line is muted, we expect EBITDA growth of 15% to 20%. So offsetting that demand weakness in the manufacturing inefficiencies that come along with that with the efforts we worked on last year around operational costs and SG&A costs, we've got a program this year to take out another $15 million to $20 million that gets started on January 1. So I think we're doing a lot to continue to improve the earnings power of the business even despite top line that's relatively soft. Lars Kjellberg: Just a quick follow-up on the commercial pipeline. True to, you obviously made a tremendous change to the commercial approach and you expect to win in the market. Can you share with us how you sort of view that commercial pipeline and how you expect to perform relative to the underlying market in the key segments you pursue? Shruti Singhal: Right. So it's a very focused approach on the commercial pipeline. The rigor and cadence by our commercial leadership is very different in terms of realistic opportunities. And we're controlling what we can control. As we mentioned, there's different categories in the market, which is weak. But as we look at our -- for example, our films business, we made the investments in resources and capital. We have made good progress in lead time reductions, quality improvements, and we're winning the customer confidence and trust back. And as a result, the business, that's one example of how our commercial pipeline and operations working. Similar in approach in filtration. We have seen good progress, and we know the automotive market, especially in Europe, is anemic. But we have seen good progress in HVAC, air pollution control and water filtration. We built a good pipeline there with customers, and we are winning in those. So to sum it up, both in SAS and FAM segments, we are very surgical on our commercial pipeline. We're pursuing the opportunities with great precision. And our customer collaboration and intimacy, I would say, is better than I've ever seen before and even the customers have alluded to that. So that's why we are optimistic for Q1 and especially beyond in 2026. Operator: Our next question is from Massimiliano Pilato from Stifel. Massimiliano Pilato: I have a couple on the comment on capturing volumes and share gains. Of course, you mentioned you had some headwinds in SAS. And you also mentioned higher input costs through 2026 to be offset by price increase. So how do you plan to capture volumes if the demand environment is still very muted and the ability to flex on prices is a little bit limited through 2026. That's the first one, and I'll ask the second one after that. Shruti Singhal: Thanks, Massi, for your question. Appreciate it. Regarding the share gain and pricing, so this is a collaborative effort. And it's -- like I mentioned in my comments as well, that it's very, very precise. So we are working very closely with our procurement, supply chain, operation teams to balance our costs with the commercial team going in for -- whether it's for the pricing or the share gain. So very, very precise and very surgical process depending on the category. That's the approach we have taken. It's a proven play. We have shown that in our FAM business. As I mentioned, 2 consecutive quarters of growth. And that approach is also working in -- or being applied to SAS and because it's proven approach for us. And as a result, we are winning in the market segments, and that's -- we want to continue -- we will continue to do that in Q1 and beyond. Scott Minder: Yes. And if I could add one thing, Sri, I think -- yes, Massimiliano, if I could add. So our pricing is one, to recover input cost increases, but there's also a connection to value. And our products bring a lot of value to our customers. Think of like a film, a protected film. It's protecting a valuable asset. So we feel like we bring value-add solutions to our customers, so we can get pricing in some of our applications because of the benefit it brings to customers. So one, it's to recover input costs, and we're committed to that, but it's also to capture the value we're bringing to the customer. Massimiliano Pilato: Then the second question relates to the rollout of new projects. Of course, you announced the partnership with Miru. How should we be thinking of the contribution of those new projects to flow through the P&L? Is it something that we can see in '26? Or is it more of a 2027 contribution? Shruti Singhal: Yes. Thanks, Massimiliano for -- so we are very excited about our partnership and collaboration with Miru. As I announced that we made investments and the technology is in terms of improving the energy efficiency in automobiles and buildings is very exciting for Mativ. We continue to work with Miru on a very close basis. We can expect to see some sales depending on market towards the end of 2026, but more flowing into 2027. Massimiliano Pilato: Got you. Very good. Then the last one on the outlook for Q1 '26. How much of the $15 million to $20 million of savings through '26 are already baked into Q1. Scott Minder: Well, on a run rate basis, we think we've got $5 million to $7 million that we're going to lap in 2026, not all in Q1. And then the rest of the savings will be new initiatives that we come up with from now until the end of the year. So there'll be a little bit more weighted to the middle to latter part of the year. Operator: We currently have no further questions. So I will hand back to Shruti for closing remarks. Shruti Singhal: Thank you. First, I want to express my sincere gratitude to all Mativ employees for their dedication and hard work over the past 12 months in embracing change and delivering our Q4 and full year results. And finally, thanks to all of you for joining us this morning for our earnings call. We look forward to staying connected in the coming months and to welcoming you to our next earnings call in May. Have a wonderful day ahead. Thank you for your time. Operator: Thank you. This concludes today's Mathys Fourth Quarter and Full Year 2025 Earnings Call. Thank you for joining. You may now disconnect your lines.
Operator: Good morning everybody. Welcome to Vector Limited Conference Call and Webcast to discuss the company's financial and operational results for the half year ended 31st December 2025. [Operator Instructions] I must advise you that this conference call is being recorded. I would now like to turn -- hand over to you Vector's Chair Douglas McKay who will take you through the call. Douglas McKay: [Foreign Language] Hello everyone, and welcome to this presentation. I'm Doug McKay, Vector's Chair. Today, we're going through Vector's results briefing for the half year ended 31 December 2025. Joining me on the call for the first time as our group Chief Executive is Chris Blenkiron. Pleased to have you here, Chris. And we have Chief Financial Officer, Jason Hollingworth. We'll start the presentation with comments from Chris on overall financial performance. Then Jason will look at the detail. Chris will then talk about the outlook for the next 6 months, and then I will come back to talk about the dividend. After that, we'll be happy to take your questions. And I'll now hand over to Chris to start the presentation. Chris Blenkiron: Thank you, Doug. Hello, everyone, and thank you for joining the call. It's great to be speaking with you for my first market update since joining Vector in December. I'll start off by setting the context for these results. The new regulatory period, known as DPP4, began on the 1st of April 2025. At this time, the Commerce Commission increased allowable revenue for all electricity distribution businesses in New Zealand. The changes support the investment that's needed for the country's energy transition. Also, keep in mind that the gray bars on the slides show the impact of businesses that have now been sold and continuing operations are shown in blue. This is to allow for easy year-on-year comparison. With that background in mind, I'll talk through some of the top line results. Vector's group financial performance for this half year has been strong and in line with our expectations. Revenue for Vector Group is up 14%, driven by higher electricity revenue. Higher revenue has flowed through to an increase in adjusted EBITDA to $240 million. This is up 19% over the same period in 2024. Adjusted EBITDA excludes capital contributions, which are paid by new customers for their connections to the network and is how we currently ensure that growth pays for growth rather than cost of growth being spread across all Auckland electricity consumers. Net profit after tax was $113 million, down 4% with the higher adjusted EBITDA offset by lower capital contributions. Gross capital expenditure was $223 million, down 15% on the prior period. However, we do expect capital expenditure to be higher in the second half of the year than it was in the first. In terms of regulatory quality measures, we include SAIDI minutes in our quarterly operating statistics, which were released last month. SAIDI is how electricity distribution businesses are measured by the Commerce Commission for the duration of power outages on their networks over a year. At this stage in the regulatory year, which finishes at the end of March, we are within the regulatory limit. Our focus is on making sure every dollar we spend produces the best value possible and keeping our charges, which are around 1/4 of the total power bill as affordable as we can. I'll now hand over to Jason to go over the detail behind these top line results. Jason Hollingworth: Thank you, Chris. This slide shows the segment contributions towards the adjusted EBITDA figure. Adjusted EBITDA from the Electricity segment was up $48 million, reflecting that HY '26 was under DPP4 and HY '25 was under DPP3. Earnings for Gas were flat on the prior period. Other includes VTS, Vector Fibre, Equalise, which offers cyber services to other lines companies and our group eliminations. It also includes a $9.3 million loss on sale from HRV effective on 1st of August '25. Next slide. Net profit after tax was down $5 million or 4%. This is down on the prior period with the higher adjusted EBITDA being offset by the factors shown on the slide, including lower capital contributions, fair value movements on financial instruments and tax. Gross capital expenditure has decreased from a comparable 2024 period to $223 million, and you can see here some of the detail. Net CapEx after deducting capital contributions was down at $126 million. Capital contributions were down at $97 million. The slide on group debt shows that our debt levels have remained flat with gearing at 37%. The next slide, we'll now look at the segment performance, starting with electricity. Adjusted EBITDA for electricity was higher, as previously mentioned. The higher impact from pass-through costs is the transmission charges we collect on behalf of Transpower. These have increased because of Transpower's own revenue reset that reprice transmission at the same time as distribution. We passed transmission costs on and recover them via our revenues. There are also higher OpEx costs in the period linked to increased maintenance activity and also higher digital costs. Total electricity connection numbers grew by 1.3%. Looking at gas. Adjusted EBITDA for gas distribution was flat at $24 million, with slightly higher revenue in the period, offset by slightly higher costs. Gas distribution volume was down 4.5% compared to the prior period due to lower demand from the residential, industrial and commercial sectors. There has been a 0.4% in total gas connections over the period. These results are consistent with our most recent forecast for the Gas network, which were published last year in our gas asset management plan. We have recently submitted on the Commerce Commission's DPP4 draft Gas decision. This is the 5-year reset for gas distribution networks with the commission's final decision due in May 2026. We welcome the commission's intention to continue to accelerate depreciation given the heightened uncertainty over the long-term nature of gas in New Zealand. And given the difficulty in accurately forecasting gas volumes for the next 5 years, which is fundamental -- which is a fundamental input into setting a price cap, our submission advocates for a move away from a price cap for approach that would share volume forecast risk between both the network owners and consumers. The Commerce Commission is still considering its final decision, so we don't yet know what this will mean for consumer prices. Pipeline costs are just one component of the gas bill; however, most forecasts show that over the long term, these will rise. That's why we're advocating for a managed transition and making sure we recover costs fairly now. This also means keeping the gas network safe and reliable while it's still in use and planning for decommissioning when these pipes reach the end of their life. Next slide looks at Bluecurrent. Our investment in Bluecurrent continues to perform in line with our expectations. Year-on-year, Bluecurrent has increased its revenue, resulting in higher EBITDA, and this is flowing through to higher distributions. In this period, we received $26.6 million of distributions in relation to our 50% shareholding. And I'll now hand back to Chris. Chris Blenkiron: Thanks, Jason. For the 2026 full year results, we are forecasting adjusted EBITDA to be within our guidance range of $470 million to $490 million. We are now forecasting gross capital expenditure within the range of $500 million to $540 million. This forecast represents an increase over our full year 2025 capital investment and at around $0.5 billion shows our commitment to significant investment in Auckland's critical energy infrastructure. We're forecasting capital contributions within the range of $180 million to $215 million for the full year. We've tightened the ranges for gross capital expenditure and capital contributions because we now have greater visibility of project time lines through to the end of the reporting period. Thank you to all of the Vector people, our field partners and suppliers who work incredibly hard for our customers and who delivered these results. We know that for our energy system to be at its best and most affordable, the whole sector needs to coordinate well and work in concert with each other. We're committed to doing this to support the region's role in our national economy and to help our country meet our energy aspirations. I'll now hand back to Doug. Douglas McKay: Thank you, Chris and Jason. The board has determined an interim dividend of $0.125 per share with no imputation. Now that brings us to the end of our presentation. But just before we move to questions, I'd like to thank Chris and his executive team and everyone else at Vector, plus our field service providers and call center for their hard work over the period to deliver for Vector customers and shareholders. Chris, Jason and I are now happy to take any questions. Operator: [Operator Instructions] Your first question comes from Grant Lowe with Jarden. Grant Lowe: Tim, can you hear me okay? Unknown Executive: We can. Grant, Yes. Grant Lowe: Thanks for the presentation. And welcome, Chris. Just around a few for me. The electricity business was a beat on my numbers at both revenue and EBITDA. So I think the revenue was up circa 28%, which is a touch higher than my uplift that I was expecting. Were there any sort of one-offs in that result in terms of inflation catch-up and the like that we've seen in the past? Jason Hollingworth: Yes, Grant, there is still a wash-up balance that we were able to recover in this period. So that is in there as well. That's coming to an end because it has a 2-year lag. Grant Lowe: Yes. Okay. And do you have that number to hand as to roughly how much that was? Jason Hollingworth: I don't have it to hand that I can look it up and get it to you, yes. Grant Lowe: Okay. Yes, great. Thank you. Okay. No, that's good. And then just the -- so the guidance has been held, and we've also got that $9.3 million loss in there. With guidance being held, was that guidance already factoring in the $9.3 million loss and the washup balance that going into that number when you set the guidance at the full year? Jason Hollingworth: I think, to be honest, probably not Grant. So I think we're at the probably higher end of that number. That loss turned up after we set that guidance. So yes. Grant Lowe: Yes. So the washup balance was probably $9 million, that's calculable. But -- so effectively, is this effectively a $9.3 million upgrade to the guidance range. Jason Hollingworth: I think it puts us at the top end of that guidance. We're now saying it would have been at the top end of the guidance. We've held the range. But I think if we haven't had the HRV situation, we would have probably been guiding to the top end of the range rather than sort of leaving the range as it is. Grant Lowe: Yes. Okay. I guess, that's useful. And then just around the dividend payout, it was a touch lower than I had in my forecast, I was forecasting 13% versus your 12.5%. I appreciate it's a free cash flow measure. But obviously, the -- if we just think about the EBITDA for a second, that's up quite materially. How did the Board go about -- think about setting the 1H dividend? And then what are the sort of swing factors around for the full year dividend, what we might expect to see there? Douglas McKay: Yes, it's a good question. To be honest, we didn't pay any attention to -- and we haven't with the interim in terms of its percentage relative to the 70% of the policy. And I understand from Jason this morning, it's lower than that. Jason Hollingworth: For the half result. Douglas McKay: For the half year results. Yes. We don't look at the half in that respect. It's the full year that we will pay consideration to the 70% minimum. So we don't have any reason to think we won't be well within the range at the year-end. Look, part of the decision-making was what was it last year in the interim and what should it be this year, given EBITDA is strong, as you say. And so we uplifted it by 0.5%, and we sort of thought, well, that's a good indication of how confident we feel about the way things are tracking. But if you looked at it strictly versus the policy, but we don't think about the half year in that respect, we could have gone a bit higher. But no, we haven't. Grant Lowe: Okay. So I guess -- I mean, my full year is $27 million versus the $25 million last year based on the free cash flow calculation. I guess what I'm hearing is that there was a touch low on the free cash flow side of things. If everything sort of plays out with respect to guidance and everything else, would it be reasonable to assume that there is a slightly stronger uplift in the second half if everything plays out according to plan? Douglas McKay: If everything plays out, yes, it will, Yes. I wouldn't necessarily agree with the $27 million, but you're at the top end of what I'm thinking of as Chairman anyway. I'm not speaking for the Board at the moment, but we'll see. Grant Lowe: Okay. Yes, indeed. And then last one for me. Just I think last year, you provided guidance on Bluecurrent distributions. Do you have any thoughts on that? I see we've got the half year figure of $26.6 million. Do you have a full year figure in mind? Jason Hollingworth: We do have a number. I don't have it to hand, but you can see the year-on-year sort of increase for Bluecurrent period-on-period. So I think that we expect that to continue into the second half. So I think last period, we got $23.4 million. This period, we're getting $26.6 million, so an uplift. So I expect that to continue as they continue to deploy meters. Operator: Your next question comes from Andrew Harvey-Green with Forsyth Barr. Andrew Harvey-Green: Doug, Chris and Jason. Just a couple of questions from me. First one, just looking at the electricity OpEx line, there was a reasonable increase, I guess, relative to first half last year, but even relative to the second half last year. Is that -- should we be thinking as that the sort of the normal half year run rate for OpEx on electricity going forward? Or are there some sort of one-offs in there that might pull it back for the second half and other periods? Jason Hollingworth: I think there are some one-offs in that, Andrew. I don't think it's actually coming down, but I don't think it's going to keep lifting at that rate. There has been, I guess, an increase in our maintenance spend in this half that's probably going to continue with some change in standards and just some extra activity that we've been doing. We also have a couple of large projects underway that are -- have to be under these new accounting rules now have to actually be expensed rather than capitalized. So our digital costs are sort of running at a higher rate, which I think is probably going to continue while these projects are occurring. So yes, it's mainly those 2 areas that are causing that increase, maintenance spend, which is going to continue and this lumpy digital spend around a couple of key projects that are cloud-based and therefore, have to be expensed. Andrew Harvey-Green: Just a follow-on question around the metering. I noticed, I think that it's been refinanced. So you've got -- expecting lower interest costs going forward. All other things being equal, we should expect that to help increase distributions back to Vector from the metering? Jason Hollingworth: They've refinanced at lower interest rates. Their NPAT number is lower because they've had to write off their arrangement fees from the original facility, but sort of that's noncash, if you like. So the actual underlying cash flow is better because they've got lower interest rates, I think, by circa 30 basis points from memory. So it's a reasonable reduction. Andrew Harvey-Green: Yes. Okay. Cool. And last question for me was just whether we've got a little bit of an update on the strategic review of the fiber business. Chris Blenkiron: Yes, Andrew. No real update, that process continues. And just a reminder that there's no guarantee that the outcome of that strategic review would result in a sale, but the process does continue. Operator: Your next question comes from Phil Campbell with UBS. Philip Campbell: Just a couple from me as well. I just noticed in the half year cash flow statement, it looked as though there was some kind of positive working capital movement. So that was one of the reasons why if you did do a dividend payout ratio calculation, it was a little bit lower. I'm assuming there's just timing issues around that, Jason, and that will probably reverse in the second half? Jason Hollingworth: Yes, that's right. There's nothing there that I'm aware of -- yes that's structural. I think it's timing, yes. Philip Campbell: And then just on the dividend coming back to this kind of $0.27, I think we've got that in our model as well, and we're assuming that the payout ratio declines from last year. I think from last year, from memory, it was 85%. So we've got that coming down. I just wanted to see if that was still the thinking. I think the rationale at the last result was just some uncertainty around what EA is doing in terms of those capital contributions. I just wanted to check if that was still the thinking from the Board? Douglas McKay: 0Yes, it will be lower than 85% this time around. Jason Hollingworth: I think last year,, don't lock that in because that was a sort of one-off to do with sort of transitioning from DPP3 to DPP4 and the fact we only had a quarter in our results. So I think we said, look, we're paying up at this level, but it's not a -- don't bake that into your future numbers. Philip Campbell: And maybe just a question on CapEx. Obviously, like it was a bit weaker in the first half. And obviously, you've tightened the range up in the full year, still a large number. What's the kind of reason for the CapEx number kind of coming down? Chris Blenkiron: Yes, Phil, there's a couple of reasons. I mean 1 is some customer projects were sort of pushed out. It's always difficult with these lumpy capital projects, as you know, to get the timing right. So a few of those have been pushed further out. And that's probably the primary reason. So we do have some confidence going in the second half that, that run rate will certainly pick up. Philip Campbell: Is that data centers or you can't really comment? Chris Blenkiron: We can't comment on the specific projects, but there's a number of them. Philip Campbell: And then maybe just last question for me on metering. I noticed that Neil Williams has left a CEO. I'm just wondering if there's any reason for that and whether you've recruited a new CEO for Bluecurrent? Chris Blenkiron: Not yet. We haven't recruited yet. The Bluecurrent Board is managing that process, and we have 2 representatives on that Board, looking after our interests, Dame Paula Rebstock and Simon MacKenzie. And they're in the process of working with the headhunter now to find the right replacement. Philip Campbell: Great. Awesome. And I just noticed you may not know the answer to this question, but I just noticed in the AFR, there was, obviously, one of the Bluecurrent competitors, I think, potentially a transaction happening there. Just wondering if there's any valuation read-through that you might want to comment on? Douglas McKay: Are you talking plus ES? Philip Campbell: Yes. Yes. Douglas McKay: Well, look, I can't quote the numbers, but I did remember thinking the expectations on value looked very, very high. But I didn't do an earnings multiple or anything. It just -- I think it was $3 billion or something. It was a massive number. So obviously, we're trying to be involved in that process. We are interested strategically in increasing our participation in that market, increasing our number of meters but we'll just have to see how that plays out. If people are at that sort of number, that's a very big number. Philip Campbell: Right. And then maybe just very last one, just on the fiber process. Is there any kind of timetable there? When you say we're no guarantee of sales. Is there any time when bids are due or where about are we in that process? Jason Hollingworth: There is a timetable, Phil. And yes, I think we'll know by year-end, whether we've got a transaction or not. And I guess we won't quite know when it completes. It will depend on what the terms and conditions are. But we'll certainly, I think, have landed a decision by 30 June, one way or the other. Operator: Your next question comes from Stephen Hudson with Macquarie Equities. Stephen Hudson: Morning, everybody, and welcome, Chris. All of my questions have actually been posed, but perhaps just a general one for you, Chris. I know it's early days, but I guess I just -- and I know we'll be meeting with you, I believe, the 1st of March as a community. But any sort of initial observations on the state of Vector in terms of assets, people and strategic direction and where you may, I suppose, differ from sort of the prior thinking, I guess? Chris Blenkiron: Yes, sure. I mean, Simon's left a very strong and good business operating here, Stephen. We've got some very strong people in the right roles, doing some really good work. In fact, I think some of the credit that we will get to keeping the lights on and the infrastructure going in Auckland is probably something that we should get. It's in a strong state. In terms of the strategic direction, I've not contemplated any change in strategic direction. The Symphony strategy remains as focused as it has. I think what we'll continue to do is an ongoing test against the external environment, whether that's the customer side, the regulatory settings, decarbonization pace, technical, we'll continue to test those settings. But my focus at the moment is absolutely on sort of disciplined execution on the work that we're doing as we go into the second half. But it's great to join a great business in really strong shape. Stephen Hudson: Very good. Thanks, Chris. And I look forward to catching up. Chris Blenkiron: Yes, Looking forward to it. Thanks Stephen. Operator: Your next question comes from the line of Grant Lowe with Jarden. Grant Lowe: Another one from me. Just around the meters rollout in Australia. Obviously, the regulatory bodies over there have -- I'm not sure exactly what the terminology is, but effectively mandated 100% penetration by 2030. Is there any sort of commentary you can give around Bluecurrent in terms of either contracts signed or thoughts around the level of participation in that rollout at this stage? Douglas McKay: I don't have any updates, Grant, other than we had a Board meeting here yesterday, and Paul was telling me that things are tracking as they had indicated they would be the Bluecurrent Board. So there's no surprises there. There's incremental increases in our metering network. We don't -- we haven't had any acquisitions of packages of meters or anything like that in this period. So it's all organic at this point in time, and it's steady. Grant Lowe: Yes. Okay. How do you -- just generally, like for the market as a whole, how do you see that rollout playing out? Like obviously, there was a big contract signed here for the rollout in New Zealand. Is it a similar sort of a process? Is that what you're expecting over the next well and you're sort of actively participating in those discussions? Douglas McKay: Those contracts tend to be quite long term. So once you settle into them, you've got a good tenure there mostly. You're not sort of every year or 2 into another process on those same contracts. They require a lot of capital investment. They require a lot of systems and process changes and interactions. So it doesn't move around a lot. Once you land them, it's a reasonably settled market. Grant Lowe: Yes. I guess the question I'm sort of asking is, I think rough guess there were sort of 5 million meters to go or something, you might tell me that's wrong. But are we -- do you expect to see sort of like 1 million meters contract or a rollout of 1 million meters signed in big chunks like that? Is that kind of how you expect this to play out? Jason Hollingworth: The retailers typically bundle them up into reasonably large blocks, Grant, and then sort of tender them out. And we have contracts in place with the existing retailers, and there are still some contracts being let, but we have a number already under contract. It's competitive though, as you imagine, [ Telehub, Plus ES ] are the other 2 big players. And these retailers are sort of good at getting the sharp price out of the market. And yes, so that's it. So we've got a number of already under contract that we're executing on. New Zealand is deployed, so there's not so much going on here. It's really an Australian growth sort of situation. And once you've won those contracts, you still have to execute on them, right? So there's always a risk that if you don't deliver because there's a lot of competition for field service people to install all these meters. So it's not -- one thing to win the contract, you actually got to execute on it. And we're very sort of mindful of that because the opportunity potentially to pick up some extra work if you're the party that's executing well. And we're seeing a bit of that going on at the moment as well over there where some others potentially aren't quite performing. Douglas McKay: And these contract package sizes are often in the order of 200,000 to 300,000 meters. Grant Lowe: Yes. That is useful. Operator: There are no further questions. I would now like to hand it over back to Doug for closing remarks. Douglas McKay: Okay. Thank you. If there aren't any further questions, we'll end the teleconference and the webcast. If analysts and investors have further questions, please feel free to contact Jason. For the media, please contact Matt Britton or call our usual media phone number. Thank you, everyone, for joining us.
Operator: Good day, everyone, and welcome to the Socket Mobile Q4 2025 Earnings Call. My name is Elvis, and I'll be your operator for today's call. Before we begin, I'd like to remind everyone that this conference may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities and Exchange Act of 1934 as amended. Such forward-looking statements include, but are not limited to, statements regarding mobile data collection and mobile data collection products, including details on timing, distribution and market acceptance of products and statements predicting the trends, sales and market conditions and opportunities in the markets in which Socket Mobile sells its products. Such statements involve risks and uncertainties and actual results could differ materially from the results anticipated in such forward-looking statements because of a number of factors, including, but not limited to, the risk that manufacture of Socket's products may be delayed or not rolled out as predicted due to technological, market or financial factors, including the availability of product components and necessary working capital, the risk that market acceptance and sales opportunities may not happen as anticipated; the risk that Socket's application partners and current distribution channels may choose not to distribute the products or may not be successful in doing so. The risk that acceptance of Socket's products in vertical application markets may not happen as anticipated as well as other risks described in Socket's most recent Form 10-K and 10-Q reports filed with the Securities and Exchange Commission. Socket does not undertake any obligation to update any such forward-looking statements. On the call with me today are Kevin Mills, Chief Executive Officer; and Lynn Zhao, Chief Financial Officer. Now I'll turn the call over to Kevin. Please go ahead. Kevin Mills: Thank you, operator. Good afternoon, everyone, and thank you for joining us today to discuss our performance for the fiscal year 2025. In 2025, we operated within a very challenging macroeconomic and distribution environment. While sales volumes were impacted by these external headwinds I am pleased to report that we made significant progress strengthening our product portfolio, expanding our technology capabilities and enhancing the overall value we deliver to our customers. Despite the volume pressure, our gross margins remained resilient. This is a direct result of our disciplined cost management and a relentless focus on operational efficiency. We took deliberate steps this year to reinforce our financial position and preserve the resources necessary to support our longer-term innovation and service goals. We advanced our position in the mobile data capture market through a series of critical innovations designed to meet the needs of a more integrated digital world. We launched CaptureSDK 2.0, a unified next-generation development toolkit to simplify the lives of developers making it easier than ever to build seamless integrations across both iOS and Android platforms. We introduced the SocketScan S721 with Bluetooth Low Energy for faster pairing and lower power usage. We also expanded our ruggedized line with the XtremeScan v16e, the DuraScan D751 NFC and RFID reader and the compact DuraScan D764 for direct part marking applications. A notable highlight for our enterprise strategy occurred on December 18 when our XtremeScan product was featured in the Apple Connected Worker series. This Apple hosted invitation-only webinar series is specifically designed for major companies interested in transitioning their workforce to iOS-based devices. With over 50 large companies in attendance, we saw significant interest in our XtremeScan solutions. While we recognize that project with large-scale enterprises require time to mature, the first step is demonstrating what is possible. We were honored to showcase our solutions on this platform and expect to spend a significant portion of 2026, pursuing the high-value opportunities that have already surfaced from this event. We also strengthened our international presence, particularly in the APAC region. We received official approval in Japan by our S370 and S550 as certified My Number Card readers. This milestone enables broader use in government services and digital identity authentication, contributing to growing engagement across retail, industrial and enterprise markets. Looking ahead, we remain focused on delivering dependable, high-quality data capture solutions that help our customers improve productivity and stay competitive. We have continued to invest in product development and global reach because we believe these investments drive long-term value. We are proud of the progress we have achieved in 2025 and we sincerely appreciate the trust and support of our customers and partners as we continue to build for the future. With that said, I will now turn the call over to Lynn. Lynn Zhao: Thank you, Kevin. Good afternoon, everyone. Thank you for joining today's call. Our Q4 revenue of $4 million decreased 18% year-over-year from $4.8 million in the prior year quarter, but increased 28% sequentially from $3.1 million in Q3 2025. Gross margin for Q4 was 50% compared to 51% in Q4 2024 and 48% in Q3 2025. Operating expenses for Q4 were $2.6 million representing a 10% year-over-year decrease and a 2% sequential increase from the preceding quarter. We recorded a Q4 operating loss of $730,000 compared to $513,000 loss in Q4 2024 and $1.2 million loss in the preceding quarter. In Q4, driven by the cumulative losses in recent years, we recognized a onetime adjustment to establish a full valuation allowance of $10.7 million against our deferred tax assets in accordance with ASC 740. Net loss per share for Q4 was $1.43 compared to $0.00 per share in Q4 2024 and a loss of $0.15 per share in Q3 2025. Q4 adjusted EBITDA was a loss of $94,000 compared to an EBITDA gain of $140,000 in Q4 2024 and $540,000 loss in Q3 2025. The revenue for the year was $50 million, a 20% decrease year-over-year compared to $19 million in 2024. Gross margin for the year was 49.7% compared to 50.4% in 2024. Operating expenses totaled $10.7 million, down 10% from $11.9 million in 2024, primarily reflecting employee cost management initiatives. We reported a full year operating loss of $3.7 million compared to an operating loss of $2.8 million in 2024. Net loss per share was $1.81 in 2025 compared to $0.30 in 2024. Adjusted EBITDA for 2025 was negative $1.2 million compared to negative $320,000 in 2024. Turning to the balance sheet. We ended 2025 with $2 million in cash. During the year, we used the $1.4 million in operating activities, invested $5.5 million in capital expenditures and raised $1.5 million through issuance of subordinated convertible notes. As of December 31, 2025, the inventory net of reserves was $4.2 million compared to $4.9 million at the end of prior year. This concludes our prepared remarks. I will now turn the call over to the operator for questions. Operator: [Operator Instructions] Our first question today comes from Steve Swanson, a private investor. Steve Swanson: Kevin, can you comment a little bit, we're 7 weeks into 2026. How are you feeling about the business right now? Kevin Mills: I think we got off to a reasonably good start in January. So we're feeling okay. We have a lot of activity subject to the follow-up we did for the Apple event in December. So we've been extremely busy. Overall, I would say we're on track for a reasonable Q1. So I wouldn't say we're overly optimistic or pessimistic. I think things are kind of as expected as we started the year. Steve Swanson: Okay. Another one. We've been trying to get into the warehousing and logistics business for a while now. Have we had any successes yet? Kevin Mills: Yes. We have one large customer who is, I suppose, a Fortune, I don't know, 10 or thereabout company that we have deployed with. We have something in the region of 150 units being used on a daily basis. I think based on the feedback we've gotten, we've been able to update the units, and we feel that the second generation, which we announced in December, is substantially stronger. I think with the benefit of hindsight, we covered the camera in the initial rollout of our XtremeScan. And I think that we didn't realize how integral to many applications the camera is and that we incorrectly determined that the scanning would supersede the camera, which turned out to be not the case. In our second generation, which we focused on the 16e, we have corrected that and the camera is now fully available to the user. And we've also been able to improve a number of other, let's say, shortcomings in the product based on the feedback we've got and the tests we've done. So I really feel that the V2 product, which we're in the process of now starting to ship is a large step forward in terms of the overall performance and benefit to the end user. So we feel particularly good about that. Operator: [Operator Instructions] We have no further questions at this time. Lynn, I'll turn the program back over to you for any additional or closing comments. Lynn Zhao: Okay. Thank you everyone, for your time and for joining the call. Wishing you a good rest of the day. Operator: That concludes our meeting today. You may now disconnect.
Operator: Hello, and welcome to the Klépierre 2025 Full Year Results Presentation, hosted by Jean-Marc Jestin, Chairman of the Executive Board; and Stephane Tortajada, CFO. Please note that this conference is being recorded. [Operator Instructions] I will now hand you over to your host, Jean-Marc Jestin, to begin today's conference. Please go ahead, sir. Jean-Marc Jestin: Good evening, everyone, and thank you for joining us. I'm pleased to present Klépierre's full year results together with Stephane Tortajada, our Group CFO. And once again, 2025 has proven to be a remarkable year for your company. Before presenting our detailed full year results, I would like to stress in the first few slides that our strong 2025 earnings build on our sustained track record. Over the past 3 years, Klépierre has delivered unmatched growth across the board. Our net rental income has risen by 21%, underscoring the exceptionally strong demand from omnichannel retailers, while our EBITDA has increased by 23%, reflecting the significant operational leverage inherent to our business model. In addition, our disciplined balance sheet management, combined with our operational excellence, has enabled us to grow our net current cash flow per share by 21%. This outstanding track record reflects the unique quality of platform of leading shopping centers located in the most dynamic and affluent catchment area of Continental Europe. In recent years, we have undertaken a profound transformation of our portfolio to further align with new consumer behaviors and the continuous expansion needs of major international brands. Since 2020, we have completed over EUR 2 billion of noncore asset disposals, allowing us to refocus the portfolio on malls with the strongest fundamentals while also completing three accretive acquisitions. This reshaping of the portfolio has resulted in net current cash flow per share growth well ahead of retail peers. Over the past 3 years, not only have we significantly outperformed the European property sector, but also the wider European equity market in terms of earnings growth. Specifically, we generated earnings growth 4x higher than that of the top 20 companies of the EPRA Developed Europe Index and up to 20x that of the broad Euro STOXX 600 index. Since the valuation through, we have benefited from continued appreciation of our assets that have already delivered 20% NTA growth. Today, our top 70 malls account for 95% of the value of our portfolio. Combining these solid capital-driven returns with consistent and uninterrupted dividend growth, we delivered a total accounting return of more than 31% over the last 2 years. Such a performance is 50% above the second-best performer, and twice that of #3. Now delving into our 2025 performance. Retailer sales across our malls rose by 3.4% on a like-for-like basis, underpinned by solid consumer spending and our ability to attract leading retail brands, while enhancing the shopping experience. This strong performance, once again, translated into market share gains with retailer sales growth running at twice the pace of national retail indices. Over the years, this momentum delivered a 4.6% rental uplift on renewals and relettings and pushed occupancy up by 60 basis points to 97.1%. At the same time, occupancy cost ratios improved further to 12.5%, providing us clear headroom for additional rental uplift. More income posted a strong 12.1% increase, supported by the continued expansion of specialty leasing and retail media across the portfolio, and once again, our results beat guidance. In 2025, we have delivered a net current cash flow per share of EUR 2.72, marking a 5% jump year-on-year. This result was well above the initial guidance of EUR 2.60, EUR 2.65 per share. The group has achieved a 5.1% increase in net rental income to EUR 1.120 billion, outperforming indexation by 330 basis points. This performance was underpinned by a 4.5% like-for-like growth and fueled a 5.5% EBITDA growth. This was supported by controlled payroll and G&A, which enabled a 50 basis points improvement to our EBITDA margin to 87.3%. For the second consecutive year, our NAV grew 9% again. This increase has brought our NAV per share to EUR 35.9, compared to EUR 32.8 in 2024. Overall, this marks a 19% growth over the last 2 years. Such an increase is driven on the one hand by a positive cash flow effect triggered by an increase in net rental income and, on the other hand, by a positive market effect fueled by slight decrease in discount rates during the past year. Over 2025, as was the case the prior year, Klépierre generated a remarkable total accounting return of 15% or 31% over the last 2 years. Following our strong operational and financial results, we will propose to shareholders at the forthcoming Annual General Meeting on May 7, the distribution of a cash dividend of EUR 1.9 per share for 2025, representing a 6% spot dividend yield. Obviously, our achievements are the fruit of a clear strategy that allows us to confidently continue growing in the years to come. We strongly believe in our capacity to deliver further growth through organic means, extensions as well as value-creative acquisitions. First, let me turn to our organic growth drivers. We have consistently delivered rental uplift over the past years, and our ability to continue doing so in the coming years remains fully intact. At the same time, mall income represents a major opportunity to monetize our EUR 720 million annual footfall. Second, our ability to reshape our shopping centers is unrivaled. At Klépierre, we have the expertise to adjust the scale of our malls and fulfill our retailers' constant demand. To accommodate such demand, we are launching extensions when necessary. Every single project we carry out delivers a minimum 8% hurdle rate, strengthening our shopping centers with increased footfall and retailer sales allowing further market share gains in the catchment area. In parallel, we pursue an active external growth strategy. We acquire assets, for which we are certain we can create value, assets that both strong fundamentals that are endorsed by leading international retailers and for which we see operating efficiency and significant incremental rental growth potential. But make no mistake, the best portfolio is the one that delivers the highest returns for shareholders. So why do our malls remain so highly regarded? Because our malls are rightsized for their catchment areas and deliver high sales density per square meter, enabling a gradual rental uplift over time. Additionally, investments to create streaming shopping experiences for our visitors remain core to our strategy. These investments are carried in a highly disciplined manner in order to maximize our cash flow generation and shareholders return. In addition, new supply in prime shopping centers is extremely limited, which increases further scarcity in the quality space. The A asset category is the one and only that benefits from this setup. As a consequence, our occupancy rate has steadily increased over the past years, reaching 97.1% at the end of 2025, and this is 130 basis points higher than 3 years ago. In the meantime, category killers continue to expand their store size to support their omnichannel strategy and better meet the needs of their customers. And to keep up with the evolving needs of our retailers, we strive to make continuous portfolio optimizations. By actively rotating our tenant mix, we bring in higher productivity retailers, we elevate our offer and seamlessly replace slower-performing retailers. This ongoing rebalancing enabled us to dramatically increase sales density while clearly enhancing the customer experience through the introduction of innovative brands and the expansion of our leisure and experiential offer. Consequently, we have seen our overall retail mix shift steadily over the past 5 years, moving towards health-oriented wellness and entertainment categories. Our Health & Beauty and Dining segments, for example, have been the fastest growing over the past 2 years. To name a few brands, Rituals, Normal and Aroma-Zone, a fast-growing pioneer in DIY cosmetics, continue to boom. Our Dining options and retailer mix are once again being refreshed to attract and retain a diverse and evolving demographic as the number of households continue to grow and ongoing urbanization brings more visitors to our malls. Klépierre continued to maintain a very healthy OCR of 12.5%, compared with 15.9% for listed destination peers. This performance is a direct consequence of our retenanting campaigns that focus on introducing the best retail concepts, delivering exceptionally high sales density. In 2025, sustained leasing tension and continued low OCR drove a solid rental uplift of 4.6% after annual increases of at least 4% every single year since 2022. Let me now stress the other key source of incremental organic growth, mall income. This encompasses our specialty leasing and retail media activities as well as parking and EV charging stations. These levels have been reactivated recently since 2022 and have been growing at an annual average of 12% ever since. We expect further sustained growth going forward. Specialty Leasing through [indiscernible] pop-ups and Retail Media enables our business partner to engage more directly, more deeply with shopping center visitors. The core premise of Klépierre's offering to retailers and business partners is at annual 720 million qualified audience, I just mentioned earlier. Such a large cohort provides immediate brand visibility, allowing large-scale promotions, whether through pop-up stores during festive season, major promotional campaigns in our malls or even full mall domination by omnichannel on national brands. Our nascent retail media business model is clearly shifting from a previously outsourced advertising agency type to a hybrid model. We are actively pursuing to regain full control of our mall ecosystem and better leverage our long-standing relationships with brands and business partner. Practically, by accelerating the deployment of digital screens, including the latest giant led screen technology, we are highly confident in our ability to generate significantly higher average media revenue per footfall than currently. Overall, Specialty Leasing and Retail Media are two highly complementary and synergistic activities, that let me remind you, require very little CapEx. Regarding parkings, we have taken several initiatives in order to introduce paid parking in a number of countries, in particular, in Southern Europe. Now turning to our other growth pillar, namely accretive capital allocation. We have the means to achieve our ambition as we have a rock-solid balance sheet, historically low leverage ratio and top credit ratings among our Continental European peer group. Our value creative capital allocation consists of critical extension as we continue to accompany and fulfill anchor omnichannel and iconic international retailers demand in their pursuit of ever larger flagship stores. Beyond the incremental rental income generated by each extension, such projects unlock substantial value, creating a halo effect across the entire center by driving stronger footfall, lifting total retailer turnover and strengthening leasing extension. Ultimately, such extensions allow us to gain further market share in the best catchment areas. And to be specific, over the past few years, we have launched very successful extension projects. In the Paris region, for instance, we extended our [indiscernible] mall Créteil Soleil. We subsequently initiated a similar transformative operation in Bologna at Gran Reno, and the results speak for themselves. Rents increased by double digit, if not triple digit since the extensions. Both shopping centers recorded a strong double-digit growth in sales density. If we take the Créteil Soleil example, rents were up close to 30%, and average sales density per square meter for the whole center increased by 20% since the completion of our extension. This demonstrates again our unique expertise to transform our shopping malls into unrivaled shopping and entertainment venues. In the same spirit, we have recently launched 3 additional major projects that we are confident, will create further value for our portfolio and for our shareholders. Following the completion of the latest French extension at Odysseum, Montpellier, we have initiated two major transformative projects in Italy, at Le Gru in Turin and Romagna in Rimini. And once completed, this extension will raise both assets into the super prime mall category and will boost our rental growth momentum in 2027. In parallel, we continue to have appetite for external growth. Any prospective acquisition must not only meet our financial criteria, but most critically, allows us to enhance operational performance through reversion, retenanting and the ability to rolling out our mall income solutions. O'Parinor and Romaest acquisition in 2024 strongly illustrate our strategy and clinical execution with significant value creation of 71% and 64%, respectively. Our most recent acquisition of Casamassima, the leading mall in the Mari metropolitan area in Italy, meets exactly our requirements, and we will be applying the same recipe, and we are looking forward to generating a high single-digit return as early as in 2026. In summary, we are confident about 2026 as our organic rental uplift and more income drivers are well positioned in addition to our capacity to carry out high-value extensions and selective acquisition come on top. Moving to 2026. The resilient macroeconomic and consumption environment, coupled with healthy retail sales backdrop underpin a continuous recovery of the European transaction market. According to European retail investment volumes are to reach over EUR 35.5 billion in 2025, i.e., a 5% increase year-on-year. Shopping centers, in particular, have continued to regain favor with investments accounting for close to 1/3 of total volumes since the start of 2025. This improved investment environment was illustrated by multiple prime mall landmark transactions in 2025. As a consequence, the strong operating performance of our malls continue to feed the expansionary valuation cycle of our portfolio. Over the last 12 months, our total portfolio valuation increased by 4.9% on a like-for-like basis. Our well-anchored growth profile was reflected into a slight risk premium compression in 2025, though remaining well above those of other asset classes. We believe this compression represents the early innings of a durable ongoing trend. Building on the positive momentum, we disposed EUR 205 million of small-scale assets, 8% above appraisal value and at a 5.6% blended net initial yield. While we enjoy high visibility on long-term rental growth in a more conducive capital environment, our sound financial structure also provides us great comfort in terms of refinancing and remains a key competitive advantage. We secured more than EUR 1 billion of long-term financing in the past year with an average 8.5-year maturity at a highly competitive blended yield of 3.3%. The proceeds were notably used for repaying a EUR 500 million bond maturing in February 2026, significantly limiting the impact of refinancing activities on our expected net current cash flow generation for the coming year. Looking ahead to 2026, as we believe a firmer market is set to provide tailwind for capital appreciation, and as we benefit from visibility on the cost of debt, we expect to achieve a minimum of EUR 1.13 billion of EBITDA and at least EUR 2.75 net current cash flow per share. Thank you for your attention, and I will now open the floor to questions with Stephane. Operator: [Operator Instructions] The next question comes from Pierre-Emmanuel Clouard from Jefferies. Pierre-Emmanuel Clouard: So my first question would be on the guidance, I know that, I don't know, Jean-Marc and Stephane, you never itemized the guidance, but it seems a bit cautious in my view. So it would be nice if you can give us, let's say, the main building blocks of the guidance, especially on the NII like-for-like rental growth that you are expecting in 2026, in light of the deceleration of indexation, especially in France, and maybe also the expected cost of debt increase that we might expect in 2026. Stephane Tortajada: Okay. Thank you, Pierre-Emmanuel. So I will say first that the guidance is bang in line with the Bloomberg consensus. So I'm not sure it's cautious, I would say it's in line with the market expectation. And second point, I will mention also that this is a usual pattern of guidance at Klépierre because you follow Klépierre for a very long time now that, I think, it's a usual pattern of giving guidance at the beginning of the year. I would not say cautious, I would say, just as usual. So indexation, you're right, will be lower in 2026 compared to 2025. We may expect indexation around 0.8%, we had 1.8% in 2025. But as Jean-Marc just explained, we feel that we have a lot of levers internal growth first, but also extension plus the acquisition we have just completed end of December in Bari that obviously will be positive for 2026. And for the, you mentioned also the cost of debt, as we have said, we have already covered all the financing for 2026. So you should not expect a big jump in the cost of debt in 2026 for sure. Pierre-Emmanuel Clouard: Okay. And my second question is on obviously your firepower. So if you can give us a view on your current firepower today, in order to keep your A minus rating? And what's your minimum yield requirement, when you are ready to buy assets, I would say, I'll take my chances, but if you have anything to say about the [indiscernible] portfolio, it would be interesting. And also on disposals, what's left in the noncore bucket in 2026 in your view? Jean-Marc Jestin: Okay. Thank you, Pierre Emmanuel. You have exceeding the 2 questions, but... Pierre-Emmanuel Clouard: It's a blended one. Jean-Marc Jestin: Yes, and I will answer with pleasure. I think the -- and I will add on the guidance. When we elaborate a budget, we do it very carefully, and we do that at the end of the year in September, October. And what we have also -- and we take what we know for certain, and we have done some disposals also that will have a full year impact, and we have integrated, as usual, no acquisition in 2026 and development project that we have launched, even though they are not very long in terms of construction, they will deliver in 2027. When it comes to acquisition, we have been quite successful over the recent past to seize some very interesting opportunities where we can really create value. So to the question of what can we do, we look at different type of opportunities. We are extremely selective in terms of pricing. Pricing, it's a combination of, obviously, accretion day 1, compared to our financial metrics, but also the reversionary potential that we can deliver in, I would say, in the next 3 to 4 years. So it's difficult to indicate kind of a threshold that will apply from Scandinavia to Portugal or Italy or France. I would say we have -- we think we still have some opportunities to look at, but for the time being, there is nothing ready to go. And we don't really comment on rumors. So on the portfolio, you mentioned it's market knowledge that this is for sale. We suspect there is a lot of competition on it. And as you know, we don't really like competition. So we cannot comment. It's a very slow process, we will see. For disposals, we are still doing it one by one. So just as a reminder, the top 70 assets, that's 95%. So by telling it, we said that there is 5% that are noncore, 5%, it's EUR 1 billion, and EUR 1 billion, when you sell it at EUR 200 million every year, it will take quite a distance to finish it, but we have no pressure to do that. We do it at a good net initial yield above appraisal value. We don't like the impact of dilution. So we tried to combine it with acquisition. So we do it steadily and try to protect the shareholders' return. So yes, we will continue, and it will take some couple of years to finish. Operator: The next question comes from Florent Laroche-Joubert from ODDO BHF. Florent Laroche-Joubert: Actually, I would have a first question, a follow-up question on the guidance for 2026. So I agree with Pierre-Emmanuel that it seems to be very first. And actually, I just looked at what you published last year at the same day, and it was actually quite more the same type of guidance, and we can see that today you deliver plus 5%. So maybe, could you please tell us how you beat your guidance, so we understand that you just put things for which you are maybe sure at 100%. But how can we take into account, for example, some growth, I don't know, in more income or some growth due to revisions, maybe that would be very useful. Jean-Marc Jestin: No. Thank you, Florent, and happy to see you are in line with Pierre-Emmanuel, but -- the -- on the guidance, as I said, we build and we take what is certain, okay? So most of the time, if we do better than the guidance is because we are delivering what we have at work. So in this presentation, we have remind, I think, the main cylinders for the growth. But this is under construction and needs to be done and to be delivered. So there is a very high visibility on our rental, on our occupancy, on our rent collection. But on mall income, retail media, retailer sales, also we always assume that retailer sales will be flat because we can't do better than that. And most of the time, we are delivering more than expected, but as this is under construction, we take it as it comes. So we update the market on our performance on those cylinders. So what we can say that the beginning of the year in terms of sales is very good. We have a good sales for January which allow us also to be more optimistic, even though it's only 1 month. So the sale-based rent, the appetite from retailers is also quite linked to the sales environment. So -- and that's where most of our overall performance come from. Florent Laroche-Joubert: Okay. That's very useful. And maybe a second question on the valuation of assets. So we can see that you have a significant increase this year. You tell us that maybe this is the beginning of cycle. Could you maybe give us maybe more color on your discussion with appraisals on that? Stephane Tortajada: Yes. The first building block for valuation is the cash flow. As you have just said, in 2025, we had better cash flow than expected 1 year before. So just because when you have a better cash flow, it directly translates into a better valuation. This is the first point. So it plays. Second point, it's obviously the fact that we have seen more and more transactions for very prime mature assets in various geography, France, Eastern Europe, Spain, at a very compressed yield starting by 5. So for the appraisers, it gives really them the comfort to decrease the risk premium they add on the discount rate because obviously, a few years ago, 3, 4 years ago, they were quite cautious because they did not see any significant transaction. Now we see more and more transaction coming. So it gives them the comfort just to decrease the risk premium. So I think when you add these 2 building blocks, it gives us a lot of confidence in the path of decreasing the net initial yield and increasing the valuation going forward. Operator: [Operator Instructions] The next question comes from Frederic Renard from Kepler Cheuvreux. Frederic Renard: First, maybe, can you comment on the performance of your mall by geography, which area currently the best and, which are doing worst? Jean-Marc Jestin: Thank you, Frederic, for your question. It's a very wide question. So are you talking about retailer sales or organic performance or? Frederic Renard: Yes. Jean-Marc Jestin: Yes, retailer sales, I think the pattern is for the last 3 years, I would say, and 2025 is just a confirmation of this pattern. Sales have been increasing everywhere in all geographies, but in Germany. We have a very small exposure in Germany, but the only exception where our sales have been slightly declining, it's Germany. All the rest is positive. The second pattern is that it's more dynamic in South Europe. So clearly, the Italy, Spain, Portugal are doing more than the average. And together with the Netherlands, it's not really country-specific, it's more asset-specific than country-specific, but that's to answered your question. And there are some variances in Scandinavia. It's below the average, but it's positive. And France has been a bit more lukewarm, I would say, in 2025 and also beginning of 2026. This is not only in our malls, I think it's something you have been able to see with other release. But overall, I think this is a remarkable year. And when it comes to the segments, they have been all positive, all positive. There is only from time to time, I would say, an accident in some segments like electronics or home equipment on decoration, but even fashion has been positive. And the beginning of 2026, it's everywhere, it's positive, but Germany, every segment is positive, including fashion. Southern Europe is doing above the average, and for January, the sales that we have just connected is above 2025 numbers, so for 2025 was at 3.8% and January, it's above. So it's quite interesting. What has maybe sometimes when we look at the month to month. So sometimes, months can be a bit slow and the other one, much stronger. So there is quite a bit of volatility from a month to another, but overall, October has been very strong. November has been very strong. December have been weaker, January is very strong. So that's -- there is -- so the geographies are not really meaningful to us because they are all positive. Frederic Renard: Okay. Understood. And maybe a second one, I'd like to come back on the capital allocation, if I may. I mean, the stock price has been clearly on fire over the last 3 years on the back of very good assets and liability management, still liability management that put you in a very good shape. But today, it seems to me the capital structure is inadequate and the net debt to EBITDA will continue to go down. And actually, as you mentioned, that you have a good lever from an organic point of view and that will continue like this. So you mentioned that we didn't like competition or you don't like competition. But actually, competition is increasing a bit everywhere for retail. So are you afraid of missing the right opportunities in this market? Jean-Marc Jestin: Never. Never. No, I think we take it easy, I think, okay? We are in a long-term business, okay? And if we look at the capital allocation, I think there is one strategy, which is very clear. 2025 was the 10th anniversary of the big transformation at Klépierre. You remember, we did the disposal of convenience shopping centers in '15, we acquired Corio. We had, at that time, 300 assets we acquired 57 from Corio. We are left with 70% for 95% of the portfolio. So the capital allocation that's something you build step by step, okay? And you have to make it carefully. There are so many examples of people going big time, okay? So we do it carefully. So our net debt to EBITDA -- our balance sheet -- and that was -- is, I think, a good achievement is that even though we continue to grow the EBITDA, grow the earnings, grow the dividend, uninterrupted, we deleverage the company, okay? So this is not an objective to deleverage the company. It's just a consequence of managing very well the capital allocation. So the -- we have a lot of room for maneuver. We have done a very good acquisition, as you have seen in my presentation, where we have created 71% value in O'Parinor, 50-something percent in RomaEst, Casamassima will be there. So we are very -- I don't know if we are selective. We do it a try. Timing is always an issue. It's going to be this year, going to be next year, we'll see, okay? So we invest for the long term. We invest for our shareholders, and we want to find the right product where we can build the rents up quite quickly. So I hope it answered your question. So we are in a strong position, so we cannot regret that, but we will not rush. Operator: The next question comes from Alexandre Xerri from All Invest. Alexandre Xerri: Just one question on my side, also on the capital allocation. With current very limited discount on net asset value. Does this advantage could influence your M&A strategy? And could you consider, in other words, acquisition using equity markets? Thanks to this advantage. Jean-Marc Jestin: Thank you for the question. That's a question for which I don't have an answer because there is nothing on the radar. There is nothing to build on that. I think the performance of share prices, the testament to the quality of the portfolio, the testament to our capacity never to disappoint to continue to grow, to pay dividend, to have a very strong balance sheet. And as you said, we have ample opportunities to raise capital. So we have easy access to debt, low cost of debt. So unfortunately, your question is too broad, and I can't really answer to that. Stephane Tortajada: But maybe what I could add is that the most accretive way to make acquisition is to be financed by debt. And we have a lot of room of maneuver of firepower is huge today, really huge, because when we increase our EBITDA, we increase our firepower, because -- to keep the same rating. So I think what we will first do is to look at our internal resources to make it very accretive if we make acquisitions. And then if we have really some very large acquisition, we may think about equity capital market, but the first stage will really be from internal resources. Alexandre Xerri: Okay. Understood. So maybe have you fixed an LTV level, you will not go beyond? Stephane Tortajada: No. We do not really think about LTV. We are more focused on ratings and net debt-to-EBITDA. Net debt-to-EBITDA today is 6.7x, which is the historic low at Klépierre. The rating is the best ever at Klépierre. It's A range, for sure. So basically, we want to keep a high level of rating and have net debt-to-EBITDA, which is in the right range to be A-rated. So basically, we target net debt-to-EBITDA 7.5 around, which is the right place to be for the rating. Operator: Now let me hand the conference back to the management for any written questions. Jean-Marc Jestin: We have an incoming question regarding taxation on dividends for 2025. So if management could provide us some answers as to whether or not it includes an emission premium. Stephane Tortajada: Yes. So for 2025, we have a SIIC dividend from Klépierre French tax-exempt activities of EUR 0.87 per share and non-SIIC dividend of EUR 1.03 per share. So we do not use the premium in 2025 to answer your question. And the SIIC dividend from French tax exempt obviously, is not eligible for the 40% tax rebate in the tax -- French tax code. . Jean-Marc Jestin: So thank you, Michael, for your question. . Operator: The next question comes from Tom Berry from Green Street. Tom Berry: A couple of questions really. I guess how many on a capital allocation front, how many more Casamassima style opportunities do you think are out there in the future? Do you think your focus is more tilted towards the value-add side of things? Or do you think maybe more on a stabilized portfolio basis? And then a second question just on the French operating market is obviously a little bit weaker than the others, such as Italy and Spain. How much does that sort of poor macro weigh on your '26 forecast and reversionary potential? Jean-Marc Jestin: Okay. Thank you for your question. I will try to be specific. So for the I think for the acquisition, if we will only look in countries where we already have a very strong footprint, we think we have a very strong underwriting expertise in France, in Italy and Iberia, probably better than the rest of Europe. So that's probably where we have done a lot very recently. And if we come look 5 years ago, we bought 2 malls in Spain. I think we -- the criteria for us to invest are very simple. It's a big city, regional malls, lifestyle malls, a good set of retailers, strong leasing demand and high sales per square meter. And from there, what can we build? Can we add value? So we try to find something which is not really value add. It's more very strong performance, very good fundamentals where we can roll over our expertise. And so we will never compromise too much on the fundamentals, okay, and the sales per square meter. And if the OCRs are too elevated or there is not so much a reversion, probably, we are not a good buyer for that. So this is what I would say on the capital allocation profile we are looking for. And I missed the second one, that's for disposals or? Stephane Tortajada: But what I could say maybe on the French environment because you say it looks tough. But when you look at 2025 and if you look at the NRI like-for-like geography. In France, we had plus 4.6%, which is really strong. And in Southern Europe, which is the strongest true, 5.1%. So in terms of NII growth, France was just slightly below Southern Europe, but at a very strong pace. So what I would say is that the French market, there is a lot of buzz about politics, macro, blah, blah, blah, but at the end of the day, consumption is fine. And what we see is that we gain market share in our catchment area. So, so far, we say the French market is more an impression and a feeling of being weak, but on the ground, in the number, it's fine. Operator: The next question comes from Celine Huynh from Barclays. Celine Huynh: Mark, I do apologize in advance for this question. I know you're not going to like it. Simon Properties, the management of Simon recently mentioned on the earnings call, having issued EUR 1.5 million of Klépierre shares. So I was just wondering if you could comment on that? And what are your conversations like with Simon currently regarding the stake? Jean-Marc Jestin: Thank you for the question. And obviously, I will not be upset, why should I? So I know, I think, if the -- as you know, Simon, is a shareholder of Klépierre and if you have any question regarding their shareholding, I can only recommend you to ask the question directly to them. So when it comes to the Simon implication in the company, it has been of great support so far, including yesterday where we had our Board meeting to close 2025. So they are still on Board. So on this question, I'm neither upset or surprised, but if you want answers, you should ask them. Operator: There are no more questions, so I hand the conference back to the management for any closing comments. Jean-Marc Jestin: So thank you very much, all of you, for attending, listening and understanding our fantastic 2025 results and our guidance for 2026. Thank you for your questions. And we will take the road and meet our investors in London and in Paris, and looking forward to do so. Thank you very much.
Operator: Hello, and welcome to the Klépierre 2025 Full Year Results Presentation, hosted by Jean-Marc Jestin, Chairman of the Executive Board; and Stephane Tortajada, CFO. Please note that this conference is being recorded. [Operator Instructions] I will now hand you over to your host, Jean-Marc Jestin, to begin today's conference. Please go ahead, sir. Jean-Marc Jestin: Good evening, everyone, and thank you for joining us. I'm pleased to present Klépierre's full year results together with Stephane Tortajada, our Group CFO. And once again, 2025 has proven to be a remarkable year for your company. Before presenting our detailed full year results, I would like to stress in the first few slides that our strong 2025 earnings build on our sustained track record. Over the past 3 years, Klépierre has delivered unmatched growth across the board. Our net rental income has risen by 21%, underscoring the exceptionally strong demand from omnichannel retailers, while our EBITDA has increased by 23%, reflecting the significant operational leverage inherent to our business model. In addition, our disciplined balance sheet management, combined with our operational excellence, has enabled us to grow our net current cash flow per share by 21%. This outstanding track record reflects the unique quality of platform of leading shopping centers located in the most dynamic and affluent catchment area of Continental Europe. In recent years, we have undertaken a profound transformation of our portfolio to further align with new consumer behaviors and the continuous expansion needs of major international brands. Since 2020, we have completed over EUR 2 billion of noncore asset disposals, allowing us to refocus the portfolio on malls with the strongest fundamentals while also completing three accretive acquisitions. This reshaping of the portfolio has resulted in net current cash flow per share growth well ahead of retail peers. Over the past 3 years, not only have we significantly outperformed the European property sector, but also the wider European equity market in terms of earnings growth. Specifically, we generated earnings growth 4x higher than that of the top 20 companies of the EPRA Developed Europe Index and up to 20x that of the broad Euro STOXX 600 index. Since the valuation through, we have benefited from continued appreciation of our assets that have already delivered 20% NTA growth. Today, our top 70 malls account for 95% of the value of our portfolio. Combining these solid capital-driven returns with consistent and uninterrupted dividend growth, we delivered a total accounting return of more than 31% over the last 2 years. Such a performance is 50% above the second-best performer, and twice that of #3. Now delving into our 2025 performance. Retailer sales across our malls rose by 3.4% on a like-for-like basis, underpinned by solid consumer spending and our ability to attract leading retail brands, while enhancing the shopping experience. This strong performance, once again, translated into market share gains with retailer sales growth running at twice the pace of national retail indices. Over the years, this momentum delivered a 4.6% rental uplift on renewals and relettings and pushed occupancy up by 60 basis points to 97.1%. At the same time, occupancy cost ratios improved further to 12.5%, providing us clear headroom for additional rental uplift. More income posted a strong 12.1% increase, supported by the continued expansion of specialty leasing and retail media across the portfolio, and once again, our results beat guidance. In 2025, we have delivered a net current cash flow per share of EUR 2.72, marking a 5% jump year-on-year. This result was well above the initial guidance of EUR 2.60, EUR 2.65 per share. The group has achieved a 5.1% increase in net rental income to EUR 1.120 billion, outperforming indexation by 330 basis points. This performance was underpinned by a 4.5% like-for-like growth and fueled a 5.5% EBITDA growth. This was supported by controlled payroll and G&A, which enabled a 50 basis points improvement to our EBITDA margin to 87.3%. For the second consecutive year, our NAV grew 9% again. This increase has brought our NAV per share to EUR 35.9, compared to EUR 32.8 in 2024. Overall, this marks a 19% growth over the last 2 years. Such an increase is driven on the one hand by a positive cash flow effect triggered by an increase in net rental income and, on the other hand, by a positive market effect fueled by slight decrease in discount rates during the past year. Over 2025, as was the case the prior year, Klépierre generated a remarkable total accounting return of 15% or 31% over the last 2 years. Following our strong operational and financial results, we will propose to shareholders at the forthcoming Annual General Meeting on May 7, the distribution of a cash dividend of EUR 1.9 per share for 2025, representing a 6% spot dividend yield. Obviously, our achievements are the fruit of a clear strategy that allows us to confidently continue growing in the years to come. We strongly believe in our capacity to deliver further growth through organic means, extensions as well as value-creative acquisitions. First, let me turn to our organic growth drivers. We have consistently delivered rental uplift over the past years, and our ability to continue doing so in the coming years remains fully intact. At the same time, mall income represents a major opportunity to monetize our EUR 720 million annual footfall. Second, our ability to reshape our shopping centers is unrivaled. At Klépierre, we have the expertise to adjust the scale of our malls and fulfill our retailers' constant demand. To accommodate such demand, we are launching extensions when necessary. Every single project we carry out delivers a minimum 8% hurdle rate, strengthening our shopping centers with increased footfall and retailer sales allowing further market share gains in the catchment area. In parallel, we pursue an active external growth strategy. We acquire assets, for which we are certain we can create value, assets that both strong fundamentals that are endorsed by leading international retailers and for which we see operating efficiency and significant incremental rental growth potential. But make no mistake, the best portfolio is the one that delivers the highest returns for shareholders. So why do our malls remain so highly regarded? Because our malls are rightsized for their catchment areas and deliver high sales density per square meter, enabling a gradual rental uplift over time. Additionally, investments to create streaming shopping experiences for our visitors remain core to our strategy. These investments are carried in a highly disciplined manner in order to maximize our cash flow generation and shareholders return. In addition, new supply in prime shopping centers is extremely limited, which increases further scarcity in the quality space. The A asset category is the one and only that benefits from this setup. As a consequence, our occupancy rate has steadily increased over the past years, reaching 97.1% at the end of 2025, and this is 130 basis points higher than 3 years ago. In the meantime, category killers continue to expand their store size to support their omnichannel strategy and better meet the needs of their customers. And to keep up with the evolving needs of our retailers, we strive to make continuous portfolio optimizations. By actively rotating our tenant mix, we bring in higher productivity retailers, we elevate our offer and seamlessly replace slower-performing retailers. This ongoing rebalancing enabled us to dramatically increase sales density while clearly enhancing the customer experience through the introduction of innovative brands and the expansion of our leisure and experiential offer. Consequently, we have seen our overall retail mix shift steadily over the past 5 years, moving towards health-oriented wellness and entertainment categories. Our Health & Beauty and Dining segments, for example, have been the fastest growing over the past 2 years. To name a few brands, Rituals, Normal and Aroma-Zone, a fast-growing pioneer in DIY cosmetics, continue to boom. Our Dining options and retailer mix are once again being refreshed to attract and retain a diverse and evolving demographic as the number of households continue to grow and ongoing urbanization brings more visitors to our malls. Klépierre continued to maintain a very healthy OCR of 12.5%, compared with 15.9% for listed destination peers. This performance is a direct consequence of our retenanting campaigns that focus on introducing the best retail concepts, delivering exceptionally high sales density. In 2025, sustained leasing tension and continued low OCR drove a solid rental uplift of 4.6% after annual increases of at least 4% every single year since 2022. Let me now stress the other key source of incremental organic growth, mall income. This encompasses our specialty leasing and retail media activities as well as parking and EV charging stations. These levels have been reactivated recently since 2022 and have been growing at an annual average of 12% ever since. We expect further sustained growth going forward. Specialty Leasing through [indiscernible] pop-ups and Retail Media enables our business partner to engage more directly, more deeply with shopping center visitors. The core premise of Klépierre's offering to retailers and business partners is at annual 720 million qualified audience, I just mentioned earlier. Such a large cohort provides immediate brand visibility, allowing large-scale promotions, whether through pop-up stores during festive season, major promotional campaigns in our malls or even full mall domination by omnichannel on national brands. Our nascent retail media business model is clearly shifting from a previously outsourced advertising agency type to a hybrid model. We are actively pursuing to regain full control of our mall ecosystem and better leverage our long-standing relationships with brands and business partner. Practically, by accelerating the deployment of digital screens, including the latest giant led screen technology, we are highly confident in our ability to generate significantly higher average media revenue per footfall than currently. Overall, Specialty Leasing and Retail Media are two highly complementary and synergistic activities, that let me remind you, require very little CapEx. Regarding parkings, we have taken several initiatives in order to introduce paid parking in a number of countries, in particular, in Southern Europe. Now turning to our other growth pillar, namely accretive capital allocation. We have the means to achieve our ambition as we have a rock-solid balance sheet, historically low leverage ratio and top credit ratings among our Continental European peer group. Our value creative capital allocation consists of critical extension as we continue to accompany and fulfill anchor omnichannel and iconic international retailers demand in their pursuit of ever larger flagship stores. Beyond the incremental rental income generated by each extension, such projects unlock substantial value, creating a halo effect across the entire center by driving stronger footfall, lifting total retailer turnover and strengthening leasing extension. Ultimately, such extensions allow us to gain further market share in the best catchment areas. And to be specific, over the past few years, we have launched very successful extension projects. In the Paris region, for instance, we extended our [indiscernible] mall Créteil Soleil. We subsequently initiated a similar transformative operation in Bologna at Gran Reno, and the results speak for themselves. Rents increased by double digit, if not triple digit since the extensions. Both shopping centers recorded a strong double-digit growth in sales density. If we take the Créteil Soleil example, rents were up close to 30%, and average sales density per square meter for the whole center increased by 20% since the completion of our extension. This demonstrates again our unique expertise to transform our shopping malls into unrivaled shopping and entertainment venues. In the same spirit, we have recently launched 3 additional major projects that we are confident, will create further value for our portfolio and for our shareholders. Following the completion of the latest French extension at Odysseum, Montpellier, we have initiated two major transformative projects in Italy, at Le Gru in Turin and Romagna in Rimini. And once completed, this extension will raise both assets into the super prime mall category and will boost our rental growth momentum in 2027. In parallel, we continue to have appetite for external growth. Any prospective acquisition must not only meet our financial criteria, but most critically, allows us to enhance operational performance through reversion, retenanting and the ability to rolling out our mall income solutions. O'Parinor and Romaest acquisition in 2024 strongly illustrate our strategy and clinical execution with significant value creation of 71% and 64%, respectively. Our most recent acquisition of Casamassima, the leading mall in the Mari metropolitan area in Italy, meets exactly our requirements, and we will be applying the same recipe, and we are looking forward to generating a high single-digit return as early as in 2026. In summary, we are confident about 2026 as our organic rental uplift and more income drivers are well positioned in addition to our capacity to carry out high-value extensions and selective acquisition come on top. Moving to 2026. The resilient macroeconomic and consumption environment, coupled with healthy retail sales backdrop underpin a continuous recovery of the European transaction market. According to European retail investment volumes are to reach over EUR 35.5 billion in 2025, i.e., a 5% increase year-on-year. Shopping centers, in particular, have continued to regain favor with investments accounting for close to 1/3 of total volumes since the start of 2025. This improved investment environment was illustrated by multiple prime mall landmark transactions in 2025. As a consequence, the strong operating performance of our malls continue to feed the expansionary valuation cycle of our portfolio. Over the last 12 months, our total portfolio valuation increased by 4.9% on a like-for-like basis. Our well-anchored growth profile was reflected into a slight risk premium compression in 2025, though remaining well above those of other asset classes. We believe this compression represents the early innings of a durable ongoing trend. Building on the positive momentum, we disposed EUR 205 million of small-scale assets, 8% above appraisal value and at a 5.6% blended net initial yield. While we enjoy high visibility on long-term rental growth in a more conducive capital environment, our sound financial structure also provides us great comfort in terms of refinancing and remains a key competitive advantage. We secured more than EUR 1 billion of long-term financing in the past year with an average 8.5-year maturity at a highly competitive blended yield of 3.3%. The proceeds were notably used for repaying a EUR 500 million bond maturing in February 2026, significantly limiting the impact of refinancing activities on our expected net current cash flow generation for the coming year. Looking ahead to 2026, as we believe a firmer market is set to provide tailwind for capital appreciation, and as we benefit from visibility on the cost of debt, we expect to achieve a minimum of EUR 1.13 billion of EBITDA and at least EUR 2.75 net current cash flow per share. Thank you for your attention, and I will now open the floor to questions with Stephane. Operator: [Operator Instructions] The next question comes from Pierre-Emmanuel Clouard from Jefferies. Pierre-Emmanuel Clouard: So my first question would be on the guidance, I know that, I don't know, Jean-Marc and Stephane, you never itemized the guidance, but it seems a bit cautious in my view. So it would be nice if you can give us, let's say, the main building blocks of the guidance, especially on the NII like-for-like rental growth that you are expecting in 2026, in light of the deceleration of indexation, especially in France, and maybe also the expected cost of debt increase that we might expect in 2026. Stephane Tortajada: Okay. Thank you, Pierre-Emmanuel. So I will say first that the guidance is bang in line with the Bloomberg consensus. So I'm not sure it's cautious, I would say it's in line with the market expectation. And second point, I will mention also that this is a usual pattern of guidance at Klépierre because you follow Klépierre for a very long time now that, I think, it's a usual pattern of giving guidance at the beginning of the year. I would not say cautious, I would say, just as usual. So indexation, you're right, will be lower in 2026 compared to 2025. We may expect indexation around 0.8%, we had 1.8% in 2025. But as Jean-Marc just explained, we feel that we have a lot of levers internal growth first, but also extension plus the acquisition we have just completed end of December in Bari that obviously will be positive for 2026. And for the, you mentioned also the cost of debt, as we have said, we have already covered all the financing for 2026. So you should not expect a big jump in the cost of debt in 2026 for sure. Pierre-Emmanuel Clouard: Okay. And my second question is on obviously your firepower. So if you can give us a view on your current firepower today, in order to keep your A minus rating? And what's your minimum yield requirement, when you are ready to buy assets, I would say, I'll take my chances, but if you have anything to say about the [indiscernible] portfolio, it would be interesting. And also on disposals, what's left in the noncore bucket in 2026 in your view? Jean-Marc Jestin: Okay. Thank you, Pierre Emmanuel. You have exceeding the 2 questions, but... Pierre-Emmanuel Clouard: It's a blended one. Jean-Marc Jestin: Yes, and I will answer with pleasure. I think the -- and I will add on the guidance. When we elaborate a budget, we do it very carefully, and we do that at the end of the year in September, October. And what we have also -- and we take what we know for certain, and we have done some disposals also that will have a full year impact, and we have integrated, as usual, no acquisition in 2026 and development project that we have launched, even though they are not very long in terms of construction, they will deliver in 2027. When it comes to acquisition, we have been quite successful over the recent past to seize some very interesting opportunities where we can really create value. So to the question of what can we do, we look at different type of opportunities. We are extremely selective in terms of pricing. Pricing, it's a combination of, obviously, accretion day 1, compared to our financial metrics, but also the reversionary potential that we can deliver in, I would say, in the next 3 to 4 years. So it's difficult to indicate kind of a threshold that will apply from Scandinavia to Portugal or Italy or France. I would say we have -- we think we still have some opportunities to look at, but for the time being, there is nothing ready to go. And we don't really comment on rumors. So on the portfolio, you mentioned it's market knowledge that this is for sale. We suspect there is a lot of competition on it. And as you know, we don't really like competition. So we cannot comment. It's a very slow process, we will see. For disposals, we are still doing it one by one. So just as a reminder, the top 70 assets, that's 95%. So by telling it, we said that there is 5% that are noncore, 5%, it's EUR 1 billion, and EUR 1 billion, when you sell it at EUR 200 million every year, it will take quite a distance to finish it, but we have no pressure to do that. We do it at a good net initial yield above appraisal value. We don't like the impact of dilution. So we tried to combine it with acquisition. So we do it steadily and try to protect the shareholders' return. So yes, we will continue, and it will take some couple of years to finish. Operator: The next question comes from Florent Laroche-Joubert from ODDO BHF. Florent Laroche-Joubert: Actually, I would have a first question, a follow-up question on the guidance for 2026. So I agree with Pierre-Emmanuel that it seems to be very first. And actually, I just looked at what you published last year at the same day, and it was actually quite more the same type of guidance, and we can see that today you deliver plus 5%. So maybe, could you please tell us how you beat your guidance, so we understand that you just put things for which you are maybe sure at 100%. But how can we take into account, for example, some growth, I don't know, in more income or some growth due to revisions, maybe that would be very useful. Jean-Marc Jestin: No. Thank you, Florent, and happy to see you are in line with Pierre-Emmanuel, but -- the -- on the guidance, as I said, we build and we take what is certain, okay? So most of the time, if we do better than the guidance is because we are delivering what we have at work. So in this presentation, we have remind, I think, the main cylinders for the growth. But this is under construction and needs to be done and to be delivered. So there is a very high visibility on our rental, on our occupancy, on our rent collection. But on mall income, retail media, retailer sales, also we always assume that retailer sales will be flat because we can't do better than that. And most of the time, we are delivering more than expected, but as this is under construction, we take it as it comes. So we update the market on our performance on those cylinders. So what we can say that the beginning of the year in terms of sales is very good. We have a good sales for January which allow us also to be more optimistic, even though it's only 1 month. So the sale-based rent, the appetite from retailers is also quite linked to the sales environment. So -- and that's where most of our overall performance come from. Florent Laroche-Joubert: Okay. That's very useful. And maybe a second question on the valuation of assets. So we can see that you have a significant increase this year. You tell us that maybe this is the beginning of cycle. Could you maybe give us maybe more color on your discussion with appraisals on that? Stephane Tortajada: Yes. The first building block for valuation is the cash flow. As you have just said, in 2025, we had better cash flow than expected 1 year before. So just because when you have a better cash flow, it directly translates into a better valuation. This is the first point. So it plays. Second point, it's obviously the fact that we have seen more and more transactions for very prime mature assets in various geography, France, Eastern Europe, Spain, at a very compressed yield starting by 5. So for the appraisers, it gives really them the comfort to decrease the risk premium they add on the discount rate because obviously, a few years ago, 3, 4 years ago, they were quite cautious because they did not see any significant transaction. Now we see more and more transaction coming. So it gives them the comfort just to decrease the risk premium. So I think when you add these 2 building blocks, it gives us a lot of confidence in the path of decreasing the net initial yield and increasing the valuation going forward. Operator: [Operator Instructions] The next question comes from Frederic Renard from Kepler Cheuvreux. Frederic Renard: First, maybe, can you comment on the performance of your mall by geography, which area currently the best and, which are doing worst? Jean-Marc Jestin: Thank you, Frederic, for your question. It's a very wide question. So are you talking about retailer sales or organic performance or? Frederic Renard: Yes. Jean-Marc Jestin: Yes, retailer sales, I think the pattern is for the last 3 years, I would say, and 2025 is just a confirmation of this pattern. Sales have been increasing everywhere in all geographies, but in Germany. We have a very small exposure in Germany, but the only exception where our sales have been slightly declining, it's Germany. All the rest is positive. The second pattern is that it's more dynamic in South Europe. So clearly, the Italy, Spain, Portugal are doing more than the average. And together with the Netherlands, it's not really country-specific, it's more asset-specific than country-specific, but that's to answered your question. And there are some variances in Scandinavia. It's below the average, but it's positive. And France has been a bit more lukewarm, I would say, in 2025 and also beginning of 2026. This is not only in our malls, I think it's something you have been able to see with other release. But overall, I think this is a remarkable year. And when it comes to the segments, they have been all positive, all positive. There is only from time to time, I would say, an accident in some segments like electronics or home equipment on decoration, but even fashion has been positive. And the beginning of 2026, it's everywhere, it's positive, but Germany, every segment is positive, including fashion. Southern Europe is doing above the average, and for January, the sales that we have just connected is above 2025 numbers, so for 2025 was at 3.8% and January, it's above. So it's quite interesting. What has maybe sometimes when we look at the month to month. So sometimes, months can be a bit slow and the other one, much stronger. So there is quite a bit of volatility from a month to another, but overall, October has been very strong. November has been very strong. December have been weaker, January is very strong. So that's -- there is -- so the geographies are not really meaningful to us because they are all positive. Frederic Renard: Okay. Understood. And maybe a second one, I'd like to come back on the capital allocation, if I may. I mean, the stock price has been clearly on fire over the last 3 years on the back of very good assets and liability management, still liability management that put you in a very good shape. But today, it seems to me the capital structure is inadequate and the net debt to EBITDA will continue to go down. And actually, as you mentioned, that you have a good lever from an organic point of view and that will continue like this. So you mentioned that we didn't like competition or you don't like competition. But actually, competition is increasing a bit everywhere for retail. So are you afraid of missing the right opportunities in this market? Jean-Marc Jestin: Never. Never. No, I think we take it easy, I think, okay? We are in a long-term business, okay? And if we look at the capital allocation, I think there is one strategy, which is very clear. 2025 was the 10th anniversary of the big transformation at Klépierre. You remember, we did the disposal of convenience shopping centers in '15, we acquired Corio. We had, at that time, 300 assets we acquired 57 from Corio. We are left with 70% for 95% of the portfolio. So the capital allocation that's something you build step by step, okay? And you have to make it carefully. There are so many examples of people going big time, okay? So we do it carefully. So our net debt to EBITDA -- our balance sheet -- and that was -- is, I think, a good achievement is that even though we continue to grow the EBITDA, grow the earnings, grow the dividend, uninterrupted, we deleverage the company, okay? So this is not an objective to deleverage the company. It's just a consequence of managing very well the capital allocation. So the -- we have a lot of room for maneuver. We have done a very good acquisition, as you have seen in my presentation, where we have created 71% value in O'Parinor, 50-something percent in RomaEst, Casamassima will be there. So we are very -- I don't know if we are selective. We do it a try. Timing is always an issue. It's going to be this year, going to be next year, we'll see, okay? So we invest for the long term. We invest for our shareholders, and we want to find the right product where we can build the rents up quite quickly. So I hope it answered your question. So we are in a strong position, so we cannot regret that, but we will not rush. Operator: The next question comes from Alexandre Xerri from All Invest. Alexandre Xerri: Just one question on my side, also on the capital allocation. With current very limited discount on net asset value. Does this advantage could influence your M&A strategy? And could you consider, in other words, acquisition using equity markets? Thanks to this advantage. Jean-Marc Jestin: Thank you for the question. That's a question for which I don't have an answer because there is nothing on the radar. There is nothing to build on that. I think the performance of share prices, the testament to the quality of the portfolio, the testament to our capacity never to disappoint to continue to grow, to pay dividend, to have a very strong balance sheet. And as you said, we have ample opportunities to raise capital. So we have easy access to debt, low cost of debt. So unfortunately, your question is too broad, and I can't really answer to that. Stephane Tortajada: But maybe what I could add is that the most accretive way to make acquisition is to be financed by debt. And we have a lot of room of maneuver of firepower is huge today, really huge, because when we increase our EBITDA, we increase our firepower, because -- to keep the same rating. So I think what we will first do is to look at our internal resources to make it very accretive if we make acquisitions. And then if we have really some very large acquisition, we may think about equity capital market, but the first stage will really be from internal resources. Alexandre Xerri: Okay. Understood. So maybe have you fixed an LTV level, you will not go beyond? Stephane Tortajada: No. We do not really think about LTV. We are more focused on ratings and net debt-to-EBITDA. Net debt-to-EBITDA today is 6.7x, which is the historic low at Klépierre. The rating is the best ever at Klépierre. It's A range, for sure. So basically, we want to keep a high level of rating and have net debt-to-EBITDA, which is in the right range to be A-rated. So basically, we target net debt-to-EBITDA 7.5 around, which is the right place to be for the rating. Operator: Now let me hand the conference back to the management for any written questions. Jean-Marc Jestin: We have an incoming question regarding taxation on dividends for 2025. So if management could provide us some answers as to whether or not it includes an emission premium. Stephane Tortajada: Yes. So for 2025, we have a SIIC dividend from Klépierre French tax-exempt activities of EUR 0.87 per share and non-SIIC dividend of EUR 1.03 per share. So we do not use the premium in 2025 to answer your question. And the SIIC dividend from French tax exempt obviously, is not eligible for the 40% tax rebate in the tax -- French tax code. . Jean-Marc Jestin: So thank you, Michael, for your question. . Operator: The next question comes from Tom Berry from Green Street. Tom Berry: A couple of questions really. I guess how many on a capital allocation front, how many more Casamassima style opportunities do you think are out there in the future? Do you think your focus is more tilted towards the value-add side of things? Or do you think maybe more on a stabilized portfolio basis? And then a second question just on the French operating market is obviously a little bit weaker than the others, such as Italy and Spain. How much does that sort of poor macro weigh on your '26 forecast and reversionary potential? Jean-Marc Jestin: Okay. Thank you for your question. I will try to be specific. So for the I think for the acquisition, if we will only look in countries where we already have a very strong footprint, we think we have a very strong underwriting expertise in France, in Italy and Iberia, probably better than the rest of Europe. So that's probably where we have done a lot very recently. And if we come look 5 years ago, we bought 2 malls in Spain. I think we -- the criteria for us to invest are very simple. It's a big city, regional malls, lifestyle malls, a good set of retailers, strong leasing demand and high sales per square meter. And from there, what can we build? Can we add value? So we try to find something which is not really value add. It's more very strong performance, very good fundamentals where we can roll over our expertise. And so we will never compromise too much on the fundamentals, okay, and the sales per square meter. And if the OCRs are too elevated or there is not so much a reversion, probably, we are not a good buyer for that. So this is what I would say on the capital allocation profile we are looking for. And I missed the second one, that's for disposals or? Stephane Tortajada: But what I could say maybe on the French environment because you say it looks tough. But when you look at 2025 and if you look at the NRI like-for-like geography. In France, we had plus 4.6%, which is really strong. And in Southern Europe, which is the strongest true, 5.1%. So in terms of NII growth, France was just slightly below Southern Europe, but at a very strong pace. So what I would say is that the French market, there is a lot of buzz about politics, macro, blah, blah, blah, but at the end of the day, consumption is fine. And what we see is that we gain market share in our catchment area. So, so far, we say the French market is more an impression and a feeling of being weak, but on the ground, in the number, it's fine. Operator: The next question comes from Celine Huynh from Barclays. Celine Huynh: Mark, I do apologize in advance for this question. I know you're not going to like it. Simon Properties, the management of Simon recently mentioned on the earnings call, having issued EUR 1.5 million of Klépierre shares. So I was just wondering if you could comment on that? And what are your conversations like with Simon currently regarding the stake? Jean-Marc Jestin: Thank you for the question. And obviously, I will not be upset, why should I? So I know, I think, if the -- as you know, Simon, is a shareholder of Klépierre and if you have any question regarding their shareholding, I can only recommend you to ask the question directly to them. So when it comes to the Simon implication in the company, it has been of great support so far, including yesterday where we had our Board meeting to close 2025. So they are still on Board. So on this question, I'm neither upset or surprised, but if you want answers, you should ask them. Operator: There are no more questions, so I hand the conference back to the management for any closing comments. Jean-Marc Jestin: So thank you very much, all of you, for attending, listening and understanding our fantastic 2025 results and our guidance for 2026. Thank you for your questions. And we will take the road and meet our investors in London and in Paris, and looking forward to do so. Thank you very much.
Operator: Thank you for standing by, and welcome to the Ramelius Resources Half Year Results Briefing. [Operator Instructions] I would now like to hand the conference over to Mark Zeptner, CEO and Managing Director. Please go ahead. Mark Zeptner: Thank you, Travis. Good morning, everyone. Thank you for joining us to discuss our half year results to December 2025. Alongside me is our CFO, Darren Millman. Today, I'll start with a brief overview of the operating performance and some recent updates at Dalgaranga before Darren goes through the underlying earnings and financials in more detail. We have uploaded to the ASX this morning along with our website shortly, a number of documents, including our half year '26 financial summary, the half year accounts, interim dividend and a presentation that will largely be speaking to this morning. So we start on Slide 3. Here, we set out our gold production for the last 2.5 years. Operationally, performance was in line with our expectations highlighted in the 5-year growth pathway released last October. As you can see in the graph, this period is our lowest production level with 101,000 ounces produced with Edna May being placed into care and maintenance in FY '25 and the Cue mine performance returning closer to geological model predictions. Production is on track to deliver FY '26 guidance, which is a touch below 200,000 ounces for this year. Moving on to Slide 4. We announced yesterday that first ore from the Never Never deposit at Dalgaranga has been hauled to the Mt Magnet processing plant. This is a key milestone in realizing our vision to become a 500,000-ounce producer by FY '30. Thanks to the dedication of our team for this achievement and it's an important milestone just over 200 days over the closure of the combination with Spartan. And at the end of January, we had a healthy 31,000 tonne stockpile of Never Never ore at a grade of 3.6 grams per tonne at Mt Magnet. Now whilst this grade is below the reserve grade of 7.3, it should be noted that this ore is all development ore and from the top part of the ore body. From March, we are planning to blend this initial lower grade ore with other Mt Magnet ore sources. Higher grade parts of the stockpile will be introduced in the June 2026 quarter once fine-tuning has occurred at the Mt Magnet plant. On to Slide 5, you will see the Never Never mining schedule. We are on track, both in terms of tonnes and grade. And from FY '28 onwards, these metrics significantly increase as the main section of the ore body is accessed. Turning to Slide 6. Key mining and production highlights. Pleasingly, tonnes mined were up 64%, with the introduction of a third fleet excavation fleet at the Cue pits and mining also taking place at a lower strip ratio. The mine grade was down 46% to 2.66 grams per tonne, but we are comparing this to a period which included mining from the Break of Day pit at a grade of 7.9 grams, which is quite remarkable for an open pit. At the group level, milled tons were down due to Edna May now being placed into care and maintenance. However, at Mt Magnet, throughput improved some 18% with a new line of design that we had discussed previously being an optimized material blend and very high mechanical availability. As expected and planned, mill grade and production was down as we await the introduction of Dalgaranga high-grade ore. The half year financial performance benefited from strong [ $8 ] gold price with reducing hedge book commitments, resulting in a 36% increase in the realized gold price. Without stealing too much of Darren's thunder, I would highlight that we delivered a very strong all-in sustaining cost margin of $2,921 for every ounce sold. And I think you agree this is a very impressive return and one that we see is only increasing with our reduced hedge book commitments going forward. With that, I'll hand over to Darren. Darren Millman: Thank you, Mark. For those following on the presentation, I'll be initially speaking to Slide 7 and our underlying earnings. It's important to talk about our underlying earnings as there were significant one-off and noncash adjustments between the statutory and underlying earnings in the half, primarily relating to the Spartan acquisition. We have previously highlighted these 2 significant adjustments that were recorded in the period. These included $133.2 million of nonrecurring acquisition costs, which with estimated stamp duty payable of $131 million of this. The other adjustment of note is the $46.6 million noncash fair value adjustment to Spartan's pre-existing royalty obligation. This reflects 2 things: firstly, high consensus gold price forecast since acquisition; and secondly, a high level of confidence of the ore body with the release of the maiden ore reserve for Never Never deposit. While this is a cost to earnings, it is reflective of higher expected future revenue. This will be a recurring adjustment every reporting period, whether it is at a level or not seen today, but will be largely attributable to gold price and changes in oil reserves across the Dalgaranga mineral properties. Moving on to Slide 8. Earnings were generated from revenue of $485.6 million, which is down 4% from the prior period with lower gold production being the offset almost in full by the improved Aussie gold price and reducing hedge book commitments at a higher realized gold price. The resulting underlying EBITDA of $347 million at a margin of 42% is a H1 record for the company and up 13% on the prior period. Again, the driver behind this is the improved realized gold price. The reported underlying net profit after tax of $160 million was comparable to the prior period of $170 million despite lower production. On Slide 9, we have provided more detail on the Mt Magnet earnings and operations, Mt Magnet which generated a gross profit of $244 million, which is comparable to the prior period, albeit at a slightly lower margin. The lower margin was driven by higher cost per tonne and a lower milled grade. The operating cost per tonne was in line with expectations, was higher than the prior period due to increased tonnes from Cue, which was of a higher grade, was higher strip ratio, incurs a higher haulage charge to Mt Magnet and attracts a higher amortization charge relating to the purchase price initially. Also contributing to the higher operating costs in the reporting period was an increase in underlying tonnes in the ore blend. The resulting gross margin increased to $2,413 per ounce sold. The Mt Magnet hub will only be benefited with future introduction of the Dalgaranga ore feed. Moving on to what really matters, cash, which is being detailed on Slide 10. Operating cash flow of $311.6 million was largely in line with the prior period. However, the free cash flow, which is cash flow from operations less the cash used in investing was an outflow of $40 million. This was not unexpected given the acquisition of Spartan and an increased exploration budget and the final FY '25 income tax payment. The closing cash and gold balance was $694.3 million. Secondly, we invested $211 million back into the business. This includes $73.4 million for the acquisition of Spartan, net of $199 million cash acquired, investing in the development of the Never Never and Dalgaranga infrastructure and our exploration focus. Last, we paid $148 million in income taxes in the period with $130 million of this relating to the final FY '25 payments. The last of these large one-off income tax payments have now -- were more regular payers in advance of income tax. Looking forward for the remainder of FY '26, do keep in mind the stamp duty, which is payable on the acquisition of Spartan of approximately $131 million. The timing of payment -- the timing of this payment is out of our hands, but it could be reasonably expected at back end of FY '26. Moving forward to Slide 12. I would just want to touch on the acquisition relating to Spartan. As you will see on this slide, the total acquisition of fair value was $2.8 billion, which includes our initial $19.9 million investment. What is worth highlighting is the cost of the asset to Ramelius is $2.3 billion, which takes into account the cash we acquired and the cost of initial investment as proposed -- as opposed to the fair value. As noted, there are tax synergies available to the group from the acquisition. First, the use of Spartan tax losses, which we have now concluded our analysis of the tax losses and obtained the external tax advice. The analysis shows that tax losses with a net cash benefit of $105 million can be transferred to the group, the use of which compares favorably to the $90 million we initially flagged in a growth pathway presentation back in October. This is a real and immediate benefit to the group with a net amount of just under $20 million losses being used in the December half year. And moving on to the balance sheet on Slide 13. Ramelius remains in a very strong financial position with just under $600 million in working capital and net assets of $4 billion. Subsequent to the end of this period, we have further enhanced our balance sheet flexibility and funding optionality for replacing our existing $175 million credit facility with a $500 million credit facility. We later put this new facility in place in recognition of the company's significant change in capital structure post the acquisition of Spartan and pleasingly, we've been able to improve our overall commercial terms and increase the tenure. Before handing back to Mark for closing remarks, I just want to highlight our recent activity with our hedge book on Slide 14. We have closed out our FY '27 hedge book at a cost of $28.4 million, and we have committed to, in fact, they've already started predelivering the June quarter forward contracts in the March quarter. The outcome being from the end of March, we'll have no forward contract hedges in place, and we'll have more exposure to the Australian gold price. The chart on the left of the slide shows the historical cost of the hedge book. That is what is being eliminated by the actions we have taken on our forward contract positions. We do still have a level of cover in FY '27 and FY '28 with [ collars ] in place for FY '27 of 22,500 ounces of a floor of $4,200 and a ceiling of $5,906 and put options in place for FY '27 guaranteeing a minimum price for 40,000 ounces at $5,750 per ounce. With that, I'll now hand back to Mark. Mark Zeptner: Thanks, Darren. Slide 15 shows our capital allocation and priorities and one that you perhaps are familiar with. The phase that we are in now is in the middle section, reinvestment in the business. And as we have highlighted previously, we have committed to a $0.02 per share minimum dividend for FY '26. And as such, it is pleasing that $0.03 per share fully franked interim dividend has been declared this morning, exceeding the minimum annual amount. This interim dividend is discussed on Slide 16. So if we turn to Slide 16. This is the second consecutive interim dividend paid by Ramelius and this equates to a total amount of $57.7 million or $574 per ounce produced. It takes the total shareholder returns over the past 5 years to almost $320 million at an average of 18.8% per annum. In summary, this was a solid half year result delivered during a transition phase for the business. We entered the second half with a strong balance sheet, significant liquidity and improving production outlook and leverage to a strong gold price environment. That concludes the presentation. I'll now hand back to Travis to open the phone line for questions firstly. Operator: [Operator Instructions] The first phone question today comes from Richard Knights from Barrenjoey. Richard Knights: Just one on the dividend. I mean it's certainly a beat versus consensus in my numbers. Just wondering how you're thinking about dividend policy over the next couple of years with the relatively high sort of CapEx burden we've got in terms of development. Mark Zeptner: I'll take that one. Thanks, Richard. Yes, look, we had a look at our dividend. Obviously, the gold price has run very strongly while I've been on holidays, I was tempted to extend in fact. But looking at the dividend, we look at the dividend and the buyback sort of together. The fact of the matter is and whether we're a little more conservative than others than we actually haven't been able to access the buyback much since we announced it in December. So a very small number of shares buy back will be freed up going forward more so. But the whole period through January and February pre these results has really limited our ability to buy back. So we thought a slightly stronger dividend was warranted in this case. In terms of moving forward, we'll look to reassess our dividend policy as we ramp up production as cash flows increase. Richard Knights: Yes. Okay. Maybe just one more just on the ramp-up at Dalgaranga. Can you give us an indication when you're going to be mining stope ore as opposed to development ore? Mark Zeptner: In the June quarter, very early in the June quarter, if not before. We're obviously getting back this week coming up to [ speed ] with what's going on. The mine is progressing very well. We're drilling paste fill holes, we -- as you see, we've got a decent stockpile of development ore. So it means we've put in a number of ore drives. The paste plant foundations are in place. And so we'll be ready to be stoping March, April at this stage, which is on schedule, if not slightly ahead. Operator: [Operator Instructions] At this time, we're showing no further questions via the phone. I'll hand the conference back to Mark. Mark Zeptner: Just checking on the webcast. It doesn't like there's any questions there either. This has got to be some sort of record for one question. It must be the time of day or the comprehensive nature of the presentation. As there's no further questions, we'll wrap up. Have a good day, everyone. Thanks for tuning in.
Operator: Thank you for standing by, and welcome to World Kinect Corporation's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Braulio Medrano, Senior Director of FP&A and Investor Relations. Please go ahead. Braulio Medrano: Good evening, everyone, and welcome to World Kinect's Fourth Quarter 2025 Earnings Conference Call, which will be presented alongside our live slide presentation. Today's presentation is also available via webcast on our Investor Relations website. I'm Braulio Medrano, Senior Director of FP&A and Investor Relations. With me on the call today is Ira Birns, Chief Executive Officer; Mike Tejada, Executive Vice President and Chief Financial Officer; and John Rau, President. And now I'd like to review our safe harbor statement. Certain statements made today including comments about our expectations regarding future plans and performance are forward-looking statements that are subject to a range of uncertainties and risks that could cause actual results to materially differ. Factors that could cause results to materially differ can be found in our most recent Form 10-K and other reports filed with the Securities and Exchange Commission. We assume no obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information. This presentation also includes certain non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures is included in our press release and can be found on our website. We will begin with several minutes of prepared remarks, which will then be followed by a question-and-answer period. At this time, I would like to introduce our Chief Executive Officer, Ira Birns. Ira Birns: Thank you, Braulio, and good afternoon, everyone. As I begin my first earnings call as CEO, I'd like to say how honored I am to step into this role at a defining moment for our company. We entered 2026 with a strong foundation in place and clear opportunities ahead. I'm truly energized and excited by the opportunity to lead the company into its next chapter, one grounded in accountability, aligned leadership and a commitment to consistent execution and long-term value creation. As we previewed last quarter, we welcomed Mike Tejada to the role of Chief Financial Officer, shortly before my appointment to CEO. I am joined today by Mike whose deep expertise in financial management and operational transformation has already proven instrumental as we sharpen our portfolio, enhance efficiency and create additional value for our shareholders. I'm also joined by John Rau, recently appointed President and the commercial leader of our Aviation, Marine and Land segments. John is an experienced leader with a deep understanding of our business. His focus on operational excellence and disciplined commercial execution continues to strengthen our platform and better positions World Kinect to deliver sustainable growth. And over the past several weeks, I've had the opportunity to engage deeply with our leaders and many of our employees across the company. Those conversations have been energizing and have reinforced the shared commitment to simplicity, clarity and increased transparency. Our team understands the changes we're making. They believe in where we're headed, and they are excited about contributing to the next chapter of World Kinect. That level of alignment and engagement gives me tremendous confidence in our ability to execute and deliver on our commitments. Beyond our internal audience, I've also met with external stakeholders to pressure test our thinking and better understand where we can optimize our business and drive additional value for our shareholders. While these discussions are ongoing, they have already reinforced that a unified performance mindset, a disciplined approach to capital allocation and most importantly, a sharpened focus on portfolio management are critical to driving strong results. As a result, we've been deliberately reshaping World Kinect, simplifying our business model, concentrating our portfolio on businesses that deliver more attractive and predictable returns, allocating capital with a clear ROI mindset and strengthening our financial discipline to create a clearer path to sustainable success in a dynamic and evolving industry. These actions are building a more resilient, future-ready company that serves customers with excellence and is positioned to deliver sustainable value for our shareholders. With a renewed focus on our core business and meaningful momentum underway, we are confident that 2026 will mark the start of a new era for World Kinect. With this clarity, the fourth quarter marked several pivotal milestones in our transformation and portfolio repositioning. In Aviation, we successfully closed the acquisition of Universal Weather and Aviation's Trip Support Services business, expanding our capabilities in flight support and strengthening our role in global aviation services. This business fits squarely within our core strengths and complements our global fuel distribution network. Integration is underway following our proven M&A playbook in aviation focused on operational excellence and disciplined execution. I just returned from Europe where I witnessed firsthand the enthusiasm for the opportunities we see to expand our on-airport footprint, which we believe will unlock further growth potential in this region. In land, we have taken action to meaningfully reshape the portfolio and narrow our focus to better align with our long-term return objectives. I will share related details with you in a moment. Meanwhile, as we look ahead, our land business will focus on our North American operations anchored around higher margin and more ratable cardlock and retail activities as well as natural gas. When combined, these businesses create the foundation on which we will continue to build and enable us to successfully drive longer-term land-based growth. To put this in context, for many years, our role in the C-store fuel distribution space has been focused on supplying fuel to site operators under long-term agreements, many of which are locked in for as long as 15 years, driving solid ratable profitability. While opportunities for growth here remain, we now see meaningful room for additional growth through a new pathway in which we own or lease the site and manage the fuel operations ourselves, while partnering with an independent operator who runs the convenience store. This approach increases our margin, reduces upfront capital incentives and credit risk and opens a much larger growth opportunity in the C-store fuel distribution space. In turn, we expect to drive synergies over time as we leverage this new model that more closely aligns our cardlock and retail business activities. Ultimately, we expect the targeted changes we are making and the broader strategic shift across our land segment to enhance returns and significantly improve profitability in 2026, while also providing increased transparency regarding the business' long-term growth potential. Summarizing the actions we have taken to reshape the land portfolio. In Europe, we made the decision to exit our power, energy management and related sustainability service businesses, steps that now shift our focus almost entirely to North America and our core businesses that have proven to deliver more consistent profitability and returns. In North America, as part of our ongoing efforts to streamline our portfolio and further sharpen our strategic focus, we have also recently entered into an agreement to sell our tank wagon delivery and lubricants businesses to Diesel Direct, a national mobile fueling business based in Stoughton, Massachusetts. We expect to close this transaction during the second quarter of '26. In terms of the transportation model for our remaining core land business in the U.S., we have also made the decision to fully outsource our transportation requirements to drive additional operating efficiencies. We expect this transition to also reduce capital requirements going forward, ultimately allowing us to redeploy resources towards higher-value opportunities. It's also very important to recognize that as a result of the strategic changes we've made, we plan to redeploy associated capital into core areas of our business that deliver stronger and more consistent returns. Mike will share additional details on the proceeds from the exits as well as related onetime charges. Overall, we are making meaningful progress in optimizing our portfolio. The actions we've taken have simplified our business, reduced complexity and positioned our land segment for more consistent and predictable performance. Our strategy is now very clear, build a more focused and efficient company that delivers stronger longer-term returns as we continue strengthening our core businesses through 2026 and beyond. Let me now quickly turn to a summary of our fourth quarter results. Overall, our performance fell short of where we expected it to be for a couple of reasons. While aviation results were up year-over-year, benefiting from the Universal acquisition, margins in our core fuels business were impacted by a somewhat more competitive market environment during the quarter. In addition, weaker land performance was driven principally by underperformance in the lower return lines of business we are in the process of exiting as part of our broader portfolio repositioning. The good news is that our core business in land, cardlock, retail and natural gas performed generally as expected during the fourth quarter. Mike will provide additional details during his prepared remarks. While our fourth quarter and full year '25 results fell a bit short of expectations, the strategic actions we are taking, particularly within our land business, represent a meaningful operational transformation and an inflection point for our business. It is important to note that a portfolio transformation like this doesn't happen overnight. While much of our attention in 2025 is focused on our strategic repositioning, the majority of the work is now largely behind us. Our 2026 outlook reflects our strong conviction that the structural changes in place reduce competing priorities, thereby simplifying the business, enabling greater focus on growth in our core businesses and positioning us for more consistent performance as we move through the year. With that, I'll now pass the call over to Mike for his first inaugural review of our financial results. Mike? Jose-Miguel Tejada: Thank you, Ira, and good afternoon, everyone. Before I begin, I want to say how grateful I am to be joining you today for my first earnings call as CFO during a period of meaningful transition for the company. As many of you know, I've worked close with Ira and our leadership team for many years. And stepping into this role, my focus is clear: provide greater transparency around our underlying performance and a clear line of sight into long-term value creation. Before reviewing our results, I want to briefly address our use of non-GAAP measures. As Ira discussed, 2025 was a year of meaningful transition for World Kinect. Over the course of the year, we took deliberate actions to reshape our portfolio, exiting noncore and underperforming activities and refocusing the company on businesses that deliver improved operating leverage, stronger cash flow and returns on capital. As a result, our GAAP results this quarter reflect additional actions we have taken to further improve the quality and durability of our future earnings. Reconciliations are available on our Investor Relations website and in today's webcast materials. Total non-GAAP adjustments in the fourth quarter were $325 million or $296 million after tax. The most significant of which was $247 million of noncash intangible and other asset impairments, primarily within our land segment. These impairments were driven in large part by our decision to exit additional lines of businesses -- a business that did not meet our return thresholds or align with our long-term strategy. We also recorded an additional $77 million of restructuring and exit-related charges in the quarter, also largely tied to these land exits as well as broader transformation initiatives we have previously discussed. While the majority of the financial impact from our portfolio repositioning is now behind us, we anticipate some residual nonrecurring exit-related costs into the first half of 2026 as the remaining transactions close and activities wind down. Importantly, these actions substantially complete the land portfolio repositioning we began in late 2024 and position us in 2026 with a stronger earnings base and improved visibility. With that context, let's turn to our operating results, which exclude these non-GAAP adjustments. On a consolidated basis, fourth quarter volume was 4.2 billion gallons, down 5% year-over-year. For the full year, volume totaled 16.9 billion gallons, down approximately 4%. Fourth quarter gross profit was $235 million, down 9% year-over-year and slightly below guidance, driven primarily by lower profit contribution in our land business. For the full year, consolidated gross profit was $948 million, down 8% from 2024. This reflects year-over-year declines in marine and land gross profits of 21% and 22%, respectively, partially offset by strong growth in aviation. I'll now walk through each segment to provide more details on the quarter and the full year. Starting with Aviation. In the fourth quarter, aviation volumes were 1.8 billion gallons, down 5% year-over-year as a result of more disciplined focus on maintaining appropriate return levels. Full year aviation volume was 7.1 billion gallons, modestly lower than the prior year. Despite lower volumes, fourth quarter aviation gross profit increased approximately 8% year-over-year to $130 million, driven principally by incremental profit contribution from the Universal Trip Support acquisition completed in November. Overall, however, results in our core fuel business were slightly weaker than anticipated, driven by increased competitive pressure impacting our margin versus what we have been experiencing for much of the year, which have been running above our historical average. For the full year, aviation gross profit totaled $526 million, up 8% year-over-year. As we look ahead to 2026, we expect first quarter aviation gross profit to be up year-over-year, driven by the benefits of our Trip Support acquisition and continued organic growth internationally, which we expect to more than offset continued competitive pressure. Aviation remains the cornerstone of our portfolio, supported by a strong global network, expanding service capabilities and attractive long-term demand fundamentals. Shifting to Land. In the fourth quarter, land volumes declined 9% year-over-year. And for the full year, land volumes totaled 5.6 billion gallons, down 8%. These declines were primarily driven by our exit activities as we deliberately reduced exposure and have been exiting underperforming and noncore businesses. Fourth quarter land gross profit was $71 million, down 32% year-over-year and slightly below our expectations, driven principally by unfavorable market conditions impacting certain noncore businesses, some near-term impacts of our strategic exit from these activities as well as the impacts from businesses we have already exited, including Brazil, certain operations in North America at the end of 2024 as well as our U.K. land business in the second quarter of 2025. For the full year, land gross profit was $298 million, down 22%, largely driven by unfavorable market conditions in our European power business and parts of our North America liquid fuels business, noncore activities we are in the process of exiting as well as the impact of businesses we had exited at the end of 2024 and earlier in 2025. Additionally, as Ira mentioned, as part of our exit activities, we recently entered into an agreement to sell our North American tank wagon delivery and lubricants businesses. While we recorded associated noncash impairment charges of $85 million in the fourth quarter, we expect the transaction upon closing to return approximately $100 million of capital to the business through sales proceeds and the recovery of working capital. While near-term results were below our target levels, the actions we have taken meaningfully improved the quality of expected returns of the land business. Going forward, land will be focused primarily in North America across 3 core areas: cardlock, retail and natural gas. This business model currently represents 5 billion gallon equivalents with $2 billion coming from natural gas, which is a high volume but lower unit margin business. As I mentioned before, we expect some residual nonrecurring exit-related activity to continue into the first half of 2026 as we focus on completing the remaining exits and supporting our customers through this transition. As we look ahead to 2026, while we expect full year volumes and gross profit in our refocused land business to be meaningfully lower year-over-year, we expect adjusted operating income to nearly double as a result of exiting these underperforming land businesses, resulting in a materially improved and simplified cost structure. It's important to note that our operating margin in the land business should increase substantially and get much closer to our target level of 30%. In Marine, volumes were approximately 4.1 million metric tons in the fourth quarter, flat year-over-year, while full year volumes declined 5%. Fourth quarter marine gross profit increased 2% year-over-year to $35 million, driven by strong performance in certain physical locations. However, full year gross profit declined 21%, reflecting the continued low fuel price and volatility environment. Despite these conditions, Marine continues to generate attractive returns while requiring minimal capital investment. The business remains well positioned to benefit when the market volatility improves, providing meaningful upside optionality over time. For Marine, we expect first quarter gross profit to be generally in line with prior year. On a consolidated basis, as we look toward the first quarter and with the backdrop of the related segment gross profit comments shared a moment ago, we expect consolidated gross profit to be down versus prior year and sequentially, driven principally by the exit activity in land. Moving on to operating expenses. Adjusted operating expenses in the fourth quarter were $186 million, down 6% year-over-year, primarily due to lower incentive compensation as well as the exit of certain businesses in our Land segment, which we have previously discussed. For the full year, adjusted operating expenses declined approximately 7% to $718 million. This reflects not only performance-related compensation impacts, but also our continued focus on operating efficiency. As we move forward, we expect further benefits from the strategic repositioning of the Land segment alongside continued investment in our platforms to ensure we enhance the customer experience while creating greater efficiencies. Additionally, we are also focused on improving our operating leverage through the use of advanced analytics and AI-enabled tools. For the first quarter of 2026, we expect operating expenses to be down versus prior year and sequentially when adjusted for residual land exit-related activity, driven primarily by the improved cost base in land as well as the additional focused efforts we've been making to restructure the organization. These benefits are partially offset by the incremental operating expenses associated with our Universal Trip Support acquisition. Net interest expense in the fourth quarter was $26 million, in line with expectations. During the quarter, we amended and extended our $2 billion senior unsecured credit facility to November 2030 with a 1-year extension option. The amended facility improves pricing and flexibility and reinforces our strong liquidity position as we continue to execute on our strategy. Our adjusted effective tax rate was 29% for the quarter, resulting in a full year adjusted effective tax rate of 20%, in line with the guidance we provided. Before turning to cash flow, I want to spend a moment on an important change to how we will provide financial guidance this year. For 2026, while we will continue to share insight into anticipated quarterly segment performance, we are transitioning to provide full year adjusted EPS guidance. We believe this approach better reflects how we manage the business, accounts for seasonality and market volatility and provides investors with a clearer and more consistent framework for evaluating our performance. With the backdrop of everything we have covered and driven by the market conditions and business changes referenced in the fourth quarter, we expect the first quarter EPS to be down versus prior year and relatively flat sequentially. For the full year, however, we expect 2026 adjusted EPS to be in the range of $2.20 to $2.40, representing solid year-over-year growth and reflecting the benefits of our portfolio actions and disciplined execution. Looking next at our cash flow and capital allocation. In the fourth quarter, we generated $34 million of operating cash flow and $13 million of free cash flow. For the full year, operating cash flow totaled $293 million, slightly ahead of our expectations, while free cash flow came in at $227 million, exceeding our targets for the year. Combined with 2024, we have generated $419 million of free cash flow, also ahead of our long-term objectives. Strong cash generation enabled us to continue to return capital to our shareholders. In the fourth quarter, we repurchased $40 million of shares, bringing full year repurchases to $85 million. Total capital return through dividends and buybacks in 2025 was $126 million. Additionally, our Board recently approved an incremental $150 million share repurchase authorization. And subsequent to year-end, we completed an additional $75 million in share repurchases, underscoring our confidence in the business and our disciplined approach to capital allocation. As we look ahead, I'll leave you with a few key points. Aviation remains the foundation of our portfolio, delivering strong results in 2025 while expanding our international presence and global service offerings. While we expect some increased competitive pressure versus 2025, the core business is strong and remains positioned for sustainable growth. Land reached a turning point in 2025. We simplified the portfolio, reset the earnings base and improved long-term return potential. We expect continued improvement as we move through 2026 with stronger operating margins and a significant increase in operating income. Marine continues to demonstrate resilience, generating attractive baseline returns and offering significant upside when market conditions improve. Financial discipline remains central to how we operate from cost management to capital allocation. Most importantly, however, we enter 2026 with a simpler and more focused World Kinect with clear priorities and improved visibility into earnings growth. Looking ahead, our focus is on disciplined execution, strong cash flow generation and continued progress toward our long-term margin and return objectives. Additionally, as we operate a simpler and more focused portfolio, we will strive to increase the transparency of our business model and our expectations of the business at the segment as well as at the consolidated level. With that, I'll turn the call to Latif for the Q&A session. Thank you. Operator: [Operator Instructions] Our first question comes from the line of Ken Hoexter of Bank of America. Ken Hoexter: Ira, Mike and John, welcome to everybody to new positions and great to hear the move to simplify the business and provide the clarity. So Ira, maybe just start off with -- you've made an acquisition here on Universal Trip. Maybe talk about scale of revenues, op income volumes for that. And then also on the sale of the tank wagon business, maybe talk to us about the impact we should expect on volumes, revenues or what have you as we move into the second half? Just to kick that off. Ira Birns: Good to hear your voice, Ken. Thanks for the questions, and thanks for being here. So starting on Universal, remember, that's a service business. So there's no volume and the approximate gross profit number for that business, which I think we shared at the time we closed the deal is about $70 million. So we had a couple -- remember, we had a couple of months under our wings in 2025 because we closed at the beginning of November. So we'll see -- so the year-over-year won't necessarily be the full $70 million, but the actual impact on 2026 will be somewhere around $70 million. In terms of the exits, I'll let Mike give you a high level on that. Jose-Miguel Tejada: Yes. I mean we're shedding about 1 billion gallons worth of volume between all our exits. Related to the Diesel Direct transaction, that we're receiving about $100 million between cash proceeds and return of working capital. So we should be in a pretty good position. We did take some noncash impairment-related charges in the fourth quarter. but much better positioned for the go forward. In terms of profit contribution, everything, I think these exits in totality are positioning us much better going forward, and we will obviously kind of exceed expectations as we go forward. Our expectations are to exceed that as we move forward. Ira Birns: Yes. So Ken, just to follow up. So the exits in totality, right, power, energy management and sustainability services in Europe and then the piece that Mike just talked about, unfortunately, they weren't really delivering much of anything in terms of operating profit, they were tying up capital. They involve more capital investment if we really wanted to have a chance to grow those businesses in a meaningful way. And we were just dedicating a lot of attention to those areas, which I would generally define as noncore. So it made a lot of sense to make the move. As Mike mentioned, it's got a bigger impact on volume than it does on profitability. It will bring back capital, increase our returns and most importantly, allow us to focus on the parts of that business that we've talked to you the most about over the years, right, retail and then more recently, cardlock after the Flyers acquisition. That -- those 2 pieces of the pie will become the cornerstone of that business, and that's where we think we have some real growth opportunities. We're already delivering solid margins and returns. And as I mentioned in my prepared remarks, there are some new fangled opportunities in that space to enable us to pursue growth that we really hadn't thought about several years ago. It will be easier for us to explain that business to you. I know if you go back a few years, there were 15 different pieces of the pie. And now it will principally be 3. There's a couple of smaller inconsequential pieces. But almost the entire business, once we're out of these activities that we're exiting will be cardlock, retail and natural gas. Ken Hoexter: So Mike, in your presentation, you talked about changing to just annual guidance, staying away from quarterly. But before when you had the European business, there was always the big move of European land, right, the U.K. land, right? There was seasonality in first quarter and fourth quarter. How should we think about it now as you exit these businesses? Is it going to be more ratable, more balanced? Is it something we won't see through 1Q, 2Q because of the pending sales and we'll see it in the back half? Maybe just as an initial thought, as you just give that annual guidance, how we should lay that out? Jose-Miguel Tejada: Yes, Ken. For land, I think the seasonality story kind of falls away a little bit with the U.K. land sale that we had. And a lot of these exits and activity we're doing as well kind of further -- while it wasn't as big of an impact, it kind of further kind of decreased that ratability. Now it will take a little bit of time to kind of get into the go-forward run rate, I would say, in land. But overall, the seasonality picture is much improved in land. I think the main seasonality story for the company now is really related to aviation, and that's with demand in flights. And yes, that should cover for land. Ira Birns: Yes. I'll add to what Mike said, Ken. So one of the things you were alluding to reading your mind is we always -- well, for many years, we talked about heating oil in the U.K. And if it wasn't cold, we'd have swing. If it was, that would be a seasonal pickup for land. That's gone. We do have natural gas, which does have some seasonality associated with it. Obviously, you're selling more natural gas in the winter months than the summer months. It's not necessarily as pronounced as the heating oil story was. And then aviation always has its seasonally strongest quarters in Q2 and Q3. So we still have meaningful enough seasonality where we start with our weakest quarter of the year. We build up in Q2. Q3 has generally been our strongest quarter in aviation, which is obviously the biggest piece of the pie and then we tail off a bit in Q4. That should still be the case, even though we've eliminated some of the pieces of the pie that had some levels of seasonality as well. Ken Hoexter: Great. And sorry, I do have another 1 or 2, if I can. Can you expand on the impact of -- you talked about owning and managing the fuel yourself, but partnering with independent operators who run the convenience stores. Can you maybe detail that? And then the competitive pressure in aviation sounds like you expect more. Is this a new normal or a change in business that you're seeing that increase? Ira Birns: So I'll start with the first question. That model is growing in popularity in the C-store space in the U.S., call it a hybrid model. We're still focused on growing the model that we've talked about for many years. But there are scenarios where we find opportunities to grow the business that weren't as simple with the simple distribution model that we had in the past. If we're willing to take an ownership or -- we don't have to own the site, we can lease the site, position ourselves. Interestingly enough, it's actually a somewhat better cash flow model. Because when we enter into those long-term arrangements, we generally have incentive type payments that go out upfront that we earn back over the life of the 7-, 10-, 15-year deal, which no longer would be the case in this newer model. And we own the fuel. Therefore, we're reaping a higher margin on the fuel. It's actually a good cash flow model. So it won't necessarily increase our working capital position because we've got extremely solid credit terms in that part of our business. So it just opens up doors for us to find more growth in that part of the market that we hadn't really focused on historically. We're looking at it very carefully. We're understanding that we own the asset. We have to make sure that the economics make sense and we generate the returns that we want. But we're finding opportunity. We've actually launched several locations already under that model and so far, so good. In terms of aviation, I wouldn't use the words new normal, but it may be the temporarily new normal, right? I think we're still seeing -- or I know we're still seeing some of that as we speak, quarter-to-date, we'll take a quarter at a time. The margins are still strong. And then there's also growing opportunities to find opportunities to -- I said that word twice, sorry -- to expand to new locations that could offset some of the margin pressure from that competition word, if you will. So the team is out there looking for opportunities to add airport locations to the portfolio, which will drive additional volume. So I think we still have a lot of opportunities there, but I can't tell you whether what we saw in the fourth quarter is exactly what's going to happen in Q1 and Q2. But at the moment, we're seeing a bit of the same, and we'll see what happens as the year progresses. Typically, in aviation, a big chunk of the -- as you may remember, of the contracts roll in about the middle of the year. So as we're going through those -- what's akin to an RFP process for the contracts that go from mid-'26 into '27, we'll know a little bit more about where we come out from a margin standpoint as we finalize those negotiations. So plenty of opportunity, but we just wanted to conservatively provide some caution on the fact that, that competitive pressure is out there. Ken Hoexter: All right. And if you'll indulge me, I'll toss one more and just to wrap it up. But the marine business, I think you talked about waiting for a rebound. Is that incumbent upon shipping volumes? Is it trade lanes? Given the dynamic and changes in the container market right now, what are you looking for on a rebound there? Ira Birns: Thanks for all the questions, Ken. Appreciate it. Look, in Marine, it's the same story. Certainly, there are macro factors that could always help. The biggest macro factor that has historically helped if you look at our P&L over the years in the Marine business is price and volatility. And we remain in a relatively low price environment, a low -- relatively low volatility environment. So the business, I would describe that business as stable that always has opportunity to pounce on when things move in the right direction. It could be trade lanes could help out a bit. There's all sorts of things that could drive opportunities there. But the most significant have always been price and volatility, and we're still, again, in the lower end of historical price range. And therefore, we don't expect anything materially to change in '26. If it does, that would be upside to our guidance. Operator: I would now like to turn the conference back to Ira Birns for closing remarks. Sir? Ira Birns: Well, thanks to Ken for all the questions. And thanks to all of you -- the rest of you for joining us today. I know we've been on a bit of a bumpy road these past few years, but I'm very excited about and have great confidence in the current trajectory of our company, supported by the strategic changes we've made across our organization. As we've discussed today, we now have a simpler, more focused business model that allows us to concentrate on what we do best, leveraging our global best-in-class platform to reliably deliver fuel and related services across the transportation and broader energy distribution markets. This industry continues to evolve and so do the needs of our customers. World Kinect has always been at the forefront of helping customers navigate risk, volatility and operational complexity with consistency and insight. With a streamlined portfolio and a renewed focus on disciplined execution and with a much tighter portfolio of business activities, we are better positioned than ever to meet those demands. Before we close, I want to thank all of our employees around the world for their commitment and support, particularly during a year of significant change. Their focus, professionalism and dedication are foundational to our success. We look forward to updating you on our journey as this critical year progresses. Thanks again for joining us, and we'll see you in April. Have a great day. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Hello. Good day, and thank you for standing by. Welcome to the Accendra Health's Fourth Quarter 2025 Earnings Conference Call. After the speaker's remarks, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Will Parish, Vice President, Strategy, Corporate Development and Investor Relations. Will Parrish: Thank you, operator. Good afternoon, everyone, and welcome to Accendra Health's Fourth Quarter Earnings Call. Our comments on the call will be focused on the financial results of the fourth quarter of 2025 all of which are included in today's press release. The press release, along with the fourth quarter 2025 supplemental slides are posted on the Investor Relations section of our website. Please note that during this call, we will make forward-looking statements that reflect the current views of Accendra Health about our business, financial performance and future events. The matters addressed in these statements are subject to risks and uncertainties, which could cause actual results to differ materially from those projected or implied here today. Our expectations, beliefs and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that our expectations, beliefs and projections will result or be achieved. Please refer to our SEC filings for a full description of these risks and uncertainties, including the Risk Factors section of our annual report on Form 10-K and quarterly reports on Form 10-Q. Any forward-looking statements that we make on this call or in our earnings press release are as of today, and we undertake no obligation to update these statements as a result of new information or future events, except to the extent required by applicable law. In our discussion today, we will refer to non-GAAP financial measures and believe they might help investors to better understand our performance or business trends. Information about these measures and reconciliations to the most comparable GAAP financial measures are included in our press release. Today, I am joined by Ed Pesicka, Accendra Health's President and Chief Executive Officer; Jon Leon, the company's Chief Financial Officer; and Perry Bernocchi, the company's Chief Operating Officer. I will now turn the call over to Ed. Ed? Edward Pesicka: Thank you, Will. Good afternoon, everyone, and thank you for joining us on the call today. I am pleased to welcome all of you to our very first earnings call as Accendra Health. I'd like to begin by giving you my thoughts related to the strengths of Accendra Health and why we are so excited for our future and where we are going. First, it is important to understand the size of the market that we serve or the size of the pie. Our expansive payer relationship gives us access to approximately 300 million Americans of which the CDC estimates that 3 out of 4 adults are living with some type of chronic condition. And our nationwide footprint makes Accendra Health a premier choice for all constituents involved in the administration of care in the home-based setting. In this expansive market, we have developed high brand recognition and customer support and reliance on both Byram and Apria. Our two primary go-to-market brands. We have established this through leading service, consistency and reliability. This continues to be validated by Net Promoter Scores that have exceeded the industry average for the last several years. We also have a broad range of growing product offerings and capabilities, which provides us the ability to serve patients in the home in many of the largest and fastest-growing chronic condition categories. As a result of the foregoing, we are a national leader in home-based care for numerous chronic conditions, which afflict millions of Americans and our strengths are differentiators compared to the vast majority of the thousands of other participants in the industry. As we look forward, we have a bullish outlook on the long-term demand for our unique offerings. Economic pressures continue to push care to the home-based setting while the country's aging population is afflicted with a rising number of chronic conditions. We are also optimistic about the strong long-term demand due to increasing awareness about proactive health management amongst the population, which is still meaningfully underdiagnosed, specifically in the sleep category. Another area of opportunity for us is in the anticipated competitive bidding, specifically in diabetes, urology an ostomy, all categories of strength for Accendra Health. As CMS, along with ourselves and other industry leaders work to drive fraud, waste and abuse out of the system, we believe that we are well positioned for Medicare's competitive bidding process considering our footprint, our efficient service model and broad existing referral source recognition. To capitalize on the overall favorable backdrop, we are leveraging technology and automation to ensure that we provide an industry-leading home-based care offering built on: one, Being a trusted, reliable and easy to understand partner for our patients and their clinicians; two, an integrated, streamlined and compliant reimbursement process for our payers, while at the same time, maintaining a best-in-class revenue cycle management capabilities; and three, providing a streamlined and cost-efficient channel to market for our manufacturing partners. Just a few examples of the use of technology to both improve the customer experience while also lowering our cost to serve include the use of technology to automate payer qualifications, enabling faster and more accurate order validation and improving revenue capture. Another example, building on the strength of our MyByram app is the expected launch of our new MyApria app in Q2 of this year, which is expected to enhance the customer experience while also increasing operational efficiency and supporting patient therapy adherence. Finally, in a practical application of leveraging technology, enhancing the customer experience and overall focus, we continue to see success in the fourth quarter with our Sleep Journey initiative. I'm happy to highlight continued success in our sale of sleep supplies, which grew in the range of 8% to 9% for both the quarter and full year. Finally, we are pleased to finish the fourth quarter with the completion of the sale of our former Products & Healthcare Services business, Owens & Minor to Platinum Equity on December 31. I'd like to thank and commend all parties involved for working so diligently to complete the transaction in such a quick time frame. With the transaction now closed and final separation work well underway, Accendra Health is now devoting all of its focus and energy to strengthening our core home-based care businesses to achieve reliable and growing free cash flow, stable growth and debt reduction. We're entering 2026 as a much leaner and more nimble business with a much higher margin profile post-PNHS divestiture. We have already taken actions to lean out our business and expect to continue taking actions to eliminate costs to address the loss of a large commercial payer as well as stranded costs. Despite never wanting to lose a customer, we maintained our financial discipline during the process. Since that time, our focus has been to ensure smooth transition of patient care and minimize our cost of transitioning the relationship related to this contract. Finally, now that we have the sales proceeds in hand, we are well positioned to take a thoughtful approach to optimizing our capital structure, taking into consideration all stakeholders. We are committed to deleveraging, combined with metered investments as we move forward. This will be a continuation of what we did in Q4 with investments in technology, while also paying down debt by $65 million from ordinary free cash flow. Before I turn it over to Jon, let me reiterate my excitement about the strength of Accendra Health, the growing market that we participate in and where we are going as a business. With that, I will now turn the call over to John to discuss our financial performance in the fourth quarter and our outlook for 2026. Jon? Jonathan Leon: Thanks, Ed, and good afternoon. I want to start by reminding you that despite the closing of the divestiture at the end of 2025, we will continue to report our results on a continuing operations, discontinued operations basis for as long as accounting rules require us to show comparable results. And like the last couple of quarters, unless otherwise stated, my remarks today will focus on the continuing operations. The continuing operations financial statements are what you should expect from Accendra Health. I'm sure we all look forward to much reduced business complexity post divestiture as we move through 2026. Also please note that any discussion about the financial results and outlook for the company, will cover only non-GAAP financial measures. You can find GAAP to non-GAAP financial reconciliations in the press release filed a short time ago and residing on our website at accendrahealth.com. Fourth quarter results were largely in line with much improved cash flow and lower debt compared to the third quarter. In the fourth quarter, there was decent year-over-year growth in the key categories of sleep therapy, ostomy and urology as we have seen in recent quarters. Diabetes grew by almost 2% versus last year, an improvement as compared to flat year-over-year results in Q3 and insulin pumps led to quarterly diabetes category growth. The fourth quarter saw the initial impact of a previously discussed contract loss and price impact of a large commercial payer. Overall, this payer's impact on quarterly revenue was approximately 1% of what would have been over 3% growth. This impact on revenue will significantly increase throughout 2026 in aggregate to approximately $300 million in 2026 versus 2025 and approximately an additional $40 million in 2027. We anticipate that we will have completely lapped the impact of this revenue loss by the end of the first quarter of 2027. We are on our way to replacing this lost revenue margin. For all of 2025, revenue was nearly $2.8 billion, up a little more than 3%. Throughout the year, growth in the large sleep category as well as ostomy and urology led the way, a somewhat weaker collection rate compared to a strong 2024, also inhibited top line growth. Fourth quarter adjusted EBITDA was $90 million compared to $102.5 million in last year's fourth quarter. The change was driven by lower payment prices, inflationary product cost increases, higher health benefit costs and stranded costs that were only partially offset by lower other teammate benefit costs. For the full year, adjusted EBITDA was $375 million, up slightly from 2024. The same factors impacted the fourth quarter drove the full year results. Adjusted EBITDA results include $12 million of stranded costs in the quarter from the pre-divestiture business and $36.5 million for the full year. Beginning with our Q1 2026 results, we will no longer be specifically breaking out stranded costs because with the finalization of the divestiture, these costs will now be part of the operating expenses of Accendra Health. Expense reduction, including former stranded costs is a key component of our 2026 expectations. As I mentioned, we saw much improved cash flow in the fourth quarter and related debt reduction. For the fourth quarter of 2025, operating cash flow was $68 million, which includes $67 million of cash used by the former discontinued Products & Healthcare services business. So the continuing operations business generated $135 million of cash from operating activities. For the full year, while the consolidated business of both continuing and discontinued operations had a use of cash from operating activities of over $100 million, the continuing operations that going toward Accendra generated $154 million in cash from operating activities. As a reminder, the full year cash flow from continuing operations includes $98 million in cash costs to terminate the Rotech acquisition in the summer of 2025. For the continuing operations, free cash flow in the fourth quarter, defined as adjusted EBITDA less patient equipment capital expenditures, net of noncash convert-to-sell write-off expense and after consolidated interest paid, was $18 million in the fourth quarter and for the year was $98 million. This reinforces the strong cash generation profile of Accendra compared to the legacy business. At December 31, net debt was $1.8 billion, down $315 million from September 30 and down $46 million since year-end 2024. Prior to the closing of the divestiture, we had already reduced debt by $65 million from September 30. The net proceeds received from the divestiture of the Products & Healthcare Services business of $342 million are included in the December 31 cash balance. Also, as a result of customary final purchase price adjustments, including a working capital true-up, we expect to receive approximately $12 million to $15 million of additional proceeds in the spring. As divestiture closed, we used $66 million of proceeds to settle bank debt obligations under the AR securitization program that were entirely related to PNHS. This is all detailed in slides filed via 8-K just after today's market close and also residing on our website. In addition to the $282 million of cash on the balance sheet at December 31, we had nearly $220 million of available capacity under our committed revolving credit facility and $16 million available under a newly amended accounts receivable securitization program. The bottom line is that we believe there's ample liquidity available for the business. Also, we ended the year comfortably in compliance with our debt covenants. As we've been saying for months, all net proceeds from the divestiture will be used to reduce our debt balance. We have a long-range leverage target of 3x adjusted EBITDA, which we believe is very achievable and debt reduction continues to be a top priority for 2026 and beyond. We are also committed to maintaining a capital structure that supports the transformation of the business into a pure-play, cash-generative home-based care company. We are actively evaluating all options to optimize our capital structure into our engaging stakeholders to help ensure we come away with the structure that is the most appropriate for the new higher profit, better cash flow Accendra while protecting the interest of our shareholders. We believe this process will conclude in the near term. Turning now to the 2026 outlook. The slides I referenced earlier also include pages to assist with 2026 guidance and depict the key drivers from our 2025 results and our 2026 full year guidance. I'll begin by walking through the net revenue slide. We expect annual revenue to be between $2.55 billion and $2.65 billion. As you will see, the greatest impact results from the changes with the single large commercial payer discussed earlier. Of the $300 million-plus impact in 2026 compared to 2025, approximately 15% of the reduction versus prior year will occur in Q1 and 25% to 30% in each of the second through fourth quarters. This will be partially offset by volume growth and improved collection rates. Looking at the adjusted EBITDA slide as follows: we expect 2026 adjusted EBITDA to be in the range of $335 million to $355 million. Unsurprisingly, the large commercial payer change again has an outsized impact and will be somewhat mitigated by cost reduction directly related to this payer, other expense takeout and volume growth. The 2026 expense reductions have been identified for some time and a number of actions have been taken or slated to be taken on a rigid time frame. Finally, we included a levered free cash flow walk, which again shows the strong cash flow from the Accendra business. At the midpoint, we expect at least $100 million of free cash flow in 2026. Much of the cash flow projected in 2026 is spoken for due to the cost throughout the year to separate Accendra from Owens & Minor and cash outlays related to certain expense reduction activity that I mentioned earlier. This is only a 2026 issue and future free cash flow is expected to be comparable or better and will help drive further debt reduction. In thinking about quarterly cadence, between cost reduction ramping throughout the year to a full run rate benefit, the replacement of the previously discussed impact of the large commercial payer, the time needed to reduce stranded costs and effectively separate from Owens & Minor in the business' normal seasonality. We expect about 60% of the adjusted EBITDA to be realized in the second half of the year with the first quarter of the year being the weakest and Q4, the strongest. In conclusion, Accendra Health is a very different company than the pre-divestiture Owens & Minor. The investment thesis is much improved, and we are proud to be among market leaders in a growing and dynamic space and look forward to demonstrating consistent earnings and strong cash flow. With that, I'll now turn the call back to the operator for Q&A. Operator? Operator: [Operator Instructions]. Your first question comes from Michael Cherny of Leerink Partners. Michael Cherny: Maybe if I can just dive in on some of the commentary you made on investments. Fully understand, I think we all do the dynamics around debt pay down, but you talked about targeted investments. As you think about the businesses, especially with the Rotech deal being in the background, what do you see target investments looking like for the RemainCo going forward? Edward Pesicka: Yes. I think there's a couple of different ways to look at this. And when I talked about the metered investments, primarily in 2026, we're looking at investment in technology, as I talked about, to continue to lower our cost to serve as well as improve their customer experience. I think on the -- if you're looking specifically around the M&A side, there may be an opportunity to do some tuck-ins but again, I think our -- I know our primary focus in 2026 is going to be around debt reduction. And then those metered investments would be around technology to improve customer experience as well as lower cost to serve and we would consider, if appropriate, some small little tuck-ins. Michael Cherny: That's helpful. And just one more. You talked about the rebuild of revenue recapture opportunity as you have the large customer rolling off. You signed a preferred agreement with Optum. How is that going so far? Edward Pesicka: Look, it's still early in the process. We're starting to gain some traction. But as Jon talked even in his prepared remarks, the opportunity for us to fill in the gaps, we know we won't fill and complete -- completely fill in the gap. So you can see from our walk on revenue, but it does create opportunity for us to redeploy resources to start to backfill that revenue with other revenue, whether it be a preferred provider agreement or just expansion of existing contracts and relationships that we have. Operator: Your next question comes from Kevin Caliendo with UBS. Kevin Caliendo: One, just a numbers question. Jon, how much was patient CapEx in the fourth quarter? And how should we think about patient CapEx as a percentage of overall CapEx in 2026. Jonathan Leon: Yes, Kevin. It was $45 million in the quarter, about $189 million for the year. If you think about 2026, as we've talked about, this customer -- customers that were losing had a disproportionate amount of CapEx relative to the size of that agreement. So as you saw in our guidance numbers coming down by some $25 million, $30 million. But that -- you think about patient CapEx was going to run roughly 95% of the total going forward. Kevin Caliendo: Okay. That's helpful. Just wondering if there's been -- there's been talk of a manufacturer coming back to market who had been sort of out of the market for a while. Wondering if you have any update on that? And I was wondering if that could actually maybe provide a little relief on cost if another manufacturer were to come in CPAP or events or and the like. Edward Pesicka: Yes. Obviously, I can't comment on what other companies are planning on doing, but should another manufacturer come back into the space, I think it would create a different competitive dynamic in the market. Operator: The next question comes from Daniel Grosslight with Citi. Daniel Grosslight: Really appreciate all the detail that you've provided in your presentation. If I could just go to the adjusted EBITDA range for the '26 guide. I'm curious if you can kind of maybe break down for us how much of that volume improvement I guess it will largely come through volume improvement. But how much of that is driven by Optimum and perhaps other contracts that you haven't announced publicly yet? And how much is kind of non-Optimum and noncontracted at the moment? Jonathan Leon: Yes, Daniel, it's Jon. I would say -- I would not say there's a lot of preferred agreement built into that volume growth, and it's fairly well spread across all therapy categories. So as Ed mentioned earlier, that these are -- these contracts are attractive. It takes a while to ramp them up. So yes, we have some upside built into the volume growth, but it is by no means the bulk of that, and it's pretty well spread across customers and therapy categories. Daniel Grosslight: Got it. Okay. And then on your CapEx guidance, you're no longer guiding to a net CapEx number and I see a footnote that's because I guess I don't know. I just said it doesn't include sales, patient CapEx. What are your expectations now on a net basis for CapEx? And is the delta going to be reduced significantly because of that contract rolling off? Jonathan Leon: So overall, I would still expect about 30% of the growth to be the number that you're going to see in the sales of patient CapEx, remember when calculating any cash flow off of that, that number, that 30% is already in your adjusted EBITDA number. So we wanted to be clear that we're not double counting. So that's why we've presented the way we have today. But when you think about the dollars coming back, it's roughly 30% of the total. Operator: The next question comes from John Stansel with JPMorgan. John Stansel: I just want to touch on in the adjusted EBITDA bridge. The manufacturer cost increases and inflation seems like it's outpacing pricing growth. Is that concentrated to a particular category or area? And how should we think about that as a kind of durable trend? Jonathan Leon: Yes. I would tell you, John, it's -- certainly, I wouldn't call it a trend, I'd call it more of an opportunity for us. And I would not particularly tell you it's linked to any one supplier. It's a trend. We have seen it for a while, but it's clearly a focal point for us as we go enter 2026 and beyond. And we view it as an opportunity to really grow the EBITDA from where we are today. John Stansel: Great. And then you mentioned that you're kind of considering all options to kind of optimize the balance sheet. Can you just spend a little more time talking about your levers around balance sheet optimization. It sounds like there's kind of imminent changes you think you could be making? Edward Pesicka: Yes. The way we think about this is, obviously, with the sale of NHS business and with the cash on hand on the balance sheet plus with the improvement in net debt in the fourth quarter beyond that, any time you have a major transaction like this, it creates the opportunity for us to step back and really assess our capital structure. It gives us the opportunity to assess our capital structure holistically. And I think we have to and we will look at it based on the business that we have, what Accendra is, it's a business today that has a much different working capital requirement than what the legacy business was. It's a business that we do have relatively predictable PSC or CapEx on it. And it's a business that has much stronger margins than the legacy business. So I think that's important to understand that as the backdrop of, as we have the transaction that's closed, we have the cash on hand. It gives us an opportunity to really step back and reassess. Jonathan Leon: The only thing I would add as a comment, which I fully agree with is we obviously have some things we have to address and the maturities that are in '27, so debt coming current later this quarter, which is the half to. But to Ed's point, everything else will be opportunistic in making sure we have a capital structure that fits the new business model. Operator: The next question comes from Eric Coldwell with Baird. Eric Coldwell: I wanted to go back to that recent question on manufacturer cost increases and inflation. I want to be -- if we can, I want to be clear on this. Are you seeing broad-based cost increases across multiple manufacturers and categories? And is that -- so is it general market environment? Are they passing tariffs on do you guys trying to figure out what it actually is? Is it related to a specific primarily a specific manufacturer, a specific product line? And then how does that compare to the past? Because this is -- obviously, this is a new chart for us. Thanks for giving it to us. But we don't really have the historical context on it. And then finally, Jonathan, you said you saw some opportunity there to improve upon it. What's in your control? What opportunities are in your control? How do you improve upon it? Edward Pesicka: Yes. I guess I'll add a little more color on it. So Eric, it is not across -- it is not across every single category that we participate in. it's in some of the more major categories where there's -- this is a normal process we see every year to some extent, and we have the ability to offset it with a different -- a couple of different areas. We have the opportunity to potentially offset it with mid-year all these contracts aren't locked in for the full year. There's ones that are phasing in during the year. And I think it creates opportunity for us to work closer with various manufacturing partners to look at different pricing models and growth incentives and other things like that. So that's where we think about it and where we're going to be able to go after and attack it. So I think that hopefully frames it out. It's not necessarily tariff related. It is more related to normal inflation that we've seen historically and then our ability now to work that down as the year progresses. And I think that's what Jon -- I don't want to speak for you, Jon, but I think you probably meant that as the year progresses, this is the number we have right now. There's opportunity for us to continue to work with our manufacturing partners to mitigate and reduce some of that. Eric Coldwell: Yes. That's super helpful. If I could do one follow-up? Edward Pesicka: Sure. Eric Coldwell: Yes. Collection rate also on that same chart. You mentioned in the prepared commentary that collection rate was a bit of a -- I think you said it was a bit of a headwind in '25, which impacted growth, but clearly, that would have been a big drop through to EBIT to profit. You're looking for some improvement in '26. What gives confidence what are the drivers of the improvement? Basically, what happened? And how do you -- it's not a huge number, but how do you fix it? Jonathan Leon: Yes, Eric, I'm actually very confident in that rebound in '26 because the pullback we saw was largely due to some of the technology investments we made in '24 and '25 that just you make the investments, there's a learning curve, things have to get worked out. We worked out the kinks. So that just really set us back a little bit. The technology we put in place, we'll be all very confident will be additive to our collection rate going forward. So I will tell you the pullback that you saw is minor. But does fall through. you're correct about that, but really related to the onboarding or the implementation of new investments to improve in the future. So still really happy with where the rate is overall, but I mean it came up a very strong '24 had some investments we had to work through, and it's going to get better than '26. Eric Coldwell: What is your bad debt rate? Now that you're a stand-alone pure play, maybe you can talk about that a little bit. Jonathan Leon: We had not contemplated talking about debt. It's not disclosed, but I'll tell you I put it up against anybody else in the business. Eric Coldwell: You want to give us a [ Brent Bastia Volkswagen ] kind of ratio here? Jonathan Leon: I'll respectfully pass on the opportunity to do so. Operator: Your next question comes from Allen Lutz with Bank of America Securities. Unknown Analyst: This is Dave on for Allen. Maybe just to kick it off, just more on the revenue side. your sleep growth was 89%. It looks to be a slight step up quarter-over-quarter. Just would love to know what's driving that. And then would just also love to get a sense of the underlying health of the market across some of the other categories outside of sleep and diabetes and what's contemplated in guidance here for drivers of growth. I guess, from a volume and pricing perspective, specifically for home respiratory therapy, ostomy, wound care. Edward Pesicka: Yes. So I think talk about the sleep category and what's been driving it. We've talked a lot about it over the last year was our sleep journey. And Perry and the team across the business have spent a significant amount of time understanding that sleep journey from patient capture upfront. But as important, if not more importantly, the residual reoccurring revenues associated with sleep making sure that it's easy for -- easy for the customers, that being the patient to get the reorders and that revenue cycle continuing. So that's helped out tremendously with it. I think overall, too, I think you got to be cognizant in the sleep category. It's a growing category. More and more people continue to get diagnosed with sleep apnea. That continues to expand, and it creates opportunity for additional growth there. I think in diabetes, too, it's a little bit of a mix. We saw -- in the fact that with diabetes, we saw volume go up slightly more than what our overall growth rate was. And that's -- we got a little bit of the pharmacy DME mix in there that's driving that. And I guess overall, the anticipation is you've got low single-digit growth in most of these categories on average, some of them above that, some bit lower than that expected in 2026. And the growth plan is that plus several other initiatives we have in various categories to expand beyond that. So hopefully, that frames it out, what we're seeing right now. Unknown Analyst: I guess just real quick one clarification point. I think you mentioned some of the benefits from the pharmacy DME mix. I guess, is that now a tailwind on the diabetes side. Is that what you're mentioning or at least was -- is the expectation? Edward Pesicka: Yes, no tailwind at all. That's kind of -- it's just a one channel versus the other channel. Jonathan Leon: We're still seeing the shift from pharma to DME -- sorry. DME to pharma. Yes. Unknown Analyst: Got it. Yes, I just want to clarify that. And then, yes, I think there's a lot of, obviously, great color you guys provided on the various drivers of cash flow here. But I just wanted to take a step back. And I would just love to get an understanding of what the biggest swing factors are here for the year on cash flow. From your standpoint where you sit, where you have visibility into and maybe ones that are less so. Just what are the biggest swing factors we should think through here? Edward Pesicka: I think the biggest stand-alone single item there is if you're looking at the slides we've provided is the transaction break fee and the transaction financing fees, that's $98 million. It's probably the biggest one-timer there. Jonathan Leon: Yes. It's important to realize also, Dave, that Accendra Health compared to legacy Owens & Minor, the working capital business, it's completely different. This is a business that runs with very little of any working capital consumption. And we have opportunities to improve on that as well. So it's cash generative. It's a recurring revenue business with really strong working capital. dynamics behind us. We're very, very different than what you guys are used to about. Operator: This concludes the question-and-answer session. I'll turn the call to Ed Pesicka for closing remarks. Edward Pesicka: Thank you, operator, for that. Look, this is an extremely exciting period in the history of Accendra Health. We, myself, personally, we're all extremely excited about what the future has as a pure-play supplier in the home-based care space. and I look forward to continuing to providing updates and sharing our progress with you as we continue through the year. So thank you. Operator: This concludes today's conference call. Thank you for joining. You may now disconnect.
Operator: Welcome to OET's Fourth Quarter 2025 Financial Results Presentation. We will begin shortly. Aristidis Alafouzos, CEO; and Iraklis Sbarounis, CFO of Okeanis Eco Tankers, will take you through the presentation. They will be pleased to address any questions raised at the end of the call. Matters that are forward-looking in nature will be discussed, and actual results may differ from the expectations reflected in such forward-looking statements. Please read through the relevant disclaimer on Slide 2. I would like to advise you that this session is being recorded. Aristidis will begin the presentation now. Aristidis Alafouzos: Thank you. Since August of last year, the large crude tanker market entered the freight cycle that we've been waiting for and prepared for all these years. This is a unique opportunity to have exposure to a fleet that is on the water and able to capitalize today. For a shipping investor, on the water exposure is critical in the current circumstances. As our conviction strengthened after the summer, we executed 2 opportunistic transactions and acquired 4 resale Suezmax newbuildings from Korea. The first 2 have already delivered, one has loaded her first cargo and the other one is about to load, while the remaining 2 will be delivered in the next 2, 3 months. We have already had a structurally strong freight market with strong asset values. But we added the Venezuelan barrels coming back to normal fleet and the new trade flows that creates, India materially reducing Russian imports, the Iranian question looming, and likely, most importantly, Synacor consolidating the VLCC market in a manner that has not been done before. They are currently owning and operating and waiting to be delivered a fleet of around 150 VLCCs. As a result, our NAV has been consistently and rapidly increasing and our NAV premium attempting to continue to catch up, but it has somewhat compressed, especially given these absolutely unique fundamentals in our market. We currently have no additional opportunistic transactions in play. Our focus is clear, disciplined outperformance and maximizing shareholder returns through both dividends and sustainable share price appreciation. We will catch up later, and I'll hand you over to Ira right now. Iraklis Sbarounis: Thanks, Aristidis. Let's dive into it. Starting on Slide 4 and the executive summary. I'm pleased to present the highlights of the fourth quarter of 2025. We achieved fleet-wide time charter equivalent of about $77,000 per vessel per day. Our VLCCs were at $92,000 and our Suezmaxes at $53,000. We report adjusted EBITDA of $79 million, adjusted net profit of $60 million and adjusted EPS of $1.78. This is basis our average share count for the quarter. Continuing to deliver on our commitment to distribute value to our shareholders, our Board declared a 15th consecutive quarterly distribution in the form of a dividend of $1.55 per share. With visibility on very strong Q1 fixtures and our outlook on the market, that figure represents 102% of our net income, i.e. on our current fully diluted share count post our recent equity transactions. Total distributions over the last 4 quarters stand at $3.32 per share or approximately 95% of our reported net income for the period. In November, we executed a successful and accretive equity raise of $115 million in gross proceeds against the acquisition of the Nissos Piperi and Nissos Serifopoula that were delivered by the yard in early January. This quarter, we did another similar transaction, bringing the total amount of gross proceeds raised to $245 million, acquiring at the same time, another 2 recent Suezmaxes, which are expected to be delivered to us in the second quarter. Moving on to Slide 5. Since our IPO in Oslo, we have distributed over 2x our initial market cap with over $461 million in dividends paid. Since we have had a fully delivered fleet in 2022, we have paid out 92% of our reported net income, clearly demonstrating our commitment to distributing value to our shareholders. On Slide 6, we show the detail of our income statement for the quarter and the full year 2025. TCE revenue for the year stood at $265.4 million. EBITDA was almost $204 million and reported net income was about $130 million or $3.77 per share. Moving on to Slide 7 and our balance sheet. We ended the year with $122.5 million of cash. That included a portion of the equity earmarked for the acquisition of the Nissos Piperi and Nissos Serifopoula a couple of weeks after. We also had at the end of the year, approximately $85 million in trade receivables. Our balance sheet debt was $605 million, and we subsequently drew $90 million for the 2 Suezmaxes. Our book leverage stands at 46%, while our market adjusted net LTV basis latest broker values and pro forma for the acquisition and recent transactions is around 35% . Slide 8, looking at our fleet. I'm pleased to show the addition of 4 modern and high-spec vessels. We have a total of 16 vessels on the water, 8 Suezmaxes and 8 VLCCs with an average age of only 6 years, which will further improve once we get delivered in Q2 of our 2 Suezmax resales currently under construction in South Korea. With the initial sequence of seeking of dry docks out of the way in Q4 of last year, our only dry dock for 2026 is that of the Milos 10-year survey. Slide 9, moving on to our capital structure. I have been very pleased with how our capital structure has been shaping up with the recent refinancings and new financings for the recently acquired vessels. Our margin has improved by about 140 basis points with meaningful further reduction expected once we decide how to refinance the Nissos Rhenia and Nissos Despotiko. The Piperi and Serifopoula were financed by the Greek market at record terms at 130 basis points over SOFR for 7- and 8-year terms, respectively. The debt financing market continues to be open and extremely competitive for us as we're exploring our options for the 4 vessels in the second quarter. Slide 10. We wanted to spend some time going through the 2 transactions we executed since our last quarterly update. In November, we raised $115 million at $35.5 per share, priced at roughly 1.25x our NAV at the time. In January, we followed with $130 million at $36 per share, priced at approximately 1.2x our NAV at the time. Both transactions were heavily oversubscribed executed a significant premium to NAV and were completed with third-party vessels locked on [indiscernible]. That combination is extremely rare. Very few companies, particularly in shipping, have been able to raise equity at a significant premium to NAV, secure modern tonnage, execute cleanly and immediately create value for shareholders, and we managed all 4. And here's the most important one. Since those 2 raises, shareholders have generated more than 20% return plus dividends. That is not theoretical accretion, that is realized value. We view it as a very strong statement of our shareholder aligned capital allocation discipline. We do not raise equity to grow for growth's sake. We decided to raise equity when it is accretive. It lowers breakeven, it strengthens the balance sheet. It enhances per share value and increase company share trading liquidity. Both transactions met such parameters. Slide 11, walking through the mechanics for the first transaction, vessel acquisition price was $97 million each. Imputed price taking into account the NAV arbitrage on the equity portion of the funding of the transaction implies $85.5 million. On the second transaction in January, vessel acquisition price $99.3 million. Imputed price after the NAV arbitrage implies $88.5 million. We effectively acquired recent vessels with [ promt ] delivery at the cost of a newbuild as a pure capital markets arbitrage. Above NAV [indiscernible] funded asset purchases at or below NAV, resulting in immediate NAV accretion. But it didn't stop there. And as I briefly mentioned before, the raise has also increased free float and liquidity, expanded and diversified the shareholder base, strengthened capital markets credibility and reduced fleet-wide breakeven levels. And importantly, we executed while asset values were rising. So not only did we have -- did we buy accretively, we bought ahead of further appreciation. We consider this a textbook example of shareholder-friendly execution. Growth only makes sense when it improves per share economics, and that is the filter we apply. I will now pass over the presentation back to Aristidis for the commercial market update. Aristidis Alafouzos: Thank you, Iraklis. Again, we had another great quarter. Q4 was a fantastic quarter with a consistent strong freight market and appreciating asset values. We positioned our fleet to take advantage of the seasonal strong quarter, and this year, it worked out for us quite well. The market dipped aggressively right after Christmas on the VLCCs, but we're lucky to have limited exposure during this brief window. Fleet-wide TCE came in around $76,700 per day with $92,000 on our VLCCs and 53,100 on the Suezmaxes. And we achieved 100% utilization across the fleet. Q4 looked like it would be a strong quarter since August when rates in the spot market and future started moving in a period that is usually quiet. On the Suezmaxes, as usual, we tried to minimize waiting time, fix shorter voyages as the market was going up through the quarter and triangulate as best as possible. We were penalized by dry docking our 2 2020-built Suezmaxes in China. The freight rates to move out East were actually at a discount to the local Western voyages, while the backhauls were also below round trip economics. We have a Suezmax requiring dry dock this year, and we are strongly considering putting her into dry dock in Turkey, which is slightly more expensive as a dry dock cost, but we'll be able to earn a lot more as we do not have to position her and reposition her outside of our preferred trading areas. On the VLCCs, we were quite pragmatic. On our Western positions, we fixed long voyages to go east and capture the front haul economics. And on the vessels in the East, we minimize waiting time to optimize time -- TCE, time charter equivalent, while also fixing a couple of backhauls when we're able to find the cargo offer dates and achieve a triangulated outperformance over the equivalent round voyage. The Nissos Rhenia was lucky to fix a voyage loading in the AG and discharging in the U.S. Gulf. Her next voyage had no ballast passage. This was the first quarter where our VLCCs outperformed our Suezmaxes since Q2 2024. Q1 started with a bang. We already had an excellent structural setup in crude tankers. Then as the New Year's gift and Christmas gift as well, 2 developments reinforced the market. Venezuelan barrels returned exclusively to the compliant fleet and Synacor aggressively consolidating the VLCC market, controlling over 90 ships and now operating roughly 150 vessels. We will elaborate on both shortly. We think that our Q1 guidance is strong. We have very strong fixtures from Q4 flowing into Q1 and even stronger fixtures getting concluded in Q1. We fixed a 12-month charter at $91,140 on the Nissos Nikouria. While I strongly believe our spot vessels will outperform this over this year, we still have another 15 to 17 spot ships, and we deemed it prudent. In addition, the previous batch of fixtures in the mid-70s were quite low, and we took the opportunity to set the bar higher, which has now been set even higher with multiple fixtures done at $100,000 per day for 12 months. At the moment, we do not have any interest to fix further ships on TCE. But with the volatility and rapidly appreciating market, this could change, even though we really like and want to continue our current spot exposure. As of today, we have 67% of our VLCC spot days fixed at $104,200 per day and 64% of our Suezmax days fixed at $84,600 per day, giving us a fleet-wide average about $94,800 per day on the fixed portion, roughly 2/3 of the quarter. On the VLCCs, we fixed a combination of longer and shorter voyages in order to structure their next fixing -- cargo fixing windows. The Suezmaxes have also been performing wonderfully with many opportunities for them to earn over $100,000 a day. Take note that our Q1 guidance also includes repositioning our 2 newbuild vessels from South Korea into the West where we like to trade our ships. We secured crude cargoes on both vessels from West Africa, where now they're going to move up into our preferred areas. CPC Black Sea volumes have resumed at full force as the SPM that was damaged earlier is back in use. This is a great support on the Suezmax market as we see around 40 cargoes a month from that port alone. While recently, we have seen these barrels also getting sold into the East, which has not been the case for months. This is very supportive ton miles as a vast majority of the flows usually go into Europe. Another large factor in the strength of the market and our earnings has been the Venezuela being back in the open market. But again, we'll talk about this signed for and sanctions in the following slides. We were able to capitalize on many opportunities in this quarter and look to do so going forward. On Slide 15, apologies for the repetitive slide, and I'll keep this one brief. Since Q4 '19, we've generated approximately $235 million of cumulative outperformance versus our peers. So this is a 22% outperformance on RVs and 39% outperformance on our Suezmaxes over a 5.5-year period. This reflects consistent commercial execution, not just one strong quarter. On the following slide, we look a little bit at the order book and the fleet structure. The order book has grown on the VLCCs since our Q4 report, but context matters. If we consider the 20-year mark is the end of the useful life of a normal fleet vessel, the fleet is declining year-by-year. We saw an interesting development of how a change in sanctions affects oil flows and shipping flows with Venezuela. Oil sanctions are lifted, flows resume in the normal market. The world's best traders and oil managers get involved in the trading and production. What else do we see? That the ships that were sanctioned or engaged in this dark trade remain isolated. They will not be coming back to compete against us. As we look on the next weeks to Iran, is this how it plays out there. Eventually, when the Ukrainian conflict comes to an end, is that again the same pattern? I strongly believe that sanctioned and dark fleet tainted ships do not come back to the normal market. The only window potentially for some to return are those owned by national oil companies, whether it's the National Iranian Tanker Company or [indiscernible]. But this is a very small number in the overall dark fleet. And looking at our fleet, we are sitting exactly where investors want to be. We have a young eco-designed, fully scrubber-fitted fleet and most importantly, in the water, earning today. In our opinion, what does the shipping investor want? Exposure and returns today. This is what OET delivers. And now for the more exciting slides, we have over 20% of the fleet of large tankers sanctioned and even more engaged in the trade tainted but not yet sanctioned. Against all oil analysts and traders predictions, we do not have a massive oil blood in the market. What we see instead is an inability for sanctioned barrels to find a buyer and a lot of floating sanctioned cargoes. This inability has stretched the dark fleet, increased freight rates for them and forces them to absorb more tonnage, which further restricts the size of the normal fleet. The result is simple, fewer ships available for the compliant market. That is structurally bullish. Against this, we have 3 main noncompliant trades, Venezuela, Iran and the non-price capped Russian business. Today, Venezuela is gone. The oil exporting from Venezuela is only on the normal fleet. Every single barrel from Venezuela is a cargo that wasn't around in 2025. This is extremely positive for tanker ton-mile demand as the market settles and the trade grows, it will become even more pronounced. Another sign on the tightening enforcement of sanctions, which many respected oil and political analysts gathered was Trump's ability to impact oil flows, but he succeeded and India has materially decreased their purchases of Russian crude. So instead, we are seeing constant market quotes from the Arabian Gulf, from West Africa, from Brazil, from the U.S. Gulf and even flows from Venezuela. Again, every cargo from these places is a new cargo from the compliant fleet that's replacing the Russian crude. And the final and most bullish part of our 3-slide tanker dream section is the massive unprecedented consolidation in the VLCC sector by a privately owned non-trader. Synacor has or will take control of over 85 ships since Christmas. Their total fleet footprint should be around 156 ships. This is just unbelievable. They control 17% of the total fleet, while almost 40% of the smaller part of the pie of the fleet which we actually compete with in the spot market. They have been very effective at pushing up the market. Hats off and congratulations to Synacor for this. They have done the heavy lifting and let the rest of the market reap the rewards. The market must understand that this is a seismic shift and the biggest owner-operator of tonnage is not a charter or a state oil company. They are not trying to protect their own oil trading P&L. They're only trying to maximize freight for themselves. Looking at utilization on Slide 22. When I started my career, a good friend and a highly respected broker, Chuck Monson, always told me that as you move forward -- as you move toward the high end of the utilization curve, rates don't increase linearly. They move exponentially. And that's exactly what this slide illustrates. When the market tightens at these levels, even a small shift in utilization can translate into a very meaningful move in earnings. With how fast the market has moved recently, I suspect that as we give this presentation, we are most likely out of the light blue box and perhaps one click to the right. This is precisely where modern, fully spot exposed fleets like ours benefit the most. And if this trajectory continues, I look forward to making our Q1 presentation even more exciting. Thank you for joining us today. Operator: [Operator Instructions] Your first question comes from the line of Even Kolsgaard with Clarksons Securities. Even Kolsgaard: So you mentioned it yourself as well, but I'm interested in your take on the VLCC market versus the Suezmaxes because I think the market today is mostly focused on the VLCCs. The rates are good and you have the Synacor event. But as you mentioned, the VLCC market has finally begun to outperform the Suezmaxes reversing basically trend we've seen for the last few years. So how do you think about the Suezmax versus VLCC market going forward, both for earnings and values? Aristidis Alafouzos: Even, thanks for your question. I mean, even in Q4 and potentially look -- I mean, at least through our guidance in Q1, on a dollar per metric ton or on a relative basis, the Suezmax is still outperforming the VLCC. So I mean, obviously, it's a cheaper ship, but the delta between price and earnings isn't still justified. So we think that the Suezmax is a really attractive asset. And as the VLCC market continues to tighten, and charters do their best to find ways to reduce the cost of transporting the oil from A to B. We think that the Suezmax will become a very versatile asset in order to do it. So we could -- I mean, there are some trades which will never make sense on the Suez instead of the VLCC or rarely. And this is like the really long-haul business, U.S. Gulf to China or a lot of the AG business to China. But a lot of the voyages WAF med or backhauls and the shorter runs, Suezmaxes can easily jump in and find a lot of opportunities to do backhauls or nontraditional Suezmax cargoes, which we would consider like a triangulated bonus over the normal Suezmax market. So for this reason, we think that the strength in VLCCs will be equally beneficial to the Suezmaxes and for savvy owners can give them even more opportunities to creatively trade their ships in this market. Even Kolsgaard: Got it. And just a follow-up. I guess you said you don't want to get take on any more time charter contracts at these rates. So you're pretty bullish towards the market. But when it comes to Synacor, it seems like they're bidding for VLCCs from basically every owner. Have you been tempted to sell some of your ships to Synacor? Aristidis Alafouzos: In [indiscernible] And my personal view is that Synacor will be successful in what he's trying to achieve. So I think that the exposure to the spot market and in the future, potentially TCE market or sales market is what we want to have today. Now going forwards, once things continue to reprice higher, I can't tell you what's the best choice for us to do. But I think right now, there's a lot of upside left in what's happening in the market. And right now, we've seen rates move up 20 points, a little bit more this week. And I still feel like that's just the beginning of the current spike that we're entering. So at the moment, no, we haven't seriously considered selling our Okeanis vessels to Synacor. Operator: Your next question comes from the line of Liam Burke with B. Riley. Liam Burke: You're generating a lot of cash at this level. You've got a nice hefty cash balance to support the acquisition of the 2 new Suezmaxes. Is your capital allocation strategy going to change from how it has been in the past? It's here. Iraklis Sbarounis: Liam, it's Iraklis here. I don't think it has changed. I mean it has been for some time, a key priority for us to distribute as much value as possible to shareholders. The transactions that we did were structured in a way where that was not jeopardized by any means. And this quarter and the distribution we're giving is indicative of such strategy. So not really, we're trying to give out as much as possible, and we're just focusing on extracting as much possible -- as much value as possible from the market to deliver that to shareholders. Liam Burke: Okay. Just a follow-on, on the market. In the prepared comments, the spot market is still continuing to move, I mean, exponentially at this point. But is there any thought to taking some money off the table and moving some vessel or more vessels to term charters? Aristidis Alafouzos: Liam, we answered that during the presentation as well. At the moment, the answer is no. I think what we want is to have a vast majority of the fleet in the spot market, especially as we feel that there's a lot more upside to spot rates and to the charters and owners' expectations of spot rates over the next considerable period. So I think for now, we need to keep our ships in the spot market, so we have all the optionality we need. And then in a few months, we look at it again. But for the time being, the answer is clear no. Operator: Your next question comes from the line of Fredrik Dybwad with Fearnley. Fredrik Dybwad: Congratulations with the strong results and strong bookings. I was just trying to circle a bit back to Synacor. I was a bit interested in hearing your take on how -- can you guys hear me? Aristidis Alafouzos: Yes, you got cut off right when you're asking the question. Fredrik Dybwad: Okay. Okay. Yes, I was just circling back to the Synacor stuff. How -- interested in hearing your take about how in practical terms, how is he going to be able to corner the market as we know, he hasn't fixed that many ships yet, has fixed a couple. And then lastly, how long do you think that can last if he's successful? Aristidis Alafouzos: I think that's a better question for Synacor then or [indiscernible]. I do see that his ships have been fixing. And I mean, I think that he has -- the company has stated where they think the market should be, and they will fix at those levels, and they've been very consistent with that. So I assume once rates get to the levels that they want, they'll fix some ships, they'll assess where the market is, and they'll continue to raise their expectations and put the rates higher and continue pushing this market higher. So I don't know. Again, the specific strategy of the company, and it's a question for Synacor. Operator: Your next question comes from the line of Clement Moll with Value Investors Edge. Climent Molins: First of all, congratulations on the 2 accretive offerings you pursued in recent months. I wanted to start by asking about where you see your maximum fleet size, say, on VLCCs and on Suezmaxes, where you can still capture this kind of premium you've been able to realize in recent years? Aristidis Alafouzos: Thank you for the question and being on the call. I think we answered it on a previous call as well that we would be comfortable for the fleet to continue to -- on a theoretical level, we'd be comfortable if the VLCC or Suezmax fleet was slightly larger, and we could still capture the same earnings. But what I can tell you for sure is that the fleet is the right size today for us to continue doing so. So it's not just about fleet size. It's also about the team and personnel and the technical manager. So it's -- there's many facets to how we hope -- how we have and hope to continue outperforming. But I can tell you that currently, our fleet size is perfect for us to keep doing so. Climent Molins: Makes sense. And this one is a bit more on the modeling side, but you mentioned you were thinking about potentially doing a dry docking in Turkey. Could you talk a bit about the delta between doing that in Turkey versus, say, in China? Aristidis Alafouzos: Yes. I mean I think that depending on the type of paint specification you want and maybe you have an expectation of like $0.25 million to $0.5 million more expensive [indiscernible]. But in a strong market, you save way more of that by being able to keep your earnings higher and not repositioning all the way out there and all the way back. Some owners prefer to trade in the East. Historically, as a company, we've always -- we started off on smaller ships as well like before we were public on Aframaxes and our strongest relationships are in the West and with the more Western-based oil companies and traders. So we really feel that this is the area that we can outperform. And if we have a ship that goes in the East for dry docking or she gets, a Suezmax gets an option declared out there, we never think, okay, let's trade in the East. It's always about bringing her back home into the West. And by dry docking in Turkey, we can avoid the whole positioning out there and repositioning her back. Now I think at times, this can be easier. So let's say now like CPC Korea is $9.5 million in freight to go around the cape. So those are great earnings to position your ship out there. But the CPC volumes that I mentioned during our call aren't always flowing east. Sometimes they flow only into Europe. Now I assume that with Venezuela and all the knock-on effects of the Venezuelan oil and what places what and down the line, perhaps that has something to do with why we see more CPC going east. But it's not something consistent. And then you also have the issue of the backhaul. And before the war started -- before the war in Gaza started, the Suezmaxes would be easy to go through the Suez Canal as well. And that was a way to have a backhaul that it was always at a discount to the front haul, but because you're going through the Suez Canal, it wasn't such a long voyage. Now being forced to go around the cape both ways, it becomes an extremely long voyage. So you kind of -- you lengthen those lower rate economics, which is something that we don't prefer for the next dry dock. Climent Molins: Yes. Makes sense. The opportunity cost is simply too high. Operator: There are no further questions at this time. I will now turn the call back to Iraklis for closing remarks. Iraklis Sbarounis: Thanks, everyone, for attending this call. We look forward to touching base in May for our first quarter update. Aristidis Alafouzos: Bye, everyone. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Good afternoon, and welcome to Occidental's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jordan Tanner, Vice President of Investor Relations. Please go ahead. Jordan Tanner: Thank you, Drew. Good afternoon, everyone, and thank you for participating in Occidental's Fourth Quarter 2025 Earnings Conference Call. On the call with us today are Vicki Hollub, President and Chief Executive Officer; Sunil Mathew, Senior Vice President and Chief Financial Officer; Richard Jackson, Senior Vice President and Chief Operating Officer; and Ken Dillon, Senior Vice President and President, International Oil and Gas Operations. This afternoon, we will refer to slides available on the Investors section of our website. The presentation includes a cautionary statement on Slide 2 regarding forward-looking statements that will be made on the call this afternoon. We'll also reference a few non-GAAP financial measures today. Reconciliations to the nearest corresponding GAAP measure can be found in the schedules to our earnings release and on our website. I'll now turn the call over to Vicki. Vicki Hollub: Thank you, Jordan, and good afternoon, everyone. 2025 was an exceptional year for Oxy, made possible by the focus, discipline and commitment of our people. Our teams worked safely, executed consistently and delivered outstanding operational performance, all while driving meaningful cost reductions and efficiency improvements and increasing our financial flexibility. We took decisive actions to strengthen the company and position Oxy for long-term value creation. The sale of OxyChem made possible by the quality of our portfolio was a deliberate step to strengthen our balance sheet and enable us to deliver greater value from our high-return oil and gas assets. As a result, the portfolio we have today is the strongest Oxy's ever had. Built around high-margin, lower decline and long-lasting conventional assets, we developed a world-class unconventional portfolio and achieved the technical excellence to maximize and expand its value. Now with our operational excellence and our differentiated enhanced oil recovery expertise, we are perfectly positioned to drive sustainable free cash flow growth and deliver long-term value to our shareholders for decades to come. This afternoon, I will walk through our 2025 financial and operational performance, the actions we took to strengthen Oxy and our priorities and capital plans for 2026. Richard will then cover our operations in more detail, and Sunil will review our fourth quarter results and outlook for the year ahead. Starting with our financial performance, 2025 demonstrated the resilience of our business. Even with oil prices down around 14% from 2024, we generated $4.3 billion in free cash flow before working capital. On a normalized basis and excluding OxyChem, we increased cash flow from operations by 27% year-over-year. This improvement came from exceptional execution in multiple areas, including reduced operating costs, increased capital efficiency and strong production performance. Debt reduction continued to remain a top priority in 2025. We repaid $4 billion in debt from multiple sources. And with the completion of OxyChem sale earlier this year, our principal debt now stands at $15 billion, about $3 billion lower than before the CrownRock acquisition. Just this morning, we announced a tender offer that is expected to further reduce principal debt to $14.3 billion, reaching that target we set when we announced the OxyChem transaction. This progress reflects disciplined capital allocation and a sustained focus on strengthening the balance sheet. It gives us the flexibility to invest in our best opportunities and continue delivering value to our shareholders. Now I'll discuss our operational achievements. Operational execution was a clear differentiator for us in 2025. We set a new annual production record of 1.4 million barrels of oil equivalent per day, exceeding the high end of our guidance while spending $300 million less in oil and gas capital than originally planned. We've reduced annual operating expenses by $275 million and achieved our lowest lease operating expense per barrel of oil equivalent since 2021. Reserves replacement remains critical to the sustainability of our business. Every year, we strive to add at least as many reserves as we produce. This is getting tougher across the industry, but once again, our teams delivered. In 2025, we achieved a 107% organic reserves replacement ratio and a 98% all-in reserves replacement ratio at a finding and development cost below our DD&A rate. Including the 2.5 billion barrels of resource we shared last quarter, our total resource base now stands at 16.5 billion barrels of oil equivalent, providing more than 30 years of low-cost opportunity. Importantly, 84% of our total resource base breaks even below $50 per barrel. Our leadership in enhanced oil recovery and advanced recovery techniques continues to extend resource life and improve capital efficiency. Midstream also delivered strong results with adjusted pretax income surpassing the midpoint of guidance by more than $500 million, driven by gas marketing optimization in the Permian and higher sulfur prices at Al Hosn. More importantly, our employees achieved record safety performance across our global operations in 2025. In the fourth quarter, we launched our Remote Operations Command Center in the Gulf of America, which complements our Rockies and Permian Remote Operations command centers. These utilize advanced AI and remote monitoring and have further enhanced our safety, reliability and operational efficiency. In 2025, our strategic actions improved our balance sheet and showcased our team's innovation and operational expertise. With the sale of OxyChem, our 10-year journey to build the best and most diverse oil and gas portfolio is complete, yielding a larger, higher-quality resource base now at 16.5 billion BOE, up from 8 billion BOE in 2015 and increasing production from 668,000 BOE per day in 2015 to 1.43 million barrels of oil equivalent per day in this year. U.S. assets now provide 83% of our production compared to 50% in 2015, while our international assets remain high quality and high performing with upside potential. Our mix of conventional and unconventional assets provides a complementary balance that offers investment flexibility and downside protection through the cycles. We no longer require transformative acquisitions. Instead, our teams are focused on what they do best, and that is execution, including cost reduction, capital efficiency and well performance. resulting in higher production, better margins and greater financial flexibility. I'm confident that our teams will continue to innovate in all these areas into the future. While we are pleased with this pivotal achievement, we are not yet satisfied. There's still more work to be done. So looking ahead, our priorities for 2026 will build on the progress we made last year. First, we plan to maintain our production base through safe, reliable operations because safety and operational excellence are foundational to everything we do. Second, delivering a sustainable and growing dividend remains central to our strategy, including the 8% increase to our quarterly dividend announced yesterday. Third, we will continue to strengthen our financial position and remain opportunistic in terms of share repurchases and further net debt reductions. Our value proposition is rooted in investing in high-return oil and gas projects that generate strong cash flow today while advancing mid-cycle projects to reduce sustaining capital requirements over time. We're also progressing integrated technologies in CO2, power and midstream to drive resource recovery and long-term value. Bringing STRATOS online this year is an important step in the strategy. Turning to our capital plan. We're entering 2026 from a position of strength. We expect capital spending to range from $5.5 billion to $5.9 billion, representing a $550 million reduction from 2025, excluding OxyChem. This reflects a leaner, more efficient Oxy and continued capital discipline. Even with lower spend, we expect production to average approximately 1.45 million barrels of oil equivalent per day. Approximately 70% of our oil and gas capital will be directed to our U.S. onshore portfolio, providing flexibility to respond to commodity price improvements while maximizing near-term cash flow. I'll now turn the call over to Richard to discuss operations in more detail. Richard Jackson: Okay. Thank you, Vicki. 2025 was a standout year for Oxy, and I'm proud to share the progress we've made across our operations. Last year, our focus on cost efficiency and well performance continued to deliver positive results. As Vicki noted, our teams delivered record annual production of 1.434 million BOE per day production while reducing total spending by $575 million, including a 7% beat in domestic operating expenses. In U.S. onshore, our new well capital costs were down 15% compared to 2024 with Permian unconventional costs down 16% and the Rockies down 13%. These new well cost improvements are part of our ongoing track record of oil and gas cost efficiencies. Since 2023, we've achieved approximately $2 billion in annual oil and gas cost savings across our capital and operating expense categories. At the same time, last year across all U.S. onshore basins, our new wells performed more than 10% better than the industry, measured on a 6-month cumulative oil per foot basis. We also achieved record production from Al Hosn and record uptimes in Algeria, Gulf of America, Al Hosn and our U.S. onshore EOR facilities, adding strong base production delivery to our production beat. I want to recognize our teams for the relentless drive to improve cost efficiency and performance while also delivering record safety results across our operations. As we look towards 2026, our operational priorities continue to center on 3 key focus areas: extending and improving our low-cost resource base, further driving cost efficiency, and generating resilient free cash flow at any price. Last quarter, we highlighted the significant resource opportunities ahead of us, including our 16.5 billion BOE and 30-plus years of low-cost development runway. This included our advanced recovery opportunities like unconventional EOR that position Oxy for the future. Today, I want to expand on our cost efficiency progress, which is central to our 2026 plan. The significant cost efficiencies and strong well performance we achieved in our oil and gas operations have positioned us to deliver another $500 million of cost savings in 2026 with $300 million from capital and $200 million from operating and transportation costs. This includes about 7% lower well costs, 5% less facility costs and a 4% reduction in domestic operating expenses. These structural savings are a result of a focused cross-functional effort from our teams over the last several years. Moving forward, we aim to deliver further efficiency gains with an ongoing focus on enhancing cash flow from operations and lowering sustaining capital. These efficiencies, combined with changes in our program allocation have enabled us to reduce our 2026 capital plan by $550 million compared to 2025 without chemicals. This includes $300 million capital reduction for oil and gas and a $250 million reduction in LCV as STRATOS construction winds down. On STRATOS, we've made great progress. Phase 1 is in the final stage of start-up and is expected online in Q2. Phase 2, which incorporates the learnings from our R&D and Phase 1 construction activities will also begin commissioning in Q2 with operational ramp-up continuing through the rest of the year. Last quarter, we discussed the potential to reallocate up to $400 million of capital to U.S. onshore operations as capital rolled off in other areas. However, further cost savings and higher productivity from both base and new wells eliminated the need for this reallocation. Ultimately, these efficiencies further enabled us to reduce U.S. onshore capital by $400 million compared to 2025 while still delivering a 1% production growth. This year, we plan to invest in key mid-cycle projects, including Gulf of America waterflood projects and unconventional EOR, where we've increased capital by $200 million from 2025. We view mid-cycle projects as an important part of our strategy to improve and extend resources, lower total company decline rate and ultimately lower our sustaining capital. In GOA, we are beginning our Horn Mountain waterflood project, which has potential to provide significant incremental recovery with initial uplift to begin in late 2027. We believe our pipeline of GOA waterflood projects, combined with our ongoing focus on production reliability can meaningfully lower our base decline rate and operating expenses. Importantly, our agile operations and 2026 plans provide flexibility to deliver resilient free cash flow even in a lower oil price environment. We have the ability to continue to adjust spend and activity across capital and operating expenses while delivering mid-cycle investments as needed to preserve near-term cash flow and position Oxy for reinvestment only when market fundamentals are clear. In closing, our operational strength and financial progress in 2025 has positioned us for a strong year in 2026. We've proven that our execution, relentless cost focus and operational agility can deliver outstanding results even in a dynamic market. Our teams have set new benchmarks in safety, efficiency and well performance, and we're carrying that momentum into 2026. I'm confident that by maintaining our focus on improving resources and cost efficiency, we will continue to deliver durable results and enable a stronger, more resilient Oxy that will create lasting value. Thank you. Now I'll turn it over to Sunil. Sunil Mathew: Thank you, Richard. In the fourth quarter, we delivered strong operational and financial results. We generated an adjusted profit of $0.31 per diluted share and a reported loss of $0.07 per diluted share. The difference was largely driven by charges and transaction costs related to the sale of OxyChem. Our sustained focus on cost efficiencies and operational improvements enabled us to generate approximately $1 billion in free cash flow despite lower realized oil prices. As Vicki and Richard shared, we had an excellent quarter operationally and strengthened our financial position. Production exceeded the midpoint of guidance by 21,000 BOE per day, driven by strong U.S. onshore performance. We also achieved our lowest quarterly domestic operating expense since 2021 at $7.77 per BOE. Momentum across our oil and gas portfolio is accelerating, demonstrated by our exceptional operational performance throughout 2025. We remain highly confident in our ability to unlock further value for our shareholders, driven by our disciplined capital allocation and strong operational performance. Our Midstream segment delivered outstanding results with adjusted pretax income in the fourth quarter exceeding guidance by $172 million. This was largely driven by our team's success in optimizing transportation around unplanned maintenance on third-party pipelines out of the Permian as well as higher sulfur prices at Al Hosn. As shared last quarter, OxyChem and legacy environmental liabilities are reported under discontinued operations. Our strategic actions and targeted focus on efficiencies further lowered our cost structure and enhanced our financial flexibility. The successful completion of the OxyChem sale at the start of the year accelerated our deleveraging, strengthened our balance sheet and enabled us to reduce principal debt to approximately $15 billion. Over the last 20 months, we have repaid $13.9 billion in debt. As a result, our leverage metrics have improved significantly, and our near-term debt maturity profile is fairly minimal with approximately $450 million due over the next 4 years. In addition, this morning, we launched a $700 million debt tender offer that is expected to reduce principal debt to $14.3 billion, a reduction of over 40% since year-end 2024. As a result of our disciplined execution and ongoing focus on cost efficiencies, we have driven our sustaining capital requirement lower. We are taking purposeful steps to enhance our cost structure and financial resilience as demonstrated by the operational efficiency gains realized in 2025 and expected savings for 2026. We expect to improve free cash flow by more than $1.2 billion in 2026. This is largely driven by expected annual operational savings of $500 million in oil and gas and $400 million in midstream savings, partially driven by improved crude transportation costs. In addition, we expect to realize approximately $365 million in interest savings in 2026 compared to 2025. These initiatives will continue to strengthen our cost structure, supporting resilient free cash flow in a lower price environment. Our improved financial strength, lower sustaining CapEx and lower cost structure support our 8% dividend increase. Our cash flow priorities remain disciplined with a clear commitment to delivering long-term value for our shareholders. As I shared before, as we build cash on our balance sheet, we will be opportunistic in terms of share repurchase and/or further net debt reductions. We believe this balanced and opportunistic approach will serve us better as we prepare to resume redemption of the preferred equity in August 2029 when it becomes callable without the $4 per share return of capital trigger and at a lower redemption premium. As Vicki and Richard highlighted, our commitment to cost improvements and prudent capital allocation in 2026 allows us to further reduce costs while maintaining relatively flat production. Total capital for the year is expected to range between $5.5 billion and $5.9 billion weighted to the first half. The midpoint represents an 8% reduction from 2025, excluding OxyChem, primarily driven by efficiency gains and optimization of activity levels. Our capital plan is structured to maintain flexibility and support long-term value creation, enabling us to adapt to oil price uncertainty. We continue to prioritize short-cycle, high-return assets to maximize near-term cash flow while investing in mid-cycle projects to balance base decline. Approximately 70% of our capital program remains focused on U.S. onshore assets, preserving significant flexibility to respond to market changes. Relative to 2025, spend in U.S. onshore is expected to decrease by $400 million, reflecting ongoing efficiency gains and a reduction in Permian activity levels. We plan to increase investment in the Gulf of America, Permian EOR and International by approximately $200 million, supporting our long-term base decline rates through mid-cycle investments. Investment in these projects will support future sustaining capital improvements. We have reduced our exploration budget by approximately $100 million with lower spend in the Gulf of America. Investment in Low Carbon Ventures will be approximately $250 million lower year-over-year with STRATOS anticipated completion of both phases this year. As Richard mentioned, we expect 2026 production to grow approximately 1%, averaging 1.45 million BOE per day even at lower capital levels. First quarter volumes will be lower, reflecting reduced fourth quarter activity and working interest in U.S. onshore, the impact of winter storm fern and planned turnarounds that will impact Gulf of America production in the first half of the year. Production is expected to increase in the second quarter, driven by stronger Permian volumes, positioning us for strong full year performance. In Midstream, we anticipate slightly lower earnings in 2026 as gas transportation optimization opportunities narrow with increased Permian gas takeaway capacity and in the back half of the year. However, improvements in crude marketing out of the Permian, including the benefit from revised transportation contracts at lower rates are expected to partially offset this impact. We expect a higher working capital use during the first quarter, which is typical for this time of the year, driven by property tax, compensation plan payments and higher interest payments. In summary, our disciplined capital allocation, strong asset base and operational performance continue to drive resilient performance and enhanced capital efficiency. The advancement of our key portfolio initiatives and sustained cost efficiencies have reinforced Oxy's flexibility and financial resilience. As we continue to strengthen our financial position, we are confident in our ability to create long-term value for our shareholders as we move forward in 2026 and beyond. I will now turn the call back over to Vicki. Vicki Hollub: Thank you, Sunil. In closing, 2025 was a year of strong execution and disciplined decision-making. We delivered lasting efficiency gains and higher productivity, reinforcing the capabilities and talent of our workforce. And we strengthened our balance sheet and enhanced our financial flexibility, setting the stage for strong shareholder return in the years ahead. Before we move to Q&A, I'd like to share that Jordan Tanner, who has led our Investor Relations team for the past 3 years, will be taking on a leadership role in the Gulf of America, helping to advance our portfolio of exciting development opportunities. Jordan has done an outstanding job sharing our story, helping communicate our strategy and results and supporting our leadership team. We've also gotten a lot of positive feedback from many of you about Jordan and his ability to tell our story. We greatly appreciate Jordan's contributions and look forward to his continued impact in his new leadership role. I'm also pleased to announce that Babatunde Cole will become Vice President of Investor Relations, reporting to Sunil. Babatunde brings deep operational and leadership experience, most recently as President and General Manager of our Delaware Basin business unit. In that role, he was instrumental in driving operational excellence and accelerating the growth of our unconventional development in the basin. Babatunde has 20 years of industry experience working in reservoir engineering and production operations. Please join me in thanking Jordan and welcoming Babatunde. We'll now open the call for your questions. Operator: [Operator Instructions] The first question comes from Arun Jayaram with JPMorgan. Arun Jayaram: Vicki, I was wondering if you could maybe walk through some of the moving pieces of the much lower CapEx guide relative to the soft guide that you provided on the third quarter call. You did come out about $800 million lower than that soft guide that you provided last quarter. And maybe you could just walk through kind of the moving pieces. Richard mentioned about $300 million of savings from efficiency gains, plus you're reducing exploration CapEx by $100 million. So that's about half of the delta. But maybe just walk through the other changes and perhaps what's happening with activity under the revised program? Vicki Hollub: Yes. I want to point out, Arun, that we always start our capital planning in or around June of each year. So we go through about 3 processes before we get to the point where we actually make a recommendation to the Board. And part of what happened is our teams are just getting better. Our teams came up with these ideas on what we should do and what were the best projects. But as they continue to optimize those projects, it was pretty amazing to see the cost that they were able to cut out, the efficiencies that they were able to find. So a lot of it is just the teams doing exceptional work. And again, I have to say that we've gotten to the point where the process that Richard and the team in the U.S. and that Ken and the offshore team and the international groups they're incredibly innovative, and they have processes that they put together ways to look at things that differentiates us from others. I like to call it the saving process for oil and gas. It works, and it's working for our teams. And Richard, you can -- I think both of you can share a little bit of the details about the specifics around what did change. Richard Jackson: Yes. Perfect. Thanks, Vicki. Thanks, Arun. I'll try to walk through a few of the pieces and fit Vicki's good description there. We're certainly excited about the 2026 plan. It really is a continuation of strong performance from '25. So let me just walk through a few of the pieces. As you look at oil and gas, a few moving parts that I'll walk through, but about $300 million of reduced oil and gas, and that's really mostly structural cost savings and a bit of reallocation, and I'll walk through that and then get into the structural piece. And then as we look at total Oxy, that $250 million lower LCV. So that was kind of the big picture. But diving into the oil and gas within that $300 million, the key driver of the program is really a negative or minus $400 million of U.S. unconventional capital, and that's against last year's capital. So as I mentioned in the prepared remarks, we had kind of worked through this in total and had worked ourselves out of the reallocation, but it really was those efficiencies that drove another $400 million. And then we are down $100 million year-on-year in exploration as we continue to optimize that program and then going up in our mid-cycle $200 million, and that's really focused on Gulf of America and the waterflood project and a bit in our international and our unconventional EOR. So then just let me spend the last minute on introducing this structural cost savings. So in our U.S. unconventional, about 70% of that $400 million reduction is a continuation of well cost. So we talked about and certainly highlight the $2 billion the team has achieved from '23 to '25. This is an additional 7% on well cost, an additional 5% on facilities and construction. And these are really at a high level, and we can get into it through the call, but these are really development efficiencies. These are more wells per pad, a bit longer laterals. But from an activity standpoint, we're actually able to achieve this with lower activity. So we have 2.5 lower rigs, 2 frac cores. And that's all being done through operations efficiency, but the other really important part is the production improvement. And so base production had a significant beat in the fourth quarter that rolls into 2026. And then our new wells continue to deliver not only the primary benches, but the secondary benches. And I know we had a slide highlighting that continued improvement. So I just wanted to walk through that at a high level, but certainly want to spend time on the structural cost savings because we think that they're important for this year, but we'll be able to expand those as we go into the future. Kenneth Dillon: And then similarly, for international, we have many examples of sustainable savings. For example, our drilling performance has improved so much in Algeria. We dropped a rig from our plan this year, and we can still achieve the year's program as originally planned. In GOA and the Horn Mountain waterfloods that Richard alluded to, facilities team really did a great job of reducing capital by leveraging to the maximum the existing systems topsides and then only augmenting the existing seawater system with new filters and pumps. While doing that, we were able to keep the original injection date. So a really good team performance. Arun Jayaram: Great. My follow-up is just on the Horn Mountain waterflood project. We expect the initial rate next year. Do you think that a project like this should be able to support kind of a sustaining production profile for the Gulf as we look out the next several years in that low 130 MBOE per day kind of range? Kenneth Dillon: Yes. Great question. I think the way I'd put it is we're really entering a new year around GOA, one with lower declines due to the waterflood. So this waterflood, the King dump flood, the future waterfloods. We're also improving reliability due to our ongoing initiatives and then lower OpEx per barrel long term. And we have a large inventory of development wells and additional wedge layers, including some really interesting opportunities. So it feels like we're entering GOA 2.0. In terms of declines and walkdowns, I think Horn Mountain is part of it. So it will move from a 20% to sub-10% decline by 2030 and improving to below 5% in subsequent years. King will be down to low single-digit decline. And I think at a portfolio level, average decline is projected to decrease to 12% with the potential to get below 7% as the additional waterfloods are brought online. And these have substantial reserves associated with them and very low F&D. So I think long term, we have a really good runway and can sustain production for a very, very long time. Operator: The next question comes from Nitin Kumar with Mizuho. Nitin Kumar: I want to start off on Slide 24. Vicki, you mentioned the 16.5 BOE and the $38 breakeven. What catches my eye is the sub-30 bucket. How much of that is unconventional? Because we hear a lot about shale inventory depth and exhaustion. You're showing a big piece is quite economic. So what's driving that? Vicki Hollub: Let me begin again. Yes. So what's happening there is in the U.S. unconventional is the continued improvement of the inventory. Starting with primary, the primary intervals, which were amazing. The secondary benches are providing now as much value as the primary benches did. And then all the things that Richard has mentioned has lowered costs for the resource business to down to less than 50. And this is specifically talking about the resources business, not the entire portfolio, but the rest of the portfolio is pretty competitive with U.S. unconventional. And you can see that the U.S. unconventional is pretty much almost half of the total. So in GOA and in the other areas, we are doing things that are lower -- continuing to lower those costs as well. So it's the whole resource is -- the average resource is about a $38 per barrel breakeven. Nitin Kumar: Great. Sorry about the delay. I wasn't sure what it was on my end or not. As my follow-up, Sunil, maybe for you, you mentioned the opportunistic approach to buybacks. A lot of your peers have provided formula or percentages and things like that. Could you help us understand why the reluctance to go down that path? You have a lot of room on the cash return side? Sunil Mathew: Nitin, so first, let me start with the progress we have made on deleveraging, just to put things in context. So when we announced the OxyChem transaction last year, we said that we'll be using $6.5 billion of the proceeds to pay down debt and our near-term principal debt target was $14.3 billion. We also said that we'll be initially focused on paying down the debt maturing in the next 3 to 4 years. So where are we today with respect to debt? Our principal debt is currently at $15 billion and on track to get to the $14.3 billion with the $700 million tender that we announced this morning. So we have $450 million of debt maturing between '26 and '29, and that was $5.5 billion for that same period at the end of Q3 2025. So I just want to highlight that, first, we have delivered on the deleveraging goals that we outlined late last year. So how do we -- looking forward, we would like to first get our principal debt to $10 billion, but we are not setting a time frame to get to this target as we want to have some flexibility. And we expect to have a better view of the macro in the second half of this year. And at that point, I think we will be better positioned to make the appropriate decisions on how we balance between cash build and our return of capital opportunities for 2026 and beyond. The other thing I want to highlight, which Vicki had mentioned in our prepared remarks, our foundational or top return of capital priority is to have a sustainable and growing dividend. So consistent with that, we increased our quarterly dividend by 8%. And we expect to continue making progress with lowering our sustaining capital through operational efficiency and also investing in the mid-cycle projects like the Gulf of America and Permian EOR. Now this should also help with a sustainable and growing dividend. So I just want to conclude by saying, as I mentioned in my prepared remarks, we believe that this balanced and opportunistic approach will serve us better as we prepare to resume redemption of the preferred equity in August 2029. And we always get the question, what is special about August 2029. It is -- at that point, it is callable without a $4 per share return of capital trigger and at a lower redemption premium. Operator: The next question comes from Betty Jiang with Barclays. Wei Jiang: On the efficiencies, cost savings that you've been able to achieve in 2025 and reflecting 2026 guidance. A big question that we're getting is just what does it mean for 2027? I know I'm not asking for '27 outlook, but how much of the saving is sustainable to '27? Is there anything getting deferred from '26 into 2027? Sunil, I think you mentioned that CapEx will be front-end weighted, but perhaps like activity is back-end weighted. So we're just trying to figure out if production will be growing 4Q to 4Q and really just how that all flows into 2027. Sunil Mathew: Okay. So let me start first with the 2027 capital. Again, this is too early to provide any soft guidance, but just want to give you some thoughts on how we are thinking about the next year's capital. So if you start with U.S. onshore, you can assume this year's capital as sustaining capital. But like Richard said, as we have demonstrated over the last few years, we've been able to reduce the sustaining capital through cost efficiency and strong well performance. So we expect to maintain this momentum into next year. So we could see a modest growth with this year's capital depending on the efficiency and new well performance. In Gulf of America, there will be an increase related to the waterflood project because both the injection wells for the on-mountain project will be drilled next year. International, you can assume it to be flat compared to this year. And on exploration, for the last few years, on an average, we have been spending around $200 million per year. This year is lower because we don't have a new program starting in Gulf of America. And LCV, with the completion of STRATOS this year, capital should be coming in lower into 2027. So what I would say is, overall, this year's capital range will be a good starting point as sustaining capital and depending on the exploration capital and potentially some reallocation between the assets. And the last thing I would say is if we do have a modest production growth with sustaining capital, it is primarily due to a combination of savings, not just limited to CapEx, but other categories too, and well productivity and capital reallocation that will be driving this modest production growth. And now I'll let Richard talk about the trajectory in production. Richard Jackson: Yes. Great. Yes. Two things I'd like to take the opportunity to just walk through. One is the structural savings and just think about how that rolls into 2027. Again, it's largely structural. Anything sort of year-on-year beyond that has really been optimization of our mid-cycle projects. But let me walk through that and then the production. So from a structural standpoint, again, going back to 2023 to '25, significant improvement over 28% of well cost in our U.S. onshore. I'd characterize that as -- and if you followed our story, very focused on specific operational activities, drilling, completion facilities. And so we had a lot highlights over that period of time. For example, we're drilling 50% more wells per rig per year. So twice the number of wells per rig. And so you could see that in our gross and net rig activity that we've been able to do. So as we go forward, it's a lot more development, what I'd call development efficiency. So a few highlights, wells per pad across our U.S. position has gone from 3 to 4 to 4 to 6. Our lateral length is improving 10%. And then a big part on the completion side, we've been able to really scale simul-frac. And so with these larger wells on a pad, we've gone from 10% to near 40% across our U.S. position going in simul-frac. So again, just gives some kind of underpin the structural piece of that. From an optimization standpoint on our mid-cycles, projects. As we went year-on-year, exploration is a piece of that. We continue to look at how do we optimize that program, make sure it fits on a multiyear perspective. But the Horn Mountain project, waterflood project that Ken described, the team continued to work through that through the last several months and optimize the schedule and the cost profile. And so that was a big piece of things. So it wasn't a deferral. The injection begins. We expect the uplift in late 2027. And that would be the same for our EOR projects. We've got an uptick in capital there, both unconventional and opportunities in our conventional EOR. So I just wanted to reemphasize the point of it being optimization, not deferral. Lastly, on production, just a couple of things to point to. Permian does grow, as you mentioned, it's about 4% year-on-year. And so there is a profile during the year to continue to grow there. And then in Rockies, while down year-on-year, it's really a transition year as we go into Powder River Basin. And so what you'll see is actually pretty stable wells online through the year. There was a bit of an opportunity in the DJ. We're moving to a greenfield project we call Bronco that has more wells per pad. We're actually deploying simul-frac in our Rockies operation. So this will kind of provide a steady outlook, but you're transitioning the Powder River Basin. And so that production from the beginning of the year to the end has a pretty good growth trajectory. So it's almost double from first quarter to fourth quarter. So those are some of the moving parts as you look at our activity slide and try to put the pieces together. So hopefully, that helps. Wei Jiang: Really helpful. A follow-up on the Rockies. I think the program just really stood out this year with a fairly flattish capital. Actually, the D&C is lower as a percentage, but wells, TILs are up quite a bit, almost 45%. So maybe going forward, there's a lot of moving pieces. And as you said, going into PRB, what will be a good baseline to think about going forward? Well, PRB typically higher cost as well. So maybe just unpack the dynamics there. Richard Jackson: Yes. Just a couple of points to that. I think, again, you'll see sort of the DJ trajectory trending down just a bit year-on-year. Now one thing to point out, if you look year-on-year, we had that non-op divestment last year. So that was a portion of the year-on-year change. But even just trajectory, DJ declines a bit, but stabilizes at the end of the year. PRB goes up. Again, I would look at the wells online and even if you go into DUC counts, those stayed very steady through the year. It just transitions. The dynamic I'd point you to is oil cut in Powder River Basin is higher. And so on a BOE basis, that may change a bit, but that oil cut is going to pick up in the Powder River Basin. We've seen tremendous well performance. We talked about the secondary benches in the Permian, but both the Nio and Turner have had for us, record production over the last year. That's really given us that confidence. And to back up, it's just very similar to the way we work Delaware and Midland Basin. We like that scale across the basins to really optimize operations, but they do balance themselves even between gas and the oil production. So we'll continue to help with that as that we're excited about that PRB program going forward. Operator: The next question comes from Doug Leggate with Wolfe Research. Douglas George Blyth Leggate: I apologize, I joined a few minutes late. Guys, I wonder if I could ask a couple of questions. First one is on the sustaining capital updated guidance of $4.1 billion, that's obviously at $40 oil. Obviously, we're away from that. What would that number look like, however you want to define it, let's say, I don't know, today's price or $70, how would we address that? And then my follow-up is, obviously, LCV has still got some residual capital this year. Does that go away in 2027? And can you give some idea whether or not we're starting to think about removing the drag on the midstream business? Is that thing now at least contributing to cash flow? And I'll leave it there, please. Sunil Mathew: Doug, Sunil here. So let me first start with the sustaining capital. So if you look at the midpoint of our CapEx guidance for this year, it's $5.7 billion. And the way we define sustaining capital is to keep production flat, like you said, in a $40 environment and excludes multiyear projects and mid-cycle projects that does not support production in the near term. So from $5.7 billion, you back out LCV and exploration of $300 million, you're at $5.4 billion. And then if you back out the $200 million of mid-cycle project, you are at $5.2 billion. And going from $5.2 billion to $4.1 billion at $40, that is primarily deflation, around 20% deflation. That is what we assumed going from $55 to $40. And another thing which I would like to highlight is in 2025, our sustaining capital was $4.5 billion. That was to support 1.42 million BOE per day. And so if you adjust that for OxyChem, it's around $4.2 billion. And for 2026, what we're seeing is sustaining capital is $4.1 billion, but it's also supporting an additional production of 35,000. So what that tells you is with the increased production, the sustaining capital should have been higher, but all the operational efficiency that the teams have been able to focus on and what like Vicki and Richard highlighted, that is what has helped us reduce our sustaining capital down to $4.1 billion. And like I mentioned earlier, our top priority in terms of return of capital is to have a sustainable and growing dividend and lowering our sustaining capital is key to have the sustainable and growing dividend. So -- now I'll let Richard talk about LCV. Richard Jackson: Yes, I'll start that. Appreciate the question, Doug. STRATOS, a couple of things that kind of pin yourself. STRATOS ramps up this year as we've discussed. So we'll begin to roll off capital for sure. So as we look into next year, that's about another $100 million of capital that will roll off. One thing to think about in terms of that business is as we think about the future opportunities, both for DAC and even success we've had in our sequestration hubs, as those have been put together, we really think partnership helps move that forward. So if you're thinking about it from a capital perspective, we anticipate being able to bring in partners because of the economics and the derisking that's occurring across both of those opportunities today. And so I just wanted to mention that because I think that's one aspect that we need to think about as we go forward. From a STRATOS standpoint, again, we'll ramp up this year. There'll be injection really going into next year, and we'll hit more steady operations, which will then lead to more steady revenue in the mid- to later part of next year. And we think we can really start to point to a levelized EBITDA. We told and Sunil can help me make any other connections, but I think we've talked about a $90 million to $130 million range kind of levelizing as we get into late 2028. Now I'll tell you from an operational perspective, Ken and I are both optimistic that we're going to continue to find opportunities to do like we do in other projects like Al Hosn to debottleneck and add capacity. And so while that's a good run rate that we've used and communicated operationally, we're working on how do you reduce cost and add capacity. And so anyway, that's sort of the milestones that we're looking at in that program going forward. Operator: The next question comes from Neil Mehta with Goldman Sachs. Neil Mehta: Yes. Congratulations to everyone in the new roles and Jordan, great job in the time you were in the seat. I guess the first question I actually have is for you, Richard, as you stepped into the COO seat late last year, but just some initial observations of things that you think Oxy has been doing really well from an operation standpoint? And where do you think there is room for improvement just because you have some fresh eyes in the new seat. Richard Jackson: Yes. No, I appreciate the question. A bit lucky to work for Oxy for some time. So some of these I've got to observe for a while or be a part of. But I will say the new perspective in the job a couple of things. One, the resource base that we have today is outstanding. That's been continued to improve really over the last 10 or 15 years, both as we've narrowed our focus, but also through organic efforts. And that's why we're excited to talk about all the subsurface work that we've done and the well performance, how it's played out. And so that part has been reinforced as I look across the portfolio. I would say projects like the Gulf of America waterfloods, when we think about the opportunity of EOR in Gulf of America and the contribution they can have to reduce our cost structure, lower decline, add to that sustaining capital, very exciting part of the portfolio. We're just now in a position to really take advantage of. Things like the Gulf of America working on production reliability has been impressive. So I think from a resource perspective, good. From operational efficiency, I love our teams. That's where I grew up with it. And so I just have a lot of confidence in not only what we're doing today, but going forward. I'd say the last thing I would note that I think we're starting to see some momentum on, and Vicki mentioned it in her prepared remarks, is really coming together on some of the technology. And so we talk about technology around CO2, power and water. But the other one is things like the digital technology or AI. I can tell you in the Rockies, through this last winter storm, we have been able to deploy this remote operations center. So in the U.S., let me just back up. In the U.S., about 40% of our production, we call routless, meaning that it's covered under a remote center where we resolve or understand issues before we send a person to go check it. And so in the Rockies during this winter storm, we were able to resolve about 300 issues a day remotely. And so that's not only more efficient for cost and production, but it's also safer. And so like many of us talk today, but I think we're seeing it, especially in the ranks of our operations, the ability to use this technology, things like AI to deploy our people in a more effective way are really exciting. So on top of all the drilling completion things I get excited talking about, I really do believe that's going to be a big part of our future. Neil Mehta: And the follow-up for you, Vicki, is your perspective on the macro. You always have great color on how you see the world. Be curious on how you're thinking about the setup for 2026 for oil this year where many of us came into the year a little bit more cautious. And obviously, geopolitical volatility is creating some upside risk here in the near term. So your perspective on that? And do you think the industry is going to respond to potentially higher prices in the near term or folks watching the back end of the curve and where there's been less movement. So your perspective would be great. Vicki Hollub: I think that we're still a little bit cautious about 2026 because we feel strongly that you have to look at the fundamentals. And there are going to be these scenarios where prices get driven up by things that are happening geopolitically. We don't believe those are sustainable, and we believe that could be resolved within days or it could go on for months. We don't know, but we're prepared to assume that the fundamentals don't support where prices are right now. But we do believe that towards the end of the year and into next year that the fundamentals will start to shift a bit because when you look at what's happening in our industry, and this -- we're a big believer in trying to make sure that every year, we replace the production that we produce. So our reserve replacement ratio is important to us. But if you look at the industry, the industries around the world, worldwide, the industry reserve replacement ratio right now is about less than 25%. So I think that means that the macro has got to become better for oil sooner rather than later. When you look at the exploration that's happening along the western side of Africa, the Eastern side of South America, while those reservoirs are good and they're going to be -- they're going to add value to the shareholders of the companies that are developing those. And by the way, we do have a block in Guyana that ultimately we hope to develop to is that those reservoirs are great for the companies and for the shareholders, but they're not even hardly a blip on the radar for world supply. For example, if you have like a Guyana, the original forecast, I don't know what it is now, but it was for 12 billion barrels of oil to be recovered, that barely replaces 1/3 of what the world demands for use today. So the world uses 30 billion. And so these reservoirs, while good individually for companies, they're not going to be what we need for world supply going forward. So our view of the macro is that ultimately, we believe by 2027, we're going to get much closer to being in balance with respect to supply and demand. And I would say the other thing that's happening is a lot of companies have declining resources. And there are very few oil and gas companies today that can consistently maintain a better than 100% reserve replacement ratio. And those companies have to become a shrinking business or they have to figure out what do they do about that. Some are going international when they've never been. Some are going to need to do M&A. We're doing all of that. We've done our M&A, so we're done with M&A. We're already international, and we have experience there, and we're in 3 of the best countries that you can be in internationally with respect to the governments and our partners. And then the third thing that needs to happen is we need to get more oil out of the reservoirs that the world has today. And we're the best at doing that. We have the CO2 enhanced oil recovery expertise. So we are the company that can get the most of the reservoirs we have here and internationally. So it's really important to recognize that what we've built here is something very unique and very important for our industry and for the energy independence in the United States as we start to apply our enhanced oil recovery in a bigger way for us in the Permian and then in other basins to help extend the energy independence of the U.S. So this is significant what the teams have accomplished here at Oxy, and we're proud of it. And we know we got work to do, and we'll be doing that, and we'll get better every year because that's just the way -- that's just what our teams do. That's what they're committed to do. So with that, we're over time, and I'll let you all go. And thank you for participating in our call today. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Thank you for standing by, and welcome to the Ramelius Resources Half Year Results Briefing. [Operator Instructions] I would now like to hand the conference over to Mark Zeptner, CEO and Managing Director. Please go ahead. Mark Zeptner: Thank you, Travis. Good morning, everyone. Thank you for joining us to discuss our half year results to December 2025. Alongside me is our CFO, Darren Millman. Today, I'll start with a brief overview of the operating performance and some recent updates at Dalgaranga before Darren goes through the underlying earnings and financials in more detail. We have uploaded to the ASX this morning along with our website shortly, a number of documents, including our half year '26 financial summary, the half year accounts, interim dividend and a presentation that will largely be speaking to this morning. So we start on Slide 3. Here, we set out our gold production for the last 2.5 years. Operationally, performance was in line with our expectations highlighted in the 5-year growth pathway released last October. As you can see in the graph, this period is our lowest production level with 101,000 ounces produced with Edna May being placed into care and maintenance in FY '25 and the Cue mine performance returning closer to geological model predictions. Production is on track to deliver FY '26 guidance, which is a touch below 200,000 ounces for this year. Moving on to Slide 4. We announced yesterday that first ore from the Never Never deposit at Dalgaranga has been hauled to the Mt Magnet processing plant. This is a key milestone in realizing our vision to become a 500,000-ounce producer by FY '30. Thanks to the dedication of our team for this achievement and it's an important milestone just over 200 days over the closure of the combination with Spartan. And at the end of January, we had a healthy 31,000 tonne stockpile of Never Never ore at a grade of 3.6 grams per tonne at Mt Magnet. Now whilst this grade is below the reserve grade of 7.3, it should be noted that this ore is all development ore and from the top part of the ore body. From March, we are planning to blend this initial lower grade ore with other Mt Magnet ore sources. Higher grade parts of the stockpile will be introduced in the June 2026 quarter once fine-tuning has occurred at the Mt Magnet plant. On to Slide 5, you will see the Never Never mining schedule. We are on track, both in terms of tonnes and grade. And from FY '28 onwards, these metrics significantly increase as the main section of the ore body is accessed. Turning to Slide 6. Key mining and production highlights. Pleasingly, tonnes mined were up 64%, with the introduction of a third fleet excavation fleet at the Cue pits and mining also taking place at a lower strip ratio. The mine grade was down 46% to 2.66 grams per tonne, but we are comparing this to a period which included mining from the Break of Day pit at a grade of 7.9 grams, which is quite remarkable for an open pit. At the group level, milled tons were down due to Edna May now being placed into care and maintenance. However, at Mt Magnet, throughput improved some 18% with a new line of design that we had discussed previously being an optimized material blend and very high mechanical availability. As expected and planned, mill grade and production was down as we await the introduction of Dalgaranga high-grade ore. The half year financial performance benefited from strong [ $8 ] gold price with reducing hedge book commitments, resulting in a 36% increase in the realized gold price. Without stealing too much of Darren's thunder, I would highlight that we delivered a very strong all-in sustaining cost margin of $2,921 for every ounce sold. And I think you agree this is a very impressive return and one that we see is only increasing with our reduced hedge book commitments going forward. With that, I'll hand over to Darren. Darren Millman: Thank you, Mark. For those following on the presentation, I'll be initially speaking to Slide 7 and our underlying earnings. It's important to talk about our underlying earnings as there were significant one-off and noncash adjustments between the statutory and underlying earnings in the half, primarily relating to the Spartan acquisition. We have previously highlighted these 2 significant adjustments that were recorded in the period. These included $133.2 million of nonrecurring acquisition costs, which with estimated stamp duty payable of $131 million of this. The other adjustment of note is the $46.6 million noncash fair value adjustment to Spartan's pre-existing royalty obligation. This reflects 2 things: firstly, high consensus gold price forecast since acquisition; and secondly, a high level of confidence of the ore body with the release of the maiden ore reserve for Never Never deposit. While this is a cost to earnings, it is reflective of higher expected future revenue. This will be a recurring adjustment every reporting period, whether it is at a level or not seen today, but will be largely attributable to gold price and changes in oil reserves across the Dalgaranga mineral properties. Moving on to Slide 8. Earnings were generated from revenue of $485.6 million, which is down 4% from the prior period with lower gold production being the offset almost in full by the improved Aussie gold price and reducing hedge book commitments at a higher realized gold price. The resulting underlying EBITDA of $347 million at a margin of 42% is a H1 record for the company and up 13% on the prior period. Again, the driver behind this is the improved realized gold price. The reported underlying net profit after tax of $160 million was comparable to the prior period of $170 million despite lower production. On Slide 9, we have provided more detail on the Mt Magnet earnings and operations, Mt Magnet which generated a gross profit of $244 million, which is comparable to the prior period, albeit at a slightly lower margin. The lower margin was driven by higher cost per tonne and a lower milled grade. The operating cost per tonne was in line with expectations, was higher than the prior period due to increased tonnes from Cue, which was of a higher grade, was higher strip ratio, incurs a higher haulage charge to Mt Magnet and attracts a higher amortization charge relating to the purchase price initially. Also contributing to the higher operating costs in the reporting period was an increase in underlying tonnes in the ore blend. The resulting gross margin increased to $2,413 per ounce sold. The Mt Magnet hub will only be benefited with future introduction of the Dalgaranga ore feed. Moving on to what really matters, cash, which is being detailed on Slide 10. Operating cash flow of $311.6 million was largely in line with the prior period. However, the free cash flow, which is cash flow from operations less the cash used in investing was an outflow of $40 million. This was not unexpected given the acquisition of Spartan and an increased exploration budget and the final FY '25 income tax payment. The closing cash and gold balance was $694.3 million. Secondly, we invested $211 million back into the business. This includes $73.4 million for the acquisition of Spartan, net of $199 million cash acquired, investing in the development of the Never Never and Dalgaranga infrastructure and our exploration focus. Last, we paid $148 million in income taxes in the period with $130 million of this relating to the final FY '25 payments. The last of these large one-off income tax payments have now -- were more regular payers in advance of income tax. Looking forward for the remainder of FY '26, do keep in mind the stamp duty, which is payable on the acquisition of Spartan of approximately $131 million. The timing of payment -- the timing of this payment is out of our hands, but it could be reasonably expected at back end of FY '26. Moving forward to Slide 12. I would just want to touch on the acquisition relating to Spartan. As you will see on this slide, the total acquisition of fair value was $2.8 billion, which includes our initial $19.9 million investment. What is worth highlighting is the cost of the asset to Ramelius is $2.3 billion, which takes into account the cash we acquired and the cost of initial investment as proposed -- as opposed to the fair value. As noted, there are tax synergies available to the group from the acquisition. First, the use of Spartan tax losses, which we have now concluded our analysis of the tax losses and obtained the external tax advice. The analysis shows that tax losses with a net cash benefit of $105 million can be transferred to the group, the use of which compares favorably to the $90 million we initially flagged in a growth pathway presentation back in October. This is a real and immediate benefit to the group with a net amount of just under $20 million losses being used in the December half year. And moving on to the balance sheet on Slide 13. Ramelius remains in a very strong financial position with just under $600 million in working capital and net assets of $4 billion. Subsequent to the end of this period, we have further enhanced our balance sheet flexibility and funding optionality for replacing our existing $175 million credit facility with a $500 million credit facility. We later put this new facility in place in recognition of the company's significant change in capital structure post the acquisition of Spartan and pleasingly, we've been able to improve our overall commercial terms and increase the tenure. Before handing back to Mark for closing remarks, I just want to highlight our recent activity with our hedge book on Slide 14. We have closed out our FY '27 hedge book at a cost of $28.4 million, and we have committed to, in fact, they've already started predelivering the June quarter forward contracts in the March quarter. The outcome being from the end of March, we'll have no forward contract hedges in place, and we'll have more exposure to the Australian gold price. The chart on the left of the slide shows the historical cost of the hedge book. That is what is being eliminated by the actions we have taken on our forward contract positions. We do still have a level of cover in FY '27 and FY '28 with [ collars ] in place for FY '27 of 22,500 ounces of a floor of $4,200 and a ceiling of $5,906 and put options in place for FY '27 guaranteeing a minimum price for 40,000 ounces at $5,750 per ounce. With that, I'll now hand back to Mark. Mark Zeptner: Thanks, Darren. Slide 15 shows our capital allocation and priorities and one that you perhaps are familiar with. The phase that we are in now is in the middle section, reinvestment in the business. And as we have highlighted previously, we have committed to a $0.02 per share minimum dividend for FY '26. And as such, it is pleasing that $0.03 per share fully franked interim dividend has been declared this morning, exceeding the minimum annual amount. This interim dividend is discussed on Slide 16. So if we turn to Slide 16. This is the second consecutive interim dividend paid by Ramelius and this equates to a total amount of $57.7 million or $574 per ounce produced. It takes the total shareholder returns over the past 5 years to almost $320 million at an average of 18.8% per annum. In summary, this was a solid half year result delivered during a transition phase for the business. We entered the second half with a strong balance sheet, significant liquidity and improving production outlook and leverage to a strong gold price environment. That concludes the presentation. I'll now hand back to Travis to open the phone line for questions firstly. Operator: [Operator Instructions] The first phone question today comes from Richard Knights from Barrenjoey. Richard Knights: Just one on the dividend. I mean it's certainly a beat versus consensus in my numbers. Just wondering how you're thinking about dividend policy over the next couple of years with the relatively high sort of CapEx burden we've got in terms of development. Mark Zeptner: I'll take that one. Thanks, Richard. Yes, look, we had a look at our dividend. Obviously, the gold price has run very strongly while I've been on holidays, I was tempted to extend in fact. But looking at the dividend, we look at the dividend and the buyback sort of together. The fact of the matter is and whether we're a little more conservative than others than we actually haven't been able to access the buyback much since we announced it in December. So a very small number of shares buy back will be freed up going forward more so. But the whole period through January and February pre these results has really limited our ability to buy back. So we thought a slightly stronger dividend was warranted in this case. In terms of moving forward, we'll look to reassess our dividend policy as we ramp up production as cash flows increase. Richard Knights: Yes. Okay. Maybe just one more just on the ramp-up at Dalgaranga. Can you give us an indication when you're going to be mining stope ore as opposed to development ore? Mark Zeptner: In the June quarter, very early in the June quarter, if not before. We're obviously getting back this week coming up to [ speed ] with what's going on. The mine is progressing very well. We're drilling paste fill holes, we -- as you see, we've got a decent stockpile of development ore. So it means we've put in a number of ore drives. The paste plant foundations are in place. And so we'll be ready to be stoping March, April at this stage, which is on schedule, if not slightly ahead. Operator: [Operator Instructions] At this time, we're showing no further questions via the phone. I'll hand the conference back to Mark. Mark Zeptner: Just checking on the webcast. It doesn't like there's any questions there either. This has got to be some sort of record for one question. It must be the time of day or the comprehensive nature of the presentation. As there's no further questions, we'll wrap up. Have a good day, everyone. Thanks for tuning in.