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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.
Operator: Good day, and welcome to the CF Industries 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 Martin Jarosick. Please go ahead. Martin Jarosick: Good morning, and thanks for joining the CF Industries earnings conference call. With me today are Chris Bohn, President and CEO; Bert Frost, Executive Vice President and Chief Commercial Officer; and Rich Hoker, Vice President, Interim CFO and Chief Accounting Officer. CF Industries reported its results for the full year and fourth quarter of 2025 yesterday afternoon. On this call, we'll review the results, discuss our outlook and then host a question-and-answer session. Statements made on this call and in the presentation on our website that are not historical facts are forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied in any statements. More detailed information about factors that may affect our performance may be found in our filings with SEC, which are available on our website. Also, you will find reconciliations between GAAP and non-GAAP measures in the press release and presentation posted on our website. Now let me introduce Chris Bohn. Christopher Bohn: Thanks, Martin, and good morning, everyone. Yesterday afternoon, we posted results for the full year 2025, in which we generated adjusted EBITDA of approximately $2.9 billion. These strong results reflect outstanding operational performance by the CF Industries team, the enduring advantages of our manufacturing and distribution network and constructive global nitrogen industry dynamics that have persisted into 2026. Starting with safety, our full year recordable incident rate was 0.26 incidents per 200,000 hours worked, and we experienced our lowest ever number of process safety events. This enabled us to produce 10.1 million tons of gross ammonia in 2025, which represents a 97% utilization rate. However, that performance is tempered by the incident, Yazoo City Complex in Mississippi experienced in November. While there are no significant injuries, this event is a reminder of why we emphasize individual and process safety every day across our entire network. We do not expect the Yazoo City Complex to resume production until the fourth quarter of 2026 at the earliest, given the long lead times required to fabricate and deliver certain equipment. As a result, we expect our network to produce approximately 9.5 million tons of gross ammonia in 2026. Turning to Blue Point, our joint venture with JERA and Mitsui, the project has progressed well from positive FID in April through hitting all our planned milestones by the end of the year. This included our partner securing offtake from new low-carbon ammonia demand sources and receiving contract for difference awards from the Japanese government. We expect to begin civil work at the Blue Point site in the second quarter of 2026. Finally, we continue to efficiently convert adjusted EBITDA to free cash flow. At a rate outpacing material and industrial sector averages, as you can see on Slide 10. Net cash from operations in 2025 was $2.75 billion, and free cash flow was approximately $1.8 billion. We returned $1.7 billion to shareholders in 2025. This included deploying over $1.3 billion to repurchase 16.6 million shares, approximately 10% of the outstanding shares at the beginning of the year. Given our high-performing, high-margin business, progress on strategic initiatives and what we believe are constructive global nitrogen industry dynamics ahead, we expect to continue to generate substantial free cash flow. As a result, we remain firmly committed to our capital allocation framework, investing in the business for growth and returning capital to long-term shareholders. With that, I'll turn it over to Bert to discuss the global nitrogen market environment. Bert? Bert Frost: Thanks, Chris. For the last 12 to 18 months, we had expected the global nitrogen market to be more balanced in this time frame as new capacity was slated to come online with significant tightening through the end of the decade to follow. However, the global nitrogen market remains tighter than expected. New capacity has been delayed, global production has not maintained historical levels and demand continues to grow. Nowhere is this more apparent than in our indicative global urea cost curve, which we share on Slide 13. Global urea prices are currently trading well above even the high end of the cost for range. Strong demand led by India, Brazil and North America as well by European buyers securing volumes before the EU's carbon border adjustment mechanism was implemented, has pushed demand to the right. At the same time, supply is constrained by natural gas availability in Trinidad and Iran, challenging production economics in Europe and the end of seasonal Chinese urea exports in 2025. Additionally, geopolitical concerns for the Middle East loom over the market. Through the first half of this year, we do not see many catalysts that would move prices toward the cost curve floor levels. India's February urea tender is atypical for this time of year, suggesting demand continues to meaningfully outstrip lower-than-expected domestic production. CF Industries had a very strong fall 2025 ammonia application season in North America as we position supply well, enabling farmers to capture good value per nitrogen unit from ammonia. This, along with continued strong global corn demand suggests to us that 2026 will be another year of high planted corn acres domestically, helping support nitrogen demand. From a supply perspective, we believe global nitrogen channel inventories are lower than historical averages. Chinese urea exports are also unlikely to return until the end of the Northern Hemisphere spring application season. However, we do expect that new North American ammonia capacity, should it come online at full rates, will affect prices for globally traded ammonia, but will not impact tightness for urea or UAN. As a result, we expect the global nitrogen market to remain constructive in the near term. At the same time, interest in low-carbon ammonia and low carbon nitrogen products continues to grow, both for tonnes from our Donaldsonville Complex and for our portion of Blue Point volumes. In the near term, global customers have demonstrated a willingness to pay a premium for low carbon ammonia given the benefits for their sustainability goals. We also expect demand to continue to grow from customers in Europe and Africa, seeking to reduce additional costs from EU regulations on carbon. We're also excited about the progress we're making domestically as we work with domestic retailers and end users of ag and industrial products to lower carbon footprint of their value chain. Most significantly, we have advanced our pilot project with POET, the world's largest producer of biofuels and with retailers in the U.S. to enable the production of low-carbon ethanol. We expect the project will be a model for building a low-carbon ammonia and nitrogen fertilizer supply chain in the U.S. and in North America. With that, I'll turn it over to Rich. Richard Hoker: Thanks, Bert, and good morning, everyone. For the full year 2025, the company reported net earnings attributable to common stockholders of approximately $1.5 billion or $8.97 per diluted share. EBITDA was approximately $2.8 billion and adjusted EBITDA was approximately $2.9 billion. For the fourth quarter of 2025, we reported net earnings attributable to common stockholders of $404 million, or $2.59 per diluted share. EBITDA for the quarter was $731 million and adjusted EBITDA was $821 million. For the fourth quarter, we recorded two impairment charges totaling $76 million, of which $51 million was related to the electrolyzer pilot project at the Donaldsonville Complex in Louisiana. We made the decision not to continue to invest in this pilot project given its return profile. We also recorded a $25 million impairment charge related to the incident at Yazoo City that Chris mentioned earlier. We satisfied the business interruption insurance deductible in December and expect to begin receiving insurance proceeds based on lost profitability during 2026. During the fourth quarter of 2025, we also completed a $1 billion senior notes offering. We did this both to refinance $750 million in debt that was coming due in December 2026, and to further strengthen our financial flexibility. Looking ahead, we expect capital expenditures in 2026 to total approximately $1.3 billion on a consolidated basis. CF Industries portion of this is approximately $950 million, which includes $550 million for sustaining CapEx for our existing network, plus approximately $400 million relating to both the Blue Point joint venture and the common infrastructure we are building. Finally, we repurchased 4.1 million shares for $340 million in the fourth quarter. These repurchases completed our $3 billion share repurchase program, which was authorized in 2022. After this was completed, we commenced our $2 billion program, which was authorized by our Board in 2025. Approximately $1.7 billion remains on the 2025 program, which expires in December 2029. With that, Chris will provide some closing remarks before we open the call to Q&A. Christopher Bohn: Thanks, Rich. First and foremost, I want to thank CF Industries employees for their contributions to our success in 2025. They delivered fantastic results in the midst of the tumultuous global nitrogen market and did so with a focus on safety. We're extremely proud of what our 2,900 employees can accomplish when moving in the same direction towards shared goals. 2025 showed how much we can do. From operational excellence and positive FID for Blue Point to completing two major decarbonization projects and securing our first low-carbon ammonia sales for our premium. This level of execution is not a one-year story, but rather has been consistently delivered over time. This, along with our operational advantages and structural advantages, where we operate underpins our ability to invest in growth and return in capital. This, in turn, increases long-term shareholder participation in our underlying assets and the free cash flow they generate. As you can see on Slide 9, we have increased nitrogen participation per share by over 35% in just the last five years. Given our strong core business, strategic growth initiatives in our near, medium and long-term outlook for tightening global nitrogen market, we believe we are well positioned to build on this track record and continue to create substantial value for long-term shareholders. With that, operator, we'll now open the call to questions. Operator: [Operator Instructions] Our first question comes from Andrew Wong of RBC Capital Markets. Andrew Wong: I just wanted to ask about the pace of spending at the Blue Point project, it looked like some of the project might have been pushed now [indiscernible] -- just talk about that [indiscernible]. Unknown Executive: Andrew, I think you broke up a little bit, but I believe your question was related to the slide we had in the deck on Slide 12, just the capital cost related -- excuse me, Slide 15, the capital costs related to the Blue point. So the overall expenditure for Blue Point hasn't changed our -- it's still forecasted at $3.7 billion. But with any project of this size, as you get closer and get into it, both from ordering some of the long lead items like we've done and engaging the modular contractors, you get a better idea of not only what the costs are, which haven't changed here, but also the timing of when that cost is going to occur. So we thought it would be worthwhile just given that we've moved into that stage just to re-update what the cash flow outflow will look like over the next five years. I think the important part of that slide on Slide 15 is the bottom line where it shows what's our annual cash outflow as a company. And given our free cash flow generation and the strength of it at $1.8 billion last year, $1.5 billion the year before. You can see the level of CapEx going out each of those years, is not something that we're concerned about affecting other capital allocation decisions in which we're making. And that's really one of the reasons why with this growth platform that we structured the deal the way we did, taking a 40% interest in it so that we'd be able to manage and continue to be strategic in how we do other growth projects, but also return cash to our shareholders. Andrew Wong: Okay. Great. And then maybe just a little bit more on Blue Point here. I recall there being quite a lot of room for expansion nearby on that site. CF is obviously building themselves, some of the logistics and infrastructure there potentially to handle more volumes in the future. And so I know it's still early days here, but if we're thinking longer term, like 5, 10 years from now, does it make sense that we'll see a larger complex there? And is there a timing where it's more efficient to like so that you have workers that are already working at Blue Point to move to the second side? Like how should we think about that? Christopher Bohn: Yes. So initially here, I would say our focus is on the first site. But you're right, the common infrastructure we're building, there'll be synergies where if we were to build a second plant, we wouldn't have near the level of expense that we would have for this first site. And the site itself that we purchased could hold up to 5 ammonia plants world scale the size of this one, 1.5 million metric tons. So it is an organic growth platform that we're looking at here, what the timing is where we had moved into a second site, I'm not certain that we know that just yet. There are some questions that we want to answer as we get into these module yards. But I think as we look at the long-term dynamics of the nitrogen market, there's just not enough new supply coming on to meet demand. So as we see that going forward, we do think there will be a tightening in the S&D, that will provide other organic opportunities for us, but nothing to mention right now. Operator: Our next question comes from Joel Jackson of BMO Capital Markets. Joel Jackson: I want to talk to you about CBAM, obviously, a lot in the news on CBAM. So what I want to ask you about is, it's a different scenarios. If CBAM for fertilizers goes as it is, if there's some suspension on fertilizer, if you get some offsets and other cost subsidies that sort of offset it. What does that mean for a, your business, just your business this year? And then what does it mean for returns on Blue Point as you have modeled it in the different CBAM scenarios effects? Christopher Bohn: Yes. So maybe I'll start with CBAM, then I'll get to the implications on the business in Blue Point. So CBAM, today, while there's a lot of uncertainty around it, it's in place. And so it's happening. We are continuing to see our European customers show interest in low-carbon product and willingness to pay a premium for it. So I think that speaks to their thoughts that it's going to maintain. I think whether CBAM stays or goes is probably more of an issue for European producers than it is for our North American centric production base. We view CBAM as one of several opportunities. Bert and his team and the clean energy team have been working on many different sales that go outside of Europe that we're receiving premiums on some here building in the U.S., others in Asia and Africa, that we don't necessarily have everything tagged where it has to be from a CBAM standpoint. Now what I'll say is if CBAM's altered or goes away. At some point, there's going to be some type of carbon program in Europe. And us having low carbon product, these benefits should accrue to us in that. Regarding how this is going to affect our business, I would say, as we talked about before, we did not model in any type of premium from Blue Point or even in our Donaldsonville production with related to low-carbon products. So all of that is upside to our internal rate of returns on that. So when you think about the CCS project, we started online last year at Donaldsonville. We weren't looking at anything besides the 45Q benefit that we would get from that. Now we're realizing that we're able to sell that at a premium. So that's building on that. And similar with Blue Point, our analysis was without looking at any type of product premium. Joel Jackson: Okay. And then second question. On Yazoo City, when the plant starts, hopefully, end of the year, will it look the same as it did before. Will the mix be the same? And maybe if you can just elaborate a little bit more on, is there specifically for equipment that you really need to get in that, that's the manufacturing schedule that you have to hit to get in Q4? Christopher Bohn: Yes. Just to remind everybody on the Yazoo plant, so where the incident occurred within the ammonium nitrate plant, the site itself has an ammonia plant, a urea liquor plant and nitric acid plants. All that has been effect -- has been unaffected. However, given there's the site's not logistically equipped to move that much net ammonia if the upgrades are not operating, that's why the entire plant is down right now. So the only plant that we're looking to rebuild here is the ammonium nitrate plant. And I would say it's too early to judge on a lot of different aspects of that, but our intent is to get the plant up as soon as possible. The time frame that we've given with late Q4 here in 2026 is just as we've gone out to get switchgear and some of the electrical stuff, which is longer lead time items, we've been given those dates as delivery. If it comes in sooner, that would be excellent. But we're right now just basing it on that. Maybe I'll -- just on this particular point with Yazoo City, I'll have Rich talk through some of the economics for 2026. Richard Hoker: Yes. Thanks, Chris. Joel, in terms of the economics, the full year EBITDA impact of not running the Yazoo City Complex, is it going to be in the $200 million range. And again, that's an EBITDA number. But I also want to highlight, we mentioned in our prepared remarks that we have business interruption insurance for the site. And so we are working with our insurance carriers. We're pulling together all of those claims, and we would expect to be receiving those business interruption proceeds during 2026. Our goal is to see if we can offset most or all of that kind of loss with the insurance proceeds, because that's the program that we have. I'll also mention that the timing of those insurance proceeds are going to be a little bumpy, because we will record those as they come in to the company, but that's the impact. Operator: Our next question comes from Ben Theurer of Barclays. Benjamin Theurer: Just wanted to kind of like get a little more commentary around the current tightness in the market. And you've laid this out as '25 was expected to be not as tight and then it was actually tightest towards the end of it, and we saw this because you guys doing almost $3 billion in EBITDA versus the $2.5 billion that you talked about kind of on the current mid-cycle. So as we look into 2026 and some of the drivers that you think can take you towards the mid-cycle of $3 billion, some of them might come already in 2026. So how should we think about, a, the market and b, some of these drivers over more EBITDA generation, the tax credits, et cetera, as we move through 2026, considering the [ $200 ] million miss on Yazoo related that you just mentioned? Bert Frost: Ben, this is Bert. And relative to 2025, a very interesting market as things unfolded globally. And because we're -- we participate in the global market, A lot of those issues drive what happens in different regions. And starting off with the conflict in the Middle East, which shut down production in Iran and in Egypt, and then you had high demand levels in India throughout the year, much higher than expected. I think the industry expected $6 million, we were close to $10 million and additional demand for Brazil and then European difficulty due to high gas cost took production down and it required higher levels of imports. And then the United States planting 98 million acres of corn, incremental tons were needed to satisfy that demand, even though we carried in lower inventory levels into fertilizer year '26. So a very interesting market and the combination of lack of supply and high demand drove the market to levels that were unexpected. That dynamic is carrying forward into 2026. We expect -- the USDA came out with 93 million acres of corn. I think the industry would say it's that or higher. So consistently, I would say, over the last 10 years, higher corn acres, so higher demand. And you're seeing additional needs for India, the current tender that was announced or opened on Wednesday, when those numbers will be probably disclosed tomorrow or early next week. And then you're seeing, again, around the world with $11 gas in Europe and CBAM issues, you're seeing higher levels of imports eventually will come there and South America as well. So again, a positive demand and probably limited supply. So you're seeing today in NOLA, urea pricing at $450 a short ton, which is $100 higher than it was in December of 2025. So exceptionally positive dynamics driving the industry in North America where the preponderance of our production is located and we're participating in that market. Then you have the positive gas dynamics that are taking place. Today, we're at $3 for the forward market, positive economics for that structure as well. So we see 2026 as being at least through the first half having a challenging market on supply and high demand going forward. Christopher Bohn: Yes, Ben, and I think you framed it nicely when you talked about 2025 that we thought would be balanced, some people thought a little bit long, same thing with '26. And as Bert just mentioned, '25 came out with $2.9 billion in EBITDA and the first half of '26 certainly looks very strong here. And all of that is sort of bridging those years to where the market gets what I think is going to be even tighter given the lack of new supply coming on, setting us up for when Blue Point does come on the market. And that's why in our commentary, we said we see the near, medium and long-term nitrogen dynamics, very strong, because we've bridged kind of a little bit of that time frame where we thought we'd be balanced during this, and it's actually tighter. Related to the tax credit piece for next year, we will have a full year of the carbon capture and sequestration unit operating at Donaldsonville. Last year, we did about 700,000 tons we had sequestered. This year, it will be just under 1.5 million tons that will sequester. And that number is really based on just the amount of process CO2 we have remaining after we do upgrades and with the plant turnaround schedules with ammonia plants being down. So we're going to max out the most we can sequester during that particular time frame. And right now, we're thinking that's around 1.5 million tons for 2026. Operator: Our next question comes from Mike Sison of Wells Fargo. Michael Sison: Yes, I just had a quick question on CBAM, again. So if it goes away, does that make it difficult or maybe impossible to get a premium price for Blue Point? And if it stays, then there's a good chance to get a premium for Blue Point? And then just curious what you're all hearing in terms of timing when we'll find out on a decision for that by the EU. Christopher Bohn: Yes. So with CBAM, I mean, I think it's more complicated than just whether CBAM stays or not, because you have the whole ETS scheme over there that gives free allowances that are beginning to stop. Does that continue where they don't receive those free allowances, which then would basically push European producer cost even higher without CBAM. And I think on the premium side, I'll let Bert comment on this a little bit more, but I think it goes beyond what we're hearing from European customers about buying low-carbon product when it comes to the premium. Bert Frost: The premiums in place, we have contracts in place for 2026 in demand for more. So we are constructive. We continue to have further dialogue. I agree with Chris, that this is set in motion, CBAM that is in carbon pricing. This is a train that has left the station, I believe. And so how that transpires to CBAM and our premiums were constructive. And we're even seeing that now across the globe with industrial customers and agricultural customers desiring low-carbon products. So I don't see that decreasing at all. Michael Sison: Got it. And then just one quick follow-up. Given the dynamics you shared for nitrogen this year. Is your bias that pricing kind of stays at this level and maybe the biases may be potentially to go up from here? Or how do you sort of see the kind of the scenarios for potential pricing there? Bert Frost: Yes. I'm never biased. I'm just correct. I think that because this is a global market, and you have so many different dynamics driving the world price structure with different producers and different localities producing this product that don't consume it. And you have some very gigantic producing places like China that are sometimes in and sometimes out of the market. And then you couple that with 3 to 4 months of demand in North America of actually using this product in 6 to 7 months of inventory build. And so you have to be a student of the market and follow these things. And we had an opinion coming out of Q4 or in Q4 that because of the supply demand dynamics I had explained earlier, we were on an uptick of pricing, a positive uptick in pricing, and that has transpired. How much further it goes. There's all kinds of expectations in the market today. I think there is still room to go, especially in North America. But I do think there will be a correction in the back half of the year like there always is, as we move from the Northern Hemisphere to the Southern Hemisphere of planting. Operator: Our next question comes from Kristen Owen of Oppenheimer. Kristen Owen: Carbon opportunities and maybe double-click on the agreement with POET for the low carbon fertilizers. Just given some of the proposed changes in the 45V guidelines, practice changes, I'm wondering how you're thinking about low CI fertilizer demand opportunity domestically. And if those 45V tax credits maybe help improve the unit economics or pricing premium that you're seeing here in the U.S. Bert Frost: Yes. So for the -- we missed a little bit of the first part of your question, but it's about low carbon and low carbon in the ag sector and the consumption of that product and the demand profile going forward. And our agreement with POET is exciting. POET is a super strong company and the leader in biofuels. We're also talking to other ethanol producers. But the vision is about the core value chain. And how do you take a low-carbon corn? Well, how do you create that with low carbon fertilizer, who supplies that we do and who has plenty of supply for our customers, we're building it. And so as you take that low carbon product through the value chain and as the ethanol plants decarbonize themselves, there's a tremendous opportunity for domestic and export ethanol demand to be satisfied by the United States. And we're the one place that can supply that in terms of the gasoline blends globally. And then for low carbon or low CI score fertilizer as well, we're seeing -- we're having conversations. We're seeing demand through the retail sector driven by the CPGs and other food producers as they look at their sustainability goals and Scope 3 and scope emissions. Christopher Bohn: Yes. And I think anything related to the 45V is just going to be an upside to us. As Bert mentioned, he's hearing enough activity even though at this particular point, low carbon fertilizer is not recognized in the 45V now, that is up for comment right now as the USDA is defining what are those qualifying activities and you would think low-carbon fertilizer, which would be an attractive pathway as it's very easy to verify what is the carbon score of that. So we're hopeful that gets included. But as Bert mentioned, he's already getting interest in that, even with it not being included in the 45V just yet. Kristen Owen: Super interesting. My follow-up question is a little more boring and on the modeling. So you -- can you just remind us your operating costs in 2026 you threw out the $200 million EBITDA headwind from Yazoo City, I imagine there are some stranded costs or overhead costs that won't be recoverable through the BI insurance just some thoughts around operating costs and any sort of turnaround that we should be thinking about in 2026? Christopher Bohn: Yes. In terms of the BI, our hope is that virtually all of those costs are going to be recovered through BI. We're not expecting anything major outside of it. And as we go through the rest of the year, our turnaround schedule, I think, is projected to be pretty normal in terms of what we would normally expect. So I don't really have anything I want to highlight. Operator: Our next question comes from Christopher Parkinson of Wolfe Research. Christopher Parkinson: Just a short-term question and a lot of questions for me. The short term, just Bert. Going back to some of the things you were discussing before, how are you thinking about order book flexibility into this year? I mean farmers are just now getting some deferred direct payments. You're waiting news [indiscernible] and then you mentioned India, Iran, Trinidad out, Texas capacity and it seems like there are more moving parts now than in previous years, at least going back to '22, let's say. How are you thinking about that with your team? Are you leaving some flexibility as you enter spring? Or are you happy with prices where they are now? Bert Frost: Yes. In general, we're pleased with our order book. And as I highlighted earlier, coming out of 2025 into 2026, we carried some inventory in to 2026 on purpose, because of these dynamics that we're laying out that -- and this has been the discussion. We just finished the TFI, The Fertilizer Institute meetings in Orlando this week with all of our major customers. And the message is we're heading into a logistics game that as good as the weather has been that it's been warm. We're seeing applications already start Texas, Kansas, Oklahoma and Nebraska. And I think that's going to be even more pronounced and we could see in early spring, similar to what we did in 2012. If that is the case or even if it's normal, we're approaching where the need to get products where you have difficulties on the river due to low water, you have, we believe, shortages or lower inventories in the upper Midwest. There's been a number of plant issues in our sector in Canada and through the winter storm that came through in January, we think there's been some downtime. All that equates to lower levels of available product and we're having 93 million, 94 million, 95 million acres of corn. So in terms of the flexibility, we're all about execution right now, identifying where the product needs to be, where are the orders placed against our terminals and plants and communicating with our customers where they believe they're going to be requiring tons and then communicating about those -- getting those orders placed and in the process and working with our freight providers, the railroads, the barge companies to move it. So this is all about execution from now forward. Christopher Parkinson: And perhaps a slightly longer-term question. There's obviously been a few questions here already on CBAM. But switching over to the other side of the Blue Point equation and heading to the east, Japan has actually been moving as far as I can tell, further forward, you've seen as of December [ medi ] certifications, further go forward on a $20 billion hydrogen hub, a lot of those consumers and potential, have lost supply agreements with others based on three project cancellations, one long-term deferral and one final blue -- blue ammonia facility that's, let's say, currently a flux for the next six months. As much as everybody is focusing on Europe, do you think the buy side and the Street is missing something more pronounced in Japan that's still ongoing? Christopher Bohn: Yes. I think it's an excellent point, Chris. I mean, as we mentioned every one years ago thought that there was just going to be this big wave of low-carbon supply coming online. And we had said, it's easy to announce a project, it's difficult to execute on it. And so as you mentioned, a lot of those projects have fallen off. Now what we're continuing to see a lot of interest in, and it goes beyond Japan and Asia, but it is in low carbon. And I think the JERA and the Mitsui and others over there are the leaders in this. I think more importantly, it's not only the low carbon aspect of it, it's for a new demand source. And that's something that when you look at the Medi agreement and what they were able to do with the contract for difference, their 60% of this new plant is going to a new demand source that didn't exist a year ago. And so we're optimistic that we continue to build out on that along with continuing to see additional demand growth in the legacy agricultural business of sort of that 1% to 2% a year. And all those factors are why we are suggesting that longer term, not enough supply coming on, new demand centers coming on and then just the regular legacy growth that we're going to have a very tight market when Blue Point does come up. Operator: Our next question comes from Lucas Beaumont of UBS. Lucas Beaumont: I just wanted to go back to the sort of difference between the pricing outlook and the cost curve. So I mean, we've had like strong pricing to start the year. Cost care has moved up a bit, but not as much. And I mean the sort of premium there is going to widen. And as we look further out, the energy futures curve continues to ship lower kind of now into like the [ $7 to $8.50 ] range kind of later in the decade. So I just wanted to sort of get your view on how is that sort of resolved with your view of sustained market shortages on the supply side? Does this kind of need to correct in some way? Or do you expect it to persist, I guess, through this year and then into the medium term? Christopher Bohn: Yes. Maybe I'll start. So on that, from a longer-term standpoint, there is the gas differential that you're talking about. And today, that sits at around $7 to $8 per MMBtu delta. We do expect that, that will converge a little bit with Henry Hub, by no means do we think that goes away or flattens to a level that doesn't keep us economically competitive. But I think there's another side of that, that we've just been talking about on many of these questions through here, which is the SMB side. So yes, you have the COGS side of what it would cost, but you have to bring on new capital in order to meet that demand growth without even clean energy growth coming into this, just the incremental growth of demand is going to push the cost curve demand side farther to the right, having to pull in either higher cost production than we have today or require new plants to be built. And like I said, our plants alone at $3.7 billion, capital costs are only going up. And with that, people are going to expect returns. So I think as we look at -- we expect the natural gas differential to continue, but we also expect that we're going to see demand move to the right on the cost curve and also the cost curve to be supported by new plants that are going to be needed and required or high-cost production to remain in. Bert Frost: And that also doesn't consider just what's going on dynamically around the world with energy and shortages of energy in certain locales like Trinidad or high-cost energy in Europe and suboptimally operating at 80% or less as well as other specific locations of limited production. Brazil is going to be bringing back. They're supposedly, their plants that would have been -- not been operating over the last several years. And so supply is limited that we see in the forward, demand continues to grow, but also supply continues to be cut in other locations, making for a very solid structural market, as Chris explained. Lucas Beaumont: All right. And then I guess just maybe a bit of a short-term question on the Middle East tensions with Iran. So I mean, they're about 10% of the global urea export markets. I guess, how would you see the market dealing with any disruption to production there and the impact on pricing? And I guess how would that sort of need to flow through from a timing perspective in terms of, I guess, disruption to the shipments before it's really starting to have an impact and how long it would be down. Bert Frost: Yes. If you look at the Middle East and the suppliers that are located there, the producers, are in Iran, Oman, Qatar, Saudi Arabia and UAE for urea, that's about 20 million tons. So in a globally traded ocean going traded ton, that's about 35% of the world's supply that goes through the Strait of Hormuz or close to it. However, you also have to look at ammonia where those same countries referenced are about 5 million tons or also 30% of the globally traded ammonia ton. And so if something were to happen, the constraining factor to supply would be pronounced. As well as LNG, about 25% of the world's LNG also transit through that the Strait. So if conflict were to occur, it would be, I would think, even more difficult or more challenging than the current situation in Russia and Ukraine and moving out of the Black Sea. Operator: Our next question comes from Vincent Andrews of Morgan Stanley. Unknown Analyst: This is [ Justin Pellegrino ] on for Vincent. Thank you for all the commentary on where prices and market commentary are headed over the last few weeks. But I kind of wanted to step back and go back to Blue Point for a second. You mentioned earlier in the call that as you kind of started going through the process, permitting or whatever, that the time line may have shifted around a little bit. And I was just curious, where have the pressure points been as you started to go through the process, whether that be tariffs, labor, whatever it may be? And then can you kind of just flag anything that we should be watching as that project starts to progress through the stages and anything else that's worth talking about there? Christopher Bohn: Yes. Thanks, Justin. The timing really hasn't shifted at all. So our expectation is still in 2029, the plant will come on by timing, I mean timing of payments. In which case, as you get closer into these larger projects and you're actually talking to the -- whether it be the modular yards to civil contractors, you've engaged different things like that, you have a better idea of when those payments would be going out. So, nothing's changed from our time line on the particular project. I think as far as milestones go, as I mentioned, we've pretty much achieved the milestones that we have in place where the next big ones would be the Air permit and Army Corps permit as we look to build the heavy haul bridge that will bring the modules over. Additionally, as we start to do some of the civil work, which our expectation is here in the next couple of months, we'll start moving ground, driving piles. We've already driven test piles. So I think right now, there isn't much of these milestones other than the permitting process, which, like I said, our expectation is that we will have that going here in the next couple of months. The other part that I should mention is of our $3.7 billion in total capital spend, we still have about $500 million of that, that is built in as contingency. So not knowing really where tariffs are going to fall out based on Supreme Court and also that a lot of this lead time -- longer lead time stuff doesn't come for 3 years, but we do have a sizable contingency built into this particular project. Operator: Our next question comes from Edlain Rodriguez of Mizuho. Edlain Rodriguez: Just one quick one for me. We've had some affordability issues with phosphate. And of course, you don't produce that, but you know what's going on there. And with urea prices moving higher, like any concerns about affordability in nitrogen, like is it better to be as affordable as possible just to prevent a bunch of issues or the market will just determine where nitrogen lands on the affordability spectrum, and we just have to deal with it? Bert Frost: Yes. Edlain, I think you raised an important issue because we're a part of a value chain that the farmer plays the most important role because he or she is planting and harvesting and storing many times those crops and then there's a payout. And so we do study that. We do study where that lays out for the major crops, corn, soybeans, wheat, cotton, sugar, at least for North America and what those economics look like. We are in a global market, however, and product moves pretty freely around the world from the Middle East to North America, from North America to Europe from Russia to North -- to the United States and like same thing with corn and soybeans. And so I think we're aware of that. We're looking at what that means for -- in terms of return on variable costs, return on full cost. And I think the [ Trump ] money that flowed down from Washington is helpful for in terms of balance of payments. I do think there are some credit issues in certain parts of at least the United States, I'm aware of that retailers are holding and those are conversations with how they balance their year, and so yes, we're aware, yes, we're following it. And yes, we want to be a part of the solution for the American and Canadian farmer. Operator: Our next question comes from Matthew DeYoe of Bank of America. Matthew DeYoe: I don't know. You had mentioned Brazil, and so I wanted to tap in a little bit on that and the plants that were being restarted. I know it's not your plants, and so companies don't often like to highlight or talk about that a little bit. But at least from a headline basis, there's like 1 million tons of urea in that production. And effectively, it was supposed to be started up or starting to start up by the back half of last year. Seems like you're calling for Brazilian urea to be flat on an import basis year-over-year. Is there some expectation that growth is in there? Or are you treating that plant -- those plants is 0? Or is it they'll take too long to ramp and demand will offset. I'm just kind of wondering your thoughts on that. And in general, I guess, like recommissioning in the commissioning cycle in plants and how that's creating or can create gaps in supply. Bert Frost: Yes. Brazil has been an amazing story over the last 25 years with their consumption of urea and especially on imports, because they become one of the drivers of the globe of demand. But if you go back to those earlier years, it was about 2 million, 2.5 million tons of imports to today, almost 8 million tons of imports, but parallel to that ammonium sulfate coming in at also around 8 million tons. So on the end molecule or the end product, the nitrogen product coming into Brazil has grown substantially. Ammonium nitrate being fairly consistent. And so what has happened, though, during that time period, these plants are -- you have the plant in Parana -- close to Paranagua and in Camacari and some of the plants in [indiscernible] that are up north. Those plants are not well placed, at least the northern plants to where demand is, and they've struggled to operate over the years, one, that they're inefficient, two, that their high logistics costs to move the product to the high-demand areas. Brazil continues to grow in acres and acres planted and especially with the double cropping being economically viable. And so we do see these plants coming on, and they've also talked about reinitiating construction at [indiscernible] that was stopped about 10 or 15 years ago. And so Brazil has the capability. What they don't have is the gas where these plants are producing or enough gas that's been an issue as well. So they get to an initiative of the Lula government and [ Petrobras ] to continue to invest and serve their domestic farmers as they can. But Brazil will still be a major importer, a major driver of urea demand or nitrogen demand worldwide. Christopher Bohn: Yes. And just from the urea supply side in Brazil, I'm probably a little more skeptical than others on this just from my time in manufacturing and what the cost would be to bring plants that have been idle, but likely were not necessarily taken down just because of the number of years they've been down. I think the capital -- the upfront capital cost to do that and then the efficiency of those particular plants after they are up would cause a lot of issues. So I'm still in a wait and see what happens with those particular facilities. Matthew DeYoe: Now loan on that, Bert, I just wanted to know what the -- your input. Operator: Our next question comes from David Symonds of BNP. David Symonds: I just wanted to ask on your assumption of a 4 million to 6 million tonne export quota from China in 2026. That's pretty much flat year-on-year versus what they did in 2025. And my understanding is they've got 4 million tonnes of additional capacity coming online at some point through the year and I think inventories are still quite high. So I've been penciling in a little bit more than 6 million, like 6 million, 7 million tonnes. Just curious to hear your thoughts on that. Bert Frost: I think that's possible. I think we've seen a different China in most years from the heydays of their export activity in 2015, '16, '17 to really pulling that back and recognizing the economic and political benefit of exporting that urea is fairly de minimis. But keeping that product in country for the Chinese farmers and the growth of Chinese production has been important to them. So I think there is a differential between the domestic price and the international opportunity. Last year, you're correct, it was around 5 million tons of exports, and we're penciling in. We're being conservative to say that, that maybe something that the government is initiating. But if you take their capacity and run it at an 80% plus or minus run rate, they really don't have that much to export, and that's about the run rate they've been running over the last several years. So I would say your number might be a little high, but we'll have to have a coffee over that number next at the end of the year. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Martin Jarosick for closing remarks. Martin Jarosick: Thank you, everyone, for joining us today. We look forward to seeing you at upcoming conferences. Operator: This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Moncler Group Full Year 2025 Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Elena Mariani, Group Strategic Planning and Investor Relations Director. Please go ahead, madam. Elena Mariani: Good evening, everyone, and thank you for joining our call today on Moncler's Full Year 2025 Financial Results. Let me introduce you to the speakers of today's call, Mr. Remo Ruffini, Moncler Group's Chairman and CEO; Luciano Santel, Chief Corporate and Supply Officer; Roberto Eggs, Chief Business Strategy and Global Market Officer; Gino Fisanotti, Moncler Chief Brand Officer; and Robert Triefus, Stone Island's CEO. Before starting, I need to remind you that this presentation may contain certain statements that are neither reported financial results nor other historical information. Any forward-looking statements are based on group current expectations and projections about future events. By their nature, forward-looking statements are subject to risks, uncertainties and other factors that could cause results to differ even materially from those expressed in or implied by these statements, many of which are beyond the ability of the group to control or estimate. I also remind you that the press has been invited to participate to this conference in a listen only mode. Finally, I kindly ask you during the Q&A session to speak to a maximum of 2 questions per person to give all participants the opportunity to ask questions. Let me now hand it over to our Chairman and CEO, Mr. Remo Ruffini. Mr. Ruffini, over to you. Remo Ruffini: Good evening, everyone. In 2025, even in a difficult environment, our group delivered a solid performance, EUR 3.13 billion of revenues, a strong acceleration in Q4 at both brands with Moncler DTC up 7%, Stone Island DTC up 16%, an EBIT margin of 29.2%. Net cash, EUR 1.5 billion, and our sustainability effort valued by key ranking globally. Strong results that demonstrate the quality of our operating execution and the resilience of our business model. But as usual, as always, what I'm mostly proud of is how we reached this result, investing in creativity, preserving our identity and moving forward with clarity in our long-term strategic direction. At Moncler, we are working to make the brand stronger across all seasons and all geographies, focusing on where we have room to improve our brand awareness. We also continue to build unique brand experiences and moments. After the strong success of Warmer Together, which become way more than a simple campaign, we opened 2026 with an emotional Grenoble event in Aspen. And we are back to Winter Olympics by sponsored the team Brazil and its athlete, as Lucas Pinheiro Braathen, in a relevant, unique and meaningful way. This moment are only the beginning of a year of full initiative. As Stone Island, we keep moving with focus and discipline. We are working hard to reinforce the brand in the areas that matter most, improving our collections, elevating the customer experience and making operation more solid and relevant, growing with intention rather than just scale. As we grow, we decide to make our organization even stronger. The arrival of Leo Rongone as the Group CEO in April is a natural next step in our evolution, which will bring new energy to our already solid structure. Something my leadership team and I have been considering for a while. But let me be clear, I'm not stepping down. And I'm stepping back. I will be Executive Chairman, continue to lead our creative direction and set the strategic direction of the group. I will be fully involved every day with the same passion and the same commitment. Let me close with something that feels very important to me. We grow only when we stay true to who we are, to our curiosity, to our uniqueness and to our courage to evolve because I believe that only companies that understand when and how to embrace change are able to succeed. Thank you. I leave the floor to Gino. Gino Fisanotti: Okay. Hello to everyone. Good afternoon. I hope everyone is having a good day. I just want to take the opportunity on the back of the message of Mr. Ruffini to share how happy we are with the strength of the Moncler brand right now. I think we are not just happy because of the good and the great results we've seen and the opportunities we have, but equally excited and happy about the opportunities and the potential of this brand towards the future. I think 2025 was not only a special year, was a year where we've seen our biggest year yet in terms of -- not only in terms of brand awareness and reach, but especially in terms of the brand engagement we have seen all around the globe, proving again that we are just way more than just big events and sometimes the seasonality or just a specific product. If we go to the next page, when we talk about Warmer Together, I think this was -- I want to start here. This was a quarter of records. A lot of records have been broken and we are happy to share some of them. I think the first one is Warmer Together, Mr. Ruffini just mentioned that it was more than just a campaign. In that sense, became the biggest campaign in the history of Moncler. This campaign wasn't just about product or wasn't just about celebrities, was about sharing the values about who we are and where we stand for. And I think nobody better than representing that than Al?Pacino and De?Niro, who are, for the very first time doing something together as a marketing campaign. I just want to say that this is the first time we even have issues to count the amount of coverage we're having and the amount of reactions we're having around the globe for this campaign, including markets like in Asia, like in China, where not necessarily the 2 celebrities were as known as the rest of the globe. Again, last but not least, on this campaign and the incredible results we were able to get, I think, as Mr. Ruffini said when we started this campaign, Moncler never been just about buffers and winter. We've always been about want and love since the very beginning. If we go to the next page, we will talk about Grenoble. And again, in December, we were able to launch the campaign on the back of the collection we presented at the beginning of 2025 in Courchevel with a pretty spectacular event. And again, another record breaking. This has been our biggest campaign in terms of Grenoble ever and especially since that we said that we started 3 years ago. This was a special campaign that was featuring our incredible Lucas Pinheiro Braathen, Vincent Cassel, model Amber Valletta, and of course, the most awarded snowboarder Chloe Kim. So again, incredible results there. And then on the back of that, I think we just mentioned, I think, was an opportunity for us to go back and celebrate our roots. We were not back into the Winter Olympics season since 1968. And in December, we announced the partnership with the Brazilian Federation, something that I'm sure we will cover in the next call, but I'm sure you've seen already regarding the opening ceremony and the incredible trajectory of Lucas during this Winter Olympics just a few days ago. So again, another great season not only for the brand, but specifically for this very important dimension of the brand, Moncler Grenoble. Last but not least, as we always talk about our 3 brand dimensions, Moncler Collection covered by Warmer Together, Moncler Grenoble with this campaign and the work done around the announcement for the Olympics. We have Moncler Genius, 3 very important drops during Q4 for us. The first one was an anticipated drop of Moncler Genius and Jil Sander. The second one was the reissue of a product that came a few years ago with JW Anderson, a very small capsule collection that we reissued with drop and was immediately sold out. And then last but not least, our partnership with ASAP Rocky, something that went way beyond the product collection we launched it. We were part of the partnership of his anticipated new music track after multiple years. And at the same time, we launched a very special Maya 70 jacket in December just for few destinations around the globe in DTC, and we were happy to see that product perform extremely well despite the limited units and the high price on that. So with that, I want to pass to Robert to share some of the great news from the Stone Island side as well. Robert Triefus: Thank you, Gino. Good day to everyone. I'm pleased to give you some highlights for this quarter. It's been a quarter, as Mr. Ruffini said, that we can be pleased about. It is a quarter that demonstrates the commitment we're making to focus on the values of Stone Island, the principles of Stone Island. And the campaign on the left featuring [indiscernible] is a continuation of a campaign that we've been investing in now globally for 2 years. It's a campaign that brings members of the Stone Island community to life to underline our commitment to product, the lab, the commitment to research, innovation and materiality, but also the life of our community. And this campaign, I think now, as I say, in its second year, is showing the consistency and the coherence of our brand positioning strategy. In the second column, you see Dave, a musician from the United Kingdom, who has also appeared in our lab and life campaign. We celebrated an album that he released. Dave reaches a very active part of our community. We call them the explorers, those customers who are accessing the brand for the first time, and he is a great representation. In the third column, you see a collaboration with Porter, the Japanese brand well known for accessories. We have a long-standing relationship with Porter. Accessories is not a large category for Stone Island, but it is a category of future potential. And both Porter and Stone Island stand for a commitment to research in our respective categories. And last but not least, Stone Island has a long association with soccer. Of course, this year with the World Cup, soccer will come under a particular spotlight. And in the fourth quarter, we continued our important strategic collaboration with New Balance, celebrating the sport of soccer. Thank you. Roberto Eggs: Thank you, Robert. Roberto speaking. Happy to share the positive results of both Moncler and Stone Island for Q4. As anticipated by Mr. Ruffini, we closed the quarter very positively for our business in Moncler with a plus 6%. The growth was on both channels regarding the Americas, both for wholesale and our D2C business. In Europe, the result of the third quarter was slightly negative, but locals were positive. So we were impacted by negative trend on tourism, especially with American, Korean and Japanese. Regarding Asia, all the regions grew positively during the last quarter of the year with a total result at plus 11%. I will be able to illustrate more in details in case you will be interested later on. If you move to the next chart with the results per channel, we were -- we have positive results or reverting trend on the wholesale. This was mainly due with this plus 2% on reorders for the fall/winter, strong reorders. So we're happy about the end of the year results. And regarding the D2C business, it was a strong growth at plus 7%, especially thinking that, as you know, Q4 has always been a strong role for Moncler. So we had a base of comparison over the past 3 years that was very strong. So the plus 7% is even more meaningful in that sense. If we move to Stone Island, there are also positive double-digit results in all the regions, Q4 at plus 16%. We had the Americas growing at plus 26%, also growing on both channels. The results on Europe were strong with a plus 12%. Both channels were positive. And similarly, also, we grew plus 22% with Asia. So strong performance also in all the regions in Asia. Regarding the results by channel, we had a plus 17% on wholesale. This was also due to the fact that there were some shipments that were due to be sent in Q3 that were postponed into Q4. So this was why we had a negative result in Q3, but we recovered in Q4 with this plus 17%. And you see the positive results with a strong retail KPIs that we had with this plus 16% for Q4 in our D2C channels. Regarding the opening, as you know, we tried with Moncler to open most of our stores with the start of the fall/winter season. So usually during Q3, we still had one opening in Korea in Galleria, Gwanggyo. We had for Stone Island, 3 openings. One was a conversion in Paris with [indiscernible] and we have 2 openings in the U.S. with Costa Mesa and Yorkdale. If we want to go quickly and swap through the picture, you see the opening of Gwanggyo that we illustrated here in Seoul. We put also a picture of our most important store on the Hainan Island that was where we doubled the surface at the end of the year. The opening took place in December and with very positive results for the year-end and for the Chinese New Year. And you see also one of the latest openings that we have had with Stone Island with South Coast Plaza with our OMA concept that we are now deploying in all the network. Pass the word to Luciano. Luciano Santel: Thank you, Roberto. Hello, everybody, and thank you again for attending our call today. We are now at Page 23, where we report our profit and loss for the fiscal year 2025 with an operating profitability of 29.2%, slightly, slightly, behind last year, but substantially in line with last year when we reported 29.5% with selling expenses slightly higher than last year due to the negative minus 1% comp as Roberto mentioned before, with a good control of G&A and with the usual 7% in marketing expenses as last year. So quite a good EBIT margin. Let me make one comment below EBIT on financial expenses that show an increase from EUR 6.5 million to EUR 26.2 million due to higher interest expenses on lease liabilities by the IFRS and the lower level of interest income this year as compared with last year. Let's move now to Page 24, where we report CapEx. CapEx totally in line with our plan with what we anticipated to the market in July of last year, 6.9% higher than the 6% we reported the year before due to a couple of important projects. One is about the new corporate headquarter and the other one on the distribution network, the big, very important new project in New York Fifth Avenue store. For the 2026, just to let you know, we expect to go back to a 6% incidence of CapEx on revenue. Page 25, net working capital, 9.7% against the 8.2% we reported last year, higher due to a higher level of inventory. But let me say, a healthy inventory, a result of a strategic decision we made about 7, 8 months ago to invest in one of our most important strategic raw material, which is down due to the volatility we faced last year in that sector. And so in order to be safe, we decided to buy more down than what we normally do. So everything still totally under control as well as credit and of course, payable. Page 26 now net financial position, close to EUR 1.5 billion against the EUR 1.3 billion we reported last year after a distribution of dividends last year for about EUR 350 million. Important to remind you as we report in the notes on this page, we expect actually the Board will propose to the shareholder meeting a distribution of EUR 1.4 per share in May of this year on the earnings of fiscal year 2025 with a payout ratio of over 60%. Page 27 balance sheet, nothing important to comment. Page 28, cash flow statement that reports a free cash flow of EUR 529 million behind the EUR 587 million last year. But of course, there is an FX translation impact of about EUR 20 million. And on the top of that, important to reiterate the higher change in net working capital due to the inventory level I mentioned before and higher -- significantly higher CapEx than last year with a total financial position again of EUR 1.5 billion and the cash generation of about EUR 150 million. Page 29, we report, as usual, our strong commitment on sustainability. And let me say, the strong results we have achieved this year. Okay. We are done with the presentation and ready now for your questions. Thank you. Elena Mariani: Thank you, Luciano. We will hold for a few seconds to gather questions from the audience. [Operator Instructions]. Operator over to you. Operator: [Operator Instructions] So the first question is from Melania Grippo, BNP Paribas. Melania Grippo: This is Melania Grippo from BNP Paribas. I've got two questions. The first one is on the current trends. If you could comment on what are you seeing year-to-date in retail compared to what you delivered in Q4? And my second question is on product diversification. I would like to understand if you're happy on how this is proceeding. And if you could please give any granularity on some of the categories, for example, shoes, knitwear and also on spring/summer. Roberto Eggs: Melania, thank you for your question. Happy to answer it. I will give some highlights on Q4 first before answering to the question regarding the current trading. We had, as it was presented, a strong Q4 with an acceleration towards the very end of December. We had a good month of October, November, a month of December that started a little bit more flattish, but then an acceleration from mid of December that we have continued to see in January and also in February. To be more specific on the different regions, they are all going positively with a strong performance on our Asian countries, but also on the U.S. for both channels, both retail and wholesale. I must say that Korea, especially had a very good rebound after Q3 that was a little bit less good, and we continue to see this growing trend, also thanks to the return of the Chinese on the Korean market. Chinese that have been missing a little bit on the Japanese market, but we have seen them back both in APAC and in China, and they are consuming both in China Mainland and outside in other region in Asia. So very happy about the start of the year with an acceleration that we have seen in these last few weeks. Gino Fisanotti: Melania, Gino here. Thank you for the second question. So a few things here. I think we already discussed this probably for the last 12 months. I think -- regarding product classification, I think there's a few things just to highlight. The first one is, of course, beyond outerwear, something I will come back later, we have been doing specific efforts regarding everything that is knitwear and cut and sound, something that we are really happy to see the progression of this business, especially on the knitwear side, we're seeing a really strong consumer reaction for the past 12 to 18 months. And then, of course, we're seeing good positive as well results regarding the efforts that we're starting to put around footwear, specifically in the last quarter with the new launch of the new Altive Mid boot as well as some of the work that we are doing on soft accessories. I think as we always mentioned, of course, we -- I think the other aspect that is important to keep in mind is when we talk about outerwear, we're talking about the evolution of a business that now has a strong impact, especially in everything that is more about lightweight and something that we call seasonless. It's more like lightweight solutions and lighter versions of our product as well, which is performing very well as well. So I will say we will continue on the diversification of the weight of outerwear as have been growing over the past 2, 3 years, and we will see that continue as we go into the next seasons. Regarding spring/summer, I think if you ask us, we are happy with the results of Spring/Summer '25 despite all the, I would say, the macro environment of the industry as a whole. That said, I think what you will see as we discuss is spring/summer specifically more on the back of spring and summer per se. We always said over the past probably 2 years that we were working relently in terms of improving the product offering before we were moving to do any type of a specific even bolder communication. The only thing I will just probably slightly anticipate before we discuss not to share much is that you will see an evolution in terms of the efforts that we'll be putting specifically from 2026 onwards. We are very proud of the effort that the team have been doing over the past 2 years, especially from design and product development, and we believe that we are ready to go to the next level when we talk about spring/summer. So more to come in the next probably few months, but this is an important aspect as well that we wanted to highlight to your question. Roberto Eggs: Melania, just maybe one last point on my side regarding the current trend and the current trading. I've commented on Moncler, but just to confirm that we are seeing a continuous momentum as the one we have seen on Stone Island in Q4, also at the start of Q1. Operator: The next question is from Ed Aubin, Morgan Stanley. Edouard Aubin: Okay. So I will stick to two questions from [indiscernible]. But before I do so, ask my question, if you can allow me to wish good luck to Roberto in his new adventures. So Roberto, it was very enjoyable to hear and you share your views on Moncler. So you're living on a high. Congratulations, and I'm sure we are going to hear from you soon. So moving on to the questions. I guess the first one is for Gino, and apology because it's a bit of a big picture question, so it might be difficult to answer in a short time frame. But Gino, what makes you confident that the brand desirability will continue to increase? I guess it's multidimensional in terms of advertising campaign events, shows, collaboration and retail excellence and all of that. So I know you don't have much time, but if you could comment on that, I'd be curious to have your views. So that would be question number one. And then question number two on to Luciano, I guess, is on the margin sensitivity. So I guess Moncler retail was up 4% for the full year at constant FX, and you had a 30 basis point kind of EBIT margin dilution. Is that a good rule of thumb to keep in mind for the future? And then what would make you translate to kind of a neutral margin trajectory going forward? And just related to that the Luciano, if you could update us on the FX impact you have in mind, assuming, obviously, FX would not change up until the end of the year for 2026. Gino Fisanotti: Ed, thank you so much for the question. I think, again, as you mentioned, probably, it's a longer answer that we can potentially, hopefully, we see each other and take it. But I think there's a lot of aspects for us to think why we believe that we have almost -- we always say this about this idea that this is a brand that has unlimited potential with always as every company specific resources. So we are always trying to be very focused on the few things we really want to be really good at as next steps. If we think about this, I think the things that make us super confident is not only seeing the results we're getting -- we are sharing with you today and more importantly, the reaction from customers around the brand is, first of all, is we have opportunities when we think about Grenoble. I think we strongly believe that there is a big opportunity for the brand to go further and deeper on that. We believe that there is -- as we always discuss and I just mentioned the answer before, an incredible opportunity for us awaiting us to become a more all year-round brand with spring/summer. We believe, as you know, and you start seeing the efforts in '25, and Luciano mentioned some of the investments we're doing in the U.S., specifically as we go into this mid-to long-term approach into this market. And that make us believe on all this. On the back of that, again, I think the opportunity regarding product is real, right? I think when we talk about there's 2 aspects on product that is working in a way for us, which is in one way, we keep elevating the proposition we have in terms of product offering, while we are protecting the core as well. And I think these two things make us relevant at the very mid-high-end part of the luxury industry while we are able to connect with the aspirational customer as well. So again, and this allow us what I believe is the other big part for us is we still have a lot of opportunity for acquisition, for customer acquisition that they are at the very end, the ones who allow us to keep investing and keep growing as a brand. So of course, we can elaborate a way more, but hopefully give you 5 to 6 answers to that question. And some of those, especially the ones I mentioned around renewables, Spring/Summer, the U.S. and the opportunity to keep better on Park and the way we connect emotionally with customers are the things that we are obsessing every single day as we keep moving forward and allowing us to showcase today the results that we're showcasing with you. Luciano Santel: Ed, thank you for your question. About the margins, in 2025, we reported, let me say, better than what our rule of thumb, as you said, would expect of 29.2%. This was because Q4 after Q2 and Q3 that was -- were both quite disappointing. Q4 was very good for both brands, as Roberto said. And also because in the mid of last year, when the business trend was not particularly strong, as you may remember, we decided, of course, we needed to react to that business trend, implementing some cost saving initiatives that allowed us to control and to report quite good G&A and also selling expenses without touching, of course, marketing that is, let me say, the blood for our brand and for our business. Talking about FX for this year, for 2026 based on what we know today that may be different from what may happen tomorrow based on the current FX, we expect a 4% impact on the top line, a decline of the top line due to FX. Talking about the margins, of course, we try to do whatever we can to protect our margins, reacting to the FX trend, negative trend right now with a pricing policy that is expected to offset the FX trend. So for margin-wise, the impact of FX on margin is expected to be, let me say, negligible. And this is what I can tell you right now. Of course, there are many other impacts, but your question was about FX. Elena Mariani: And Ed, let me allow you to add one small thing. When he talks about the impact of FX on top line, he said 4 percentage points for the full year. Keep in mind that for the first quarter, it will be bigger than that. It will be around 6 percentage points of impact on the top line. So it will be bigger in the first half of the year and a little bit less starting from Q2. Operator: The next question is from Erwan Rambourg, HSBC. Erwan Rambourg: I hope you can hear me. Congratulations on a very impressive 2025. And yes, specifically for Roberto, congrats on a great track record over the past 11 years and all the best for what's next. So the two questions. First of all, on China, I think you're one of the first companies to report during this Chinese New Year. So I was wondering if you had any initial faith on this Chinese New Year and possibly if you can share the split of sales to Chinese citizens onshore versus offshore and how you see this evolve this year and in the future? And then secondly, just wondering if you could give us a few metrics. I'm thinking about the average selling space, sales per square meter, UPT, anything worth looking at in terms of '25 versus '24? Roberto Eggs: Erwan, thank you for your comments. It was a pleasure working with you over the past 11 years. Regarding your question on China and Chinese New Year, I think we are still in the middle of the Chinese New Year. So we'd rather prefer to comment on the general trend with Chinese inside and outside China. And what I can comment is that we have been growing double digit, both inside and outside China. Maybe, you usually don't report data on -- and I see our team getting a little bit nervous now. But on the like-for-like, we usually don't comment per quarter, but I wanted to restate that Q4 was positive for us. So we start seeing again like-for-like growth towards the end of the year, and this is confirmed for the time being for the start of Q1. So Chinese positive inside and outside double digit. The rate of -- the share of consumption of Chinese inside and outside China is roughly the same that what we have seen in the second half of 2025. So a 70% internal consumption and 30% outside of China. I think that this trend, it could vary. It could become 1/3, 2/3, but we are not going to get back, as you can imagine to the 50-50 that we had pre-COVID because for a very simple reason, there is a repatriation of consumption in China. And on top of that, a lot of brands, Moncler included and Stone Island included, have been doing dramatic efforts to increase the footprint on the China market, even if we see still potential to have better-looking location, larger stores, and we are working already for this year on some relocation and expansion on the market. But there is this willingness also of the Chinese government to repatriate part of the consumption. So we have been working on both. We take advantage of the Chinese traveling. Japan is probably the country that has been suffering the most, but this is more linked to political tension than anything else. We have seen Hainan performing well. We have seen Korea performing extremely well. Hong Kong has been performing well also. And we have seen positive results in Europe, even if we are not at all at the same level of Chinese consumption in Europe compared to the pre-COVID. So this is something that has been confirmed. Regarding the metrics and also what we have in the plan for 2026, we have a similar number of openings than back in 2025. So you can expect similar impact this what we usually say mid-single-digit impact in terms of additional square meters that are going to drive additional sales on the market. And the other metrics on, let's say, retail excellence, they have been positive. So we have seen some traffic back in the stores, good conversion. UPT is not the name of the game usually towards the end of the year because we tend to push more on the high price value item, especially with Grenoble and UPT is more the battle that we are having in Q2 and Q3, especially for men, but the metrics have been good at the start of the year. Operator: The next question is from Chung Huang, UBS. Chris Huang: Congratulations on the results. The first one, maybe just a clarification on the cluster. So I think, Roberto, you commented that European locals in the quarter were positive. I'm just wondering if you can give a little bit more color in terms of is it more low single digit, mid-single digit and also other nationalities. I think you said that American tourism is a bit softer in Europe. But if we take the whole American cluster, how is the performance in Q4? And on Chinese, I think last quarter, you already had a very positive trend with the Chinese consumer. So just looking at the quarterly trends in Asia, it does seem like Chinese is growing around mid-teens, if you can confirm my calculation. Secondly, on the moving parts of 2026, I mean, if you can give us an update on the pricing plan for both brands. I think space already commented, but also if you can provide a refreshed wholesale guidance. I know there's some timing impact for Stone Island, for example, but just wanted to hear your latest thoughts on those metrics. Roberto Eggs: Okay. Let me clarify on Europe, and thank you for your question, Chris. Regarding the European nationalities, they have been flattish. We have had a positive impact of Chinese tourism, but on the low single-digit part for Europe. And we have been negatively impacted in Europe by Americans that were down, by Korean that were down and Japanese that were down. So this is for the global context, then we have seen also positive growth with -- even if it's not as important as from some other brands, but we have the Middle East that has been growing. So our client in Middle East and our business is developing well there and also when they are traveling to Europe. Regarding the other nationalities, you were asking regarding the Americans, they have been in the high single-digit positive cluster overall, but their performance has been mainly a local performance. So the result that we have seen in, let's say, in Q4, they are confirmed also at the start of the year, so positive performance locally, less when they are traveling outside. And regarding the other nationalities, we have seen at the end of the year, Korean going back to positive single-digit result after a negative Q3. So this was something that was very positive for us. And Japanese locally have been positive also. So the performance that we see on Japan is mostly driven by the good performance of the locals to a lesser extent on the Chinese because we have seen a decrease in the Chinese. What we have seen is, if I may say, the Chinese that are coming to Japan are there. They're spending more than before, but they are much less than before. So you have seen probably the trends that have been published also by duty-free data that are showing a minus 40% on flights, but we see an impact on the business that is much lower than that because the ones that are coming are really wanting to spend. So it has been, in a way, counterbalanced. Maybe something on the wholesale, you were asking on some of the trends that we are seeing for the wholesale. I think most of the cleaning for both brands have been done in the past couple of years. So we see a business for Moncler that is going to stay flattish for 2026. And we see an improvement on the results for the wholesale with Stone Island. I'm not saying positive, but clearly an improvement compared to what we have had in 2025. Chris Huang: Sorry, I just wanted to come back to the Chinese comment in Q4, if that's possible. Roberto Eggs: No, the performance on the Chinese, as I mentioned, was positive double digits, both in China and outside of China. So this is, generally speaking, the way we have seen the results. The cluster has been growing double digit, both in and outside China. Luciano Santel: Chris, about your last question on pricing for 2026, we expect a price increase for both brands in the region of low single digit, let me say, 3% more or less for both brands, Moncler and Stone Island. Operator: The next question is from Daria Nasledysheva from Bank of America. Daria Nasledysheva: Congratulations on very strong results. This is Daria from Bank of America. I have two. Can I please ask about your thinking on the cost base into next year? You exhibited very careful cost control in the second half, as you already elaborated on. But how are you thinking about your marketing spend next year as a percentage of sales? And if you can share with us the pipeline of activations for the coming year, that would be very helpful. And the second one is on Stone Island. Really a nice progressive improvement has continued that started realistically in Q3. How are you thinking about growth opportunities from here, given it feels like efforts on product and communication are really having an impact? What is the focus for you at the brand now? Luciano Santel: Okay. Daria, let me start and then I will let Gino to elaborate better. The answer about overall our cost base. Of course, we try and we tend as much as we can to be more and more efficient year after year. And this has allowed us, and I hope we will allow us to be flexible, reactive and to develop a lean organization, of course, with the head of the technology, automation, artificial intelligence and whatever. Talking about marketing, of course, our effort on marketing budget is totally unchanged. You saw that in 2025, we spent exactly what we have spent in the past and what is, let me say, our golden rule, that is 7%. And so for this year, for sure, we don't expect to spend less, no more, but not less than the 7%. And which -- I'll let Gino to elaborate better how we will spend this money. Gino Fisanotti: A little bit -- no less from Luciano. Daria, thank you for the question. Again, I think if we follow history of the past, 3,4 years, I think we have been evolving very much the way we're approaching. I would say our marketing team and our brand organization in terms of not only depending on big moments once or twice a year, but being the continued orchestration of a calendar that allow us to have real impact on both the brand and the business, right? And I think within that, of course, we are the ones who became extremely famous, not only for the creativity we bring to the market, but even for these big experiences or events, as you call them. I think 2025 for us was a very important year to prove ourselves that we are not only dependent on that, but sometimes like think about this. I just mentioned the incredible results we got this year in terms of reach engagement, et cetera. And we were coming from comping a year where we were doing 2 big events that we did in San Moisè and in China with Genius. Therefore, I think the campaign we did with Warmer Together was as big or more impactful than some of those moments. So in a nutshell without giving much of the details because I can't right now, I think, trust us that we will keep evolving the way we work, that we are focusing on incredible orchestration that allow us to, not only have big moments, but have the in-between moments powerful as well to make sure that we keep building this brand. And I think now I can say that we are a lead testament that we are able to do that and to push things forward as we did in the past few years and especially in 2025 as well. Robert Triefus: Daria, this is Robert Triefus. Thank you for the question. As you correctly highlighted, the momentum that we're beginning to see for Stone Island first emerged in Q3 has obviously picked up more steam in Q4. But this is really the result of a long-term strategy. A couple of years ago this month, I presented the key pillars of the Stone Island strategy, which are focused on product, the architecture of our collection to make sure not only that Stone Island is recognized for what it has always been recognized for product innovation, material research, particularly in the categories of outerwear and knitwear, and I'm very happy to say that, that is being recognized by our customers as we see in our retail KPIs. In addition, we want to make sure that, that product architecture is reaching a broad community. Stone Island has always been known for a broad community, both in terms of generations, but also geographies. So again, I'm very happy to see that we're seeing dynamism across customer segments and across geographies which showed that Stone Island continues to have this broad appeal. In terms of the second pillar, which is distribution, we said that we would focus on DTC, not in terms of a dramatic expansion of our footprint, but instead a focus on the organic growth of the existing footprint. I'm happy to say that the results are beginning to be seen. That focus has been manifested in relocations of key stores in what we consider to be our lighthouse cities, for example, in New York, in Paris, but also in improving the way that we've seen in wholesale. We've done this through the selective distribution approach that Roberto referred to that obviously Moncler has followed. And in terms of that selective distribution approach, I'm happy to say that we have developed very strong partnerships with key wholesale partners. Of course, it goes without saying that wholesale has played a very important part in the history of Stone Island, particularly in European markets, but it is through those partnerships that we're now able to show up also with the OMA store concept that we're rolling out in our own stores, but also strategically in partner stores. You made a reference to marketing having an impact. I'm a great believer in building brands over time. Rome wasn't built in a day and great brands weren't built in a day either. What we're beginning to see are the fruits of all the efforts that have been made in terms of building greater awareness of Stone Island, but awareness that is also built on deepening the engagement with our customers. That comes from an implementation of retail excellence where our client advisers are doing a better job, a storytelling around the brand. And again, that is being seen to have impact across regions. And of course, the metrics you might ask, how do we measure the impact of our marketing activities. We are seeing greater traction in terms of search. We're seeing greater traction in terms of engagement on social media. We have just been recognized in the last 2 quarters within the Lyst Index, which I think underlines how that traction is building momentum. Of course, we are very pragmatic. These are the early signs of brand momentum, business momentum, gaining traction, and we are very committed to carry that forward into 2026 and beyond. Operator: The next question is from Luca Solca, Bernstein. Luca Solca: One question about your strategic vision on retail. If we look back, we see that the retail development of Moncler and now Moncler and Stone Island, has changed quite significantly in the early days. You had relatively small stores. The size of the average store has continued to go up, you will probably reach a peak with your new store in New York. I wonder -- and at the same time, the retail network has been continuing to expand. I wonder how productivity has been playing out on a per square meter sense? And how do you see the future of this retail growth driver? If you feel that from a number of stores you point, you're more or less where you should be and if the average size can continue to go up productively. A similar question, which is on dynamics of how you see volume, price and mix going forward, we've seen quite a significant improvement in mix and like-for-like pricing, we've seen the wonders of Grenoble. But I wonder, going forward, if you feel that there's going to be a continuing push on mix and price? Or if you believe instead, that there's a need and focus to recapture some of the volume and grow through volume as well as the other 2 elements and how you see the interplay of these 3? Roberto Eggs: Luca, thank you for the first question on the strategic vision on the retail side. I think Robert just clearly mentioned the current focus on Stone Island that is very much on improving the productivity and fixing the model. And we have seen that this has been starting to really play positively on our results. Regarding Moncler, we are clearly compared to Stone Island in a phase that is a different one. When we see our project, the one we are managing, we have something that is very much balanced today between relocation, expansion and new openings. We have, this year, a focus on the U.S. We start this focus on U.S. already a couple of years ago. We have seen events in Aspen. There will be the big event of the opening of Fifth Avenue. You mentioned this would be the peak in terms of size, most probably, yes, our intention has never been to start building big stores everywhere. I think there are a few capital cities in the world where having a larger space allows you to show and showcase the brand and the experience we want to convey in our store in a much richer way. So I'm thinking about cities like Paris, like London, Milano, Beijing, Shanghai, Hong Kong, I think those cities, they deserve -- Tokyo, they deserve to have this type of flagship. But the, let's say, the format that is fitting the best the performance and the retail KPIs of Moncler, they are more around 300 square meter, which is not huge compared to what you see with the other player on the market. And I believe that with this type of format, and we don't have yet all our stores on that format, because our average size worldwide is roughly around a little bit more than 200 square meters. So we still have some stores that are smaller, but we would like to, let's say, elevate in terms of in-store experience for our clients, in terms of retention and so on. And we have seen that this format around 300 square meter is working well. So the ambition that we mentioned a few years ago on where we want to drive the sales density is still there. We said at the time that we would like to see due to the importance of Europe, China is back at the same level of 2019 so pre-COVID, which is not yet the case. So we are balancing out, but the metrics that we are currently seeing, they are there and they are improving. This year, we are going to have a similar number of projects that in the past. Clearly, in the future, we'll have much more relocation and expansion rather than new openings. But this is going to be seen year after year. Luciano Santel: Luca, this is Luciano. About your question, volume price -- volume price mix in 2025 and needless to say, volume somewhere down. But let me say that in Q4, they been getting closer and closer to flattish, so quite encouraging quarter also from the volume point of view, talking about the future price mix. I mean our strategy will still be what we said in the past, and I am sure you know very well, I mean, to keep elevating the brand, increasing our collection, increasing the high end of the collection, exploring higher prices. Right now let me say that our top prices are in the region of EUR 2,500. We see opportunities with our current customer base to increase the offer over that level. But we also believe that we can generate more volume by expanding the base of our collection, introducing a larger offer in the enterprise. Of course, enterprise for our outerwear category is expected to be in the region of EUR 1,200 more or less. So of course, it's a rich price, consistent with our pricing position. But this is the strategy. Of course, for 2026, it's still too early to anticipate what the volumes may be even at the beginning of the year, as Roberto said before, was quite -- and it is still quite encouraging. Luca Solca: Roberto, I look forward to seeing you here in Switzerland and learn about your next step in the meantime. Congratulations on a great chapter at Moncler. Operator: The next question is from Oriana Cardani, Intesa Sanpaolo. Oriana Cardani: Thank you for taking my 2 questions. The first one is on the evolution of the gross margin. Do you expect it to stabilize at the level of last year? Or do you see room for expansion? And my second question is on the price gap level between Europe, America and China, if you can give us an update? Luciano Santel: Thank you, Oriana. About your first question, talking about gross margin expansion. I hope there will be an expansion. But seriously, I mean our gross margin and our gross margin expansion has been driven since the beginning, mostly by the channel mix. Of course, right now, I mean, our DTC business is way higher than they were saying. So any expansion of the DTC business is not expected to be so important as it was in the past. But since we expect for 2026, let me say, solid wholesale business, but not in expansion and an expansion of our DTC business, for sure, from the space point of view, but hopefully also from an organic point of view, we do expect, based on this mathematics, the gross margin to expand a little bit. Please consider that we are now over 78%. And let me say that the maximum gross margin, I can expect right now, not for this year, but should we go 100% DTC, is about 80%. So at this level of development of our gross margin is becoming, let me say, more difficult to keep expanding the gross margin as much as we did in the past. Roberto Eggs: Regarding the price gap between the region, as you know, we are working on a bi-monthly basis to channel on our pricing committee, and we have been working together for the past 11 years to reduce the price gap between Europe and the other region. I must say that currently, it's probably the lowest price gap we have ever had between the region, not completely where we would like to be, but getting very close to that. So we have our American the price gap with the Americas that is below 30%. We have China around 30%, depending on the fluctuation of the currency between 28% and 30%. And we have today, China, Korea, that are more around 26%, 27%. So there is a small price gap between China and Korea to favor also the travelers inside of Asia also regarding Hong Kong, it's the same. We try to favor this 5%, 6% price gap between China and the neighboring countries, so just to favor and push sales for travelers, Chinese travelers. Operator: The next question is from Thomas Chauvet, Citi. Thomas Chauvet: I have 2 questions. The first one on categories. Could you comment on the performance of Moncler brand down jacket business relative to other category last year? What was its share of total business now. And maybe could you take this opportunity to give your thoughts on the broader down jacket market dynamics. We've seen a fair amount of competition at the entry level, at the high end, great progress on technology, sustainability-led products. Any color on that would be useful. And secondly, on inventories, and the 15% increase or EUR 70 million, if I understand correctly, that's largely due to advanced purchase of raw material of down. Are you seeing any kind of unusual inflation in the sourcing of top quality down and what is down typically as a percentage of cost of goods? And just finally congrats to Roberto for a great career for a decade at Moncler and all the best in your future projects in Switzerland or abroad. Gino Fisanotti: I will take it. I think Normally, we don't share again, the performance of the different segments. I think I will go back and repeat a few things we shared before. I think, of course, outerwear is part, of course, of the core of our offering in our business. I think what you will see specifically there, just to give a bit more context is the diversification we have been doing, especially in the past 3 years in terms of the offering, right? It's like not just the traditional outerwear, but all the different segments between seasonless, lightweight versions for travel retail, et cetera, and the demand we're seeing, especially on over shirts and that kind of style. So -- the outerwear business is way larger than it was before. And I think we are seeing specific traction in certain markets. We always talk about the Sunbelt of the U.S. where average temperature is around 18 to 22 degrees. We're seeing some markets in Asia where these performed extremely well. So I would say when we think about outerwear and the size of it, despite that we're growing other segments and other classifications within the business, this -- there was an expansion over the past few years. I think the other aspect that you are discussing is on one hand, outerwear as the same of the different product proposition is going through this process of elevation on one side in terms of how much value we can put in design and in the fabrics we use for certain products. On the other side, there is an innovation place that, of course, we know will take central place for this. I think I don't know, but we can look at what just happened in Aspen literally 15 days ago. In the latest collection we presented for winter 2026 or we can go into for winter '25 or the now 2-year spring/summer evolution of Grenoble, and you will see a lot of different innovation apply to ski work, to no work, to upper ski and even to some of our summer propositions regarding shirts or 3 layering systems. So I think there is a real evolution, I would say, especially on materials, applications on Grenoble, but we will keep fostering this idea of high style and high performance as we keep doing this segment of the business. But again, just to round this answer, outerwear is bigger as a classification than just a traditional view on a winter jacket only, and this is something that have been helping us to not only grow that part of the business at the same time as we keep growing other classifications within. Luciano Santel: Okay, Thomas. About your question about inventory, first of all, let me say it again because it's very important and nothing unusual on our inventory level. Nothing unusual means that our inventory is all good inventory, current season inventory and everything that is to be considered also it has already been written off. So what you see in our net working capital is only good inventory. It is higher this year because we decided to invest more than usual in down last year due to the volatility of the price in that moment. And of course, I mean, when we perceive price increase trend in the market, we decided to anticipate and to buy more down than what was needed normally. Of course, let me say something obvious, and I'm sure that is very clear for you. But we only buy top quality down, we never may decide to buy lower quality down in order to save money, so just to make it clear for everyone. And so the top quality down last year saw a peak in price opportunity. We bought down when the prices were still lower. But of course, this was not at all for speculative reasons, but simply because down is the essence of our DNA. So we needed and we wanted to be safe and to have even more down than needed then to run the risk to have a shortage of down. About the contribution of down, I don't have a number. Honestly, it's not meaningful in quantity, not meaningful in percent of our cost of goods sold. But again, is the essence of our DNA. Gino Fisanotti: Thomas, I forgot -- I think one thing, Thomas, I forgot to -- I think you mentioned about competition. I just want to give one second of an answer because I realize I didn't answer about that. Again, regarding competition, I think we always -- every year or every 2, 3 years, we talk about different aspects of competitors and things like that. We are, of course, in a segment where there's different players. I think the only thing I will tell you is, of course, we always remain very humble enough to look at what competition is there, what competition is doing, what the customers are doing and what's working, what's not working. I think at the same time, we do that. And we see, of course, when you talk about outerwear and you talk about different innovation solutions, there's a lot of different players, even a lot of luxury brands trying to play there. We always observe and try to learn, but more importantly, become better. I think on the other side, we always -- and I think Mr. Ruffini mentioned this at the opening speech, remaining true to who we are and our DNA and more importantly, to deliver strong product solutions for customers that look for a very authentic and meaningful brand. I think Grenoble, again, is a perfect example on top of what we can say about Moncler collection, about a segment of the brand that is delivering incredible product. And we strongly believe that despite competition as well, there's no other luxury brand as authentic as we are in terms of coming from the outdoors and delivering incredible innovative solutions for customers. Operator: The next question is from Charles-Louis Scotti, Kepler Cheuvreux. Charles-Louis Scotti: I have 2. The first one on the U.S., where you are still relatively underpenetrated. Have the Warmer Together campaign and the Aspen event increased your confidence in the brand's growth potential in the U.S.? And today, Moncler generate EUR 1.5 billion in APAC, nearly EUR 1 billion in EMEA. Do you see a similar EUR 1 billion revenue opportunity in the U.S. over time? Second question, could you please comment on the recent trends in the e-commerce channel and remind us your exposure to online across both brands? And some of your peers have pointed to an improvement recently, suggesting for them a gradual return of the aspirational customers. Do you see similar trends in your business? Gino Fisanotti: Thank you for the question. I think regarding the first one in terms of the U.S., I mentioned this before. This is one of the areas where we strongly believe we have an opportunity to do better. I think -- I will -- of course, I will mention in a second about Warmer Together or Aspen, but this is just singular aspects of a bigger plan, right? I think we strongly believe in this idea of an end-to-end approach towards the market. I think Moncler proven case from Europe to China in the past few years about -- it's not about just retail, it's not about just marketing, it's not about just CRM. It's about everything we are trying to do together and the orchestration of those efforts. I think what you started to see in 2025 between some specific launches we did with Genius, with Mercedes-Benz and legal campaigns regarding Moncler Collection with Penn Badgley, U.S. ambassadors in Grenoble campaign, going to the Met Gala for the first time, Aspen, Warmer Together, all these things are the beginning of something that we believe is a journey, right? I think this will not -- I think Robert just talked about building brands, right? And this is not about something that will have a silver bullet that will work overnight. We believe that, that journey already started in 2025. '26 is a major year for us to keep building towards that potential we have in the U.S. We not only have just did Aspen. I think we are going to open Fifth Avenue later in the year and many other things that will come that will help us to start bringing that potential we see. I think you mentioned something regarding revenues. I will not comment on the size of our revenue. The only thing I will always comment is on the philosophy we have where we always say that revenue is a consequence of what we do. So we strongly believe that we're able to do the efforts that we believe we're putting in place for the U.S. and we drive this end-to-end offense. We strongly believe that the revenue as a consequence will come and we will build long-lasting growth in that market as we are able to do in other geographies as well. Roberto Eggs: Just to complement the answer of Gino on the U.S., we never set targets that are -- we are never driven by purely on turnover and additional business. We always believe that if we do the right things for the brand, results will be a consequence of it. So clearly, now in terms of attention, we are fully focused on the U.S. I think the elements that we just mentioned that were mentioned by Gino, the Fifth Avenue is going to be one of the key elements, the campaign Warner Together has. The fact that we had an event on Aspen. Also, we opened also a very successful -- already very successful store in -- second store in Aspen dedicated to Moncler Grenoble. We had a fantastic receive with clients before -- just before and after the show. So we believe that we are currently doing the right things. We need to elevate also the level of operational excellence and the Fifth Avenue will be a catalyst of this new energy we want to bring also in our team locally. So I think you need to give us a little bit of time. It's going to be a journey that already started, but we are confident. Remo Ruffini: Charles, I think your second question was regarding the online business. Again, I think here, again, regarding online, I strongly -- we believe in this idea that the online experience have been evolving, at least for us in the past 2 years. And this is why one of the reasons that we set our .com in terms of the experience and the look and feel on the second half of 2025. I think we are leveraging more and more .com to attract customers and to more importantly, educate as a more product-centric experience. This is something that took us a bit of time to evolve, but we are happy to see that evolution and see how we can engage product to that front. I think clearly, the online channel have been underperforming through the physical part of the DTC in Q4. I will say within that, EMEA was the one that we were struggling a bit the most compared to the rest of the markets. But again, we believe that there is a kind of an evolution, not to use the word revolution in terms of how customers today are searching, how the searching engines that they're using and how they interact and they leverage platforms not only to just to purchase but to interact with brands, and this is something that we will keep evolving as we just did in September this year. Robert Triefus: Just a couple of words in answer to the e-commerce question for Stone Island. You may recall that around 18 months ago, we internalized the site from YNAP. We took advantage of that moment to launch a new front end and equally to be able to launch omnichannel services through localized warehouses. All in all, these actions have been very productive for the brand in terms of visibility, storytelling, product, narration. And we've seen and we are seeing a very strong trend in organic traffic to the website. So the e-commerce channel is a channel that we see with great potential. Operator: The next question is from Andrea Randone, Intermonte. Andrea Randone: The first one is about the recent interview held by Mr. Ruffini. He talked about the increasing attention of Chinese people towards outdoor activities as a possible tailwind for Moncler. Can you elaborate on the level of maturity of this trend? And the second question is about the internal production. I mean, what is the contribution of internal production on your current business? Is this a possible driver to make your products even more unique in the future or it is not? Gino Fisanotti: Andrea, Gino here. Thank you for the first question. I will take that one. Again, regarding the attention specifically from the Chinese people, as you said, on market regarding other activities, I think we have been saying over the past probably 2 years that we are seeing kind of a momentum towards outdoor activities, especially in Asia after COVID, especially '22, '23 and especially the buildup of first resorts for the outdoors, both summer and winter. This is something that is always happening in the U.S. but got reinforced, especially in the past 3 years as well. Reality is that what we are seeing is definitely the opportunity. We believe that opportunity is being started to being captured by Moncler Grenoble. Moncler Grenoble is performing pretty well across markets, but I would say has a really strong reception in the Asian markets or in China, but not only just in Fall/Winter, especially with the Spring/Summer collection. So this is something that is a testament a bit of what you were saying, and I think what you were alluding when Mr. Ruffini was mentioning about the more avid potential participation or activities of Asian markets, specifically in China regarding the outdoor. So this is something, as you can imagine, that we are monitoring as we go. We are looking forward not only in terms of the winter results, but the activities that are happening to our customer during summer. And we are trying to, of course, make sure that Grenoble is at the center of this conversation. Remo Ruffini: Yes, Andrea, about your second question on our internal production. Internal production for this year is expected to be in the region of 30%, 3-0 percent of our total production. Of course, most of this production is made in Romania, in our big industrial hub in Bacau, where we have 2 big buildings to produce outerwear. But we also produce outerwear ourselves in Italy in 2 different buildings in the region of Trebaseleghe where we have our headquarter. Furthermore, as you probably know, I'm sure you do, last year, actually end of the year before, we opened a brand new building for the production of knit only, quite a big building that allows us to make the weaving of all our knit production or more than 50% of our knit. And why we did that? Why? In 2015, we made a decision to open our own production in Romania because we realized and of course, it was extremely important that we needed to own our technology. And by owning our technology is the most important and essential way to develop and improve the quality of our product and not only improving the quality of the existing product because in Romania as much as in Italy, in Trebaseleghe. But I didn't mention Milan, but also here in Milan, we have a small industrial laboratory, not for production, but to develop prototypes, thanks to the proximity with our design team. This is the only way to improve, not only the quality, but to keep developing and researching new technologies for our product. So again, this is strategically very important. It was strategic in the past, and it is becoming more and more important also as a way to emerge in the market. Operator: The next question is from Chris Gao, CLSA. Chris Gao: Congrats on the great results. This is Chris Gao from CLSA. I have 2. So the first question is regarding Chinese consumers, especially the aspirational consumer spending trends. So basically, in the past few quarters, we're very happy to see queues coming back for Moncler and also for some other luxury peers, though we reckon that the general middle class may still take some time to recover, right? We are also very happy to see that you are both exploring higher price segmentation and also introducing more entry-level products at the same time together. So my question is, in the past few quarters, from a number perspective, do you see aspirational customers of Chinese have been sequentially contributing more to your growth than before? And how would you see the outlook of Chinese aspirational customer spending to Moncler brand? Do you expect it to gradually come back a little bit more as a growth driver? The second question from me is a follow-up on e-commerce. So basically, right now, we see some luxury peers introduce the AI-empowered e-commerce platform. And just wondering how would AI impact your omnichannel consumer experience in the future? Do you have any plans on that front? Roberto Eggs: Thank you for the question. We'll answer on the first one regarding our Chinese consumer. We haven't seen big differences between -- in terms of recruitment and percentage of younger, more aspirational customer or the top end of the pyramid for Moncler. Basically, in China, we have been growing with both and I believe that this is very much linked to the strong momentum that the brand is experiencing on the market since a lot of quarters or a lot of years because it's 3 years in a row that we have been performing well. You remember, we had also a Genius event a couple of years ago in Shanghai, and this was back in 2024, and we were afraid that the year after not having these events, we will see a slowdown in the momentum in China, which has not at all been the case. And I know it's a little bit abnormal because some of the peers are suffering on the market, but we haven't seen a slowdown, both on the aspiration and the top of the pyramid. Clearly, Grenoble is helping us also to grow on that part and what we call the Edit collection. So the more -- the one with less logo. So we are both growing on the very technical part of Grenoble, but at the same time, also with products that are less logo-driven and that are more, let's say, sophisticated. At the same time, our bestsellers, the one that we usually don't have on display, the Maya and so on continue to perform extremely well. And the difference transitional -- seasonal product like the knitwear, it's also a category that has been driving a lot of new customers into the brand. And as you know, those clients that are entering through this category, they usually upgrade themselves into outerwear later on. Remo Ruffini: Chris, thank you. Again, just last comment on what Roberto was saying. I think you mentioned this. I think it's important, and we said it before. I think for us, it's important that as we keep elevating our product proposition, we keep protecting the core. So while we acquire new customers on the more high end, we keep protecting and providing access to our customers. So this is a very important part of our product strategy. Regarding -- you mentioned about online and AI, I will give you a short answer there because this is something we communicated when we launched the new .com in early September. When we launched the new .com we announced our partnership with Google that we have been used as a partner that using the Veo AI platform with them. And what we are trying to leverage there is on the .com experience on part of the recommendation we do with customers based on their journey, we have been leveraging, of course, part of content. And then the last part is we're leveraging that as part of the service in terms of leveraging product as a system address. So there are certain areas today that if you go, for example, into Moncler Grenoble part of .com you can see and understand how the different parts of the product connect to each other for a better performance from mid-layers to under layers to top layers. So again, all the things are trying to be more effective and more efficient in the usage of our partnership with Google and their AI platform. Operator: [Operator Instructions] Gentlemen, there are no more questions registered at this time. I turn the conference back to you for any closing remarks. Elena Mariani: Thank you very much for participating in this call. Let me just give you a quick reminder of the next release. Our Q1 2025 interim management statement will be released on April 21, post market close, and our quiet period will start on March 23. Thank you again. For any follow-ups, feel free to contact me or the IR team any time. And of course, I will see many of you on Monday. Thank you again. Have a great evening. Operator: Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.
Operator: Hello, and thank you for standing by. Welcome to QBE Fiscal Year 2025 Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Andrew Horton, Group Chief Financial Officer (sic) [ Chief Executive Officer]. Sir, you may begin. Andrew Horton: Good morning, everyone, and let's begin. I'm here with Chris Killourhy, our new group CFO. Hopefully, you've had a chance to take a look at our release this morning. We've had a great year with an ROE just shy of 20%. And we're very proud of these results. Before we begin, I'll start by acknowledging the traditional owners of the many lands on which we meet today. For me, this is the Gadigal lands of the Eora Nation and recognize their continuing connection to land, waters and culture. I pay my respects to the elders past and present, and I extend this respect to any First Nations people joining us today. Moving to Slide 4 with a snapshot of our results. This is a great summary of our performance. We exceeded all our key guidance and targets this year. Headline GWP growth picked up to 7% and tracked ahead of our guidance for mid-single-digit growth. We beat our combined ratio guidance again this year with an excellent result of 91.9%. Our catastrophe experience and an improvement in our crop business drove the majority of the upside relative to the 92.5% we reiterated in November. Profitability is attractive across the majority of portfolios, and we're confident of sustaining strong underwriting performance. We had an exceptional investment result this year. Our high-quality investment portfolio returned 4.9%, driving another record year of income. Collectively, both post-tax profit of USD 2.1 billion and earnings per share were up around 25% for the year. And our return on equity at around 20% is excellent. Capital improved to 1.87x and remains comfortably above our targets. This leaves us with valuable flexibility to support growth alongside active capital management. In November, we announced our first buyback in several years and we wasted no time in getting started through late December. The final dividend of $0.78 takes a full year dividend to $1.09, which is a 50% payout. It's clear the business is in fantastic health with strength across the board from growth to underwriting investments to capital. Moving on to Slide 5. This is a simple summary of our progress in recent years. It's been roughly 4 years since we refreshed our strategy in late 2021. Since then, we've executed well, driving steady improvement in both financial performance and also the key metrics we track around people, culture and customer. This year, we've extended a strong and consistent track record of growth. Underlying organic volume growth continued at 7%, and we have a business that can confidently sustain this trend. We have strong messages on catastrophe costs and reserving. This year, catastrophe costs were $400 million below budget, marking the third consecutive year below allowance. These have not been light cat years by any means, with '23 and '24 amongst the costliest years on record for the industry. And the $130 billion of insured losses in 2025 was only modestly below last year. I'd also remind you that these aggregate figures mask the fact that the insurance industry is picking up a greater share of industry losses as reinsurers have moved further away from the action. We had a favorable reserve development this year, and we've spoken about our confidence in more stable and predictable reserving outcomes. Piecing these elements together, the end outcome is a simple picture. Our combined operating ratio steadily improved, volatility is down and ROE is up. This is driving strong returns for shareholders. Our TSR is roughly double the local market since we launched our strategy, and we see great opportunity ahead. Before passing to Chris to unpack the results in more detail, for the next few moments, I want to take a step back and share how we're thinking about performance over the medium term. So turning to Slide 6. This is a summary of how we think about the industry outlook and the 5 medium-term aspirations since we have for QBE. The audience -- this audience will appreciate the increasing complexity in the world, which is resulting in a risk landscape for our customers, which is highly complex. Risk awareness is elevated and the role commercial P&C has to play has never been more important. With this complexity, the industry is needed to become more mature and sophisticated, but ultimately, those in the industry, you truly understand risk, plus of scale, diversified operations are going to be in the driver's seat over coming years. We have great breadth and diversification in the business with capacity to deploy across all our key markets, spanning insurance and reinsurance. I do think this point is underappreciated, but is going to become more obvious and valued asset for QBE as we continue to execute around these aspirations. Delivering durable growth while sustaining strong margins and returns. So turning to Slide 7 on growth. The great breadth in our portfolio means there will always be classes we can grow. Looking out over the medium term, there are 3 overarching pillars to how we think about growth. Firstly, we remain in supportive market conditions. While rates are softening in parts of the portfolio, this is coming from a starting point of very strong rate adequacy. As we look to 2026, over 90% of our portfolio is expected to be at or above rate adequacy, defined by the pricing we need to achieve target returns. This foundation of strong and broadly distributed profitability is an excellent starting point as we look to grow the business. This picture may not be present every year, though with a diversified business, we'll always have flexibility to navigate various product cycles. Touching on some of the structural opportunities over the coming decade. Many of the global investment megatrends on this graphic will give rise to new risks and in some cases, rapid growth in insurance value pools. We have broad expertise across most specialty and commercial lines with leading underwriters and strong relationships. It's hard for many in the market to match our capacity to deploy collaboratively across 3 divisions, multiple classes of business covering both insurance and reinsurance. We'll continue to work with our major trading partners to provide innovative solutions and position into these fastest-growing economic megatrends. I'll leave you with a handful of data points. We have a leading energy and renewables presence who truly shine when brokers are looking for innovation. Investment in clean energy will be substantial, resulting in insurance premiums in the tens of billions of dollars. We're finding our strong position in these segments dovetail nicely into the growing energy requirements supporting artificial intelligence. Alongside this, the construction of data centers will drive significant growth in premium across multiple classes over the next few years. And as the world continues to digitize, cybersecurity moves higher as a risk for companies of all sizes, while AI liability will be of increasing focus. Cyber premiums around $15 billion today are expected to increase towards $30 billion at the end of this decade. Growing mobility demands will result in more boats, planes and trucks, while infrastructure investments support growing and urbanizing populations will be substantial. So plenty of areas where premium growth will substantially outpace the general economy, and we're well placed to capture a sensible share in the context of a well-balanced portfolio. The final pillar speaks to some topical trends in the industry. Firstly, surrounding the structural increase in market facilitization. We have a leading portfolio solutions franchise, which has been around for roughly 2 decades. We've seen and participated in the complete journey of this burgeoning market and learned a lot along the way. Today, our Portfolio Solutions team manage about 20 different facilities, and we lead two of the world's largest. Facilitization is only going to increase as it represents a more efficient option for the customer and broker and if structured correctly, strong performance for the carrier. In and around each of the investment megatrends just touched on, there are facilities already being developed. And as a market leader, we'll get the first look. As more business gets facilitized, it will come at the expense of those without a strong market proposition or genuine underwriting expertise. This will ultimately consolidate capacity toward market leaders. Finally, on AI, we continue to build, deploy and partner to enhance many aspects of our business. AI will allow us to boost underwriter productivity, unlock sharper risk insights and become a more efficient and effective business. We have a significant amount of proprietary data and market insights, which have been built through market-leading franchises in operation for many decades. AI can help us to better unlock and leverage these data assets and further enhance our market position. So let's turn to Slide 8. This slide brings many of these points together, detailing our new medium-term outlook. Our financial outlook has been primarily based around a single year ahead with both premium growth and the combined ratio. With where we stand today, having restored performance and pivoted the business as an organization, our strategic focus is much longer dated. The quality of our earnings is substantially improved with better breadth, stability and visibility. Our planning is more medium term, and we organize ourselves around a much clearer view of value creation for the enterprise. So we want to start sharing some of that with you and begin translating our medium-term plans into our guidance. To get ahead of the obvious question, medium term for us here means the next 3 years. So starting with growth, we see a continuation of mid-single-digit GWP growth over the medium term. Where we can do better and deploy capital at strong returns, we'll always hold a preference to grow the business. Over the medium term, we see our Group ROE trending in the 15% plus range. This assumes an effective tax rate of around 25% and an investment return sustain in the 3% plus range, which is essentially what futures predict today. Underpinning the outlook is a view that combined ratios are fairly sustainable around current levels. We spoke in August about the breadth in our business with 50-plus sales, which aggregate up to around 14 underwriting pools. Each have different P&L characteristics, different claims drivers, different capital requirements and different dimensions across combined ratio and investment income. How effective we are as capital allocators will be a key driver of our performance as we look to deploy our capital to optimize risk-adjusted returns and drive value. With 2025 marking QBE's fourth consecutive double-digit ROE, on the right-hand side, you can see the extent to which we've driven compelling value for our shareholders. As we continue to execute over the medium term, we should be able to extend this picture where a 15% plus ROE profile will continue to deliver great value for shareholders. Before moving on, I want to emphasize that this is not signaling any relaxation of our focus on combined ratio. It will always be a key metric for QBE. Now ultimately, we manage the business to a view of return on equity, and the combined ratio is really an output of our portfolio mix. So moving to Slide 9. Having discussed growth and returns, this slide gives some color on how capital fits into the picture. We shared our capital allocation framework last year. It's relatively straightforward. We have an aspiration to grow the business, provided we can achieve adequate returns. All our pricing models and view of rate adequacy is calibrated to an ROE hurdle, which works out to roughly 1.5x our Weighted Average Cost of Capital. This is a hurdle, not a ceiling, which many parts of the portfolio are comfortably clearing. We just delivered an ROE of almost 20% and see returns holding over the hurdle over the medium term. We have a 40% to 60% dividend payout ratio, which should be highly dependable through market and economic cycles. And finally, we have additional levers to distribute surplus capital beyond the dividend as needed, as we recently highlighted with the buyback announcement. Had a small window in December to start buying before the close period and completed around $90 million of the total. I want to build a track record of following through on these announcements and moving through them with some pace. So looking ahead, the simple outlook of mid-single-digit growth alongside returns of 15% plus ROE suggests a very healthy picture for capital. We have ample flexibility to support growth and likely see ongoing surplus capital generation on top. To ensure we optimize returns, we'll look to return any surplus. This will be an annual assessment as we exit the year where we have full visibility of our current period profits and growth plans for the year ahead. The final message on this slide relates to alternative capital. We've historically had limited alternative capital in our business. As these markets and investors have evolved, we do see opportunities from both a cost of capital and capital efficiency perspective. This can be an important lever for us as we strive for sustainable mid-teen returns, particularly where we can build long-term strategic partnerships. I'm going to stop here and pass to Chris to take you through the financials and should take a moment to welcome him this morning. As you know, we placed a great deal of emphasis on consistency and stability of management in recent years. We've been focused on building greater talent depth and genuine succession pathways. I'm proud that we've been able to announce Chris into his new role in such a quick time. He's a highly experienced and talented executive and having operated through a number of key roles for QBE in the past decade, will no doubt settle him well and become a great asset for us. So over to you, Chris. Christopher Killourhy: Thank you, Andrew, and good morning, everyone. It really is a privilege for me to be speaking for the first time today as Group CFO. As Andrew mentioned, I've been lucky enough to be with QBE for around 12 years now across actuarial leadership, divisional CFO roles and most recently leading QBE Re. Across those roles, 2 things have consistently stood out, the depth of our talent and the strength of our culture. And it's that foundation that I believe that underpins the performance we're sharing with you today. Turning first to Slide 11. 2025 was an excellent year. We exceeded plans and delivered QBE's strongest Return on Equity in many years. Gross written premium grew 7% to $24 billion, around 8% if we exclude crop and exit. The combined ratio improved to 91.9%. That's more than a better -- that's more than 1 point better than last year and comfortably ahead of our outlook of 92.5%. This result is underpinned by both prudent reserving and a continued focus on portfolio optimization. Investment income was around $1.6 billion, delivering a return of 4.9%. The net impact from ALM activities was again broadly neutral, and our tax rate for the year was 24%, modestly better than an actual tax rate of around 25%, and that's driven by the mix of our earnings tilting towards our North American tax group. Profit for the year was a record $2.1 billion. Earnings per share grew around 25% and our ROE has increased to 19.8%. Our capital position also remains very strong with a PCA multiple of 1.87. Our final dividend of AUD 0.78 takes the full-year dividend to AUD 1.09, up 25%. The payout ratio remains at 50%, a level we see as sustainable. Above this level, it's likely that we will continue to use buybacks to distribute surplus capital. We've also increased the franking rate of the final dividend to 30%, which we expect to maintain going forward. Turning now to Slide 12. Headline GWP growth of 7% exceeds our mid-single-digit outlook with underlying growth close to 8% if we exclude exits. This is a full 4 points higher than headline growth in 2024 and highlights the impressive momentum we continue to see across the business. Growth continues to be skewed to the Northern Hemisphere led by reinsurance, Accident and Health, portfolio solutions and targeted adjacencies in North America. Australia Pacific was broadly stable, but the story here is momentum, which improved through the second half with a return to ex-rate growth that we expect to continue into 2026. We entered 2025 with a clear set of initiatives to restore growth in ASPAC, including new partnerships, distribution improvements and a more dynamic approach to pricing. It's been great to see the outcome of execution as these actions gain traction. A brief comment on our crop business and its impact on Net Insurance Revenue. Crop GWP increased 11% to $4.3 billion. However, given our focus on portfolio optimization, Net Insurance Revenue actually declined by 6% over the period. This is because we've increased sessions to the federal reinsurance pool, materially reducing exposure to those states we regard as underperforming, including California and Texas. This does, however, weigh on Group Net Insurance Revenue growth in 2025. But in 2026, I'm pleased to say that Group GWP growth and Net Insurance Revenue growth should be much more closely aligned. Before moving on, it's worth remembering that our ex-rate growth here includes both volume and exposure adjustments. And these exposure adjustments play an important role in managing inflation. Our underwriters generally adjust on sums insured for property lines on wage rolls or turnover for workers' compensation and liability lines. And in the case of energy and marine lines, premiums often adjust off commodity prices. Turning to Slide 13 for a little more on the group's underwriting performance. Underwriting performance was excellent with a combined ratio of 91.9%. Catastrophe costs were around $750 million, which is well below allowance, but this is a pleasing outcome in a year where industry losses have been pegged at $130 billion, including a challenging year here in Australia and the devastating California wildfires. We shared catastrophe costs at our November update and losses have increased only modestly from this level. I do think that highlights the quality of the portfolio given the challenges observed here through the Australian summer. I'd also remind you that if we cast the mind back to the first half, we were comfortable with our catastrophe budget then in what was actually the most expensive first half on record for the insurance industry. Turning now [Audio Gap] to reserving. I do believe we're now starting to see the impact of our more prudent reserving strategy that Andrew and Inder have outlined over recent years. During 2025, we recognized a modest central estimate release of $40 million, and that's our first full year [Audio Gap] in several years driven by short-tail lines plus LMI and CTP [Audio Gap] while retaining prudence against more uncertain longer-tail lines. Our reserve strength and resilience has steadily improved over recent years, and I'm confident we're exiting 2025 with group reserves in the strongest position we've held for many years [Audio Gap] needed. Importantly, these charts also highlight the extent to which we're managing to multiple pricing cycles. This diversification provides a meaningful lever through which QBE can manage the overall underwriting cycle. This picture results in an overall rate increase of around 1% for the year. If we exclude Property business and Lloyd's, the rate increase is actually closer to 4%, which have been fairly steady throughout the year. Premium rate adequacy remains comfortably in excess of targets across the group, and as Andrew touched on, is broadly distributed across the business as we look to 2026. The expense ratio was 12.4%, while absorbing an elevated investment envelope of around $300 million. These investments are supporting modernization, including the migration of Australia Pacific portfolios onto our new cloud-based Guidewire platform. Importantly, expense growth has moderated meaningfully now at 5% from closer to 10% over the past few periods as we're starting to drive greater efficiencies. Highlighted another way, in 2025, headline GWP growth was 7%, which contrasts favorably with a headcount reduction of 1% over the same period. Efficiency, along with capital allocation is going to be a major focus for me, and we've got a meaningful opportunity as we drive greater benefits from recent investments embed the deployment of AI and work ruthlessly to eradicate process inefficiency. Looking ahead, we expect an expense ratio of around 12% in 2026 and for that to guide lower over the medium term. Turning now to Slide 14 with some more information on the performance of each of our divisions. Pleasingly, all 3 divisions have delivered margin expansion. Under Julie's leadership, North America improved by over 1 point despite pressure in Accident & Health and Aviation. Starting with our crop business, this business delivered a result of 88%. That's our strongest performance in 7 years. The positive performance reflects in part the early benefits of the strategic overhaul we've highlighted throughout the year. We reset our leadership team, recalibrated our utilization of the federal fund and repositioned our private products portfolio. Further benefit from these actions is anticipated in 2026. Alongside the benefits from internal actions, the portfolio was supported by better-than-average yields in a number of our key Midwest states, including the Dakotas, Iowa, Illinois, and Nebraska. Our Commercial Lines business in North America has also performed well. However, as flagged earlier, our specialty business has been impacted by claims activity in A&H and Aviation, resulting in a combined operating ratio of over 100% for our U.S. specialty business. I'd like to say some more on Accident & Health. This is an excellent business in a growing sector of the economy with strong market position, good track record and a highly attractive through-cycle return on capital. We write close to $1 billion in premium. And this year, we did see a lift in claims severity on account of rising treatment costs, medical advancements and the demand for new drugs. The team has responded quickly through rate, policy terms, and attachment points. Around 70% of the book renews at 1 January, and we achieved a rate increase north of 20% in addition to tightening terms. We'll continue to monitor loss trend, and we'll take whatever action necessary to return this book to profitability. Moving now to International. It's been another year of impressive performance for Jason's business with growth across all segments and a combined ratio of 88.5%. We did benefit from cat running below allowance, which offset some reserve strengthening in certain liability and marine portfolios as called out at the half. Given 2 of our more cycle-exposed segments, namely Lloyd's and Reinsurance, reside in International, it's sensible to say a little more on rate here. Rate for International was fairly flat for the year, where our U.K., Europe and reinsurance businesses saw rates in the low to mid-single digits, this was partly offset by some softening in our Lloyd's portfolio. Putting this in some context, however, since 2018, our Lloyd's business has benefited from cumulative rate change to 2025 of around 60%. This contrasts with the rate reduction of around 3% at the 1/1 renewals last month. Similarly, for QBE Re, rates were down 1% at 1/1, where we renew over half the book, but that contrasts with cumulative rate increases of around 65% since 2017. We do see it as a positive that competition is largely restricted to rate, while discipline remains around terms and conditions. For both QBE Re and Lloyd's, terms and conditions, attachment points, how we selectively deploy capital year-on-year and how we leverage facultative reinsurance are frequently more important than rate when it comes to delivering performance. Finally, on Australia Pacific, SES business had an excellent year with the combined ratio improving significantly, supported by favorable reserve development across 15 of our 20 sales, along with easing inflation. The impressive performance is despite catastrophe costs running modestly over budget in what we know was an active catastrophe year. Overall, rate increases tracked in the low single digits, fairly stable on what we reported at the half year. And looking ahead, we'll benefit from substantial CTP rate increases put through in recent months, including around 15% in New South Wales. Turning now to our investment results on Slide 15. Our investment portfolio delivered another record result with income of around $1.63 billion, representing a return of around 4.9%. Risk assets returned almost 10%, while fixed income yields exited the year at approximately 3.7%. And for reference, futures markets currently imply the fixed income yield will exit 2026 at around 3.8%. Investment FUM increased by 17% this year, with roughly 1/3 of that attributable to the weakening U.S. dollar. Our assets and liabilities are, however, well insulated from FX. And while funds under management have increased, so too have our claims reserves. Similarly, the increased prescribed capital amount associated with higher FUM and reserves is absorbed by an increase in available capital, resulting in negligible impact on the PCA multiple. There remains a modest FX gain of $24 million in the group P&L, and that's reported within the expenses and other line shown here in this table. Investment mix shifted slightly with risk assets of 15% of the portfolio. The OCI fixed income book now stands at around $3.5 billion or 12% of our overall core fixed income portfolio. Moving now to Slide 16 and an update on reinsurance. We achieved another strong and importantly, sustainable reinsurance outcome. Our diversification by region and class of business means we have a highly sought-after proposition in the market. Given the support of our strong reinsurer relationships, we were again able to reduce the attachment point of our CAP program now to $250 million. That's a reduction of almost 40% in just 2 years. And this is at a time where in the market more generally, attachment points and terms and conditions are rarely moving. Ultimately, we see this as strong external validation of our approach to portfolio management and the initiatives we've executed to reduce problematic exposures. The lower cat retentions have allowed us to modestly reduce the cat budget to $1.13 billion, whilst maintaining sufficiency around the 80th percentile. Whilst the allowance has been trending lower, group property premiums have been fairly stable. And the chart here summarizes catastrophe experience for our North American division and helps illustrate the improvements in our catastrophe portfolio. You may recall that historically, this division had driven much of our cat volatility. It's a simple picture, highlighting the impact of portfolio remediation led by Peter and Julie, including the exit of multiple programs, the middle market business and our consumer portfolios. Despite these exits, our share of regional property premium is down only modestly in contrast to a much more significant fall in our share of property losses. Finally, on reinsurance, I did want to expand on Andrew's earlier comments about alternative capital. Following the launch of QB Re's first Cat Bonds in 2025, the 2026 bond has broadened coverage to the whole group, attaching now at $800 million. The bond provides greater certainty around the availability of capacity whilst also reducing our overall cost of capital. We also launched the casualty sidecar on the QB Re casualty portfolio. As you know, you can think of the mechanics of the sidecar is similar to that of a quota share. And we've effectively quota shared around 1/3 of the casualty reinsurance portfolio for the 2025 underwriting year. In effect, this allows QBE to swap underwriting risk for fee income, enabling us to recycle capital, manage reserve risk and ultimately support more capital-efficient growth. These are early transactions as we build our profile in these markets, but I do see this space as important as an important lever for QBE as we calibrate the business to deliver sustainable mid-teen returns. Turning now to my final slide, Slide 17. I'm fortunate to be inheriting a balance sheet in excellent health. We received credit rating upgrades from both S&P and Fitch moving to AA- for the first time. The year-end PCA multiple has increased to 1.87. And following payment of the final dividend and adjusting for the buyback, the pro forma PCA reduces to 1.73. Alongside our 50% payout ratio, the buyback brings our total shareholder distributions to around 65% of this year's profits. And turning finally to funding. We retired our Tier 1 notes effectively replacing this funding with Tier 2 issuance. This reduces our cost of capital and leaves us with significant flexibility to engage these markets opportunistically if we need to in the future. This does mean that our debt to capital increased by around 4 points to 24%, but we expect gearing will glide back toward the middle of our target range over the medium term. It's been a pleasure to have the opportunity to present what I believe are a very positive set of results today. But before passing back to Andrew, I wanted to briefly touch on a small transaction we announced earlier in the day. We've agreed terms to sell and exit our global trade credit and surety business, chiefly composed of our Australian and U.K. trade credit operations. While this business has performed well over an extended period underpinned by an excellent team, we recognize its leverage to macroeconomic settings. The exit will allow us to recycle capital into our core focus areas where we see a greater opportunity for long-term growth. Total premiums under consideration around $200 million, and we're planning to close later in the year. The modest upfront proceeds and capital release will add to today's messages around capital strength. I'll pause here and hand back to Andrew. Andrew Horton: Thanks, Chris. We gave our 2026 outlook back in November, and there's no change today. We see growth continuing in the mid-single digits and a combined ratio of around 92.5%. We expect the pace of growth will sustain over the medium term and see a solid 15% plus outlook for ROE. We've included a quick bridge here of our 2025 underwriting result to this year's guidance of 92.5%. I appreciate many will adjust our reported result of 91.9% for the favorable catastrophe experience and this leaves you in the early 94% range. Consistent with what we flagged in November, there were 3 categories driving the bridge to our outlook. Firstly, reinsurance spend and our cat budget. We achieved quite significant savings on the new program and our cat budget will be a touch lower year-over-year. Secondly, on expenses, we had an expense ratio of around 12.4% this year and should be able to land at 12% or better in 2026. And finally, on ex-cat claims. We see support from pricing initiatives. Chris spoke to the substantive 20-plus increase at 1/1 in A&H. While small, our U.S. Aviation portfolio recently saw rate increases of over 40% for the large airline segment. And closer to home, we've now put through mid-teen increases in New South Wales CTP. Where there's claims activity the industry is showing discipline and pushing for rate. Our performance management agenda has plenty of remaining upside, particularly as we work through remaining underperforming cells. And finally, we've spoken about the elevated level of large claim costs where we expect some normalization. Through the recent reinsurance renewal, we're also able to lower the retention for our risk excess of loss cover. The coverage were generally attached for non-cat large claims of $50 million previously and in many instances, that is now just $25 million. This will help manage large claim volatility. So I hope that gives you a bit more clarity on how we're seeing things into 2026. We'll hold our usual first quarter update alongside our AGM on May 8. Before wrapping up, I do want to thank our 13,000 people for their contribution to these outstanding results, which we can all be proud of. With that, I want to thank you for joining us. And before passing to the operator, I want to remind you, we'll be taking just 2 questions per analyst. Thank you once again. Operator: [Operator Instructions] Our first question comes from the line of Andrew Buncombe with Macquarie. Andrew Buncombe: Congratulations on a great result. Just the first one for me. In previous years, there's been some surprise around how you pay out the first half dividend, just to set us off on the right track for next year. Can you just remind everybody how you think about the payout in the first half results for dividends? Andrew Horton: Yes, exactly. I think we're paying it, Andrew, on a 1/3, 2/3 basis. I was just getting confirmation before I made that comment. So we're just seeing 1/3, 2/3 rather than 50% of the first half profit. And that sort of takes out the volatility. So we look at 1/3 of where we're forecasting to be at the end of the year rather than 50% of where we are at the half year. Andrew Buncombe: Excellent. And then the other one from me was just can you remind us whether there's any benefit to the FY '26 combined ratio from the tail of any of the roll-off of the North American portfolio, the noncore portfolios? Andrew Horton: No. So we're expecting not to talk about the roll-off of the North American book anymore. It's just an all-inclusive number. So no expected benefit, no expected negativity from it. It's relatively small at this point in time, so we can absorb it within the North American numbers. Andrew Buncombe: My congratulations again. Andrew Horton: Thanks, Andrew. Operator: Our next question comes from the line of Andrei Stadnik with Morgan Stanley. Andrei Stadnik: Can I ask my first question around the casualty sidecar? I think you mentioned reinsuring about 1/3 of the risk. But can you remind us the dollar figures involved? Because I thought this sounded relatively meaningful. Andrew Horton: Yes. Chris, can I hand to you as you were running that business when we did it. Christopher Killourhy: Sure. I mean the size of the sidecar is in the region of $450 million. I think a way of thinking about the cycle, the benefits we get. It's roughly -- the ratio is roughly sort of 1:3 in terms of premium to capital. But where we really see the capital benefit potentially coming in is in outer years as reserves build up and we bring more years in? Andrei Stadnik: For my second question, you've spoken a lot about all facilities and how you've been growing that. Can you talk a little bit more maybe about some of the efficiency benefits? Are you seeing anything on the cost there, particularly in the context where there's some really heavy criticism about the cost of operating in the Lloyd's market and how long they're taking to replatform. So the way you run a facility, is that a way to maybe help with that? Andrew Horton: Yes. So I mean, the great beauty about them is the facilities are both Lloyd's and some that are non-Lloyd's. From our point of view, we write about $1.5 billion of premium with a group of around 20 people. So our own costs of doing it are low. For brokers, it's very efficient for them because they have a preplaced amount, so they don't need to open broke that amount within the facility. So the brokers costs go down, and they pass some of that on to the clients or some cost to the clients. So the clients benefit from a lower price. The brokers have lower costs, and we have relatively low cost to actually write it. So generally, it works out well for the buyer of insurance, the intermediary and ourselves. And that's why I believe these are things that are going to stay. The market did have a facilitization 25, 30 years ago. And I don't think there was that balance of dividing up the economic benefit, particularly well. And therefore, they generally collapsed in the late 90s. These are much larger, much more structural and the client and buyer benefits quite a lot. Operator: Our next question comes from the line of Kieren Chidgey with UBS. Kieren Chidgey: Andrew and Chris, just first question on the North American combined ratio detail. you've provided today on Slide 14, just sort of 97.7% at a divisional level, obviously, including crop. And I think you're flagging a profit in noncore this period. So it does imply the core business, excluding crop and that noncore is well into the 100% level. And I appreciate Accident & Health, you've already flagged as an issue in aviation, but just keen if you can give us an idea around how the rest of the U.S. business was tracking last year ex those 2 areas, particularly given it was a benign [ cat year ] and it looks like you had a bit of PYD support there as well. Andrew Horton: Yes. So I have a go at starting on that. So as it breaks down into crop, commercial and specialty, the crop business obviously had a very good year as we've talked about. The commercial also had a good year. That's broken down between the property programs, which not surprisingly performed well. You made the comment about having a few [ cat ] percentage of losses also dropped. So the activity we've taken to rebound that portfolio has worked well. A commercial casualty within that business was also good, a bit of stress in workers' comp in that division. But overall, the commercial performed well. So the challenge, I think, as Chris just mentioned, was almost all in the specialty and had a combination of factors. It has the A&H book, does have aviation, which had 1 or 2 large losses. We did pick up some prior year negative in transaction liability, which the market has recognized in the U.S., and we've seen rate increase quite considerably in transaction liability, particularly in the U.S. on the back of it. And 1 or 2 of the financial lines programs did not perform well. So you're right. I think the overall combined ratio, excluding crop, is close to 100% year-on-year, but we see the potential improvement in the A&H. We think we're on top of the transaction liability in the market moving. Financial lines programs have either dropped or changed. So we see that as a positive, although it's negative in 2025, positive for the potential performance of the business in 2026. Kieren Chidgey: Andrew, the ex rate growth in the U.S. in the year ahead, sort of outside obviously, the repricing in A&H and aviation, are you actually growing in those specialty areas have been quite weak in the past year? Andrew Horton: So I think that's a great question. I don't think there'll be any ex rate growth, particularly in A&H. We'll probably be looking at the rate and ensuring we've got the right clients and the right portfolio. I think there will be some extra growth in aviation. We've been working on that team for a number of years now. It's a great team. So we do want to build on that. And then within the U.S., most other lines will be looking for ex rate growth in 2026. Kieren Chidgey: My second question is just on reinsurance you flagging significant reinsurance savings in the year ahead, I guess, not out of line with sort of double-digit renewal reductions we've heard sort of globally at 1 January, but there's quite a bit that goes on in your reinsurance line with the crop quota share and the like. Can you give us a better feel for how much cat reinsurance spend is and roughly how meaningful this rate reduction on the cat cover is into 2026. I know it's complicated as well with some of the reinsurance transactions, Chris has probably talked about earlier. Andrew Horton: Yes, it's not going to be an easy one to answer on this call. We may have to come back to it. And as you say, we saw the reductions in the property cat reinsurance, which is in line with what people have been talking about. And it seems to vary between 10% and 20% depending on who you talk to and whether you've changed your retention or not. So we're definitely in the mid-teens in terms of price savings on the cat reinsurance. I think we'll have to come back to you on the mix because you're right, there's some in our reinsurance spend. There's always going to be some complexity of how much we reinsure in the crop world, and we're looking at how do we balance what we retain and what we reinsure. And we do this reinsurance to the federal funds in the U.S., but we also buy some external reinsurance. And if we're comfortable about the crop performance, we may lower our external reinsurance. It's not a simple one to work out exactly what percentage of our gross premiums we're going to reinsure out. Chris, I don't know if you have a better answer than that, but we may need to come back to you and give you a bit more depth on that outside this call. Christopher Killourhy: Yes. I think on the breakdown, we can come back with more detail. I think to Andrew's point that we hugely value the relationships we have with our reinsurers. So we don't want to go into too much of exactly where we got to on the final negotiation. But to Andrew's point, we see the -- you'd have seen ranges between 15% to 20%, and we'd like to think we came out towards the better side of that. But I think most meaningfully for us is the fact that we're able to secure the reduction in attachment point and also the cat bond we placed this year has just helped us a little bit with bringing down the overall cost of the program. Kieren Chidgey: Okay. You can't sort of give us a rough feel for that combined cat budget reinsurance building block on your core waterfall, how you're viewing that from a materiality point of view next year? You've been quite clear on the expense ratio improvement. Andrew Horton: Yes. Well, on the waterfall, it's obviously not coming from crop. It's coming from the cat mainly because that is the one where we're seeing rate reductions. I don't know, we obviously give it in size on the waterfall. So let's come back to you and we can come up something on that. Christopher Killourhy: It's approaching a point improvement, maybe in the region of 80 basis points for both the cat, the combined benefit of the reduction in the cat allowance and also the reduction in the cost of the program. So in the aggregate, it's around about 80 basis points. Operator: Our next question comes from the line of Julian Braganza with Goldman Sachs. Julian Braganza: Just the first one, just looking at your initial estimate of ultimate claims for 2025. You sort of alluded to that. It's looking very strong and improved materially just over the last few years, particularly from 2024. Just want to understand, one, how much of that improvement is due to mix versus resilience? What are your expectations here for leases over the medium term? And also just what's baked in your ROE guidance for reserve releases as well over the medium term? That's the first question. Andrew Horton: So I mean part of it is what we've been talking about in a number of years of ensuring we are reserving well for claims, especially medium and long-term claims, and we do think that's building up, which is a positive sign for us. I don't know whether you've got anything else to add to. Christopher Killourhy: Yes. I mean I think in terms of as we look forward, we're not sort of factoring anything in specifically for reserve releases in the -- in our guidance. But if you -- exactly to Andrew's point, if we just think of the math that we're holding on to long tail -- on our long tail portfolio, we're holding on to the loss ratios for a period of 3 years. So by definition, you would expect that to all things being equal to translate into some releases, but we haven't factored that explicitly into the guidance we've given today. Julian Braganza: Okay. And just to clarify as well, your ROE guidance assumes 80% POA on the cat budget similar to what you've structured this year and last year? Just the clarification. Andrew Horton: No, definitely Yes. Julian Braganza: Awesome. Okay. And then just a second question. In terms of just your cat loading, 5% to 6% of NEP, is there an opportunity to bring that down further as you think about derisking your business from a cat perspective, look at some of your global peers, they're around the low single-digit mark. We've seen your MERs come off. We've seen noncore losses run off as well. So just wondering how you're thinking about that over the medium term? Andrew Horton: Yes, I don't think we necessarily think about lowering it. What we've spent a reasonable amount of time over the past few years was taking out the cat losses, which were too large. In other words, it wasn't in good balance. So I think writing property business in catastrophe zones is fine as long as you're in control of the balance of it, you don't have too much of it, you're comfortable with the reinsurance program you have, and you keep back testing that against various catastrophic losses that you haven't got an outsized share. So we haven't really thought in bringing it down to a lower level. And while it delivers a good ROE and we can cope with that volatility within the rest of the book. We have not set ourselves a target of getting the 5% to 6% down to 4% to 5% to 3% to 4%. So we actually quite like it at the pricing it is, complements everything else we do. It makes us important to brokers and clients when we can do both. So no, we're not thinking of lowering it. Operator: Our next question comes from the line of Nigel Pittaway with Citi. Nigel Pittaway: First of all, a question on growth. I mean, Andrew, you mentioned that, obviously, at the moment, you're still seeing supportive market conditions with competition confined to rates and where necessary, people are disciplined in pushing for rate. I mean do you see any risk to that? And then in that context, do you expect your sort of GWP growth in '26 to be in similar areas to '25, obviously, taking into account the fact you've said there'll be no unit growth in A&H and a bit of pickup in growth in Australia. Andrew Horton: So I think it's a great point. So I feel comfortable in the medium term of looking at the growth. So 2026, definitely, with the breadth of the book and the support we're getting in pricing and the areas we're focusing on, feel pretty comfortable about that. We do believe QBE Re and the portfolio solutions and cyber will continue to grow into 2026, and those were 3 good growth areas for us in 2025. We're trying to think of other areas. There are new areas, and we touched on earlier on about as renewables going to grow or the energy world going to grow and data centers, a lot of talk about insurance and data centers, and I'm sure we'll get a share of that. So I feel pretty comfortable about the 2026 growth. We're also trying to balance it of not putting too much stress into the system, and I've talked about this before, it growing mid-single digit is not trying to overstress us. We're not forced into growth in any way, shape or form because fundamentally, margin is by far the most important thing. And we're trying to get this margin under as much control as possible and manage the volatility around that margin. So yes, I feel pretty good about 2026 where the rating environment is. Just as a touch point, rates on Jan 1, where we write a reasonable amount of the international business virtually in line -- almost exactly in line with where we thought they were going to be. So we haven't seen anything in the first 1.5 months that takes us away from this potential growth for 2026. Nigel Pittaway: And then I mean in terms of the rate rises and terms and condition changes you've put through in A&H, I mean at 3Q, you sounded pretty confident competitors were going to follow suit. I mean the latest intelligence is that that's what you've done is pretty much in line with the market? Or have you been sort of stricter than the rest of the market in your reaction to the losses that occurred this year? Andrew Horton: I think, Nigel, we're in line with the market. As you say, there's been a lot of talk about this. So that's a good thing because it means the market needs to resolve it and it's obviously nothing unique to us, and it's much easier to resolve when the market is accepting the issue rather than we're the only ones who think we need a rate of x and the market is happy with half x or 75% of x. So it's definitely a market-wide issue and numbers are similar. I'm sure we're going to find some people who are further ahead of it, and some people aren't as up speed in it, and the portfolio is going to vary a bit. But fundamentally, I feel good that it's a market-wide issue and rate is holding. Operator: [Operator Instructions] Our next question comes from the line of Siddharth with JPMorgan. Siddharth Parameswaran: Couple of questions. Just firstly, on the ex-cat claims ratio bridge that you've flagged the improvement that you're flagging from '25 into '26. I was just hoping you could help us understand what's happening on the inflation versus rate side. In terms of what I saw in the fourth quarter, it seemed like rates were slightly negative, and I know you're flagging some rate increases since 1 Jan, but just wanted to get a perspective, one would think that six months ago, you flagged that rate was behind inflation and rate has got lower. So just keen to make sure that we understand where that improvement is coming from? Andrew Horton: Yes. I mean if we just do it at a completely macro level, I think the rate increase across the whole portfolio in '26 is going to be a low number. And what we're planning for is inflation being 2 or 3 points higher than that. So we definitely have that. And that means if we did nothing and just renewed everything and nothing actually changed, margin would potentially shrink. But that's not what we'll be doing. And some of the rate increases built into the exposure you charge anyway. So the rate is always a bit of a -- this is a headline premium adjustment as opposed to that inflation being built into the exposure on which you charge the same rate. So it's a very simple number. We're changing the portfolio on the back of it. You try and focus not surprising on core clients that have a better, better rating and you drop the ones that are worse in an environment where you potentially are being squeezed. That could be property or A&H and therefore, you can end up with a similar outturn despite apparently having this difference between inflation and rate. The other thing I'd say is inflation is always an estimate, and generally, you don't really know what it's going to be like until a few years down the track while rate is what it is, and it's just purely based on a premium number. Christopher Killourhy: I think another point I'd add. I mean, Andrew mentioned earlier about we see circa 90% of our portfolio as being above adequate. And actually, it's interesting when we look at rate movements that the 10% of the portfolio that, therefore, is inadequate is where we're still seeing rate strengthening come through. So I think it again goes to evidence that the market is still behaving pretty rationally. Siddharth Parameswaran: I guess the question was just around the 2 components. What is your view on rate and what is your view on inflation? Andrew Horton: Yes. So I'd say in total, the view on the rate is, it's going to net to a small single digit, but the spread is obviously large because we talked about A&H getting 20% plus, and they are going to be 1 or 2 that go negative. And then the inflation assumptions are going to average to 3%, but some of them are going to have inflation of 10% to 20%, and some are going to have none. And overall, net-net-net, those are the 2 numbers. But there's so much more to the group than those 2 numbers. So I'm not sure what to do with them because I don't see 1:3 meaning margins should go down by 2 because that just assumes we don't do anything, and we will be. And that's what Chris was trying to pick up on. When you got it well rated, you're relatively comfortable to continue with it. And when you -- it's not well rated, you're not. Operator: Our next question comes from the line of Simon Fitzgerald with Jefferies. Simon Fitzgerald: Just quickly, Andrew, you talked about rate adequacy. I just wanted to explore that a little bit more in the context of property. I recall that you said, I think, at the half that property could fall by 25% in terms of rate adequacy before you would lose interest in that segment. In some pockets of property, property core, for example, we are getting a little bit close to that. And I noticed in terms of the graph on Page 21, property forms 33% of GWP. I was just hoping you could maybe break that down a little bit more in terms of the ones that are exposed to that sort of 10% to 15% as you described or more and ones that aren't. Maybe you could just sort of describe that property portfolio in a little bit more detail. Andrew Horton: Yes. I haven't necessarily got the quantum of it all, but I'll have a go at it. So we write catastrophically exposed property and non-cat exposed property. So what we're finding is the specifically U.S. cat exposed property is taking the largest decrease. So that's starting with the largest decrease or planned was in 2025, probably will be in 2026. And that's often what's driven the reinsurance, the cat reinsurance. It's been the reduction in the U.S. property cat reinsurance going down. Elsewhere in the world, it is less than that. Going to -- if your non-cat European property, of which we write a reasonable amount, we're probably seeing no rate decrease, rates holding and it's fine. So you've got that big spread. So within the 30-odd percent, there is a big spread between the U.S. cat and, let's say, European non-cat. And everything else is plotted in between on that. So of course, when we're looking at rate adequacy, we're trying to break it down by portfolio, by country, by type and determining what is rate adequate and what isn't. So I'd expect this year, potentially the most stress could be the U.S. cat. That said, of course, it was the one that went up the most in the 4 years prior to it. So its rate adequacy went up over shot. I mean this is what the insurance industry can do with a volatile classes. We find myself inadequate, we overshoot and then we start coming back to where we could have been the whole time if we've known exactly what everything was going to happen. So that's why we tried to show these cumulative rate change charts, just to remind people where we've actually come from in each of the lines business. I'm not sure I've answered it as precisely as you would like. What I'm trying to flag is we've got a lot of different types of property geographically cat, non-cat within the portfolio and trying to manage those to deliver the best risk-adjusted return. Again... Simon Fitzgerald: Maybe a question -- just in regards to the change in the reinsurance structures and so forth, can you just give us a little bit of guidance in terms of '26 about how we should be thinking about that reinsurance expenses line and will it be broadly similar to '25 or what sort of decrease should we expect given the new change? Andrew Horton: Yes. I mean the property cat reinsurance is definitely coming down. And we just -- I think we were saying earlier on, we probably need to do some analysis of that and share that with you because it's quite hard to determine what the net position of that reinsurance line is going to be based on it having property and casualty and some quota share and crop in it. And so we need to do that rather than me try and estimate it now. So let's come back to you on that. Operator: Our next question comes from the line of Freya Kong with Bank of America. Freya Kong: Providing the bridge to 92.5% for this year. Just as a follow-up to Sid's question about 1% rate versus 3% inflation. Are there any business mix shifts that are being assumed in getting us to 92.5%, i.e., shift towards lower combined ratio lines next year? Andrew Horton: Yes. I mean, obviously, when we were talking earlier on about trying to grow the QBE Re and QBS and cyber, potentially those at this point in time have good margin, and therefore, we're trying to push those. So that's it -- I mean, that's a really important point that we're forever rebalancing the portfolio, and therefore, it's not stable. So the math just doesn't work that we just take these 2 numbers and assume everything is going to come down on that basis because we're not at all sitting in a consistent position year-on-year. So we're doing exactly what you're suggesting of -- and it's pretty obvious, isn't it, remediate the ones which are under pressure and really grow the ones where the margins are good. And that's what I think we're getting better at and why the results are improving as we've done more and more of that. And what we've done is let go some of the businesses that historically gave us combined ratios greater than 100% and also drove quite a lot of the volatility around it. So that's why we feel comfortable. So in that ex cat element, there is a reasonable amount of rebalancing and is also looking at some of the portfolios that truly need to change and how do we change those and that can be re-underwriting, going back to our core shrinking, there could be a number of things in it. That's why we feel comfortable about it. Sorry, Chris. Christopher Killourhy: I think it's a great question because I think one of the things we do want to be really respected for is how we move capital between portfolios across cycles. And we just see that as good underwriting, good sort of running an insurance company. So absolutely, there will be sort of change in the portfolio in terms of rebalancing the business we see as being more adequate or performing better. What I would say, however, is there is sort of a fundamental mix shift in terms of, for example, increasing our weighting to property cat because it runs at a lower combined ratio, that would then bring in some additional volatility. So we are -- the mix will change as we just look to keep rebalancing towards the business we see is more adequate, but we're certainly not relying on a shift to sort of more volatile business to bring the combined ratio down. Freya Kong: Okay. Great. That's really helpful. And can I just ask on Accident & Health, what's the impact been on retention in the book, given you push through 20-plus percent price increases? And is this still an area for growth in the medium term, assuming remediation this year go as well? Andrew Horton: So the latter part, definitely. I mean we've been involved in this group or the team since 2001, and I think we acquired the company in the late -- around 2010. So it's been with us a long time. They've got a lot of tenure. They manage all sorts of different types of events that have taken place. So definitely want to grow it. I think in the short term, we've don't really want to grow too much this year. We've been able to retain almost everything we wanted to retain. I think that just shows stress in the market, the fact that people are shopping around and struggling to get a move and have come back to us on the back of trying to do that. It's generally a relatively low retention business. So these companies do move on a regular basis. So I think the average retention normally is around 70%, which is considerably lower than our average, which is in the 80s on average. So generally, it is a shopping around business, and I think more has taken place this year. And therefore, we've been able to retain everything we wanted to retain. Christopher Killourhy: Yes. And I think we do see, as Andrew says, this is a portfolio that, I guess, does have lower in general retention rates than we'd see elsewhere. And one of the things we do all see generally over time is that the renewed business tends to perform better than the new business because it does sort of take that one cycle just to sort of harvest the business. And so there is an element of while it was growing, you will just get a little bit of strain in there. So that's part of what we're just managing going forward as well. Operator: Ladies and gentlemen, due to the interest of time, I would now like to turn the call back over to Andrew for closing remarks. Andrew Horton: I'd just like to thank everyone for joining us today, and I'm sure we're going to be seeing a number of you over the next week or two. Thank you very much.
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: Thank you for attending the Guardant Health Q4 2025 Earnings Call. My name is Cameron, and I'll be your moderator for today. [Operator Instructions] I would now like to pass the conference over to your host, Zarak Khurshid, VP of Investor Relations. You may proceed. Zarak Khurshid: Thank you. Earlier today, Guardant Health released financial results for the quarter and year ended December 31, 2025. Joining me today from Guardant are Helmy Eltoukhy, Co-CEO; AmirAli Talasaz, Co-CEO; and Mike Bell, Chief Financial Officer. Before we begin, I'd like to remind you that during this call, management will make forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. This call will also include a discussion of non-GAAP financial measures, which are adjusted to exclude certain specified items. Additional information regarding material risks and uncertainties as well as the non-GAAP financial reconciliation to most directly comparable GAAP financial measures are available in the press release Guardant issued today as well as in our 10-K and other filings with the SEC. Guardant disclaims any intention or obligation to update or revise financial projections and forward-looking statements, whether because of new information, future events or otherwise, except as required by law. The information in this conference call is accurate only as of the live broadcast. With that, I would like to turn the call over to Helmy. Helmy Eltoukhy: Thanks, Zarak. Good afternoon, and thank you for joining our fourth quarter and full year 2025 earnings call. Starting on Slide 3. 2025 was a breakout year for Guardant, where years of investment continues to fuel breakthrough innovation and best-in-class execution across our portfolio. In oncology, we introduced groundbreaking applications for Guardant360 Liquid, upgraded Guardant360 tissue onto our smart platform and expanded Reveal to support therapy monitoring. In screening, we expanded Shield to include a multi-cancer detection results report. At the same time, we made significant progress driving adoption across the portfolio. We have seen exceptional growth in our oncology business, primarily due to the new capabilities and insights enabled by our smart apps that are increasing both the breadth and depth of ordering of Guardant360 more than a decade after its launch. In MRD, we received Medicare coverage for CRC surveillance in early 2025 and growing clinical data generation for Reveal positions us well for additional reimbursement coverage this year. And 2025 represents the first full year for Shield IVD where very meaningful volume and revenue generation exceeds our expectations. We have significantly expanded the commercial team and established impactful strategic partnerships to meet the growing demand for a high-performing blood-based screening option. These advancements reflect our growing execution at scale as we deliver actionable insights to physicians and patients across the care continuum. Importantly, this execution has directly driven strong financial performance, both accelerating our top line growth and strengthening our path to profitability. Now I'd like to share a story that illustrates the real-world impact of our tests. A 60-year-old man had gone his entire life without being screened for colorectal cancer despite repeated recommendations from his physician each year to undergo a colonoscopy. Although he agreed to stool-based testing on several occasions, the kits were never completed once they arrived at his home. During a routine office visit, the patient was offered a Shield blood test, which he agreed to and the test was completed that same day in the office. The Shield result was positive, which motivated the patient to undergo his very first colonoscopy following his physician's recommendation. The colonoscopy identified Stage 1 colon cancer and the patient was quickly scheduled for surgery. Because the cancer was caught early, he has been informed that his treatment is likely curative. The patient expressed deep gratitude for the accessibility and ease of use of the Shield blood-based test, which removed a long-standing barrier to screening and ultimately delivered a life-changing result. Turning to top line performance on Slide 4. We delivered $281 million of revenue in the fourth quarter, representing 39% year-over-year growth and $982 million of revenue or 33% year-over-year growth for the full year. This exceptional performance reflects continued broad-based growth across our oncology screening and biopharma and data businesses. Taking a closer look at our oncology business on Slide 5. Oncology revenue increased 30% to $190 million and oncology volumes grew 38% to approximately 79,000 tests in the fourth quarter. Turning to Slide 6. Our Smart Platform is driving a clear step change in oncology volumes. Guardant360 continues to benefit from a consistent rollout of new Smart Platform applications which drive deeper clinical adoption. Guardant360 tissue gained traction following the major product upgrade release in the second quarter of 2025 and Reveal volumes have benefited from Medicare reimbursement for CRC surveillance in the first quarter of 2025. Together, these drivers will continue to catalyze very strong growth in our oncology business. Moving on to Slide 7. With each patient tested, our data repository continues to deepen and diversify, bringing together rapidly growing smart epigenetic profiles, multimodal longitudinal data sets and an expanding set of earlier-stage and asymptomatic [Audio Gap] Infinity AI learning engine to this expanding data treasury, we can accelerate therapeutic discovery and biomarker development for our biopharma partners while uncovering new biological insights that reinforce our clinical franchise. The result is a compounding flywheel that steadily increases the clinical utility of our portfolio and expands the impact of what we can deliver to physicians and their patients. We have already applied Infinity AI to develop 15 smart applications on Guardant360 liquid, and we believe these applications meaningfully expand the clinical utility of Guardant360 liquid while further extending our leadership in the liquid CGP market. Looking more closely at some of the recent highlights within our oncology business on Slide 8. All of our oncology products contributed meaningfully to our fourth quarter 38% year-over-year growth in volumes with Guardant360 delivering remarkable volume growth of nearly 30% year-over-year. Reveal continues to be our fastest-growing product, reflecting growing demand for tissue-free MRD. We are particularly encouraged by the early uptake of Reveal for late-stage therapy response monitoring launched in the fourth quarter, which is broadening its clinical use. We are advancing the clinical evidence supporting Reveal and recently submitted our chemo monitoring data package to MolDx for Medicare reimbursement and data from our CDK4/6 monitoring study for publication. We continued expanding global access in Q4 with the launch of our Guardant360 CDx technology with Policlinico Gamelli, a leading oncology center in Rome, Italy. With approximately 400,000 new malignant tumor cases diagnosed annually across Italy, we are excited to empower oncologists to make more informed treatment decisions for patients with solid tumor cancers. Turning to Slide 9 to take a closer look at our Reveal data pipeline. We continue to make strong progress in generating and publishing compelling data across multiple cancer types. Based on the Medicare coverage we gained for CRC surveillance, we have now submitted additional data packages to support coverage in breast cancer surveillance, immuno-oncology monitoring and chemo monitoring. As I just mentioned, we also plan to submit the package for CDK4/6 inhibitor monitoring following the publication. We were encouraged to see data from the largest study of MRD in Stage II colon cancer published in the Journal of Clinical Oncology, which shows that detecting ctDNA with Reveal better predicts recurrence and overall survival than standard imaging. Looking ahead, we have ongoing studies across more than 5 additional tumor types in both the adjuvant and surveillance settings. Together, the growing body of evidence will continue to strengthen the clinical utility of Reveal and support broader adoption in MRD. Moving on to Slide 10. Building on our leadership in tissue-free MRD, we launched Guardant Reveal for therapy monitoring in the fourth quarter, expanding the franchise into a significant new opportunity in late-stage cancer. Physicians can now use a simple blood test to gain a real-time molecular view of treatment response and detect disease progression earlier. While still early in the launch, we have been very encouraged by the initial traction we are seeing. We believe we are building a meaningful competitive moat in our oncology business through the combined strength of Guardant360 and Reveal. Guardant is uniquely positioned with scaled offerings spanning both treatment selection and monitoring, enabling a more comprehensive view of the patient journey. This differentiation is driving deeper clinical adoption, supporting more integrated ordering patterns and creating a natural synergistic dynamic across the oncology franchise. When used together, Guardant360 and Reveal enable a seamless approach to therapy selection, monitoring and retreatment across the continuum of care. We are also excited about the potential for therapy monitoring with Guardant360, highlighted by the results from the AstraZeneca-sponsored SERENA-6 trial. This study demonstrated a progression-free survival benefit when late-stage breast cancer patients were switched to camizestrant following the detection of ESR1 mutations in blood. Upon companion diagnostic approval of Guardant360, we believe this practice-changing protocol could represent a meaningful driver of test volume. Together, these advances reflect the growing role of blood-based monitoring in cancer care. Shifting gears to our biopharma and data business on Slide 11. We delivered another year of strong performance with revenue growing 18% year-over-year to $210 million in 2025. We are a leader in companion diagnostics with 25 approvals to date across the U.S., Japan and Europe and a robust pipeline of ongoing CDx programs. In the last 6 months alone, we have announced 5 new CDx approvals for Guardant360, including the U.S. approval last month for the encorafenib combination therapy in patients with BRAF V600E mutant metastatic colorectal cancer, representing the first FDA approval for Guardant360 in CRC. Our biopharma partner base now includes more than 200 companies. And in January, we announced a multiyear agreement with Merck to develop companion diagnostics and commercialize novel therapies. This partnership reflects the growing role of our Smart Platform across both liquid and tissue and drug development and the strategic value of our platform to biopharma customers. We also made significant progress expanding both the scale and utility of our data set through a series of high-impact partnerships. These collaborations integrate comprehensive EMR records for genomic and epigenomic tumor profiling to accelerate cancer therapy research and development, advanced drug response prediction and biomarker insights using multimodal AI and enable biopharma partners to access EHR and clinical genomic data to support more efficient clinical development of new cancer therapies. With that, I will now turn the call over to AmirAli for an update on screening. AmirAli Talasaz: Thanks, Helmy. Moving on to Slide 12. Shield has delivered extraordinary growth since launch. We delivered $35 million of Shield testing revenue in Q4, driven by approximately 38,000 tests, which was a meaningful step-up compared to 24,000 tests in Q3. Revenue growth has closely tracked volume growth, reflecting ADLT pricing, favorable collections and a disciplined focus on reimbursable lives. Based on performance to date, we believe Shield is the most successful diagnostic launch in history outside of COVID testing and is positioned to be a significant multiyear growth driver for Guardant. Now turning to Slide 13 to take a closer look at screening highlights for the fourth quarter of 2025. Shield had strong sequential growth in Q4, driven by growing demand from both patients and physicians. Adherence rates remained high, reinforcing the accessibility and convenience of blood-based screening. To support the growing demand, we continue to scale our commercial organization throughout 2025, exiting the year with approximately 300 sales reps. Last month, we received coverage from TRICARE for active duty service members and their families with no co-pay. TRICARE will cover Shield for all eligible average-risk individuals aged 45 and older. In Q4, we launched a dedicated health systems team, and we are excited to report that we have successfully deployed our first enterprise scale integrations with large health systems in West Virginia and Georgia. We are excited by the early progress demonstrating the market demand and our ability to operationalize Shield within complex health systems, including full EMR integration and workflow deployment. Beyond CRC, we are excited to expand Shield to include multi-cancer detection results reported in October. Although still early days, we are encouraged with physicians' enthusiasm to get access to MCD findings and strong interest by patients to be part of the MCD data collection initiative. Turning to Slide 14. We are very encouraged by Shield's real-world adherence, which reached 93% across the first 100,000 Shield test ordered. In other words, when physicians order Shield for CRC screening, 93% of patients completed the test. This represents a meaningful improvement compared to other screening modalities where adherence typically ranges from 25% to 71%. As we illustrated in the patient story earlier, the ability to complete the Shield test during an office visit removes key barriers and enables far more patients to complete their CRC screening. Taking a closer look at our recent strategic collaborations to scale our commercial infrastructure on Slide 15. We are excited to announce collaborations with Quest Diagnostics and PA Group, which will broaden our national reach in 2026. Our collaboration with Quest enables access to their national sales organization and allows providers to order Shield and receive results directly through the Quest connectivity system, which was used by approximately 650,000 clinicians and hospital accounts last year. We remain on track to launch this collaboration later this quarter. The PathGroup collaboration went live in the fourth quarter and expands Shield's reach to more than 250 health systems across 25 states. We look forward to seeing the positive impact of our growing commercial infrastructure in 2026 and years to come. Moving on to Slide 16. Our goal has always been to detect many cancer types early when they are most treatable. With that in mind, we developed Shield as a multi-cancer detection platform. Turning to Slide 17. In fourth quarter, we expanded Shield to include a multi-cancer results report, which includes findings for 9 of the most common cancers in addition to CRC. With each positive MCD finding, the report includes a cancer site of origin or CSO color, which provides tumor-specific information, giving more clear guidance to physicians for subsequent diagnostic workup. The Shield MCD report is available to Shield CRC patients who opt in and authorized the release of their medical data to Guardant. As a result of this initiative, we expect our Shield data repository to grow exponentially, and we look forward to leveraging this high-quality data to support reimbursement and regulatory approvals, drive a deeper understanding of clinical utility and support future technology improvements. We are encouraged to see the recent passage of legislation establishing a Medicare coverage pathway for multi-cancer detection tests. While this is not expected to be a meaningful driver of our business in the near term, we view this as a positive step forward for the field. Turning to Slide 18. Our outstanding commercial performance in 2025 reflected in rapidly growing revenue was driven by several factors. We achieved ADLT status for Shield, securing a $1,495 reimbursement rate that supports healthy ASP and gross profit, enabling us to reinvest in commercial expansion. We also benefited from meaningful first-mover advantage and clear product market fit, which drove broad provider adoption. Our best-in-class commercial execution, continued progress with EMR integration, inclusion in NCCN guidelines were additional key contributors to our growth trajectory in 2025. We believe these foundational achievements position Shield for continued strong growth ahead. Looking more closely at our 2026 setup, the ADLT rate of $1,495 has now been incorporated into the clinical lab fee schedule and is secured through December 2027. We also expect to see benefits from our collaboration with Quest and PathGroup alongside the continued expansion of our field force throughout the year. Additional growth drivers include ACS guideline inclusion, targeted direct-to-consumer campaign launches and the expansion of sales phase Shield into select markets outside the U.S. Turning to Slide 19. We continue to invest aggressively in R&D to improve our product performance. As part of that process, we have rigorously evaluated dozens of external technologies over the years. We recently completed the acquisition of MetaSight Diagnostics, which brings a new technology in-house that is complementary to the Smart Platform and also brings on an impressive team, further strengthening our world-class R&D organization. We are excited for the technology's potential to enhance our CRC screening, [Audio Gap] multi-cancer detection and ultimately, the entirety of our oncology product portfolio. It also has the potential to accelerate our multi-disease detection pipeline. With that, I will now turn the call over to Mike for more detail on our financials. Michael Bell: Thanks, AmirAli. Turning to Slide 20. I'll review select financial highlights for the quarter and full year ended December 31, 2025. Unless otherwise noted, all growth rates are year-over-year. Total revenue in the fourth quarter increased 39% to $281.3 million, reflecting strong execution across oncology, biopharma and data and screening. Oncology revenue increased 30% to $189.9 million, driven by continued strong volume growth. We reported approximately 79,000 oncology tests in Q4, up 38%, demonstrating sustained momentum across the portfolio. Guardant360 liquid volumes increased nearly 30%, supported by expanding clinical utility from Smart apps launched over the past year, and Guardant360 tissue remains strong following the major upgrade introduced in Q2. Reveal continued to be our fastest-growing oncology product, benefiting from CRC surveillance reimbursement and ongoing strength in breast and lung cancer. We were also encouraged by the early uptake of Reveal for late-stage therapy response monitoring launched in Q4. Average selling prices were stable sequentially with Guardant360 liquid in the range of $3,000 to $3,100, Guardant360 Tissue approximately $2,000 and Reveal between $600 and $700. As a reminder, we've submitted data packages to MolDx for Medicare reimbursement covering breast MRD and both immunotherapy and chemotherapy response monitoring. Successful outcomes will provide upside to Reveal ASP. Biopharma and data revenue was $54.0 million, up 9%, which was in line with our expectations. Screening revenue totaled $35.1 million from approximately 38,000 Shield tests. Shield ASP was approximately $850, consistent with expectations and reflecting our focus on Medicare covered patients. Out-of-period revenue totaled approximately $18 million for the fourth quarter of 2025, including approximately $3 million related to screening. This was in line with prior periods compared to approximately $17 million in both the third quarter of 2025 and the fourth quarter of 2024. For the full year, total revenue grew 33% to $982.0 million. Oncology revenue increased 26% to $683.6 million. We reported approximately 276,000 oncology tests, representing 34% growth. Guardant360 volume growth accelerated to 25% for the year, driven by continued smart app adoption. Guardant360 tissue volumes strengthened in the second half following the Smart Platform upgrade and Reveal remained our fastest-growing oncology product throughout the year. Biopharma and data revenue grew 18% to $210.1 million. Finally, screening revenue totaled $79.7 million in our first full calendar year since launch, generated from approximately 87,000 Shield tests. Turning to Slide 21. Non-GAAP gross margin improved to 66% in Q4 compared to 63% in the prior year. For the full year, non-GAAP gross margin increased to 66%, up from 62% in 2024. This improvement was primarily driven by a significant reduction in Reveal cost per test, which improved from over $1,000 in Q3 2024 to under $500 throughout 2025. We also made meaningful progress improving Shield gross margins. Shield's non-GAAP gross margin improved from negative levels at launch to 52% in Q4 2025. This reflects strong ASPs under the Medicare ADLT rate, disciplined focus on reimbursable testing and continued volume-driven cost reduction. Shield cost per test declined sequentially and exited the year at approximately $450, in line with our operational plan. Non-GAAP operating expenses were $260.0 million in Q4, up 21% and $903.7 million for the full year, up 19%. Full year operating expense was modestly above guidance due to 2 Q4 items. Firstly, an increase in accrual for the 2025 company bonus plan, which reflects the strong performance in the year across financial, regulatory and commercial milestones. Secondly, the continued reinvestment of incremental screening gross profit into sales and marketing to accelerate our commercial build-out. Adjusted EBITDA loss improved to $64.9 million in Q4 compared to $78.4 million in the prior year quarter. For the full year, adjusted EBITDA loss improved to $220.9 million versus $257.5 million in 2024. Turning to Slide 22. We continue to improve cash performance in 2025. Free cash flow burn was $233 million for the year, an improvement of $42 million and in line with our guidance. Importantly, excluding screening, the core business generated positive free cash flow in both Q3 and Q4. We expect the core business to be free cash flow positive for the full year 2026 and remain committed to achieving company-wide cash flow breakeven by the end of 2027. As AmirAli mentioned, in December, we acquired MetaSight for $59 million in upfront cash plus up to $90 million in contingent consideration tied to future commercial and regulatory milestones. We believe this technology enhances our existing product portfolio and accelerates our multi-disease detection pipeline. Following the MetaSight acquisition and our November equity and convertible debt financing, we ended the year with approximately $1.3 billion in cash, providing sufficient runway to fund our growth initiatives and reach company-wide cash flow breakeven. Turning to Slide 23. We entered 2026 with solid momentum across the business and increasing visibility into our growth drivers. For full year 2026, we expect revenue to be in the range of $1.25 billion to $1.28 billion, representing growth of 27% to 30%. This outlook reflects sustained strength in oncology and accelerating expansion in screening, firmly positioning us to achieve our 2028 long-range revenue target of $2.2 billion. We expect oncology revenue growth of 25% to 27% in 2026, supported by volume growth of approximately 30%. We believe demand fundamentals remain strong across the portfolio. Guardant360 Liquid should continue to benefit from adoption of Smart apps and Guardant360 tissue growth should continue to build on the Smart Platform upgrade and continued strong commercial execution. Reveal is expected to remain our fastest-growing oncology product, driven by MRD and therapy monitoring. Note that our oncology guidance does not include potential upsides during the year from SERENA-6 ESR1 monitoring, FDA approval of Guardant360 Liquid CDx and the launch of Reveal Ultra. For biopharma and data, we're encouraged by recent strategic partnerships and the strength of our CDx pipeline. For 2026, we're forecasting low double-digit revenue growth, supported by both ongoing collaborations and new program starts. We expect screening revenue to be in the range of $162 million to $174 million, driven by 210,000 to 225,000 tests, a meaningful growth from approximately $80 million revenue and 87,000 tests in 2025. As in 2025, we expect sequential increase in Shield volumes every quarter with the increases expected to be greater towards the back half of the year. This reflects early year seasonality at PCP offices, the ramping productivity of our growing number of sales reps and the expansion of EMR capability through our Quest and PathGroup collaborations. Note that our screening guidance does not include potential upside from Quest co-promotion activities as well as ACS guideline inclusion, which we continue to expect in the near future. We continue to make steady progress improving gross margins across our products through ASP optimization, workflow efficiencies, transition to NovaSeq X and disciplined cost management. For 2026, we expect non-GAAP gross margin to be in the range of 64% to 65%, reflecting ongoing operational improvements, volume growth and expected product mix. We expect non-GAAP operating expenses of $1.03 billion to $1.05 billion, representing 14% to 16% growth year-over-year. We anticipate continued operating leverage as revenue growth outpaces expense growth. R&D and G&A are expected again to remain relatively stable with incremental investment primarily directed towards screening sales and marketing. Finally, we remain focused on reducing cash burn each year. For 2026, we expect free cash flow burn of $185 million to $195 million, an improvement from 2025. Excluding screening, we expect the remainder of the business to be free cash flow positive for the full year. Finally, turning to Slide 24. Looking ahead, we have a rich set of catalysts across our business that will drive continued growth. In oncology, we expect to launch several new products, including Guardant360 Liquid CDx following FDA approval, our ESR 1 monitoring test and Reveal Ultra. In addition, we expect to release additional apps driven by our Smart Platform and advanced reimbursement across multiple indications for Reveal. In biopharma and data, we expect new CDx approvals as well as additional strategic biopharma and Infinity AI data partnerships. In screening, we look forward to inclusion in ACS guidelines in the near future, driving commercial expansion with Quest and expanding self-pay Shield outside the U.S. With that, we'll now open the call for questions. Operator: [Operator Instructions] The first question comes from the line of Dan Leonard with UBS. Daniel Leonard: I'd like to talk a little bit about Reveal therapeutic monitoring. Helmy, both you and Mike commented on that in your prepared remarks. Could you elaborate further on how you're framing that opportunity, both for Reveal volumes as well as for Guardant360 volumes as well. Helmy Eltoukhy: Yes. We're very excited about Reveal for therapy monitoring. We think it's an important opportunity to really solidify and work synergistically with Guardant360. If you think about it, all the volume we have with 360 patients are being tested in terms of therapy selection. And then this idea of coupling that with Reveal for essentially monitoring how those patients are doing on therapy is really exciting. And then the nice thing about that is, unfortunately, as some of those patients progress, they're going to need a new therapeutic decision in terms of hopefully a next-generation drug or a next-line therapy that can be applied to them. And so Reveal for therapy monitoring really bridges to that next Guardant360 test. And we have a very unique platform and portfolio that allows these tests to work together. And so I would say that when we get some of the reimbursement wins for IO monitoring and chemo monitoring, this could be a very important driver for growth over the next few years for the oncology business. Operator: The next question comes from the line of Puneet Souda with Leerink Partners. Puneet Souda: The first one, Helmy, for you. When you look at the strong growth that you've seen in oncology, maybe could you elaborate how should we think about that throughout the year and both in G360 versus Reveal? How should we think about the growth of those products? Because important drivers like the camizestrant launch and other things that you mentioned are actually still not in the guide. So just trying to think about sort of how should we think about both of these products volume growth throughout the year. Helmy Eltoukhy: Yes. Maybe I'll start and I'll let Mike sort of jump in. We're very bullish about '26 in terms of the progress we've made in '25 and what we're seeing at the beginning of the year here. So I would say that we think it's going to be another strong year for 360, something around at least 20% growth in terms of volumes. And then obviously, another very strong year for Reveal. It will continue to be our fastest-growing product. We think we'll see some acceleration, obviously, with Reveal for therapy monitoring as well on top of that. So I think we're well underway for sort of LRP Investor Day projections in 2028. Michael Bell: Yes. Well, maybe just to add because we didn't talk about tissue. I think in the back half of '25, we saw a nice acceleration with Guardant360 tissue following the smart upgrades that we did back in May of last year. And so I think that also as we look forward in 2026, we continue to expect tissue to accelerate. We think there's getting the FDA approval for Guardant360 during the year also could potentially have a pull-through impact on Guardant360 tissue as well. So yes, we're feeling bullish about all of the products across oncology. Operator: The next question comes from the line of Doug Schenkel with Wolfe Research. Douglas Schenkel: Both on Shield and they're related. It's really great to hear that you are expecting to be free cash flow positive in 2026, excluding Shield. I'm curious what you're thinking in terms of Shield specific burn. I think you've provided color on that in the past. And I guess kind of building off of that, I believe you exited 2025 with approximately 300 Shield-focused reps. How should we be thinking about the pacing of rep hiring throughout 2026? And where do you think the sales force should be at year-end? Helmy Eltoukhy: Do you want to start with that? Michael Bell: Yes. Yes, I can start on the question on -- on screening burn, Doug. Yes. No, for '25, again, our overall burn for the company was $233 million. Of that, roughly around $220 million was screening. We sort of set a target of $220 million. Actually, we pushed quite hard on that, particularly towards the end of the year. We're really wanting to take advantage of our first-mover position. And we mentioned again on the call that excluding screening, the rest of the business was actually cash flow -- free cash flow positive for Q3 and Q4. For '26, we think a similar level of burn on screening as '25. So around that sort of $220 million mark. Again, we're going to be making heavy investments on the commercial side, really building out that infrastructure. And we still expect '26 to be a year of investment for screening and then '27 to be a year of inflection where we start to get a lot of operating leverage on that commercial infrastructure that we build. And maybe just to point out one other thing. Again, we set our full company free cash flow guidance of $185 million to $195 million burn. So that's implying that the rest of the business now is strongly cash flow positive in 2026. And the sort of midpoint of that guide is around $30 million positive cash flow. So yes, we're feeling really good about how we're sort of managing the burn. AmirAli Talasaz: In terms of commercial infrastructure and field force, we are very excited with a very powerful commercial platform that we built in 2025. And we are going to continue to build out that commercial organization in 2026. I'm not going to get into the specifics of maybe exact headcount of the field force, but maybe just to give you some direction and color the way that we can think about it, we will continue to invest our incremental gross profit that we are going to generate this year into further build-out of our commercial infrastructure on both sales and marketing and majority would go still in building sales force and hiring more people. Operator: The next question comes from the line of Tycho Peterson with Jefferies. Tycho Peterson: I want to start off on one of the bigger topics on ADLT pricing. What is your latest thinking? And what have you baked into the guide, if anything, for G360? And then overall, you are guiding for a decel in volumes and revenue in oncology, presumably some conservatism there. There's a lot you didn't bake in, but where do you think kind of the most conservatism is in the outlook on oncology? Helmy Eltoukhy: Yes. In terms of ADLT, I think we're still on track in terms of FDA submission, making very good progress there. We think that hopefully gets through the finish line in the second half of this year and then potentially sets up second sort of next ADLT pricing rate for 360 at the beginning of '27. So nothing is baked in, in terms of ADLT pricing for 360 for 2026. In terms of the second part of your question, I'll let... Michael Bell: Yes. I mean maybe on the volumes, '25 was an incredibly strong year, particularly with Guardant360 and just with the Smart apps driving the volume. But I think we look at 2026 as just continuing that trend. Our guide is 30% oncology volume growth. And so we think that's incredibly strong. And again, that's coming across all of the portfolio. Helmy mentioned it earlier, but we still expect strong traction with Guardant360, Reveal being the fastest-growing product and tissue continuing to accelerate. So yes, I think we're feeling really positive about the guide that we put out for oncology growth next year -- or this year, should... Tycho Peterson: Okay, Mike. And then just a follow-up on speak of conservatism, you're also guiding for Shield ASPs to be down relative to where you exited '25. What's the thought process there? And also, what are you baking in for international? I know you flagged that as incremental. Michael Bell: Yes. On Shield ASP, we've seen this trend over the past few quarters. We've really focused on the Medicare population and reimbursable tests. And I think we've done a really great job there. But there is -- we are seeing a lot of demand from the under 65. And so I think our assumption going into '26 is that, that demand will continue to grow and that sort of mix of commercial versus Medicare is just going to increase. So that's really the fundamentals of how we see the ASP moving. we still will maintain the ADLT rate at $14.95. That's now going to be in place for '26 and '27. And we're seeing great reimbursement from Medicare Advantage payers saying that's been leading to some out-of-period true-ups as well. And our ASP for Medicare Advantage is getting stronger and stronger. But yes, it's just really going to be -- it's a mix impact between Medicare and non-Medicare. And on the international side, if the question was focused on Shield, we've seen small contribution from Abu Dhabi in '25. I think we expect, again, the international contribution to be relatively small in '26 and really the driver of the vast majority of the volume and the volume growth is going to come from the U.S. in '26. Operator: The next question comes from the line of Daniel Markowitz with Evercore ISI. Daniel Markowitz: I wanted to ask on Reveal Ultra. It sounds like that's an area where there's a lot of excitement internally. Can you talk a bit about what will be differentiated about the offering, how you see the tumor-informed competitive landscape evolving and when we can expect to see some data or a more substantial update on that asset? Helmy Eltoukhy: Yes. We're excited about Reveal Ultra, making good progress there. We're on track for launching it this year. And it's something where we believe that the true clinical sensitivity of that test will be best-in-class. I think there's a lot of I would say, contrived messaging in the space in terms of different bars that people are using, but we believe that this will, I think, redefine sensitivity in the tumor-informed space. There are other features of the test. It's going to do more than, I think, other tumor-informed offerings. We always have a special sauce at Guardant with all our tests in terms of when we launch them. And so I think I would just say stay tuned as we share more details later this year about that test. Operator: The next question comes from the line of Andrew Brackmann with William Blair. Andrew Brackmann: AmirAli, you sort of talked about the recent MCED legislation and sort of the longer-term impact there. Can you maybe just sort of broaden out that commentary, talk to us sort of about the importance there for Shield in particular? And as you sort of think about the necessary steps for Guardant to sort of take advantage of that, can you just remind us on sort of the data generation and sort of path to FDA approval here? AmirAli Talasaz: Yes. So I think we're talking about this MCED deal that just passed. So we are -- as I mentioned in the prepared remarks, we are encouraged to see the passage of the legislation. It's moving the whole field forward, but it's not going to be a meaningful driver of our business based on the business plan that we have in near term. Again, it's good for the field. Maybe as we go through midterm and talking about more than triannual testing with Shield, maybe there would be opportunities enable with this MCED deal for us. But again, in near term, we don't look at it as a meaningful driver of our business. Operator: The next question comes from the line of Subbu Nambi with Guggenheim. Subhalaxmi Nambi: A follow-up to Andrew's question, AmirAli. What has the opt-in rate for MCED Shield been so far? And if you were to accumulate significant data by year-end, would you be able to submit something to the FDA for RSE approval? I know it doesn't matter to the core story, but just trying to figure out as we think about upside. AmirAli Talasaz: Yes. Thanks for this important question. When we are thinking about the data that now we are generating with this MCD offering for Shield when the physician and patients are opting in. On one side, we are really encouraged by the enthusiasm that we are seeing on the provider side and participation by patients to opt in to release their medical record to us. On the other side, on the data side, I think in hopefully, in near future, we would be the company that has access to the widest, broadest clinical data in terms of clinical utility of MCD testing in U.S. patient population. So we are seeing good adoption rate. I don't want to get to the exact number of it. It's trending up, but so far, so good. So far, so good, and we are very excited with it. Operator: The next question comes from the line of Michael Ryskin with Bank of America. Unknown Analyst: This is Aaron on for Mike. Can you talk a little bit more about the puts and takes of the Shield guide? Obviously, 4Q saw the 14,000 sequential volume growth. But should we thinking about that as more of an anomaly and just kind of thinking about how much conservatism is embedded within the guide? And I guess the second part of that is thinking about Quest and PathGroup, those look like upsides to the guidance. And so how should we be thinking about the timing of those impacts of those tailwinds as we head through the year? AmirAli Talasaz: Yes, sure. Look, obviously, we are very excited with this guide of like 87,000 volume going to midpoint of 217,000 and a very huge revenue growth and contribution. On the other side, when we are thinking about the guide, we are, again, just in the -- still very early inning of this launch. This is just the second year of launch, and we want to be thoughtful with our guidance. We typically don't want to get too excited and get ahead of our skis just based on 1 quarter performance. But the trends are very positive. We are, again, very excited of how 2026 is going to shape out for us. In the prepared remarks, we talked about some of the 1Q seasonality in PCP offices is kind of normal. for us, again, in terms of year-over-year growth for us, I think we are very excited with the guide that we put out there. And there are some upside. We'll see like we are very optimistic about ACS guideline, and we believe it should be near. It's not part of our guide right now until they update their guideline. Quest, PathGroup, very minor contribution. We are counting on some benefit of the EMR connectivity enabled through this Quest and PathGroup integration, but we are not counting any kind of contribution in terms of the volume contribution of the co-promotion and volume that comes from Quest salespeople. We are going to monitor it. It should be positive, but since we don't know exactly how positive it would be, we want to monitor for the first few months of the launch and see how it goes. And then if appropriate, we would adjust our guidance accordingly. But we just want to be thoughtful about that matter as well. Operator: The next question comes from the line of Mark Massaro with BTIG. Mark Massaro: I wanted to also ask about Shield. So for AmirAli, one of the success stories of -- one of the drivers of the success of Cologuard was their direct-to-consumer TV launch. How are you thinking about spending in 2026? Is it more Select digital? Or do you anticipate some spend on TV? And then I also wanted to ask about Quest. There is access for the, I believe, the Quest salespeople to promote Shield. I just want to double check that these reps are incentivized. And then can you just maybe give us a sense for where the Shield test might sit in their bag relative to the other products they're selling? AmirAli Talasaz: Yes. So some DTC pilot has actually happened for us in 2025 in select markets. And in 2026, we are excited that hopefully, consumers and even physicians would see even more of that. So we have some active campaigns that they are about to get finalized, and we are excited to put it out there and see what the impact would be. So we are very excited about it. The rest, stay tuned after we launch it in very near future. In terms of Quest, yes, actually, the salespeople are incentivized. It's part of their commission plan. And what we do know is actually it was very important and interesting for the Quest management team to get access to Shield as a very differentiated brand that gives them opportunity to talk about something new and something exciting with the accounts. So again, we are going to monitor how the launch goes with Quest in terms of co-promotion part of it. It should be again positive, but we'll see how positive it would be. Operator: The next question comes from the line of Kyle Mikson with Canaccord. Kyle Mikson: On the MetaSight acquisition, interesting to see that. Most of the consideration is tied to future commercial performance and the regulatory approval of the technology. So first one, wondering what the path is to noncancer launch is? And then second, it seems like they use mass spec, how does that factor into your NGS heavy platform? AmirAli Talasaz: Yes. So we are very actually excited about this acquisition to bring a very high-quality world experts on some specific complementary technologies to our Smart Platform. So we are very excited to go to work and see what we can do. It's a small technology talking again. So let us make more progress, and we will talk about it at the right time. Operator: The next question comes from the line of Casey Woodring with JPMorgan. Casey Woodring: Just a couple more on Shield maybe. So you mentioned that the guide is back half weighted. What does that guide imply for Shield in 1Q? I think that, that comment would imply a sizable step down sequentially. And then I guess, on the ACS commentary you made, if that hits in the first half of 2026, can you help us think about the upside to volumes in the back half of the year and what that could look like? AmirAli Talasaz: Yes. Maybe I'll start with the ACS part. Let us actually see when it would happen. It should be in the near future. But I think when you think about there are about a dozen states that they have state-level mandates that even younger patient population should get access to the test. And the whole screening market is maybe about 40% this 65 year and above and more are, in fact, on the younger patient side. That could be an interesting upside and growth driver for us once we start really going much deeper on the commercial testing within those states. But let's first see actually when they update their guideline, and we go from there. In terms of Q1, yes, that's true that there is some Q1 seasonality in PCP offices, which in terms of screening and so forth. But our team has done a very good job to reschedule appointments that have been kind of impacted or the events that have been impacted. And we are on track to screen more patients in Q1 than in any other previous quarters. post launch. So let's see how the rest of the quarter goes, but -- and we will talk about this in our next earnings call. Operator: The next question comes from the line of Dan Arias with Stifel. Paul Stewardson: This is Paul on for Dan. I guess I just want to follow up on Subbu's question about kind of regulatory strategy for multi-cancer Shield. One of your competitors had some data out this afternoon with not meeting the primary endpoint with a very, very large MCED trial in terms of looking for stage shift. And then one other piece was this week in the New England Journal, there was some FDA willingness to be a little more flexible on what evidence generation might look like. I'm just wondering if any of these developments kind of influence what you would look to do for your evidence generation strategy and for your regulatory strategy with Shield MCD? AmirAli Talasaz: Actually, this news just came out. So I don't know all the details of it. We've been on this call with you guys. But I think when I think about it, really, what is important in the field of multi-cancer detection is the performance of detecting early stages. And we believe with the technology that we have for Shield, the performance of early-stage detection as it's shown in CRC could be very interesting, and that could have a meaningful impact. On the other side, I think it really highlights what we are doing to capture all the clinical evidence, medical record of the patients who are going through MCD testing in U.S. and really establish the utility of this MCD testing at very large scale. We are going to benefit from this commercial scale of Shield, and we can put that evidence together in a very OpEx friendly and in a very quick way. So I think it's kind of -- we are getting more bullish with the pathway that we went after screening business and what we are doing with our MCED offering. Operator: The next question comes from the line of Luke Sergott with Barclays. Luke Sergott: So on the Shield demand and after you guys have had this for 1.5 years now, but this is like the first full year of launch has been great. You're going to trend even further for next year. Can you kind of give us a sense of where the demand is coming from? Like how much of this is from the care gap closure versus winning share from colonoscopy or FIT or Cologuard or any of the other tests? AmirAli Talasaz: Yes. So demand is coming from PCP physician in terms of patient type. Still, we are really focused on unscreened patient population. I think some of the latest data that I've seen about still 90% of the patients who are getting screened by Shield have not been screened before, at least during the last 5 years. when we got access to their medical record and claims. So really, our messaging is working, and we are increasing the rate of overall screening. Care gap and those kind of opportunities still is ahead of us. We need to get into -- we need to qualify for quality scores and Shield still is not. Once we get to the HEDIS, that would be a huge additional growth driver for us. So care gap program is not part of our growth right now. Operator: The next question comes from the line of Jack Meehan with Nephron Research. Jack Meehan: Appreciate all the color on the screening investments you're making. I was wondering if you could share color on the oncology side, specifically, just the mark-to-market, how large the sales force is there now and planned investments? And then second, you've talked about the NovaSeq X transition. When in the year is that taking place? And any way you can quantify level of savings you expect? Helmy Eltoukhy: Yes. So I think obviously, as Mike said, we reached cash flow positivity on the oncology side last year. And obviously, we'll be generating cash this year. We're in a really good spot in terms of where we are with oncology. We've been essentially reinvesting in the business as a matter of course, as we see opportunities for growth on the sales side, as we see revenue per rep sort of grow, we saw tooth around a healthy number in terms of a matter of course, expansion of the team. And so we're in a healthy spot, and we'll continue to sort of invest where we see return on investment in terms of potential volume growth. In terms of the NovaSeq transition, maybe I'll let Mike take that one. Michael Bell: Yes. We -- I mean, first of all, we successfully transitioned Reveal over to NovaSeq X just over a year ago as well as workflow efficiencies. We saw a nice reduction in the cost per test for Reveal. And with Guardant360, we started that transition. It will take time to fully be implemented. probably around about the middle of the year, I would expect all Guardant360 liquid tests to be on NovaSeq X. And yes, we expect to see a nice improvement in our cost per test. I think just put in to quantify it a little bit, our gross margin currently for Guardant360 is in the high 60s. And probably once we've gone through the full move to NovaSeq X and things are working properly, I expect to see maybe 200 basis point improvement and sort of pushing that Guardant360 gross margins into the low 70% level. So yes, no, we're feeling very positive about the switch, and it's going to have a nice impact on our P&L. Helmy Eltoukhy: Operator, one more question please. Operator: Our last question comes from the line of Bill Bonello with Craig-Hallum. William Bonello: So this one, I guess, is probably for Helmy. I think the -- if I understand it right, that the FDA approval would open the door to physicians being able to order both tissue and blood from Guardant concurrently. I'm just curious what your sense of is for the appetite for using both tests upfront and then also touch on maybe any reimbursement challenges that you might anticipate if that becomes more common. Helmy Eltoukhy: Yes. As you know, guidelines, I think, are increasingly recommending that for patients upfront, especially in lung cancer and breast cancer, which are some of our 2 largest indications for 360. And one of the challenges is the way that LDT is reimbursed, it really is not possible to order them concurrently. And so that's obviously been a little bit of a headwind that sort of will become a tailwind once we get FDA approval for Guardant360. So we do see that as a potential driver. Obviously, we want to make sure it's done in the cases where it's -- there's clinical utility for the patients and value for treatment selection. But we're very confident that I think will be, I think, important catalyst for our tissue business going forward. Operator: Due to the interest of time, that was our last question. That will conclude today's call. Thank you for your participation, and enjoy the rest of your day.
Operator: Good afternoon, and welcome to the RingCentral 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 Steven Horwitz, Vice President of Investor Relations. Please go ahead. Steven Horwitz: Thank you. Good afternoon, and welcome to RingCentral's Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining me today are Vlad Shmunis, Founder, Chairman and CEO; Kira Makagon, President and Chief Operating Officer; and Vaibhav Agarwal, Chief Financial Officer. Our remarks today include forward-looking statements regarding the company's business operations, financial performance and outlook. These statements are subject to risks and uncertainties, some of which are beyond our control and are not guarantees of future performance. Actual results may differ materially from our forward-looking statements, and we undertake no obligation to update these statements after this call. If the call is replayed after today, the information presented may not contain current or accurate information. For a complete discussion of the risks and uncertainties related to our business, please refer to the information contained in our filings with the Securities and Exchange Commission as well as today's earnings release. Unless otherwise indicated, all measures that follow are non-GAAP with year-over-year comparisons. A reconciliation of all GAAP to non-GAAP results is provided with our earnings release and in the slide presentation, which you can find under the financial results section at ir.ringcentral.com. With that, I'll turn the call over to Vlad. Vladimir Shmunis: Good afternoon, and thank you for joining us. Before I begin, let me work with welcome Mahmoud ElAssir to our Board of Directors. As Senior Vice President and Chief Technology Officer at UnitedHealth Group, Mahmoud leads technology infrastructure, platforms and services, including corporate systems. Previously, Mahmoud held senior leadership roles at Google and Verizon, where he led major AI and cloud network and platform transformation initiatives, powering global enterprise and consumer services. Mahmoud brings deep expertise in AI native platforms, cloud infrastructure, real-time data systems, security and large-scale product engineering. This perspective will be invaluable as we scale RingCentral through the next phase of our AI-led evolution. Moving on to the results. We had a strong Q4 capping a solid 2025, in which we met or exceeded all our key operating metrics. Total revenue for the year grew nearly 5% and subscription revenue grew just over 5.5%. Of particular note, we generated record free cash flow of more than $0.5 billion, up 32% versus 2024. This translates to over $5.80 of free cash flow per share in 2025. I am also pleased with the progress we have made in meaningfully reducing the value of new shares granted by over 35% year-over-year. Managing SBC is a key priority. Our steady-state SBC target is 3% to 4% of annual revenue as we expect to achieve it in the next 3 to 4 years. Improving profitability, combined with the reduction in SBC translated to our full year of positive GAAP operating margin. We achieved nearly 5% GAAP operating margin in 2025, which we expect to approximately double in 2026. We are targeting to achieve approximately 20% GAAP operating margin in the next 3 to 4 years. With this in mind, we are now in a position to expand and diversify our overall capital allocation strategy. I'm happy to share that, today, we announced our first-ever quarterly dividend of $0.075 per share. We believe that these strong results are not an aberration but an early sign of good things yet to come, as RingCentral transforms itself into an agentic voice AI company. Here is why. RingCentral is an acknowledged leader in cloud-based business communications. We have built a $2.5 billion business from scratch by making human connections simpler, cheaper and more reliable. Our global platform is carrier grade, secure and regulatory compliant. It is trusted by 0.5 million businesses and over 8 million end users worldwide and supports tens of billions of minutes and billions of calls and SMS messages annually. Critical technical requirements are low latency and bullet-proof reliability, with the system designed to avoid any downtime even during maintenance windows. Scratchy voice or worse, no dial tone are simply not acceptable. With a multibillion-dollar cumulative investment and thousands of highly specialized real-time communication specialists, expanding and improving our cloud-native platform over the last 2 decades, this asset is a strong differentiator as the world gets transformed by AI. Simply put, RingCentral's investment and know-how serve a mission-critical need, and they're very hard and likely not cost effective to replicate. Far from being outdated by forthcoming AI agents, RingCentral's platform is a natural bedrock for emerging agentic voice AI. Looking forward, consumers communicate with their providers predominantly via voice and text, and these interactions are growing. When a consumer calls or texts their business provider, it can be answered by a human or AI agent. In either case, it is RingCentral's platform that makes this interaction possible. And as workflows gradually incorporate more AI agents, RingCentral is in a strong position to provide additional value by incorporating agentic voice AI at the very top of the B2C communications funnel. At the recent Investor Product Day, I laid out our vision for RingCentral 3.0, whereby RingCentral is well on its way to transforming itself into a leading agentic voice AI platform. With agentic voice AI, we are now in a position to not only make connections but also to add significant value to those interactions themselves, before, during and after every call or text messaging, thus, enabling businesses to answer more calls more efficiently, garner more leads and process more inquiries at a higher quality. This makes our service substantially stickier and more valuable to our customers as we are able to answer questions, provide insights and analyze conversations for better customer experience and outcomes. While it is still early, recent results are encouraging. Firstly, our pure AI ARR revenues have almost tripled year-over-year and has contributed significantly toward us meeting our stated goal of $100 million ARR from new products in 2025. We but even more importantly, ARR from customers who utilize at least 1 of our monetized AI products, which we refer to as RCAI utilizing customers, has now more than doubled year-over-year and is now approaching 10% of our overall ARR. With new logo acquisitions, AI attach rate is meaningfully higher, making it a long-term tailwind. Importantly, our RCAI utilizing customers average significantly better ARPU, and they're stickier with net retention rate exceeding 100%. This is another strong tailwind. Looking forward, I could not be more excited about 2026 and beyond. We are leveraging a scaled, cloud native, real-time communications global platform and are able to spend over $250 million on innovation annually. AI is a natural tailwind to our business. The majority of this ongoing investment is now directed towards our new AI-led product portfolio. Our investments are showing good early results. Our brand is strong. Competitive moat is wide and increasing, and our GTM is well established and differentiated. We are embedding intelligence across every interaction and creating new monetization and differentiation opportunities to further widen our moat and increase wallet share. Our financial performance is strong and improving, allowing us multiple avenues to return capital to our shareholders. With a proven team and the rapidly expanding portion of our revenue attributable to AI, we are in a unique position to revolutionize business communications yet again, now through AI. With that, I'll turn it over to Kira. Kira Makagon: Thank you, Vlad. Let me now expand on a few points. Agentic voice AI is our strategic priority that is delivering clear ROI. RCAI utilizing customers are driving tangible value. They have higher usage, increased spend and stronger retention. As Vlad highlighted, approximately 10% of our ARR now comes from customers using at least one AI product and that adoption more than doubled over the last year. AI is driving structural improvements, making every customer more valuable. Our AI solutions, AIR, AVA and ACE, deliver measurable outcomes at every stage of a conversation, before, during and after, respectively. Each plays a distinct role in driving automation, productivity and insights. Built upon our proven mission-critical communications platform, our agentic voice AI portfolio extends a durable moat grounded in scale, reliability and over 2 decades of customer trust. Our AI Receptionist, or AIR, is a virtual receptionist that ensures businesses never miss an important call or lead. It can handle multiple calls simultaneously, is multilingual and is able to answer questions, schedule appointments and meetings, and route calls. AIR is easy to set up with no professional services required in most cases. As a matter of fact, we have proof points of AIR being set up by human receptionists who are not technically savvy. AIR is our fastest-growing agentic voice AI offering and it is helping us capture greater wallet share from our customers. In Q4, AIR customer count reached 8,300, up 44% sequentially, with customers adding usage-based minute bundles to drive more efficient front-office operations, higher call intake and ultimately, more revenue. With a usage-based model, AIR revenue scales directly with our customers' business activity and is not subject to potential reduction in seat counts. If and when a call is connected to a human, that is where our AI Virtual Assistant, or AVA, steps in to assist in real time. AVA captures notes and surfaces recommendations, accelerating workflows for our RingEX and RingCX customers. After the call, our AI Conversation Expert, or ACE, closes the loop, analyzing every recorded interaction for insights that improve coaching, quality and performance across the organization. ACE has been well received with customer count now exceeding 4,800, up 144% year-over-year. Together, AIR, AVA and ACE create a layer of intelligence at every point of interaction, automating upfront, assisting in the moment and analyzing for ongoing improvement, helping customers drive better performance, stronger customer experiences and more informed decision-making. Let me now provide some real-world examples. A large multi-specialty health care provider in Tennessee deployed AIR in Q4 to address persistent challenges with long wait times, inefficient routing and schedule appointments with integrated SMS. After a 3-month trial, which enabled them to route 100% of incoming calls properly, they expanded AIR minutes from 30,000 to 0.5 million minutes per quarter. Destination Pet, a nationwide premium pet care provider, purchased RingEX and AIR in Q2 2025, and shortly after in Q4, they added ACE. They are leveraging AIR and ACE across 180-plus locations to capture every call and monitor call quality across every site, demonstrating that tangible ROA customers look to drive as they expand adoption of our AI portfolio. PM Pediatrics, largest specialized pediatric urgent care provider in United States, is leveraging AIR, AVA and ACE to enable faster routing, higher first contact resolution and richer patient engagement across their 80-plus locations. In particular, AIR is enabling them to handle 30% more patient calls. This integrated AI approach modernizes operations, reduces friction and enhances patient experience. The key point is that AIR, AVA and ACE are designed to automate, assist and analyze across the entire conversation journey. With RingCentral sitting at the very top of the B2C funnel and serving hundreds of thousands of businesses and millions of end users globally, we now have tangible early proof points of our ability to deliver significant customer value via agentic voice AI. The compounding flywheel of AIR, AVA and ACE is building upon the strength of our carrier-grade secure global business communications platform and sets us apart from point solutions contributing to ARPU extension and higher retention. In November, alongside our agentic voice AI suite, we introduced Customer Engagement Bundle, or CEB for EX. CEB is a purpose-built solution for businesses with non-dedicated agents who don't need the complexity of a full-scale contact center. Just months after launch, we crossed 1,000 customers, confirming strong demand. CEB is also quickly becoming another vector for RingCentral agentic voice AI growth. For customers with dedicated agents that require formal contact centers, RingCX provides an AI-powered customer experience suite, including WEM. Momentum with RingCX remains strong with adoption by more than 1,500 customers, nearly doubling year-over-year, while revenue and ARR also more than doubled. In Q4, over half of our $1 million-plus TCV deals included RingCX, and more than 50% of overall RingCX deals included AI. For example, Patient Connect, a specialized health care call center and scheduling provider, uses RingCX with AVA agent assist the surface patient insights, cutting handle times by 50%. They also use ACE quality management to replace time-consuming spot checks of call recordings, reducing escalations by 40%. Patient Connect reflects a broader pattern. Our agentic voice AI is delivering transformative results across customers of all sizes and industries, ourselves included. RingCentral customer support runs the full RingCX suite with WEM and agentic voice AI, resolving more interactions upfront, cutting queue volumes by over 50%, accelerating resolution times and elevating customer experiences. This is reflected in our latest Gartner Peer Insights ranking, where service and support scored a new high, placing us in the top tier of communications members. In summary, we're executing on our agentic voice AI vision, where AIR, AVA and ACE create an intelligence layer across every conversation. RCAI utilizing customers spend more, stay longer and represent a growing share of our business. This sets RingCentral up for durable growth, expanding profitability and meaningful long-term value creation. With that, I will hand it over to Vaibhav now. Vaibhav Agarwal: Thank you, Kira, and good afternoon, everyone. As Vlad noted in his comments, we have a durable TAM, well-established competitive moat, a rapidly emerging agentic voice AI portfolio and a well-established GTM. Our AI, while early, is making a meaningfully positive impact on our performance and is already contributing to all key financial metrics. Let me provide more details on our performance and outlook. Q4 was a strong finish to a good year, reflecting our strong position in a growing market and disciplined execution across the board. Over the course of 2025, we meaningfully strengthened our financial profile across all key metrics. Our business is robust, growing and poised to further benefit from agentic voice AI. We believe we are well positioned to continue strengthening our balance sheet and enhancing capital returns, thus, positioning the company for sustained long-term value creation. As Vlad noted, in 2025, we surpassed $2.5 billion in revenue, achieved $100 million in ARR from new products, delivered record free cash flow of over $0.5 billion, achieved full year GAAP profitability, reduced net leverage in SBC and returned our absolute share count to 2019 levels. These milestones enabled us to drive record free cash flow per share while continuing to invest in innovation at a world-class level. Based on our strong financial performance and outlook that I will be sharing with you shortly, I am now incredibly excited to announce our first ever quarterly dividend of $0.075 per share. This strategic enhancement to our capital return strategy is reflective of our confidence in the future of our business and our ability to drive long-term cash flows. More details of this dividend are available in our press release. Turning to Q4. Subscription revenue was $622 million, up 5.5% year-over-year; and total revenue was $644 million, up 4.8%, both in line with guidance. Our core business remained durable in Q4 with stable monthly net retention rates above 99%. Within our customer cohorts, small business and global service provider business totaling over $1.1 billion in ARR, both grew in double digits with strong unit economics. As Vlad indicated, a key metric moving forward is performance from customers using at least one of our AI products. We refer to these as RCAI utilizing customers. This is currently approaching 10% of our overall ARR, more than doubling year-over-year. As these RCAI utilizing customers come from all cohorts, this metric better reflects how we manage our business. We plan to report on our progress with RCAI utilizing customers periodically instead of previously disclosed cohort-based metrics. Moving to profitability. Q4 subscription gross margin remained above 80%. Non-GAAP operating margin reached 22.8%, up more than 140 basis points year-over-year, driven by operating leverage and improved sales and marketing efficiency. Our disciplined approach to equity management resulted in an SBC reduction by over 300 basis points as a percentage of revenue year-over-year. This contributed to us delivering GAAP operating margin of 6.6%, up about 4 points year-over-year and GAAP EPS of $0.26. Non-GAAP EPS increased more than 20% to $1.18, above the high end of our guidance. In Q4, we generated $126 million of free cash flow, up 13% year-over-year. During the quarter, we also repurchased approximately 5 million shares for $135 million. For the full year 2025, subscription revenue grew 5.6% to $2.43 billion, and total revenue increased 4.8% to $2.52 billion. Subscription gross margin was 80.5%, and non-GAAP operating margin improved 150 basis points to 22.5% or $566 million of operating profit. Revenue growth again outpaced operating expense growth, reflecting disciplined hiring, expanded offshoring, vendor consolidation, increased internal use of AI and investments in higher return products and go-to-market [ motion ]. Our strong operating performance, combined with working capital improvements, drove a record $530 million in free cash flow, up 32% year-over-year, representing a 21% margin. New equity grants declined 36% to approximately $160 million or 6% of revenue, driving a 340 basis points reduction in SBC as a percent of revenue. As a result, we achieved a full year of GAAP operating profitability with GAAP operating margin of 4.8% and GAAP EPS of $0.48. Non-GAAP EPS grew 18% to $4.36, above the high end of guidance. Weighted average fully diluted shares were approximately 91 million. Free cash flow per share increased 36% to $5.81. Expanding free cash flow per share as well as our GAAP profitability remain core priorities. Turning to our balance sheet. We reduced debt by more than $275 million, ending the year at 1.7x net leverage. We have $955 million of undrawn credit facility, which we expect to use to address the $609 million convertible maturity in March 2026. After that, we have no maturities until 2030. We also used $334 million towards repurchase of shares in 2025. Before I get into specific guidance for Q1 and 2026, let me highlight a few key pillars that are foundational to our long-term strategy. First, we remain committed to investing in durable growth rooted in world-class ongoing innovation. We are spending over $250 million in innovation with the majority going towards our new AI-led products. Second, improving GAAP and non-GAAP profitability and free cash flow. We expect free cash flow of $590 million in 2026 at the midpoint. As Vlad noted, we also expect GAAP operating margins of 9% in 2026 at the midpoint with a goal of reaching 20% over the next 3 to 4 years. Third, we remain focused on reducing SBC to drive improvements in EPS and free cash flow per share. We expect annual grants in dollars to decline further to approximately $150 million in 2026 with further reductions over time. Our goal is to reach a steady state of 3% to 4% SBC as a percentage of revenue over the next 3 to 4 years. Fourth, continued deleveraging with a near-term goal of achieving investment-grade credit rating. To that end, we remain committed to reducing our gross debt to $1 billion by the end of 2026. Fifth, returning additional capital in the form of dividends and share buybacks. On the latter note, our Board has approved a $250 million increase in our share repurchase plan, bringing the total authorization to $500 million. With that context, let me turn over to guidance. For the full year 2026, we expect subscription revenue growth of 4.5% to 5.5%; total revenue growth of 4% to 5%, GAAP operating margin of 8.6% to 9.6%, expanding approximately 430 basis points at the midpoint; non-GAAP operating margin of 23% to 23.5%, expanding approximately 75 basis points at the midpoint; free cash flow of $580 million to $600 million, up 11% at the midpoint; SBC of $240 million to $250 million, down about 2 points to approximately 9% of revenue at the midpoint; in-year new stock grants of $145 million to $155 million; free cash flow per share of $6.67 to $6.94, up 17% at the midpoint based on 86.5 million to 87 million shares; non-GAAP EPS of $4.76 to $4.97, up 11% at the midpoint. For Q1 '26, we expect subscription revenue of $622 million to $625 million; total revenue of $640 million to $645 million; GAAP operating margin of 7.1% to 8.2%; non-GAAP operating margin of 22.8% to 22.9%, up approximately 100 basis points year-over-year; non-GAAP EPS of $1.16 to $1.19; SBC of $60 million to $65 million. In closing, I would like to thank our customers and employees for a strong 2025, and now we look forward to another strong year of execution with agentic voice AI, providing a durable tailwind to our business. With that, we will open the call for questions. Operator: [Operator Instructions] The first question today is from Brian Peterson with Raymond James. Brian Peterson: Congrats on that above consensus free cash flow outlook for '26. Just maybe double-clicking on that and with that cash flow, I'd love to understand what are your capital allocation priorities as we think about 2026 and beyond and maybe the longer-term strategy with the opportunity, both for debt payback or the dividends. Would love to get more perspective there. Vaibhav Agarwal: Thanks, Brian, for the question. So yes, on free cash flows, we are super proud of what we've accomplished over the last 5 years -- sorry, the last 3 years. If you look at our trajectory, we've gone from $100 million to $500 million in free cash flow, and this year, at the midpoint, we are guiding to $590 million, so up 11% year-over-year. So we are super happy with the progress there. Now with those levels of free cash flows and the consistency with how we are producing them, we have a lot of optionality in terms of our capital allocation priorities. So clearly, the first priority is investing in the growth of the business. So as you read probably in the transcript, we are spending over $0.25 billion of R&D spend, majority of which is going in our AI-led products. So think of that as 4% to 5% of margin that's getting invested in growth. From there, we are looking to strengthen the balance sheet by reducing our leverage to being investment grade. So we remain committed to bringing our gross debt down to $1 billion by the end of 2026. And also as a reminder for people, we have a $609 million convert that's coming due in March, and we expect to refi that with the undrawn Term Loan A facilities. So once we pay down the debt, there is no debt maturities until 2030. So net-net, we've taken care of any near-term debt maturities. After deleveraging, we are returning additional capital through a balanced combination of buybacks and super excited to announce our first quarterly dividend. So we repurchased about $300 million of stock. Our Board has authorized an incremental $250 million, which takes our available share repurchase balance to $500 million, and we've lowered share count to 2019 levels. And dividends will just complement share buybacks. It's an incremental way of returning capital to our shareholders. And the reason we are very excited about that and the reason we initiated it now is because of the confidence that we have in our business as well as the strong free cash flows that we are generating. So overall, look, with our recurring revenue model as well as growing portfolio of AI products and improving profitability profile, we feel comfortable in our capital allocation strategy. Brian Peterson: Great to hear. And maybe just following up. I would love to understand how you would characterize the demand environment versus enterprise, mid-market, SMB. Any color you can kind of share on the various customer segments? Vladimir Shmunis: Repeat the question, please. Brian Peterson: Yes, Vlad. I'm just going to get some perspective on what you're seeing in terms of demand. Kind of enterprise, mid-market, SMB, just by customer size, what are you seeing in the environment out there? Vladimir Shmunis: Yes. You know what, great question. So demand actually continues very strong across all segments. And we're doing well with new logos, and we're actually doing pretty well with upsells as well across all segments. We are seeing more pricing pressure in the enterprise than in SMB and in particular, in small business, where contracts are shorter duration, and we don't have any COVID lapping contracts at this point in those segments. Because of that, they are doing -- they are -- specifically the small business, is growing in double digits and have actually accelerated year-over-year. By the way, this was not always the case. Okay? So that seems to be very much an area of strength. And as a reminder, between small business and global service providers, in total, there is a bit over $1 billion, closer to $1.1 billion of combined revenue, and that's growing in double digits and performing well above the Rule of 40, if it were standalone. So we are seeing that. With enterprise, there are still pricing pressures, still mostly having to do with COVID lapping contracts. And I think as we've indicated on some of the past calls, we expect for that headwind to subside over this current year, so entering '27 with a clean slate from that perspective. Operator: The next question is from Siti Panigrahi with Mizuho. Sitikantha Panigrahi: Great. I want to dig into a little bit on your profitability. That's impressive, seeing the GAAP profitability and the target for further expansion. So Vaibhav, could you talk about the levers that you're seeing to get there? Is it more like gross margin expansion with your own product mix or you're expecting some kind of operating leverage on any particular line? And also in the same context, where do you see this stock-based compensation to come down in next few years? Vaibhav Agarwal: Yes. Thank you, Siti, for the question. So let me unpack maybe the three-part question that you had. So relative to operating margins, again, if you look at our trajectory over the last 3 years, we've doubled operating margins from 12% to 24%. So -- and this year, we are also guiding to a 75 basis point expansion, and we are expanding margins while we are continuing to invest in innovation. So where that expansion is coming from is a few areas. Number one, as you mentioned, our gross margins continue to be strong at above 80%. Number two, we are very disciplined in terms of spend. And we also have operating leverage in our business, so we've been consistently driving revenue growth, which is outpacing expense growth. And then in terms of our spend, we are really disciplined in terms of our hiring practices. We are offshoring. There is a lot of vendor consolidation. And then Kira talked about this in her script, that we have increasing use of AI internally. So all of that is driving operating margin expansion. Now operating margin for us has a broader definition. We also look at it in the context of SBC reduction as well as conversion into free cash flow and free cash flow per share. So we are continuously driving reductions in SBC. We are disciplined in terms of our brand practices. So if you'll see from our guide, we are going from almost 11% of SBC to 9%. So there's a 200 basis points improvement and over the longer term -- in the medium term, I apologize, we have laid out a target of SBC being 3% to 4% in the next 3 to 4 years. So I think that's point #1. Point #2 is we also look at operating margin in the context of free cash flow conversion. So if you go back a few years, there was a delta between our operating margins and free cash flow, and that has come down pretty significantly. So now the quality of the operating margin conversion is pretty high, and we've guided to $590 million this year or up 11%. So net-net, overall, look, we have a lot of operating leverage in our model, and we can always drive higher margins, but we are balancing that expansion in margins with reinvestment in innovation and growth. Overall, from a long-term perspective, we feel comfortable with the long-term sustainability of both operating margins and free cash flows because there are a number of structural drivers. And we have a scaled revenue model, which produces recurring revenue and as high net retention rates as Vlad indicated. We have embedded operating leverage in the model, and we are being very disciplined in terms of how we are deploying that cash. So overall, we believe we have a strong foundation to continue to keep improving both operating margin as well as free cash flows. Sitikantha Panigrahi: Okay. That's helpful. And then a quick follow-up on AIR that grew 8,000 customer plus. So that's pretty good. But what's the average contract value for those AIR customers? Are you seeing the ARPU for AI-related customer different? I mean, anything, changes? How does compare that versus non-AI customer? Basically, I'm trying to understand if you're seeing any kind of meaningful dollar expense and [ per seat ] with AI. Vladimir Shmunis: Yes. I'll take that. Vaibhav can add additional details. Okay. I'll start with your last question. Are we seeing lift? Absolutely. We already said that -- so here are a few things I really want people to appreciate. So one is we have achieved a $100 million ARR exit rate with new products, which we said 2 years ago, we had 0 revenue. We said would at the $100 million, we have achieved that. So that's check. We also said that AI -- pure AI comprises a meaningful portion of that. Okay? And just as a reminder, our new product initiatives include our 3 AI products, AIR, AVA and ACE, as well as contact center, which is RingCX. Okay? So AIR, AVA and ACE together are contributing to that $100 million. But even more importantly -- and this is a new metric that we have put out there and that would urge people to be judging us on that moving forward. And that is a percentage of overall revenue that comes from customers that utilize at least one of our paid AI products. Now why say paid? Because almost all of our customers are utilizing some AI in their portfolio. Okay? But a subset is paying for AI. So this is the dollars, AI dollars, paid AI dollars that comprised the $100 million. But they pull together, at this point, almost 10% of our ARR, so in the $250 million range to date. Okay? So it has a direct impact but a much more stronger and $0.25 billion like indirect impact, both in ARR and also very importantly, it is showing significantly better retention. And our overall is pretty good, world class, we think. But now it is showing net retention substantially above 100% across the board. That includes small business. So I hope I answered that question. Operator: Your next question is from Elizabeth Porter with Morgan Stanley. James Faucette: This is Jamie on for Elizabeth. Would be great to just get a sense on how you're seeing the different uptake of AI across different go-to-market channels, maybe like thinking about the GSP space or sort of verticals, whether it's enterprise versus SMB. Vladimir Shmunis: Kira, you want to take that? Kira Makagon: Yes. Sure. So Jamie, the uptake has been good across segments on direct and channel. I would say that AIR -- where we launched our -- so we have 3 products, AIR, AVA, ACE, and AIR is having particularly a good uptake in the smaller customers as it's really easy to set up and especially in the small business, where it's -- they're pressed for just pure resources to be able to take incoming calls, for example. That's been like a lifesaver for customers, being able to go from anywhere in improved lead taking to all the way that translates to real revenue. Our AVA product particularly sells well with our mid-sized customers and ACE across the board. This is the product that does a post-call analysis. In terms of -- and a similar direct end channel, and I would say that on the GSP side, we announced last quarter AT&T is taking it to market. Now we've got TELUS taking it to markets. We've got other GSPs taking our AI products to market, so seeing very consistent and repeated uptake on AI products with the GSP constituency as well. And in terms of the results, we spoke a little bit on the -- during the script with real numbers that support why customers are using it, and it goes from essentially improving their revenue profile to be able to expand, to be able to monitor quality, to be able to achieve their strategic goals such as, for example, one of the customers that we quoted achieving their rating classification, so they can take in and attract more providers. Operator: Next question is from Andrew King with Rosenblatt. Andrew King: Just wanted to get some extra color on how you might have adjusted your partner program in order to reflect the company's new AI priorities? Vladimir Shmunis: Really, really good question. Look, we have a well-established and a well-differentiated partner network. We have a pretty good understanding of which partners cater to what audiences. We also know what our golden verticals are, and a couple that really stick out at this point is health care and financial services. And then there is also SLED, which is doing very well for us as well. So at a high level, we are going with those partners, and I would say that, that would be tip of the spear for us. Over time, we believe that AI will be utilized across the board and adding values in all verticals, but this is the one that come to mind first. Also, GSPs generally tend to -- their user bases tend to be SMB in their own right, and this is another testament how well our AI and AIR, in particular, is playing in SMB, is that not only is it doing well for us but also most of our GSP partners have now lined up and is deployed or will be deploying shortly. So it's [indiscernible]. Andrew King: Congrats on the strong performance. Operator: [Operator Instructions] The next question is from Ryan MacWilliams with Wells Fargo. Unknown Analyst: This is [ Cyrus ] on for Ryan. With the recent announced integration with OpenAI's like 5.2 voice model, what are OpenAI's models bringing specifically to the Ring platform that are enhancing your voice offering? Kira Makagon: Well, we -- in the press release, we clearly spoke about 5.2 model. Generally, I would say that we are -- we utilize the models that make the most sense for the transaction that is being analyzed and most cost effective. So we always test all the models. 5.2 is the latest model and shows very good results. So we look for accuracy. We look for latency. We look for things to optimize during essentially processing and apply what's best in that particular scenario. And I should add to that as well that we -- the platform generally is model agnostic, and so we also utilize other models as they're applicable to specific needs of what's being processed at the time, whether it's a real-time transaction or post processing transaction. So different models apply and there -- we always do arbitrage between the models. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Steven Horwitz for any closing remarks. Steven Horwitz: Thank you, everyone, for joining us today. We look forward to seeing you next quarter and also seeing you at Enterprise Connect in March. Please contact the Investor Relations at ir@ringcentral.com if you'd like to attend. I will be also sending out an invitation soon. Thank you very much. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Thank you for joining us today. Certain statements made during the course of this conference call that are not historical facts, including those regarding the future financial performance and cash position of the company, expected improvements in financial and related metrics, expected ARR from certain customers, certain expected revenue mix shifts, expectations regarding seasonality, customer growth, anticipated customer benefits from our solution, including from AI, our AI and CCaaS revenue opportunities and current estimations regarding the same, including the ability to leverage data in support of AI revenue opportunities, company growth, enhancements to and development of our solution, market size and trends, our expectations regarding macroeconomic conditions, company market and leadership positions, including the effective onboarding of our new Chief Executive Officer, business initiatives, pipeline, technology and product initiatives, including investment in R&D and AI, including a recently announced suite of our AI solutions as well as other future events or results are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are simply predictions, should not be unduly relied upon by investors. Actual events or results may differ materially, and the company undertakes no obligation to update the information in such statements. These statements are subject to substantial risks and uncertainties that could adversely affect Five9's future results and cause these forward-looking statements to be inaccurate, including the impact of adverse economic conditions, including the impact of macroeconomic challenges, including continuing inflation, uncertainty regarding consumer spending, high interest rates, fluctuations in currency exchange rates, lower growth rates within our installed base of customers and the other risks discussed under the caption Risk Factors and elsewhere in Five9's annual and quarterly reports filed with the Securities and Exchange Commission. In addition, Management will make reference to non-GAAP financial measures during this call. A discussion of why we use non-GAAP financial measures and information regarding reconciliation of our GAAP versus non-GAAP results and guidance is currently available in our press release issued earlier this afternoon as well as in the appendix of our investor deck that can be found in the Investor Relations section of Five9's website. Also, please note that the information provided on this call speaks only to management's views as of today and may no longer be accurate at the time of a replay. Lastly, a reminder that unless otherwise indicated, figures -- financial figures discussed are non-GAAP. And now I'd like to turn the call over to Five9's Chairman, Mike Burkland. Michael Burkland: Thanks, Tony, and thanks, everyone, for joining our call this afternoon. Before we discuss our strong finish to the year, I want to acknowledge that this is my final earnings call at Five9 after 18 years with the company. It has been the privilege of my career to lead this organization, and I'm incredibly proud of what we've accomplished together. We've grown Five9 from approximately $10 million in annual revenue to a $1.2 billion run rate, while enabling some of the largest brands in the world to transform their customer experience. These achievements are a testament to the talented team of Five9ers and our vision to be the leader in AI-powered CX. As you know, Amit Mathradas started as CEO on February 2. And before we dive into the business results, I want to take a moment to formally welcome Amit to his first earnings call. After a comprehensive search process, we selected Amit for his deep experience in product innovation, AI and operational excellence at scale. His leadership style and his proven track record of leading through evolving market conditions align perfectly with Five9's culture and the tremendous opportunity ahead of us. I have the utmost confidence in Amit's leadership and all of us here at Five9 are extremely excited to start this new chapter with Amit at the helm. With that, Amit, I'll turn it over to you to share a few of your initial thoughts on Five9 and our opportunity ahead. Amit Mathradas: Thanks, Mike. I am thrilled to join my first Five9 conference call and would like to express my gratitude to the leadership team and the Board for putting their trust in me as Five9's next CEO. I officially started on February 2. And in the past 2 weeks, I have spent time meeting partners, customers, listening to employees, reviewing road maps and getting deeper into the operational cadence. And what I have seen so far has reinforced why I took this role. I joined Five9 for a simple reason. That is I believe we have a large opportunity in front of us and that we have the right foundation to capture more of it. I strongly believe that over the long term, customers will look to Five9 for a unified CX platform that can solve their agentic and traditional human needs. This multi-agent world uniquely positions Five9 to drive efficiency, elevate customer experience for all our customers. From a communication standpoint, you should know that I will be clear on what's working, what is not and what we are doing to improve it. And with that, I'll turn it back to Mike to discuss our fourth quarter and full year performance. Mike? Michael Burkland: Thanks, Amit. We're pleased to report solid Q4 results. We had an exceptional bookings quarter, achieving a Q4 record, highlighted by enterprise AI bookings more than doubling year-over-year, contributing to healthy increases in backlog. In terms of top line, we finished the year strong with fourth quarter total revenue coming in at $300 million. Subscription revenue, which now makes up 82% of total, accelerated to 12% year-over-year growth in Q4. This was driven by enterprise AI revenue growth accelerating from 41% to 50% year-over-year and core CCaaS subscription revenue growth accelerating from 7% to 8% year-over-year. I'm also excited to report that our enterprise AI annual run rate revenue surpassed $100 million in the fourth quarter. On the bottom line, we achieved all-time records in the fourth quarter with adjusted EBITDA increasing to a margin of 26% and free cash flow more than doubling year-over-year to a margin of 22%. These results demonstrate our commitment to balanced growth and operational excellence. I'm incredibly proud of our team's execution. And with our strong positioning in AI-powered CX, we believe we're set up for continued success in 2026 and beyond. Turning now to our business updates. Today, I'd like to focus on 3 key topics: first, our large and growing market opportunity; second, our differentiated position in AI-driven CX; and third, our strong partner momentum. We are in the early stages of a long-term transition in the CX industry with multiple secular growth vectors driving a significantly expanding addressable market for our platform. As a reminder, Gartner forecasts the market for traditional CCaaS to grow at a 9% CAGR and the gen AI customer service market to grow at a 34% CAGR through 2029 to a combined annual spend of $48 billion. We believe that both of these growth drivers will create a powerful tailwind for Five9 as we continue to execute against this durable multiyear opportunity. Importantly, we believe Five9 is well positioned to lead in this new era of AI-powered CX. At the core of our advantage is data, more specifically, conversational data. We capture every customer interaction across voice, digital and AI-driven channels. Therefore, our platform remembers every conversation, whether it was with a human agent or with an AI Agent through voice or digital. This creates what we call a relationship-based experience where every engagement feels personal, contextual and connected. Our end-to-end platform serves as a real-time orchestration engine for customer interactions, whether handled by a human agent or by an AI Agent, enabling seamless collaboration between the two. Each interaction strengthens the next, and this continuous learning loop compounds over time, creating a powerful data flywheel that drives higher performance, accuracy and personalization. This is a significant advantage that only an end-to-end platform can deliver. Our platform advantages are also driving significant momentum in product innovation. At our CX Summit in November, we announced a suite of new AI-powered solutions designed to help enterprises elevate their CX, including our AQM, which is a next-generation Agentic Quality Management solution, our AI-powered Genius Routing engine, our OneVue unified analytics and reporting platform. And our no-code Adaptive Digital Engagement solution. These innovations showcase how Five9 continues to lead in AI-driven CX and further strengthen the power of our end-to-end platform. In addition to our product innovations, we continue to double down on partnerships as a key driver of differentiation in both our products and our go-to-market. That's why we're excited about the expansion of our partnership with Google Cloud and the launch of our joint Enterprise CX AI solution, which we announced in January. We were an early adopter of Google's AI technology, and it continues to pay off for us by accelerating innovation across our CX and AI portfolio. Our joint solution brings together the Five9 AI-infused intelligent CX platform and Google Cloud's Gemini for customer experience, to deliver faster time to value, seamless end-to-end orchestration across the customer journey and more personalized interactions. Customers can move beyond pilots and deploy AI and production faster, grounded in real customer context and built for enterprise scale. That's why we're already seeing strong traction with some of the largest brands in the world leaning into the combined power of Five9 and Google. And before I turn it over to Andy, I want to thank our incredible team of Five9 for your passion, dedication and commitment to excellence throughout my tenure as CEO. Together, we've built something truly special. As I transition the CEO role to Amit, I'm more excited than ever about Five9's future. We have a differentiated platform, proven expertise, strong customer momentum and the right leadership to capitalize on the significant opportunity ahead. And with that, I'll turn it over to our President, Andy Dignan, to share more details on our go-to-market performance. Andy? Andy Dignan: Thank you, Mike, and congratulations on your well-earned retirement. And Amit, I look forward to working with you as we build on Five9's strong foundation. We were pleased to deliver an exceptional quarter of bookings. As Mike mentioned, total bookings represented a Q4 record, driven by enterprise AI bookings more than doubling year-over-year and our installed base bookings achieving another all-time high for the third consecutive quarter, driven by ongoing strength in upsell and cross-sell activities. In addition to strong execution by our sales teams, a key driver of our success is our partner strategy. Partners expand our reach. They bring us into more enterprise buying motions and speed up time to value for customers. Five9 has been partner-first for years. And today, more than 80% of our business is partner influenced. Our balanced route-to-market model is working. Partners are leading complex transformations, accelerating AI adoption and delivering outcomes faster than ever. In 2025, Five9 doubled year-over-year, the number of partners certified to implement Five9 services, showing just how mature and essential our ecosystem has become. Building on Mike's comments about the multiple secular growth vectors expanding our market, we're seeing customers lean into both sides of that transition at once, modernizing on CCaaS while accelerating adoption of AI. The first example is a global power management company with over 85,000 employees that selected Five9 to modernize from an on-prem platform to a CCaaS foundation. They chose us based on our native integrations with Salesforce and ServiceNow and our AI Agent and Agent Assist capabilities to improve self-service and drive higher agent productivity. We expect this initial order to result in approximately $2.8 million at ARR. Another example is a life, health and financial services provider that chose Five9 to move from on-prem to cloud and improve work performance. They selected Five9 for our tight integration with their health care CRM and our comprehensive suite of AI solutions. We expect this initial order to result in approximately $1.1 million in ARR. The third example is a hospitality technology company migrating off of a cloud competitor. They chose Five9 for our open platform approach, which allows deep integration with their hospitality platform, their core business. They view this integration as a differentiator for their customers, including some of the highest-end hospitality brands in the world. They also chose Five9 because of our joint partnership with Google Cloud to accelerate AI-driven CX. We expect this initial order to result in approximately $3.4 million in ARR. In addition to customers choosing us as their core CX solution, we continue to see our customers expand their use of Five9's AI capabilities and make long-term commitments to Five9 as their CX AI provider. One example is a health care provider that expanded their Five9 commitment from approximately $6 million to over $10 million in ARR, along with a 3-year commitment. They are doubling down on AI with a clear focus on leveraging AI Agents to drive meaningful cost savings across the business. Looking ahead, we remain encouraged by the momentum of our business, fueled by pipeline and RFP activities sustaining elevated levels. And with that, I'll turn it over to Bryan to take you through the financials. Bryan? Bryan Lee: Thank you, Andy. Before I dive into the financials, I want to thank you, Mike, for your exceptional leadership and incredible partnership over the years. Your vision and execution have positioned the company well for the future. And Amit, welcome aboard. I'm excited to work with you as we advance Five9 to the next chapter. Now turning to our financial performance for the fourth quarter. We're pleased to report strong Q4 results with total revenue coming in at $300 million, representing 8% growth year-over-year. Subscription revenue growth accelerated to 12% year-over-year in the fourth quarter, primarily driven by: first, enterprise AR revenue growth accelerating to 50% year-over-year, now making up 12% of enterprise subscription revenue; second, core CCaaS growth accelerating to 8% year-over-year; and third, continued momentum market where 228 of our million-plus ARR customers grew subscription revenue 24% year-over-year, now making up 59% of subscription revenue. Additionally, our concurrent seat count continued to grow at a healthy rate, both quarter-over-quarter and year-over-year, relatively in line with our core CCaaS revenue growth. Subscription revenue represented 82% of total revenue, up from 79% a year ago. And we expect this mix shift to continue as we focus on high-margin subscription revenue, increasingly led by our AI solutions. Telecom usage represented 11% of revenue and professional services made up the remaining 7%. With regard to seasonality, as expected, the sequential uptick in our consumer and health care verticals in Q4 was meaningfully less than last year for telecom usage. For subscription revenue, sequential growth was better than anticipated, but still less than Q4 of last year. Our enterprise business represented approximately 91% of total revenue on an LTM basis. Within this category, LTM enterprise subscription revenue grew 15% year-over-year. Our commercial business represented the remaining 9%. As a reminder, this part of our business underperformed in Q3, but the immediate actions we implemented drove favorable results in Q4, and we expect LTM year-over-year growth to return to normal historical levels next quarter. With regard to our dollar-based retention rate, our spot rate increased sequentially, while the LTM rate stepped down from 107% in Q3 to 105% in Q4 as anticipated. This is primarily due to tough compares as Q4 '24 benefited from strong seasonality and our largest customer completing its multiyear ramp. In 2026, we expect LTM DBRR to remain range bound within a small band in the first half and inflect upward in the second half. Turning now to profitability. Q4 adjusted gross margin was 63%, down by approximately 40 basis points year-over-year, primarily driven by lower gross margins in telecom usage and PS. Adjusted EBITDA margin increased by approximately 260 basis points year-over-year to 26% as we continue to focus on disciplined expense management. Additionally, we continue to boost productivity as demonstrated by our revenue per employee increasing 14% year-over-year. Q4 GAAP EPS was $0.23 per diluted share, representing 5 consecutive quarters of positive GAAP earnings, while non-GAAP EPS came in at $0.80 per diluted share. In terms of cash flow, we generated $84 million or 28% of revenue in operating cash flow. Additionally, we generated free cash flow of $67 million or 22% of revenue, which represented over 10 percentage points of margin improvement year-over-year. As a result, we ended the quarter with total cash and investments of $697 million. And now for a closer look at key full year 2025 income statement metrics. 2025 total revenue came in at $1.15 billion, growing 10% year-over-year, with subscription revenue growing 13% year-over-year. 2025 adjusted gross margin expanded by approximately 110 basis points year-over-year to 63%, while 2025 adjusted EBITDA margin expanded by approximately 470 basis points to 23%. 2025 GAAP EPS was positive for the first time on an annual basis at $0.45 per diluted share, while non-GAAP EPS came in at $2.96 per diluted share. 2025 operating cash flow finished at $226 million, and free cash flow came in at $162 million. Now turning to our full year 2026 and first quarter guidance. For 2026 revenue, we're initiating our guidance at a midpoint of $1.254 billion, which is in line with the high-level outlook we provided last quarter. For Q1 revenue, we're guiding to a midpoint of $299.5 million, which is also consistent with the high-level outlook of relatively flat sequential change we shared last quarter. In terms of quarterly progression, we expect Q2 revenue to increase slightly quarter-over-quarter, followed by momentum building further throughout the year. As a result, we continue to expect revenue to return to double-digit growth in the second half of 2026, driven by our strong backlog of both new logo and installed base bookings. With regard to the bottom line, we're guiding 2026 non-GAAP EPS to a midpoint of $3.18 per diluted share, which is higher than the high-level outlook of $3.14 per diluted share that we provided during our last earnings call. We're also guiding to continued GAAP profitability in 2026 with a midpoint of $0.91 per diluted share for GAAP EPS. For Q1 non-GAAP EPS, we're guiding to a midpoint of $0.68, which reflects a typical sequential decline in the first quarter of the year. As for the remainder of the year, we expect relatively flat sequential move in the second quarter and large improvements in the second half. Also, for other key profitability metrics, we expect at least 24% in annual adjusted EBITDA margin and approximately $175 million in annual free cash flow. Additionally, we plan to host an Investor Day in late 2026, where we will provide additional details on our strategic priorities and long-term financial outlook. We look forward to sharing more with you at that time. Finally, on our share repurchase program, we completed a $50 million accelerated share repurchase on February 2, buying back approximately 2.6 million shares. We have $100 million remaining under our authorization through December 2027. This reflects our strong cash generation and confidence in Five9's value creation opportunity. In closing, 2025 was a transformational year for Five9. We delivered strong financial performance, expanded our AI capabilities and strengthened our strategic partnerships, and we believe we have positioned the company well for sustained profitable growth. With Amit now leading the team, we're energized about our opportunities ahead and committed to executing our strategy to deliver long-term shareholder value. And with that, operator, please open the line for questions. Operator: [Operator Instructions] Our first question comes from Raimo Lenschow from Barclays. Unknown Analyst: This is [ Damon Coggin ] on for Raimo. Congrats on your retirement, Mike, and congrats, Amit as well for the new role. Great to hear the continued strength with the AI portfolio, reaching $100 million ARR, accelerating 50% year-over-year. Can you help us understand some of the breakdown between what is greenfield and then what is within your existing customer base? And then what is factored into the 2026 guide just from that portfolio? Michael Burkland: I'll start, and Bryan, feel free to chime in. But look, this is a combination of us having a lot of success with new logo attach of AI and also penetration into our installed base. I don't think we quantified the breakdown between the two, but I can tell you both are growing at a significant rate and very strong. Bryan? Bryan Lee: Yes. And if you think about the 2026 revenue guidance, we've kind of given you the shape of the curve on a total revenue basis. And this is the first time we've given you the breakout of growth rates between enterprise AI as well as core CCaaS. So core CCaaS, obviously, that's a big portion today, and that's going to follow the shape of the curve for the total revenue guide, which means that if you back into the enterprise AI, it's going to still be growing at a very fast clip, but it will ebb and flow through the quarters, but it's still going to be the fastest part of our portfolio. Operator: Our next question comes from Siti Panigrahi from Mizuho. Sitikantha Panigrahi: Great. Mike, it was great working with you and wish you good luck for your next phase. And Amit, congratulations and look forward to working with you. Great. Amit, I want to ask you, you have great product experience operation and when you look at AI outside the industry. As you look into Five9, and I know you talked about opportunities huge, how do you see to navigate Five9 when it comes to product? Or where do you think you can bring some changes? Or where do you think it's working? Or do you think it is too early to talk about that? Amit Mathradas: Thank you, Siti, for that question. Look, I think the answer is a combination of what you laid out a little bit. Look, one of the reasons I took this role is I am really bullish on the transformation that's going to happen within the CX space. As humans, agents, systems, software all come together, I actually think this turns allows our end users and customers to have more efficiency, greater experiences and in some cases, new experiences that haven't even been factored in as yet, right, just like how the Internet per se transform retail. And so for me, I am really looking forward to unlocking that, which is how do we actually increase the TAM by doing new things with AI and traditional CCaaS and providing customers new opportunities. To the second part of the question on where do we go from here and which pieces, it's a little bit early. I'm still getting my feet around our product and our road maps. But what is really exciting is the stat we put out, which is we've already done $100 million in ARR of AI, and it's growing. So we have proof points to back up this thesis that AI is growing. It's happening fast, and it's happening both in our new logo as well as in the existing base. Operator: Our next question comes from Ryan MacWilliams of Wells Fargo. Ryan MacWilliams: Excellent. This one is for Mike. Mike, I mean, what a great run and congrats. I mean I just think back to probably 15 years ago when people said that the biggest contact centers in the world would never move to the cloud, right? And now you guys have customers that are over 10,000 seats and some of the largest Fortune 50 companies that are out there. So people have been wrong before in the contact center industry about what's coming next. I mean, as you kind of take a step back today, what do you think people are missing right now in terms of the contact center opportunity? Like I know it feels like the seats are a question and like where some of these interactions will be. But like what do you think the contact center of 5 years from now means for Five9? Michael Burkland: Yes. Thanks, Ryan. I appreciate the comments. And look, I think you're absolutely right. I mean I remember when we went public in 2014, how everyone really just questioned whether or not large enterprises would shift to the cloud. And obviously, we're 40% cloud today, 60% still are on-prem, and it's going to be a multiyear opportunity for us to continue that trend. But look, things have changed. The AI opportunity is massive. We've invested. We were early in this investment with our Inference acquisition. We've built a lot of capabilities on top of that. And I think what people are starting to realize, and I'm not sure -- I think we're just at the very beginning of this realization, quite frankly, across the investor set and across -- I think our customers already see this, but I think the investor community is starting to learn that this end-to-end platform advantage that we have and some other players have, think of, again, Five9 as the system of engagement or the system of interaction, the system of action as opposed to, say, a CRM system, which is kind of the system of record. And I think it's important to understand that we're on the front lines. We're right there at the moment of truth with a customer and a brand. And we have an unfair advantage because of that. And providing both AI-driven solutions as well as solutions for the human agents in an orchestrated fashion. That is our power, that is the power of our platform, and it results in, again, these personalized contextual and connected experiences that only a platform like Five9 can deliver. And I think that is what -- it's showing up in the numbers, but I think we're starting to talk more explicitly about those numbers, Ryan. And that is our core CCaaS revenue growth accelerated from 7% to 8% and our AI revenue growth accelerated from 41% to 50%. And that is the recipe for success. I'll stop there. Ryan MacWilliams: You really want to trust the system to give you the right answer because it's not fun to be on the other side of a wrong answer. Operator: Our next question comes from Terry Tillman of Truist. Giancarlo Secchiano: It's Giancarlo on for Terry, and I appreciate the question. Congrats on a strong quarter. And I think that you guys were talking about the strong adoption for the newer features that you guys rolled out. And I was just wondering what sectors were seeing the highest uptake for those features? And maybe can you talk about what customers are kind of saying was their biggest pain point? And like how has that changed over the last few months? Michael Burkland: I'll move to Andy? Andy Dignan: Yes, I'm going to take that one. So we're seeing a lot of success in health care and retail. And we talked about a lot of expansion within our customer base. And so I think what -- really what we're seeing is customers wanting to take that next evolution from their CX strategy to AI. And the challenges that most of them have historically seen is their data is not in a good spot, right? We've talked about this for a while. Your AI strategy is only good as your data strategy. And so we put a lot of effort into focusing on making sure that our customers understand where their data needs to be to go deliver on those use cases. And over time, as we've talked about like the customer example today, a customer expanding their AI, we've proved that time and time again over the last couple of years. And so now they're making their bets for 3- and 5-year renewals based on what we demonstrated and our success and their confidence in us going into the future. Operator: Our next question comes from Catharine Trebnick of Rosenblatt. Catharine Trebnick: Congratulations, Mike and Amit and back to the AI question. So what percentage of your enterprise base is adopting the AI, especially looking at AI Agent Assist and Genius Routing. What I'm trying to really understand is what's the runway going forward for enterprise adoption? Michael Burkland: Yes, I'm happy to start. Catharine, look, I think it's early days in terms of kind of end-to-end full penetration within our base, almost every single one of our customers is obviously, right? Every enterprise in the world is looking at AI and making AI decisions. But it's early in terms of the rollout in a lot of these cases. And again, I talked about our end-to-end platform a lot and the fact that our customers are rolling out our AI and our CCaaS in production environments, not just in proof of concepts, not just in slick demos, but in real production environments. And -- but it's still early days in this opportunity. As I talked about, we've crossed $100 million in ARR and AI, but it's -- we're just getting started. Operator: Our next question comes from Peter Levine of Evercore. Peter Levine: Mike, best of luck, and Amit welcome aboard. Maybe how do you think about the risk that the LLM native platforms bypass the traditional CCaaS architecture entirely, right? Like in what scenario does an enterprise build their own AI Agent directly on top of like an OpenAI and Anthropic, right? And I guess the question is like what core functionality does Five9 provide that can't be replicated, meaning like what's the hardest to kind of disintermediate from you guys? Is it the workflow, the infrastructure, the compliance, the data? Like help us think through like the risk that these platforms are going to come in overnight to replace you guys? Michael Burkland: Yes. Very good question, Peter, and I'll start, and you guys feel free to chime in. Again, we talk about our platform advantages, mainly the data advantage is number one, and it's conversational data and its historical and real-time conversational data. It's also this orchestration capability across all channels and across any back end, whether it's AI on the back end handling this interaction or whether it's a human agent, being able to orchestrate across this entire interaction set is an absolute competitive moat. And look, we're going to continue to have advancements by LLMs, but I've said this even 2 years ago, you cannot run a customer service organization on an LLM. LLMs are a foundational technology that we're all leveraging to deliver applications, solutions for customer experience. And the bar is set. The bar is always going to be there's an orchestration capability of these on-premise solutions that we replace. They're supporting thousands of human agents and now thousands of AI Agents in the future. And that orchestration capability is really isolated to these end-to-end platforms like Five9. Peter Levine: Maybe, Bryan, can you just help us understand the $100 million in AI revenue, what percentage of that is like seat-based, usage-based? But just help us understand what makes up that $100 million. Bryan Lee: Yes. So our $100 million of enterprise AI revenue is all consumption or capacity based. So the way it works is that we charge for a block of committed units, whether that's minutes or gigabytes or whatever it may be. And then anything above that would be overage. So it is absolutely consumption-based and yes, and gaining a lot of traction there. Operator: Our next question comes from Samad Samana from Jefferies. Samad Samana: I'll echo the words of my peers. So congrats, Mike, and great to be working with you, Amit. Just I guess a question, Bryan, as I think about the guidance and how you're thinking about the kind of the first half versus the second half, how much of that is influenced by the timing of either large logos that were still in the backlog, whether let's call it, the large pharmaceutical company or the large logistics company being fully live versus how much of that is AI revenue ramping? And have you made any adjustment to the guidance algorithm to account for maybe the change in revenue being more consumption-based versus seat-based? Just help us understand kind of the guidance mechanics. Bryan Lee: Yes, absolutely. So if you think about 2026 revenue, we're guiding to a midpoint of $1.254 billion. So that essentially for the year implies incremental revenue of $105 million. So I'll kind of talk about that in the form of contributions from DBRR versus backlog versus new logos bookings for the year. So if you look at DBRR first, the LTM rate, we exited 2025 at 105%, and we expect that to stabilize in the first half with minor fluctuations in either direction, but then inflect in the second half, right? And that alone makes up about 2/3 of that $105 million of incremental revenue. So the remaining 1/3 is actually fully covered by the backlog that we have. So essentially, there's -- and that has contingencies built in as well. So there's essentially no dependencies on the new logos bookings for the year. And the backlog, as you said, it is combined with both new logo bookings that we've already won as well as installed base bookings that we've won that have ramp associated with it. And those are turning into revenue throughout the year. We have great visibility into those, but every single customer in that backlog has a unique schedule of ramp. And it's -- this year happens to be much more back-end loaded, which is why there's that acceleration to double-digit growth in the back half of the year. And if you think about consumption versus seat-based, so our AI portfolio is all consumption and capacity-based, as I talked about earlier. And that's going to continue to be a significant driver of growth throughout the year. It's going to ebb and flow, as I mentioned earlier, but it will be the fastest growing part of our portfolio. Samad Samana: And then maybe just a follow-up. On the AI revenue, the $100 million for enterprise AI rev is very impressive. Can you just maybe help us understand how much of that is maybe allocated towards, let's call it, like next-gen solutions that you guys have rolled out in maybe like, call it, the last 12 to 18 months versus maybe what was foundationally from like an Inference or something that you had kind of in a prior period? Just to help understand where the momentum is inside of the portfolio. Bryan Lee: Yes. I'm happy to start and then others can chime in. So if you look at the composition of our AI revenue, the two biggest ones are our AI Agents as well as Agent Assist. And then followed by Workflow Automation and a lot of other smaller products that are growing very fast, but still very small in nature. So -- and AI Agents, of course, we're gaining significant traction in terms of the gen AI base as well as Agent Assist that's using gen AI as well. So we haven't given the exact mix. But of course, there's really strong momentum and acceleration that's happening across the board. Operator: Our next question will come from DJ Hynes of Canaccord. David Hynes: Well deserved, Mike, we'll miss you on these calls, but I know clearly, you still have an impact on the business from the Chairman seat. So look forward to that. Amit, good to see you again. Look forward to working with you. I got two questions. Bryan, I'm going to start with you. The AI revenue growth acceleration, I suspect that's just a function of what we talked about last quarter, right, that lag between bookings to kind of when it hits the P&L. And if that's right, I mean, AI bookings have been growing quite a bit faster, right? I think 80% last quarter, 100% this quarter. That tells me AI revenue growth should continue to accelerate. So, a, is that correct? And then the second question, I don't know if it's for you, Mike or Andy, but just talk a little bit more about the Google partnership, right? Like what that could mean for the business? What are they using from you? What are they -- what role does Gemini play in that? Just how do the pieces fit together and what it could mean? Bryan Lee: Yes. So I'll start, DJ. So thanks for the question. So yes, you're exactly right. We've been talking about enterprise AI bookings growing either 80% plus for the last 3 quarters. And we said if we string together multiple quarters like that, we'll start to see the acceleration happen, and we are starting to see that in Q4, where it accelerated from 41% to 50%. Now going forward, as I mentioned earlier, there will be ebbs and flows, but we do anticipate that if we can continue that momentum on the bookings side, they sit in backlog for a little bit and then they start converting into revenue, and that's what's baked into our guidance. And the acceleration that we're seeing in the back half of 2026 is driven by not just AI, though, also by core CCaaS in our backlog that's converting to revenue as well. So we're seeing momentum on both sides. Michael Burkland: And I'll start on Google, and Andy, please chime in. And I'll just give you one high-level comment. DJ, thanks for the comments, too. Look, it's been a pleasure working with you and the rest of the analyst community. Look, the Google partnership, in my opinion, is something very significant for Five9. And what I love about the partnership is it was born out of success that we were having together in the market with large enterprises. And it was more than just an alignment on paper. This was driven, as I said, by success in the market that we're having with them. And that's the -- in my opinion, at least those are the kind of partnerships that really flourish in the long run. So Andy, feel free to... Andy Dignan: Yes. If I look at the technical side of it, the solution -- I mean this is real joint solution. This is hands-on keyboards, engineers at Google and Five9 building this joint solution together. We've already had, to Mike's point, success. And we look at the opportunity that filling the pipeline from this coming together is really, really strong. And so you're going to -- obviously, it's going to be our CCaaS environment. We've been leveraging the Google and Gemini application and foundational models to build our own AI products. And so we're going to continue to build out what that joint solution looks like together. Operator: Our next question comes from Will Power of Baird. Ioannis Samoilis: This is Yanni Samoilis on for Will Power. And I'll echo the congratulations to Mike and Amit. And I'd love to hear a little bit about what you're seeing across the different verticals that you serve. If you could just discuss if any are strengthening more than others or if there are any that you expect to help power that second half acceleration more than others. And in particular, like for some of your bigger verticals like your health care vertical or maybe consumer, it would be great to get an update on what you're seeing and then what you're factoring into the guide for 2026. Bryan Lee: Yes, Yanni. So thanks for the question. And seasonality, if you look at our consumer and health care vertical in Q4, which are the 2 seasonally strongest ones typically. Now if you recall, we mentioned that we were expecting minimal seasonal uptick in Q4. In reality, what happened was the uptick was a little bit more favorable than what we were anticipating, but still weaker if you compare to Q4 of '24. And if you break that down between subscription and telecom usage revenue, the usage portion -- telecom usage portion was much weaker than last year, which is why as a percent of revenue, you saw a step down by 1 percentage point quarter-to-quarter versus -- we're going back to Q4 '24, it actually stepped up as a percent of revenue, right? But these dynamics means that in Q1, the seasonal downtick that always happens in those 2 verticals are actually going to be a little bit more muted than what we saw a year ago. And that's exactly what's baked into our guidance. If you look at our Q1 revenue guide, the sequential change is flat this year. But if you compare that to a year ago, it was negative 2% sequential guide, right? And so going forward for the rest of 2026 -- and by the way, the non -- all the other -- we track 17 verticals, the other 15, they're pretty much in line with typical sequential growth rates for Q4. And going throughout 2026, what we're assuming is that the seasonality, the macro conditions are all very similar to what we saw in the fourth quarter. Andy Dignan: I could add in on some of the segments. I mean our 3 biggest verticals are financial services, health care, retail, and we're truly seeing the adoption in those spaces, right? And I think what it points to is the platform advantage that we do have, health care, financial services, just from a regulatory perspective, security -- integrations, we talk about the complexity of the CCaaS deployment. On average, we do 24 integrations, up to 100 integrations at times. And so I think the bar is really high for them to adopt AI. And I think it just shows the fact that we're building true scalable enterprise AI solutions. It's a testament to the success the team has had building the products. Operator: Our next question comes from Jackson Ader of KeyBanc. Jackson Nichols: This is Jack Nichols on for Jack Ader. I was wondering if you could talk about new logo large customer pipeline and how influential Five9's AI features help land new customers? And then as a follow-up, could you talk about how AI helps dollar-based gross retention and then the dynamics of upselling in renewal contracts? Andy Dignan: Yes, we feel good about our -- in terms of our large deal pipeline, we feel good about the levels continuing to be strong. And obviously, AI is a big part of why they're choosing Five9. And so both in landing new logos. And then as you've heard us talk about $10 million-plus deals over the last couple of quarters that are expanding their spend with us. And so I think it's kind of across both segments. Bryan Lee: Yes. And I'll just say from a financial perspective for DBRR, when we talk about enterprise AI bookings doubling during the quarter, it wasn't just on the new logo side. It was both new logos and installed base. So we're seeing a lot of momentum there. And that's part of what's going into the backlog and then driving that acceleration on a total revenue basis, but also from a DBRR perspective in terms of the inflection upward in the second half. Operator: Our next question comes from Arjun Bhatia. Arjun Bhatia: All right. Perfect. I had two -- I guess, two quick questions. First, just on the NRR uptick. How -- like when you're expecting to inflect in the back half, obviously, that's a trailing 12-month metric. But where exactly kind of are you seeing the upsell, cross-sell? Is that coming through on the AI front? Is it core CCaaS continuing to pick up pace or on-prem migrations, right, from legacy kind of Cisco, Avaya? And then just a follow-up on the Google question. Are you -- like is it exclusive with Gemini? Are you using multiple models? Can you just talk about how you've built your stack a little bit? Bryan Lee: Yes, Arjun, I'll answer the first part of the question. So if you look at DBRR, I do want to point out that the spot rate in Q4 actually stepped up from Q3 to Q4, and that was driven by the conversion of installed base bookings in our backlog to revenue during the quarter. So even though the last 12 months coming into the last quarter actually stepped down on a rounded basis from 107% to 105%, which in actuality was only a little bit over 1 percentage point. That was more of a calculation where that's an LTM figure like you said, right, where it was dropping off Q4 '24, where it benefited from very strong seasonality and our largest customer finishing its multiyear ramp at that time. So we're already going into the year with a step up from Q3 to Q4. And of course, it will stabilize and fluctuate in either direction slightly. But the driver of that inflection upward is really driven by both core CCaaS and AI. So we saw the momentum in Q4. We talked about the acceleration on both sides. And if you look at the backlog, yes, AI has been gaining significant momentum, and it's consistently been above 20% of enterprise net new bookings. But core -- it's always attached to core CCaaS in the vast majority of deals, and that's also sitting in our backlog. So really, the acceleration will be coming from both. Andy Dignan: And on the LLM question, the Gemini, I mean, we made a decision 7 years ago, and that brings true that we believe that sort of a multiple engine, multiple LLM is the way to build the products. We sort of saw where this was going, which is these LLMs are continuing to kind of one up each other, right? And the other thing that's really important is each one of them sometimes delivered specific capabilities, right? You could have a single use case and use multiple LLMs as part of that. Now certainly, as part of the joint go-to-market with Google, we're going to be leveraging Gemini, right? There's a lot of very strong performance. We have a team within engineering and our services teams that are constantly benchmarking these LLMs as well. And so that brings us really to allow us to really continue to innovate on top of what's going on in the market. Operator: Our next question comes from Elizabeth Porter of Morgan Stanley. Unknown Analyst: I just want to echo the congratulations to Mike and Hamed. I guess the question from our side is like I think in the past, you guys have described kind of an AI fog among enterprise customers that having kind of lifted through 2025. And I guess just in light of some of the splashy announcements from the Frontier Labs or some of the upstarts in the space, has that fog stayed clear as we enter 2026? Or are you seeing any sort of lengthening in sales cycles as a result? Michael Burkland: Yes, I'll start, Andy, please chime in. Look, I think it's safe to say that every company in the world is prioritizing their AI decisions, right? And that's not going away. The fog that we saw predominantly in the kind of middle of '24 is that -- or sorry, a while back was really just the lack of CCaaS decision-making because of that. But we still obviously -- every enterprise out there is thinking about AI first, and we're now part of those conversations. It's so important for us to be front and center in the CX part of those AI decisions. And our sellers have become the experts. We've got solutions that we can lead with from an AI perspective. And it's a great way for us to go to market to a market that is pulling a lot of attention around AI. Andy Dignan: Yes. And in terms of the lengthening of sales cycles, I mean, outside of that fog, which was a lot of times, customers were coming off of doing a lot of proof of concepts, right, that weren't successful. We kind of saw that as an opportunity, like Mike said, to really up our game in terms of enabling our teams, but really more so very focused on having specific vertical-driven outcomes that we have customers who deployed it before. And so that really kind of came through. And so that's allowed us to, in my opinion, sort of accelerate some of our sales cycles, both on the new logo side and obviously, the installed base of customers continuing to just buy more of our AI. Operator: Our next question comes from Gil Luria of D.A. Davidson. Clark Wright: This is Clark Wright on for Gil Luria. Can you give us a medium-term financial framework? You already are effectively in line with all the metrics, excluding gross margins and revenue growth. How do you think about the impact of AI adoption on revenue growth and the inferencing costs that can weigh on gross margins going forward? Bryan Lee: Yes. So I'm happy to answer that. So if you think about enterprise AI revenue growth, what we've always said is that there is a significant opportunity out there. We've been very successful in terms of the bookings growth rate that you've seen. And if we can continue that is definitely upside to the revenue forecast and guidance that we have out there. And we -- it's a huge TAM expander for us, right? And we continue to execute very strongly there. Now in terms of margins, if you look at our AI Agents, which is the biggest part of our enterprise AI portfolio, they actually -- we have gross margins in the high 70s and 80s. And so -- and that AI portion as it becomes a bigger mix of our revenue, we expect that to be an accretive part of our overall gross margin trajectory going forward. Operator: This concludes the Q&A portion of our call. I will now hand the call back over to CEO (sic) [ Chairman ], Mike Burkland, for closing remarks. Michael Burkland: Chairman to be correct. Amit is our new CEO. And look, I just want to thank everybody for joining us. And I also want to just say personally thank you to all the analysts and all our shareholders. It's been a pleasure, my pleasure to work with all of you. And Amit, welcome aboard again. I am so bullish on our future and a big part of that bullishness is because you're here as our next CEO. So welcome. Amit Mathradas: Thank you. Michael Burkland: Thanks, everyone. Amit Mathradas: Thank you.
Operator: Good day, everyone, and welcome to Sprouts' Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. Now it's my pleasure to turn the call over to the Vice President of Investor Relations, Susannah Livingston. Please proceed. Susannah Livingston: Thank you, and good afternoon, everyone. We are pleased you are joining Sprouts on our fourth quarter and full year 2025 earnings call. Jack Sinclair, Chief Executive Officer; Curtis Valentine, Chief Financial Officer; and Nick Konat, President and Chief Operating Officer, are with me today. The earnings release announcing our fourth quarter and full year 2025 results, the webcast of this call and financial slides can be accessed through the Investor Relations section of our website at investors.sprouts.com. During this call, management may make certain forward-looking statements, including statements regarding our expectations for 2026 and beyond. These statements involve several risks and uncertainties that could cause results to differ materially from those described in the forward-looking statements. For more information, please refer to the risk factors discussed in our SEC filings and the commentary on forward-looking statements at the end of our earnings release. Our remarks today include references to non-GAAP financial measures. Please see the tables in our earnings release for a reconciliation of our non-GAAP financial measures to the comparable GAAP figures. With that, let me hand it over to Jack. Jack Sinclair: Thanks, Susannah. Good afternoon, everyone. In 2025, Sprouts delivered over 7% comp sales growth and achieved more than 40% earnings per share growth, reflecting the strength of our strategy. These strong results are a testament to the team's focus on our target customers and Sprouts' positioning to capitalize on the ongoing trends in healthy living. These are outstanding full year results. However, we are not happy with how the year finished as our comp momentum slowed. In 2025, we made progress on a number of key initiatives. New stores exceeded expectation. We launched our loyalty program and our expanded self-distribution supported both service levels and freshness. We introduced more than 7,000 new items, including more than 600 new products under the Sprouts brand. In addition, disciplined cost management and a continued system enhancement helped us build a margin profile that has seen significant expansion. This performance builds on what has been a remarkable multiyear journey for the business. Over that time, we've driven strong new customer growth, reinforced our business foundation and made meaningful progress towards our purpose of helping people live and eat better. At the same time, the macro environment remains uneven and consumers are increasingly value focused. Against this backdrop, the health and wellness landscape continues to evolve. What began as a focus on natural and fresh has expanded into more targeted outcome-driven solutions with customers becoming more discerning, seeking innovation, quality and transparency while also being highly value conscious. We believe our purpose and strategy position us well to address affordability and access, two of the most important challenges in healthy living today. While our conviction in the long-term algorithm remains strong, 2026 will be a challenging year as we lap some big numbers. We are very pleased with our new stores, our investments in self-distribution, our growing depth of customer data and the continued advancement of our differentiated assortment. At the same time, we are disappointed with transactions and still learning how we can shape customer behavior through loyalty and personalization. In 2026, we are investing in the capabilities needed to fully exploit our loyalty data. We know we can do more. We also have the capacity in our P&L to help address the affordability challenges that many of our customers are facing. The team remains excited and confident in our ability to support our health enthusiast customers and drive growth in the years ahead. In a moment, I'll talk more about our plans for 2026. But for now, I'll hand it to Curtis to review our fourth quarter and full year financial results as well as our 2026 outlook. Curtis? Curtis Valentine: Thanks, Jack, and good afternoon, everyone. In the fourth quarter, total sales were $2.1 billion, up $152 million or 8% compared to the same period last year. This growth was driven by a 1.6% increase in comparable store sales and the strong results from new stores. Our key points of differentiation continued to drive our sales with attribute-forward products growing faster than our core business. E-commerce sales grew 15%, representing approximately 15.5% of our total sales for the quarter. Additionally, Sprouts brand continues to resonate, now making up nearly 26% of our total sales for the quarter. Basket drove our comp with traffic ending slightly negative after a disappointing holiday season and finish to the quarter. We effectively managed costs and margins against this backdrop. Gross margin for the fourth quarter was 38.0%, a decrease of 10 basis points compared to the same period last year, primarily due to shrink, partially offset by the benefits from our move to self-distribution in meat. In addition, the rapid adoption of our loyalty program did put some pressure on gross margins. We look forward to utilizing this data to further engage our target customers and drive sales behavior. SG&A for the quarter totaled $653 million, an increase of $38 million and 41 basis points of leverage compared to the same period last year. This improvement was largely driven by lower incentive compensation expense and effective cost management. Depreciation and amortization, excluding depreciation included in the cost of sales was $39 million. For the fourth quarter, our earnings before interest and taxes were $123 million. Interest income was approximately $581,000 and our effective tax rate was 27%. Net income was $90 million and diluted earnings per share were $0.92, an increase of 16% compared to the same period last year. For fiscal year 2025, total sales increased nearly 14% to $8.8 billion, driven by comparable store sales growth of 7.3% and strong new store performance. Our focus on innovation and differentiation resonated well with our target customers, driving overall sales. Additionally, we were happy to see that our new stores exceeded our expectations for the second consecutive year. Gross margin was 38.8%, an increase of 70 basis points compared to gross margin in the prior year. This was predominantly driven by improvements in shrink from our investments in inventory management over the last couple of years as well as leverage from increased sales early in the year. SG&A expenses for the year totaled $2.6 billion, an increase of $283 million or 45 basis points of leverage compared to SG&A last year. This leverage is mainly attributable to sales leverage from strong comp performance early in the year. Store closures and other costs totaled $5.6 million due to ongoing occupancy costs from our 2023 store closures and disaster recovery costs. Depreciation and amortization, excluding depreciation included in the cost of sales, was $150 million. For 2025, our earnings before interest and taxes were $686 million. Interest income was $2.6 million, and our effective tax rate was approximately 24%. Net income was $524 million and diluted earnings per share were $5.31, an increase of 42% compared to the prior year's diluted earnings per share. Sprouts ended the year with 477 stores across 24 states. Looking ahead, there are over 140 approved new stores and more than 95 executed leases in our pipeline. A strong and healthy balance sheet has underpinned our financial performance. For the year, we generated $716 million in operating cash flow, which enabled self-funding of investments in capital expenditures of $224 million, net of landlord reimbursement. We also returned $472 million to our shareholders by repurchasing 4 million shares and have $836 million remaining under our new $1 billion share repurchase authorization. The year ended with $257 million in cash and cash equivalents and $23 million of outstanding letters of credit. We have been encouraged by our strong sales and customer growth in recent years. However, the challenge of lapping this growth has been more difficult than we anticipated, particularly with our lower engaged customers who are visiting less often and purchasing fewer items as they navigate economic challenges. We are encouraged to see our loyalty members increasing their frequency and spend, but know that there is still significant opportunity ahead. Our customer engagement and personalization capabilities are still maturing, and our customer is telling us they need greater support in making healthy living more affordable. We are well positioned to do more for our customers as we look ahead to 2026. As for our outlook, it's important to note that fiscal year 2026 will be a 53-week year with the extra week falling at the end of the fourth quarter. We estimate the impact from the 53rd week to be approximately $200 million in sales, $28 million in income before interest and taxes and $0.21 in diluted earnings per share. For the full year, on a 52-week basis, we expect total sales growth to be between 4.5% and 6.5% and comp sales to be between negative 1% and positive 1%. We plan to open at least 40 stores in 2026. Earnings before interest and taxes are expected to be between $675 million and $695 million, and earnings per share are expected to be between $5.28 and $5.44, which includes some share repurchases. With our strong cash generation, we plan to utilize our free cash flow to repurchase our shares and would expect to spend at least $300 million on this program in 2026, which is included in our EPS outlook. Year-to-date, we have already deployed $100 million towards share repurchase, and we'll continue to take a disciplined opportunistic approach when we see a disconnect between our share price and our long-term fundamentals. We also expect our corporate tax rate to be approximately 25.5%. During the year, we expect capital expenditures net of landlord reimbursements to be between $280 million and $310 million. For the first quarter, we expect comp sales to be in the range of negative 3% to negative 1% and earnings per share to be between $1.66 and $1.70, which includes the impact of a higher tax rate due to year-over-year share price changes and the related stock-based compensation tax impacts. In the first quarter, we expect EBIT margin pressure of approximately 85 basis points due to fixed cost deleverage and the impact of our loyalty program. To add some additional color to the full year guide, we expect the first half of the year to be challenging as we lap double-digit comp comparisons. We anticipate sequential comp improvement thereafter as we rebuild towards our long-term financial algorithm late in the year. EBIT margins are expected to face some early year headwinds due to fixed cost deleverage and higher-than-expected sign-ups for our loyalty program. We expect that this will stabilize later in the year as we leverage our investments in self-distribution and anniversary the loyalty rollout while still experiencing modest new store growth pressure in the second half as our pipeline is weighted more heavily to Q3 and Q4. While we expect to experience short-term growth headwinds as we stabilize our business after two years of significant growth, we remain confident in our strategy and our ability to return to our long-term growth algorithm. And with that, I'll turn it back to Jack. Jack Sinclair: Thanks, Curtis. While we're not happy with our current business performance and our 2026 outlook, we believe strongly in the long-term potential of Sprouts and our ability to take the necessary steps to reaccelerate growth. Over the years, Sprouts has built a strong foundation for sustainable long-term value creation. As always, we recognize the future is more important than the past. The exceptional growth we've seen over the last two years was supported in part by the broad expansion of the U.S. health and wellness movement, where Sprouts is uniquely positioned with the right products and customer experience to serve as a top destination for healthy discovery. Growing from this elevated base of new customers now requires sharper execution, deeper customer engagement and better affordability for our customers. In 2026, we are focused on preparing for our next phase of growth by leveraging our operational strengths and advancing our forging customer engagement real estate and supply chain initiatives, along with targeted investments in talent, technology and affordability that reinforce our unique value proposition. We are positioning Sprouts for long-term success. Our top priority is serving the needs of our target customer. Launched last year, our loyalty program exceeded sign-up expectation and significantly broadened our customer insights. We expect the program to deliver a behavioral shift over time. We are pleased to see our most engaged customers increasing their frequency and to see some customers join our rewards program and significantly increase both frequency and spend at Sprouts. Yet we see opportunities to deepen engagement further, while by driving additional frequency, expanding participation across more categories or encouraging trial of innovative new items. Beginning in 2026, we've enhanced our loyalty program to provide more value and are investing in our personalization capabilities to increase program effectiveness. As we have spoken about many times, our customers come to us for a variety of solutions to support their healthy living journey. Better understanding these customer cohorts and personalizing how we engage with the needs remains a critical growth lever. In 2026, we're adding new talent with deep expertise in data analytics and customer engagement to fully unlock this potential. Health and wellness continues to provide tailwinds in the marketplace, and we will stay ahead by offering more unique products. The forging team continues to source products from around the world and is leading in evolving trends. We've established ourselves as the retailer of choice for launching new health and wellness products, supported by our commitment to nurturing and growing emerging brands as they scale. We'd like to thank all our vendors for their partnership, especially those who have trusted us to launch their trending products. Their innovation, combined with our customers' growing appetite for discovery in health and wellness continues to be a key driver of our success. By the end of 2025, our organic sales mix grew to more than 30% of our total sales, and this trend remains a key focus for us. On the docket for 2026 are more products with on-trend attributes such as no seed oils, gut health and longevity. Also, you will see organic grass-fed whey protein, functional hydration beverages such as tractors, modern take on the hay market and products like Elevate Organics formulated to heal the body and the planet through regenerative farming practices. These are just a few examples of what this team is delivering to our customers. Sprouts brands have now surpassed $2 billion, continuing to outperform overall company performance. Rather than replicating national brands, our goal is to offer customers products that complement their favorites while delivering something distinctly Sprouts, high-quality innovation at a great value. The team has developed a robust three-year innovation pipeline designed to meet the evolving needs of our health-orientated customers, focusing on products they trust and actively seek out. The launch of our new hemp wellness bowls is a terrific example of the intersection of health and affordability. The success of this new offering shows that customers respond when we deliver both in a compelling way. Next week, customers will see our new sweet heat seasonal event come to life across our stores with an exciting set of limited time products only found at Sprouts. We continue to drive market-leading healthy innovation and our stores help bring it to life for our customers. Our teams remain focused on delivering our unique customer experience, educating shoppers and showcasing our differentiated assortment. I continue to be so proud of how our teams execute in stores for our customers. New stores continue to perform well. This strong performance reinforces our confidence in our growth path. Our robust new store pipeline now includes over 140 approved locations and plans to open 40-plus new stores in 2026. We are also excited to have entered a new state earlier this year with the addition of our first New York store, expanding our presence in the Northeast. While nearly all of our 2026 openings will be in our existing footprint, the team is also looking forward to 2027 and beyond. and we are approving sites in both the Midwest and the Northeast to lay the foundation for further future growth. On the supply chain front, the transition to self-distribution for fresh meat is progressing very well, strengthening our control over our fresh categories. Today, 75% of our stores are serviced with fresh meat from our distribution centers. Our Northern California facility is on track to be fully operational by early in the second quarter, completing our self-distribution rollout. Stores are already benefiting from increased delivery frequency with fresh meat products now arriving alongside daily produce shipments. We're also continuing to invest in our forecasting and replenishment capability that we expect will enable Sprouts to scale and grow. We believe the cost efficiencies from these initiatives and other investments will allow us to support our customers with a more affordable, healthy living journey while also maintaining our strong margin profile in the long term. Lastly, the Sprouts team remains the heart of the organization with ongoing investments in the development to drive the business and key initiatives forward. We continue to invest in our talent engine pipeline to support our future growth. Our ongoing investments in our team have helped maintain a low turnover, and that stability is reflected in the consistently exceptional customer experience scores we received, many of whom tell us time and again, I love Sprouts. We extend our gratitude to our more than 36,000 team members for their commitment to serving customers every day. I also want to thank Scott Neal and wish him the very best in his retirement. As our Chief Merchant, Scott has driven outstanding growth in our business while furthering our strategy of differentiation. As well, we welcome both Don Clark, our new Chief Merchandising Officer; and Mandy Rassi, our new Chief Customer Officer. We look forward to their contributions as we scale our business for continued growth. In summary, while the near-term backdrop is challenging, the steps we are taking today are strengthening the business and reinforcing our ability to grow our $290 billion total addressable health and wellness market. It's amazing to reflect on our growth from a single store in Chandler, Arizona in 2002 to more than 500 stores by the year-end, serving over 14 million customers walking through our doors every quarter. The health and wellness movement remains strong, and Sprouts' unique positioning continues to set us apart. By managing costs with discipline and investing behind the capabilities that differentiate us, we are confident in our ability to create long-term growth and value for our shareholders. We appreciate your continued interest in Sprouts and look forward to keeping you updated on our progress throughout the year. And with that, I'd like to turn it over for questions. Operator? Operator: [Operator Instructions] Our first question comes from the line of Ed Kelly with Wells Fargo. Edward Kelly: I guess I wanted to start with current comp momentum. You talked about some slowdown into holiday disappointing into the year, and it seems like that's continued into Q1. I was hoping maybe you could unpack what you think is driving that additional step down where you are running currently versus the comp guidance that you've given for the quarter? And then as part of this, Jack, you have mentioned the idea of maybe investing in some value for your customers. And I think that's an idea that maybe price and promo, you've kind of resisted that idea historically. Just curious as to how deep of an investment you think you will be making there. Jack Sinclair: I'll let Curtis talk specifically on the numbers, Ed. First and foremost, what's happening, there's an uncertain macro environment. There's clearly some tough lapping that we're going and the toughest lapping does actually come in Q1 in terms of the numbers that we got last year for a variety of kind of -- a variety of reasons that are not going to be repeated this quarter. So that's one of the reasons for it. On the other context of it in this affordability the affordability issue, our customers are saying to us, look, we really love your business. We really love what you do. But can you help us a little bit on this affordability? Can you help us just a little bit on what you're doing? And it's caused us to take a really good look at what are the options in terms of pricing, what are the options in terms of promotions. And the great thing about the business today from where it's been over the years is we've got the capacity to invest going forward if we need to invest to support the customer in the particular circumstances that are existing at the moment. So that -- I think we just got more capacity to do -- we've got more options in terms of how we think about it. And Nick and the team are thinking really hard about how we can pick the right actions to support the customer in this affordability issue. And some of it will be promotions. Some will be personalization. Some of it will be about pricing. So we're looking at it in a bit of detail across the board, and we'll be taking some action, and we can -- we've got the capacity to do that. Do you want to talk numbers, Curtis? Curtis Valentine: Yes. On the step down, Ed, really, the primary thing is that customer lapping issue as we kind of look back, it's a low engaged customer that we really brought in with new customers, with reactivated customers. at the new year last year in the fourth quarter last year, and there were some of those viral moments and eggs and things like that, that were driving customers our way. So as we get up against it, it's just been challenging. And I don't think the macro helps in that respect. It makes it more challenging. And the combination of factors has made it difficult. Year-to-date, we are right at the midpoint of the guide. We're about a little over halfway through the quarter, and we are past the King Soopers' strike lapping that we had last year. That's behind us, but we're right at the midpoint of the guide here year-to-date. Operator: Our next question comes from the line of Seth Sigman with Barclays. Going to move to the next question comes from the line of Leah Jordan with Goldman Sachs. Leah Jordan: I just wanted to ask about the comp guide. See if you can just walk through how you're thinking about traffic versus ticket as we go through the year. What have you assumed of any contribution from loyalty? And then I understand you have the difficult lap in the front half. But at the end of the day, natural and organic category is still growing pretty nicely across grocery. So, I guess, why do you think you've been more challenged in this current backdrop? And has anything changed in the competitive landscape? Or just more detail on what gives you the confidence that you can get back to that positive growth in the back half? Curtis Valentine: Yes. Leah, it's Curtis. On the guide front, from a traffic basket perspective, we'll see in the full year guide, slight pressure on traffic. It should get sequentially better as the year progresses. The first half will be challenged, and then we'll see sequential improvement as the compares soften a bit. And then the basket will be just the flip of that, slightly up and offsetting to the flat midpoint in the guidance. As far as the confidence to get back to where we've been before, it's really just we have good strength in pieces of our strategy right now. New stores are performing really well. Attribute-based SKUs are performing really well. We continue to be pleased with the innovation and forging piece and the partnership with emerging brands and vendors. Those are all still going strong for us. We've had two great years of growth. We had two really strong years of sequential improvement prior to that, too. And so we feel like those are the building blocks for how we'll get back to where we need to go. As we mentioned earlier, we need to do a little bit more for the customer in this moment. We're going to be working on our personalization and customer engagement capabilities throughout the year and accelerating some resource there. Those are the pieces that should help us get back. And yes, we're expecting to be a part of that sequential improvement. The things that we're doing, we're assuming will help us get back to where we want to be and embedded in the guide. And then there's obviously just a lot of uncertainty and a long year ahead of us as it relates to the consumer pressure and our customer lapping conversations. So a balance of those things embedded in the guidance. Jack Sinclair: So, with regard to the competitive scenario, clear, that you are referring to, I think the great thing about our company is it's all in our own hands. We've got the capacity to do what it needs to do in the marketplace. We're not seeing anything really dramatic coming at us from different. We think this is a kind of lapping challenge and an affordability challenge that everybody is having to look at carefully. And the consumer uncertainty that's come from the affordability, it's not really reflected itself in a huge competitive space. We are watching really closely whether the products that we have, the differentiated products that we have are priced appropriately within the market. But it's not about what other people are pricing because they don't sell these things, and it's about how do we give the right balance of the assortment, the right balance of price points, the right balance. And that's what we think we've got to do in the context of this affordability. Inflation has clearly driven some significant increases on pricing on coffee, on meat, and it's affected some of the less -- the customer who doesn't come as often is clearly affected in some of those categories, and we're watching that closely, and we'll take the action that we need to take. But the great thing is it's all in our own hands. Leah Jordan: Okay. That's very helpful. So I mean, it sounds like the lap is a big issue here. So that kind of leads to my next question around the right margin profile for this business. So you've had some really nice expansion over the last couple of years. And I think when we've talked before, it's, hey, we wouldn't really be giving that back. But today's guide is implying a notable margin decline. We're hearing more about investing in value in the last question and in the prepared remarks. So, I guess, assuming you look back on algo in the back half, what is the right margin profile for this business? How do you think about the ongoing level of investment that's needed here? And just kind of the pressure that you're seeing today, what is temporary investment versus deleverage? Just kind of how do we think about the long-term margin profile? Curtis Valentine: Leah, it's Curtis. Yes. So I think, yes, the midpoint of the guide, there's a pressure on EBIT margins. That's primarily if we look at the full year fixed cost deleverage, occupancy depreciation deleverage as we think about the full year, around that, still fairly stable. And obviously, there'll be a shape of it from first half and second half. But we've made investments in the business over the last few years to create some space, inventory management, self-distribution. We've talked a lot about those. And then as we look ahead, we also feel like there's plenty of things left for us to go after and levers to pull in the longer term. And so continued improvement, inventory management, category management, additional self-distribution down the line. There's lots of opportunity for us to go. And in fact, the challenge is we've seen the business go up and then the business come back down. And that just highlights that there's still room and maturity for us to go get in the business and inefficiencies for us to capture. So in the medium and long term, we still think there's investments to be made that can drive profitability that we can use to address affordability and take care of our customer. And that's how we're thinking about it. Operator: Our next question comes from the line of Rupesh Parikh with Oppenheimer. Rupesh Parikh: Just going to store openings and new store productivity, just curious how they continue to perform as you got into Q4. And then new store productivity does look a little lighter in Q4. Just curious if the timing or if there's anything else to discuss there. Curtis Valentine: Rupesh, it's Curtis. Yes, really pleased with the new stores. The performance continues to be strong there. The '25 vintage outperformed our box economics expectations, not quite as strong as the '24 vintage, but still really strong. The performance has been consistent with our expectations as it relates to established markets, nonestablished markets, kind of East Coast, West Coast. It's been pretty consistent, and we're really pleased to see the response we're getting when we bring this to new communities. And it really reinforces for us the confidence in the long term and our ability to return to our algorithm. And then the new store productivity, that does get a little bit bouncy from quarter-to-quarter, mix of stores and where we're opening them and year-over-year comparisons. But overall, really pleased with the new store performance. Jack Sinclair: And the fact that we're consistently now building all in the new and the new V6 that we started a little while ago, we've now got more than 100 of those. We can start to make them even more efficient going forward as the team are working on learning how to do -- how to build them a little bit cheaper, how to execute them a little bit faster and how we can operate them a little bit more effective. So there's a lot of really good work going on behind. And when you've got the customers responding well to the new stores, it gives us a lot of scope to play to improve the efficiencies. Operator: Our next question is from Michael Montani with Evercore ISI. Michael Montani: I had a two-parter. One was, can you share the new store opening cadence by quarter for the year? And then the other question was, if you look at 4Q, can you just parse out what you saw in terms of inflation versus transaction counts? And is the 300 bps softening you've had sequentially so far? Is that basically all transaction counts? Curtis Valentine: Yes. Mike, it's Curtis. I'll take them in reverse order there. On the softening, it's primarily traffic in the fourth quarter, a little bit of units. We are starting to see some unit pressure again, back to that affordability concept and some of the challenges from inflation that we're seeing. Inflation kind of continues to play out the way we've expected. It's low single digits in line with CPI. And then you have -- we've got our mix towards premium products that's driving up our AUR and organic and things like that, that drive it up a bit and some of the value pack stuff that we've done over time. And then you have -- you do have some categories like coffee and meat that are inflationary that also drive that up a bit. And then, yes, so we're seeing the unit pressure a little bit across the board for all customers. And then the traffic challenge is primarily that lower engaged customer that we've seen. On the new store opening cadence, backloaded again, as I mentioned in the script, six here in the first quarter should be nine in the second quarter and then pretty balanced in Q2 and Q3 to get us to our 40 for the year. And 2027 is shaping up pretty strong, and that should be a more balanced kind of quarterly spread of new store openings, but one more back-weighted vintage here in 2026. Jack Sinclair: And we try and avoid -- I think we're going to avoid really having anything in November and December after the -- certainly after Thanksgiving, trying to avoid those. And that's something that we're pretty confident we'll do this year. Operator: Our next question comes from the line of Mark Carden with UBS. Mark Carden: So just building on the topic of affordability, you guys have mentioned in the past that you tend to be more of a secondary or a tertiary shop for customers. I know your assortment is largely unique, but do you believe you've seen much in the way of wallet share shift on some of the categories where you might overlap with a Costco or another grocer where they tend to shop? I know you called out eggs perhaps in the lap, but does anything else jump out? Or do you think it's more just a function of consumers controlling their own shrink, so to speak, as conditions remain challenging? Jack Sinclair: I'll let Nick have a go at that one, Mike. Nicholas Konat: Mark, it's Nick. So what we're seeing on the customer side, our -- from a share of wallet standpoint, our share of wallet is holding pretty flat. We saw just a little tiny bit of a loss in Q4 in share of wallet, but overall holding strong, which means if you think about our innovation and differentiation continues to win, and we're not seeing significant -- any kind of real share of wallet declines to some of the more conventional channels that you would expect or maybe allude to in your question. So we're holding our own there. We are certainly seeing the consumer navigate towards value, which is part of what you hear from us on how do we meet our customer where they are and provide the value that we can do to help them. I think it's important to note, it's not just about price. I know -- I think that's a place people go. But for us, it starts with what we're great at, which is our innovation and differentiation. And what we're seeing in our business is when we can provide health forward products at a really strong value like our Bowl program under $10 and our Sprouts brand organic program, our $5 sandwiches, we're seeing a really, really strong purchase from customers. And we just need to innovate more in that space at this given point in time in addition to leaning on things like personalization and loyalty, our always sharp produce pricing and offering. And as Jack mentioned, being smart about how we price and promote to continue to maintain and grow share in this time. Operator: Our next question comes from the line of Tom Palmer with JPMorgan. Thomas Palmer: I wanted to ask on shrink. It was not mentioned as one of the potential margin headwinds for this year. I know last year, it was called out as a pretty substantial tailwind, especially in the first couple of quarters of the year. And I think there was a little bit of a question of how much of that was double-digit comps driving shrink lower versus all your work with inventory management. So, now as you lap that, I guess, any update on what you're seeing with shrink and maybe how much of it you're holding on to versus your expectation? Curtis Valentine: Tom, it's Curtis. Yes, it was a little bit of pressure on shrink or a favorability last year as we had the strong comps. We are up against that. Certainly in the fourth quarter, that's part of the story. And then in the first and second quarter, we'll be up against that a little bit. But we do feel like we've made sequential improvement there over the years. and that the team is prepared for that. I think where it really gets challenging is when you get those whipsaws in sales, right? The big acceleration that we saw and now a bit of the deceleration that we've seen as the business has settled and moderated, that's where it's really challenging. I think we've got a good handle on where we are here as we're sitting here in the first quarter, and the teams are continuing to put work and investment into that to prepare us for later in the year. And so on the balance for the year, we do expect shrink to be fairly stable, and it will just be a little bit choppy quarter-to-quarter. Operator: Our next question comes from the line of Robbie Ohmes with Bank of America. Robert Ohmes: Curtis, I was hoping you could give a little more color on the gross margin assumptions you guys have in the guidance for 2026. Would love to see if you could give us a little more on -- should we just think about it as occupancy deleverage in the weaker comp quarters and so more pressure on gross margin? Or can you give us some help on how much merchandise margin might change or go down in 2026? Curtis Valentine: Yes, sure, Robbie. The first half will be a bit pressured. I'll talk about it in terms of EBIT margins and the drivers there, and you'll get a little bit of the color on both sides underneath that. But yes, the fixed cost deleverage certainly pressured with a negative comp here in the first half, that will be challenging. primarily occupancy and depreciation. There's lots of moving parts. We've got cost work that we've done that will help and other new store growth pressure and things like that. But net-net, it's really a fixed cost story. On top of that, we've got the loyalty program that we saw good adoption and uptake in people opting into the program that puts a little bit of pressure on the rewards and the points that we're absorbing there. So there'll be a little bit of pressure there that falls into the gross margin in the first half. And then as we get later in the year, we'll be leveraging those investments in self-distribution. We'll be anniversarying the loyalty program, and that compare will get a little easier, and we'll get back to kind of a more stable EBIT margin as we think about the second half. Jack Sinclair: Robbie, as I said in the script, I think there's real capacity in our organization to make sure we can deliver the algorithm long term in terms of the net margin going forward. So we're feeling pretty confident about that in the future. Operator: Our next question comes from the line of Kelly Bania with BMO Capital Markets. Kelly Bania: I guess, just to be frank, the outlook for '26 kind of earnings or at least EPS flattish, maybe up low single digit. I guess it doesn't really signal to me a major or even small investment in affordability for your customers. So I was just wondering if you can talk about what's really planned there, whether it be pricing promos. I know loyalty continues to roll out and you made some tweaks there. But is that something that could evolve? Are you still kind of analyzing what kind of investment in affordability you want to make for your customers? And I guess, do you think that removing -- do you think that some more affordable prices could remove the volatility that we're seeing in your comps and maybe insulate you more from the macro pressures that you are seeing? Jack Sinclair: We certainly think that from a customer point of view that they're asking us to do a little bit more to help them, as I said in one of the other questions, the customers are very positive about our assortment and the service they get in stores and the type of stores that they're going into. So there's confidence in that. The customer is seeing in this challenging environment, can you do a little bit more for them. And we're going through a number of tests to try and figure this out. So we -- to that point, I'll pass you on to Nick to just talk a little bit more about what we're thinking about doing, but it's not fixed yet, and we're doing some tests to see where it goes. Nicholas Konat: Kelly, it's Nick. I think to answer your question on affordability, there's multiple prongs there to get there. I think the biggest one is leaning into our strength and looking at our assortment and the offering we provide to the customer and making some changes. Candidly, we -- I think you could argue we might have gotten a little bit further on the premium spectrum over the last couple of years on our offering. And there's a lot of innovation and access to our healthy products that are a little bit more on the value side of the equation. And that's just some good assortment work to make sure we have good balance across our categories, and the teams are already working on that as we speak, just to give access at every price point to every one of our customers. So that's a big piece of it. And as I mentioned, we're seeing that work in things like what we do with our deli meals and bowls program and so on. You're going to continue to see us stand tall with produce pricing. I think we're in a really good place there, and that strategy will continue. And then as Jack mentioned, I think there's some of the things that we carry that have a little bit of overlap. And the important thing for us is that we're competitive. We're never going to win on price. We're always going to win with assortment and innovation and differentiation. But there's probably a handful of products that we want to be sure that we're right every day to just continue to maintain our trust. But we've got a lot of levers to pull to help support that. So we don't think we need to make any kind of massive investment to do that, which is what I think you're seeing reflected in our financials. And obviously, the last piece of this is as we continue to improve our personalization lytics capabilities, it's a great way to drive value for the customer and then the access to the things you're looking for. Operator: Our next question comes from the line of Chuck Cerankosky with Northcoast Research. Charles Cerankosky: When you're looking at the loyalty program, how has the vendor participation been? And I'm looking at it as an offset to the strong sign-ups from customers. And is that something that is less than expected? And perhaps, is there any conflict with the vendors as they look to Sprouts own brands product introductions as part of the loyalty program? Nicholas Konat: Chuck, it's Nick. We -- to be honest with you, we are just starting to unlock vendor participation in the loyalty and personalization program in the beginning of this year. We -- '26 or '25 was focused on launching the capability, building it out, starting to get some -- the data, the testing, the learnings -- and this year really is a great opportunity for us to start to unlock more value for it. And so we're just starting into the fiscal year with getting vendor participation. The good news is this is a win-win for our vendors and for us. Our vendors, especially the emerging players are looking to find their target audience, customers who might fit the key attributes, whether they're in the organic space or the gluten-free space. And so we can provide great access to those customers at a really strong ROI that helps them get trial for their products. And for us, obviously, certainly introducing these products to our customers who tell us they want newness from us and driving value and long-term value. So we're in the early innings, so to speak, Chuck, on that effort, and I think we'll continue to see ways to unlock value for our vendors and us through the course of this year. Jack Sinclair: And Nick, I would probably say the idea that we're much -- there's no real conflict going on with the vendors about Sprouts brand. It's the opposite of that, Chuck. I think we've got ourselves in a place where we're kind of the place that people want to come to bring innovation and differentiation. And we're working really hard at that. The forging team are doing really well. We're launching a lot of products. And we're giving people opportunity and a starting point for their brands. And so as I say, we're not having a lot of -- not having any cut, it's the exact opposite. Operator: Our next question comes from the line of Scott Marks with Jefferies. Scott Marks: I wanted to just follow up on this. notion of some pressure on units, some of those comments earlier. Are you seeing maybe more impact on certain categories or departments or even attribute-based items than others? And wondering how that impacts margin mix. And then obviously, as you work through kind of the ways to create value, how does that inform your thinking about changes across different parts of the store, let's say? Jack Sinclair: We are seeing some differences across different categories. We referenced coffee and meat where you're seeing significant inflation. You're seeing unit effects in that space. Produce business, I think people are being careful with their shrink, buying a little bit less units in our produce business than in what has been a volatile pricing environment in produce. So, yes, we're seeing it and watching it pretty closely in terms of how that works. And part of our job is to make sure that we minimize the impact of categories that are seeing a lot of inflation. And we certainly see that as something that that's our job to try and take care of our customers when they're saying to us, look, this is costing a lot of money. So, yes, we're seeing different things by different categories. And the unit -- when you -- we've got an elasticity model. And if things don't sell as well, we can take a really good look at the pricing. And that's kind of the way we're thinking about it. Nicholas Konat: Scott, the only thing I'll just add to your question, I think there's not really any mix pressure based on how the sales are moving. So there's not any pressure on the mix driven by our sales. I think the only other thing I'd add to Jack's comment is, for us, the biggest unit challenges, there's some category piece, but just in that less engaged customer. The customer we gained last year that are putting less units in the basket for that group is where we're seeing it more so than, say, our core customer. Operator: Our next question comes from the line of John Heinbockel with Guggenheim Securities. John Heinbockel: Jack, so to follow up on that last one, how are your target or core cohorts performing behaviorally, right, and their view on affordability? And then is affordability more an issue in reality or perception and how you think about maybe altering marketing, the marketing message beyond personalization to address affordability? Jack Sinclair: Well, we're certainly taking a good look at our marketing messaging and being the kind of focusing on that. We think there's some real affordability issues rather than being for the customers. And what we found is our loyalty data has given this really clearly, those loyal customers to us are spending a little bit more money with us. It's the less engaged customers that Curtis outlined, I think, in the script, which is specifically those are the customers that are drifting are coming less often and spending a little bit less from us. And the feedback we're getting from them is that's an affordability crisis in terms of the affordability crisis that exists in the marketplace is affecting them more so than our loyal customers. Operator: Our next question comes from the line of Krisztina Katai with Deutsche Bank. Krisztina Katai: So I wanted to follow up on the attribute, on attribute-based products that continue to perform well for you guys. Can you talk about planned SKU launches for 2026? And then within that, how are you thinking about the price points where you want to add more products or where you maybe double down a little bit to further deliver on the value that the customer is looking for? Or just maybe just talk about how you see the current assortment within the stores? And just to what degree do you think that some of these assortment changes need to happen? I would love to get your thoughts there. Jack Sinclair: Yes, it's a great question. Nick just touched on it. So I'll let Nick expand on how to explain what we're doing there. Nicholas Konat: Krisztina, I think as a starting point, I actually feel really good about our assortment mix across the key health attributes. Think about protein, fiber, grass-fed, gluten-free, organic. I mean that is who we are is offering breadth and depth across those attributes and not just one part of the assortment in store but all over. So I actually feel we're really well positioned. To my earlier comment, I think where we can improve is how do we make sure access to some of those attributes and some of those offerings are available at more price points. And so making sure that you have that at more entry-level price points in our category, the right opportunities for organic and gluten-free. I think there's some opportunities for us to get just better balance for where the customer is right now and what they're asking for from us. So you'll see us spend more time on innovation and launches that continue to have balance and -- but continue to be focused on attributes. We're not going to make any changes and change what we carry. We're going to continue to lean into the health and wellness attributes that help us stand out. And then to those launches, I mean, you're going to see us continue to launch close to 6,000, 7,000 new items this year. You're going to see us continue to grow Sprouts brand. And as a reminder, Sprouts brand is focused in areas where our customers telling us they want innovation. We're not looking to do a national brand compared to program. That's not our strategy. So we'll continue to see hundreds of new items in Sprouts brand, both across our fresh businesses and our nonperishable. And I think you're going to see us also launch even stronger. We're really happy with what's happened with our partnership with the Haymaker product from Tractor and Elevate. And when we really line up behind some of these key brands, we're seeing really outstanding uptake with the customer. And I think you'll see our marketing and merchandising teams double down on some even bigger launches through the year as well. Operator: Thank you. Ladies and gentlemen, this will conclude our Q&A session, and I will pass it back to Jack Sinclair for closing comments. Jack Sinclair: Yes. Thanks, everybody, for your attention and your interest in working with Sprouts and talking to us today. So I wish you all the very best. Take care. Operator: And this concludes our conference. Thank you for participating. You may now disconnect.
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: Good morning, and welcome to the Perseus Mining Investor Webinar and Conference Call. [Operator Instructions] I'll now hand over to Perseus Mining Managing Director and CEO, Craig Jones. Thank you, Craig. Craig Jones: Yes. Thanks, Nathan, and welcome to Perseus Mining's December 2026 (sic) [ 2025 ] Interim Financial Report. I'm joined today on the call by Lee-Anne de Bruin, our Chief Financial Officer. and I'll hand over to her shortly. But before I do, Perseus produced a strong operating result during the half. And with our low cost and favorable gold prices, we're pleased to increase our interim dividend to $0.05 per share. And the other news that we released today is a substantial increase in the ore reserves and mineral resource estimate for Nyanzaga, which extends the life of that mine by 5 years and really highlights the quality of that asset. So I'll pass over to Lee-Anne now to take you through the details of our report. However, before I do, I'd like to acknowledge Lee-Anne and her team for the tireless work to produce this financial report, and thanks go to her and her team for the excellent work. Lee-Anne de Bruin: Thanks, Craig. And hi, everyone. Welcome to our call. The 6 months to December delivered a very strong solid operational performance as our mines transitioned into new mining areas and we made significant progress with our capital growth projects. Perseus produced 188,841 ounces in the 6 months with an all-in site cost of $1,649 per ounce. The average gold price achieved was up 38% at $3,241 an ounce. And our cash margin per ounce was up at $1,592 per ounce for the 6 months, generating notional cash flow of $301 million and ending the half year with $755 million in cash and bullion on the balance sheet. The operational performance delivered by our Perseus sites has translated into a great financial performance for the 6 months ended December '26 (sic) [ '25 ]. As CFO, I have the privilege of being able to share these results with you, which represent the efforts of all the Perseus team over the last 6 months. Thanks to each member who has contributed to this result. We couldn't do it without you. Revenue for the 6 months increased by 5% against the 2024 comparative period to $608 million. And this was largely due to the 38% increase in the average gold price realized, as I've mentioned, offset by our anticipated reduction in gold produced during the 6 months. Just quickly focusing on cost of sales, which plays into the EBITDA number. This increased on the comparative period, and this is largely attributable to the higher royalties during the period, culminating with higher gold prices. In addition, as we've mentioned in our quarterly, we had a 2% increase in royalty rates in Côte d'Ivoire, totaling $20 million, which was included in this period, of which $9 million related to the 6 months ended June '25. Further, the primary ore resources for Yaouré have transitioned to the Yaouré open pits and Edikan has transitioned to the Nkosuo open pit, both of which have higher concentrations of waste and lower overall grades. This obviously would increase the total cost to produce each ounce compared to December 2024. The slight increase in revenue was offset by the increase in cost of sales and delivered an EBITDA of $316 million for the 6 months. Moving to profit after tax. This was -- this achieved was USD 186 million, 8% lower than the comparative period. Key items to note were that the depreciation and amortization decreased by 46% on the comparative period, mainly driven by lower ore tonnes mined, resulting in lower mine property and deferred stripping amortization. And this was also as a result of the completion of the Edikan, AG and Fetish pits and the Yaouré Stage 1 and the CMA Stage 3 pits by June '25. We also incurred a foreign exchange loss of about USD 27 million, which was due to the impact of the weaker U.S. dollar against the euro on a certain balance sheet transactions such as bank balances. Overall, the group has maintained stable profits during the period and generated net cash from operating activities for the half year of USD 194 million. EPS for the period was at $0.1210 per share. And as Craig mentioned earlier on, Perseus Board of Directors approved an interim dividend of $0.05 per share, which is up 100% on the December '25 interim dividend, and I'll speak a little bit back to that shortly. Importantly and always has been a focus of Perseus as we pivot to the balance sheet, the financial performance in the 6 months has positioned Perseus well to deliver on our future growth opportunities. As mentioned earlier, we ended the year with USD 755 million of cash and bullion on our balance sheet, and this is after investing USD 175 million in our growth projects and exploration. In December '25, Perseus successfully refinanced and upsized its existing USD 300 million facility to USD 400 million. This also includes a $100 million accordion option and has a 3-year term with options to extend for a further 2 years. The cash and bullion, coupled with the newly upsized and undrawn facility, give Perseus just under $1.2 billion in liquidity to deploy in further opportunities. In addition to this, Perseus also had listed securing investments of about USD 230 million, which, as you'd be aware, include our 17.8% investment in Predictive. And capital returns to shareholders, in line with our dividend policy, which aims always to reward shareholders, while maintaining balanced capital structure to fund our corporate growth objectives. The Perseus Board resolved to declare an interim dividend of $0.05 per share, up 100% on the FY '25 interim dividend. This dividend was declared by the Board, giving consideration to the balance sheet position and upcoming forecast cash flows from our 3 existing operations and the development of the project in Tanzania, Nyanzaga. In addition, during the 6 months, Perseus renewed the share buyback program at AUD 100 million in August last year. And as of today, Perseus has repurchased AUD 9 million worth of those shares of the renewed share buyback program. Perseus has maintained a disciplined commitment to its articulated capital management framework during the 6 months, and we've ensured operational discipline to deliver reliable and strong operating cash flows, while obviously ensuring we meet our commitments to all our stakeholders. As I mentioned, the 6 months delivered $301 million in notional cash flow. Importantly, we paid $144 million to our host governments in corporate income taxes, withholding taxes and royalties. And we made further economic contributions of $340 million, which includes local procurement and community contributions. We've then also focused on our balance sheet resilience, which I've spoken to earlier on with a liquidity of $1.2 billion. And then we have then invested ongoing discretionary investment, and this is evidenced through USD 175 million we've invested in our projects, of which $150 million went to growth capital at Nyanzaga, CMA underground and Bagway and about USD 25 million in exploration, some of which has delivered the increase in the Nyanzaga reserve that was released this morning. This brings me to the end of the financial presentation, and I'll now hand back to Craig. Craig Jones: Yes. Thanks, Lee-Anne. And looking ahead, so for FY '26 and as outlined in our December quarterly release, our production guidance remains unchanged. So group gold production in the range of 400,000 to 440,000 ounces and with production obviously weighted to the second half of the year. Our group all-in site cost guidance range has increased as we outlined in our quarterly from a range of $1,460 to $1,620 per ounce to a new range of $1,600 to $1,750 or $1,760 an ounce. And that really has been -- the guidance has been updated to reflect the increase in gold price assumptions and the resulting increase in royalty costs. We've also allowed for the 2% royalty increase in Côte d'Ivoire for Yaouré and Sissingué, whilst we discuss the fiscal arrangements with the Ivorian government to result in a fair and equitable distribution of mining proceeds through these unprecedented gold prices. Our gold price -- our gold production is weighted to the second half and with the inclusion of the new higher-grade ore sources at Edikan and Sissingué and as per our mine plan. And it's also expected that Yaouré will produce in the lower half of its cost guidance -- sorry, our production guidance. Nyanzaga, so during the quarter, we progressed our organic growth work, which focuses on resource to reserve conversion at our existing mines. It is also focused on brownfield exploration and the development of a greenfield's exploration portfolio. And along with our half 1 '26 results this morning, we're pleased to release the updated ore reserve for the Nyanzaga Gold project in Tanzania to 4 million ounces. This represents a 73% increase from 2.3 million ounce ore reserve reported in April 2025 and as part of the updated Nyanzaga project feasibility study. The mine life is extended to 16 years, and that includes 14 years of production at greater than 200,000 ounces per annum, which cements Nyanzaga as a long-life, low-cost mine and a cornerstone asset for Perseus for many years to come. The ore reserve increase at Nyanzaga is based on further cutback to a large-scale open pit mining operation as outlined in the feasibility study. The total gold production over a 16-year period is currently estimated to be 3.5 million ounces based on JORC 2012 probable ore reserve of 90.9 million tonnes at 1.38 grams a tonne for 4 million ounces of gold production. And gold production exceeds 200,000 ounces per annum from FY '28 to FY '41. Applying Perseus's assumed long-term gold price assumption of $3,000 an ounce, the Nyanzaga AISC metric updated to $1,621 an ounce over the life of mine. I recently got back from my second trip to Tanzania and the progress we're making on the ground in Nyanzaga is fantastic. The steel erection has commenced in the milling facility and pre-stripping of the Tusker deposit has also commenced. So the project is well on track to enable first gold pour in January 2027. We're also progressing with updated mineral reserve estimates for our other existing mines with an update to Yaouré expected towards the end of this financial year, and Edikan will follow in December 2026. So those 2 updated estimates are focused on extension of the mine life of our existing assets. This slide really highlights the diversified nature of our portfolio. Operating across 3 African countries, we have ore reserves of 6.69 million ounces and an additional 2.85 ounces in foreign estimates at Sudan. The release of our update to the Nyanzaga reserves and resources is the first step of our work to highlight the potential of our existing portfolio through resource conversion, and we look forward to updating the market on Yaouré and Edikan later on this year. Alongside our financial and operating performance, Perseus continues to deliver tangible value to our host communities and governments. This slide captures the breadth of our contributions. In the first half of 2026, our economic contribution reached $484 million across our host countries, and this includes $308 million in local procurement, which directly supports national supply chains and local business development. We also contributed $144 million in taxes and royalties and $3.37 million in community contributions as we continue to support our local development funds and key community initiatives. Our workforce is overwhelmingly comes from the regions in which we operate with 95% of our workforce coming from our host countries, and this is a reflection of our commitment to building local capability and building the skills base that our future growth depends on. For our safety indicators reflect a strong safety performance, but the reality is that true safety performance is ultimately reflected in human outcomes, not statistics and the recent fatalities at Sissingué are a testament to that. Sustainability is at the core of our purpose and guides how we deliver results, creating value and building resilience. And that's what makes Perseus a trusted partner in achieving its mission of creating material benefits for all stakeholders in fair and equitable proportions. During the half, we continued to deliver solid operating performance, generate strong financial returns and progress our strategic growth objectives, all while maintaining high sustainability standards. With a strong balance sheet, high-margin operations and clear growth path, we believe we're well positioned to continue delivering long-term value for all of our shareholders and stakeholders. So thank you, and I'll hand over to the floor for questions. Operator: [Operator Instructions] Your first question comes from Ben Wood. Ben Wood: I was just going to ask one on the government negotiations with the Côte d'Ivoire government on royalties sort of moving forward, what sort of impacts? Do we know the granularity of what to expect moving forward? Or are they still sort of taking place? Lee-Anne de Bruin: Thanks, Ben. Yes, I mean we sort of have a little bit of understanding, okay, but we're not in a position to sort of put that out there. But I think the important thing is we don't see any radical change from what we've got today and Ivorian government are being very open and very pragmatic around the impact of wholesale royalty changes. So the point of the whole thing is that they will be releasing a new mining code sometime this year, and they want to make sure that any changes are ratified into the new mining code. Ben Wood: And so they're sort of consulting various companies and engaging strongly, are they... Lee-Anne de Bruin: Yes, they... Ben Wood: Then [indiscernible] a hard line on it. No, very highly engaged, very open. We had meetings. The industry are very unified together in this. So it's actually probably one of the best I've actually seen in my history of working where the industry has mobilized and working very collaboratively with the government... Operator: There are no further questions at this time. So I'll hand back to Craig for closing remarks. Craig Jones: Thanks, Nathan. I think we're pretty pleased with our results and the performance of the company in the first half, and it really sort of bodes well for our delivery of the second half. I'm very pleased to be able to release the $0.05 per share dividend. I think that's a positive indication of how things are going and also the upgrade in the resource and reserves at Nyanzaga, which really shows that Nyanzaga is a cornerstone asset for Perseus for many, many years to come and will be a long-life, low-cost asset. So some fantastic work going on the business. I really want to thank everyone within the organization for their support and their efforts to create the results that we have created and look forward to presenting the next round of updates in the next quarter.
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Bullish sentiment decreased 4.0 percentage points to 34.5%. Neutral sentiment increased 5.2 percentage points to 28.5%.
The US trade deficit slipped modestly in 2025, a year in which President Trump upended global commerce by slapping double digit tariffs on imports from most countries. But the gap in the trade of goods such machinery and aircraft — the main focus of Trump's protectionist policies — hit a record last year despite sweeping import taxes.
Shares of most of the cybersecurity companies Jefferies covers are trading at the lowest valuations seen over the past five years.
Earnings from DoorDash, Figma, and Moody's suggest that fears about AI disruption are overdone.