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PERI 2025 Q4 财报电话会议

Operator: Hello, everybody, and welcome to the Perion Network Q4 and Full Year 2025 Earnings Call. Today's conference is being recorded, and an archive of the webcast will be posted on the company's website. The press release detailing the financial results is available on the company's website at www.perion.com. Before we begin, I'd like to read the following safe harbor statement. Today's discussion includes forward-looking statements. These statements reflect the company's current views with respect to future events. These forward-looking statements involve known and unknown risks, uncertainties and other factors, including those discussed under the headings Risk Factors and elsewhere in the company's annual report on Form 20-F that may cause actual results, performance or achievements to be materially different and any future results, performance or achievements anticipated or implied by these forward-looking statements. The company does not undertake to update any forward-looking statements to reflect future events or circumstances. As in prior quarters, the results reported today will be analyzed both on a GAAP and a non-GAAP basis. While mentioning EBITDA, we will be referring to adjusted EBITDA. We have provided a detailed reconciliation of non-GAAP measures to their comparable GAAP measures in our earnings release, which is available on our website and has also been filed on Form 6-K. Hosting the call today are Tal Jacobson, Perion's Chief Executive Officer; and Elad Tzubery, Perion's Chief Financial Officer. I would now like to turn the call over to Tal Jacobson. Please go ahead. Tal Jacobson: Good morning, and thank you for joining us on the Perion's earnings call for the fourth quarter and full year of 2025. 2025 was a defining year for Perion. For a company that has been around since 1999, we consider 2025 as year 1 for the new Perion, a year in which we changed everything except our name. We redefined our mission, our strategy, our technology, our organizational structure and even our executive team, all in 1 year. Today, we will summarize the results of the pivotal path we took 12 months ago. We will present the Q4 results that gives us the confidence in our Perion One strategy. We will also cover our 2026 guidance and our 3-year organic plan based on the momentum we're seeing. In 2025, we started building Perion One as a centralized platform for marketers. We integrated our technologies, expanded strategic partnerships and introduced new innovations to drive growth. We are now introducing the next phase of Perion One, deepening our technology and becoming an AI-native execution infrastructure that delivers measurable results across channels, platforms and verticals. Outmax, our AI execution agent, is already getting into more and more channels, delivering meaningful results for our customers. Perion One is becoming the infrastructure that allows our clients to harness the power of AI agents to execute all their media activities. Let's start with the fourth quarter performance. I'm happy to share that we delivered strong results in Q4. Our main growth engines, CTV, Digital Out-of-Home and Retail Media, all delivered double-digit year-over-year growth, significantly outpacing the market. We accelerated our contribution ex-TAC faster than the revenue growth. We delivered strong adjusted EBITDA growth and generated meaningful operating cash flow, demonstrating that we continue to operate with discipline. This combination of growth and profitability reflects the strength of the infrastructure we are building and our ability to execute in a highly dynamic market. The global advertising ecosystem is both massive and complex. Marketers navigate in a fragmented universe of screens, platforms, formats and buying environments while being held to higher standards of performance and accountability. Budgets, signals and optimization are often siloed by channels. That fragmentation is where efficiency and performance break down. This is the core challenge we've been focused on solving. We've built Perion One to unify the fragmented ecosystem. Its AI-powered execution infrastructures enable marketers to harness AI agents to perform highly complex marketing activities. Perion One helps advertisers make confident decisions faster and continuously optimize every campaign in real time. It also helps publishers to maximize inventory value through smarter demand allocation and yield optimization. By aligning execution across both sides of the ecosystem, demand and supply, Perion One improves efficiency, performance and outcomes end-to-end. At the center of Perion One is Outmax, our AI native execution agent that drives results for our customers. Outmax' goal is to be the one AI agent for every channel, whether it's YouTube, Facebook, Instagram, NBC, Disney+ or digital out-of-home. Outmax acts as the intelligent execution agent that ensures every dollar spent is working at its maximum potential. It removes the guesswork and replaces it with algorithm certainty, allocating spend, managing pacing and optimizing outcomes in real time. Outmax is already showing great results for our customers. Let's take a look. [Presentation] Tal Jacobson: Here is a strong example of how Outmax agents performance drives trust and scale. The Outmax AI algorithmic model started with this specific advertiser on a $50,000 YouTube budget test in 2023. The performance justified the budget expansion as we grew the spend to $4.5 million in 2024 and to $20 million in 2025. When technology drives performance, scale comes organically. Another example comes from our digital out-of-home technology, where we're seeing the same pattern. In late 2025, we announced the launch of digital out-of-home player that became the marketing operating system for digital out-of-home publishers. As you can see in this graph, an out-of-home publisher that integrated this solution in September '25 scaled with us from a spend of EUR 200 a month to over EUR 0.5 million a month in just 90 days. This is not an isolated win. It demonstrates the repeatability of our execution model across environments and formats. It's the Perion One infrastructure that scales performance and creates stickiness among our customers. This next example shows how execution and optimization come together in our Outmax for CTV. With Webroot, we applied Outmax CTV, AI-driven optimization, to continuously improve performance. Outmax drove a significant reduction in cost per action and an uplift in site visitation that led to week-over-week efficiency improvements. It is also important to note that Webroot had a full transparency into performance, allowing them to see what was working and scale with confidence. All these examples prove that the outcome is consistent across different brands, channels and formats. This Outmax outcome delta graph represents how we think about our AI agent models, models that have only one purpose, to create consistent incremental uplift for our customers. It is a difference between having an army of media traders executing with hands-on keyboards versus our Outmax AI agent optimizing in real time. Following a short learning period, Outmax agent continuously applies dynamic bid and execution adjustments across dimensions, reallocating spend based on live performance signals. This execution capability directly translates into how customers consistently increase ROI at scale with us and why this execution model is trusted by some of the world's largest brands. Perion's technology serves 52 of the Fortune 100 companies in the U.S. across industries, including retail, pharmaceuticals, airlines, technology, media, financial services and insurance. This wide variety reflects trust in our execution model regardless of the vertical. One of the most exciting things about the new Perion is the level of strategic partnerships we are attracting. We are partnering with the most advanced companies in our industry to accelerate our growth. This quarter, we launched 3 new partnerships with Amazon, Walmart and Mastercard. Through our new Amazon partnership, we are combining Amazon's unique audience data and measurement capabilities with our AI-driven creative technology and premium inventory. This partnership strengthened Perion's long-term programmatic revenue potential with commerce brands. I'm also happy to share that Perion's AI-powered dynamic creative optimization is now integrated with Walmart Connect's first-party audience and sales insights. This help advertisers better personalize campaigns, explore opportunities for incremental sales lift and improve ROI. And with Mastercard, we're integrating aggregated purchase insight across the U.S. and Europe, particularly strengthening our digital out-of-home and CTV execution. Together, this partnership extends the power of our infrastructure. Collectively, those achievements reflect a structural shift in our business. 2025 marked Perion's transition from reset to execution and scale. We established Perion One as our AI native execution infrastructure. We unified our brands, our technology and our data into a single operating system, powering the execution of planning, activation, optimization and measurement. Our growth engines reaccelerated. CTV, Digital Out-of-Home and Retail Media showed clear momentum and drove advertising solutions back to growth. We strengthened execution across the organization, simplifying the operating model, refreshing leadership and increasing focus and speed. At the same time, we deepened our AI capabilities, introducing advanced execution algorithm agents and expanding performance solution across channels. Importantly, we returned to year-over-year growth in the second half of the year, demonstrating operating leverage and improved cash flow strength. Taken together, 2025 repositioned Perion for a scalable, durable growth. This foundation is what supports our forward targets. By 2028, we expect Perion One to represent the vast majority of our business with legacy activities remaining stable and no longer defining growth. Today, we present how we think about the future of Perion with our 2028 targets that include 3 main KPIs: Two for accelerated organic growth and the third for EBITDA margin expansion. Specifically, we are targeting Perion One pro forma spend CAGR of at least 25%, contribution ex-TAC CAGR of at least 20% and adjusted EBITDA margins reaching 28% of contribution ex-TAC. These targets are supported by clear structural growth drivers that include continued expansion in our performance-driven AI agents across CTV, Digital Out-of-Home, YouTube, Meta, web and Retail Media. This resonates with a market-wide shift towards performance advertising that is directly aligned with the Perion One offering. Internal AI-driven automation improves operating leverage, while disciplined cost management and targeted investment in go-to-market and innovation ensure we scale efficiently. This is scalable growth built on execution. With that, I'll now turn it over to Elad Tzubery, our CFO, who will walk you through the financial results of the fourth quarter, full year 2025, 2026 guidance and our targets for 2028. Elad Tzubery: Thank you, Tal, and thank you all for joining us on the call today. Our fourth quarter results mark a definitive turning point for Perion. Over the last 18 months, we focused on unifying our advertising solutions under the Perion One strategy. We are now seeing substantial financial impact. This quarter demonstrates the power of our execution. It reflects on our top 3 financial metrics. We delivered 19% year-over-year growth in contribution ex-TAC resulting from our go-to-market strategy. We achieved a 53% surge in adjusted EBITDA resulting from the efficiency measures we built earlier this year, and we generated over 400% year-over-year increase in operating cash flow, which enabled us to end the year at almost 90% adjusted free cash flow to adjusted EBITDA ratio. The Perion One platform continues to fuel our 3 growth engines: CTV, Retail Media and Digital Out-of-Home. Even more importantly than the outstanding performance of these engines, they are also consistently outgrowing the market. We expect this momentum to continue serving as the primary catalyst for our future expansion. We are entering 2026 with a highly efficient operating model, strong cash-generating abilities and a clear long-term financial road map to continue our top line growth. Our strong financial results, the successful implementation of the Perion One strategy and our AI-based execution infrastructure are the foundation on which our 2028 target plan is built on. We are backing this confidence in Perion's organic growth trajectory with action. We recently expanded our share repurchase program to a total of $200 million, of which we already executed $118 million. Moving on to our key financial metrics for the fourth quarter. Revenue for the quarter grew 6% year-over-year to $137.1 million. More importantly, our contribution ex-TAC grew 19% year-over-year to $65.2 million, significantly outpacing our growth in revenue. Adjusted EBITDA reached $24.3 million, an increase of 53% compared to last year. This implies an adjusted EBITDA to contribution ex-TAC margin of 37%, showcasing the operating leverage we have unlocked. The strength of our underlying business model and our consistent ability to generate cash proved itself effective once again. During this quarter, we generated $21.8 million in operating cash flow. We ended the year with $313 million in net cash even after repurchasing shares at almost $24 million in the fourth quarter alone. Looking at the full year of 2025, revenue was $439.9 million and contribution ex-TAC for the year was $203.4 million. Adjusted EBITDA reached $45.2 million, reflecting a 22% ex-TAC margin. On an annual basis, we generated $41.9 million cash from operations, representing a 504% year-over-year increase. Furthermore, our conversion rate of adjusted free cash flow to adjusted EBITDA was an exceptional 89%. This proves that even during a transition year, Perion's business model is resilient, profitable and highly cash generative. While our AI execution infrastructure is channel-agnostic, our strategic focus on the fastest-growing channels in digital advertising is bearing fruit. Our growth engines are both growing and outpacing the market. CTV revenue grew 59% in the fourth quarter and 42% for the full year, reaching $62.1 million. As the shift from traditional linear TV to connected TV advertising is accelerating, advertisers are increasing their CTV spend, looking for performance and measurement. This is exactly what Perion is offering. Digital Out-of-Home revenue grew 28% in the quarter and 36% for the full year to $94.9 million. This was driven by our expanded global footprint and our complete end-to-end digital out-of-home full stack solution. Retail Media also continues to be a star performer. Revenue increased 42% in Q4 and 36% for the full year and more than doubled the market growth. As we integrate more deeply with industry-leading retail partners like Walmart and Albertsons, we are seeing higher stickiness and recurring spend from top-tier brands. We expect to continue to capture market share in this rapidly expanding vertical. Looking at our revenue mix for Q4 and the full year, we see the continued shift towards advertising solutions that stands at the core of Perion One. Advertising solutions revenue increased by 7% year-over-year in Q4. This demonstrates the growing portion of CTV and Digital Out-of-Home, which accounting collectively for 44% of revenue in the fourth quarter and 36% in the full year 2025, accelerating from 34% and 23%, respectively, last year. Web declined 17% year-over-year in the fourth quarter and 13% for the full year. It is important to note that on a pro forma basis, when utilizing the lower-margin activities that were discontinued in late 2024, web revenue declined 12% in the quarter and only 1% for the full year. Search revenue increased 3% year-over-year in Q4, and we expect it to remain stable going forward. Contribution ex-TAC in the fourth quarter grew by 19% year-over-year to $65.2 million, representing a margin of 48% compared to 42% last year. For the full year 2025, contribution ex-TAC margin was 46% compared to 43% last year. As we move forward with our strategic plan and add more customers to the Perion One platform, we expect a shift in product mix that will grow our contribution ex-TAC at a faster pace compared to the total revenue. This measure better represents our top line performance than revenue alone. Adjusted EBITDA for the fourth quarter surged 53% year-over-year to $24.3 million, representing 37% of contribution ex-TAC and 18% of total revenue. This compares with 29% and 12%, respectively, last year. The fourth quarter is the second consecutive quarter that delivered year-over-year margin expansion. This reflects our improved operational leverage and is a result of the disciplined cost management structure we implemented earlier this year. We have successfully decoupled our expense base from our revenue growth, allowing a higher share of each incremental dollar to flow to the bottom line. As we increase our investment in innovation and go-to-market initiatives, we will also continue to optimize our cost structure. Those efforts, along with scaling our Perion One platform, will allow us to further expand our margin gradually over the next years. GAAP net income in the fourth quarter was $8 million or $0.19 per diluted share, a 61% increase compared to the fourth quarter last year. On a non-GAAP basis, net income for the fourth quarter was $21.4 million or $0.49 per diluted share. This reflects a 30% increase compared to the fourth quarter last year. For the full year, GAAP net loss amounted to $7.9 million or a loss of $0.19 per diluted share. On a non-GAAP basis, net income for the year was $51.3 million, delivering a non-GAAP diluted earnings per share of $1.13. In the fourth quarter of 2025, cash generated from operating activities significantly increased to $21.8 million, and our adjusted free cash flow grew to $20.7 million. On an annual basis, cash generated from operating activities significantly increased to $41.9 million and adjusted free cash flow grew 142% to $40.2 million. This reflects an 89% free cash flow conversion ratio, among the highest in our industry. Turning to our balance sheet. As of December 31, 2025, our balance sheet remains very strong and includes $313 million in cash, cash equivalents, short-term bank deposits and marketable securities. Our strong cash position gives us the financial flexibility to support our balanced capital allocation framework. First, it supports organic investments in our AI infrastructure and an aggressive go-to-market strategy. Next, it allows us to fund our share repurchase program. And lastly, it provides us the flexibility to pursue M&A opportunities that align with our Perion One strategy. Looking ahead, we expect to continue to generate positive free cash flow and maintain a strong conversion ratio. We remain committed to returning value to our shareholders. In the fourth quarter alone, we repurchased 2.5 million shares for a total amount of $23.9 million. Since the initiation of the program, we have returned over $118 million by repurchasing 12.9 million shares. Reflecting our confidence in our 2028 target plan, our long-term value proposition and our cash generation ability, the Board has recently authorized an expansion of our share repurchase program from $125 million to a total of $200 million. At our current valuation, this program represents in full a 56% return on our market cap. 2025 served as a year in which we focused on consolidating our Perion One platform. We introduced new advanced solutions, implemented Outmax, our Agentic AI execution agent and build the foundations for growth with efficient scale. We expect 2026 to be the year we begin to scale. For the full year 2026, we expect contribution ex-TAC of $215 million to $235 million and adjusted EBITDA of $50 million to $54 million. Looking ahead for the next 3 years, our strong results, the successful enrollment of the Perion One strategy and the AI-based execution infrastructure we have been building provide us with the substantial foundations for the 2028 target plan we present to you today. As we become the AI execution infrastructure of digital advertising, spend becomes a leading indicator of our platform's adoption and scale. It represents the total media spend running through our platform. On a pro forma basis, Perion One spend grew at a CAGR of 34% in the 2022 to 2025 time frame. Due to our investments in go-to-market, our innovative solutions that allow us to attract new customers and Outmax's ability to improve ROI and retain customers, we remain confident that the growth trajectory will continue moving forward. we project that Perion One spend will continue to grow at a pace of at least 25% CAGR through 2028. The other legacy parts of Perion, primarily our search activities, are expected to slightly decrease going forward and remain relatively stable. Diving deeper into Perion One, on a pro forma basis, Perion One contribution ex-TAC grew at a CAGR of 19% across the 2022 to 2025 time frame. Moving forward, the surge in spend is expected to translate into growing contribution ex-TAC. This provides us with confidence to target a contribution ex-TAC CAGR for Perion One of over 20% through 2028. Our confidence in this target is supported by 3 key catalysts. First, the ongoing strength of our growth engines; CTV, Digital Out-of-Home and Retail Media continue to provide significant organic tailwinds. Second, the broader market shift to performance advertising aligns perfectly with Perion One's offering. Outmax, our AI agent, demonstrates higher ROI for advertisers, establishing our solutions as value-driven products. Third, our value proposition attracts new customers and drives expansion within existing ones, reflected in our land and expand business model. It is important to emphasize that this growth will be purely organic, driven by the Perion One flywheel. Starting 2026, we expect Perion One to comprise 85% to 90% of the consolidated contribution ex-TAC. Moving forward, search is becoming a smaller portion of the contribution ex-TAC mix, completing our transition to a Perion One pure-play growth story. The rapid growth of Perion One spend and contribution ex-TAC will be accompanied by a balanced approach in profitability. We are targeting an adjusted EBITDA to contribution ex-TAC margin of 28% by 2028. Achieving this margin expansion relies on 2 complementary levers. First, efficiency. We will continue to drive internal efficiency and utilize AI-based automation to optimize our cost structure. Second, we will invest to scale. We plan to strategically deploy capital into go-to-market and innovation. While this requires upfront investments, it is essential to expedite growth and ensure we capture the full potential of our platform in the long term. As a result, Perion's consolidated profitability margins are expected to expand into 2028. We have always prided ourselves on being a highly profitable and cash-generative business, and our 2028 target plan is designed to amplify that. Even as we continue to invest in our AI infrastructure, we expect to maintain a high adjusted free cash flow conversion ratio. To summarize, the Perion One model is a combination of top line growth, increased efficiency and strong and sustainable cash flow generation. Perion enters 2026 stronger and more focused than ever. We have the technology, the balance sheet and the strategy to deliver significant value to our shareholders. With that, I will turn the call back to the operator for questions. Operator: [Operator Instructions] our first question comes from Andrew Marok at Raymond James. Andrew Marok: Two, if I could. Can we please start on the 2026 guide? A little bit of a wide range there, about 10 percentage points worth of growth. So I guess, can you walk us through what the low end versus the high end assumptions are there? And what you're maybe thinking for political impact in the second half of the year? Elad Tzubery: Yes. The guidance for 2026 represents the current view of the business. We expect to see a gradual decline in search and our other legacy activities, in parallel, a sharper increase in the Perion contribution ex-TAC. Given the market dynamics that we see -- I'm sorry, given the market dynamics we see today, we see shift towards performance. And within that, we actually believe that Outmax would be able to deliver -- would be able to capture more scale into our [indiscernible]. And right now with how we're seeing 2026 in terms of the budget spend, we see that advertisers are planning for shorter cycles and the visibility remain 6 months. And since right now at the beginning of the year, we start to stay disciplined in how we're seeing it and taking into account that second half of the year will -- the seasonality of AdTech is thinking much more... Andrew Marok: Got it. And then maybe a follow-up on that. I haven't run through all of the numbers, but it seems that there's like an acceleration implied going from '26 in the context of your 2028 guide, accelerating off of '26 into '27 and '28. Is that just an impact of like the mix shift away from search and toward the Perion One platform? Or are there things like incremental product launches and things like that, that are contemplated over the course of your medium-term guide? Elad Tzubery: We are not actually taking into account the new proposition, but we will add to the market. You take on the point, the growth of the Perion One platform together with the search declining will actually bring -- and expedite the growth towards [indiscernible]. Operator: Our next question comes from Eric Martinuzzi at Lake Street. Eric Martinuzzi: Yes. I saw that one of your announcements in the past quarter was the integration with the Amazon DSP. Just wondering if you did see wallet share gains with your advertising, both brand and agency advertisers? And then what does that mean for kind of the ramp in 2026? And I have a follow-up. Tal Jacobson: Yes, absolutely. So the Amazon DSP, that request actually came from our customers for a long time to use our DCO, our dynamic content optimization, with our inventory through the Amazon DSP. So we've been working with Amazon for quite a while on that integration, and we're extremely happy about it. We think that's going to open up a huge opportunity for us. As we just launched this. Obviously, there are things that are going through this, but it's just getting started. Eric Martinuzzi: Okay. And then as far as each of the DSPs also has AI tools to optimize spend across -- through their relationships with advertisers. What are you hearing from advertisers as far as the prioritization of using Perion One to manage campaigns as opposed to leaving in place spend at traditional legacy DSP. Tal Jacobson: That's a great question. I think that's really where we're focusing on. We're not trying to replace other DSPs. I think -- I would carefully predict that all DSPs are going to have their own AI tools if some of them don't already have them. But that's not the case for us. So what we're trying to do is to be a layer above all of those DSPs and optimize cross channel and understand where things operate the best. And that's based in the goal. So if the goal is to drive more people to websites, the goal is to drive more people to physical stores, the goal is to install an app, that is the goal. And then our AI agent can actually run across all DSPs and figure out, on that specific goal, where would that make the most sense and get the best outcome. So even though currently, most of AI tools that we're seeing out there are mostly UI-based and not the execution layer, I'm sure people are going to add more execution parts, but our execution infrastructure is built in a way where other AI agent can interact with our AI agent. And based on that, get the best yield for the advertiser. So it's kind of a different play. We're not optimizing for inventory, which every DSP optimized for its own inventory. We're optimizing for the outcome of the advertiser across all inventories, which is really the big thing we're trying to solve for that industry. Operator: Our next question comes from Jason Kreyer at Craig-Hallum Capital Group. Jason Kreyer: So I just want to start out talking about Outmax. If you can talk about maybe what the adoption has been over the last couple of quarters? And then are there any barriers to marketers adopting Outmax? Tal Jacobson: Yes, absolutely. Thanks for the question. We're seeing strong adoption, and we've shown only one example where we have many examples how the land and expand actually works with Outmax. Outmax is really all about performance. So even though we're extremely excited about the level of technology we have here, our advertisers are actually excited about the level of performance it drives. And we're seeing anything between 40% to almost 80% uplift with some of our advertisers. And it usually starts from budgets for tests and then pretty quickly, it goes into getting more and more budgets, but it's all performance driven. So we're seeing great success with that. Jason Kreyer: And broader question just on Perion One. Over the course of the last year, as you've rolled this out and you've worked with new customers to onboard, are you seeing anything unique in terms of selling cycles? Or are you seeing selling cycles compress at all over time now that that's been in the market longer? Tal Jacobson: Yes. So we are seeing people talking less about specific features and more about the outcome of the feature. So people -- in the past, they were tending to look at specific features or specific channels. Now they mainly care about the performance and the outcome. So that's why it kind of makes sense that we combine everything into one AI agent where just tell us what you're trying to achieve and let the agent figure it out. So that made our sales cycle shorter. It's easier to get testing budgets and then through showing actual results, increasing that -- the amount we're getting from the clients. Operator: Our next question comes from Steve Hromin at Oppenheimer. Steven Hromin: This is Steve Hromin on for Jason. So just one question from us. So with the very strong 28% guide for '28 EBITDA margin versus, I guess, this year is around 23%. So just if you could double-click on sort of what underpins your confidence in achieving that between cost of revenue efficiencies or OpEx or anything of that nature, AI initiatives? Elad Tzubery: Sure. Thank you. So I would start by saying that we're already seeing the progress that we did this year with our efficiency. Q4 results proving we jumped from 29% last year in Q4 to 37% this quarter. We took a lot of efficiency measures already this year, and we will continue to invest in them, specifically around the G&A and the cost of revenues using automation and AI tools that we implemented and build on our day-to-day operation. Together with that, we are seeing an increase for next year to 23% since we are about to invest as well in go-to-market and R&D. So as we progress along the year, we'll see more of our ex-TAC growth as a result of our performance, then we're definitely going to see the impact of what's coming as well to the EBITDA contribution ex-TAC ratio. So it's a combination of those 2. Operator: [Operator Instructions] our next question comes from Laura Martin at Needham. Laura Martin: Sure. So my first question is on the web. I think you said it was down 17%. So I'm really -- can you hear me okay? There you go. Tal Jacobson: We just lost you for a minute. Repeat that, please? Laura Martin: Sure. So the question is on web. I think you said the web piece of the business is down 17%. And so I'm interested in -- is that because -- I'm interested in the fundamentals behind that. Is that CPMs are under pressure or traffic is down because we have AI answers not sending visitors to websites? Or is that -- like tell me what's going on in the fundamentals of web? That's my first question. Elad Tzubery: Laura, with respect to web, the decline is driven from 2 different reasons. First of all, it's proactively. If you remember, we shut down low tech and low-margin legacy activities at the beginning of '25. So that's part of the decline. On a pro forma basis, if we are neutralizing that, Q4 decline was 12%. And on an overall -- on a yearly basis, it was quite flat. I think that the second reason is that actually human behavior is shifting towards otherworld gardens. What's important to remember that Perion One is channel agnostic. Outmax is optimizing for the ROI of the advertisers without necessarily specification of a certain channel. It's programmatic to hit certain KPIs defined by the customer. And whatever channel presents the best ROI, this is where we're going to see the spend. So it's really a channel agnostic play. Laura Martin: Okay. And then my other question was customers. So to your point about the fact you're not really a DSP, you're sitting on the layer above that because you want to optimize for brand advertising for the advertiser. It feels like there's going to be a big shift in your customer -- like what kind of customer you're calling on. So can you talk about that, please? Tal Jacobson: Sure. I'm not sure we're going to have a shift in the type of customers. We're still dealing with the majority of our clients come through agencies, but some of them are brand direct. But I think the way we interact with customers is definitely going to change. Up until a year ago, we interacted with them based on specific products or channels. We are now looking at a more holistic approach that let's look at the entire budget, let's figure out what are we trying to achieve, let's see if we can get you guys on better performance. Not necessarily switching between DSPs, but necessarily optimizing algorithmic approach into driving more performance. So the algorithm might choose different creative, it might choose different audiences, might choose different devices, but that's the focus. So we're actually the same type of customers, different level of conversation, which is more holistic and a broader approach. Operator: Our next question comes from Jeff Martin at ROTH. Jeff Martin: I was just curious if you could touch on, at least in your core growth areas, the market share gains that you've achieved over 2025. What has been the biggest contributors to the outpaced growth relative to the industry? And could you touch on the sustainability of that outpaced growth? Elad Tzubery: Sure. I think we see it in the -- our growth in Q4 definitely came from the growth engines that we see. CTV led with almost 60% year-over-year growth. Digital Out-of-Home with 28%. The Retail Media vertical once again increased 42% in Q4. So overall, all of our growth engines were really outpaced the market by double or triple than the industry. And I think this is part of the power of the value proposition that we are providing to customers around -- specifically around those channels. As we said, this is the foot in the door, always to gain more spend and budgets, and we see this in Q4 results. Operator: This now concludes the question-and-answer session. I will hand the call back to Tal Jacobson for closing remarks. Thank you. Tal Jacobson: Thank you for joining us at our Q4 and full year 2025 earnings call, and thank you for being part of our journey. We'll see you next time. Elad Tzubery: Thank you.

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HUN 2025 Q4 财报电话会议

Operator: Greetings, and welcome to the Huntsman Corporation Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Ivan Marcuse, Vice President, Investor Relations and Corporate Development. Please go ahead, Ivan. Ivan Marcuse: Thank you, Kevin, and good morning, everyone. Welcome to Huntsman Corporation’s fourth quarter 2025 earnings call. Joining us on the call today are Peter R. Huntsman, Chairman, CEO and President, and Philip M. Lister, Executive Vice President and CFO. Yesterday, 02/17/2026, we released our earnings for the fourth quarter 2025 via press release and posted to our website, investors.huntsman.com. Also posted a set of slides and detailed commentary discussing the fourth quarter on our website. Peter R. Huntsman will provide some opening comments shortly, and we will then move into the question-and-answer session for the remainder of the call. During the call, let me remind you that we may make statements about our projections or expectations for the future. All such statements are forward-looking statements and while they reflect our current expectations, they involve risks and uncertainties and are not guarantees of future performance. You should review our filings with the SEC for more information regarding the factors that could cause actual results to differ materially from these projections. We do not plan on publicly updating or revising any forward-looking statements during the quarter. We will also refer to non-GAAP financial measures such as adjusted EBITDA, adjusted net income and loss, and free cash flow. You can find reconciliations to the most directly comparable GAAP financial measures in our earnings release which has been posted to our website. I will now turn the call over to Peter R. Huntsman, our Chairman, CEO and President. Peter R. Huntsman: Ivan, thank you very much. As we review 2025 results, I think it is worth commenting on a bit on this past year and on our focus on 2026. I often end my prepared remarks with these words. We will continue to focus on what we can control and where we can create value. I do not say this to be repetitive, but rather emphasize where our focus needs to be. Our industry started this past year 2025 with optimism that North American housing was going to pick up. Chinese consumer confidence was going to recover and Europe would finally realize their follies and do something to reinvigorate their industrial competitiveness. Instead, shortly after our call, Liberation Day was announced and markets and consumer confidence was thrown into chaos. China repositioned and rechanneled their trade and stood toe to toe against the U.S. while their domestic market slowed. Europe policymakers focused on what was making them uncompetitive and decided to double down and lost a record amount of chemical production throughout the year. In North America, we saw U.S. housing and durable goods struggle to show any growth. Despite these hurdles, we continue to cut and restructure our cost basis, closing multiple facilities. We achieved growth in most of our tonnage that exceeded the general market while attempting to lead multiple price increases. And perhaps most importantly, we converted 45% of our EBITDA to free cash flow. A higher percentage than many in the industry. As we look out over 2026, we anticipate a gradual recovery in North American homebuilding and durable goods as well as an improvement in the Chinese domestic markets. We are seeing some very early signs of both improved volumes and pricing in Europe. It is too early to say these increases will fully materialize but we remain hopeful. While we do not control the outcome of these large macro changes, we will be more than ready to take advantage of any opportunities to expand margins and increase revenues should they come along and by focusing on those items we can control and conditions we can influence. On the strategic front, I believe that 2026 will continue to be another year of changing market dynamics. Even if we start to see a recovery, we will likely see further opportunities for mergers, joint ventures and industry consolidation. As always, we will be willing to engage with interested parties and push where there is an opportunity for value to be created. We will not be sitting on the sidelines waiting to see what comes along. Like 2025, we have set expectations internally to generate enough cash to cover our dividend. This requires more than just moving inventory about. And we will continue to be focused on further structural change in how and where we do business to accomplish this. With regards to pricing and growth, we will push to grow our assets at a better pace than the general industry and do this by winning business through new product development and innovation. Pushing to fill out capacities and upgrade materials through our MDI splitter in Geismar, capacity increases in high purity amines for the tech industry and catalysts, and expanding capabilities in material usage in aerospace, power and the fast evolving auto industry. We will also be selectively using AI tools if they make economic sense to further reduce our cost, simplify our processes and expand our R&D capabilities. In short, I hope that 2026 will be a year of recovery compared to 2025. The coming weeks should signal to what degree we will see demand returning to the North American construction industry and China’s moves following the Chinese New Year, the March National People’s Congress and President Trump’s visit to China in early April. The next several weeks should be anything but boring. With that, operator, we will open the call up for questions and comments. Certainly. We will now be conducting a question-and-answer session. First question is coming from David L. Begleiter from Deutsche Bank. Your line is now live. David L. Begleiter: Thank you. Good morning. Peter R. Huntsman: You mentioned some potential improvement you are seeing in Europe. Can you dive down into what is David L. Begleiter: driving that improvement? And how long and can that persist going forward in the year? Peter R. Huntsman: Yes, I think that as we look at Europe two things that we see. We see price increases that have been announced across the board. Well, most everyone have announced price increases, there might be one producer out there that is not. We are seeing a bit of a pickup in construction and as well as in auto. We also continue to see demand, not necessarily in polyurethanes, but in other divisions around the power segment, building out the infrastructure as well as aerospace. So I want to emphasize that at this very call last year, I think in my comments, I commented that everybody in North America had announced price increases as well. And all of those fell through shortly after the chaos that ensued after Liberation Day. So again, I am not trying to throw water on what we are seeing thus far into the quarter. But in Europe right now, I will take anything we can get and run with it. David L. Begleiter: Got it. And just in aerospace, how much did the business grow in 2025? And how much do you expect the business to grow in 2026? Thank you. Peter R. Huntsman: We expect the business to grow slightly better than the build rate. Again, I would just remind you, there is a difference between the delivery rate and the build rate. If you go to some of the airline aircraft manufacturers, you will see when you go to Toulouse or you go to Seattle, you will literally see scores of planes that are waiting FAA certification. So you can see where an Airbus or Boeing can show 15 deliveries, but a build rate that is much higher or much lower than that. Also, just as a reminder, we put a lot more product into wide bodies than we do narrow bodies. So when somebody says that they have got a record number of deliveries, or of production rates, we want to see more wide bodies. Just as a side note, the wide body production rate is still below this year is still below where it was in 2019. And that is not through lack of demand. There is still a backlog of years and years on wide body, pushing ten years on wide body planes. It is the capability that both producers seem to have lost during the COVID era. So as we see that recovery in wide bodies, we also have announced in previous calls the penetration of our products in internal applications around adhesives and internal components. So I say that we expect to grow better than the production rate, I say that meaning that we already have under contract a lot of the fuselage, the wings and so forth that we have had for some years. But we are picking up new business on a per-plane basis that will gradually be benefiting us throughout the year as well. So aerospace for us will continue to grow slightly better than the production rates of the wide body planes in both Airbus and Boeing. Thank you. Next question is coming Kevin William McCarthy from Vertical Research Partners. Your line is now live. Kevin William McCarthy: Yes, thank you and good morning. Can you refresh us on the amount of cost savings that you expect to flow through your financials in 2026? And where those might show up on a segment basis, please? Philip M. Lister: Yeah, Kevin. We targeted $100 million of cost savings Peter R. Huntsman: overall, which was headcount reductions of approximately 500, almost 10% of the workforce, and closure of Philip M. Lister: seven facilities. By the 2025, we had actually achieved Peter R. Huntsman: that annualized run rate of $100 million. The question is very specific to the in-year saving that we would expect in 2026. Philip M. Lister: That is about $45 million of in-year savings that we would expect to achieve excluding any impact from inflation. And you should get some additional savings to come through as well in 2027. Kevin William McCarthy: Okay. Very helpful. And then Peter, I wanted to follow up on a comment that you made in your opening remarks to the effect that we may see more in the way of mergers, JVs and industry consolidation this year. Were you referring to the industry in general? Or do you see opportunities for those sorts of strategic actions in the polyurethanes arena, for example? Peter R. Huntsman: I think both. I think that if you look in general is the most direct answer I can give. But I also have to look at where there is the most payoff. That is usually where you are seeing the largest number of divestitures, closures, possible joint ventures, and so forth. I think it is something like MDI where in the U.S., you have four manufacturers. I would imagine that the cost curve between those four manufacturers is pretty steady. And it would probably be pretty tough to see a merger take place of one of those four or two of those four manufacturers coming together. So U.S. might be a rather limited area in the area of MDI. Mike Harrison: I look at some place like Europe, I think the cost curve again, this is just my opinion, but the cost curve in Europe when you look at facilities, an MDI facility that would be in Antwerp or in Rotterdam, and you compare just the integration and the scale, then you take some facilities that are far smaller where they are taking raw materials, producing it in country A, moving it to country B where they are processing it into MDI, moving it to country C where they are splitting it. Again, you have a much greater cost curve in Europe. And I would assume that you have got leaders and laggards in Europe that you do not see in Asia, you do not see that in North America. That could easily precipitate possible closures. They could precipitate possible combination of assets taking place. And so I would say that it has to do with both the chaotic nature of the manufacturing footprint, costs and so forth that are associated with that. But at the same time, look, the number of chemical companies there are today that produce polyethylene, for example, in North America are fewer than there were fifteen years ago. Polypropylene, you look at the number of companies, look at the number of companies that are just our peers that are publicly traded. There is a general consolidation that is taking place, has been taking place. And I would assume that as you look and companies have cut the cost that they have cut, I imagine most companies have taken out all of the fat that exists and probably is now maybe even carving into muscle into certain areas. The next area that you are going to see for material cost savings is going to come about through possible mergers and so forth. So again, these are just my observations, but I continue to believe that there will be opportunities as there have been in ’25 and ’26. Now does that mean they make financial sense? You have seen some very large companies that have just shut down assets, some that have sold them off at a loss, others that have sold them for almost nothing. I think we are pretty public with our German maleic anhydride facility. We tried to sell it. We got to a point where we even tried to pay people to take it, and were unsuccessful in all of that. So we finally decided to shut it down. So every company is going to vary. And just because there is a deal out there does not mean that you have got to pursue it. But it does mean that there is, I believe, continues to be opportunity for churn. Kevin William McCarthy: Great. Thank you both. Peter R. Huntsman: Thank you. Next question is coming from Josh Spector from UBS. Your line is now live. Josh Spector: Yes. Hi, good morning. I wanted to ask about Philip M. Lister: your debt covenants that were updated a week ago and your outlook. I guess if I am doing some math right, need to be above six times net debt to EBITDA. Means your EBITDA in 1Q through 3Q needs to go from about $60,000,000 to $80,000,000 to $100. I guess one is that about right? Because I recall some of your prior agreements had some adjustments and maybe added some EBITDA temporarily. And two, just your level of confidence of achieving that step up if the industry does not improve. Philip M. Lister: Yes, Josh, it is Phil. So we posted our credit agreement on the new banking group on Friday. And if you want, you can look through all 160 pages, but I will give you the synopsis of that. Good banking group, pleased with the agreement overall. And you are right, the agreement has definitions of consolidated EBITDA which are different to the adjusted EBITDA that we state publicly. In addition to that, there are certain baskets as well. I am not concerned at all in 2026 about the leverage ratios. I think that adjusted EBITDA as we publicly quote would have to drop to something well below $100,000,000 on an LTM basis for us to even have a conversation about those leverage ratios. I am not concerned and I am pleased with the agreement that we put out on Friday. Josh Spector: Okay. So just there is then some sort of adder of a sizable amount, I guess, to bridge that gap, which I guess I should read that document to find more. Can you size it now? Or is it more complicated than that? Philip M. Lister: You have various definitions to size it, but you can see in the details, but you have got more than a couple of $100,000,000 there, and I am not concerned in the least about those add backs and help bridge the ratio. Kevin Estok: Great. Peter R. Huntsman: Thank you. Next is coming from Michael Joseph Harrison from Seaport Research Partners. Your line is now live. Mike Harrison: Hi, good morning. Peter, was hoping that you could talk in a little bit more detail about how you are thinking about MDI margins playing out over the quarter or two. It sounds like in polyurethanes, you are still expecting overall margins to kind of be under pressure. But I am curious Kevin William McCarthy: where you might be, maybe a little bit more optimistic Mike Harrison: Well, I think two things when you think about margins expansion. One is how much, what is the industry doing around volumes. And obviously, the more that you sell out of a fixed asset, the better your margins are going to be even if pricing does not change. And so typically going into the March, April, May timeframe, you are usually seeing demand picking up quite substantially. I do not see anything right now, at least, that is equivalent to the liberation day we saw a year ago that kind of threw people into Kevin Estok: chaos. Mike Harrison: Interest rates are steady, if not dropping a very small percentage. Homes are becoming more affordable as builders are building smaller homes, and simpler homes, if you will. And I remain optimistic having spoken to some of our customers and having spoken to some of the banks and lenders and so forth. In this area, that recovery in volume is going to be something that we should see increasing over the next few quarters here. I would also hope that pricing initiatives that have already been set, we sent out price increase notifications yesterday in our MDI business in North America, largely to offset rising benzene and natural gas costs. That obviously needs to happen just to offset the headwinds of natural gas and benzene as similar price increases have gone into effect in Europe to offset those costs, and hopefully gain some traction there. And China will probably have to wait till after the Chinese New Year. It started yesterday, goes into the early parts of March, before we see what is happening in China where we are seeing an RMB price today of around 14 for polymeric MDI. So I anticipate that we will see both an improvement in volume demand and in pricing. Kevin Estok: All right. And then Vincent Stephen Andrews: for my follow-up, I was hoping that you could maybe give us an update on the potential for share gains in spray foam insulation in North America. And kind of where do we stand in terms of rolling out that spray foam insulation product line in Europe and in Asia? Mike Harrison: Well, Europe and Asia we are going to continue to look at opportunities there as they come, and perhaps looking at third parties and so forth. Our main focus on building solutions is going to be North America. We continue to make steady progress in gaining market share. And at the same time, we are also doing that with increasing margins and lowering our own costs, consolidating our manufacturing footprint, and providing customers with new solutions and new products, innovation. So I think that our building solutions, urethane spray foam business today is probably in as good a shape as it has been the last three or four years. So I continue to be optimistic about the direction of that business. Peter R. Huntsman: Thank you. Next question today is coming from Patrick David Cunningham from Citibank. Your line is now live. Patrick David Cunningham: Hi, good morning. Thanks for taking my questions. Mike Harrison: Peter, you have taken a lot of steps to rightsize the cost structure Patrick David Cunningham: and footprint in Europe, particularly in polyurethanes. Do you still feel there is more to go from either you or the industry? And I know in the past, you have been skeptical about things like antidumping or energy policy reform in Europe. But have any of the more recent calls to action or radical policy reshift given you any more encouragement at this point? Mike Harrison: Yes. I remain hopeful that European policymakers will eventually do the right thing. As I had an opportunity a couple of quarters ago to meet with President Ursula von der Leyen, and I told her they need to do three things. They need to restart their nuclear, refocus on nuclear production. They need to move away from this crazy green new deal that has run them into the ground. And I apologize to her for using the f word, but they need to start fracking. And so she shook her head and yeah, we need to talk. The problem is there is just too much talk and there is too little action. But I continue to be optimistic that action will come about. I believe that in Europe, look, we have got two issues there and I have already touched on the first one, of what I consider to be a very wide structural issue with the industry of small facilities that I question just how competitive they are. Again, I do not run one of those, and so I do not know what goes on in those boardrooms and so forth. But there does seem to be more capacity than needed to satisfy the industry. There is a pretty disparate cost curve in Europe. And Europe continues to struggle with high energy costs. And so I think that there needs to continue to be a consolidation or refocus on those two things. As far as our cost structure in Europe, as I look at that cost savings of $100-plus million that Phil talked about earlier, most of those 500 reductions that we have seen in the company and the seven site closures, sadly, have taken place in Europe. And do we have more that we could be doing there? I really strain to see where there is large material change that can happen there by cost cutting further. I think that we want to position the business with the realization that Europe continues to be a $20 trillion economy. As much as we struggle in certain areas of polyurethanes, we continue to do very well in Europe in aerospace, and power, and coatings and certain adhesion formulations, and our thermoplastics polyurethanes and elastomers businesses. So not all is on fire in Europe. I just think Europe is capable of doing a lot more than what they are doing. And we hope that we are able to see recovery. I would remind you that it was just four years ago our most competitive MDI produced anywhere in the world was Europe. Europe was the most profitable end of our MDI business a couple of years ago. It can be great again. And I will spare Phil Lister saying, let us make Europe great again. But so we will go on to the next question here. Patrick David Cunningham: Understood. And then maybe just on Advanced Materials, it seems to have a lot going for it entering into 2026. You have new wins, strong aero, power businesses and maybe some stabilization on some of the core coatings and infrastructure. So how should we think about growth in 2026 and any sort of latent upside or operating leverage you may have for margins and what sort of right margin levels we should think about? Mike Harrison: I think that look. Advanced Materials is going to be stable before anything else. But where we need to see the growth taking place and margin improvement taking place is the segment of the industry where I believe we have the greatest opportunity for improvement. That is The Americas. Europe continues to be a strong segment for Advanced Materials. Asia continues to be a strong area. And The Americas will continue to see recovery as we see building recovers, we see the PMI continue to recover in The Americas. And I continue to be very optimistic about that trend. Peter R. Huntsman: Thank you. Next question today is coming from Michael Joseph Sison from Wells Fargo. Your line is now live. Michael Joseph Sison: Hey, good morning. Peter, can you talk a little bit about Kevin William McCarthy: the cost curve now? You sort of mentioned that Europe used to be Michael Joseph Sison: your highest or lowest cost or highest margin area. So Josh Spector: where are we now maybe industry-wise for the regions? And then Kevin William McCarthy: you know, at some point, if things do not improve in Europe, Josh Spector: I mean, what do you do with your assets there? Does it make Kevin William McCarthy: sense to just reduce exposure and sell out the U.S. or, you know, what are the options if Michael Joseph Sison: this downturn continues? Which I hope it does not. Well, Kevin Estok: yes, I hope it does not either. Europe has got too much potential. Mike Harrison: And I think that what we are seeing right now, our biggest headwinds where I look at our MDI production in Rotterdam versus Geismar versus Caojing. We have basically the same technology. We have the largest line in Caojing. We have the most lines in Geismar. We look at our cost for benzene in the three regions as basically flat. Our cost for chlorine and so forth is essentially flat. The big drivers is energy, is natural gas and energy costs. And so that is what fundamentally needs to change in Europe. And, unfortunately, today, I think that the seeds have been sown that I am not sure that there is going to be a fast change taking place. Now that is why we have made the funding that we have made in the last couple of years in Europe, which I think will address a lot of these issues going forward. The bottom line is that Europe, if demand is not going to improve, and if they are going to leave themselves open for cheaper product to come in from Asia and from the U.S. Eventually, European policymakers have got to determine if they want to protect homegrown industry in Europe. And two macro things need to—there needs to be less production in Europe and European policymakers need to decide if they want to stop cheaper products from coming into Europe. Patrick David Cunningham: Got it. And then just a quick follow-up on Josh Spector: sort of the industry consolidation potential. Kevin William McCarthy: If Huntsman Corporation ends up being a buyer, Josh Spector: of stuff, where do you want to focus those acquisitions? And then you know, what are the potentials for Huntsman Corporation to divest stuff if things are not going to improve longer term. Mike Harrison: Well, we are going to, in my opinion, we are going to have to do both. Because we do not have the ability today, we are not going to go out today with the balance sheet that we have today, stretch that balance sheet and put it in jeopardy. So that is why I say my comments. We have got to be creative. We have got to be smart. And you have got to look at things such as joint ventures or possible, you know, mergers and or some sort of consolidation play. And I think we can continue to expand and to grow the business without necessarily going out and taking on more debt. Now if we are able to sell something or monetize something, I think we have been very consistent over the last couple of years. Our primary focus is going to be to expand our applications and the footprint that we see in Advanced Materials. And we would like to invest in those type of applications. That is not necessarily that we are going to go out and we have to invest in epoxy. But when we look at areas like aerospace and adhesions, and we look at the power systems and so forth, even look at some of the automotive areas that polyurethane is participating in around battery potting and so forth. These are going to be the sort of applications and product innovation that is going to be rewarded over the next decade. So where would we be buying? Probably first off we need to find where there is best opportunity, but it would be in that area. But, again, I want to end this by where I started it, and that is we are not going to go out today and take the balance sheet we presently have. We are going to have to do some work before we go out and just start adding on more debt or see a material change in improvement in the industry. Peter R. Huntsman: Thank you. Our next question today is coming from Aleksey V. Yefremov from KeyBanc Capital Markets. Your line is now live. Joshua David Spector: Thanks and good morning. This is Ryan on for Aleksey. Peter, I want to go back to some earlier comments I kind of found quite interesting around affordability and maybe some improving conversations with customers. I was just wondering, are you maybe seeing improved Philip M. Lister: order patterns from customers kind of ahead of maybe upcoming construction season? Or is there something else on the radar? Just any additional color there would be much appreciated. Mike Harrison: I think that it is simply too early to say, and I am not trying to obfuscate. We had a very cold East Coast, everything east of the Rockies, in January, December. I think that if anything, we are probably going to see a little bit of a delayed, probably a couple of weeks. We typically start to see construction orders start coming in about February, about now, and start building up through the month of March. And so that by April, you are seeing the full impact of what I would call a construction season. That obviously can be delayed through weather. It can be delayed in Asia because of a later Chinese New Year, which is what we are seeing this year. So I think between later-than-usual Chinese New Year and a colder-than-usual winter months that we saw in North America. Now I did say earlier, we are seeing what I would consider to be green shoots, and I want to emphasize again, very early green shoots in Europe, about a little bit better demand and pricing traction than we have had the last couple of years. So that again, I will take anything I can get at this point. And we are going to nurture that and we are going to Kevin Estok: see Mike Harrison: make the most of that. Philip M. Lister: Right. Okay. That is helpful. And I was just curious. Can you—you guys made some comments in the prepared remarks just around kind of inventory levels in the U.S. But I was wondering if you can maybe comment on where you believe MDI inventories are in both Europe and Asia? Thank you. Mike Harrison: You are talking about our inventory levels or that of customers and the industry in general? Philip M. Lister: Just the industry in general. Mike Harrison: Yeah. I would say ours are very low. And again, I cannot speak for every customer that is out there, but just anecdotally, it feels like the supply chains between us and the consumer is quite low. And, you know, all companies right now in that supply chain are trying to control cash, trying to control inventories and working capital. Building suppliers, OSB producers, auto industries that are having to write off billions of dollars on EVs and so forth. They are all focused on cash right now and inventory control. So one of the unknowns that we may well see going into ’26 is—and I say this having lived through a bunch of other sudden rebounds in the industry—this industry typically does not recover over the course of four or five quarters. It usually gets to a point where people realize products are Kevin Estok: tight. Mike Harrison: All of a sudden, we cannot restock in time for a demand upswing. And all of a sudden, you find out there are shortages. And we look back in 2018. We look back—every couple of years, this seems to happen. I would not be surprised if that were to happen in ’26 in certain regions of the world. Peter R. Huntsman: Thank you. Next question today is coming from John Roberts from Mizuho Securities. Your line is now live. Mike Harrison: Thank you. Are you seeing any significant decline in price for merchant chlorine in the U.S.? One of the major U.S. suppliers talked about significant weakness in the merchant chlorine market. No. I think it has been pretty steady. I would love to see it collapse but it has been pretty steady. Peter R. Huntsman: Okay. And then sorry, I have forgotten that Europe was actually the most profitable MDI region for you. Kevin William McCarthy: I think that it was less disadvantaged a few years ago, but I never really thought it was advantaged. What was the source of the advantage Ivan Mathew Marcuse: that Europe had over the rest of the world? Mike Harrison: We had, again I am speaking for Huntsman Corporation. I am not speaking for our competitors. We had a lot of downstream business, more downstream business in Europe five, six years ago. That went into our elastomers business, TPU. Went into our system houses. We had more system houses there than we did any other place. And we also had lower chlorine and caustic prices and our auto business in Europe used to be one of the most profitable segments we had anywhere in the world. Today, that auto segment that is most profitable is in China. Again, I think we still have a very good auto segment in Europe and a very good one in the U.S. You know, we are seeing the same trends that a lot of other companies are seeing. Kevin Estok: Thank you. Peter R. Huntsman: Thank you. Next question is coming from Matthew Blair from TPH. Your line is now live. Mike Harrison: Great. Thank you and good morning. Could you talk about your expectations for global MDI capacity growth in 2026? And I think there are reports that one of your U.S. competitors is looking to add capacity this year. Philip M. Lister: I think that would raise global capacity by roughly 2%. Do you agree with that? Is that something you are seeing as well? Kevin William McCarthy: Do you expect any material increases in Asia MDI capacity Kevin Estok: this year? Thank you. Mike Harrison: Well, Asia—I will hit that first. Asia continues to be our most profitable MDI market and supposedly the one that is most oversupplied with MDI. There was a lot of talk earlier in 2025 that with the tariffs going up in the U.S. and a lot of that Asian material that was going into the U.S. had merely washed back into Europe and into China and flood those markets. We have not seen that take place. So as I look at capacity additions in China, I think that they may well be coming on, but I question how much impact they are going to have and we are not seeing that material necessarily leaving China any more than it has over the last couple of years. In the U.S., yes, I think we are seeing the impact of some of that incremental debottlenecking, some of that expansion that has been taking place over the last couple of years with one of our competitors here. I would remind you that typically companies go out about six to twelve months before capacity comes into the market and you start cutting deals, you start talking to people about pricing, and what you do not do is bring up a new line of 50,000 metric tons, for example, and all of a sudden tell your sales and marketing, we will go sell it now that we are producing it. And so the impact of that volume coming into the market which from what I have publicly read is sometime middle part of this year, I would say from a pricing point of view, from a supply point of view, is probably being felt in the fourth quarter of this last year and first quarter of this year. Having said that, we are talking about an expansion of about what—low to mid single digits—in North America of actual capacity that is coming in. So I am not sure that it is going to have a material adverse change to the market. Great. Thank you. And then is there any major turnaround activity we should be on the lookout for later in the year for Huntsman Corporation, like any sort of MDI downtime in Q2 or Q3 that we should be aware of? Philip M. Lister: No. Just our normal turnaround activity. We had the once-in-four-year major Rotterdam turnaround last year, but normal turnaround activity across all three regions. We do have to make sure that our plants remain reliable. So there will be periods of planned outages but nothing abnormal. Peter R. Huntsman: Thank you. Next question today is coming from Laurence Alexander from Jefferies. Your line is now live. Mike Harrison: Hi, this is Dan Rizzo on for Laurence. I have questions based upon something you mentioned before about kind of focusing on wide bodies within aerospace. I was wondering if getting to narrow bodies as a focus, how its done with the cycle is like, or if that is an opportunity in the coming year and years? Well, it will not be an opportunity until they start redesigning the 737 and the A320 Airbus. When I say redesigning, that would be a major, major overhaul by now making carbon fiber wings and fuselages and so forth. So I do not see that happening anytime in the foreseeable future. Again, I think you are going to see opportunities to have new adhesions and so forth applications going into the narrow body. And it is incrementally moving towards light weighting and so forth. So that is an area of focus that we continue to have as to how do we have greater penetration into the narrow bodies. But as far as all of a sudden they start making composite wings or fuselages, I would love to see it but that would be a major change to the design of the plane. Peter R. Huntsman: Thank you. Next question is coming from Frank Joseph Mitsch from EM Research. Your line is now live. Michael Joseph Sison: Good morning. Kevin William McCarthy: Peter, I never thought I would hear you say the word, let alone on a conference call. Mike Harrison: It was quite revealing to say it in Europe of all places too, where I think I may have been thrown in jail. Kevin William McCarthy: And for the record, if anybody dialed in late, he said fracking. So just to clarify that. Michael Joseph Sison: Hey. Speaking of clarifications, you know, let me come back to the consolidation question. Kevin William McCarthy: That was asked by a couple of other people. I mean earlier this earnings season we had Patrick David Cunningham: a company overtly Michael Joseph Sison: state that it was, you know, open for selling the company, and you obviously say, hey, look, we are willing to engage with interested party and create value where there is Kevin William McCarthy: an opportunity to do so. Is there any—should we be reading through the lines on Huntsman Corporation here in that regard? Or, you know, how would you address that? Mike Harrison: No, I would—look, the standard answer that we give on something like that is we do not comment on rumors or M&A activity. In this case, I would say that it is no. We are not in a sale process today or anything of that sort. I think that as we look at it, we just—we see and you hear a lot of companies that are talking about that they are studying the future of their division X or they are looking at consolidations or they are looking to shut down assets and so forth. And wherever you see chaos, you see—usually, you see opportunities. Kevin Estok: So Mike Harrison: I would not read more to it than that. Kevin Estok: Terrific. Thank you so much. Thank you. Next Peter R. Huntsman: question today is coming from Jeffrey John Zekauskas from JPMorgan. Your line is now live. Kevin William McCarthy: Thanks very much. In the first quarter, your Michael Joseph Sison: polyurethanes range first quarter of $25 to $40 million in EBITDA. And last year, you made $42. So is the reason why your urethanes EBITDA should be down is that prices are lower year over year, and I would expect that volumes would be higher. And why is the range so big? And, you know, what is the difference between the lower end of the range to the higher end of the range? Do you need to get prices up in the first quarter? What is the real dynamic there? Mike Harrison: Well, we do need to get prices up in the first quarter. We have got rising natural gas costs in the first quarter that right now, as I sit here, represent a $10 million headwind that we were not anticipating a couple of weeks ago in our polyurethanes business. So yeah, I do see some headwinds. I do see that coming down. I would remind you that as we look at the first quarter of last year’s $42, that was coming off of a fourth quarter—I do not want to get into too much detail here—that was coming off of a fourth quarter in 2024, $50, and leading to a $31 of this last year. So we were seeing a polyurethanes business last year that was in a nosedive, if I could put it mildly. And I look at polyurethanes this year, I certainly have more optimism in the market. We are starting it from a low basis obviously, in the fourth quarter going into the first quarter. I do hope that we are able to do better than that median range, and that adjustment, the range that we gave literally we argued about that just over the last couple of days internally because of the headwinds that we are seeing. And as we look at natural gas prices, this very week in Europe are starting to come down. Again, this is something that if we were to have this call two weeks from now, it could be maybe a few million dollars difference one way or the other. But I think directionally, we are seeing volumes coming up. We are pushing prices and I would say that the business is set certainly in a different direction in ’26 than it was in ’25. Kevin William McCarthy: Okay. And when you look at polyurethanes prices for Huntsman Corporation, did they sequentially move lower through the course of 2025? Kevin Estok: And then for Phil, Kevin William McCarthy: is your base case that working capital is a use in 2026? Mike Harrison: Yes, I will let Phil answer on the working capital. In 2025, yes, we did see pricing pressure on a downward basis in all three regions. Pricing actually came down in Europe and the U.S. about the same. Started higher in Americas. It is still higher in The Americas today, but both came down about the same amount throughout 2025. And Asia less so. Philip M. Lister: Yeah. From working capital. If we did not do anything, and you assume the economic conditions are better in 2026 than they were in ’25, therefore, you have got more revenues, more receivables. You would expect a use. We have a number of programs in each of the individual items of working capital—inventory, AR, AP—and I fully expect and target that our cash conversion cycle, which we reduced by 10% in 2025, will again be a reduction in 2026. And therefore, we would be targeting overall an inflow absent significant changes to the macroeconomic environment. Kevin Estok: Thank you. Next question is Peter R. Huntsman: coming from Hassan Ijaz Ahmed from Alembic Global. Your line is now live. Kevin Estok: Good morning, Peter. Peter, Kevin William McCarthy: quarters ago, I believe it was ’25, actually maybe it was Q2, you mentioned that sequentially in polyurethanes, Kevin Estok: you guys see 8% to 10% volume uptick. And you only saw a 3% volume uptick in Q2 last year. So, obviously, you know, Liberation Day, you know, tepid demand globally, presumably all those factors went into that. Hassan Ijaz Ahmed: But as you look at Q2 of this year, particularly keeping in mind some of the lean inventory comments you made, could we be gearing up for a pretty big sort of volume uptick within polyurethanes? Mike Harrison: It all depends on the macro issues around the construction season. And we will certainly know that by March. I would, in my opinion, it is mostly going to be around construction. And that will lead to construction demand, lead to increased—usually increased—durable goods in North America. And that is where we had our biggest miss this last year. So, again, and at the same time, remember, Hassan, we are also going to be pushing through price increases. And you have got to balance that very carefully as to how much do you want to increase prices and push for price increases and hold the line on pricing and how much do you want to go after volume. So it is a tough line to walk. Kevin Estok: And Mike Harrison: we will follow the macroeconomic indicators. Hassan Ijaz Ahmed: Very helpful. And as a follow-up, I mean, again, it seems that just from the sounds of it, you seem a little more comfortable about pricing as it pertains in polyurethanes as it pertains to North America, particularly keeping in mind this incremental capacity that is coming online. Is it fair to assume that we should see a healthy pricing trajectory in North America despite this capacity coming online, keeping in mind some of comments you made about how, you know, you sort of presell ahead of this capacity coming online. Mike Harrison: Yeah. Hassan, you have got to remember, I am my father’s son. I grew up in a household where polystyrene was considered to be the greatest petrochemical product ever produced. And so, yes, I am always going to be pushing for better prices. I am always going to be optimistic about demand and pricing and so forth. Take what I say with a grain of salt in those areas. I would say that it is simply too early to say in the North American market and largely to the Chinese market, which you well know that the pricing in China is usually going to be the two weeks or so after Chinese New Year is over, usually, you see quite a bit of volatility, hopefully, upward pressure on pricing there. North America, it is just too early to tell. Again, we have got pricing announcements that have gone out to our customers. And we are also seeing some pricing announcements and some small bits of traction in Europe on pricing as well. But I do not want to get the wagon ahead of the horses here and say that somehow I am announcing that we have been successful in getting prices through in Q1. We have made the announcements. They will likely see the impact in Q2, if anything. And we will continue to push for that. Peter R. Huntsman: Thank you. Our next question today is coming from Vincent Stephen Andrews from Morgan Stanley. Your line is now live. Michael Joseph Sison: Hi, good morning. This is Turner Enrichs on for Vincent. Kevin William McCarthy: What drove the less severe than expected seasonal drop in North American polyurethanes last quarter? Philip M. Lister: So polyurethanes overall in North America grew slightly, and that is really around some of the business wins that we have seen in the early part of the year. I do not think there was anything material that we saw in quarter four which was particularly different. What we saw in polyurethanes in Q4 was that the outage we would expect in Rotterdam to last a little bit longer actually was a little shorter and therefore that provided some upside overall. Michael Joseph Sison: In terms sequentially, you still saw seasonality in North America. What we said in the prepared remarks is December, we were maybe a little bit more aggressive in terms of how we thought it would have been a more of a seasonal decline versus last, but you still saw the normal seasonality. Thanks. Makes sense. Patrick David Cunningham: So as a follow-up, we are about a year into significant tariffs having been placed on U.S. MDI imports. And I have seen trade reports that indicate imports of Chinese-origin MDI Kevin William McCarthy: have dropped something like 80%. Could you speak to how you have seen tariffs play out in terms of Patrick David Cunningham: regional demand dynamics? Mike Harrison: Yes. We have seen those same numbers, public data on Asian imports. That does not mean that Asian players are not bringing product in from Europe, but that poses a number of questions in and of itself on the economics behind something like that. I am surprised this past year to see the amount of product that is coming in from Europe, particularly around smaller sites that I would not consider to be very competitive. But what do I know? If I mentioned earlier, again, this is just—I am not speaking on behalf of the company. It is my own thoughts. I mentioned earlier about a rebound that can suddenly happen. And as I look in the North American market, if you see a rebound in housing—and I am not talking about a historical recovery in housing—but if you see a usual, maybe a little bit better than usual, certainly better than last year, rebound in housing, with the constraints that have been put into place by tariffs and just by the macroeconomics—tariffs are not the only thing that discourage trade as well—I could see the scenario where you could see the U.S. running into supply issues before other areas of the world. Again, I want to be very clear. I am not saying that I am going to see a rebound here in Q2 or anything. I am just saying that as you look at that fundamental basis where the U.S. used to have a pretty healthy chunk of its production of supply side at least being satisfied by imports that have been cut off, U.S., in my opinion, U.S. will probably be the first to feel tightness should that occur. Peter R. Huntsman: Thank you. Our next question today is coming from Arun Shankar Viswanathan from RBC Capital Markets. Your line is now live. Hey, good morning. This is Adam on for Arun. Thanks for taking our Kevin Estok: question. Patrick David Cunningham: Maybe if we could zoom out a little bit, be a little hypothetical. So do you think mid-cycle earnings levels for Huntsman Corporation could be maybe through the end of decade because I think Michael Joseph Sison: your peak earnings was kind of in the $1,500,000,000 range, maybe mid-teens margins. This year Peter R. Huntsman: was 2.75%, closer to mid-single margins. Patrick David Cunningham: And assuming some of those normalized volumes you are talking about, Peter R. Huntsman: normalized cost inputs, do you think the business could get back to Patrick David Cunningham: an $800 or $900 million EBITDA range in that 10% margin? Or do you think some of this is structurally impaired from asset closures and Europe misbehaving? Mike Harrison: I think that we still have the production capabilities to generate those sort of EBITDA. A lot of that is going to be how does Europe land. And Europe for us used to be a third of our EBITDA, and you have got a third of our business today in polyurethanes that is struggling in comparison to the U.S. and Asia. If Europe gets back on its feet from an industrial point of view, and that does not mean that it becomes a global leader, but just kind of recovers back to where it was, yes, I would hope that we would be able to get back to those sort of numbers. We still have the same amount of tonnage of MDI that is being produced around the world. We have the same fundamental capacity to produce production in our amines and in our performance products and our advanced materials. We have taken out, obviously, a lot of costs, a lot of people. We have taken out some of the downstream system houses and so forth. But that has not necessarily eliminated our ability should we see an economic recovery in Europe and should we see the U.S. housing market go back to its normalized levels. Yeah, I would think that we have that opportunity. Patrick David Cunningham: Okay. That is great. And I know there have been several questions on the MDI pricing in Europe. Have you been able to quantify any of that? What are those price increases that you are aiming at? I know maybe not all of those will flow through. Just curious what you are going for. Mike Harrison: In Europe, I would—yeah. I think it is just too early to speculate as to what—we are in the process right now negotiating with a number of customers and so forth. I would very much like to see us at least offset our raw material increases that we are seeing. And that is going to be a tug of war through the first quarter. Peter R. Huntsman: Thank you. Next question is coming from Aaron Rosenthal from JPMorgan Chase. Your line is now live. Emily Fusco: Thank you for the time. This is Ellen for Aaron. Can you walk us through the moving pieces on the revolver quarter over quarter? Did you fund on the new RCF to repay outstanding? The outstanding amount at year end? And if so, what is the balance today? And do you have any plans to term out the balance via new debt? And finally, just curious if you would have any interest in tapping your equity to help shore up the balance sheet. Philip M. Lister: No on the final comment. New revolver, as I said, I think we are extremely pleased with the strength of the banking group. We have moved to an $800 million revolver. The way that I look at it overall is we have an $800 million revolver. We extended our maturity and also the capacity on our securitization program, which now adds up to approximately $300 million. And at year end, we had over $400 million of cash, so overall $1 billion, and we were borrowing approximately $500 million across our securitization program and our revolver. So that gives a net amount of approximately $1 billion moving forward. To your question around terming out any of the borrowing. Obviously, we have had that discussion as we have moved through the revolver process. I do not see that as necessary as we sit here today. We have managed to put in place an accordion to $400 million which we could tap into as a durable upcycle unfolds over the next eighteen to twenty-four months. And I take a look at the overall capital structure, which I think is pretty much aligned with the portfolio that we have. So I think we are comfortable with where we sit today, but we are always looking at our capital structure in light of the extended trough that has occurred in the chemical industry. Peter R. Huntsman: Thanks. Operator, why do not we take one more question? I think we are at the top Mike Harrison: of the hour. So we will take one more and then wrap it up. Peter R. Huntsman: Certainly. Our final question today is coming from Salvator Tiano from Bank of America. Your line is now live. Kevin Estok: Thank you very much. I just want to go back on the capacity additions in the U.S. that you were asked about before. Firstly, if I heard correctly, I think there was a mention that it is low to mid single digit capacity growth in North America. And I just wanted to check with your industry intelligence essentially what are you seeing in terms of the actual number because at least what we have seen from some trade publishers talks about more of a 20% or more increase in the one-point-something million ton market? And secondly, Peter, you mentioned that you saw most of the impact already in Q4. I am just trying to understand if I were to think like a buyer of MDI and inventories in the supply chain are very limited as you have said before. How would they be already benefiting from that capacity coming midyear if I cannot restock anymore and I have to wait? Would not theoretically that mean that all the pricing impact will only come when the new capacity comes online because there is no opportunity for a buyer to restock further? Mike Harrison: Well, okay. So I am not trying to avoid an answer to the—but you are asking me to kind of get into the mind of the person who is bringing on the capacity, which I have not the foggiest idea. Just because that capacity is coming on does not mean it is all going to come on in one day, and it is all going to flood the market in one day. Oftentimes, it takes quarters to be able to integrate and to be able to bring on capacity. And I know in our case, when we have brought on capacities in the past, it does take you up to a year to sell the product out. You are not going to want to bring on 100,000 tons of new product and somehow sabotage your existing 500,000 tons of product that you have got that you are already selling by cutting prices. How a certain competitor or producer will bring on capacity, when they bring it on, what impact they want to have on the market and so forth is all yet to be seen. And my comments were that earlier that I believe as we have seen in the past with this particular producer, product is bled into the market usually on an as-needed basis. They will obviously be expanding their footprint. But how they do it and how soon they choose to do it and what impact they choose to have on the market, that is kind of out of my—I just simply do not know. But again, it is very, very rare that you would all of a sudden see 100,000 tons start up on Wednesday and it floods into the market. Philip M. Lister: And you are going to be Mike Harrison: seeing that lower margins and lower price immediately. Peter R. Huntsman: Thank you. We have reached the end of our question-and-answer session. And that does conclude today’s teleconference and webcast. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.

86天前Insight Analytics约5分钟阅读

MPCT-UN.TO 2025 Q4 财报电话会议

Operator: Welcome to the Dream Impact Trust Fourth Quarter Conference Call for Wednesday, February 18, 2026. Please advise the participants are in listen only mode and the conference is being recorded. [Operator Instructions] During this call, management of Dream Impact Trust may make statements containing forward-looking information within the meaning of applicable securities legislation. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the Trust's control that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. Additional information about these assumptions and risks and uncertainties is contained in the Trust's filings with the securities regulators, including its final long-form prospectus. These filings are also available on Dream Impact Trust's website at www.dreamimpacttrust.ca. Your host for today will be Mr. Michael Cooper, Portfolio Manager. Mr. Cooper, please proceed. Michael Cooper: Thank you, operator. Good morning. I'm here with Derrick Lau, the CFO. We put out a press release on January 7 with a business update. And although we're quite busy in a lot of efforts, there hasn't been that much of an update since then. I guess the key thing is 49 Ontario, which we've talked about quite a bit, and I guess we talked about all of 2025. And by the end of the year or early into this year, we had accomplished everything we had set out for, including having a 20-year debt which really helps us manage through the cycles. And we got the development charge waiver, and we're really pleased to be one of the first of the groups that got development charge waivers to begin construction. And although there's a softening rental market between the HST savings, the development charge savings and what we're seeing in construction costs, which is a significant decrease. I think our overall cost will be down by more than rental rates are down. And what's nice about it is there's like -- right now, we're sort of at the fulcrum of declining population as people are leaving the country when their visas come up as well as the massive delivery of condos. So our hope is that while the savings are permanent, the rental rates will return to normal before the building is finished. The building, we had about $65 million of equity in the project. We sold 10% so we got $57 million. We got $5 million or $6 million on the first advance for prior costs, and we got a piece of land that we'll be selling. So there's a fair amount of equity there, especially when -- I mean, right now, there's about $4 a share equity in 49 Ontario. And as we complete it, I mean, we're getting about $1 a share out of that in terms of the sale plus cash we're getting back. But we think that by the time we've completed the building, which would be, let's say, 2030, -- it's about $120 million or $6 a share on its own. So we're very pleased that the work we're putting into 49 Ontario has come to fruition. And $6 a share is a lot of equity in one asset. And we've got other assets we're working on that we think will contribute as well. So I'll get into it in more detail, but we are seeing progress. There's some other areas that we thought might be done by now. It looks like it could take a couple of weeks more. But throughout the whole company, we've been dealing with that. We've been advancing projects. We've been very fortunate leasing up Maple House, which is stabilized at this point and Block 4, 7, Block 3, 4 -- Block 7 was finished and is almost fully leased. And Block 3, 4 we just started leasing at the beginning of the year, and it's quite encouraging what we're seeing. So there's a lot of good signs, and I think we just got to bring a lot of it together for people to see it. So Derrick, on that, do you want to give an update on the quarter and the year? Siu-Ming Lau: Thank you, Michael, and good morning. During 2025 and into early 2026, the Trust has made good progress on its 5-year strategic plan. Our plan is focused on progressing key development projects, reducing risk and enhancing liquidity. I will provide an update on these initiatives after going through our fourth quarter results. In Q4 2025, the Trust recognized a net loss of $23.5 million compared to an $8.3 million net loss in the prior year. There are several moving pieces that caused this change. These included fair value adjustments in each year, condo occupancies at Brightwater in the prior year quarter and a deferred tax recovery position. In addition, in Q4 2025, we recognized a loss related to the amendment of our convertible debentures. Partially offsetting these was NOI growth from our multifamily rental assets, including those that reached or are nearing stabilization. For the recurring income segment, same-property NOI for multifamily properties was $2.8 million compared to $2.5 million in the prior year. The increase in NOI was largely driven by improved occupancy across our assets in lease-up and higher rents from our turnover across our value-add portfolio. As at December 31, 2025, the portfolio had committed occupancy of 94%. The Trust continues to advance its near-term multifamily pipeline, which is expected to deliver nearly 1,500 units over the next 2 years. At Cherry House, Block 7 is over 94% leased and leasing for the remaining blocks commenced in January. For the Development segment, the Trust reported a net loss of $5.9 million, which is largely consistent with the prior year quarter. In 2025, Brightwater closings surpassed 500 units. During the quarter, closings commenced at the Mason, which comprises 158 units with proceeds used to repay approximately $15 million of construction debt. As noted in our January update, we commenced demolition at 49 Ontario in November and have since completed the sale of a 10% interest to our partner, CentreCourt, for $6.5 million. We also secured 20-year government financing and completed our first draw. Proceeds were used to repay the prior $80 million land loan and to recover certain predevelopment costs. As the sale into the new partnership occurred post year-end, 49 Ontario was temporarily classified as an asset held for sale as at December 31, 2025. We expect 49 Ontario to be included in equity account investments beginning in Q1 2026. We continue to make progress on our near- and medium-term debt maturities. During the quarter, we reduced our 2026 debt maturities by $56.5 million. This includes the convertible debenture extension, repayment of the Brightwater construction loan and the Stafford mortgage repayment. Since 2024, the Trust has reduced its land loan exposure by $95 million. We expect to further reduce our land loans by $56 million over the year, and we are working closely with our lenders and partners to address the remaining debt maturities for 2026. We remain focused on reducing risk and enhancing liquidity. In January 2026, we increased the capacity on the Dream loan to $50 million. As of February 17, the Trust has $24.8 million of cash and $29 million of availability under the Dream loan. The financing agreement demonstrates Dream's continued support of the Trust and provides it with increased flexibility as we work through our 5-year plan. I'll now turn the call back over to Michael. Michael Cooper: Thank you, Derrick. As I mentioned earlier, 49 Ontario is the largest asset and the most significant revenue generator for us over the next few years. Quayside is coming along. We expect to have news on it very soon, and we're working with CMHC. And hopefully, it's less than a year behind 49 Ontario. On our loans, Derrick and the team have done a great job renewing loans. At Forma West, we are just finalizing a deal to extend it further 3 years with some paydowns. And on Quayside and Victory Silos, we're making a lot of progress. So we're really appreciative working with the banks. Going from a point where lands were $250 a foot 3 years ago to it being very difficult to sell land because of the lack of demand for condos, it's been a massive change. But with our work with the federal and city -- federal government of the city, we've been able to create projects. CMHC came out last week and said that they expect that housing starts will decline across the country over the next 3 years. And in the Toronto area specifically, condo will be down to 20-year lows. I would also just say that there will be continued apartments, but they think apartment starts will decline as well because it's tough to get things done now, but we've been able to get a bunch done. And I think all of that will be good in that there's not a lot of new supply coming and the old supply is all landing. So I think over the next couple of years, we're looking at some pretty good times. Let's see. I think at this time, if there's anybody who has questions, we'd be happy to answer them. Operator: [Operator Instructions] Your first question comes from Sairam Srinivas with ATB Capital Markets. Sairam Srinivas: Just looking at the multifamily portfolio and more specifically in Ottawa, occupancy is down a bit quarter-over-quarter. Is that more of a function of the softer market there? Or is it more something specific to the lease-up in Aalto Suites? Michael Cooper: I think, firstly, our property in Ottawa, I don't believe it is down. I think that the 2 properties that are down are in Gatineau. And I think some of it is seasonal in that it's been a pretty brutal winter. And I think there's some things in the Gatineau market that are a little bit -- we're at the top end of that market. So I think it's been a bit slow. We're addressing that now. We expect it to be significantly higher in the summer. But we're very much aware that where we are now is not where we want to be on a stabilized basis, but I think this winter has been brutal. Sairam Srinivas: That's fair. It's been pretty chilly out here. And Derrick, maybe this is a question for you. Looking at debt maturities in '26, I mean you spoke about the land loans and that's probably a priority for you guys. But can you speak about the cadence of the other maturities that are there in the year and the nature of those maturities... Siu-Ming Lau: For sure, Sai. So for the ones that were maturing near the beginning, we pushed those out and we're addressing those. So we're actively working on about half of those right now, and the remainder or the bulk of it is near the year-end. So we have time to deal with, and we're working with our lenders, and we expect to be in good shape in addressing these maturities across the year. Operator: Your next question comes from Sam Damiani with TD Cowen. Sam Damiani: Just on the press release back in January, just wondering which did incorporate some planned disposition activity. Any updates on that front as we sit today? Michael Cooper: Well, I would think about that this morning. We were referring to dispositions between now and 2030. We actually have very few in our business plan for 2026, like we're not trying to sell everything. In 2026, we've got a couple of small ones, and I think those are going fine. There's one I think we might delay. What I would say is we've had a couple of things go the right way in terms of cash. And I would say like at all times, we're looking both at our liquidity and value. And if we've got the cash to delay a sale in the sort of softer markets now, we kind of -- for commercial, we'd rather lease it up. Apartments maybe have a little better tone. So I think it looks as if we're going to be in pretty good shape cash-wise this year. So we may defer one sale. So I think we're looking at maybe $16 million of sales. This year, we might have $5 million. But that -- I would say that's planned. There's a bit more to do next year. Sam Damiani: Okay. That's helpful. That clarifies it. And just on the leasing market on the residential side, has there been a change in a little bit of occupancy headwinds, I guess, in certain markets, but has there overall been like a further increase in the use of incentives to lease units over the last 3 months? Michael Cooper: Our incentives have been -- I think that in purpose-built rental, you're at the most expensive apartments in a market, and you've got to lease up a lot of units at once. So I mean, incentives are pretty normal. I think the -- I don't think they've changed for us. I would say when you take a look at Block 10, which isn't with ACLP financing, there's no affordable. It's about just over 200 units. It's leased up really well and surprises how well at least and at least at good rates. Maple House has been slow. I think we were a little slow to realize that the market wasn't listening to our pro forma. But the last quarter, we got it stabilized, and it's looking really good. And I mean, I think we've got it stabilized at a sufficient occupancy and revenue that we're in the process now of seeing that asset become -- the loan become nonrecourse. And that's a $357 million mortgage that should go nonrecourse in the next couple of months, and that's a huge accomplishment. So we mentioned earlier Gatineau, and that hasn't been as good as we thought. But for the most part, we're very pleased with how the leasing has been going in Toronto on the new builds. And there's been a lot of turnover on the value add, and we're sort of lagging occupancy, but we're picking up a lot on rents going. I think it's been a bit of a surprise for all landlords that there's probably double the turnover today as there was 3 years ago. So that's pretty good. So it's actually not bad in Toronto for the apartments. Sam Damiani: Okay. Last one for me. Just, Michael, in your comments, you mentioned an update on the debt on Forma West. I wonder if you could just expand on that a little bit. Michael Cooper: Yes, it's hard to because it's not quite done, but it's a 3-year extension with some paydowns, and we got 2 partners. So we dealt with it the way the consensus was, but I think it's worked out pretty good. And it was all budgeted. So it's fine to have the paydowns, but it's also good to have a 3-year debt, so it's going to come up in 2029. So I think when Derrick referred to reducing some of the loans, the land loans this year, some of it's paid down. Some of it is selling the assets or putting them into production. So -- it's all part of what our plan is. But every time we get a land loan extended, we're pleased. We're doing very well with Quayside, with Victory Silos. And I don't think there's much more on the land loans that we got to deal with we dealt with Zibi last year. So the debt has been pretty good, I'd say. Operator: Your next question comes from Roger Lafontaine with Nugget Capital Partners. Roger Lafontaine: Michael, and Derrick congrats on a very good quarter. I had one question about your transaction delay. You mentioned -- I know one of your peers said that the office market in downtown Toronto was improving, and he delayed an office sale to lease it up ahead of the sale. So I was wondering if you'd be able to touch base on whether you're seeing that with your properties or with Dream's properties about improved office transaction liquidity if that was one of the assets you might have been considering to dispose. And I was also wondering if you could perhaps mention if there was any kind of update on the Capital View Lands. I know there was some excitement last year about that and kind of the market went cold. So those are my 2 questions, and I'd appreciate any kind of feedback. Michael Cooper: The asset we're looking to defer is actually an apartment asset. And there's a couple of reasons on the -- there's a couple of technical aspects that we got to work on before we sell it. So that's the main driver. I think the pricing would have been pretty good. Your comments on office, I didn't know that somebody had decided not to market to lease it up. What we're seeing, and this is from a distance because we're sort of -- obviously, with Dream Office, we're pretty close to what's happening in the office market. But it seems that like a year ago, 2 years ago, 3 years ago, like George Brown College bought an office building from H&R, and we sold a building to the Ontario government, we sold another building to a health care group. So what you saw was you saw owners like investors in office buildings selling their assets to users. And that changed a lot in 2025. And what's important about that is when an investor is buying an office building, they're basically creating a model for -- that will represent what they think is going to happen in that building. And this is where it's been a really interesting thing this year. We're starting to see what assumptions people are making. So one of the things is it seems as if when you're selling an asset, there's a concurrence that 95% occupancy is reasonable. The leasing costs, they're using average leasing costs and buyers are under the assumption that leasing costs will improve over the next couple of years. They're using lower leasing costs than we would. So I think that's really good. The third point we're seeing is people want to have buildings that are mostly leased, like 90% or more. So if your building is 80% leased, it's going to get a big discount. But as you lease it to 90%, you start to get into what looks like to be really quite attractive pricing. So I think that the individual that decided not to sell a building, but lease it up some more is getting that information from how investors are valuing assets. And there's been a pretty significant amount of data on the assets. There's widely reported that Oxford wants to sell the Citibank building. We hear there's other buildings coming up for sale. We've also heard of some buildings that have been selling off market. So it looks like there's an investment market in office. And to bring it back to Impact Trust a bit more, there wasn't much of a market before in land. There's not too much of a market right now because most of people who like land already have a lot. But we're anticipating that we'll start to see land transactions follow office transactions, and we'll be able to get good feedback on value. So it is an interesting time. And despite the news, it looks like it's generally getting better. Did I answer both your questions? Roger Lafontaine: Yes. And for reference, the property I was referring to was on Front Street. It was an H&R property. They noted it on the Q4 call. So I thought perhaps that would be good for Dream Impact, which does have office still. So that sounds great. Operator: Your next question comes from Alexander Leon with Desjardins Capital Markets. Alex Leon: I wanted to start off with the land loans. I'm just wondering if you can give an estimate of the expected interest expense savings from the $56 million repayments. Michael Cooper: A good question. I think that -- two things have happened. Number one, the principal is going down; and number two, the interest rates have come down, too. So like the floater rate is 2.25%, we're probably in at 5%. We might have been paying more. And then on $50 million, that would be 2.5%. But on the other balance, it was probably 75 basis points on 100. So we're probably looking at $3.25 million a year. Alex Leon: Okay. That's great. I appreciate that. And then moving on to Cherry House. I know that you guys started leasing some of the remaining blocks early this year. I'm just wondering if you're planning on kind of reaching stabilization this year and transferring that over to the recurring income segment. Michael Cooper: I would expect -- I mean, that would be nice. I'd expect it would get to next year. I think it's about 850 units. So it's just a little bit better than Maple House, but we're pleased with the leasing, and we hope to break the back of it this year, but not finish it up until next year. Alex Leon: Okay. Got it. My next question is just on some of the condo occupancy income. I'm just wondering how much was recognized in 4Q related to the Mason and whether there is any more to recognize throughout the remainder of the year? Michael Cooper: No, there was none in Q4, and there won't be any for the remainder of the year. Alex Leon: Okay. And is that the same with kind of the other component, Brightwater? Michael Cooper: That's correct. Alex Leon: Okay. And then last one for me... Michael Cooper: Sorry, go ahead. Alex Leon: Sorry, the last one for me was just on -- there's some verbiage in the MD&A about some nonrecurring expenses in G&A and at the NOI line as well. I was wondering if you could give some color on that. Michael Cooper: Yes. So there was -- in the NOI line, there was some property tax accruals that occurred. It was about $600,000. So that was in there. If you want to look at the run rate for kind of NOI multifamily, you would probably add about $154,000. So I believe that was $2.8 million. So it's about $3 million run rate on there. Alex Leon: Okay. Awesome. And then was there something in G&A to bring it higher this quarter? Michael Cooper: There was a shared service recovery that was at year-end. So that was about $1 million. That was for kind of additional work that was performed on Ontario, getting that up and working with the government and all those things to get, sorry, to get that development going. So there's additional work on there. So that was about $1 million there. Operator: Your next question comes from Ian Gillespie, a private investor. Ian Gillespie: Two questions. One on 49 Ontario. Given that you've been undertaking the demolition and you must be now receiving firm bids on some of the construction. Can you quantify what sort of savings you're seeing on those bids relative to what you might have seen a few years ago? Michael Cooper: Yes, I'm glad you're asking compared to a few years ago because when I say that, what I mean is the market's changed. So I think, I know the answer, thinking about what's appropriate to say. We've done 10%. We've got about another 50% that we've got good indications, but we haven't signed them up. So before the end of the June, we're expecting to have 60% or 70% done. And we've got pretty good visibility. So I would say from like the worst days, it's more than 10% savings. And that goes a long way. Ian Gillespie: On that project, it would. Second question, with regard to the Dream loan, $29 million is still available. What is your forecast in terms of further draws on that loan, if any, over the course of this year based on the way you've modeled the year at this point? Michael Cooper: We budgeted that it will be used up this year. But literally, we have $5 million and $10 million swings all over the place. So far, the swings have been positive. And to a certain extent, we're saying like, hey, if we've got enough liquidity, maybe we won't sell that building and stuff like that because we can do better by waiting. So the expectation is that we will draw all $50 million in 2026. Ian Gillespie: And then if you need to go beyond that for any reason? Michael Cooper: Look, it's -- okay, let me take a second. I've never seen an environment as volatile as we're in with as many macro Canadian issues as well as geopolitical issues. So if you think about a bell curve, you got the 2 tails. Obviously, everybody is focused on, are we looking at events that could be at the really bad end in the tails, right? Like how bad can it get? But what we're seeing on the ground actually is we're generally in a recovery. I think in Canada, we're in recovery per capita income is increasing. I think we have like 1.5% growth in per capita income this year, which is pretty good. That's adjusted for inflation. So we look at it and say, the real likelihood is that things are going to continue to get better. And I think we're well positioned for that. There's a tremendous amount of value in this company. But we're also very thoughtful that with free trade, with the Canadian finances and some of the big ambitious stuff they have going on, hopefully, it will work. Maybe it doesn't. Will the projects that are being talked about ever happen, those kinds of things. So we have a backup plan if it doesn't go as well. It just depends how deep into the tail we get, meaning I think we have an expectation that we'll achieve the capital needed in 2027 from sales. But I think Dream is really quite excited about what's happening. And if everything else is fine, we'll probably look at expanding the loan if it's necessary. Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Cooper for any closing remarks. Michael Cooper: Thank you, operator. I'd like to thank everybody for calling in. We appreciate the questions. Like everything, it seems really slow and then all of a sudden, a bunch of things happen. We've had a very busy first part to the year, and I think that the next 90 days is going to be busy, too. So we'll have a lot to update you on. So thanks for your continued support. We look forward to catching up, and please feel free to reach out to Derrick or me if you have further questions. Thank you. Operator: This brings to close today's conference call. You may now disconnect. Thank you for participating, and have a pleasant day.

86天前Insight Analytics约5分钟阅读

GPN 2025 Q4 财报电话会议

Operator: Ladies and gentlemen, thank you for standing by, and welcome to Global Payments Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions]. As a reminder, today's conference will be recorded. At this time, I would like to turn the conference over to your host, Senior Vice President, Investor Relations, Nate Rozof. Please go ahead. Nathan Rozof: Good morning. Welcome to Global Payments Fourth Quarter and Full Year 2025 Conference Call. Joining us today is our CEO, Cameron Bready; CFO, Josh Whipple; and COO, Bob Cortopassi. Some of the comments made during today's conference call will contain forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied and we caution you not to place undue reliance upon them. They speak only as of the date of this call, and we take no obligation to update them. In addition, we will be referring to several non-GAAP financial measures. For a full reconciliation of the non-GAAP financial measures to our most comparable GAAP measure, please see our press release furnished as an exhibit to our Form 8-K filed this morning and the supplemental material available on our Investor Relations website. Finally, I'd like to note that we developed a slide presentation to accompany our prepared remarks, which is also available on our Investor Relations website. and Cameron's comments will begin on Slide 4. With that, I'll turn the call over to our CEO, Cameron Bready. Cameron? Cameron Bready: Thanks, Nate. Good morning, and thank you for joining us today. As I'm sure you've seen by now, we successfully completed the acquisition of Worldpay in January, alongside the simultaneous divestiture of our Issuer Solutions business, marking an important milestone in the strategic transformation we've been executing over the past 18 months. I want to take a moment to extend my sincere appreciation and best wishes to our Issuer Solutions colleagues and to warmly welcome the talented team members of the Worldpay to the Global Payments family. Their expertise, passion and commitment have strengthened our organization from day 1. Our combination with Worldpay is not about creating a larger version of our 2 companies. It is about creating a better Global Payments, one with the enhanced scale capabilities and the focus necessary to compete and win as the worldwide partner of choice for commerce solutions. And we have greater conviction today than ever that this transaction will allow us to do just that. We have a lot to cover today, so let me briefly outline the agenda. I will begin with Global Payments standalone results for the fourth quarter and full year. Next, I will introduce the new Global Payments and highlight the key strategic initiatives we are focused on executing in 2026. I will then turn the call over to Josh to share more detail on our financial performance and outlook. We are very pleased with how we ended the year, delivering exactly as expected and fully aligned with the outlook we provided last February. For the fourth quarter, we reported 6% constant currency adjusted net revenue growth, excluding dispositions, 80 basis points of adjusted operating margin expansion and 12% adjusted EPS growth. Our Merchant Solutions business maintained strong momentum with adjusted net revenue growth accelerating to slightly above 6%. For the full year, we executed on all of our key objectives. We accelerated adjusted net revenue growth from 5% in the first half to 6% in the second expanded adjusted operating margins by 100 basis points, well ahead of our expectation of 50-plus basis points and delivered 11% adjusted EPS growth at the high end of our expectations. Importantly, we generated strong free cash flow in 2025 with over 100% adjusted free cash flow conversion. This provides us with the flexibility to return $1 billion to shareholders in 2025, while simultaneously reducing leverage in preparation for the closing of the Worldpay transaction. In addition, our portfolio divestitures have enabled us to return an incremental $1.2 billion to shareholders. Robust free cash flow generation and returning capital to shareholders remains central pillars of our investment thesis. With our major transactions now closed, we are resuming our share repurchase programs as we execute on our $7.5 billion capital return target for 2025 to 2027. At current valuation levels, we see buybacks as a highly compelling opportunity to drive shareholder value, given the clear dislocation between our share price and the fundamental performance and outlook for the business. To that end, our Board of Directors recently approved a $2.5 billion share repurchase authorization, and we are entering into an accelerated share repurchase agreement to immediately repurchase $550 million of our shares. We expect to return capital through a combination of open market purchases and accelerated share repurchases in addition to maintaining our stable dividend. Beyond our financial results, we also made substantial progress on our transformation program this year. We successfully transitioned from a holding company structure to a unified operating model globally, eliminating silos, increasing accountability and improving organizational performance, speed and efficiency. As part of this program, we continue to modernize and simplify our global technology stack, improving reliability, accelerating innovation cycles and enhancing ease of use and the overall experience for our merchants, partners and team members. Further, we are investing in the adoption of our new AI-enabled development tools and enhanced product operating model, allowing for increased productivity and quicker speed to market for new functionality. 2025 also marked the successful rollout of Genius, which is performing exceptionally well and remains in the early innings of what we see as a meaningful long-term growth opportunity. Finally, we continue to invest in our sales transformation. We have deployed a new technology platform with embedded AI capabilities to better manage lead flow and improve our performance. And we've already onboarded 200 of the 500 new sales professionals we announced on our third quarter call. As we enter 2026, we are well positioned to be the world's leading pure-play commerce solutions provider, and our North Star remains consistent, driving sustainable growth in M&A from an unrelented focus on our clients, leveraging our strategic advantages. Our advantage starts with our worldwide omnichannel reach, serving over 6 million merchant locations across online, in-store and in-app experiences in more than 175 countries. This breadth provides meaningful diversification and exposure to the full Global Payments TAM that is unmatched by any single competitor. Our advantage also extends from our go-to-market approach. We compete on product differentiation, service, reliability and fit to customer need, supported by a direct sales force of more than 5,500 professionals worldwide including approximately 1,500 experienced sellers from Worldpay. Alongside our direct channel, we operate a vibrant partner ecosystem with more than 1,700 financial institutions and thousands of software and platform partners, complemented by a robust dealer network that in solves Genius and supports customers end to end. For merchants preferring self-service, we offer that as well for streamlined install reporting upgrades and enhancements, all without human interaction. And with approximately $4 trillion in annual payments volume, our scale enables us to serve the largest global enterprises to small merchants alike and everything in between and to be highly price competitive, where we choose while still leading on capability and service. While these embedded advantages are significant, we are not standing still. We plan to invest approximately $1 billion annually in commerce technology to help our customers grow, expanding omnichannel offerings, advancing our AI-enabled product road map and accelerating innovation across Genius and our platforms. With our newly combined profile, we have taken the opportunity to evaluate the fundamental elements of our identity. Our aspiration is clear, to be the worldwide partner of choice for commerce solutions. And the value proposition that is reflected in our vision comes down to 2 simple things: igniting business growth in enriching lives around the world. We are not just a company that provides payments and software solutions. We are a company built to fuel the growth of businesses of all sizes with innovative payment and commerce solutions. And when we enable seamless, frictionless payments and delightful experiences we enrich people's lives through commerce. That brings us to our mission, which is to make every day commerce better. When our clients think about Global Payments, we want that statement to define who we are and the value we deliver. We will bring our aspiration vision and mission to life by leveraging our competitive advantages across 4 strategic pillars. First, our pure-play focus. Being exclusively focused on commerce solutions allows us to move faster, allocate resources with greater precision and amplify the impact of every dollar we invest to ensure that we have the best products and solutions in the markets in which we choose to compete. While some competitors are spread across a broad set of competing priorities, we are narrowing our focus, enabling us to execute more quickly and more effectively for our clients and partners. Second, our truly client-centric approach. This is a meaningful point of differentiation. Many competitors organize around their product lines, be it point-of-sale systems, payment gateways, embedded finance platforms, et cetera. Each team optimizes for their feature set. Then the client has to stitch together to make it work for their business. We organize around client segments. Our teams understand the full end-to-end requirements of large enterprises, SMBs and software platforms. And we build solutions that actually align with how they run their businesses. We provide dedicated relationship managers who architect the right combination of capabilities. We do not just simply sell what is on the shelf. This is a fundamental structural advantage, and we have the scale to deliver across every client segment we serve. Third, our enhanced capabilities and continued investment in innovation. From best-in-class enterprise payment tools to the feature-rich Genius platform, the breadth and depth of our capabilities are unmatched, and we will continue to invest to drive innovation and differentiation. Fourth, our global reach with local expertise. Our extensive geographic footprint enables us to help clients expand into new markets and unlock new sources of growth. And because we pair that reach with deep local knowledge, understanding domestic payment methods, customs and regulations we are uniquely equipped to help them succeed in every market they enter. These 4 pillars, pure-play focus, client centricity, innovation and global reach work together to multiply what's possible for our clients and partners. In 2026, we are focused on 4 initiatives to drive near- and long-term success for Global Payments, seamlessly integrating Worldpay, accelerating our go-to-market strategy and activities rapidly expanding Genius and boldly leveraging AI to create new revenue streams and drive productivity across the business. Beginning with Worldpay integration, our synergy initiatives are already well underway, and we remain confident in our ability to achieve $200 million in annualized revenue and $600 million in expense synergies over the next 3 years. Thanks to more than 8 months of preclosing preparation, we are already off to a great start with integration execution. Worldpay's U.S. direct sales force is already enabled to sell Genius. They have boarded their first cohort of new clients and the pipeline continues to build. This quick success demonstrates that Genius has a very short sales cycle and time to go live that is measured in days, not weeks. We are also progressing our next key priority to integrate Worldpay's e-commerce capabilities into our SMB offerings, an important driver of revenue synergies, and we're already having early success in the U.K. where we were able to quickly bring Worldpay's SMB e-com offerings to Global Payments sales channels. As we advance our integration program, we are taking a best of both approach across our teams, products and technologies. Further, we have made substantial progress with establishing our new leadership structure, having announced our new executive leadership team and all the senior leaders reporting to them. Consistent with our goal to unite is one global team. Our leadership team is now roughly evenly split between heritage Global Payments and Worldpay executives. And we are currently executing a comprehensive organizational design effort across the rest of the company, identifying top talent, eliminating duplication and maximizing efficiency as we bring the organizations together. Turning to our go-to-market strategy. We have organized our combined business around 3 channels: enterprise, integrated and platforms and SMB. Ultimately, these channels will enhance our value proposition and align with our unified client-focused operating model. Gabriel de Montessus, leads enterprise, which serves merchants with over $50 million in annual payments volume online and in-store. Gabriel joins us from Worldpay, where he's led this business for the past 5 years. Within Enterprise, we are uniquely positioned to continue winning share because of the breadth and depth of our capabilities. And with the combination, we can now unlock growth in markets where Global Payments has operated historically, but lacked the full suite of enterprise-grade solutions necessary to serve more sophisticated global clients. In addition to delivering highly reliable and scalable payment acceptance in this channel, we help our clients to generate incremental revenue by continuously bringing new innovative products to market that enhance authorization rates and avoid abandoned shopping carts. Recent innovations include our new 3DS Flex solution, which utilizes AI to achieve best-in-class authentication rates compared to peers, including over 7% higher authentication success rates in key markets like the U.K. and our revenue boost solution delivered more than $2 billion in measured approval rate uplift for merchants in 2025, igniting their growth. We simultaneously help our clients to save money by leveraging our scale, investments in data. For example, our Disputes Defender product uses AI to automate charge-back responses utilizing more than 500 data points. It protected over 40,000 merchants last year, increasing chargeback win rates by an average of 15%. Our dynamic routing solution also consistently delivered savings. In 2025, we optimized nearly 8 billion debit transactions, saving our customers over $200 million, an increase of more than 10% year-over-year. The strength of our competitive position led to several noticeable successes in 2025, including new wins with Domino's Canada and TaxSlayer. Key new e-commerce wins include Pfizer, global sports streaming network DAZN, European rideshare app, Bolt and a notable omnichannel cross-sell with Polish Airlines. The team also executed multiyear renewals with over 50 of our largest clients in 2025, representing over $1 trillion in annual payments volume, including numerous leading enterprises. Turning to integrated and platforms. Matt Downs leads this business serving ISVs, PayFac, platforms and marketplaces across more than 100 verticals. And Matt also joins us from Worldpay, where he led the Platforms business. Matt is a veteran of integrated payments businesses with deep knowledge and experience in the sector, including leadership roles in SaaS businesses. In this channel, we are uniquely positioned to support partners across the full operating model spectrum from traditional ISV referral and managed PayFac as a Service to full PayFac in every configuration in between. The combined business gives us purpose-built flexibility to match how each software platform partner wants to monetize payments and control the experience, whether they need low code referral simplicity, a curated a la carte stack or end-to-end PayFac capabilities. Critically, we can tail our operating models for the most sophisticated platforms and still deliver them at scale with attractive margins, leveraging our unified APIs, onboarding risk and managed services to keep partners agile as they grow. We've seen this come to life through recent wins with leading software providers, including ABC Fitness, LightSpeed and Vital Edge as well as recent multiyear renewal with one of our largest PayFac clients. And by combining with Worldpay, we will be able to further accelerate our global expansion of this channel. Lastly, our global SMB channel supports businesses with less than $50 million in annual payment volume and is led by David Rumph, a 14-year veteran of Global Payments. Our SMB business may stand to benefit most from our combination with Worldpay. Together, the breadth and depth of our distribution positions us very well competitively. We have the unique ability to sell new products and commerce solutions through direct and partner channels and markets around the world and we can cross-sell and upsell our innovative capabilities across our base of 6 million merchant locations. We also bring enterprise-grade capabilities to SMBs, such as our machine learning-based payments optimization tools, and integrating Worldpay's e-commerce capabilities will create a more powerful omnichannel solution. Our SMB team is executing with urgency, expanding distribution, rapidly enhancing Genius and making adoptions simpler and faster for customers. Turning to Genius. We continue to see substantial growth opportunities for this platform, and it remains a central pillar of our strategy. We have strong conviction in the product, and we'll continue to enhance its feature set to make it even better. In November, we hosted our first Genius users conference at Truist Park, a great stage to showcase the pace of innovation and hear directly from our clients. One highlight of the conference was the introduction of Genius Drive-thru, our multilane solution that pairs a seamless order flow with our patented camera vision system, so each vehicle is automatically matched to the right order. The outcome is simple, faster lines, fewer errors, happier guests. We also announced Uber Eats as our preferred delivery partner in the U.S. and Canada. Restaurants can self onboard in minutes, and orders updates and cancellations sync instantly between Uber Eats and Genius, reducing workload at the counter and allowing clients to unlock incremental demand faster. As we continue to invest in Genius, we are widening where Genius can win. We launched Genius for services and extended support into higher education and age-related verticals. Further, we expanded distribution to our wholesale channel, successfully piloted Genius in Germany and introduced mobile payment capabilities for on-the-go businesses in the U.K. And we unveiled the industry's first modular point-of-sale hardware that combines a contemporary aesthetic, which functionalities that most systems cannot match. By modular, we mean that each of the components is interchangeable, allowing our customers to configure the point of sale to meet their specific use case. The screen, stand, CPU and connection hub can be easily swapped out, which future-proofs the solution by allowing clients to upgrade individual components without needing to replace any of the rest of the device. Earlier, I described our vision to ignite business growth in enrich lives around the world. In Genius is doing exactly that for 7 Brew drive-through coffee, which is one of the fastest-growing coffee chains in the U.S. 7 Brew chose Genius to preserve what makes their brand special, personal, high energy service, while streamlining order flow and back of house operations. We implemented Genius at more than 500 locations in just 65 days, and they have kept growing at roughly 10 new rooftops a week, which underscores Genius' scalability. We also added Braum's Ice Cream with 320 locations in Love's Travel Stops. Further, SeaWorld deployed nearly 100 Genius kiosks across 5 theme parks and Diamond Baseball Holdings brought Genius into an additional 6 of its minor league stadium. Even with all this progress, we are not slowing down. We recently launched a comprehensive marketing campaign across 4 key U.S. markets, TV, radio, digital signage and more, to put Genius in front of more prospects more often. And for 2026, we plan to continue investing in feature functionality to meet the needs of several professional services verticals that will further expand distribution through Worldpay's channels including their 50 largest referral banks and more than 6,300 branches. Internationally, we will scale in Germany and expand into Ireland and the Czech Republic and we will roll out our new mobile form factor, including tap to pay on phone into additional markets worldwide. Finally, our fourth important initiative for 2026 is expanding our investment in AI and agentic commerce. AI is rapidly advancing and has become a foundational initiative permeating all aspects of our organization to both strengthen our top line and accelerate our efforts on cost efficiency. We are leveraging AI across 3 strategic paradigms, agentic commerce, AI embedded within our products to improve client outcomes and AI-enabled productivity and operational efficiency. First and foremost, agentic commerce is the next evolution of the retail experience, where AI can research, select and even complete transactions on behalf of consumers. With our leading scale and sophisticated e-commerce capabilities, we are differentiated by our ability to act as a universal connector across genic platforms and protocols for merchants of any size anywhere in the world, operating in any vertical. To position Global Payments at the center of the shift, we've been a founding member of every major protocol announced, including Google's Universal Commerce protocol and OpenAI agentic commerce protocol. In fact, we've just completed our implementation of the latter, so our merchants can accept payments originating from ChatGPT as well as Google's AI chat interfaces. We also launched our own model context protocol or MCP in November, which makes it easier for AI agents to initiate in query payments in automated operational workflows. Our stand-alone acquirer-agnostic token vault and credential management systems are world-class and a crucial capability for an agent world where tokens underpin secure handling of credentials between agents, merchants and other entities. We were also in partnership discussions with several leading ecosystem players to support our merchants with additional value-added services that become increasingly relevant in the world of AI-led commerce, including product lead optimization, know your agent functionality, agentic fraud prevention and disputes management and many others. As for embedding AI into our products and capabilities, we are already seeing results in our business. Across our global e-commerce business, we are using deep transaction insights and intelligent routing to help merchants capture more revenue with less friction. Our AI-powered authentication optimization service goes far beyond legacy rules-based systems by dynamically choosing the path with the highest probability of issuer approval or regulatory compliance. In 2025, it delivered a 4-point uplift in approval rates for pilot merchants by deciding when to invoke or bypass 3D Secure based on issuer behavior and risk signals. This is a great example of how our scale and data convert declines into approvals, reduce friction and protect revenue that otherwise would be lost at checkout. Within Genius, we are leveraging AI to solve real problems for small businesses. For example, we can automatically gather customer reviews from multiple social platforms and use generative AI to drive personalized on-brand responses on behalf of our merchants. And we are launching a natural language agent assistant within Genius that will provide insights to business owners. And lastly, we continue to embrace AI to drive productivity and operational efficiency throughout our business. Our engineering teams have adopted AI-assisted coding tools, which accelerates requirements gathering and development cycles by nearly 20%, while also improving code quality. Productivity and output quality have continued to increase as adoption has scaled. And as we integrate Worldpay, AI will play a central role in automating repeatable processes, driving greater efficiency and helping us capture the expense synergies we have outlined. By embedding AI into core operational workflows, everything for merchant onboarding and risk reviews to service ticket routing, settlement reconciliation and partner support we can dramatically reduce manual effort in cycle times, allowing teams to focus on higher-value work, improve accuracy and consistency across shared processes and enabling us to scale the combined organization far more efficiently. Likewise, we are leveraging AI to further accelerate our technology consolidation efforts across the combined enterprise. Enhanced data-driven visibility into our application and infrastructure landscape will help us rationalize platforms reduce redundancy, expedite migrations and facilitate the retirement of duplicative systems. These initiatives will allow us to continue to simplify our technology stack, improve capital efficiency and enable us to concentrate investment on the scalable future-ready platforms, strengthening our operational agility. Lastly, our scale gives us a distinct advantage as we deploy AI. Every year, we process trillions of dollars in payments volume and billions in individual transactions across geographies, channels and verticals. This breadth and diversity of data creates uniquely rich training environments for our AI models. Because we see such a wide cross-section of global commerce in real time, our models learn faster, generalize better and detect patterns and ways unique to our scale. That allows us to improve authorization rates, reduce fraud, enhance risk scoring and deliver more personalized insights for our customers. Importantly, we also do this with strict adherence to privacy, security and regulatory requirements. In short, the scale of our data does not make our AI better. It drives better results for our customers. With a clear focus on these 4 key initiatives, we are well positioned to deliver on our targeted outcomes and advance our priorities for 2026. Specifically, we expect to achieve the following this year. First, we will firmly establish the new Global Payments. We're building on work already in motion to fully leverage our new business profile, bringing together capability, systems and brands while executing disciplined integration plans to support future growth. To further accelerate this progress, we are advancing our technology and innovation strategy, including aligning orchestration capabilities to continue to deliver a modern experience and single integration point for clients as well as exposing the full breadth of our capabilities globally. Secondly, we will unite as one global team. Bringing together the full strength of our team members, talent and payments expertise is essential. When we operate as one team, we move faster and make better decisions and unlock the full potential of our combined organization. Third, we will deliver exceptional value and experiences for our clients and partners. This includes client-focused product innovation, expanding Genius across high-growth verticals and geographies, broadening our omnichannel capabilities globally and scaling our marketplace solution. We want Global Payments to be synonymous with exceptional value and experience. That is a key priority for 2026. Finally, these initiatives will drive sustainable growth and long-term value creation. We are a proven compounder. We grow through all phases of the economic cycle. In 2026, our priority is squarely on building durable top line performance by building strong sales momentum, expanding distribution for innovative commerce solutions and beginning to execute on our revenue synergy opportunities across every clients' segment. With that, I'll turn it over to Josh. Joshua Whipple: Thanks, Cameron. We're pleased with our financial performance in the fourth quarter and for the full year, which were consistent with our expectations. I'm particularly proud that we delivered these results while meaningfully progressing our transformation agenda, preparing the separation of our Issuer Solutions business and navigating a complex regulatory approval process and conducting extensive planning for the integration of Worldpay. As a reminder, the following figures reflect the last quarter of results for stand-alone Global Payments, which includes Issuer Solutions, and excludes Worldpay for the full quarter. Starting with the full year 2025, we delivered adjusted net revenue of $9.32 billion, an increase of 6% from the prior year on a constant currency basis, excluding dispositions. Adjusted operating margin for the full year improved 100 basis points to 44.2% or 80 basis points, excluding dispositions. The net result was adjusted earnings per share of $12.22, an increase of 12% compared to the full year 2024 or 11% on a constant currency basis. The top line accelerated in the second half as we expected. And in the fourth quarter, we delivered adjusted net revenue of $2.32 billion, an increase of 6% from the prior year period on a constant currency basis excluding dispositions. Adjusted operating margin for the fourth quarter increased 80 basis points to 44.7%. The net result was adjusted earnings per share of $3.18 and an increase of 12% compared to the prior year period or 11% on a constant currency basis. Our Merchant Solutions segment achieved adjusted net revenue of $1.78 billion for the fourth quarter reflecting growth of slightly over 6% on a constant currency basis, excluding dispositions, consistent with our expectation for modest acceleration from the third to the fourth quarter. We saw continued momentum across our POS and software business, which achieved high single-digit growth again in the fourth quarter, excluding dispositions. Genius continues to resonate in the market and its rapid adoption has been accelerated by our realigned go-to-market efforts. New POS locations in the fourth quarter were 25% higher than new locations in the prior year period and our enterprise restaurant rooftop count at year-end was more than 50% higher than the number at the end of 2024. Genius' payments attach rate in the enterprise segment nearly doubled in the fourth quarter, enhancing customer lifetime value and demonstrating the tangible financial benefits of our sales force transformation emphasizing cross-selling efforts. And in the retail vertical, new Genius rooftop boarded in Q4 were 40% higher than in the prior year period. Our Integrated Embedded business also grew in the high single digits in the fourth quarter and continues to win share. We continue to launch partnerships across the more than 100 verticals that we serve, including SiteView and Vision Care and Lawn Buddy in field services, among many others. At the end of the fourth quarter, our pipeline of signed partners yet to go live was 19% larger than it was at the end of 2024, which will support and drive revenue growth well into 2026 and 2027 as those partners are fully integrated and the relationships ramp up. Core payments showed continued strength and delivered mid-single-digit growth in the fourth quarter, benefiting from our unrivaled distribution channels around the world. In the U.S., new sales in the fourth quarter were 35% higher than in the prior year period, representing our strongest quarter in several years as we benefited from the onboarding of our new sales professionals and the enhanced effectiveness of our transformed go-to-market organization. Internationally, revenue in Central Europe grew in the mid-teens, and our business in Greece had one of the strongest quarters on record as we continue to benefit from strong secular trends in these markets. For the fourth quarter, Merchant Solutions delivered an adjusted operating margin of 49.2%, an increase of 120 basis points compared to the prior year period. This performance reflects the ongoing realization of benefits from our transformation as we continue to streamline our organization and see higher returns from our investments in our sales force. Turning to cash flow. We produced strong adjusted free cash flow for the fourth quarter of $891 million, resulting in a conversion rate of adjusted net income to adjusted free cash flow of over 100% for the full year 2025. We invested $168 million in capital expenditures during the fourth quarter and $618 million for the full year 2025, equating to roughly 7% of revenue as we continue to enhance our leading technology, products and infrastructure. This was slightly lower than our initial 2025 target as we intentionally moderated our CapEx spending while we were planning the Worldpay integration. Finally, for the full year, we repurchased 13.2 million shares for approximately $1.2 billion which represents more than 5% of our shares outstanding and includes repurchases using the proceeds from the sale of our payroll business. Our balance sheet remains very healthy. In the fourth quarter, we ended the quarter at 2.9x leverage. Shortly after the end of the fourth quarter, we closed the Worldpay and Issuer Solutions transactions. Our debt at the close of the transaction was approximately $22.3 billion, which includes the $6.2 billion of senior notes that were issued in November and incremental short-term borrowings. Post closing, more than 95% of our outstanding debt was fixed rate, and our weighted average cost of debt was approximately 3.95%. We're also pleased to report that our investment-grade credit ratings were affirmed by all 3 rating agencies in connection with the transactions. Following the close of the transactions, we continue to have ample liquidity with approximately $5 billion available in total across excess cash and capacity under our upsized revolving credit facility. Today, we're pleased to share our 2026 outlook for the new Global Payments, which represents our expected performance following the close of the sale of Issuer Solutions and the acquisition of Worldpay. We provided quarterly historical supplemental combined financial information in the appendix to aid your modeling. These present all prior periods for adjusted net revenue and operating income to include Worldpay and exclude Issuer Solutions. We've also incorporated the conforming adjustments by period to align historical results of Worldpay with Global Payments accounting policies. Consequently, our outlook for 2026 adjusted net revenue and adjusted operating margin is presented on a combined basis as if we owned Worldpay for the entire year. For 2026, we expect constant currency adjusted net revenue growth of approximately 5%, excluding dispositions. This outlook assumes a continuation of the trends we saw exiting Q4, namely resilient consumer spending growth and a generally stable macroeconomic backdrop. Our full year outlook further assumes that constant currency adjusted net revenue grew slightly below 5% in the first half of the year. We see opportunity for modest sequential acceleration over the course of the year, and we expect to exit the year with constant currency adjusted net revenue growth above 5%. Further, we anticipate reported adjusted net revenue will benefit from foreign currency exchange rates by a little less than 50 basis points for the full year 2026, which will primarily impact the first quarter. We expect adjusted operating margin expansion of approximately 150 basis points for the full year 2026, which includes realized cost synergies in 2026 as we begin executing on our integration initiatives. Moving to nonoperating items. We currently expect net interest expense to be approximately $850 million this year, and our adjusted effective tax rate to be approximately 15.5%, which reflects certain cash tax benefits from our acquisition of Worldpay. We also expect our capital expenditures to be approximately $1 billion in 2026, representing approximately 8% of adjusted net revenue, which is consistent with our prior outlook. And we anticipate a conversion rate of adjusted net income to adjusted free cash flow of greater than 90% in 2026. Regarding capital allocation, we expect to return more than $2 billion of our capital to our shareholders this year through share repurchases and dividends which includes the $550 million accelerated share repurchase plan Cameron mentioned earlier. Putting it all together, we expect adjusted earnings per share of $13.80 to $14 in 2026, which represents growth of approximately 13% to 15% over Global Payments 2025 earnings per share of $12.22 and we expect adjusted earnings per share growth to accelerate modestly in the second half of the year relative to the first half as we continue to see greater benefits from the integration and our ongoing transformation activities. Finally, we believe our 2026 outlook demonstrates the attractive financial profile of the combined company and provides us with ample free cash flow this year and beyond to further the capital allocation priorities that we've articulated over the past 18 months. As we look to deploy capital, we remain committed to maintaining our investment-grade credit ratings and plan to delever back to our 3x net leverage target by the end of 2027. Additionally, we will continue to invest for growth maintaining capital expenditures in the range of 7% to 8% of revenue, all of which will be focused on driving innovation as a pure-play merchant services business. And importantly, we'll harness the power of our free cash flow to return capital to our shareholders. This will include our current steady dividend and significant share buybacks targeting $7.5 billion over the 2025 to 2027 time period. In summary, we are pleased with the progress we've made in advancing our transformation agenda, completing 2 transformative transactions ahead of schedule and commencing the integration of Worldpay. We're proud of delivering Q4 and 2025 results that were in line with our expectations and we believe the business is very favorably positioned to execute our 2026 objectives and continue our ongoing return of capital to shareholders. And with that, I'll turn the call back over to Cameron. Cameron Bready: Thanks, Josh. I could not be more proud of our team's execution this year and excited for what we can accomplish going forward as we combine with Worldpay. The Worldpay acquisition represents a pivotal moment in our evolution. And as we integrate our businesses, our focus remains on driving consistent durable growth through an unwavering commitment to our clients and the strengths that are distinctive to Global Payments. Our new pure-play orientation allows us to move faster, deploy resources more effectively and serve clients in a truly client-centric way. And we will differentiate through feature-rich products, white glove service and support experiences that consistently exceed expectations. With unmatched payments experience in deep fluency across nearly every vertical and client type, we are uniquely positioned to deliver tailored technology solutions, not one size fits all approaches. And now with our expanded geographic footprint, we have an unparalleled global reach. We can ignite growth for our customers and partners by helping them expand into new markets around the world, supported by local expertise and deep relationships, from best-in-class enterprise payment tools to feature-rich platforms like Genius, Global Payments is at the forefront of modern commerce technology. And with $1 billion in annual investment, we are one of the few companies in the industry capable of innovating at this scale, anticipating our customer needs and delivering solutions before they even ask. Finally, we remain laser-focused on delivering shareholder value and maintaining a disciplined capital return framework. We are a proven compounded with substantial free cash flow generation. Based on our current share price, our capital return plans enable us to repurchase the equivalent of roughly 30% of our market cap over this year and next. Operator, would you please open the line for questions. Operator: Our first question comes from Dave Koning at Baird. David Koning: Great job. I guess, first of all, 5%-ish organic constant currency growth, that's great to hear. What's the split maybe between enterprise and SMB and then between Worldpay and Global? Or are all parts of the business growing about mid-single digits? Cameron Bready: Thanks for the comment. I'll ask Josh maybe to kind of walk through the guide and then give you a little more color on the expectation for 2026. Joshua Whipple: Yes. So thanks, Dave. It's Josh. Look, as I said in my prepared remarks, our guide for the full year is at that 5% constant currency ex disposition. And our merchant business, we exited the year a little bit over 6% organically. And Worldpay exited the year approximately 4%, which kind of gets you to the 5% for the full year. As it relates to kind of the first half versus second half, we've adjusted -- we've closed the transaction. We felt that it was prudent to guide the first half to modestly below 5% as we kind of line and bring those businesses together. And as we move through the year, we expect to see modest acceleration on the top line with top line growth in the back half of the year over 5%, and this is largely driven from the increasing benefits from our sales expansion as well as improving our sales effectiveness from the transformation and then the continued ramp of Genius. As it relates to the overall splits, as you think about the pro forma splits of the business, SMB is approximately 50% of the revenue composition and then as you think about platforms and enterprise and e-commerce, that represents the other 50% of the pro forma and they're probably equally split. So that's about 25% for each of those 2 businesses. Cameron Bready: And Dave, it's Cameron. Maybe I'll just add a couple of comments, if you don't mind. I think first and foremost, I think the outlook that we gave for the combination of the 2 businesses back in April remains our outlook over the medium term. in terms of where we see revenue growth for the business. I think as we thought about 2026, with the businesses coming together very early in the year, we wanted to take a fairly prudent approach to the outlook for 2026. So these are 2 large businesses. We're very focused, particularly in the first half of the year to make sure that we get off on the right foot together. We're focused on our integration activities and particularly around realigning our go-to-market channels, as I described in my comments around enterprise platform and integrated and SMB. And from our vantage point, we think this is the right approach to take for the guide for 2026. So I think it's worth noting that we closed the business about 6 months earlier than we originally anticipated. And obviously, that factors into I think, our outlook as well. But we're exiting the year, as Josh highlighted, above 5%. I think that gives us good momentum to kind of accelerate growth heading into 2027. And obviously, I think that puts us on track to get to kind of the medium-term outlook that we had for the combined business that we shared when we originally announced the transaction. Operator: Our next question will come from Darrin Peller at Wolfe. Darrin Peller: A nice job and congrats on closing the deal early. Could we touch on the, a, the trajectory of the synergies you're expecting as the year progresses? And then maybe a little bit more color on what you're incorporating into the guide around synergies again, just to remind us where you stand on that. And then I guess just -- I'll put it all together as one question. Just really understanding the cross-sell into the SMB business at Worldpay, utilizing what you're seeing with the success of Genius. I know that's been a business that has some real potential and so I'm curious to see what you're seeing given the -- it's been a couple of months since you closed and working towards the close for some time. Joshua Whipple: Darrin, it's Josh. I'll take the first part of the question on cost synergies. So as we discuss probably, we expect to realize $600 million in cost synergies over the course of the next 3 years as we integrate these 2 businesses. And look, in year 1, we expect to realize or 2026, we expect to realize $70 million to $80 million of cost synergies. And look, we spent a lot of time planning, obviously, over the last 6 months as we approach the closing date. We feel very, very good about that number. We have very, very detailed plans in place, and we've already started executing on that. So we expect to see kind of that $70 million to $80 million in cost synergies in 2026. Cameron Bready: Yes. And Darrin, it's Cameron. I'll take the second part of the question. Look, I think we have a lot of optimism around what we can do as a combined company, particularly in the SMB channel, as I mentioned in my prepared remarks, particularly around the ability to cross-sell our capabilities into the existing Worldpay base and also leveraging the Worldpay distribution platforms to get better penetration and saturation of our solutions into the market. As I noted, we've already enabled Worldpay to sell Genius through their channels, their direct channels here in the U.S. market, and they've already sold a number of solutions into the marketplace and have a nice growing pipeline of opportunities as well. We're also going to introduce Genius into Worldpay's FI platforms here in the U.S., as well as our wholesale channels as we look to expand the distribution through which we push Genius moving forward in time. So I see lots of opportunities to leverage kind of the existing Worldpay distribution channels. here in the U.S. market to bring more of our products, Genius and our other commerce enablement solutions to the market, as I said before, to get better adoption of those capabilities more broadly. And then, of course, in the U.K., where Worldpay has a large presence today. We also plan to bring Genius to the U.K. distribution platforms for Worldpay in the SMB channel and obviously look to cross-sell Genius into the existing sort of back book of customer base that exists with the Worldpay business in the U.K. as well. So the combination of our 2 SMB businesses gives us much better and diversification of distribution, more channels by which to bring Genius to market. And obviously, an embedded back book of customers a significantly large probably 5-plus million merchant base of customers. that have the potential to cross-sell commerce-enabled solutions and Genius into as we move forward. Operator: Our next question comes from Dan Dolev at Mizuho. Dan Dolev: Well, great results here. Congrats. I love seeing the stock going up, well deserved. Cameron, question for you. The stock is clearly very undervalued in our view, and you're firing in all cylinders, you're buying back a lot of stock, like very good. Maybe can you discuss what are the puts and takes of staying public here versus alternatives? Because I think the message to the market is that there's going to be a lot of really good things down the road, staying public. So maybe some views here would be great. Cameron Bready: Yes. First of all, Dan, thanks for the comments. And obviously, we agree with your conclusion as it relates to the valuation I think, look, first and foremost, we're focused on integrating Worldpay and unlocking the promise that we see in the combination, which we think obviously is immense. And we're also very focused on executing against our capital return plans. That said, as we continue to do that, we continue to assess all options to maximize value for shareholders. We think that's our responsibility and it's something that we take very, very seriously. What I would tell you is, look, if we get to a point after a period of time of integrating the businesses, producing results, returning capital, if the public markets continue to not fairly value the business, I think we owe it to ourselves to look at all alternatives and evaluate all alternatives. And what I would say around that is there's an enormous amount of private capital that's obviously on the sidelines, and then you're seeing bigger and bigger deals getting done. So it feels like a more feasible option now than it ever has been. But I think in the short term, we're focusing on delivering on the commitments we've made, executing well on the integration, and we'll continue our capital return plans, and we'll see where we are as time progresses. Operator: Our next question comes from Ramsey El-Assal at Cantor Fitzgerald. Ramsey El-Assal: I had a question about the expansion of your sales force and your plans to hire another 300 sales heads this year. What parts of the business will these sales additions be stacked against? Is it mostly SMB and Genius? Is it Worldpay offerings, cross-selling? I guess, where are you going to deploy these folks to make the biggest difference? Robert Cortopassi: Ramsey, it's Bob. Thanks for the question. Most of the expansion of the sales force heretofore has been focused on North America and specifically our sales of the combined Genius payments and value-added service offerings. I think that's the segment of the market that we still see opportunity to add incremental sales resources, particularly as you go up market from the very smallest of SMB into the upper end of SMB and beginning into the mid-market space. We continue to see that largely is driven by relationship sales activities. There's certainly merchants who are interested in self-service options, and we provide a full spectrum of digital sales and customer acquisition channels and tool sets to serve them. But the more complex sales do, in our view, require a the engagement of a relationship, consultative sort of sale. And so we're going to continue to stack resources against that as we see opportunities to expand and accelerate Genius adoption. Operator: Our next question comes from Adam Frisch at Evercore. Adam Frisch: On Genius, our check suggests that the SMB space is obviously still very competitive, but none of the major players are pricing irrationally in the market that would threaten current business models. My question is, would you agree with that? And then a quick tangential question. There's been some speculation around Toast renewing with you. Our checks pointed to a competitive deal, but you would retain them if you're able to provide any update on that, that would be great. Cameron Bready: Yes. Maybe I'll start. Thanks for the question, and I'll ask Bob to add a little bit more color as well. I'd say, look, from our vantage point, the market -- the competitive market around point of sale does remain very competitive. Obviously, there's a number of strong players in the space. We believe that we are one of them, and we are building momentum around everything that we're doing with Genius, and we feel very good about where we are I think, in the progress that we have made. I think as we look across the things that we're doing, we're growing well in the areas that we've already launched our capabilities. And I think that's evidenced by the commentary that Josh provided in his prepared remarks this morning in his script, we're also expanding into new markets and new geographies, new subverticals, new form factors, and as well new distribution channels, as I commented on earlier, all of that gives us, I think, enormous confidence we're going to continue to build momentum around Genius and continue to see very positive results and gain more share with Genius in the marketplace. I would say as it relates to the pricing environment, it remains fairly rational to your point. I don't think we're seeing a lot of irrational behavior from a pricing standpoint. It is very competitive. I think one of the things that we feel very good about is given the enormous scale that we bring to the business, particularly from a payment standpoint, we can be as price as competitive as anybody. But our goal remains to be with our distribution diversity the capabilities and feature richness of our solutions and obviously, the distinctive service experience that we think we can deliver to customers. As it relates to the second part of your question before I turn it over to Bob, maybe to provide a little more color around the POS market. We have renewed with Toast on a multiyear deal. So that is done, and we're proud to continue to support them from a payments perspective going forward. Robert Cortopassi: Yes. Adam, I think Cameron well covered the competitive environment. It still is a very competitive marketplace. We continue to feel very strong about our opportunities to win there. And I think we are demonstrating that with the share gains that we're executing on sequentially quarter-over-quarter since the Genius launch last year. The one data point I might offer around this is that particularly in our POS sales team, the signed annual revenue per deal is up nearly 50% on a year-over-year basis. So I think that speaks not only to sort of the constructive pricing environment that continues to represent value as we go to market, but also the value of the combined solution that we're driving today with Genius attaching sales, attaching value added services and delivering that to merchants of compelling value size and opportunity for the business. Cameron Bready: And if I could add maybe one more anecdotal data point. As we talk about sort of 200 sales reps that we've hired recently as we're building towards the 500 million, a number of them are actually point-of-sale sellers that have come from competitors in the marketplace. So I think that's a good sort of data point as it relates to their confidence in the product and capability that we're bringing to market and their ability to be effective sellers inside of our environment, given the tools that we've provided. Obviously, the lead flow that we're able to bring to them and, of course, the product and capability we're bringing to market. So we're proud that we've been able to do that and feel good about, again, how the product is positioned as a competitive matter going forward. Operator: Our next question will come from Tien-Tsin Huang at JPMorgan. Tien-Tsin Huang: Thanks for going over so much stuff here. It's great to consume. Just thinking about the revenue growth algorithm, maybe in a little bit more detail. Would you encourage us to focus on performance across the enterprise, integrated and the SMB channel? Is that the best place for us to study the business? And any big picture thoughts on growth contribution from, say, units, volume, net sales, pricing, that kind of thing or even Worldpay versus Global Payments. I know it's a lot to cover there. But just trying to get a better sense of the growth algorithm. Cameron Bready: Yes. Look, Tien-Tsin, it's a great question. I appreciate you asking some of this, we're going to be able to dig into a little bit deeper as we get to Q1. We get the channels completely realigned. We only closed a month ago, and we're obviously working through getting all the channels kind of aligned on a historical basis and a go-forward basis, et cetera. So we'll be able to give you a little more visibility around the business. We prepare for the Q1 call, particularly across the enterprise integrated platform and SMB channels. So more to come on that front. I would just say around the growth algorithm more broadly. Obviously, given the significant investments we've been making in commercial activities. Obviously, we expect that to be the primary driver of growth for the business going forward. We'll always continue to make sure that we're optimizing price and yield in our portfolio given the level of value in service and capability that we bring to the market. But we think we've done a pretty good job over the course of time of optimizing our pricing in the business. So our goal is really to lean more into the commercial capabilities of the business, given all of the investments that we've made through transformation, obviously, the increased capabilities that we have through the Worldpay acquisition to such that commercial activities and new revenue growth generated from our go-to-market activities will be the primary driver of growth in the business, coupled with the core same-store sales and just organic growth in the customer base that we have. So that's a good way to think to think about the growth algorithm more broadly kind of across the business. And as I said before, we'll give you a little more color around the individual channels as we get to the first quarter and leading up to our Q1 call. Operator: Our next question will come from Andrew Schmidt at KeyBanc. Andrew Schmidt: Cameron, Josh, Bob. Great to see the state results here. Congrats I want to just ask about the Worldpay growth expertise for this year into next. Maybe just talk about the sort of e-commerce SMB integrated payments breakout. So where the largest opportunities are there. It sounds like there might be a little bit of step up into next year to get to that sort of intermediate term growth rate. Obviously, a lot of opportunities with these organizations coming together, but a finer point there on the subsegments. And I understand this will be consolidated at some point. But any detail there, that would be helpful. Cameron Bready: I'll try to give you a little bit of color and as I said before, I think we'll be able to give more detail around the individual channels as we get to the first quarter. As we -- at the Worldpay business more broadly, we talked about sort of their normalized growth in 2025, which was essentially on top of what we underwrote as part of the transaction. So we feel good about the trajectory of growth in the business. As we talked about before, they're on their own sort of transformation journey, accelerating growth across the business, and we're continuing to see good progress within the world-based and stand-alone business. And now as we bring our 2 companies together, our goal is to continue that trajectory for the combined business to get to the medium-term outlook that I shared earlier, which remains our medium-term outlook for the business. Look at the -- in the Worldpay business, their enterprise e-comm capabilities are best-in-class and they're highly competitive, and we're seeing very attractive growth rates there in terms of both volume and revenue. They're more legacy, card-present, enterprise business. That's more of a GDP grower. So you blend those 2 together. And you have a healthy growing business. It's a good mix of very strong e-com growth and slightly lower kind of enterprise, more card-present oriented growth. The platform business, again, is a bit of a tale of two stories. The Payrix and managed PayFac solutions is growing very, very nicely. Obviously, as we've talked about in the past, Worldpay has a book of integrated referral partners that probably hasn't been nourished as well over time. So the overall channel is growing kind of around the average rate for the combined business that we've outlined for 2026, but it's a little bit of a tale of two stories in terms of the composition of that portfolio. And I think SMB is the area where Worldpay perhaps was more challenged kind of as it exited FIS. Obviously, the combination with Global Payments brings better product capability to those distribution channels. I think Worldpay has really good distribution in the SMB space. They just need better product in solutioning to serve SMB customers. And I think, obviously, Global Payments brings that in spades which gives us a lot of confidence as we put their SMB business together with ours, we're going to be able to drive attractive growth rates for that combined channel going forward as a combined company. So gives you a little bit of color as to how we think about the different elements of the Worldpay business, as we said before, their growth in 2025 was on top of what we underwrote as part of the deal. And we're continuing to see good activity and obviously, signs that they're on the right track in terms of continuing to accelerate as we move forward in time. And our goal, as I said before, is to build on that as we bring our 2 companies together here this year. Operator: Our next question will come from Dominic Ball at Redburn. Dominic Ball: Super interesting data point on the platform business there with Toast. Moving to the back book in Genius, you're being quite clear over the last sort of 9 to 12 months, you wish to sort of migrate merchants on to Genius from the back book. Initially, this was sought to be led from merchants or more merchant led. There's been a few instances we've seen here and there like mobile bites, where it seems to be more of a proactive migration. So can you clarify sort of the philosophy around from book versus back book migration how proactive do you intend to be? And then kind of a time line on this as well? Robert Cortopassi: Dominic, it's Bob. I think our strategy around it hasn't fundamentally changed. What you might be seeing are some differences in market dynamics amongst some of the legacy portfolio. So our focus is still on front book opportunities primarily and serving the back book migrations as and when clients are ready to make that move. We've instantiated no sort of formal deprecation program or wind-down strategy for the legacy platforms that are forcing people to make a choice to move. So what both our direct sellers as well as our dealer network are doing are responding to the demands of those clients. In some cases, people known about Genius for many months now. We've been talking about its launch since early last year. Momentum has been building and excitement has been building around the platform. And so we do have pent-up demand in the back book and both our direct sellers as well as our dealer network, as I mentioned, are serving those as and when they're ready to migrate. The great news, as we mentioned is that while Genius is an entirely new platform, it's built on top of technologies that we've been developing over the past 3 to 5 years or so. So it provides for a fairly streamlined conversion and upgrade experience for those clients looking to upgrade both software and hardware services to the newer Genius stack. So just to sum it all up, we're responding to our customers. We're there and ready when they're ready, but we're not putting again to anybody's head to force a migration. And we're still very excited about the front book opportunities that we continue to convert at a pretty steady and accelerating clip. Cameron Bready: Yes. And I would only add to that, and I think that's exactly my view as well. The only thing I would share is as we think about the back book, if a client wants to make a move or is looking to make a move more broadly, our goal is to make that as seamless and easy as possible. So if a client is willing to go through the process of making a change, it should be easier to move to Genius than any other third-party solution in the marketplace. And certainly, our goal is to make it as easy as possible creating as little disruption for that client as possible. So recognizing that someone making a decision to upgrade platforms are going to have to make some change. Our goal is to be able to minimize change and obviously, continue to build on the goodwill we have with that client and make it easy for them to move to Genius. So that's really our focus versus to Bob's point, a forced migration that puts clients in a position of having to make a change in some cases against their will. Operator: Our next question will come from James (Sic) [ Jeff ] Cantwell at Seaport. Jeffrey Cantwell: The one I have for you is about Genius. The question is, what does Genius offer right now in terms of value-added services? Does that have an app store for merchants yet? Some of your competitors, particularly in the SMB space have had success with that. Can you maybe talk to us about whether that is part of the thinking now and going forward? Robert Cortopassi: James (Sic) [ Jeff ], it's Bob. I'm going to address the question, but could you restate -- you broke up a little bit what functionality are you asking about specifically? Jeffrey Cantwell: Sure. Just maybe just go through what Genius offers right now in terms of value-added services and also if there's any plans for an app store for merchants, particularly with regards to SMBs. Robert Cortopassi: Got it. App Store. Thanks for clarifying. So in terms of value-added services, what I would say is that there's a suite of value-added services that comprise 2 big categories. One is things that are available to everyone who's using Genius or maybe more specifically or useful to everyone who's using Genius and those are things around tools like embedded finance, client loyalty, social reputation management, scheduling and bookings engine, those sort of things. Then there are specific value-added services or feature functionality that's specific to a vertical. So when we think about something like spa salon, where you've got scheduling and client communications and those sort of things built into the workflow or when you think about an enterprise restaurant where you might be looking at a drive-thru management and digital menu boards in kiosks and things of that nature or you look at a field services business where you've got mobile invoicing and text to pay links and a mobile operating form factor and a distribution management scheduling of service providers or deliveries or whatever the case might be. So there's a pretty broad stack of feature functionality by vertical and value-added services that span all of it. Specific to an app store, look, I think our approach to that is one of making available easily, the ability to integrate incremental value-added services and feature functionality to the core Genius platform. And that same ease of integrating is used and consumed by our own developers but also available to third parties to plug in other value-added services. The idea of trying to reinvent an app store and create and open marketplace of a variety of quality of solutions, a variety of quality of integrations and a variety of quality of support for those plug-ins or apps. Frankly, I haven't seen that work very well in the market today and providers who've taken that approach end up with a graveyard of hundreds of failed solutions that are poorly integrated and poorly supported. So we're much more interested in curating a holistic, high-quality experience, whether those value-added services come directly from Global Payments or in partnership with a third party. Operator: Our final question of today will come from Jason Kupferberg at Wells Fargo. Jason Kupferberg: Guys, I had 2 questions. I'll ask them upfront. First, just on the free cash flow. Are we reiterating the outyear targets? I think we had been talking about $4 billion in '27, $5 billion in '28, at least on an adjusted basis. So if we can cover that as well as what those numbers might look like on a GAAP basis, and then just any specific areas of conservatism you might point to in the initial top line outlook for '26? Joshua Whipple: Yes, Jason, it's Josh. Let me take the free cash flow question. So yes, we expect '27 to be over $4 billion in levered free cash flow and the $5 billion marker that you mentioned in 2028 from adjusted free cash flow perspective. And look, what I'd say from a GAAP perspective, as we move through the integration, and we expect our onetime cost to come down so that our GAAP free cash flow will go up. So again, that's something that we're very, very focused on across the transformation and the integration. So you should expect those onetime costs to come down and get free cash flow to go up. Cameron Bready: And Jason, it's Cameron. Maybe on the second part of your question. I would just reiterate maybe some of the comments I shared earlier, which is, look, as the businesses are coming together for the first time here early in 2026, I think we've taken a fairly prudent approach to the outlook for the year. As I said, we're very focused on making sure that we get started on the right foot with the 2 businesses. We are realigning go-to-market activities based on client channel versus product, which is how we were oriented previously at Global and we just want to make sure that, obviously, as we're doing that, that we're able to focus on integration when we're getting the businesses and aligning go-to-market activities in the right way, so we get ourselves off on the right foot. Our outlook over the medium term, I think, remains the same. And as Josh highlighted, we expect to be exiting the year at a rate above 5%, which I think sets us up well heading into '27 and '28 as we talked about earlier. Operator: This concludes today's Q&A back to management for any final remarks. Cameron Bready: Thank you very much for joining us this morning. We apologize for going a little bit long, but we had a lot of content that we wanted to share. We appreciate your support in Global Payments and look forward to speaking with you very, very soon. Have a good day, everyone.

86天前Insight Analytics约5分钟阅读

DVN 2025 Q4 财报电话会议

Operator: Welcome to Devon Energy's Fourth Quarter 2025 Conference Call. [Operator Instructions] This call is being recorded. I'd now like to turn the call over to Mr. Chris Carr, Director of Investor Relations. You may begin. Christopher Carr: Good morning, and thank you for joining us on the call today. Last night, we issued Devon's Fourth Quarter and Year-end 2025 earnings release and presentation materials. Throughout the call today, we will make references to these materials to support prepared remarks. The release and slides can be found in the Investors section of the Devon website. Joining me on the call today are Clay Gaspar, President and Chief Executive Officer; Jeff Ritenour, our Chief Financial Officer; John Raines, SVP, Asset Management; Tom Hellman, SVP, E&P Operations; and Trey Lowe, SVP and Chief Technology Officer. As a reminder, this conference call will include forward-looking statements as defined under U.S. securities laws. These statements involve risks and uncertainties that may cause actual results to differ materially from our forecast. Please refer to the cautionary language and risk factors provided in our SEC filings and earnings materials. With that, I'll turn the call over to Clay. Clay Gaspar: Thank you, Chris. Good morning, everyone, and thanks for joining us. Today, we'll focus on Devon's strong fourth quarter and full year 2025 results. Before diving into those very impressive results, I also want to cover the highlights of our recently announced merger with Coterra Energy. I'm incredibly excited about this merger and what it means for our shareholders. The combination of these 2 outstanding companies creates a clear path to superior value creation that neither company could achieve independently. The merger unites complementary portfolios with substantial and overlapping positions across the best U.S. shale basins. At the heart of this combined portfolio is a world-class position in the Delaware Basin, which will generate more than half of our total production and cash flow, backed by a decade-plus of top-tier inventory. Beyond the Delaware, the geographic diversity and balanced commodity mix provides strength throughout the volatility of the commodity price cycle. The scale and operational overlap of our combined platform will unlock substantial value. By implementing best practices, optimizing our cost structure and maximizing our infrastructure utilization, we will capture significant synergies. In total, we expect to deliver $1 billion in annual pretax run rate synergies by year-end ' 27. To be clear, these synergy targets are incremental to our business optimization program and reflect true operational and efficiency gains. And importantly, if there are any net reduction in activity levels, these capital savings will be incremental to our announced $1 billion target. I want to emphasize that we have a strong record of delivering on these business optimization wins. Our proven framework and experience will be leveraged to identify, deliver and communicate these merger synergies. Another critical benefit to this transaction is the enhanced free cash flow generation from the pro forma company. With this uplift, we plan to accelerate capital returns to shareholders through higher dividends and expect a significant new share repurchase authorization to deliver cash returns consistent with best-in-class peers. Bottom line, this transformative merger checks all the boxes and positions us to be an industry leader that delivers differentiated value to investors. With that strategic perspective, let's now turn back to Devon's impressive fourth quarter and full year 2025 results, which demonstrate the strong operational and financial momentum that we're bringing to this combination. Let's turn to Slide 4 for a deeper look on how our disciplined execution delivered another quarter of exceptional results. As you can see displayed on the left, beating on production, operating cost and capital results in an impressive free cash flow for Q4. Our production optimization efforts drove oil above the top end of the guide, fueled by strong new well performance and outstanding base production management. Operating costs significantly improved from the start of the year, reflecting enhanced reliability and relentless operational efficiency. Capital spending finished 4% better than guidance as we continue to capture drilling and completion efficiencies through advanced technology and a culture of continuous improvement. Combined, these efforts translated into $700 million of free cash flow, positioning us to return substantial value to shareholders. I want to emphasize that these results are not just one-off isolated wins, they are direct outcomes of disciplined execution across our entire portfolio. This consistency is evident in our full year performance and reflects the effectiveness of both our strategy and our team. I also want to quickly highlight our impressive reserve performance for 2025. Our capital program achieved a reserve replacement rate of 193% of production at an F&D cost of just over $6 per BOE. While a single year of reserves booking should never be viewed as a sole measure of success, this result provides compelling evidence that the quality and sustainability of our advantaged multi-basin portfolio. Turning to Slide 5. You can see how our focus on operational excellence and disciplined execution culminated in outstanding full year 2025 results. Our track record speaks for itself. Quarter-after-quarter, we drove meaningful improvements to our outlook. Since our preliminary guidance, we delivered an incremental 9,000 barrels of oil per day while reducing capital spend by nearly $500 million. These results reflect a sustained commitment to margin enhancement, technology adoption and continuous improvement across our entire organization. The impact is clear. Capital efficiency improved by more than 15% from our preliminary 2025 outlook, enabling us to extract more value from every dollar invested. Turning to Slide 6. As we've shown many times in the past, our capital efficiency results rank consistently among the very best in the industry. On the left-hand side of the slide, our well productivity stands more than 20% above peer average. On the right side, Devon's capital efficiency outperforms industry by 13%. Together, leading well productivity and capital efficiency translate directly into the strong free cash flow generation that powers our cash return framework. Turning to Slide 7. Another critical driver of Devon's strong performance is our business optimization program. In less than a year, we have captured 85% of our $1 billion target, and we are firmly on track to achieve the remaining savings during 2026. As an aside, I think it's important to remind you that this goal is focused on sustainable free cash flow. The progress of this goal will manifest in multiples of this dollar amount to our enterprise value. This outlook of continued progress is supported by several key catalysts. The planned term loan repayment in the third quarter will deliver $50 million in annual interest savings. At the same time, we are accelerating the implementation of AI-enabled artificial lift optimization and advanced analytics well beyond the pilot programs that we've mentioned on prior calls. Additional benefits will come from operating cost improvements through condition-based maintenance and enhanced drilling and completion cycle times. Beyond these initiatives, we have more than 100 active work streams focused on driving sustained base production gains while reducing the capital required for our maintenance programs. Most importantly, this initiative has fundamentally transformed how we operate. Continuous improvement and the accountability are embedded into our culture, empowering our teams to deliver sustainable value well beyond the initial target. Business optimization is no longer a program with an end date, it has become core to how Devon operates every single day. Turning to Slide 8. As we discussed last quarter, parallel to driving incremental value out of the day-to-day business, we are also regularly evaluating opportunities to rationalize our portfolio to enhance shareholder value. Throughout 2025, we executed on strategic transitions -- transactions via midstream, marketing and leasing that collectively delivered over $1 billion of value uplift to our enterprise NAV. To be clear, these gains are in addition to the improvements from our business optimization initiative. New this quarter, I wanted to highlight our continued investment in Fervo Energy. We recently participated in their Series E funding round, bringing our investment to approximately 15% in this innovative geothermal energy company. Fervo is pioneering next-generation geothermal technology, and we see compelling strategic and financial opportunities in this partnership. It leverages our core skills of geoscience expertise, land leasing, horizontal drilling and completions and subsurface production and recovery skills while positioning Devon in a power-generating sector with significant growth potential. With that, I'll now hand the call over to Jeff. Jeffrey Ritenour: Thanks, Clay. Turning to Slide 9. Devon delivered another year of strong financial results. In 2025, we generated $3.1 billion in free cash flow, demonstrating the strength of our asset base and the effectiveness of our operational execution. This robust free cash flow enabled us to return $2.2 billion to shareholders through dividends, share buybacks and debt retirement. We remain committed to growing our fixed dividend through the cycle. In 2025, we increased our quarterly dividend by 9% to $0.24 per share. Following the expected close of the Devon and Coterra merger and pending Board approval, we plan to raise our fixed quarterly dividend by another 31%, reflecting our strong confidence in the combined company's ability to capture synergies and to deliver an enhanced cash return profile to shareholders. We're also focused on opportunistically reducing our share count and returning value through buybacks. Over the past year, we've reduced our shares outstanding by approximately 5% through disciplined repurchases. Following the merger close and with Board approval, we anticipate a new share repurchase authorization of more than $5 billion, providing significant capacity to deliver strong per share growth over the next several years. In addition to dividends and buybacks, we also possess an investment-grade balance sheet and excellent liquidity. We ended the year with $1.4 billion in cash and a net debt-to-EBITDA ratio of less than 1 turn. This financial strength provides flexibility to invest in high-returning opportunities while consistently returning significant capital to our shareholders. Lastly, I want to touch on our outlook. Looking specifically at the first quarter, we expect production to average around 830,000 BOE per day. This guidance reflects approximately 10,000 BOE per day of weather-related downtime in January. Even with this temporary disruption, our previously provided full year 2026 guidance remains unchanged. Upon the close of the merger, we plan to provide updated guidance for the combined entity. Before we open the call to questions, I want to note that today, we would like to focus the Q&A on Devon's stand-alone results and outlook. As you can appreciate, we are limited in what we can discuss regarding the pending merger at this time. We expect to file our S-4 registration statement in the coming weeks, which will provide additional details on the transaction. With that, operator, we'll take our first question. [Operator Instructions]. Operator: [Operator Instructions] Our first question comes from Neil Mehta with Goldman Sachs. Neil Mehta: I'll try to state on the stand-alone business here and just your perspective on the business optimization and where you are relative to the $1 billion of the pretax target. And what are the key milestones you're focused on the first half of 2026? Of the buckets, which is the one that you feel you're most focused on as a management team right now? Clay Gaspar: Yes. Thanks for the question, Neil. We're really excited about the progress. We launched this thing a year ago, and I can tell you it was a bit aspirational as we thought about how do we come up with all of these numbers. We knew that there was so much more potential to unlock. But we didn't have a line-by-line attribution to each individual piece. And I can tell you, it's been really exciting to see the organization just really unlock around this. As we've talked about before, it's been a very heavy leaning on technology. I think we're just scratching the surface on some of that real potential. But as we mentioned in the prepared remarks, 1 year in, we're now at 85%. We have clear line of sight to being able to achieve the full $1 billion. And I think importantly, as we think about the skill set and the culture around identification, tracking and communicating, I think that really translates into our next challenge going forward, which we're incredibly excited about. I might ask Trey just to give some additional thoughts as he's a little closer to this on a day-to-day basis. Robert Lowe: I appreciate the question, Neil. We -- Clay mentioned this in our opening comments that we now are up over 100 work streams that we're tracking related to business optimization. We have a ton of confidence in what we see coming forward. Over the last few quarters, we've talked a lot about what we're doing in the production space, specifically with trials around gas lift optimization and a few other topics. What I can confidently say and what we're really excited about at the team level is a lot of the investments we've made in artificial intelligence and in the platforms that we've built over the last year are really coming to fruition in the production space. We've seen those advantages already in the drilling results that we've had, but we're going to start to see over first quarter and second quarter a lot of the projects that we trialed in the second half of 2025 start to scale. And so as we scale these things, which all of these technologies are very scalable. We'll do that across the entire organization. We're going to see a lot of benefits flow through on the production side, ultimately resulting in kind of our ability to lower capital long term, and we'll see improvements on the LOE. Operator: Our next question comes from Neil Dingmann with William Blair. Neal Dingmann: My question is on the Delaware position, I guess, whether it's stand-alone or pro forma. I'm just wondering, with a larger upcoming position, I'm just wondering, is there plans to target even longer laterals and potentially upspace the wells to boost results? And then I'm just wondering, will you continue to be as active on the ground game there as you've been in recent months. Clay Gaspar: Yes. Thanks for the question, Neil. The Delaware Basin is just an incredible piece of business, stack of rocks and a great place to work. And so incredibly excited about our current position and the pro forma position as well. What I would tell you is the truism of the best place to find oil is where you found oil before continues to hold true. We think about additional landing zones. We think about innovative technology. We think about improving recovery. We think about flattening our base decline, lowering our downtime. All of these mechanisms that we are so excited about absolutely translate into this incredible position that we have in the Delaware Basin. As we go forward, you bet, we're going to be in a very strong financial position to be opportunistic as we have been. I think that continues in a position of strength, how we think about those opportunities, I think we'll be in a great position to maximize those opportunities. Thanks for the question. Operator: The next question comes from Doug Leggate with Wolfe Research. Doug Leggate: Clay, you're making it hard for us. We all want to ask questions about the merger and all that stuff, but we'll try and behave ourselves and not do that this morning. I do want to ask question about -- Yes. Well, I don't want to waste my question on something you're not going to answer, so I'm going to try something else. Exploration, Clay, you and I have talked about this before about the -- perhaps the loss of collective capability on some of your peers. We're seeing speculation or perhaps not so much speculation that you guys are now looking internationally. I wonder if you could just frame for us whether it's conventional or unconventional, domestic or international, what is the role of exploration in Devon? And if I may ask you to opine just on a broader issue, what does this say about the maturity of U.S. shale if indeed you are pursuing opportunities elsewhere? Clay Gaspar: Yes, that's a great question, Doug. I'm happy to talk about it. When I think about it, internally, we have some terminology we use around pillars. Pillar 1 is make Devon a better Devon. And that's clearly the focus around this business optimization, all of the work that we're doing with technology, leaning in efficiency that just translates into everything else that we do. And importantly, buys us the credibility to be able to consider things above and beyond just making Devon a better Devon. The pillar 2 is a little bit more organic in nature. And these are things that we mentioned Fervo on this call. We think about what the potential is from there. We've talked about exploration. We've clearly been interested in understanding the potential, not just here in the U.S. but around the globe. But I would tell you, those are long-dated investments, long-dated relationship builds, things that we need to evaluate over time. And as we know, the best time to evaluate those are when you're in an incredible position of strength. And so I think about our portfolio today, the free cash flow that we just displayed in full year '25 as I look forward to our capabilities kind of going forward, this is exactly the right time for us to really think about leveraging, not just our financial strength, but our operational strength. And so when I think about the skills that we have and really exporting that or at least leveraging that into other opportunities. These things can be multiple years in the making. What we want to make sure that we are in position is that, one, we really objectively understand the skills that we currently have, how we evolve those over time, where business opportunities are in adjacent businesses or businesses that look slightly different than what we do today, and then really hunt for those opportunities where those kind of that Venn diagram overlaps and be in a ready position to be able to capture those opportunities, albeit most of those will evolve over time, but be ready to capture those and be positioned for that opportunity when those do come up. What I would tell you is, please don't mistake any work that we're doing for next decade opportunities to conflate anything of a lack of confidence in the near term. The confidence in the near term is exactly why we need to be doing things to think about the next decade for Devon and well beyond the positions that we're in today. Again, from an opportunity, a position of strength, that's exactly what we're doing, continuing to refine the skills that we have, think about things creative and beyond our current footprint and then be ready for when those stars do align that we can jump right on them. Doug Leggate: Can you confirm the Kuwait interest, Clay? Clay Gaspar: Yes. What I would tell you is we have explored interest in a lot of places. That's a long, long way from putting material dollars to work. What I would tell you is to really understand the potential that we have. For example, the work that we're doing in resource plays domestically, clearly, there will be opportunities internationally. For us to understand and evaluate where that potentially could fit in our long-term horizons, we absolutely need to be engaged in those conversations, getting our name out there, participating in that so that we can understand the surface challenges, the kind of above-ground risks and how do we quantify that and put it in context to other opportunities that we have. So while I'll avoid commenting on any one particular deal because I think it's way too early for any of that, I can confirm that we are exploring a lot of different ideas and opportunities so that, one, we have a better kind of relative positioning and an understanding of what will absolutely fit us best for our longer-term horizons. Thanks for the question, Doug. Operator: The next question comes from Kelly Akamine with Bank of America. Kaleinoheaokealaula Akamine: My question is on cash OpEx. I'm noticing that LOE plus GP&T on the full year guide is lower than 1Q '26. Can you kind of talk about the cadence of the lower cost there and whether it's reflective of the GP&T optimization efforts on the NGL front? John Raines: Clay, this is John. You cut out a little bit, so jump in if I'm not answering your question. But just for the cadence on OpEx for the full year, we've continued to make consistent improvements in our workover optimization. We've consistently reduced our failure rates. That really contributed to a lot of the drop in LOE plus GP&T for the full year. Going into Q4, we actually saw some tailwinds on some recurring items. Trey mentioned and Clay mentioned in his comments, the condition-based maintenance approach. We're very early innings in that. We're starting to scale that. We started changing some of our maintenance approaches in the Delaware Basin, and we've already seen some costs come out of the system. And so that contributed to the Q4 number. From a power standpoint, we've also energized 2 microgrids in the Delaware Basin. With that, we're able to release a lot of site-specific generation. So just good blocking and tackling on the LOE front. About the time you cut out, I think you were talking about Q1, we do see an uptick there on LOE plus GP&T. Really, what's driving that is twofold. One, it's a little bit of a soft spot in our volumes for the year. As Jeff mentioned, we had the weather downtime that hit us in Q1. But then very specifically, we've got line of sight to just some higher workover activity in the Williston that was mainly weather-driven and then some workover activity in the Eagle Ford that was driven, or is driven by some well cleanouts. On the GP&T front, you did see the drop-off in Q4, and that is absolutely related to one of our new gathering and processing contracts going effective in the Delaware Basin. And so that's at a much lower rate, and you're seeing that contribute as well. Operator: The next question comes from John Freeman with Raymond James. John Freeman: Just following up on the last question on the OpEx side. It sounded like, Clay, maybe that when you talked about sort of the expanding of the automation of the artificial lift optimization, and I think you said it's sort of above and beyond what you all had contemplated previously. I'm just trying to get a sense, does that mean that there's potential that you all could ultimately exceed that kind of $1 billion target with just sort of whether it's that or some of the other catalysts that you all sort of outlined on Slide 7? I'm just trying to get a sense of what's left to be accomplished for the $1 billion and if there's potential upside based on some of this. Clay Gaspar: Yes, John, what I was really just trying to articulate and frame is that while we've achieved 85%, we have a great deal of confidence in being able to achieve the full $1 billion. More to come on that particular topic, but that will be something that will unfold in the coming quarters. Just again, reiterating, we haven't changed the $1 billion target. I think what has changed is just kind of our approach that this is kind of how we work going forward. And there's so many smaller wins that just don't make the headlines that I'm equally excited about. I see this kind of contagion around the organization in all parts of the company really contributing and thinking differently about how do they get their share of the contribution to this sustained free cash flow win. And to me, that's just a winning culture. So I really feel confident in the $1 billion, and I feel equally confident that there's more to come in regards to just the change in culture and innovativeness that we're leaning towards. Operator: The next question comes from Arun Jayaram with JPMorgan. Arun Jayaram: Clay, I was wondering if you could just maybe provide some insights around the 2026 program. You're spending or plan to spend about $3.5 billion upstream. How should we think about kind of capital allocation between regions outside of the Delaware? It looks like today, you're operating about half of your rigs in the Delaware. But how should we think about capital allocation between the Mid-Con, Williston Basin and Eagle Ford, PRB? Clay Gaspar: Yes. Arun, I would say, directionally, think of it pretty similar to how we have been allocating. Clearly, I don't want to get ahead of myself once we get the deal closed. That will be a first order of business. As I mentioned on the last call, really thinking about those opportunities around capital allocation and stepping up the value creation there. Arun Jayaram: Understood. And my follow-up is just you guys have had some really good opportunities in terms of portfolio management, thinking about Matterhorn and your investment in Waterbridge. Clay, I was wondering maybe you could elaborate on the ownership position in Fervo Energy. I think Fervo, we saw them at Baker Hughes' recent annual meeting, have some really unique technology in geotherm. But talk about the decision to invest in Fervo and value creation potential for Devon shareholders from that. Robert Lowe: Thanks for the question, Arun. This is Trey. I've been a part of the kind of Fervo investment decision since we started at Devon. And honestly, we originally got introduced to the team there through some of our technical contacts on the engineering and geoscience side. Fervo is a pioneer in the space with enhanced geothermal systems, and that basically means they're using horizontal drilling and multistage hydraulic fracturing to build out geothermal systems. And it looks a lot like what we have led the way on the subsurface interpretation and with how we've characterized, as an example, hydraulic fractures. And so we got to know them on a technical basis originally. Then we met the management team, got to know the founders really well and ultimately started to really see a lot of the things that we liked about what Vrbo was doing and wanted to support them and to better understand that geothermal business. That's led us over the last couple of years to where we are today, where we're now a 15% owner in the business and continue to be really enthusiastic about what they're doing. Operationally, they're having a lot of success. They continue to drive well costs down, and we've been supporting them with technical support throughout that process to help make their business better. Operator: The next question comes from Phillip Jungwirth with BMO. Phillip Jungwirth: I'll try not to ask this in relation to the merger, but Jeff will be heading up commercial, which has become an increasingly important role for large E&Ps. So the question is more just how do you see the commercial opportunity for Devon stand-alone? And where is the current focus now for the company? Clay Gaspar: Well, I think that does kind of venture into an area we probably don't want to spend too much time on, but I can reiterate what we said on the last call. Once we get the company combined, the management team, the new Board, I think it's going to be a really exciting platform to reevaluate, as I just mentioned, some things near term like capital allocation, but also thinking about asset rationalization, thinking about some of these long-term opportunities. Remember, we're going to have an incredible financial footprint, operational footprint, portfolio. And I think that just really opens up the door to a lot more possibilities. So without getting too far ahead of ourselves, I would just say that the financial footwork, financial foundation is there, and we feel really good about that positioning and really opening the doors to additional opportunities. Operator: The next question comes from Charles Meade with Johnson Rice. Charles Meade: I don't intend to make this a post-deal question, but I acknowledge it may be. But I wondered if you could talk about the dividend, how you chose that new level. It's a big bump. And what the thought process is there to arrive at 31.5% is the right number? Clay Gaspar: Yes. I think the -- it's a big bump from our side from the Coterra side. It's basically on par with what they have been doing. And so I think that was kind of the foundation. Now obviously, again, this is all presupposing a little bit on what the new pro forma Board will approve, but we've guided to is that $0.315, which again is a nice bump on our side. And then in combination, we also project that the Board will approve a very substantial share repurchase program. I think that gives us a lot of latitude in addition to being able to pay down some debt that's coming due, I think just gives us a great framework of opportunities to return this very significant free cash flow directly back to shareholders. Operator: The next question comes from Paul Cheng with Scotiabank. Paul Cheng: The fourth quarter Delaware result is really very impressive. I mean you have lesser number of TEU and then production is actually higher than expected. Just want to see that how repeatable or that there's some one-off item that we should be aware such as the timing of when the well come on stream? Anything that you can share on that? And also that the outperformance, how much is really coming from the new well and how much is on the base operation doing better? Clay Gaspar: Thanks for the question, Paul, because we did have an outstanding fourth quarter. That's on the back of quarter-after-quarter performance. There is a kind of an overall downdraft in cost structure. That's efficiency, that's technology, there's also an updraft in productivity. And so thinking about how do we get more out of these precious resources that we have in the portfolio today. And what you see in the fourth quarter is that really coming together. While quarter-to-quarter, it's always going to vary just a little bit. I mean you bring on these big pads, just a shift in a couple of weeks from beginning to a little bit later in the quarter can manifest in different kind of near-term ebbs and flows. I would look at the overall quarter-over-quarter progress. And I think that I feel very confident in extending well into '26 and beyond. I think that is what we're most excited about. This business optimization was really code for how do we all get really hungry and really creative on that incremental value opportunity. I might turn it to John and ask him his thoughts on the balance of new wells versus the base -- the incredible base work that we're doing as well. John Raines: Yes. Thanks, Clay. I mean, really, the story is twofold. I mean we did have some help from timing on the wedge. We had 3 incredible programs come on in the fourth quarter. The timing helped, but also the wells all outperformed our internal expectations there. The well mix for us, it changes quarter-to-quarter, but we had a pretty balanced well mix. These 3 programs, in particular, had a good balance of Wolfcamp B, Bone Spring, but also Wolfcamp A. So all of those things were contributing factors. But Clay is right, we would be remiss not to talk about the base. Throughout the course of 2025, we saw a lot of production optimization through various projects on the base. And all in all, for the full year, the base outperformed by about 5,000 barrels of oil a day. So when you think about that type of contribution on the base, it's almost 2% of the base. That's just a huge part of our business and an exceptional result and exceptional value to the company. Paul Cheng: John, what's the underlying base decline rate in the Delaware right now for you guys? Clay Gaspar: Paul, if you were asking about decline rates, right now, yes, our base decline rates right now in the mid 30% range. Paul Cheng: Is that changed from previously? Or that is still the same? I would imagine with your better base operation, your underlying decline rate should be lower or should be less. Clay Gaspar: Yes. I'd say we've had some tailwinds on the base. The decline rate itself hasn't changed dramatically year-over-year. Now granted, we're, call it, 1 year into a lot of these production optimization projects. What I would tell you is our downtime is significantly lower. Historically, that was in the 7% range. As we go into this year, we're looking at something inside of 5%. So that's really where you're seeing a lot of the base wins show up. Operator: The next question comes from Kevin MacCurdy with Pickering Energy Partners. Kevin MacCurdy: I wanted to stick on the Delaware productivity as it was very impressive in 4Q. Is there anything you can comment on the stand-alone 2026 program and how it compares to the 2025 program in terms of the zones you're targeting, the geography and the forecasted productivity? Clay Gaspar: Yes, great question. I'll hit on that at a high level. So just top line 2025 well productivity. 2026 is going to look very similar to that. We moved more wholesomely into the multi-zone co-development in 2025. We're firmly into that development methodology. So you'll see very consistent well productivity in 2026. When I think about the mix, the one thing I would ask folks to consider is I'm going to talk about the full year, but these things can vary pretty significantly quarter-to-quarter. But as I think about the program, about 90% of our activity is going to be weighted to New Mexico. When I break that down a little bit further kind of by area, we'll see a little bit of an uptick in Tod this year in the Delaware, it's about 30%. Cotton Draw is about 25%, Stateline is about 15%. And then the balance of that activity is really spread out across the remainder of the Delaware Basin. Zone mix is another thing. We've got a lot of diversity in the zones for 2026, just like we did in 2025. But just to break it down at a high level, we're about 40% Wolfcamp. We're about 45% Bone Spring and about 15% Avalon. So all those things very similar to 2025. And because of that, we're expecting pretty consistent year-over-year well productivity. Operator: Our final question today comes from Matthew Portillo with TPH. Matthew Portillo: I actually had a question on the Bakken. Looking at the state data, you already have an impressive mix of 3-mile laterals in the development program. As you continue to shift more capital to the Grayson acreage, I was just curious how that mix shift might change for 3- and 4-mile lateral development moving forward and what that might mean for the breakeven of the asset base? Clay Gaspar: Yes, Matt, great question. I mean when you look back at 2025, admittedly, our lateral lengths were a little bit probably shorter than what we wanted, just given the layout of some of the units that we had last year. So we averaged closer to about a 2-mile lateral in the Williston. As you fast forward into 2026, we're going to average something closer to a 3-mile lateral. But when you look at the breakout, we are starting to introduce 4-mile laterals into the equation. We're actually drilling our first 4-mile pad right now. So the teams have continued to optimize the program for longer lateral development. And of course, as you go longer, you're enhancing the economics of those programs and the breakevens are coming in pretty significantly. Christopher Carr: It looks like we've kind of exhausted the question list. Thanks for your interest today. And if you have further questions, please reach out to the Investor Relations team. Have a good day. Operator: Thank you, everyone, for joining us today. This concludes our call, and you may now disconnect your lines.

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IAG.TO 2025 Q4 财报电话会议

Operator: Thank you for standing by. This is the conference operator. Welcome to the iA Financial Group Fourth Quarter 2025 Earnings Results Conference Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Caroline Drouin, Head of Investor Relations with iA Financial Group. Please go ahead. Caroline Drouin: Thank you, and good morning, everyone. Welcome to iA's Fourth Quarter 2025 Earnings Call. This conference call is open to the financial community, the media and the public. And I remind you that the question period is reserved for financial analysts. So before we start, I draw your attention to the forward-looking statements information on Slide 2 as well as the non-IFRS and additional financial measures and information on Slide 3. Also, please note that a detailed discussion of the company's risks is provided in our 2025 MD&A available on SEDAR and on our website. And I will start by introducing everyone attending on behalf of iA. Denis Ricard, President and CEO; Eric Jobin, Chief Financial Officer and Chief Actuary; Alain Bergeron, Chief Financial Officer; Stephan Bourbonnais, responsible for our Wealth Management operations; Renee Laflamme, responsible for Individual Insurance, Savings and Retirement; Pierre Miron, Chief Growth Officer for our Canadian operations and responsible for iA Auto and Home; Sean O'Brien, Chief Growth Officer for our U.S. operations and now responsible for all of our Dealer Services Operations; and finally, Louis-Philippe Pouliot, in charge of Group Benefits and Retirement Solutions. So with that, I will now turn the call over to Denis Ricard. Denis Ricard: Good morning, everyone, and thank you for joining us. We are very pleased to be here to review our fourth quarter and also the full year results. I would qualify the results as a good quarter and closing an excellent year. And before getting into our fourth quarter performance, I'd like to take a moment to reflect on 2025. A remarkable year for iA, marked by strong execution across the organization. We met or exceeded all our key financial targets delivering a core ROE of 17.1% and 16% growth in core EPS, fully aligned with our midterm objectives. Our businesses in both Canada and in the U.S. continue to build strong momentum with solid sales across every segment and disciplined progress on our strategic priorities. This growth was supported by our robust capital position fueled by $665 million of organic capital generation in 2025. Throughout the year, we deployed capital with discipline, balancing strong return to shareholders with investments that support future growth. This included the acquisition of RF Capital, which is already accretive and strengthening our wealth platform. Thanks to the dedication of our teams and the consistency of our performance across the organization, we closed 2025 with excellent momentum and a solid foundation as we enter 2026. With that, let's turn to Slide 9 for an overview of the results. Our fourth quarter results reflect strong and profitable growth across all business segments, including record individual insurance sales and very strong individual net fund inflows. This momentum underscores our continued success in the mass market and the power of our distribution networks, which we continue to invest in to drive sustained growth. We delivered a solid finish to the year with core EPS of $3.10 and a trailing 12-month core ROE of 17.1%, which already meets our midterm target. These results underline the strength and resilience of our diversified business model and the momentum we carry throughout 2025. Business growth remains strong across the company. Net premiums and deposits reached $5.9 billion, up 4%, and total assets under management and administration exceeded $341 billion, a substantial 31% increase. This was driven by strong seg fund inflows, favorable market conditions and the addition assets from RF Capital. This performance highlights the continued expansion of our distribution network, the breadth of our product offering and the sustained demand across our target markets. Our capital position remained robust at year-end with a pro forma solvency ratio of 137%, this trend was underpinned by $170 million of organic capital generation in the quarter, a testament to our consistent value creation. As at December 31, our capital available for deployment was $1.4 billion on a pro forma basis. We deployed significant capital again this quarter, including the RF Capital acquisition and continued investments. At the same time, we continue returning capital to shareholders through regular dividends in our NCIB. This balanced approach to capital deployments remain a cornerstone of our strategy, enabling us to support strategic growth, return capital to shareholders and continue investing in digital and AI-enabled capabilities that enhance efficiency and our overall product and service offering. Finally, our book value per share increased to $79.24 up 8% year-over-year or more than 10% when excluding the impact of NCIB. In a year where book value growth across the industry was generally modest. Our performance reflects the consistency of our results and our disciplined approach to capital deployment. Turning to Slide 10. Our Insurance Canada segment delivered another strong quarter, with broad-based growth across all units. Starting with Individual Insurance business, sales reached a record high of $111 million this quarter, supported by the strength of our distribution networks, the effectiveness of our digital tools and high adviser engagement. We continue to rank #1 in Canada for the number of policies issued, a leadership position we're proud of. In Group Insurance, premiums and deposits rose by 2% year-over-year, supported by premium increases on renewals and good sales throughout the year. In the fourth quarter alone, sales were up 15% from last year. In Dealer Services, sales grew 4% to $183 million. Finally, iA Auto & Home delivered another good quarter with sales rising 9% to $146 million. This reflects both an increase in number of policies in force and the positive impact of recent pricing adjustments. Overall, our results in Insurance Canada demonstrate solid execution and ongoing momentum across the board. Turning to Slide 11 to comment on sales on Wealth Management. Business activity was very strong in this quarter in Q4, as evidenced by record individual gross sales of $3.1 billion. In seg funds, we continue to build on our leading market position. Gross sales reached nearly $2 billion, up 27% year-over-year, and net sales grew to almost $1.2 billion. This reflects the sustained appeal of our product lineup and the effectiveness of our distribution networks. In mutual funds, gross sales increased by 16% year-over-year to $694 million and net sales reached $13 million. This reflects favorable market conditions and improving industry-wide sales. Sales of other individual savings products totaled $429 million, essentially in line with last year. And in Group Savings and Retirement, total sales reached $851 million. While this is lower than last year, it is important to note that prior year sales included a nearly $1 billion insured annuities transaction. Assets under management and group savings were 11% higher than a year ago. Turning to Slide 12. Our U.S. operations performed very well again this quarter. In Individual Insurance, sales increased 18% year-over-year to USD 80 million. This strong result reflects ongoing momentum in both final expense and middle market segments with Vericity again contributing meaningfully this quarter. Taken together, this business is an important driver of our long-term growth ambitions in the U.S. market. Dealer Services delivered another strong quarter with sales rising 8% year-over-year to USD 295 million. Our strong distribution relationships and diversified offering continued to support growth. We are seeing good traction from our management actions particularly our focus on service quality and disciplined pricing. This positions the business well to continue generating sustainable growth and to further expand our presence in the U.S. market. With that, I will now hand it over to Eric, who will take you through our fourth quarter profitability and capital position. Eric Jobin: Thank you, Denis, and good morning, everyone. I'm pleased to walk you through our fourth quarter results, which we are very satisfied with, especially considering the normal seasonality and higher-than-expected expenses linked to the company's strong performance in 2025. Overall, our fourth quarter results continue to reflect the underlying strength of our business fundamentals. Turning to Slide 14 for a closer look at the performance by segment. In Insurance Canada, core earnings for the fourth quarter were $105 million compared to $116 million in the same period last year. As a reminder, last year results included elevated core insurance experience gain of $15 million, while Q4 2025 reflected core insurance experience loss of $4 million. This year-over-year variation is due to the normalization of the P&C insurance experience at iA Auto and Home as well as unfavorable morbidity experience in special market this quarter. Excluding this experience variance, underlying performance remains solid, higher core insurance service results were recorded, driven by individual insurance, employee plans and iA Auto and Home. Core noninsurance activities, which typically show slightly lower results due to seasonality in the first and fourth quarters were nevertheless higher year-over-year, supported by the good performance of dealer services. Core other expenses were slightly higher year-over-year as a result of normal business growth. Let's now move from Insurance Canada to Wealth Management. On Slide 15, core earnings in the Wealth Management segment were $127 million in the fourth quarter, up 13% year-over-year. This growth was primarily driven by higher combined risk adjustment release and CSM recognized for services provided, reflecting strong net segregated fund sales and positive financial market performance over the last 12 months. Core insurance experience gains of $2 million were also recorded due to favorable longevity experience. These positive factors were partly offset by higher impact of new insurance business and group savings and retirement. Core noninsurance activities were similar to the same quarter in 2024. The higher net revenue on assets and the strong contribution from RF Capital, which is already accretive and performing ahead of expectation were offset by lower net interest income and nonrecurring expenses and other distribution and advisory affiliates. Turning to Slide 16. Fourth quarter core earnings in our U.S. operations were $30 million, an increase of 15% compared to the same period last year. This result reflects higher combined risk adjustment release and CSM recognized for service providers supported by good business growth over the past 12 months. The segment also benefited from lower core other expenses, although slightly tempered by core insurance experience losses from unfavorable insurance lapses. Core noninsurance activities, which typically post lower results in the first and fourth quarters due to seasonality totaled $15 million essentially in line with last year. This includes results from dealer services and from eFinancial, the distribution -- the digital distribution entity of Vericity. In Dealer Services, the sales mix was more weighted towards insurance product for which earnings emerge gradually over time, while eFinancial performed as expected. Now turning to Slide 17 for the results of the Investment segment. Core earnings for the quarter were $91 million before taxes, financial charges and debentures dividend. Core earnings were driven by core net investment result of $127 million compared to $120 million in Q4 2024 and $132 million in the third quarter. This result was driven by strong expected investment earnings of $124 million and favorable credit experience of $3 million in the car loan portfolio at iA Auto Finance. The $5 million quarter-over-quarter decrease in expected investment earnings reflects the impact of the reduction in assets following the acquisition of RF Capital. The $3 million year-over-year decrease reflects the same impact partially offset by favorable impact of the interest rate variation, including the steepening of the yield curve. Moving to Slide 18 for the result of the corporate segment. Core other expenses totaled $87 million pretax in the fourth quarter. This includes $74 million of core other expenses, which is near the upper end of the quarterly target range of $68 million, plus or minus $5 million. It also includes a provision for variable compensation that was higher than expected by $13 million, highlighting the company's strong performance in 2025. For the full year 2025, core other expenses were in line with target, showing our disciplined approach to expense management and our continued focus on operational efficiency. Looking ahead, our quarterly target range for core other expenses has been updated from $68 million, plus or minus $5 million in 2025 to $70 million plus or minus $5 million for 2026, reflecting normal inflation while maintaining our strong commitment to operational efficiency. Please turn to Slide 19 to review our robust capital position and financial strength. As of December 31, 2025, our solvency ratio stood at 133% and 137% on a pro forma basis when taking into account the impact of the 2026 AMF revised CARLI Guideline that came into effect on January 1, 2026. The quarter-over-quarter variation reflects the impact of our strategic capital deployment activities, including the RF Capital acquisition, share buybacks and dividend payments to common shareholders. These were partly offset by strong organic capital generation, favorable macroeconomic variation and the positive impact of the updated capital requirements related to domestic infrastructure. In the fourth quarter alone, we generated $170 million in organic capital, bringing the total for the full year to $665 million, surpassing our 2025 target of at least $650 million. We closed 2025 with high-quality and flexible balance sheet 1.4 billion in capital available for deployment on a pro forma basis and a sustainability to generate capital organically. The strong financial position gives us the capacity to deploy capital strategically while preserving a prudent and resilient balance sheet. Please turn to Slide 20, which summarizes the year-end assumption review and management actions. The net economic impact was a positive $10 million. The review was positive across nearly all categories. These updates and management actions ensure we maintain an accurate representation of our underlying economics and appropriately position the company as we enter 2026. The total impact, which includes an immediate impact on earnings as well as an increase in both CSM and risk adjustment reflects a shift in the timing of profit recognition, which is positive for future periods. This concludes my remarks. Denis, I'll turn it back to you for the closing comments. Denis Ricard: Thank you, Eric. Now please turn to Slide 22. We are very pleased with our fourth quarter results, particularly considering normal seasonality and higher expenses tied to the company's strong performance in 2025. The quarter allowed us to close out a remarkable year, one in which we achieved all our key financial objectives. As we look ahead to 2026, we are in a very strong position to sustain our profitable growth trajectory. Our earnings momentum is well established, and we continue to see strong sales across all business segments. We also have a robust and flexible balance sheet and significant capital available for deployment, key ingredients to support growth, acquisition and expansion. With these trends, we are moving forward with confidence and discipline. Our strategic investments in digital capabilities are enhancing efficiency and supporting business growth and the recent acquisition of RF Capital, which is performing ahead of our initial expectations, further strengthens our wealth management platform. Our confidence in our earning power is reflected in our new core ROE target as we now expect to achieve a core ROE of at least 17% again in 2026, along with more than $700 million in organic capital generation. In short, everything is in place. We have the means, the strategy and the momentum to achieve our ambitions and meet our financial targets. Thank you. Operator, we are now ready to take questions. Operator: [Operator Instructions] The first question is from Gabriel Dechaine from National Bank Financial. Gabriel Dechaine: Quick question on lapse. We saw it in the -- your actuarial adjustments and then we saw it was tied to one specific product. Can you tell us which product that was? And if it's related to the small amount of lapse, negative lapse experience we saw in the U.S. this quarter? Eric Jobin: Yes, Gabriel, it's Eric. This -- the product that is in that is at play here is a term product in Insurance Canada. And this product has been sold for, I would say about 10 years now. And just before we started to sell it just before the pandemic. And the pandemic created a bit of noise and the results, and we wanted to take the time to appropriately understand what was going on before triggering reserve strengthening. So now we're confident with a couple of years out of the pandemic, we're now confident in the experience. And we had to increase the lapse. Just to be clear here, it's not a lab supported product. It's really a term product. So we had to increase the lapses at almost all duration, including the renewal. So that's what took place here. It's not connected with the U.S. Gabriel Dechaine: Okay. So you've had this issue for a while now, and you've observed it for I don't know what period of time, but sufficiently enough to have a firm handle on that particular problem. Is that what you're saying? Eric Jobin: Exactly. We had set up in the past temporary provision to face what we thought was temporary headwinds. And now that we see the fact that it's permanent and it's a different behavior than expected. We fixed it and put it behind us. Gabriel Dechaine: Got it. Your buyback program, will you tell me how that works? Is it on a program that -- or do you have discretion because we saw some acceleration over the course of, well, actually this quarter heading into results and seems to maybe have been -- could have been a better timed, I guess, is one way of putting it? Like what are your plans going forward, Denis? Denis Ricard: Yes, yes. Okay. Thank you. Thanks for the question. We've accelerated it recently, starting in November. I think you can see the number on a monthly basis. We are running at the pace of around 4% a year right now, and we might accelerate it. It's obviously dependent. It's the formula that we have, and it depends on the price and a couple of criteria but you might expect that it might increase a bit if the price as it is this morning continue. Gabriel Dechaine: Got it. And then last one on these expenses in corporate. So for the full year, these -- what do they call non -- whatever they call, the one that qualifies for that $68 million plus or minus $5 million. You say you hit that this year. But then we have Q2 and Q1, you had these variable compensation costs that created some deviation is more noticeable this quarter. But why shouldn't we consider those as part of the corporate expenses and take away a different conclusion? Eric Jobin: Yes, thanks for the question, Gabriel. In reality, what took place here is one part of the variable compensation. As we do the financial statement every quarter, we want the provision to be at the right level at quarter end, reflective of all variable compensation necessary. And in Q4, what took place is that one part of that variable compensation with the stock performance from September 30 to December 31, justified significant increase on top of some other multiplicative effect that came at play. So it's just a normal provisioning given what happened in Q4. Gabriel Dechaine: And just -- can I go in the other direction? Eric Jobin: Yes. Operator: The next question is from Paul Holden from CIBC. Paul Holden: First question, I guess, will be on RF Capital. Since we could see the results as a publicly traded company, we saw it was operating around breakeven, but you managed to squeeze out $8 million of net income this quarter. So I just want to understand that source of accretion. And then maybe also, you can remind us what can we expect from RF Capital through the course of 2026, both in terms of sort of integration targets and accretion? Denis Ricard: Well, I think, Eric, you will cover the first part, and then Stephan can go on the second part. Eric Jobin: Yes, sure, absolutely. In fact, Paul, what is at play here is -- and remember, in Q3, I said that we were moving ahead or moving forward the accretiveness expected on RF Capital for 1 year for two specific reasons, the good work around the retention of the advisers and the market performance as well. So those were the two explanations for moving ahead of schedule with that. And I said at the same time that don't expect it to be accretive in Q4. But the reality is that the stock market performance and retention effort even showed benefit right from the start in Q4. So those are still the same reason as for last quarter. And for the business, I would leave it to Stephan now. Stephan Bourbonnais: Yes. Thank you, Eric. I'd say when you look at it, the integration synergy plan is progressing really, really well. The -- I think what was kind of unexpected for us is that we were able to close sooner than expected on October 31, right? So that what gave us a real head start to our plan. We were able to create those road maps really, really early from the get-go and be able to deliver that in Q4 in November and December. So as you know, we're no longer operating as a public company, which helped us to save on board committee audit and external costs that we needed to deal with. In the same week of the announcement, we were able to move quickly to realign the leadership team structure at RF to make sure we'd be aligned on our growth strategy and our road map. We started harmonizing corporate function as well when you're thinking about HR, legal and IT and again, benefited from the synergies there. And we even started reviewing some of the contracts with vendors. I mean we are sharing the same vendors across multiple platforms, and we're now able to benefit from the scale there. So this is what I think you're seeing in the results, and this is what you're seeing in us being comfortable to say we move this to be accretive year 1 instead of year 2. And on -- I would say, on the forward-looking and what you could expect, Eric mentioned very strong retention. So it's -- we're in a better spot than we thought. We're creating good momentum with the team in terms of bringing them solution for their clients in terms of products, investment solution, the assistance of capital market. This has been very well received by the team. And what's been interesting to see is kind of the noise that we've created in the industry. So our story about being the #1 nonbank in Canada with over $200 billion is catching on and people are interested in learning about it. So we've seen Investia and iA Private Wealth benefit from that. Advisers retention has been stronger than we've seen in those channels as well because I think our advisers understand that we're committed to the business. But we're also seeing an increase in the recruiting pipeline for both dealers. I think we're going to be able to announce some significant adviser movement towards our organization in the next coming weeks. So overall, things are going very well, and we feel very good about the progress that we've seen so far. Paul Holden: That's good. So I think the point on the adviser retention is a really important one. I don't know if you're able to provide any data statistics in terms of where retention is versus what your expectation was? So we -- yes, go ahead, Eric. Eric Jobin: Yes, I was going to say, Paul, just a reminder, we did not disclose because those are kind of sensitive parameters in our acquisition models and so on. So we did not disclose the expected assumption, neither the actual outcome, but I will tell you that it's really, really good in terms of actual outcome compared to expectation, which was high, but it showed up very, very well. Paul Holden: Understood. Okay. Okay. I'll leave that there. And then second question I want to ask is on the ROE target. So the positive for me is you achieved the ROE target actually this year, so 2 years ahead of plan, which is obviously very positive. My question really then is like why not increase the ROE target? I get you pulled it from 27% to 26%, but you're already there. So why not increase the ROE target? Is that -- is it related to capital deployment and that you can't buy a business that's generating 17% ROE, I get that. So maybe that's a factor? Or is it new businesses coming on at roughly 17% ROE? I guess -- or maybe you're just being conservative because I just want to understand a little bit better, like why can't it expand from the 2025 result? Denis Ricard: Yes. The question is good. I mean why don't we increase it? I mean the question could be asked, why would we increase it? -- in a sense that 17% is already where we had made the guidance at the beginning of last year. We were able to deliver on it. And I mean, quicker. Now we're changing it. We're seeing this is like the run rate of our ROE. But don't forget the plus, okay? So we're working on the plus. And so for us, it's really a matter of being, I would say, conservative, prudent in our approach. We would rather underpromise, overdeliver. We always work to obviously improve the ROE. And you hit one important point also because if we are a growth company, okay? We want to grow the organization, and we're looking at acquisitions. And sometimes when you buy an acquisition in the first year, you might not get the ROE that is your target. So you also have to take that into consideration in your guidance. So I would say it's really about being prudent going forward here. Operator: [Operator Instructions] The next question is from Tom MacKinnon from BMO. Tom MacKinnon: I wonder if you could talk a little bit about your group experience in the quarter. I think it may have been hurt by some outsized claims. What's your strategy is with respect to renewal of that group and how we should be looking at group experience going forward? Denis Ricard: Yes. Again, in this case, I guess, Eric, you will go first and then Louis-Philippe. Eric Jobin: Yes, absolutely, Denis. In fact, what happened in the quarter, Tom, is that there was, the federal government took some measures in the past to limit the number of permits for foreign students coming to Canada. This is a group we have in terms of covering medical foreign students coming to Canada in special market -- in the special market division. And since the government limited the number of permits, we kind of got hit on both sides I referred to. The premium income did go lower than expected, and we were hit on the claims side as well. So unfortunately, it resulted in bad experience in Q4. And -- but at the same time, this group will renew, is expected to renew in -- during the course of 2026. I will leave Louis-Philippe to talk about the strategy going forward. But note that in the change of assumptions for this group, we took a reserve increase or reserve strengthening to put this phenomenon behind us in 2026 up to the point of renewal. So it's part of -- we saw the impact in 2025. You have it in the experience loss. We fixed the reserve to have it at the appropriate level at year-end. And now strategically speaking, Louis-Philippe will talk about what he's doing on the business side. Louis-Philippe Pouliot: Well, so I think the main takeaway here is we're looking at that business. And for a group of that size, there's a number of tools at our disposal. Eric touched on a few of them. It includes also working with our distribution partners, repricing those groups. So we have a number of those tools. And we've taken some of those actions already, and we have the ability to make the choices of not renewing the business even if we figure out that we can't get to where we want. So we feel pretty good. We don't have a headwind ahead of us in 2026 on that front. Tom MacKinnon: Is the coverage that you're strengthening the reserves for, is that like supplementary medical? What is it specific? It's not disability, is it? Maybe you can just describe what, where you're seeing these elevated claims. What kind? Eric Jobin: Yes, you're right, Tom. It's not -- it has nothing to do with disability. It's really supplemental coverage. So it covers medical drugs and therapists coverage. So it's all of those site benefits and group insurance. Tom MacKinnon: And when does this group renew? Eric Jobin: September. Tom MacKinnon: Okay. So you're still going to have them for a few more quarters, but you're comfortable that you've bumped up the reserves enough to cover the additional incidents. Is it more of an incidence issue? Is that what it is just more going on claim here? Eric Jobin: Well, I said, but I said that Tom, two things. It's an incident and severity. But at the same time, we had less new students that came to Canada to keep the volume of premium at the appropriate level. So it's a combination of the two. And you are absolutely right. The move we did on the reserve was really to strengthen the balance sheet so that we don't have expected loss ahead of us up to the point of renewal. Tom MacKinnon: Right. And would you be able to share with us that reserve build, what the dollar amount was after tax or pretax? Eric Jobin: Yes. We did not disclose it, Tom. But it's part, if you look at the change of assumption page on Page 20. It's part of the other segment on the P&L side. So you see that we have a $70 million charge on this P&L side, and it's part of that, but it's significant. You saw the magnitude of the loss in Q4. So it's significant. Tom MacKinnon: And it's -- is it a significant part of the $4 million insurance experience loss that you had in Canada in the quarter? Eric Jobin: Yes, absolutely. Because when you think about it, we refer to the fact that iA Home & Auto had a normalization of experience in the fourth quarter, but it didn't mean that iA Home & Auto had an experience loss. They were still positive, but it was reflective of a normal winter. So if you take that into account, the fact that we had favorable mortality, and you see that we end at minus $4 million, it means that the loss was significant. Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Caroline Drouin for any closing remarks. Caroline, your line is open. Caroline Drouin: Thank you, everyone, for joining us today. All of our fourth quarter earnings release and slides for today's conference call are posted in the Investor Relations section of our website at ia.ca. A recording of this call will be available for one week starting this evening and the archived webcast will be available for 90 days, and a transcript will be available on our website in the next week. Our 2026 first quarter results are scheduled to be released after market close on Tuesday, May 5, 2026. Thank you again, and this does conclude our call. Operator: This brings a close to today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

86天前Insight Analytics约5分钟阅读

WTTR 2025 Q4 财报电话会议

Operator: Greetings, and welcome to the Select Water Solutions Fourth Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Garrett Williams, Vice President, Corporate Finance and Investor Relations. Garrett, please go ahead. Garrett Williams: Thank you, operator, and good morning, everyone. We appreciate you joining us for Select Water Solutions conference call and webcast to review our financial and operational results for the fourth quarter and full year of 2025. With me today are John Schmitz, our Founder, Chairman, President and Chief Executive Officer; Chris George, Executive Vice President and Chief Financial Officer; Michael Skarke, Executive Vice President and Chief Operating Officer; and Mike Lyons, Executive Vice President and Chief Strategy and Technology Officer. Before I turn the call over to John, I have a few housekeeping items to cover. A replay of today's call will be available by webcast and accessible from our website at selectwater.com. There will also be a recorded telephonic replay available until March 4, 2026. The access information for this replay was also included in yesterday's earnings release. Please note that the information reported on this call speaks only as of today, February 18, 2026, and therefore, time-sensitive information may no longer be accurate as of the time of the replay listening or transcript reading. In addition, the comments made by management during this conference call may contain forward-looking statements within the meaning of the United States federal securities laws. These forward-looking statements reflect the current views of Select's management. However, various risks, uncertainties and contingencies could cause our actual results, performance or achievements to differ materially from those expressed in the statements made by management. The listeners are encouraged to read our annual report on Form 10-K, our current reports on Form 8-K as well as our quarterly reports on Form 10-Q to understand these risks, uncertainties and contingencies. Please refer to our earnings announcement released yesterday for reconciliations of non-GAAP financial measures. Now I would like to turn the call over to John. John Schmitz: Thanks, Garrett. Good morning, and thank you for joining us. I am pleased to be discussing Select Water Solutions again with you today. 2025 was another record-setting year for Select, both operationally and financially. I'll start with some of our 2025 highlights and provide an update on our key strategic development efforts. Now I'll hand it off to Chris to speak to the fourth quarter and the financial outlook in more detail. In 2025, we improved our consolidated margins, streamlined our Water Services segment and drove significant market share gains in our Chemical Technologies segment. We made key investments in long-term diversification efforts across the municipal and industrial space and advanced our technology efforts in both beneficial reuse and mineral extraction. But importantly, we made great strides in our core water infrastructure growth strategy including the ongoing build-out of our premier Northern Delaware water infrastructure network. During 2025, we grew recycled produced water volumes by 18% resulting in more than 330 million barrels of recycled during the year. We also hit a significant milestone during the fourth quarter, achieving 1 billion barrels recycled since the beginning of 2021 which helped drive the water infrastructure revenue growth of more than 800% across that same 5-year period. During that time, we've seen Water Infrastructure grow from our smallest segment to now our largest segment by profitability. Importantly, we continue to add inventory and underwrite future infrastructure growth and in 2025, we executed multiple new MVCs and added nearly 1 million new dedicated acreage with an average contract term of 11 years. Accordingly, we are well on track towards growing our Water Infrastructure to our stated target of greater than 60% of our consolidated gross profit in the next 24 months supported by sizable additional year-over-year growth of 20% to 25% in 2026 as compared to '25. Our industry faces significant evolving produced water challenges, and these challenges are perhaps most keenly felt in the Northern Delaware Basin. We've made a strategic choice to focus in this basin, which contains some of the most productive geology and lowest breakevens in the industry but also produces the highest water cuts in a region with decreasing disposal availability and increasing regulatory scrutiny. In the Northern Delaware, our recycling first infrastructure network gathers hundreds of thousands of barrels per day with our facilities acting as distribution hubs that can balance water longs and shorts across a broad regional footprint through expansive dual aligned pipeline networks. Additionally, the network can be balanced as needed with our interconnected traditional disposal solutions are alternatively enable future beneficial reuse and out of basin disposal solutions. Our unique infrastructure model sets at Select to be the cost advantage provider versus other competitors in the industry creating significant economic value and cost savings for our customers while generating attractive long-term returns for Select. We also continue to partner with our customers to find the most economic and operationally efficient ways to enhance the utilization of their existing infrastructure. Notably, at times, this may result in our customers operationally transferring our direct conveyance of their existing water-related infrastructure assets to us. Select's ability to integrate these assets into our existing commercial network drives greater operational efficiencies, reduce cost and yields enhanced systems reliability. Throughout 2025, we have been conveyed multiple recycling, disposal and storage facilities from key partner customers. This continued in the fourth quarter as we reached an agreement with a top customer for the direct conveyance of 3 existing treated produced water storage facilities as well as a permit for additional disposal facilities in Eddy County, New Mexico. We have since drilled and completed this disposal facility with immediate plans to integrate it into our broader network. We believe this is a strong endorsement of our customers' trust in Select and the value-added solutions we are providing. When combined with an additional disposal acquisition we completed in the fourth quarter, we added 55,000 barrels per day of new disposal capacity in the Northern Delaware during the quarter. These new assets and contract awards, combined with the significant backlog of our ongoing construction projects will drive additional network capacity and geographic reach across the entirety of the Northern Delaware Basin, supporting the strong 20% to 25% growth outlook I mentioned for the Water Infrastructure segment in 2026. We are also finding new ways to leverage the produced water volumes within our existing infrastructure asset base to generate incremental cash flow and high margin royalty stream without requiring incremental capital investment. This includes recently announced strategic partnership for produced water lithium extraction in both the Haynesville and the Permian regions, which should begin contributing initial royalty revenues by early 2027 and growing from there. In summary, our Water Infrastructure growth strategy is working. I'm excited to see the continued growth from this segment in the years ahead. Now shifting briefly over to our other segments before I hand it over to Chris. Our Chemical Technologies segment proved adaptable during 2025, achieving tremendous growth and market share gains in spite of a softer activity environment. This included 19% year-over-year revenue growth and more importantly, 45% growth in gross profit before D&A. Our research and development efforts continue to drive new product enhancements and demand for advanced chemical technologies. Growing lateral lengths and increased focus on enhancing recovery rates for oil in place continue to drive demand from our highest quality friction reducers and our advanced surfactant product offering. I am very pleased with our recent market share gains and technology advancements and I am cautiously optimistic about the renewed focus from our customers on securing high-quality offerings that improve well performance. On the Water Services side, we were focused on streamlining this segment throughout the past year to simplify our service offerings and position us for the long-term operational efficiency and margin enhancement. Overall, our Water Services segment performed quite well against a challenging market environment in 2025, maintaining its market-leading positions across each of the segment's core service offerings. We continue to evaluate strategic alternatives for our Peak rentals business with a measured and disciplined approach to ensure an outcome that best serves each of Peak and select strategic focuses and growth initiatives while maximizing the value for Select shareholders. While we proceed with this process, Peak continues to garner increased traction in its power solutions offering while generating ample excess free cash to support Select's core Water Infrastructure growth strategy. To conclude, I believe that Select remains extremely well positioned to meaningfully grow our adjusted EBITDA in 2026 with a unique integration of high growth, Water Infrastructure solutions alongside steady market-leading Water Services and Chemical Technologies solutions. I'm excited for the year ahead and firmly believe our current strategy will continue to drive long-term value for Select shareholders. At this point, I'll hand it over to Chris to speak to our recent financial results and the 2026 outlook in a bit more detail. Chris? Chris George: Thank you, John, and good morning, everyone. As John mentioned, 2025 was an important year for Select across many financial and operational metrics. While 2025 brought a challenging macro environment overall, I believe the business performed quite well within those conditions, generating $1.4 billion of consolidated revenue with improved consolidated margins and a record $260 million of adjusted EBITDA. I'll start by covering a few high-level market perspectives before getting into the financial performance and outlook in more detail. Looking forward, we anticipate a commodity price environment in 2026, but is fairly steady overall. With oil largely expected to stay within the $55 to $65 price range we've seen during the second half of 2025 and so far, early in 2026. Near term, we do foresee potential upside to the natural gas market outlook and are well positioned to benefit from our market-leading positions in key gas basins if incremental opportunities arise. Generally, we believe this current commodity environment supports overall activity levels holding relatively steady to the second half of 2025. Now looking at our recent segment level performance and outlook in more detail. We saw meaningful annual growth in each of our Water Infrastructure and Chemical Technology segments across 2025 and more recently, we grew both revenue and gross profit across all 3 of our segments during the fourth quarter. In the fourth quarter of 2025, the Water Infrastructure segment increased gross profit before D&A by 5%, while improving margins to 54%. As we continue our New Mexico system expansion, we work closely with our customers to support their evolving development schedules alongside our planned construction time lines. During late Q4, certain top customers requested short-term schedule changes, resulting in modestly lighter than anticipated volume growth across our fixed infrastructure. However, given the breadth of Select's integrated service offerings, including our temporary water transfer capabilities, we were readily able to support these changing development needs during the quarter, allowing key customers to achieve their adjusted production objectives while maintaining our originally planned infrastructure build-out time lines. This resulted in a 77% sequential uplift in our water transfer revenues in New Mexico during Q4. Driving a sizable outperformance in the period for our Water Services segment, more than offsetting the expected seasonal impacts for that segment and driving 7% overall revenue growth for Water Services as compared to the prior guidance of modest sequential declines. With the continued infrastructure build-out in New Mexico and new facilities coming online, we expect a growing shift in volume activity onto our fixed infrastructure network in the coming months, which should drive high-margin sequential growth for the Water Infrastructure segment during the first quarter and further throughout 2026. Accordingly, we anticipate 7% to 10% growth in Water Infrastructure's revenue and gross profit before D&A during the first quarter of 2026 as compared to the fourth quarter of '25. With several projects planned to come online during the first 3 quarters of 2026, we anticipate a continued growth trajectory for Water Infrastructure over the course of the year. Altogether, we expect very meaningful 20% to 25% year-over-year growth for the segment, while maintaining strong, steady margins throughout the year, similar to the 54% gross margin before D&A we generated in Q4. As we continue to commercialize the new facilities over the course of the year, we also believe there remains capacity utilization enhancement that can drive further upside into 2027 alongside other new potential contract wins. For Water Services, gross margin before D&A improved during the fourth quarter by approximately 2 percentage points to 20%. And when combined with the aforementioned 7% revenue gains drove strong 16% growth in gross profit before D&A for the segment during Q4. Coming off a strong fourth quarter, we anticipate steady revenue in the first quarter for Water Services. While we anticipate revenues to be down year-over-year for the segment, recent divestments account for more than 80% of this decline and we expect to maintain relatively steady revenue consistent with the recent Q4 run rate and current Q1 outlook throughout the full year 2026. Supported by our recent rationalization and operational improvement efforts, we expect to see near-term margin improvement for the segment, with gross margin before D&A of 19% to 21% for both the first quarter and full year 2026. As John mentioned, the Chemical Technologies segment had a tremendous year in 2025 with annual revenue growth of 19% and 45% growth in gross profit before D&A relative to 2024. The segment finished the year strong with record quarterly revenue generation of $87 million during the fourth quarter, a 14% sequential increase. Gross profit before D&A grew further with 16% sequential gains resulting in 20% gross margins before D&A during Q4. On the back of recent gains, we expect this segment can produce similar annual revenue in '26 to that of the prior year with upside potential while gross margins before D&A should hold steady in the 19% to 20% range. Based on current customer activity outlook for the first quarter of 2026, we anticipate Q1 revenue to return to the high 70s up to the $80 million range with margins remaining in the 19% to 20% range. While SG&A increased modestly to $43 million during the fourth quarter of '25, we are targeting a 5% to 10% year-over-year reduction in SG&A and SG&A expected to reduce back below 11% of revenue for full year '26 and potentially as early as Q1 as we recognize the benefits of ongoing cost reduction and business optimization efforts. Altogether, we generated consolidated adjusted EBITDA of $64.2 million during the fourth quarter of '25, above the high end of our adjusted EBITDA guidance of $60 million to $64 million, driven by sequential revenue and gross profit gains across all segments during the fourth quarter. For the first quarter of 2026, we expect an increase in consolidated adjusted EBITDA to $65 million to $68 million primarily attributable to increased volumes on our Northern Delaware infrastructure network with a continued upward trajectory throughout the year, setting the stage for solid year-over-year adjusted EBITDA growth. Looking below the line, we anticipate cash tax payments in 2026 to be a relatively modest $5 million to $10 million, including state taxes, and our book tax expense percentage applied to pretax operating income to likely stay in the low 20% range. Driven by the continued capital investment in our infrastructure business, I expect depreciation, amortization and accretion will continue in the $46 million to $50 million range during the first quarter, while trending up into the low 50s over the course of 2026. Interest expense should remain in the $5 million to $7 million range per quarter. With fourth quarter net CapEx of $70 million, we finished the year at $279 million in net CapEx, just slightly above our previous guidance. The continued strong customer demand for recycling centric Water Infrastructure solutions led to significant capital investment throughout '25 with numerous facility expansions and pipeline projects that are currently underway. To fund our continued water infrastructure growth, we anticipate net capital expenditures of $175 million to $225 million in 2026, after considering an expected $10 million to $15 million of ongoing asset sales. This includes approximately $50 million to $60 million of maintenance spend weighted predominantly towards the Water Services segment, consistent with the prior year. We are entering 2026 and with several projects already under construction were contracted with construction commencing soon, which should result in a heavier CapEx weighting to the first half of 2026. While this 2026 capital program includes all existing contracted projects, we do have an additional backlog of future opportunities. We are in the middle of a unique build-out window, especially for our premier infrastructure position in the Northern Delaware, and we would be excited to convert some of these opportunities into future growth throughout 2026 and into 2027. The Water Infrastructure assets we placed in service have very low maintenance capital needs, which should result in very strong discretionary cash flow for Select over time. With an 11-year average contract tenor for our current projects, we expect to deliver highly accretive long-term revenue and cash flow benefits. While the build window and growth capital associated with the projects continues at pace in the short term, we would expect capital expenditures to come down in 2027 providing ample long-term free cash flow generation. Additionally, as we have discussed before, our Water Services and Chemical Technologies segment also each provides strong cash flow conversion given their low capital intensity. Converting approximately 70% or greater of their gross profit to cash flow, helping to support the near-term build-out of our footprint while maintaining a very disciplined balance sheet. While we are very focused on executing on near-term infrastructure investment and growth strategy, we believe we are positioning the business to deliver healthy and durable free cash flows over the long term that will provide us with good optionality for future capital allocation frameworks over time, including future growth investments, diversification opportunities or enhancements to our shareholder return program. To conclude, I am very excited about the year ahead. I believe we have a clear execution path to increase shareholder value with a growing long-term contract portfolio, supporting a multiyear growth trajectory and increase through cycle stability in addition to nascent long-term diversification potential across opportunities such as our Colorado municipal and industrial project, beneficial reuse and mineral extraction. With that, I'll hand it over to the operator for any questions. Operator? Operator: [Operator Instructions] And our first question comes from the line of Scott Gruber with Citigroup. Scott Gruber: You guys have a couple of larger expansions coming online in Northern Delaware this year. But you mentioned there are some additional opportunities in the Northern Delaware. So just curious, would the additional opportunities be kind of smaller bolt-ons to your system? Or would they require larger trunkline expansion? I'm just curious after kind of what's in the queue has become operational, kind of where do you stand in the maturation of that Northern Delaware system? Michael Skarke: Yes. Thanks for the question, Scott. This is Michael. We are seeing a lot more smaller opportunities than we saw last year, the year before as the system gets built out, and it's roughly half to be built out, but we're continuing to move forward. We're really able to find some small opportunities that leverage the entire system, and they create really attractive returns because you're leveraging the full system and adding acreage. So I'd say that we're seeing a lot more of those than we've seen in the last couple of years. There still are a couple of pieces that are chunkier out there that we're still chasing that as we expand into new territories, specifically in Eddy County that are becoming available. So I'm hopeful that we can deliver on some bigger projects. But really as kind of you look past that and kind of into the back half of '26 and beyond. I think it's going to -- you're going to see more and more of the smaller opportunities that are just highly accretive because you're leveraging the full system. Scott Gruber: And just thinking longer term, after the Northern Delaware is established and as you said, you'll keep tapping into those smaller opportunities. Is there an opportunity to kind of really expand the system, whether it's into the Southern Delaware, we hadn't further east at all or other basins. Kind of what's the next leg of growth for the infrastructure business longer term? How do you think about that? Unknown Executive: Yes. So you saw us announce something in Winkler County, which is really kind of the first time that we stepped below the Texas State line out of New Mexico inside the Delaware in a meaningful way. We will continue to expand within Lea and Eddy County. I go back to those 2 counties have the most economic inventory. They're underbuilt -- there's just a tremendous opportunity there. And I think what we're building in Lea and Eddy County is really truly differentiated. There's not another asset system like that in the Permian or outside the Permian and it's certainly where you want to be. Now having that said, that system can expand into the Central Basin platform, where you're seeing the development for the Barnett and the Woodford and that's kind of what we were looking at when we moved into the Winkler. So I think you'll see us continue to grow that system beyond just Lea and Eddy County and then possibly expand kind of some of the existing systems like what we have in [ Upton ] trying to kind of meet in the middle somewhere on the platform. Operator: The next question comes from the line of Bobby Brooks with Northland Capital Markets. Robert Brooks: So first, you guys have announced 2 different lithium extraction partnerships the past few months. And it seems like a really exciting way to add another incremental high-margin revenue stream to the business along with highlighting how your infrastructure can further deleveraged the uplift financials. With that in mind, I was just curious to hear what other opportunities might you be evaluating in the similar lane as lithium extraction or just other opportunities where you see things that could be kind of similar, high revenue, low cost uplift? Michael Skarke: Bobby, this is Mike. Thanks for the question. And yes, we're really happy with our progress over basically a year of really characterizing our asset base across all of our basins and a lot of engagement with technology partners. And I think you're seeing the results yield and some exciting announcements recently, but there's more to come there. The strategic decision we did make was to participate, spend our capital on building out Water Infrastructure, large volume available at a single point, water storage and in particular, as Michael was mentioning, that Northern New Mexico system, where we're treating water anyway, that is a very unique capability that we have, and it is a big OpEx reduction for these technology partners. So we're in a position where we can provide the water with already a big chunk of that cost done for them essentially. So we're looking across the available market, picking the best-of-breed operators. And this recycling first model has really put us in a pole position and a very attractive partner for these folks. So you will see more of these lithium deals. We have something in the New Mexico area that we haven't given details on but we will also, hopefully, in the first half of this year, we're expecting also some interesting news around iodine extraction. And even some of our partners are talking strontium magnesium. So we, again, we're always very thoughtful about bringing the right technology to the right water. And I think when you got that marriage right, you can make some of that really high-margin royalty revenue that you're referring to. Robert Brooks: Got it. Super helpful color. And then just was curious to hear a little bit more of an update on kind of how you guys are looking at the Peak rental business and kind of strategic moves there. It seems like nothing has happened yet, but just curious like kind of what outcomes do you guys see as most likely? And then could you also just remind us like what type of [ genset ] equipments are -- does Peak own? John Schmitz: Yes. This is John. Yes. So we continue to engage strategically around Peak rentals and making sure that both the outcome is very positive for Peak because of the uniqueness of their opportunity that they have as well as the outcome to Select and the capital that we're deploying in the Water Infrastructure are the various areas around these networks that have been described. But Peak was built around an accommodations business that supported accommodations around drilling rigs and frac equipment. And any time you do that, you support that accommodations with power generation, communications, security, water application of both sewage as well as fresh and to support that mechanism. So our power generation were diesel-powered distributed mobile generators, and they supported everything on the drilling side and everything on the completion side. What we have inside of Peak that we think is very special is about 350 MSAs with the people that are drilling wells and completing wells, we're now taking Peak into the production phase of the well, where they're lacking power and we have both the MSAs as well as the network and the knowledge base to distribute that power properly. We also have found a very unique opportunity and Peak has now harvested it and put it out and now demonstrating the value, but putting a battery pack between that distributed power, basically our diesel power units and then the use has really shown value, both in the economics of the usage of diesel or the economics of the cycle time of those generators or really the value of the electric current going into the use system. Especially if you can take it away from smaller generations where you're putting it into trader houses with air conditioning and computers and TVs and refrigerators and start taking it into artificial lift, compression, things of that nature. So artificial lift equipment is very sensitive in their prior needs and what they do. They're already a customer, they're already in the MSA, and we've now entered that market with what we've got. We've also started to expand the distributed power business from diesel-powered natural gas -- I mean, diesel power generation to natural gas power generation. It fits really well both in movement of water, compression and artificial lift. So it's just natural. But we're being very careful, and we want to make sure that we Protect peak because it's got a very good thesis in it. At the same time, we're looking for the right capital structure both for Peak as well as the right outcome for Select. Chris George: And maybe one thing to add to that, Bobby, is what we've seen with that business and the transition to the nat gas genset capabilities, primarily on a recent basis, but we've used that to support the build-out and the pace of our own Water Infrastructure development, particularly in New Mexico, where power is short and you're talking about 3- to 5-year build windows for full power build out. So we've had the need and the opportunity to build our own integrated power capabilities through that business to support the pace of our own growth and development. So we're going to be thoughtful and diligent around the approach on how we support our own internal needs to Select, to generate cash out of the peak business to support our growth and then find the right long-term opportunity set for it. Robert Brooks: That's terrific color. I really appreciate all that detail. And then just one last one for me is in the press release and your prepared remarks kind of hinted that you guys had multiple successful benefits of reuse pilots. And I was just hoping to get a little bit more color there. Where these pilots in collaboration with the E&P is testing their own internally developed technology or maybe there was internally developed technology by Select were all the pilots focused on Permian? Or were there pilots happening in other basins? And maybe what were some -- just generally, what were some key learnings from these pilots and ultimately, like what made them successful in your... Michael Skarke: Yes. Bobby, this is Mike again, a great question. And it's interesting because you're touching on another area where because of our recycling first and large-scale treatment capabilities, this is another area that benefits directly from that. So starting from treated produced water versus raw really gives you a leg up in this area. So we've, over the years and more recently have completed several pilots of increasing scale, everything from life film evaporation to multi-effect vacuum distillation, the membrane distillation, normal [ RO ] units. The fact is we touch a lot of different colors and types of water, and we always want to be able to bring the right technology, which, again, because we're multi-basin and we touch a lot of that water, we want to be ready. More recently, in conjunction with one of our premier operators, university in the [ Price Water Consortium ]. We did one of our larger scale projects where we were able to take treated produced water, treat it fully. And actually, we're land applying it as a part of a pilot with this university, and we are growing all sorts of native and other crop plants out nearby our treatment facility and also the water is going into a greenhouse for what we would consider to be one of the largest and more technically advanced plant growing tests. So we're proving up the water quality not only by just running the standard test, but we're also proving it by looking at biological growth and soil quality. So all of that is kind of our strategy, is our contribution to prove that this is a viable way to operate in the future. We're helping inform regulatory efforts with this data. And ultimately, I think the reason we're chasing this is push the industry, but also it's transformational. It's a critical long-term solution that we need to bring to life. And so our focus now is around the techno-economics of these different solutions. And ultimately, we need to make money on this. So we are going to look very carefully and build the systems that have the right capital return and investability. And really what we're trying to solve here ultimately is what we all know is a pinch point in industry, especially in the areas where we operate in New Mexico and around the Texas border, we have to find ways to dispose barrels. So I mean, really, what we're doing is defining the future of Select to be a pioneer in the space and to really continue to create for the next 5, 10, 20 years, the way that our system that we're investing in now can live on as that portfolio shifts to perhaps a more disposal-oriented solution. So I think what you'll see from us is over the next couple few years, we will begin to announce plans, and we will begin to brand commercial scale facilities online. Robert Brooks: Congrats on a good quarter. Operator: The next question comes from the line of Derrick Whitfield with Texas Capital. Unknown Analyst: Congrats on a strong quarter and update as well. Unknown Executive: Thank you, Derrick. Unknown Analyst: I wanted to start with the macro environment for Water Infrastructure. With all macro being a bit murky at present, a, how are you guys thinking about growth opportunities in the second half on the upstream side? And b, when do you see a potential inflection in capital for municipal growth opportunities? Chris George: Good questions, Derrick. So from a back half of the year kind of near-term macro outlook perspective, as we define from a capital program, we're going to be heavily weighted towards the first half of the year on the current capital outlay based on contracts in hand, but we do have some strong backlog opportunities and continued excitement around the ability to layer on some incremental capital opportunities beyond the current program, and we'll be excited to win some of those, as Michael outlined. . Looking at the back half of the year in '27, we do anticipate a maturation phase, as Michael outlined in New Mexico, and we do think that you're going to see a transition towards some of the incremental growth opportunities around the diversification set and some of the things that Mike mentioned around beneficial res as well. So we would anticipate that the larger kind of remaining committed portion of our municipal project up in Colorado sees its large investment cycle in 2027 to the extent that aligns with the time line of getting contracts in hand as we previously outlined. So we think that we'll start to see a maturity phase out of the New Mexico footprint over the course of '26 and into early '27, and there continues to be an exciting opportunity set. But we do think that you'll start to continue to see excess free cash flow generation and more capital allocation, discretionary choice availability for us. Unknown Analyst: Great. And for my follow-up, I wanted to focus on your prepared comments on the chemicals segment. We're hearing from the upstream sector, increasing levels of interest in integrating surfactants in both completion and workover activities. I guess, are you guys seeing that demand out in the field? And if you are, how much of that are you baking into your revenue guidance? Unknown Executive: We are seeing that demand out in the field. I mean we're seeing -- we're getting inbounds. We've seen the statements made by some of the largest operators around the benefits of surfactants. Thankfully, we have extensive experience appliance, surfactants, both in completions and [ EUR ] technology. Also surfactants are -- they're really customized. I mean they're highly specific to the rock which fits us well because our chemistry value prop is custom chemistry to enhance oil recovery. We saw a pickup in surfactants in Q4 and we think that will continue to benefit us in '26. There certainly is opportunity beyond kind of what we have in place. We're investing right now in our technical team and really making sure we understand what surfactant to chemical packages work well with which rock, which ones are fairly neutral and which ones are actually eroding the performance. And so as we couple that with our in-basin manufacturing and surfactants there in Midland, Texas, we think we're very well positioned to capitalize on what should be continued expansion of that chemical offering. Chris George: And one final point I might add is, as we continue to also see the growth and the demand of -- we're reusing produced water and treated produced water, it creates an even more complex set of circumstances for matching the right full suite of chemistry with the right outcome you're looking for. So as Michael talked about, those specialized and customized solutions based on the geology, having the overlap with our water recycling and treatment capabilities provides us a unique advantage to also look at that application of the advanced chemistry side as well. Operator: The next question comes from the line of Derek Podhaizer with Piper Sandler. Derek Podhaizer: I wanted to, I guess, stick on the Chemical Technology segment and maybe just -- can you talk to us a little bit about your market share here? I mean, the friction reducers and the surfactant sound pretty exciting from a growth angle perspective. Just looking at the model and you're at this $300 million run rate for top line revenue. Where could this potentially go? And then secondarily, do you have the capacity to grow revenue well beyond the $300 million? Or would we expect to see some capital meaning to start being fed into this to really start growing this more significantly as we get this uptake of friction reducers and particularly surfactants. Michael Skarke: Yes, Derek, just to kind of start we're very excited about the market share increase we've seen. We're excited about the prospect of surfactants given our history and our technology team. And again, we saw some of that in Q4, but the majority of Q4 was our friction reducers and the chemistry that we've been providing. We do really well when you need a stronger, more durable chemistry. So it's more -- you see more produced water. We have higher market share in produced water jobs than we have in [ Brian ] fresh water jobs. We have higher market share on longer laterals than we do on shorter laterals. We have higher market share on [ simul ] fracs than we do on simul fracs. We have higher market share on [ signals ] than we do on [ zippers ]. So the more complex the solution, that's really where we shine. So we think we're skating to where the puck is in terms of providing complex technical chemistry. And I think the team has done a really good job of coming up with solutions and that's why you've seen us grow market share really pretty ratably over 2025. Chris George: And to your point on capacity and capital needs, Derek, we do have, as Michael said, our in-basin manufacturing plant in Midland, we've got another sizable plant in East Texas. And as it currently sits today, we've got continued opportunity for expansion. The business generates great free cash flow out of its core profitability. And so to the extent there's opportunities to add efficiency or add new line scale. I mean, we can do that in a meaningful way out of the current plant footprint and do it in a manner that's going to continue to allow us to generate in excess of something like 70% of free cash flow on the profitability of the business. Derek Podhaizer: Got it. That's helpful. And then maybe kind of piggybacking off your last point there. I mean kind of I'm reading this correctly, that would get into more of a steady state as far as the capital needs for the overall business? I mean, how should we really start thinking about free cash flow generation maybe out of EBITDA, I mean, obviously, like we've ranged from negative to 25%, 30%. I mean what's the -- where do you see this going? Could we get kind of in that 40% range, 50% range? Just looking longer term as we recalibrate the CapEx here and you flip more to free cash flow generation for the overall business? Chris George: Certainly, a good question. We are in a pretty unique build-out phase for the business, particularly in that Mexico footprint. So this year, we do did guide to a lower capital program than we undertook in '25. But certainly, to the extent we can continue to build a backlog of opportunities beyond that, we're going to be excited to do that and look to capitalize on that in the next 12, 18 months. But looking out further, we think that the free cash flow generating capabilities of the business, Derek certainly could replicate something or beyond what you've outlined there. The core legacy services and chemicals businesses, as we've outlined before, generating strong free cash flow to fund our growth in excess of 70%. Infrastructure is largely consuming it's capital or it's cash flow today for capital growth, but it's even, I would say, more maintenance-light application of operations than the rest of the business. So as we get to a through-cycle maturity phase here over the next 24 months, it will be making further choices around incremental growth, diversification, acquisitions or shareholder return enhancement. So we're pretty excited about what that can look like over the next 24 months as we get into '27 and beyond. But the maintenance needs of the business at $50 million to $60 million today are very modest and will continue to be so. Operator: The next question comes from the line of Conor Jensen with Raymond James. Unknown Analyst: You noted a little project timing slippage in Water Infrastructure from the fourth quarter into '26. Just maybe a little color on what happened there and some puts and takes on how that could impact the 20% to 25% growth in 2026 on either side of the calendar there? Michael Skarke: Yes, thank you, Conor. So the project slippage, we just had some, I think, fairly minor delays when we're building something of this size and magnitude and it's all linear, a few things can set you back. This one specifically around right of way. We had some delays in getting some of the right of way that we needed, which pushed it back a little bit. But it's all things that we've secured now. We're moving forward. And I think we're in a good position to kind of execute across the front half of this year. Unknown Analyst: Got it. That makes sense. And then for Water Services, I was wondering if anything changed there to drive a little bit stronger outlook, a little bit stronger run rate than we thought previously. Is any of that water transfer outperformance expected to continue going forward? Chris George: Yes, good question. So as we outlined, we definitely saw some strong uplift in New Mexico in tandem with the build-out time lines we talked about on the Water Infrastructure side. We were able to supplement that with the temporary water logistics in the fourth quarter, which drove a 70-plus percent growth in that New Mexico last mile logistics business, which was a great outcome. We talked about previously some of the opportunity we had to integrate water transfer into our long-term infrastructure contracts with sizable dedications that incorporated that water transfer. So we continue to be excited about the opportunity to see further stability and growth out of that part of the business within services over time, particularly in the Delaware Basin region. So it was a great outcome for our ability to support our customers with changing schedules, both on their side and on our side in the fourth quarter. And as we continue to get the infrastructure up and running, we've got a good view into an ability to continue to see some stability and growth out of that segment or that region, and we think that will provide kind of a steady state for the business over time here. Obviously, we had the rationalization and the divestment activities in 2025 that were the right choices for the business. And so on the backside of that, the second half of '25, we think, provides a pretty good run rate for the business and you should see that through all the way for '26. Operator: The next question comes from the line of Jeff Robertson with Water Tower Research. Jeffrey Robertson: Michael or Chris, would you anticipate that any of the efforts to increase utilization in the Northern Delaware Basin could have a positive impact on Water Infrastructure margins in 2027 versus what you think in 2026? Chris George: Good question, Jeff. So obviously, every incremental barrel you can push through a piece of infrastructure is generally an accretive barrel. So we do think over time, as we grow the utilization, we bring on commercial volumes beyond our core anchor tenants on the new assets that we'll continue to see opportunity to enhance the margins over time. So I think that, that's something we'll continue to be focused on. There is some exposure on the commodity side of oil sales through the asset base across both the disposal and recycling footprint that we'll be cognizant of as we think through margin profile as well. But generally speaking, Jeff, you're right, there's definitely opportunity to continue to see the enhancement to the margin profile. We'll continue to be active and under taking new build-out and contract opportunities, and we'd be happy to underwrite those anywhere in that 50% to 60% margin profile as we've historically done. But we'll be focused on what that looks like to continue to improve. Jeffrey Robertson: With respect to your gas exposure, particularly in the Haynesville, would increased utilization have an impact on infrastructure margins that would be noticeable and/or Michael, what kind of opportunities are there to -- or need is there for Select to expand its footprint there? Michael Skarke: Yes. No, thanks for the question. We're seeing good strength in the natural gas basins I mean, we're very fortunate that we have the leading disposal position in both the Haynesville and in the [ Marcellus ]. And we're having conversations regularly with customers about expansion opportunities or contracts. And those were conversations that really weren't being had 12 or 18 months ago, and that's just as a result of the gas price and the activity there. So I do expect that we will -- we're going to continue evaluating solutions in both basins, and I think you'll see us make some expansions outside of the Permian in 2026. Now having that said, again, most of the opportunity is around the Permian and most of it's in Lea and Eddy County as we've mentioned. Chris George: And one maybe final point to add back to your first question as well, Jeff, as we think about the margin profile long term, as we outlined earlier and Mike talked through the continued ability to add on some of these incremental royalty streams to the business. We're talking low to no cost type of revenue dollars that are benefiting from the existing capital investments we've already made. So to the extent we start to see those projects come online in late '26, early '27 and ramp over time. Those will continue to provide meaningful margin accretion opportunity as well. Jeffrey Robertson: And lastly, Mike, with respect to some of the beneficial reuse pilots, is it fair to think that if you can tie benefits our reuse into your Northern Delaware system, for example, that, that would attract more customers to the system because it would enhance your Select's water balancing capabilities in that area? Michael Lyons: Yes, Jeff, absolutely. I think, in particular, in New Mexico, we need to continue to support the state and the legislation to get to a, I would say, environmentally responsible, but industrial-friendly outcome. So I think that will help as we think about either land application or water discharge. There are other technologies that we're evaluating as well that will get incremental disposal like nontraditional disposal, let's say, onto the system as well. And that's absolutely a part of what we consider to be the end-to-end full life cycle of the barrel solution. So -- and again, yes, you're right. It is part of something that we can offer because of the large infrastructure footprint that we already have, which includes treatment, which reduces cost and increases the viability techno economically of all these solutions. So we do believe we're in a very unique position to support our customers that way. Operator: The next question comes from the line of Sean Mitchell with Daniel Energy Partners. Unknown Analyst: You guys mentioned earlier in the Q&A, simul-frac I'm just curious if you guys have an estimate or any color around simul-frac growth today versus maybe 2 years ago? I mean, obviously, there's a lot more sand and water going down hole with this completion design. Where is that today relative to maybe where it was 3 years ago? And where do you think the industry is at large on simul frac? Are we 25% of the industry, 30% of the industry using it? And where can that go potentially? Do you have any comments around that, that would be helpful. John Schmitz: Yes. This is John. First of all, I think I'd start the answer by percentage-wise of where that is today and where it's going. We would say that it's definitely increasing. But the way that we see it and primarily water and chemistry is the intensity in the space, whether it's simul-frac or [ tribal ] frac or longer laterals or how much you can do in a 24-hour period, that intensity is real, and it also is very engineered. So what this company is seeing right now is the effects of all intensity, all complexity of multiple water sources in recycling application and delivering mechanisms for massive water throughout long periods because of movement into simul-frac for [indiscernible] frac or longer laterals or what it is. So probably can't answer your position as a percentage, but we'll tell you that this company sees a heavy-weighted engineered intensity. Operator: This concludes the question-and-answer session, and I'd like to turn the call back over to John Schmitz for closing remarks. John Schmitz: Yes. Thanks, everyone, for joining the call and for your interest in learning more about Select Water Solutions, and we look forward to speaking to you again next quarter. Thanks. Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

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OPL.WA 2025 Q4 财报电话会议

Leszek Iwaszko: Good morning. Thank you for standing by. Let me welcome you to Orange Polska conference call in which we will summarize our achievements in 2025. My name is Leszek Iwaszko, and I'm in charge of Investor Relations. The format of the call will be a presentation made by the management team, followed by a Q&A session. Speakers for today will be our CEO, Liudmila Climoc; and CFO, Jacek Kunicki. So I'm passing the floor to Liudmila to begin the presentation. Liudmila Climoc: Thank you. Thank you, Leszek. Good morning. Happy to welcome you at our conference summarizing last year results, and let's start. In March last year, we have presented to you our new 4-year strategy, Lead the Future. And today, I'm very pleased to say that 2025 was a strong start. We have progressed in all key pillars of our strategy and prepared a solid ground for next years. First on the line is our commercial performance that was excellent in both retail and wholesale. In retail, we uplifted both customer base and ARPO. In wholesale, we started to benefit from new important business development streams. And commercial growth is an essential pillar for value creation in our plan. Second, to mention is network. In order to win customers, we are committed to bringing first-class connectivity at home, at work, on the move. And in 2025, we significantly progressed in 5G coverage, already 85% of Polish population can enjoy 5G with better quality, higher speed, better latency. Orange Fiber is now reaching almost 10 million homes. It's 2/3 of households in Poland, and we have added 1 million last year. And the third important contributor to our results was transformation, transformation and efficiency. One of the main pillars of Lead the Future. We increased our efficiency by better cost and by better CapEx management, increasing profit margins and improving cash conversion as a result. We have initiated a new transformation program last year that brought the first results, but we expect more to come in next years. Lead the Future is focused at value creation for our shareholders. And in 2025, we clearly demonstrated it by growing our financials. I'm very proud that we delivered 47% in total shareholder return through growth of our share price and paid dividend. Speaking about the financials, let's have a look on how we have performed versus guidance. So here, you see the slide illustrating it. We did very well. Growth rates on revenue and EBITDAaL was overachieved. We promised the range of low single digits. In both cases, we achieved mid-single. We overachieved on revenues, thanks to positive dynamic in IT&IS and in wholesale, but the main engine of revenue growth is our core telco services with strong 6.5% growth. EBITDAaL benefited from strong profitability of core telco and wholesale, but also combined with cost efficiencies in. For eCapEx guidance, it is met at the low end of the range, despite lower-than-expected sales of real estate, we managed to -- we managed our investments very efficiently. As you see, our growth story is developing faster than originally expected. And let's see what were the main commercial performance drivers for this. So looking on the commercial parts, 2025 is very strong. We attracted new customers and simultaneously, we grew ARPO in all key services in a very balanced way. In convergence, both customer base and ARPO increased by a solid 4%. For fiber, customer base increased by 10% and ARPO by almost 5% and I'm very pleased with this performance in convergence and fiber as competition here continues to be the most intense. We estimate -- so that we further improved our market share in high-speed broadband. So Orange is the [ synonym ] of fiber. Mobile performance in 2025 was exemplary, almost 350,000 customers joined us with mobile postpaid offer. It's almost 4% growth. The highest number in a few years. And both segments were contributing consumer and business and also all brands were contributing to this performance. ARPO increased by less than 1%, and it is explained by a strong contribution of more than 5% growth of ARPO for main brand, which is diluted by an increasing share of the B brand in our total customer base. Pace of growth in all services is in line with what we said for us as an ambition in Lead the Future, and it is demonstrating that we have the right strategy and we are navigating well in the competitive environment in Poland. So to zoom on our commercial tools, let's move to the next slide. Our focus in Lead the Future is on building new relationships, reaching new families with our services and further using it as a pull for further growth with additional services and with conversions. In 2025, we achieved it by pursuing a bold marketing plan. We visibly improved our marketing communication, refreshing the main brand in order to reach younger segment, changed the visual identity of our prepaid products and our B brand, Nju also received a new format. We put together -- we put also higher focus on stand-alone offers. Our new multi-SIM family offer proved to be a very successful in second part of the year. We boosted content proposition for our fiber and TV offer, making it significantly more attractive. And these elements combined with AI-enabled tailored offers contributed to customer loyalty for the existing base and allowed us also to attract new customers. On the value side, we further pursued our more for more strategy. ARPO benefited from good demand for higher data plan in mobile and also higher speeds for fiber offer. Customers with higher speed options in fiber already account for almost half of our customer base. As a result, the number of Orange households where we are present with, our services was growing, reversing a multiyear trend. And this represents fundamental change for us that is also offering very promising prospects for future. This was about retail. Let's now look at wholesale on Slide 8. Last year was particularly strong for our wholesale line of business, both our own and also in our core -- FiberCo Swiatlowód Inwestycje. As you see on the slide, we have recorded a solid 13% of wholesale revenue growth, excluding legacy services, much better dynamic versus previous years. And I will mention 3 drivers that were contributing to it. First is a new fiber backhaul contract, which was bringing results in the last 4 months of 2025. In 2026, this year, it will help us to fill the gap left by national roaming contract that has expired in 2025. Second is the accelerated growth of revenues from access to our fiber network to other operators. And accordingly, growing monetization of our infrastructure. We reported an impressive 36% growth of wholesale customers on our network, a result of opening of our network for wholesale, which took place in the second part of 2024. And the third pillar driver is services, which we rendered to our FiberCo Swiatlowód Inwestycje, like lease of infrastructure delivery of services, network maintenance, they are growing in line with growing scale of FiberCo. Speaking about our 50% co-owned FiberCo. 2025 was a very important milestone here. It marked completion of the initial investment program, which was set in 2021, in line with our plan, FiberCo network reached 2.4 million households. In 2026, new program has started with fully secured financing, and we are very pleased with operational and with financial dynamics. Despite the fact that FiberCo is still at a very early stage of development, significantly investing into the network expansion. Swiatlowód Inwestycje EBITDA of last year exceeded PLN 140 million with a margin of 35%. We expect this to increase along the growing network acceleration. And obviously, we plan to strengthen it further by Nexera deal of course, subject to regulatory approval, which we are awaiting now. This acquisition is expected to be highly synergetic. Now switching to connectivity on Slide 9. In 2025, we reinforced our commitment to provide the fastest, the most reliable and trusted connectivity in Poland. And I want to start from mobile. We made big progress in 2025. Major projects of radio access modernization, which we have started several years ago is now almost finished. It is making our network more energy efficient and will enable usage of new spectrum for -- new spectrum bands for 5G. For 5G, it was the second year of rollout on C-band spectrum. We are covering now already 60% of population in Poland, meaning that we are very much advanced on the market. Rollout on 700 megahertz spectrum, aiming wide coverage has started just 6 months ago, and we are already at 64% population coverage. These both spectrum bands, we boosted 5G coverage to 85% by end of last year from below 40% a year ago. And we -- as well, we have completed the commissioning of obsolete 3G, allocating frequencies to 4G and enabling us to increase network capacity and improve the quality of services, which we are providing. In fiber, we are investing both in the reach and the coverage of the network, but also in service quality. Orange Fiber from a quality perspective was again validated by independent benchmarks where our fiber network is ranked again #1 in 2025. Fiber reach continues to grow fast. We have added another 1 million households to the coverage, reaching 10 million homes in total. It was mostly delivered by Swiatlowód Inwestycje and also by access to other third parties, FiberCo's networks. Our own build is targeting wide zones with projects supported by EU subsidies. Rollout as well accelerated in 2025, as we have invested almost PLN 90 million in this project, and it will be completed this year in 2026 with investment effort of over PLN 100 million -- PLN 120 million. Let's zoom now on transformation. With Lead the Future, we have initiated a new wave of transformation. You remember the ambition of our Transform and Innovate pillar to boost efficiency, which will be leading to improved profit margins. We will achieve it through automation, through process reengineering and opportunities which are arising from integrating AI in our operations. Firstly, in sales and customer care operations. Here, digital channels are progressing, and we see them being much more efficient and much better responding to customer expectations to be served online fast with seamless experience. And as a result, we are approaching 30% in share of digital sales with ambition to reach 35% by 2028. My Orange app is our key asset here contributing to this target. We are constantly improving it, adding new functionalities and using AI for personalization. In customer care, we are making another step change with AI agents. For instance, in 2025, we launched an agent, which helps our advisors to provide optimal remedy for technical problem solving. This reduced number of contacts and improving customer experience. We are working on more agentic solutions to be implemented in this year 2026 for better quality and better productivity. Secondly, in network operations, we improved cost efficiency last year, and we are aiming to do more. To reduce cost of service delivery and network maintenance, we use more remote tools, self-installation, boxless solutions for content and TV, and AI supported dispatching of technicians. We have started progressive decommissioning of legacy copper network targeting first areas with less customers, less usage and accordingly less profitable. And recent deregulation decision will allow us to do it at a much better speed. And finally, we are reducing costs across all our functions, making ourselves leaner and more agile. In recent months, we have made several organizational changes aiming to streamline our operations. And as a part of this process, we signed a new social plan with our social partner under which number of employees will be reduced by 12% over the next 2 years. And finally, I want to stop at the moment at our sustainability agenda and achievements. I'm convinced that growth and responsibility go together. And our actions bring a real difference and contribute to the development of Polish society and economy. And we are very proud of our progress in 2025. In today's fast-changing world, there is a growing need for education on responsible and safe use of technology. And here, we concentrate our energy, the number of beneficiaries of various digital programs was growing and exceeded 200,000 last year. And as well last year, our Orange Foundation has celebrated 20 years anniversary, a proof of our long-term commitment for society and for digital inclusion. On environmental area, in 2025, we significantly reduced CO2 emissions. Actually, we almost reached our goal, which we set for 2028. This was possible as all the electricity we consumed came from non-emission sources. And finally, in 2025, we reinforced our efforts in the area of circular economy, thanks to newly launched platform, we significantly improved the collection of used handsets. And also, we significantly increased the share of refurbished fixed devices that we distribute. It brings a positive impact on the environment, but also is improving our cost base. So this being said, I want to pass the floor to Jacek to give more deep dive on our financials. Jacek Kunicki: Thank you, Liudmila. Good morning, everyone. Let's start with the financial summary. Our financial results last year were strong and they came above expectations. We have increased both revenues and EBITDA by over 4% year-over-year and expanding operating activity is the main driver of our value creation. What is important is that this growth is built on a solid sustainable foundations. We've executed a disciplined investment plan, allocating capital to growth areas and decreasing CapEx intensity. We are confident to further optimize capital allocation going forward. As a result, we have converted the EBITDA growth to cash flows, reaching PLN 1 billion of organic cash flows in 2025. These achievements have also built solid foundations for further growth of shareholder value in the future. Let's now look at details of our performance, starting with revenues. Q4 revenues have increased by a strong 4.6% year-on-year. Please note that all key products have contributed to this achievement. Let me comment on two of them with the highest impact. First, core telecom services, which are key for our growth, value creation and margins. We're pleased with the sustainable strong performance stemming from a simultaneous growth of the number of customers in the key product areas and of their respective ARPOs. Core telecom revenues were up 5.5%, so at the high end of our midterm guidance. This was achieved versus a high comparable base of Q4 2024, when we implemented price increases for the customer base of prepaid. The second item is wholesale. It was an exceptional quarter for wholesale with 27% year-on-year revenue expansion. Q4 included the full impact of the fiber backhaul contract signed in the prior quarter in Q3. And also, it was the last quarter with revenues from national roaming. We expect to further grow the value of our wholesale business going forward. To sum up on the top line, first, we're happy with the pace of revenue growth and the key drivers of our margin. Second, revenue growth is supported by all major product lines. This includes IT&IS revenues, which have returned to a double-digit growth of sales in 2025, a dynamic that will continue this year. Let's now switch to profitability. We're pleased with a strong 6% growth of the EBITDA after lease in the fourth quarter. This was driven by a 5% increase of the direct margin. It reflected consistent margin expansion from core telco services coupled with them discussed significant contribution from wholesale. Indirect costs have increased year-over-year, but mostly because of a PLN 30 million impact coming from 2024 when we recorded a catch-up of the fiber rollout margin in the last quarter of 2024. This item apart indirect expenses grew by less than 1% year-over-year as cost pressures were contained by the savings program. Our cost transformation is accelerating. It delivered savings in workforce, network operations and G&A, and we plan to increase the savings run rate that will be visible in 2026. To recap on EBITDA. First, we delivered a strong 4% growth in the full year of 2025 with an acceleration in the second half of the year. Second, the growth is built on sustainable drivers as the increasing revenues and margins are converted to EBITDA via our high operating leverage. Let's now turn to net income on the next slide. We achieved PLN 760 million of net income last year. This included PLN 150 million provision for a 1,000 employee headcount restructuring to be done in 2026 and 2027. It is important to our transformation and it will increase our efficiency going forward. Excluding this provision, net income was on a comparable level to 2024. On the one hand, it was driven up by growing EBITDA, a factor that will consistently boost our net results going forward. On the other hand, it was brought down by 2 elements that we don't expect to repeat in the future. First, depreciation, which was driven up by purchase of the 5G license, changing asset mix and one-offs with opposite impacts in both 2024 and 2025. Here, we judge depreciation to have reached its peak in 2025. Second item is finance costs, which increased as a consequence of higher debt due to the purchase of the 5G license and higher interest on the PLN 1.2 billion refinancing, which we had made back in the middle of 2024. We expect significant growth of net income this year in 2026. As the EBITDA growth is its fundamental underlying driver while the negative impacts visible in 2025 are largely nonrecurrent. Let's now switch to capital expenses on the next page. Our economic CapEx amounted to PLN 1.8 billion. So it was at the very low end of our guidance. CapEx intensity measured as a percentage of revenues, has decreased to 13.8% in 2025, in line with our midterm ambitions. We allocated 40% of CapEx to fiber and mobile networks. In fixed, this included fiber rollout in white zones and connections dedicated to the B2B. In mobile, we have significantly progressed with 5G deployment as discussed by Liudmila a few minutes ago. Please note that this year, in 2026, we will finalize the EU subsidized fiber build, and we will reach the peak of the run rate of 5G rollout. This latter program should be nearly finished by the turn of 2028 and 2029 and both of these present us with an obvious opportunity to further decrease CapEx intensity after 2028. Let's now look at cash flow on page -- on the next slide. We generated PLN 1 billion of organic cash flows last year. This good result was achieved thanks to growing operating cash flows, and these were coming from the EBITDA, so a sustainable underlying positive driver. It was offset by less cash from the sale of real estate and 2025 was challenging in this area, and some key transactions were delayed through 2026. As a result, we expect higher inflows from this activity this year. Obviously, the free cash flow was influenced by the acquisition of the 5G license. But now we have the last of the new spectrum acquisitions for 5G behind us. So the cash flow prospects going forward are much more predictable. On the balance sheet side, the balance sheet remains very strong, and we have already secured the refinancing of the PLN 3.7 billion debt that is due next year. For the conclusion, I wanted to reflect on our value creation model shown on the next slide, which we have presented alongside with the Lead the Future strategy. Our 2025 achievements confirm that it is working well. It increased the key drivers of shareholder value creation and their underlying dynamics inspire confidence about the good prospects for the future. That is all from me, and I hand the floor back to Liudmila for the outlook and conclusions. Liudmila Climoc: Thank you, Jacek. So now coming to our priorities for 2026. We have 4 main areas and all 4 are rooted in our strategy in Lead the Future and it starts with profitable commercial growth. On consumer market, we aim to deliver a solid growth of core telco services, and we are going to achieve it through our balanced volume and value strategy in mobile, in fiber and in convergence. Secondly, we aim to achieve profitable growth in B2B. For small businesses, we will differentiate by complementing telco products with digital services, such as KlikAI web creator that we have just launched in subscription model. For large businesses, we bring new operating model that will group all our IT&IS competencies under one roof in order to unlock more potential. So commercial growth will be accompanied by high-intensity transformation to improve our profitability. As we discussed today, we have high ambitions in this area. Our commercial ambitions require a reliable and high-quality connectivity in order to answer to customer demand and accordingly investments in innovative solutions and tools that bring value for customers and for our operations. And this is the -- reflecting the way how we will prioritize on our investments, of course, keeping an eye on return. And now let's turn the page to see how this translates into financial targets for 2026. We aim to create significant value for shareholders this year. 47% in total shareholder return in 2025 is impressive, and we will make every fourth to sustain this positive momentum. We plan to grow revenues at low single-digit rate, noting that it is essential to maintain a solid dynamic of core telco. We expect another year of solid EBITDAaL growth in the range of 3% to 5%. It will be achieved through a combination of profitable commercial growth and cost transformation. Higher revenues and high EBITDA will be achieved with similar level of investments like in 2025, meaning a decrease in CapEx intensity obviously, roll out of 5G and completion of fiber project and white zones will be key for 2026. In line with the midterm objectives, we provide guidance for organic cash flow. It reflects our internal focus on these key return metrics. And we are very happy to achieve PLN 1 billion in organic cash flow in 2025, and we are aiming to generate at least PLN 1.1 billion in cash in 2026, a double-digit percentage growth as our objective speaks for itself. And looking at the midterm guidance on the next slide. As you have seen, 2025 results were good. And we also expect strong outputs in 2026. We are confident regarding our ability to reach this ambition. And as a consequence, we are more optimistic regarding the greater value in the future. And as such, we are upgrading our midterm guidance. For EBITDAaL, we are maintaining guidance of CAGR at low to mid-single digit. However, we clearly see that the current trends make high end of this range more probable. Regarding eCapEx, we are making our commitment more concrete. This -- we will spend PLN 1.8 billion per year. This means growth in revenues and EBITDA with a stable level of investments, so improving our CapEx efficiency. The combination of solid EBITDAaL growth and flat eCapEx enabled us to be more bullish regarding cash generation. We are now expect to generate at least PLN 1.4 billion of organic cash flow in 2028. This implies at least 40% growth versus 2025 level and a double-digit CAGR. This guidance clearly illustrate better prospects for future, for value creation, for our shareholders, dividend is also very important in this regard. So let's have a look on it on next slide. As presented today, we delivered our objectives for 2025, and we enjoy more optimistic future prospects. As a consequence, we recommend a cash dividend of PLN 0.61 per share from 2025 profits. This is a 15% increase versus last year. The level of PLN 0.61 per share now becomes a floor for the remaining years of Lead the Future plan. A year ago, you remember, we told you that we are working to create conditions to enable us to grow dividend, and we are very glad to be able to deliver on that, and we will continue with these efforts going forward. This concludes our presentation. And in just a moment, we will be ready to take your questions. Leszek Iwaszko: Yes. Please give us a moment. We will return for Q&A. Leszek Iwaszko: Welcome back. For Q&A session, we are joined by 4 more board members. Jolanta Dudek, Deputy CEO, in charge of Consumer Market; Bozena Lesniewska, Deputy CEO, in charge of Business Market; Witold Drozdz, in charge of Corporate Affairs; and Maciej Nowohonski, Board member in charge of wholesale market. [Operator Instructions] We have a first question coming from the line of Dominik Niszcz from Trigon. Dominik Niszcz: I have two questions, one on CapEx and the second on mobile B2B. So I would like to ask for a comment on CapEx in the context of rising prices of certain network components, you actually are not increasing your CapEx guidance in the long term, but lowering it from around 14% of revenues to at 13%. So should we understand that despite rising equipment prices, you believe there is no need for such high investment volumes as you previously assumed? And what is the price growth component in 2026? Jacek Kunicki: Thank you, Dominik. I would reiterate, yes, our CapEx guidance well, is an all-in guidance. It's not excluding any price increases or price decreases because you have some elements increasing in prices indeed and the memory chip crisis, it is resulting in some prices that might be temporarily or permanently increased. It also includes the fact that while eCapEx in '25, '24 was heavily supported by the sale of real estate, the proceeds from sale of real estate, this stream of both cash flows and CapEx support will inevitably be disappearing by the end of the plan. And it does involve a lot of effort on our side to make sure that we invest today in platforms and in systems that allow us to be more efficient tomorrow. This goes for IT expenses. And you will see by comparing the structure of our CapEx today to the structure of our assets or even to the structure of the CapEx 6 or 7 years ago that proportionately, we're investing more, and this is linked with IT transformation. It allows us to be more efficient on the side of the OpEx, but it also gives us future CapEx benefits as we will have less labor-intensive and also capital works. So yes, you will have both elements increasing our CapEx or pushing it upwards and the memory chip prices are a part of this. You will also have elements that will be relieving some of the pressure and giving us a potential to decrease CapEx. The fiber projects are near completion this year and starting from next year, this means roughly PLN 100 million less of CapEx dedicated to these type of programs. We will have the CapEx peak for the 5G rollout for 2 or 3 years and then CapEx for 5G rollout will be going down. The CapEx structure is obviously changing in according with the needs. But looking at the different projects that we have in the pipe, looking at the stage of advancement, looking at the fact that we have just finalized the renewal of the radio access network, we feel confident to be able to grow the EBITDA and revenues based on the same absolute level of CapEx. Dominik Niszcz: Okay. And second question, mobile B2C, what is the share of B2B segment in your stand-alone mobile revenues? And what is behind the current weakness in this market in your view? So is it more related to the condition and number of small businesses in Poland or rather to competitive pressure from other operators? Liudmila Climoc: Thank you for the question. I understand it's more for B2B. Yes. So from the perspective of last year, mobile was growing slightly less than in the previous year. As I will remind that in the previous year for a few years, consequently, we work on the price hikes and the growth of both ARPO and the overall revenue was for a few years at the level between 4% to 6%. Now we noticed the slowdown on the market. We are in the market. This growth, especially for the small companies is a little above the 1% for the overall '25, the situation differs segment by segment. In higher segments, we have the severe price fight between operators about the big customers, big deals. And here, we treated very selectively always having in mind that we create the value and the margin for the company and some deals are not tackled by us or even we are not going below the certain threshold that still allow us to generate the margin. So all in all, the difference between segments is very huge. We see the slowdown of the overall market according to the comparison of the results of the -- all operators, which we have till at the end of Q3 because the Q4 is not released yet fully, we see it was around the slowdown to around 1%, 1% a little plus, and we are accordingly in this market, keeping our very high market share above 32% since plenty of years. Leszek Iwaszko: Next question will be coming from the line of Marcin Nowak from IPOPEMA. Marcin Nowak: I have two questions. The first question would be about your optimism because it has been mentioned a few times during the presentation that your outlook is quite optimistic going forward. So my question is if still your guidance is more on the cautious side or more optimistic side going forward? And the second question is regarding the recent fine from the anti-monopoly office. Is it already fully covered in -- it was already fully covered in the second quarter under -- in an item below EBITDA or maybe there we should expect some more provisions related to that? Jacek Kunicki: Thank you, Marcin. Very relevant questions. I guess what we try to do is when we give a guidance, we try to give a range in which you would find the borders of our optimism or pessimism. And likewise, when we guide for EBITDA, it's 3% to 5%. So if we would be -- if we are on a cautious side, we will be closer to 3%. If we are on the optimistic side, we will be closer to 5%. I guess what -- and where we try to give you a little bit of flavor is we did not change the guidance for the midterm, and this is EBITDA -- low to mid-single-digit growth. But the optimism that we see right now, and it's not groundless, it's based on very solid trends in the B2C market is based on good positive business development in wholesale, and it's based on an accelerating pace of transformation that we're observing. That allowed us to, first, deliver the good results for '25, deliver a guidance, which is closer to mid than too low for the '26. And we do see that current trends would be with some degree of optimism point us towards the mid rather than low single-digit increase of EBITDA CAGR for the midterm. As for the cash flow, we did not change our stance. The cash flow guidance was and is at least -- it was at least PLN 1.2 billion. Now we expect to have at least PLN 1.4 billion. It means we will be working to try and make sure that we can deliver more cash, if possible. On the fine -- on the second question, Marcin, on the fine, we will not comment on an ongoing proceeding. So no comments regarding any items below EBITDA, no comments on the provision side, everything relating to risks, claims and litigations is appropriately described in the notes to the balance sheet, which you will find us publishing roughly mid-March. Leszek Iwaszko: Next question will be coming from the line of Ali Naqvi from HSBC. Ali Naqvi: You mentioned that you'll be seeing some reduction in capital intensity after your 2028, 2029 period. Could you give any kind of quantification of what that could go down to? And then your leverage is lower versus peers and the low end of the below market telcos. I appreciate you may be restricted in doing buybacks, but to keep the balance sheet more efficient, have you considered doing special cash returns, especially considering you're quite confident of the organic free cash flow you're going to generate to 2028? Jacek Kunicki: Okay. So on the capital intensity, First, we will be progressing with capital intensity reduction even before we are going to pass the peak of the 5G rollout. If you imagine us keeping CapEx at PLN 1.8 billion and growing the EBITDA by -- let's be optimistic, mid-single-digit CAGR, then it is clearly decreasing CapEx intensity. CapEx intensity means that CapEx as a percentage of revenues will be trending towards 13% by the end of the plan. And so that is step one. And then well, I think we will not guide for the CapEx in the period after the strategy. But clearly, the 5G rollout represents a few hundred million that we are spending each year. And this is something that will first decrease towards the end of the plan. And at some point in time, when we will have the 5G rollout completed. Of course, we will have other business priorities back then. But definitely, completing a rollout of 5G that is today consuming a few hundred million yearly, it does present us with an opportunity to decide do we increase investments in other areas that could be value accretive, productive? Or do we further decrease the CapEx going forward, knowing that already by that time, we will be trending towards 13% of revenues. So it's 2 phases, okay? One is relative to revenues to decrease CapEx by 2028. And then after we will have the 5G completed, we will have a decision to make, do we see other sources of good projects to invest this capital or do we further reduce capital intensity. On the shareholder remuneration, today, we are happy with a very strong balance sheet. I think it does give us ample balance sheet flexibility going forward. As far as shareholder remuneration is concerned, we haven't considered buybacks because of the limitations that you're aware of. And for the dividends, we have the policy that today's recommendation once voted by shareholders on the AGM will become the floor for the dividend going forward within the period of the strategy. And obviously, I will repeat the same message that I said 1 year ago. We will be working to create conditions that will enable us to be in a possibility to further increase shareholder remuneration in form of a dividend going forward. Leszek Iwaszko: Thank you. We do not have any more voice questions. So maybe I will read the instructions. [Operator Instructions] But there is one more question that came to us online. In the meantime, we have more voice questions, but we take those later. But the question on -- that came to us via text is, in the commentary through the Q4 results, the CEO pointed out that we are poised to generate substantial profits in the coming years from fiber backhaul business concluded in the second half of '25. Could you please say a few words about this agreement? Maciej Nowohonski: So good morning, everyone. Thank you very much for the question. And excuse me for my voice -- which definitely has seen better days, but this is in contrast to what we actually achieved on the wholesale line of business, the performance there is really satisfactory to us. I will not get down into the details of the commercial terms and conditions of the contracts that we are signing. But to give you color of what is happening on the holding market, I think, first of all, you are looking at the different markets in Europe and all across the globe, and you can compare or differentiate conditions on these markets, in Poland, particularly what strikes you probably is still the fragmentation of the market, and on this fragmented market, Orange Polska stands out in terms of the infrastructure. And we actually enjoying the basically, the success, which is purely generated from that, that we are strong in infrastructure, the market on which operators buy from other operators is large and is growing. The wholesale fiber, which normally, I would say, is connected with the wholesale activity is only a part of this market. And there is plenty of operators, which are actually interested to buy infrastructure and capacity for the transport network. And we basically respond to that constructing within the last 5 years, very strong activity and competence on that market. We are truly a partner to other operators on wholesale activity. And the result of that is visible in the contracts that we are winning on that front. So we will enjoy that particular contract for the coming years. Obviously, there is plenty of things to execute, but we are confident that we are able to do that with success. Leszek Iwaszko: Next voice question is coming from the line of Nora Nagy from Erste Group. Nora Nagy: Congratulations on the solid results. Two questions from my side, please. Firstly, on the tariff indexation, if you plan to implement it in 2026? And then if so, on which services? Jolanta Dudek: Hello, everyone. Thank you for these questions. In B2C, this year, we have implemented 2 price hikes for tariffs, first in Jan for mobile and in Feb for fixed broadband. In the meantime, we informed our customers about CPE clauses price hike for customers with indefinite contracts. So simple answer, we -- this year, we continue what has been done last year, and we have just implemented those 2 price hikes. Jacek Kunicki: And I think just to complement, I think on the price hikes that Jola mentioned were for the customer [ x ], so for the acquisitions and retentions, mobile and broadband. And the indexation obviously applies to the customer base that had eligible -- was eligible because they had the clauses in the contracts, and they were out of loyalty. Nora Nagy: Yes. And then secondly, how do you see the mobile phone services of Revolut in Poland? Shall we expect the company to focus more on the low-cost segment following the Revolut market entry? Jolanta Dudek: So as far as Revolut offer concerns, we expect that this offer will be dedicated mainly for the niche segments. And why, first of all, we do not see the impact on mobile number portability to Revolut. The second, this is the offer only limited to e-SIM. Third point, this offer has roaming packages on top and it's limited only to mobile, while home market is going to -- is focused on packages. So for the time being, we do not see the important impact on our base and on our market. Leszek Iwaszko: Another voice question is coming from line of Dawid Górzynski from PKO BP. Dawid Gorzynski: Actually, I have three questions. So maybe I will address them one by one. First one is on your assumptions behind over PLN 1.1 billion organic cash flow for this year. I wonder like what do you assume for the value of assets sold? And regarding cash CapEx, what maybe other differences between eCapEx and cash CapEx this year, if cash CapEx may be like higher than eCapEx because of some reasons. Jacek Kunicki: So for this -- thank you for your question. The PLN 1.1 billion organic cash flow. the base is what we achieved this year. The main growth driver is the growing EBITDA because we do expect to have 3% to 5% EBITDA growth, and we do expect for this EBITDA growth to convert to cash. We did not make bold, unorthodox assumptions on working capital. And we have assumed eCapEx to be flat at around PLN 1.8 billion. And eCapEx includes both the CapEx spending and also the inflows from sale of real estate. As I mentioned, last year, real estate sales were a bit below our expectations due to a challenging market and due to some key transactions being delayed even from late December. So on the one hand, the delay of the transactions gives us some boost and potential to do more this year from real estate sales than we did last year. But then on the other hand, it's not a recurring business. We really need to be prudent on our assumptions for real estate sales and for how much we are able to sell because this is a transaction by transaction and a buyer-by-buyer market. So I will go back. It's the EBITDA that is driving the better prospects for cash flow, not some wild assumptions on neither working cap nor on the real estate sales. We will obviously do our best to maximize real estate sales, minimize working cap. But the underlying driver is the EBITDA growth. Dawid Gorzynski: Second question on the Cybersecurity bill that is awaiting the sign from the President in Poland. Do you assume any impact of that bill on like potential requirement on replacing high-risk infrastructure? And perfectly, if you can quantify that impact for next year? Witold Drozdz: Obviously, we monitor closely this legislation. The deadline for signing is tomorrow. So we will see if it is signed or not. However, as it introduces some regulations that are that -- or will not introduce, but anyway, it refers to some fields of regulation that we are aware of, and it is also fully in line with the policy that we pursue for years, then we do not expect any substantial impact from the perspective of our business and results. Maybe Jacek... Leszek Iwaszko: Your third question, Dawid. Dawid Gorzynski: And yes, last question on Nexera deal and that chance or the requirement if -- do you think that the debt in Nexera will need to be repaid or it may be stood in the company? Jacek Kunicki: Thank you very much. So here, for Nexera, we are after having signed the SPA, we have not yet had the closing of this transaction. So obviously, this means that the process is really preliminary. Our intent is to keep the debt on the balance sheet of Nexera. We think that this asset will be performing much better than -- this transaction gives much better prospects for Nexera going forward. Orange Polska and APG are highly reputable buyers. We have substantial synergies of this transaction with Swiatlowód Inwestycje, we clearly have an intent to bring Nexera under the umbrella of Swiatlowód Inwestycje. So this also means that these better prospects mean better financial prospects for the company, and we will be discussing this with the financing banks. The intent clearly is to keep the debt and as much as we can of the debt on the balance sheet of Nexera. We are not in a position today to share with you exactly where we are in this process also because of an early stage. We are just after signing the SPA, we will be keeping you updated on what we have finally achieved. But definitely, the intent, the goal is to keep the debt on the balance sheet of Nexera. Leszek Iwaszko: We have one more text question. I will read it. It comes from Piotr Raciborski from Wood & Co. What impact of changes in working capital on organic cash flow? Do you expect in 2026, I guess you're -- unless you want to add the asset, but I think it was answered just a moment ago. Jacek Kunicki: Yes. I mean we will see how the business evolves. We will see how the inventory levels, the receivables will evolve over time. We will need to monitor this as we go forward. I would prefer not to disclose extremely specific assumptions, but it's -- the growth of the organic cash flow is not built on an assumption -- explicit assumption of a significant improvement or a significant decrease -- increase of working cap. It is based on the growth of EBITDA and the growth of EBITDA is coming from -- predominantly from core telecom services. So that does not imply huge requirements for working cap. And it's coming from cost transformation. And again, this is not something -- it's not sale of handsets in installments. It's not something that is requiring us to freeze up large amounts of working capital as a result of this. So this is what makes us confident going forward, is that the progression of cash flows is based on solid, sustainable, repetitive growth patterns coming from the core business. And this is what makes this growth very healthy. And this is why we think we can sustain it, not only for 2026, but we can sustain the good progress all the way up to 2028, hence, the improving prospects for the midterm guidance. Leszek Iwaszko: Thank you. We have no more questions. So thank you very much for listening, watching us, asking questions in case you wanted to meet us, please give us a note on that. Otherwise, we will come back in April with Q1 results. Thank you very much. Jacek Kunicki: Thank you very much. Liudmila Climoc: Thank you.

86天前Insight Analytics约5分钟阅读

KPT.TO 2025 Q4 财报电话会议

Operator: Good morning, and welcome to KP Tissue's Fourth Quarter 2025 Results Conference Call. Note that today's call is being recorded for replay. [Operator Instructions]. I will now turn the call over to Doris Grbic, Director of Investor Relations. You may begin your conference. Doris Grbic: Thank you, operator. Good morning, everyone, and thank you for joining us to review Kruger Products Fourth Quarter 2025 Financial Results. With me this morning is Dino Bianco, the CEO of KP Tissue and Kruger Products; and Michael Keays, the CFO of KP Tissue and Kruger Products. Today's discussion will include certain forward-looking statements. Actual results could differ materially from these forward-looking statements due to known and unknown risks and uncertainties. A list of risk factors can be found in our public filings. In addition, today's discussion will include certain non-GAAP financial measures. The reconciliation of these non-GAAP financial measures to the most comparable GAAP measure can be found in our MD&A. The press release reporting our Q4 2025 results was published this morning and will be available on our website at kptissueinc.com. The financial statements and MD&A will also be posted on our website and on SEDAR. The investor presentation to accompany today's discussion can be found in the Investor Relations section of our website. I will now turn the call over to our CEO, Dino Bianco. Dino? Dino Bianco: Thank you, Doris. Good morning, everyone, and thank you for joining us for our fourth quarter and full year earnings call for fiscal 2025. 2025 proved to be a strong year across many areas of our business, marked by share gains in revenue growth, strong margins and greater profitability, along with enhanced operational efficiency and an improved safety record. We are particularly pleased, revenue growth was well diversified both in Canada, leveraging our leadership position in this mature market and in the U.S., which is our growth engine for future years. In the fourth quarter of 2025, our momentum culminated with adjusted EBITDA growing more than 25% year-over-year to generate a run rate above $80 million for a second consecutive quarter. In addition, expanded in-sourcing a paper from our Sherbrooke expansion project improved the margins of our Away-From-Home segment and overall business. Going forward, we intend to build on this solid foundation to deliver growth in 2026 and beyond. Now let's take a closer look at the quarterly numbers on Slide 6. Revenue improved nearly 4% in the fourth quarter of 2025, mainly driven by higher sales volume in both our Consumer and Away-From-Home businesses. Revenue in Canada grew 5.1% in the fourth quarter, while U.S. sales rose 2.2% year-over-year. It should be noted that our U.S. segment was facing a high comparable with revenue up almost 20% in Q4 last year. However, we're very pleased with the incremental growth year-over-year in the U.S. market as our annual growth rate was 8.2%. In terms of profitability, adjusted EBITDA increased 26% year-over-year to reach $84.2 million. The strong growth in adjusted EBITDA can be attributed to higher sales volume and improved productivity at our manufacturing sites, along with lower pulp costs and freight rates. These factors were partially offset by a number of items that Michael will provide more details on in his financial review. On Slide 7, I would like to highlight our revenue growth of 7.5% and adjusted EBITDA increase of 20.2% in fiscal 2025. Following 3 consecutive years of profitable growth, we head into 2026 a strong momentum and are well positioned for further growth. On Slide 8, average pulp prices in Canadian dollars varied between a decline of 6.6% to an increase of 3.3% in the fourth quarter of 2025 compared to the previous quarter. On a year-over-year basis, average prices for NBSK and BEK declined 7.3% and 5.3%, respectively. Moving forward into 2026. Industry analysts continue to expect pulp prices to upwards over the year. Let's move to our operations slide on Page 9 -- slide 9. Production rates for our paper machine and converting operations remained positive in the fourth quarter, helping us exceed our targets for the full year. At Memphis, our renewed asset strategy focused on producing premium products drove robust sequential improvements across both paper machine and converting lines. As well, our new state-of-the-art converting line in Memphis remains on track for startup in early Q2 2026. In terms of our newly proposed projects in the Western United States, we're in the process of firming up the location, project scope and financial details of the new TAD facility, which is slated to open in 2028. We anticipate making a detailed announcement in the first half of 2026. Finally, we are proud to report that we achieved record safety results across our manufacturing assets in 2025, with several sites achieving key milestones throughout the year. Let's turn to our brand support on Slide 10. During the fourth quarter, we continued developing equity building campaigns behind Cashmere, SpongeTowels, Bonterra and Scotties to reinforce these brand names with our consumers. Cashmere bathroom tissue was recently featured in a full episode of Project Runway Canada design challenge. We are pleased with the exposure our Cashmere brand received from this televised event. Also during the fourth quarter, we also initiated a Scott for Scotties activation with Toronto Raptors Star, Scotty Barnes. The campaign featured a playful stunt on social media, which the NBA basketball star changes named to Scotties with an "S" to promote our facial tissue brand across Canada. Limited edition Scotties Barnes Boxes were also released in December as part of this solution. In addition, we recently unveiled the sixth edition of the Kruger Big Assist program, which has made hockey more accessible to Canadian families through $1 million in donations to date. The program is highlighted in a Parent Assist new TV commercial airing during CBC's broadcast of the Olympic Winter Games, Milano-Cortina 2026. The ad recognizes and celebrates the dedication and sacrifice of minor hockey parents across the country. Also airing during the CBC's broadcast is Kruger BigAssist content series, which shines a light on 12 Canadian hockey icons, both men and women, representing Team Canada at the Winter Olympics. And finally, we expanded support on Scotties seasonal cubes in the fourth quarter with the release of the Toronto Maple ease, Montreal Canadian and holiday Qube formats. Let's turn to Slide 11, where the data presented is taken for Nielsen and shows Kruger Products branded market share in Canada over a 52-week period ending December 27, 2025. The numbers reflect incremental growth year-over-year for Kruger products in bathroom tissue, which is a highly competitive product category. Also in terms of facial tissue, we increased share by 130 basis points from the same period last year to reach 46.3% share of the Canadian market. These share gains were driven by new innovations and continued support behind our market-leading Scotties brand, as I previously mentioned. And likewise, we grew share by 130 basis points on the paper towel category, raising our total to 25.3%. This was driven by our Maiden Canada promotions, leveraging our dual marketing strategy for both high-quality and base level towels as well as expanding our product portfolio with new formats and sizing options for consumers. Looking at our Away-from-Home segment on Slide 12. Revenue increased moderately over year in the fourth quarter on higher volume, but decreased sequentially due to seasonality. Similarly, profitability improved compared to the fourth quarter last year, highlighted by a healthy 11% adjusted EBITDA margin but declined from the previous quarter. As mentioned earlier, the network in-sourcing of paper contributed AFH's greater profitability on a year-over-year basis in the fourth quarter. Also the launch of Cashmere, Scotties and Titan Away-from-Home are already showing strong performance in this market. And finally, we continue to monitor the AFH market environment given ongoing economic uncertainty. I will now turn the call over to Michael. Michael Keays: Thank you, Dino, and good morning, everyone. Please turn to Slide 13 for a summary of our financial performance for the fourth quarter of 2025. As Dino mentioned, we generated an adjusted EBITDA of $84.2 million on sales of $560.1 million in the quarter, representing a strong year-over-year adjusted EBITDA growth of 26%. Net income totaled $23.4 million in Q4 2025 compared to a net loss of $13.7 million in the fourth quarter of 2024. The year-over-year increase is due to a favorable foreign exchange difference of $29.7 million and a higher adjusted EBITDA of $17.4 million. These items were partially offset by increased income from noncontrolling interest of $4.7 million, higher income tax expense of $3.8 million as well as higher interest and other finance costs of $1.6 million. In our quarterly segmented view on Slide 14, revenue from our consumer business grew 4.3% year-over-year to $472.3 million and this increase was driven by higher sales volume, both in Canada and the U.S. In our Away-from-Home segment, revenue improved 1% year-over-year to $87.8 million. This increase was also due to slightly higher sales volume in both Canada and U.S. The consumer adjusted EBITDA in the fourth quarter totaled $78.1 million compared to $64 million in Q4 2024, with a margin of 16.5%, representing an improvement of 2 points over the same period last year. On a sequential basis, the consumer adjusted EBITDA remained stable from Q3 2025. For our Away-from-Home business, adjusted EBITDA amounted to $9.7 million compared to $4.6 million in Q4 2024. The margin more than doubled year-over-year to 11%, partially driven by the expected benefit of in-sourcing our paper supply post Sherbrooke extension, as Dino mentioned, and sequentially, the AFH adjusted EBITDA decreased $0.7 million from Q3 2025. Moving on to Slide 15. We show our consolidated revenue for Q4 2025, which improved 3.8% year-over-year to $560.1 million on the strength of higher sales volume across both segments. On a geographic basis, revenue in Canada grew $15 million or 5.1% year-over-year, while the U.S. revenue rose $5.5 million or 2.2%. On Slide 16, we provide details of our year-over-year profitability. The adjusted EBITDA increased $17.4 million to $84.2 million, resulting in a margin of 15% compared to 12.4% for the same period last year. The year-over-year increase was driven by the higher sales volume, favorable productivity at our manufacturing sites, lower pulp prices and a reduced freight costs. These items were partially offset by higher manufacturing overhead costs and increased SG&A expenses. Now let's turn to Slide 17, where we compare Q4 revenue to Q3. Revenue decreased slightly by $1 million sequentially or 0.2%, primarily due to lower U.S. sales volume. Geographically, revenue in Canada increased by $5 million or 1.7% while the U.S. revenue declined by $6 million or 2.3%. It's worth noting that Q3 is historically our strongest volume quarter, making the decrease in U.S. sale largely a timing effect this quarter. On Slide 18, the adjusted EBITDA in the fourth quarter dropped by $1.5 million or 1.8%, driven by higher SG&A expenses, elevated freight and warehousing costs, increased marketing expenses, greater manufacturing overhead costs and lower U.S. sales volume. These factors were partially offset by the reduced pulp price, bringing the adjusted EBITDA margin to a comparable level to Q3 at 15%. Turning to our balance sheet and financial position on Slide 19. Our cash position continued to improve, reaching $196.1 million at the end of the fourth quarter, up from $149.1 million at the end of Q3 2025. The increase was primarily due to the higher adjusted EBITDA and a decrease in working capital at the end of the year. Long-term debt at quarter end stood at $1.741 billion, a decrease of $9.4 million sequentially, reducing the net debt by $55.7 million. Our leverage ratio also declined to 3.1x compared to 3.4x in Q3 2025, demonstrating further a commitment to strengthening our balance sheet. To conclude my section, we will review capital expenditures on Slide 20. Our CapEx for Q4 2025 totaled $33.4 million and for the full fiscal year, CapEx totaled $78 million. For 2026, we have raised our CapEx range to be between $100 million and $120 million, which includes some spending for the new converting line in Memphis and other strategic projects, as previously shared. Thank you for joining us this morning, and I'll now turn the call back to Dino. Dino Bianco: Thank you, Michael. Please turn to Slide 22 for my closing comments, which reflects sustained momentum from the last 3 years of profitable growth. We are finalizing details for a new TAD tissue plant in the Western United States that will better serve our fast-growing U.S. business with ultra-premium tissue products, which is slated to open in 2028. We will continue managing our margins and navigating through volatile economic conditions. We are investing in our operations to enhance efficiency and support growing capacity all the while keeping our people safe. We intend to continue to build market share across our brand portfolio on a long-term basis. And as mentioned on many calls, our Away-from-Home business has built a sustainable business model and is well positioned to maintain this positive momentum going forward. And of course, we will continue to build the foundation of our organization through capabilities that will enhance our adaptability and resilience in years to come. Finally, let's turn to our outlook for the first quarter 2026, where we expect adjusted EBITDA to be in a similar range of Q4 2025. We'd be happy now to take your questions. Operator: [Operator Instructions]. First, we will hear from Ahmed Abdullah at National Bank of Canada. Ahmed Abdullah: On the CapEx raise, does that include any preparatory spend for the TAD project? Michael Keays: Good morning, Ahmed. Yes, it would include a small amount for the TAD project. Mainly first year expenses, which will be still fairly low for 2026. Our base CapEx will be anywhere from $50 million to $70 million this year. Line 11, which is the previously announced project would be anywhere from $25 million to $35 million. So that leaves a very small amount that could be expected for the TAD 3 project, at least in the first year, but nothing significant. Ahmed Abdullah: Okay. And you highlighted the U.S. as your growth engine. What are the share trends that you're seeing there? And kind of what's driving that for you? Is it distribution wins, promos, or any other trends that you can highlight would be helpful. Dino Bianco: Yes, it's Dino. Yes, it's our growth engine because we're relatively a small player there, and we have been supporting some key customers. And those customers continue to grow. And every time we pick up new distribution, could be a new customer or new warehouses of an existing customer, it has a fairly multiplier impact on our growth rate given our smaller base there. So we see that as a great growth opportunity with existing assets that we have. And then, of course, when the new asset comes on board in a few years, that will continue to fuel the growth and continue to serve our growing customers. Ahmed Abdullah: Okay. That's helpful. And just on volume versus price mix for the quarter. Is there any comments you can give us there on any impact from price that helped you in the quarter? Or is it purely we can assume 100% volume driven? Michael Keays: There would be 100% volume driven, Ahmed, for this quarter. No specific price impact as pulp has been fairly stable or a slight decline in the quarter. Operator: Next question will be from Hamir Patel at CIBC Capital Markets. Hamir Patel: We're seeing pulp list prices heading higher here in 2026. Are you considering additional consumer tissue price hikes or de-sheeting in either Canada or the U.S.? Dino Bianco: Yes, Hamir. Good morning. One thing we've built over the last few years is a very robust pricing model for our businesses, both on the branded -- well, branded Away-from-Home and our private label supply. We always look at a bundle of inputs, not just pulp. We look at, obviously, energy, labor, freight labor -- other inflation. And we use that to determine whether we should go up, when we should go up or whether we should go down. So we'll just let it go through that model. I can't pulp predictions are just at their forecast. We'll watch the market and be ready to react accordingly if and when it does go up according to our pricing model. Hamir Patel: Fair enough. And when we look at it prices for North America, how should we think about actual realized costs. Because I know that historically, we see list -- the sort of discount off list increase every year. So what was that sort of discount factor for 2026 for the industry? Dino Bianco: Yes. I don't know if I quote to you -- as you said, it's a big number, and it seems to grow a couple of percentage points each year. I don't know if I can quote to you what it is this year relative to last year probably I'll give you a wide range. It's probably in the 40% to 60% range. And then you have a discount. There is a wide range there. I mean we focus on -- honestly, we focus on our landed cost which moves directionally with the list, but we just focus on what is our landed cost of pulp. And we believe that to be common to market, and we will then use that as our input to determine any pricing action we need to take. Hamir Patel: Okay. That's fair enough. And just last question I had here. On the Away-From-Home side, it looks like margins, they've been over 10% for the last 3 quarters in a row. Should we think of that as kind of a consistently double-digit margin business going forward? Dino Bianco: Yes. Look, you asked me this question about 5 years ago. I think I said, I think we can get to 10%. And we have. And I'd also say it's a sustainable business model. It isn't just a one-off, we got lucky. So I really believe this is the model that we run. The team has done a great job. Certainly, in-sourcing papers helped, but we've got better OEs on our operations. We've got a stronger pricing model. We've got a better mix of premium products, a really robust growth in the United States. So a lot of things going well in that business, which I believe will it be 10% every quarter? I don't know there's still volatility in the business, but I think long term, this is a business that should be in the low double digits. Operator: Next question will be from Sean Steuart at TD Cowen. Sean Steuart: A couple of questions on the TAD project coming. I guess we're going to get details in the coming months. But what are the remaining hurdles, milestones that need to be addressed before you make the final decision, whether it's site location or project scope. Maybe we'll start there. Dino Bianco: Yes, it's a great question, Sean. And it's exactly the right question because it is really activity-based that will determine when we make the decision versus time, but we're assuming those activities will be concluded in time for us to make an announcement in the first half. So really, the big 3 are working -- and we've been working tirelessly with a couple of communities, but one in particular, around solidifying the and incentives, operational plan, labor stats, et cetera. So we've been working through that. We hope to get that finalized in the coming weeks. The community is very anxious, and so are we, to get that resolved. The second area is making sure we've got all our permitting in place, construction permits, air permits, et cetera, so we're well ahead on that. And then the big one is making sure that we've got our project financing secured, which we are working actively with our lenders on that. So I believe the conclusion of those three things will happen over the next month to 2 months, and we should be in a position to make an announcement, as I said, in the first half. Sean Steuart: Thanks, Dino, for that. And then following on that, Michael, you guys have been comfortable taking leverage ratios higher through previous big CapEx initiatives. Can you speak to any threshold you're managing around for this project as you speak with your lending -- your lenders on this project going forward? Michael Keays: Yes, Sean. Obviously, we wouldn't get back to a situation where we were like in 2021, 2022, with this project. And our balance sheet is a much stronger position today than it was also at the beginning of our last few projects, whether it's the first TAD in Sherbrooke or the Sherbrooke expansion. So the leverage ratio could get back above 4 during a short period of time, but we would expect to be able to maintain an acceptable ratio of between 4 and 5. So during that construction period, if not below. So I think we'll take a prudent approach here based on what we know today and then our experience over the last few years to be able to get this project across the finish line. Operator: [Operator Instructions]. Next, we will hear from Frederic Tremblay at Desjardins. Frederic Tremblay: Question on in-sourcing paper in AFH. Have you feel like there's more to do there? Or have you reached the maximum quantity that you can get internally for that? Do you feel that we've seen the full margin benefit from paper in-sourcing in AFH? Dino Bianco: Yes. I think it will be stable for a period of time. It depends on the use, we grow before the new paper machine comes on board with the TAD project. Because even though that won't necessarily be AFH, it will reset the network again. I think we're going to be okay. There may be times that we might have to buy on the market, but nowhere near being a structural part of that business like it was last year. It will be more tactical as we need paper or unique types of paper. So I don't see it as being a major thing, but I still see us needing to buy paper in the market in certain quantities when needed. Frederic Tremblay: Okay. And then switching to the new U.S. facility. You mentioned earlier on the call supporting growth of existing customers and targeting new customers as well. Do you have a bit of color on your expectations for customer mix on this new facility? Is it mainly going to support your current client base? Or are you targeting an expansion of the customer base with that facility? Dino Bianco: Yes. I mean that's a great question. We represent customers either in whole or part that over 70% of the ACV of customers in the United States. So there are some customers we're not in, but we think we have a wide enough base. And given the fact that this facility will be in the Western United States, I think it gives us a great opportunity to service the Western divisions and warehouses of those existing customers who are also growing significantly in the West. So it lines us up quite well. with existing customers and their growth and maybe an underserved area being the Western U.S. business. So may there be new customers, I think at the -- on the margin, yes. But the way we built our model, we will be able to satisfy the output of that facility with our existing customers and the growth from those existing customers. Operator: Thank you. And at this time, we have no other questions registered. So I would like to turn the call back over to Dino Bianco. Dino Bianco: Thank you. Before I conclude, as 2025 has come to a successful end for a conclusion for our business, I really want to thank our 3,000 employees across North America for the amazing work that they are doing to drive these results and set up our company for continued success. As I said on the call, we certainly had strong financials, but also strong safety, strong share growth, capability building, operational performance. There's lots going on in the business, all moving in the right direction. And as important as it is in delivering our current results, we're setting ourselves up for future success. So I'm so proud of everything we have accomplished. On that note, I also want to thank all of you on the call today. We look forward to speaking with you again following the release of our first quarter results for 2026. So thank you. Have an amazing day. Thank you. Michael Keays: Thank you. Operator: Thank you, sir. Ladies and gentlemen, this does conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.

86天前Insight Analytics约5分钟阅读

DIR-UN.TO 2025 Q4 财报电话会议

Operator: Hello. Welcome to the Dream Industrial REIT Fourth Quarter Conference Call for Wednesday, February 18, 2026. [Operator Instructions] And the conference is being recorded. [Operator Instructions] During this call, management of Dream Industrial REIT may make statements containing forward-looking information within the meaning of applicable securities legislation. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond Dream Industrial REIT's control that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. Additional information about these assumptions and risks and uncertainties and is contained in Dream Industrial REIT's filings with securities regulators, including its latest annual information form and MD&A. These filings are also available on Dream Industrial REIT's website at www.dreamindustrialreit.ca. Your host for today will be Mr. Alexander Sannikov, CEO of Dream Industrial REIT. Mr. Sannikov, please proceed. Alexander Sannikov: Thank you. Good morning, everyone. Thank you for joining us today for Dream Industrial REIT's year-end 2025 Conference Call. Here with me today is Gord Wadley, our recently appointed Chief Operating Officer, who we are happy to welcome to the industrial team and Lenis Quan, our Chief Financial Officer. 2025 was characterized by significant volatility and unprecedented changes to the global trade environment. Despite this volatility, our results once again demonstrated the resilience of our business. In 2025, we delivered FFO per unit of $1.05, a 5% increase year-over-year. Our average in-place rent increased by 8%, driving comparative properties NOI growth of approximately 6% for the full year. After a turbulent start of 2025, the leasing environment strengthened towards the second half of the year. We have seen a solid uptick in leasing velocity across our key markets, translating into positive absorption and stabilization of asking rents. Across our platform, we signed over 10 million square feet of leases at 30% spreads during the year, including 1.2 million square feet of development leasing. We ended the year with in-place and committed occupancy of 96.2% and a healthy tenant retention ratio of approximately 70%. Over the past few years, we have successfully captured meaningful upside embedded within our portfolio. There is still significant mark-to-market opportunity in the next 2 to 3 years, especially in our Canadian portfolio. In addition, we expect market rent growth to resume in the second half of 2026 and into 2027, following over 2 years of muted market rent development. During this time, we worked diligently to enhance our business by adding strong ancillary revenue drivers complementing our core operations and allowing us to continue driving FFO and cash flow growth irrespective of the amount of upward pressure on market rents. Our solar and our private capital business are the most established within our portfolio of ancillary revenue opportunities. These businesses continue to see healthy growth trajectory, significantly outpacing the growth rates in our core business and are already meaningfully contributing to our FFO and cash flow. Through the execution of these levers, we have significantly grown our free cash flow and meaningfully reduce our payout ratio over the last 5 years. In addition to deploying the retained cash flow, we are actively recycling capital to enhance our return profile further. During the year, we completed or firmed up on over $850 million of dispositions at premium to our IFRS values, including the formation of the DCI joint venture with CPP Investments. The first tranche of the recapitalization of our 3.6 million square foot portfolio by the DCI JV closed in early February, resulting in estimated net proceeds of $375 million. The opportunity offering -- the deployment opportunities offering the strongest risk-adjusted returns within our investable universe are all unique to our business and include our intensification program, activation of our land bank, solar and co-investments in our private partnerships. Beyond these opportunities, we're looking to deploy our capital into selective unit buybacks and accretive acquisitions. Our on-balance sheet acquisition pipeline is robust with over $350 million of opportunities currently in exclusive negotiations. These are mid-day infill assets in our core existing markets with growing in cap rates on these assets is just below 6% on average, and there's strong reversion opportunity translating into mark-to-market cap rate in the mid-7% range. As we deploy the proceeds from already completed and firmed dispositions. We intend to continue recycling capital out of nonstrategic assets into our core strategy, focusing on urban infill midday assets and selective new development that benefit from structural demand tailwinds. Looking ahead, while we recognize that the geopolitical uncertainty and trade tensions will continue to persist in 2026, our key growth drivers remain firmly intact. We are encouraged by the operational tailwinds, a strong access to capital and attractive deployment opportunities, all underpinned by a solid balance sheet. With now, I will turn it over to Gord to discuss our operational highlights. Gordon Wadley: That's great. Thank you very much for the introduction, Alex. It's really good to be with you all again today and share firsthand some of the great work our team is doing across the platform. I'm really looking forward to executing on the robust opportunity set within the industrial business. Our portfolio continues to generate very stable and consistent cash flow growth, which is a testament not just to the quality and location of our assets but also the leasing and operating teams we have in each region that ensure we are achieving our goals. In the fourth quarter, just from a macro perspective, the Canadian industrial leasing market continued to stabilize with 6 million square feet of net absorption recorded during the quarter. This represents the strongest pace of absorption in the last 12 quarters. Combine this with a shrinking supply pipeline and a transition to more build-to-suit developments, the outlook for fundamentals has improved across most of our operating regions. Across our specific occupier markets, we continue to observe sustained demand for our assets in core urban locations. Since the beginning of October, we've completed over 2.1 million square feet of leasing at an average rental spread of 14.3%, bringing year-to-date leasing to a very strong 7.4 million square feet at an average spread of 19.6%. This directly underscores the embedded mark-to-market opportunities across our portfolio. As Alex pointed out earlier, we're very encouraged by the recent leasing trends across key markets. Starting with the GTA. This market continues to lead the country in terms of absorption and leasing momentum. We recorded one of the strongest quarters of net absorption in 2025 in the region. This was driven in large part by solid demand across small and mid-bay product and improving activity in larger format space. I'm quite pleased to share that our team did approximately 2.5 million square feet of leasing in this market across the platform over the course of 2025 alone and approximately 610,000 square feet in Q4 with a rental rate spread of 58%. We're also seeing significant new requirements in the market that have been waiting on the sidelines since the normalization process in 2024. Based on recent market research from major brokerage houses, there's been over 40 million square feet of active industrial requirements across Canada. When you look at markets such as Calgary and Vancouver, active requirements significantly outpaced current availability in that market and account for 40% of current availability in the GTA. In Quebec, I wanted to touch on that small and mid-day leasing supported modest occupancy gains in Q4 2025, driven by the lease up of smaller vacancies. While elevated sublease availability and excess large bay inventory continued to weigh on overall market conditions, pushing the overall vacancy rate to just under 6%. Despite these near-term headwinds, demand for very well-located and functional mid-bay space remains quite healthy, especially for on-island product, with small to mid-bay availability stabilizing in low to mid-single-digit range. Good renewal activity, strong tenant relations and steady absorption has allowed our team to maintain occupancy and capture rental growth where conditions support it. A great example that I want to draw everyone's attention to of this momentum is our 366,000 square foot asset in Montreal, where we successfully regeared the entire building occupied by 3 tenants to market rents. These renewals were completed at starting rental rates of $13 to $14, with average annual escalations of 3%, achieving a spread of over 70% compared to prior rents. Notably, we also regeared 137,000 square foot lease within the building 5 years sooner and did better than expectations. In Western Canada, leasing conditions remain very strong. During the fourth quarter, we transacted over 800,000 square feet. Calgary and Edmonton benefited from solid renewal and backfill activity and leasing spreads since October have averaged to high teens. At our Balzak 20 development, we completed 20 new leases during the quarter, achieving full lease-up at rents in the mid-$10 per square foot range, with approximately 3% annual steps. This commences in early 2026. We also stabilized our Balzak 50 development through a 245,000 square foot lease at starting rents of $9.75 per square foot with escalations of about 2.5%. These 2 marquee developments in Calgary are now 100% leased and expected annual NOI contribution of over $10 million. The strong leasing performance highlights sustained industrial demand for the Calgary region and reinforces our strategy of delivering modern, well-located logistics assets to meet the need of national and global occupiers. In Europe, we're also observing very robust leasing activity. The leasing market has been somewhat less impacted by tariffs in 2025, and we have continued to see very resilient fundamentals with new demand drivers for industrial space such as defense and nearshoring becoming more prominent. Availability has stabilized in the low mid- to single-digit range and is trending downwards with increasing take-up and declining supply. Our team expect market rent growth across our core markets in the Netherlands and Germany to outpace inflation in the very near term. To date, we've already addressed over 40% of our 2026 expiries. And since the start of 2026, we have signed or advanced negotiations on over 1.3 million square feet of space, positioning us very well as we move throughout the year. I will now turn it over to my friend, Lenis to discuss the financial highlights. Thank you. Lenis Quan: Thanks, Gord. We are pleased with our 2025 financial performance as our business continues to deliver stable and consistent growth. Despite slower leasing of existing vacancies amid tariff-related disruptions that affected roughly 1/3 of the early part of 2025, our portfolio delivered solid cost comparative property NOI growth of 8.4% for the quarter and 5.7% for the year. This strong organic growth allowed us to absorb higher cost of refinancing and also the impact of early refinancing over $500 million of low-cost debt in 2025. We delivered diluted FFO per unit of $0.27 for the fourth quarter, 5.3% higher than the prior year quarter. For the full year, diluted FFO per unit was $1.05, representing a 4.9% increase year-over-year. Our net asset value at year-end was $16.60 per unit, reflecting stable investment property value. The slight quarter-over-quarter decrease in NAV primarily reflects transaction costs largely the incentive fee payable on the gain realized with the sale of the initial assets into the new DCI venture with CPP Investments. During the fourth quarter, DBRS upgraded our credit rating to BBB high with stable trends. Following the upgrade, we secured interest rate savings on our various corporate bank unsecured facilities, which represent approximately $0.05 on FFO per unit this year. We continue to actively pursue financing initiatives to optimize our cost of debt and maintain a strong and flexible balance sheet with ample liquidity. We successfully addressed all of our 2025 debt maturities. We repaid the maturing Series A debentures in December by temporarily drawing on our credit facility and ended 2025 with leverage in our target range and with a net debt-to-EBITDA ratio of 7.9x. In early February, we repaid the majority of the balance on our credit facility following the closing of the first tranche of asset sales to the DCI venture. Over the next few quarters, we expect to deploy these proceeds on an accretive basis towards a combination of unit buybacks and strategic growth initiatives. And in conjunction with this objective, we suspended the DRIP, our distribution reinvestment plan as of the end of 2025. Through last Friday, in 2026, we have repurchased $2.4 million of units at a weighted average price of $13.08 or a total of $32 million under our NCIB program. With growing cash flow generated from the business and current available liquidity of over $700 million after repaying our facility draws, we retain sufficient capital to fund our value-add and strategic initiatives, including funding our development pipeline, solar programs and contributing to our private capital partnerships. Our 2025 performance highlights the resilience of our business. The multiple growth drivers we have built position us well to continue delivering on our operational and financial targets. For the full year 2026, we expect to maintain stable average in-place occupancy in the high 94% to low 96% range. We expect comparative properties NOI growth for the first half to be relatively consistent with the Q4 2025 growth rate. And depending on timing of leasing, we expect 2026 full year CPNOI growth to be stronger than the full year 2025. We expect to deploy the proceeds from the sale of the initial DCI portfolio over the course of the next few quarters, more weighted towards Q2 and Q3. As such, average leverage is forecasted to be in the low to mid 7x debt-to-EBITDA range to almost 1 turn lower than at year-end on a run rate basis as we deploy the proceeds. As a result, we currently expect our Q1 FFO per unit to be slightly lower than that of Q4 2025 with the quarterly run rate accelerating as we deploy the sale proceeds. For the full year, our current outlook for FFO per unit is $1.08 to $1.10. As we execute on our leasing and capital deployment targets, we will update our outlook. In addition to the above factors, our FFO growth expectation is predicated on current foreign exchange rates and interest rate expectations. I will turn it back to Alex to wrap up. Alexander Sannikov: Thank you, Lenis. Over the past 5 years, our cost of debt has gradually increased by approximately 200 basis points. During this time, we delivered FFO per unit growth of 30%, equating to an annual growth rate of approximately 6% to 7%. Going forward, our business remains on a strong growth trajectory, and we expect to continue delivering solid results to our unitholders. We will now open it up for questions. Operator: [Operator Instructions] Your first question comes from Kyle Stanley with Desjardin. Kyle Stanley: Gord, you gave a really good overview of kind of the market dynamics and leasing demand looks quite strong in the fourth quarter. I'm wondering, as we've kind of begun the first quarter of this year, have you seen any changes year-to-date that would either be more positive or somewhat concerning? And maybe where is your pipeline today versus where it would have been last quarter? I believe last quarter, with reporting, you disclosed roughly $1.7 million of leases under negotiation on both the on-balance sheet and JV portfolio. So just curious how that looks today. . Gordon Wadley: It looks good. It looks very consistent. I appreciate the question. It looks very consistent to what we saw last quarter. And the fundamentals are largely in line going into Q1. So we feel pretty good about the start of the year. . Kyle Stanley: Okay. Just looking at the Calgary assets, the development assets that have been leased up, I think the disclosure highlights $10 million of NOI on a run rate basis. I'm wondering if you can disclose how much of that $10 million of NOI was baked into the fourth quarter results. And I'm just trying to think about bringing that -- the ramp up online through 2026. . Alexander Sannikov: Very limited was -- in the fourth quarter, there's been some space income producing. It is going to gradually build up into 2026 and you'll see the run rate in the second half kicking in. Kyle Stanley: Okay. Okay. Perfect. And then maybe just higher-level question as it relates to the new defense strategy. Obviously, we just kind of rolled out yesterday and still very early days. But clearly, it seems like it should be positive for manufacturing activity. And although Dream Industrial doesn't necessarily play in the manufacturing space as much. I just want to get your high-level thoughts on what this could do for demand going forward. . Alexander Sannikov: Yes. Thanks for this question, Kyle. As you say, we're not in manufacturing space. However, because of the assets that we have, which is infill mid-bay product, primarily in Canada. These assets are pretty flexible. So they can be used for last mile distribution. They can also be used for light industrial. And we do have some occupiers who are in light industrial and manufacturing operations within our properties. And so these manufacturing facilities will benefit from these defense-driven demand drivers. But broadly, industrial sector, we expect will benefit from that, primarily the more closer in mid-bay product is going to benefit mostly as opposed to kind of big box logistics and fulfillment type centers. So we are encouraged by what we're seeing, and we're starting to see early drivers from that emerging. In addition, I would say that we are seeing a slight uptick in user acquisition activity connected to defense needs in particular. Operator: The next question comes from Himanshu Gupta with Scotiabank. . Himanshu Gupta: So just on the 2026 FFO guidance, does that include full deployment of net proceeds from the JV the end of the year and NCIB as well. And the question is just wondering when we will see the accretion from that CPP JV in numbers. Lenis Quan: Thanks, Himanshu. We do expect to deploy the proceeds over the course of the year. The first tranche closed in February, second tranche is targeted to close by the second half of the year. So that would help just with timing of deployment. So we do expect to have it -- we're targeting how it's only deployed by the end of the year. So the -- looking at Q4, kind of that run rate will be higher than what Q1 would be as the proceeds are fully deployed. So a stronger run rate through the end of the year and into 2027. And I think in terms of types of deployment and buyback activity, I think it is going to be dependent on the opportunities. We've stated a target on the buyback program, but I think we want to just monitor other deployment activities, returns and where the unit prices and how the unit prices are acting. Himanshu Gupta: Okay. Do you still expect like low to mid-single-digit FFO accretion from this transaction? It looks like more in next year than this year? Alexander Sannikov: Thanks for this follow-up, Himanshu. As we communicated in the original announcement press release, we do expect that the accretion is going to fully materialize when we get the balance sheet fully deployed, which as Lenis just commented, will happen in 2026. So the accretion will build up through the second half towards the run rate. We still expect accretion to be there. And it is moderately accretive for the full year 2026 as we communicated in December when we announced the transaction. So the thesis remains intact. Himanshu Gupta: Okay. And then when you say balance sheet fully deployed in terms of acquisition activity, fair to say most of the acquisitions will be done in Europe and then the remaining on the JV in Canada? Alexander Sannikov: We expect that on balance sheet acquisitions in Canada will be around 30% to 40% of the volume for this year. And obviously, our co-investments in private partnerships are going to be mostly in Canada as well. Himanshu Gupta: Okay. And my last question is Alex, in your prepared remarks, you mentioned market rent growth to resume in second half of this year and then next year as well. Can you elaborate like which markets you think can lead the market rent growth recovery here? And do you assume like limited new supply in the near-term? Alexander Sannikov: We're already seeing market rent growth in the West. So we expect that, that will continue. Certain segments of the market in Calgary and Edmonton will likely outperform others. But broadly, we expect the market rent growth to continue in the West. And when it comes to Toronto and Montreal, we would indeed expect second half to start seeing rental growth again primarily in the tighter end of the market, which is small and mid-bay product, leading the way and then that gradually translating into growth in market rent for larger bay assets starting perhaps in Toronto, where we are seeing more robust pace of absorption. Operator: The next question comes from Brad Sturges of Raymond James. . Bradley Sturges: Just to clarify comments there, Lenis, on the same-property NOI. I think you said for the first half of the year, you expect NOI growth to be similar to what Q4 to was. Is that correct? Would there be any guidance for the full year? Or maybe I missed that in the opening comments. . Lenis Quan: Thanks, Brad. That's right. For the first half of the year, we were expecting the same property growth to be consistent with fourth quarter. We reported 8.4% in the fourth quarter. So to be in and around that range. Obviously, as we complete more of the leasing towards the year, we commented that we expect full year growth to be stronger than full year 2025 growth. Alexander Sannikov: Just to build on that, Brad, I think what we're effectively saying is we are confident that it's going to be stronger than 2025 in 2026. The degree to which it's going to be stronger is going to depend on the timing of leasing. But we think the 2025 is an achievable hurdle. Bradley Sturges: I guess for now, we should think about it as sort of similar growth for now and then we'll kind of see on timing as the year progresses? Alexander Sannikov: And we'll update you on timing again. . Bradley Sturges: Yes. Okay. You talked about private partnerships. Obviously, you've had success in Canada. Just any updates on European opportunities at this point? Is this -- is there any kind of changes in opportunity there that you might be able to get across the line this year? Alexander Sannikov: No change in the outlook and we're still exploring opportunities in Europe. We did put more emphasis on to the Canadian JV with CPP Investment in the second half of 2025. So that took precedent over any European joint venture formation, perhaps pushing back the European joint venture by a couple of quarters, but it still is on our radar to explore, and we are advancing dialogue there. Bradley Sturges: Okay. And just on -- last question just on your development opportunity, I guess, more specifically like expansion and intensification. How does that opportunity shape up for this year? Could you see some more projects get out into the pipeline this year? . Alexander Sannikov: Thanks for that follow-up. Yes, we do, and we are tracking a number of opportunities. Some of them on a build-to-suit basis, some of them on a speculated basis, both in Canada and in Europe. And in Canada, that would include the wholly owned portfolio, but also our private ventures. So we are continuing to pursue opportunities to activate our land bank selective thing. Operator: The next question comes from Mike Markidis with BMO. Michael Markidis: Just wanted to lean into the JVs in Canada a little bit, Alex. I mean I think there are -- you've outlined it a little bit in the MD&A and in your comments, but there are differences between the JVs. But maybe you could walk us through sort of the different strategies within DSI, DCI and what's on your balance sheet. . Alexander Sannikov: Thank you for this follow-up, Mike. As we articulated in the announcement press release in December when the DCI venture was formed, the on-balance sheet strategy in Canada is going to lean into newer quality, you can describe it as generally core plus mid-bay infill assets, whether we've acquired them or build them that's generally what we are going to be pursuing more of for the on balance sheet strategy. The DSI joint venture is very mature. We continue to be active in looking at opportunities, both acquisitions and dispositions. And with the in DCI joint ventures, it's just starting. It has generally more of a value-add lens to evaluating opportunities, both from a profile of assets but also from a kind of target underwriting time lines and perhaps the leverage point as well. So quite different from the DSI joint venture given its scale and overall setup. So that's how these ventures fit together and from our standpoint, without maybe going into 2 granular specifics, we believe they fit well together and we can be active across of interest and we'll have more capital available to cover opportunities that we weren't covering before. Michael Markidis: Okay. And then just your comment on DSI being very mature and obviously still looking at acquisitions in dispute. But from a net square footage or net asset value perspective, do you expect that to grow? Or will be the focus be more on growing DCI just because it's earlier stage at this point? . Alexander Sannikov: It is hard to comment specifically. We do have acquisitions identified for the DSI joint venture. We have assets that we just closed on in Q1, and we have another asset in due diligence right now. And equally, we will look at recycling opportunities as we have in the past. It's really difficult to comment on the net growth or net contraction we will pursue both, and we'll aim to achieve the best total return outcome for the venture through this capital recycling activity. Michael Markidis: Okay. And globally, I guess, Canada is a pretty small place. and you now got 3 different strategies running in Canada. Is there room for any more at this juncture? Or do you think you're pretty much set up from a private capital perspective on the Canadian assets for the Canadian landscape? . Alexander Sannikov: We feel like we reasonably set up, we don't have a core segment of the market of it right now. So there could be room for that, but we're not actively pursuing that at the moment. Michael Markidis: Okay. I guess last one or maybe 2 last ones for me quickly. Just, is there -- I mean, obviously, things can change and an asset could become more of a core value add versus what you deem as being core plus today. But is there any more seeding or transfer of assets from the wholly owned into either of the JV is contemplated in the near term? Alexander Sannikov: Nothing is currently contemplated. Michael Markidis: Okay. Last one for me. I know you guys have a core fund in the U.S. just it's been relatively inactive if you can give us some updated thoughts on the landscape down there and if there be potential to raise capital for a U.S. strategy over the next year or two? Alexander Sannikov: We are seeing better opportunities in the U.S. now than we were, let's say, 2 years ago. So that is both on the acquisition side and on the capital raising side. So we are spending more time there. And hopefully, we'll see more growth for that vehicle or -- if not, then we'll perhaps start exploring other opportunities more likely in private capital partnership set up to grow the U.S. business. We are generally encouraged by the trends we're seeing for the U.S. market for that vehicle, although it is early days. Operator: The question comes from Sam Damiani with TD Cowen. Sam Damiani: Alex, just on your comment for market rent growth sort of to resume in the latter half of this year into next year. What do you need to see from a market sort of data point perspective to, I guess, give you more confidence or would be more certain that market rent growth is going to resume under that time line. . Alexander Sannikov: Thanks for this follow-up, Sam. We expect to -- that we will need to see consistent pace of absorption, consistent trends either stable to downward on the availability rates and that will then lead to greater confidence by the landlord community to for stronger rents. And there are some less significant metrics and factors such as sublease availability that will contribute to that. We think that it's not going to be a broad-based rental growth to start. It's going to affect certain subsegments of the market first. Where we're seeing, for example, if you look into statistics for the GTA is that there's quite significant difference between vacancy rate for small assets versus large assets as a proxy for a small bay versus large bay. And so with these smaller assets showing tighter vacancy rates and availability rates. So we will likely see or we expect to see stronger rental growth for that segment of the market sooner than the larger bay. And it is going to be market-specific not just segment specific, as we commented before, we expect to see stronger perhaps rental growth in the West and maybe sooner than we would in the GTA and the GMA. Sam Damiani: Okay. That's helpful. And do you -- between the DSI, the DCI, I appreciate the new acronyms there and the balance sheet strategy, I mean, which of those sort of 3 buckets would be -- you expect to see the most acquisition activity in 2026? Alexander Sannikov: Well, for the own balance sheet program, we expect to deploy the capital that we have, whether it's in the unit buybacks or the acquisition. So we expect that is going to be all deployed in 2026. When it comes to private ventures. It is difficult to comment. These are early days for the DCI JV. We don't want to comment on behalf of our partners indirectly. So we'll report on our progress, including the pipeline that we are pursuing for debenture as we make progress. Sam Damiani: Appreciate that. Last one for me, and I apologize if this might have been asked, but we're working on a European JV, is that still in the works? Has it -- have you progressed on that sort of path since November, December? . Alexander Sannikov: So we commented earlier, Sam, you may have missed that, yes, it's still something that we are pursuing. We did put more emphasis on the DCI JV in the second half of 2025. We didn't want to pursue kind of 2 joint ventures at the same time. So it did push out the European JV formation by maybe a couple of quarters, but it still is something that we are exploring. Operator: The next question comes from Matt Kornack with National Bank. . Matt Kornack: It was evident with the results that you sold some vacancy but also some mark-to-market potential. Obviously, the cap rate was quite low on what you achieved. But can you give us a sense of the: a, whether the residual portfolio that you wholly owned should operate at a higher occupancy; and b, just the ability to get kind of cap rates more in line with your IFRS cap rate in terms of deploying some of that capital? Alexander Sannikov: Yes. Thanks, Matt. So the margin opportunity in the DCI initial portfolio was quantified in the announcement press release and if you refer to that, you'll see that the mark-to-market opportunity as of September 30 in the DCI initial portfolio and on balance sheet holding on portfolio was pretty close. Two, as we approach year-end, the mark-to-market opportunity for the wholly owned portfolio did decline a little bit just as a function of NOI growth and in-place rental growth as opposed to kind of changing the balance dramatically. When it comes to the occupancy outlook, as Lenis commented, we think that mid-90% range for our portfolio, call it high-94% range to low-96% range is the right run rate. For 2026, we obviously are aiming higher but as we've consistently highlighted for multi-tenant portfolio like ours, high 96% to 97% range is relatively full. We're unlikely to exceed that for a prolonged period of time. Matt Kornack: Makes sense. And then as we think about -- and again, we've all asked about this market rent growth inflection, but is there kind of a magic number on occupancy before tenants start to get a little nancy and want to pay up the rent or make decisions to move into space that would maybe precipitate that change in market rent? . Alexander Sannikov: Our observation is that every market is different in that regard. So there are markets where rents grow at 6% to 7% vacancy and there are markets where rents are growing at 3% vacancy. So it is highly market-specific and increasingly a subsector specific. So what we generally expect we need to see is just consistent pace of absorption and consistent development of availability rates, flat to down. Matt Kornack: Okay. And then just looking at your projects in planning, I think, to get to the 6% to 7% estimated unlevered yield. It looks like you need kind of in the $18 rent level. Obviously, different markets. So maybe it's achievable in some and not others. But can you give us a sense, is that still kind of the gravitational pull higher in terms of market rents is that it's more expensive to deliver this type of space than what you're currently getting for space in the market. . Alexander Sannikov: Yes. A lot of our products planning are in Brampton or they weighted towards Brampton by cost to complete. And rents for new products in Brampton are in that high-teens range, and that is pulling the average a little bit. Operator: [Operator Instructions] Your next question comes from Pammi Bir with RBC Capital Markets. Pammi Bir: Not sure if you can quantify this, but with the 2026 same-property NOI guidance, does the sale of the assets to the DCI JV, help or detract from that outlook that you provided, I think you're greater than 2025? Gordon Wadley: Without commenting specifically on the DCI JV, it is probably adding the numbers a little bit in the first half and relatively neutral in the second half. Maybe DCI JV, you could see high growth into 2027 as some of the vacancies get leased up. Pammi Bir: Okay. Got it. And then just on the when is the -- again, coming back to the guidance on same property NOI. Just putting all the comments together and the occupancy numbers that you quoted, is it fair to say that at this point, the way you see it is the bulk of the growth in 2026 is going to be from higher rents as opposed to occupancy gains. Lenis Quan: Yes, there will be some slight from occupancy gains. But I mean, obviously, it's going to be higher rents. There's the base escalators in Canada indexation in Europe. But I mean certainly, the trend over the last few years has been on capturing the higher rents as we've rolled over leases, and that will continue. I think we included some disclosures as to kind of over the next few years, the spreads of where our in-place rents are by market versus the average market rents for the region. So there's still quite a bit of upside to capture. Pammi Bir: Okay. Got it. And then just maybe last one, sticking with the lease maturities and tenants. Any on your watch list at the moment? And any large known vacancies coming back to you in the next few quarters or that you're aware for this year? Alexander Sannikov: We have a couple of vacancies coming back to us. There's one unit in Spain that is coming back to us in the first quarter that we expect to re-tenant at higher rents after demising that unit, that's 200,000 square feet there's a couple of idiosyncratic units that are on known vacates, but then there's vacant units currently vacant units in the pipeline. So overall, as Lenis said, occupancy and run rate plus/minus at the range where we are at today for 2026 on average is a good modeling level. . Pammi Bir: Okay. Great. Alexander Sannikov: Just kind of following up on your CPNOI question, Pammi. As you know, over the last year or two, while occupancy wasn't contributing to the NOI growth, it was actually taking away a little bit as occupancy was declining slightly. And so as we expect that the occupancy is going to stabilize in-place occupancy is going to stabilize at today's level, then it's going to be less of a negative factor to the overall CPNOI equation. . Operator: The next question comes from Tal Woolley with CIBC. Tal Woolley: Lenis, in the outlook for this year. I think just looking at your numbers, you did about $11 million in management fees in 2025. I'm just wondering on the timing of the JV closings and the expected ramp-up of its asset base. If we're looking at incremental management fee in the order of like $3 million to $4 million for 2026 and then growing thereafter. . Lenis Quan: Yes, I think that would be -- it seems like a reasonable estimate. Obviously, the new venture is going to close in 2 tranches, so it'll take a little bit of time for that new component to kick in throughout the year, but certainly, by the second half of the year, that will be in there. A lot of the margin is also dependent on leasing, there's a recent component as well, but there's a little higher margin on that as well. So that's a little bit lumpier, but obviously something that we focus on as well. Tal Woolley: Okay. And just if I'm modeling this, which is an exit cap rate and around 6%. I'm not going to get too much in trouble if I use that. Alexander Sannikov: Tell forward purpose you modeling as cap rate? Tal Woolley: Sorry for the portfolio disposition. For the $805 million. Alexander Sannikov: We would suggest you refer to the announcement press release where we quantified the in-place rents. And the disclosure we provided in the announcement press release will also allow you to calculate roughly the market rents the portfolio and then that would be a more accurate way of modeling the NOI impact. Tal Woolley: Okay. And then I just -- I apologize if I missed this earlier, but just with respect to the potential defense opportunity there is in the industrial space here in Canada, is this something like you're not especially interested in, just given that you guys are -- tend to focus more here in the country on small and mid-bay product versus larger stuff. What sort of strategy are you trying to develop to address the potential demand there? . Alexander Sannikov: Thanks, Tal. We are very interested in it. And we actually think that our product is going to be a beneficiary of the additional defense requirements and activity relating to defense industries because of the flexible nature of our real estate. So occupiers for this kind of product tend to look for closer infill assets with strong power connectivity to public transit, and that's exactly the type of assets that we are targeting to own and own already. And so we are very much focusing on the defense opportunity. and how it can affect our portfolio. Tal Woolley: Do you have an estimate of how much square foot do you have occupied by defense-related tenants right now, whether it's contractors, the government itself? . Alexander Sannikov: We are -- we do -- we haven't disclosed that yet, but we'll probably provide more color over time. It is meaningful across our managed portfolio. We have a number of that are already in defense sector. And we have some light industrial and manufacturing. We have buildings with strong power connections, connectivity and that drives, again, demand from light industrial-type occupiers. So this is something that we are going to quantify more as we observe kind of how the defense requirements develop. Tal Woolley: Okay. And then I think in mid-December, you were sort of talking about how you were in due diligence and late-stage negotiations on roughly $600 million of product. I'm just wondering if you can talk about the progress made there and where and what type of -- where are you finding these assets right now? And so any quantification of like what the sellers -- like who's selling this stuff right now? . Alexander Sannikov: Yes. So we commented in our prepared remarks that we have over $350 million of assets in exclusive negotiations. Going in cap rate, we are currently underwriting these assets too, it is just under 6% with mark-to-market cap rate in the mid-7% range. And these are mid-day assets in our target markets. So this is the type of product that you will be very familiar with as you look at what we've been acquiring over the last few years. Tal Woolley: And no large portfolios out there at all? Alexander Sannikov: We are monitoring a number of portfolio situations across our footprint. Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Sannikov for any closing remarks. . Alexander Sannikov: Thank you for your support and interest in Dream Industrial REIT. We look forward to reporting on our progress next quarter. Goodbye. . Operator: This brings to close today's conference call. You may now disconnect. Thank you for participating, and have a pleasant day.

86天前Insight Analytics约5分钟阅读

STO.AX 2025 Q4 财报电话会议

Kevin Gallagher: Good morning, and welcome to the presentation of Santos' 2025 full year results. I'm speaking today from the traditional lands of the Kaurna people of the Adelaide Plains and pay my respects to Elders past and present. I also acknowledge and recognize the support of traditional owners and indigenous people everywhere Santos operates around the world. Before we start, I draw your attention to the usual disclaimer on Slide 2. Santos delivered a strong result despite lower commodity prices with the base business continuing to demonstrate the resilience of our disciplined low-cost operating model. I'll begin with an overview of our results before handing over to our Chief Financial Officer, Lachie Harris, to present the financial details. Our Chief Operating Officer, Brett Darley, will then discuss the operational performance of our base business. Following Brett's presentation, I'll take you through our outlook and strategic priorities for 2026. Then we'll open the call up to questions. In 2025, personal and process safety performance were outstanding, with Santos ranking in the top quartile of our sector globally for personal safety and outperforming the global benchmark for process safety. Our lost time injury rate and total recordable injury rate were Santos' best on record. Process safety performance measured by the loss of containment incident rate was the best in more than a decade. While we are proud of these outcomes, we remain focused on continuous improvement, and I'd like to take this opportunity to thank all of our employees across our global operations for their hard work and commitment to continual improvement. Slide 5 summarizes our 2025 financial results. The business generated strong revenues and delivered free cash flow from operations of $1.8 billion, EBITDAX of $3.4 billion and underlying profit after tax of almost $900 million. Our gearing was 26.9% including leases and 21.5% excluding leases, notwithstanding a capital-intensive period. This performance demonstrates the value of our disciplined focus on costs, reliability and margin. Accordingly, the Board has resolved to pay a final dividend of $0.0103 per share, 48% of free cash flow from operations in the second half. Underpinned by our disciplined low-cost operating model, the base business continues to improve reliability and reduce costs. Total production for the year was 87.7 million barrels of oil equivalent, an increase on 2024, and unit production cost was the lowest in a decade at $6.78. Pleasingly, we received more than 900,000 ACCUs for Moomba CCS Phase 1. PNG LNG plant was at capacity throughout 2025. In GLNG, we saw plant reliability of more than 99.5%, and our marketing and trading team signed 3 new LNG sales and purchase agreements in the year. Compounding growth in shareholder returns is driven by consistent value extraction from the underlying portfolio and the disciplined application of our capital allocation framework. For 2025, the $0.0103 per share will be returned to shareholders in the final dividend, equivalent to 48% of free cash flow from operations in the second half, exceeding our commitment under the capital allocation framework. The total amount returned to shareholders for the year is $0.0237 per share, which is 43% of free cash flow from operations. The Board's decision to increase returns to shareholders reflects the fact that Barossa is now producing and gearing has passed its peak at a lower level than previously anticipated. Over the last 7 years, compound annual dividend growth of more than 13% has been achieved despite a period of major capital investment and significant global inflation. Santos delivered Barossa, a Tier 1 long-life asset, within around 6 months of the original planned start date and without drawing on additional budget contingency. On a project of this scale and complexity, that is a significant achievement. It demonstrates outstanding project self-execution and disciplined contractor management despite the challenges of COVID, global supply chain disruption, uncertain regulatory approvals and unprecedented litigation. Just as importantly, it demonstrates our capability to execute major development projects while continuing to run the base business efficiently, reliably and safely. We've taken a very considered approach to the final stages of commissioning to ensure offshore operations achieve a high level of reliability as quickly as possible once full production is achieved. The project has a high level of technical complexity with technology deployed to improve operational efficiency and emissions. And we're currently producing at just under half rates while we go through a sequence of compressor dry gas field change-outs, and we are targeting ramping up to full production rates in the next few weeks. Mechanical completion of Pikka Phase 1 was achieved in January, with ramp-up to plateau production rates expected around the middle of the year. Dynamic commissioning is underway at the seawater treatment plant, Nanushuk Drillsite B and the Nanushuk processing facility. The Nanushuk Drillsite B has been handed over to operations, another key milestone towards first oil. Drilling performance remains exceptional. We're now drilling the 26th well and continue to push technical limits. Two combination wells have been completed, including a record 10,000-foot horizontal section that delivers 2 bottom hole locations with a single well. Combination wells deliver savings on cost as well as rig time, accelerating the drilling schedule and getting more reservoir sections online earlier. 20 development wells have been flowed back, including 10 producers, with average expected start-up flow rates of approximately 7,000 barrels per day per well, in line with pre-drill expectations. The 23rd well delivered the highest productivity to date with expectations of flow rates of approximately 8,000 barrels per day. Once the flow rates, Barossa and Pikka Phase 1 together are expected to lift Santos' production by around 25% by 2027 compared to 2025 levels. In 2026, as these 2 major development projects are integrated into the base business and we rightsize the business, we expect a reduction in headcount of around 10% across the business from 2024 levels. Moving to Slide 10. Santos holds a unique and diversified resource base with a 17-year 2P reserves life and a 10-year 1P life, supported by almost 4.7 billion barrels of oil equivalent and reserves and contingent resources. The quality and depth of our inventory underpins our strategy to continue to backfill existing infrastructure and grow production. We are optimistic of making significant resource additions following the appraisal campaigns in the Beetaloo and Bedout Basins over the next 18 months or so. Across the portfolio, we have a deep inventory of opportunities embedded in the base business. These have the potential to leverage existing infrastructure to lift production and deliver strong returns, supporting our ambition to maintain production between 100 million and 120 million barrels of oil equivalent in the near term with clear pathways to sustain growth beyond that. Slide 11 demonstrates the disciplined low-cost operating model in action. With a relatively steady production over the last few years, we have still managed to reduce unit production costs during this period, generating strong cash flows despite falling commodity prices, resulting in our ability to increase shareholder returns over the same period. Additionally, we have delivered 2 major developments, Moomba CCS and Barossa and are closing in on the start-up of Pikka Phase 1. All of this has been achieved while maintaining balance sheet strength, improving our personal and process safety performance and lowering our emissions. Santos has already achieved its 2030 emissions target, supported by the world-class Moomba CCS project, reinforcing the role lower carbon gas can play in delivering energy security while reducing emissions. Our strategy remains clear: generate strong cash flow, reward shareholders, reinvest to backfill our infrastructure and to build new capacity and grow production and continue to operate safely and reliably. I'll now hand over to Lachie to provide an overview of our financial results. Lachlan Harris: Thanks, Kevin, and good morning, everyone. I'll step through the financial performance for 2025, which reflects a resilient base business and disciplined execution across the portfolio. In terms of our 2025 financial highlights, free cash flow breakeven from operations was $27.43 per barrel, demonstrating the ongoing cost discipline from our base business. All-in free cash flow breakeven was $58.90 per barrel. Going forward, we will target an all-in free cash flow breakeven of $45 to $50 per barrel. At this range, we will have capacity to invest in projects that add high-quality production volumes, reserves and resources and continue progressing our organic pre-FEED opportunities. Unit production costs was $6.78 per barrel, the best result in a decade, achieved with FX tailwinds and cost discipline. Total 2025 dividends of $770 million include the final dividend declared of $335 million. Slide 14 details our balance sheet strength. Pleasingly, gearing finished the year at 26.9% including leases, which is a real positive, noting we're at the conclusion of our peak capital investment phase, Barossa is in production and Pikka Phase 1 nearing production. We remain committed to a resilient balance sheet and maintaining an investment-grade credit rating as production and cash flow increase following the delivery of Barossa and Pikka Phase 1. This financial strength provides flexibility to fund growth, deliver shareholder returns and actively manage gearing. Our continued investment-grade credit ratings from Fitch, Moody's and S&P reflect Santos' disciplined capital management and low-cost operating model that has been in place since 2016. Our long-dated debt maturity profile supports financial stability with an average weighted term to maturity of 5 years. In 2025, we accelerated the final repayment of the PNG LNG project financing facility, fully repaying the debt. The early repayment reduces interest costs and removes restricted cash requirements, which helps strengthen our liquidity position. Santos now has approximately $4.3 billion of liquidity across cash and undrawn facilities. There are no scheduled debt maturities in 2026, with the next due in September 2027. During 2025, we also successfully completed a $1 billion senior unsecured 10-year bond offering in the U.S. 144A/RegS market. This attractively priced long-term capital further strengthens our funding base and supports disciplined growth from our high-quality diversified portfolio. Consistent with our capital management framework, we continue to protect and strengthen the balance sheet to safeguard our financial position through hedging strategies for both commodity and FX exposure. Hedging has been undertaken at rates well below the long-term Australian dollar FX average, providing strong protection for the balance sheet. The strength of this balance sheet is what has funded the development projects whilst provided strong returns to shareholders. Our underlying earnings show that product sales revenue remained strong at over $4.9 billion, generating EBITDAX of $3.4 billion and underlying profit of $898 million. Underlying profit is lower than the prior year, reflecting lower commodity prices and a higher effective income tax rate. Our 2025 free cash flow from operations highlights the strength of Santos' diversified portfolio, high-performing core assets, secure LNG contracts, inflation-linked domestic gas contracts and continued cost discipline. Pleasingly, we continue to maintain high gross profit margins across the portfolio, with a gross profit margin of 33.7% this year. We have delivered savings of around $50 million and continue to target an annual savings run rate of $150 million. As we have previously advised, once Barossa and Pikka Phase 1 are online, we expect our free cash flow sensitivity to increase from around $400 million for every $10 movement in Brent oil up to $550 million to $600 million for every $10 movement. As outlined earlier, we achieved record low unit production cost of $6.78 per barrel in 2025, supported by FX tailwinds and disciplined cost control. Our track record shows we continue to outperform our peers in this space with an unwavering commitment to cost discipline. In addition, we remain focused on our target of less than $7 per BOE unit production cost. Santos is Australia's low-cost operator, and that is not a slogan. It is a competitive advantage. With the production from Barossa and Pikka Phase 1 coming online, Santos is positioned to fully fund the base business and growth capital requirements. This includes exploration and appraisal, decommissioning, corporate and funding costs and investment in growth at an all-in free cash flow breakeven of $45 to $50 per barrel. Our portfolio will keep production between 100 million to 120 million barrels of oil equivalent over the next few years, but the $45 to $50 framework allows us to pre-invest in our next stage of growth, including exploration and appraisal projects such as Papua LNG, Beetaloo and the Bedout Basin. Cash flow in excess of our all-in free cash flow breakeven will be returned to shareholders at a minimum of 60%, with the remaining 40% available for degearing the balance sheet or increased shareholder returns. With a strong balance sheet, Santos has the ability to take advantages of opportunities for value-accretive growth. Thank you. And I'll now hand over to our Chief Operating Officer, Brett Darley. Brett Darley: Thanks, Lachie, and good morning, everyone. Let me turn now to the operational performance. Our base business has delivered another strong year. Safety remains a leading indicator of operating capability, and we achieved our lowest lost time injury rate on record. We are getting more from our infrastructure with reliability above 98% across PNG gas, PNG LNG plant and GLNG upstream facilities. The GLNG plant at Curtis Island achieved 99.5% reliability. A key competitive advantage for Santos is our ability to self-execute projects. In 2025, 296 wells were drilled globally. We reduced drill duration in the Cooper by 2.5 days per well, drilled a record 8,200-meter horizontal well in Alaska and completed the first triple lateral CSG well in Queensland. In 2025, PNG LNG sustained an annualized run rate of 8.6 million tonnes per annum, supported by plant reliability of more than 98% and the first full year production from Angore. PNG LNG effectively ran full for the year with upstream capacity exceeding planned capacity. We intentionally choke back some of our operated wells, a strong position that highlights the depth and flexibility of our resource base. Our Santos operated fields provided 17% of PNG LNG gas supply with upstream operated gas reliability of 98%. The Hides F2 well was completed with a safe and accelerated start-up in the first quarter -- in the fourth quarter. Initial production is averaging around 60 TJs a day, further adding volume and resilience to our supply base. Alongside strong operational delivery, we maintained our disciplined cost performance. Upstream PNG production costs decreased $0.34 per BOE compared to 2024. And overall, we delivered a 5% reduction in unit production costs. This improvement was driven by targeted initiatives, including the reorg of our supply chain and logistics services, delivering around $1.3 million in sustainable annual savings and optimization of maintenance programs, contributing more than $5 million in savings in 2025. Put simply, PNG LNG is performing. Costs are improving, and we've got a deep runway ahead of us. It's a high-quality, long-life asset in a very strong position. GLNG and our Queensland CSG operations delivered another year of strong performance. GLNG produced 6 million tonnes of LNG, shipping 101 cargoes, with more than 99.5% plant reliability. We also completed Train 2 shutdown safely and on schedule. GLNG continued to support the East Coast domestic gas market, supplying 11 petajoules through seasonal shaping and working with our joint venture partners to exercise contractual flexibility so we can continue supporting the domestic gas market in '26. Upstream supply remained stable with record production rates from Roma of 223 terajoules per day and record average production from Scotia of 105 terajoules per day, underpinned by high facility reliability. And we continue to focus on disciplined cost performance. In 2025, we completed several compressor facility upgrades, enabling the shutdown of a legacy facility. These initiatives delivered around AUD 5 million per annum in production cost savings and unlocked an additional 15 terajoules a day of incremental production. At the well level, we continue to push technical boundaries. Pump life has improved through solids handling initiatives and the rollout of our smart PCP digital program, which reduces failure rates and improves uptime. We also extended our well design capability drilling our first triple lateral CSG well and achieving our longest in-seam lateral length at 3.2 kilometers, increasing reservoir access and improving recovery. In Western Australia, our focus on reliability and disciplined execution and infrastructure-led value continues to deliver strong results. Varanus Island averaged 99% reliability in 2025. Production costs improved by around $66 million compared to '24, with unit production costs now approximately $6.15 per BOE, benefiting from strong contribution from the Halyard-2 well and FX tailwinds. The Halyard-2 infill wells is a strong example of our self-execute capability. It came online in the first quarter and has exceeded pre-drill deliverability expectations by 38%, reinforcing the value of developing reserves close to existing infrastructure. The same self-execute, low-cost tieback model underpins approval of the John Brookes 7 infill well as the next Varanus Island backfill opportunity, while the Varanus Island compression project Phase 2 has developed around 24 million barrels of oil equivalent of 2P reserves. The Cooper Basin was impacted by a record-breaking flood event on a scale not seen since 1974, affecting more than 200 wells and several upstream compressor facilities. Our focus throughout has been the safe recovery of these facilities, and I'm pleased to say production rates have now returned to pre-flood levels. We have safely reinstated about 70% of impacted wells and facilities and restored more than 2,500 kilometers of road access. Importantly, drilling activity continued uninterrupted, with 104 wells drilled and 80 wells connected during the year. As a result, 30 wells are now ready for connection in early '26 once residual flood water is received and full access to flowline routes is restored. Beyond recovery, we continue to advance the long-term potential of the Cooper Basin. Whilst the Cooper has its challenges, we've been progressing our resource opportunities, including the Granite Wash and the Pachawarra tight gas plays. Our future investments will focus on these areas that provide higher margins and contain the majority of our future resource base. We've also progressed in the planning of a new way of operating these areas with the development of the Moomba Central Optimization project. This project will transform the cost structure in the central area of the basin, and we have plans in place to change the way we are thinking about the Cooper Basin more broadly. In 2025, we also implemented our integrated remote drilling ops center, the IROC, which will improve safety and cost by taking people out of the field and reducing evaluation costs and is expected to deliver around $5.5 million in annual recurring savings. It will also improve our stimulation and completion activities, improving overall well productivity. I'll now hand back to Kevin. Kevin Gallagher: Thanks, Brett, and thanks, Lachie. If you step back and look at the global energy system, the starting point is simple, energy demand continues to rise. The transition isn't replacing one source with another. It's adding new supply to meet structural growth. Gas plays a unique role in that system. It is the only scalable, dispatchable fuel capable of supporting renewables while maintaining grid stability. That makes it a foundation fuel for economies that are growing. Asia remains at the center of LNG demand growth, with consumption forecast to expand strongly through to 2050. Santos is well positioned with advantaged supply into the region, Tier 1 customers and a track record of reliability. In a world of geopolitical uncertainty and shifting trade dynamics, that reliability carries a premium. Customers are prioritizing dependable partners. At the same time, oil demand remains resilient. Projects, such as Pikka, add competitive low breakeven supply that strengthens our portfolio and long-term cash generation. That structural demand growth is not theoretical for Santos. It's already embedded in the quality and performance of our LNG portfolio. Our LNG marketing business continues to capture value through disciplined end use customer-focused contracting. The LNG portfolio is 83% contracted over the next 5 years, with portfolio pricing realized at 14.6% slope to Brent in 2025. Our average contract price remains above peers and supports strong cash margins. Our proximity to Asian demand centers provides a structural advantage with lower shipping costs, lower emissions and faster responsiveness compared to more distant suppliers. That advantage is matched by portfolio flexibility. With multiple LNG sources, we can direct volumes into highest value markets and respond to seasonal and market disruptions. Our LNG portfolio is also weighted toward higher heating value gas, primarily from PNG LNG and Barossa, which together account for over 75% of our equity LNG volumes. Customers place a premium on richer LNG, and that is reflected directly in our realized prices relative to our peers. That demand and portfolio strength gives us a clear platform for execution, which brings me to our 2026 strategic priorities. There are 8 priorities that will guide our focus in 2026. Together, they form a single operating framework focused on safety, cost discipline and long-term value creation. I'll step through each of them. The first priority is delivering steady-state production for Barossa, establishing it as a reliable Tier 1 long-life cash engine for the portfolio. Barossa is expected to achieve full rates in just a few weeks' time. And throughout the next few months, we'll work to overcome the usual early issues on any new project to achieve the sort of reliability we see across the rest of our operating assets. The second priority is bringing Pikka Phase 1 to plateau production rate with a focus on a safe, controlled ramp-up, to steady performance. We expect to achieve this very important milestone in the second quarter, and then that focus will turn to achieving the expected levels of reliability of any other Santos asset. The third priority is delivering on PNG LNG backfill projects. PNG remains a core asset in our long-term portfolio, supported by a prolific resource base. Our focus is on sustaining plateau production through near-term backfill opportunities, including the APF pipeline tie-in and an oil infill drilling program. These are practical, very high-return projects designed to extend asset life and preserve cash generation. The fourth priority is progressing Papua LNG to final investment decision. Papua represents the next phase of development of our -- for our PNG platform and is underpinned by a net 2C resource of 1.6 Tcf. Just the other day, I was pleased to hear encouraging comments from the operator CEO clarifying the improved cost position that we are aiming to get an FID decision around the middle of the year. The fifth priority is commencing Beetaloo appraisal activities. Beetaloo is a transformational opportunity for Australia and Santos. The scale of the resource is globally significant and has the potential to reshape our long-term production profile. This is not a marginal resource addition. It is a new basin with the potential to supply both domestic and LNG markets, subject to successful appraisal. Our 2026 program is focused on proving commercial flow at scale and demonstrating the basin's development potential. Importantly, Beetaloo sits within a supportive jurisdiction that has established a clear pathway for responsible development. Alongside Beetaloo, the sixth priority is progressing the Bedout Basin appraisal program. This work expands future supply options. We've already discovered 5 fields in the basin supporting a net 2C contingent resource of 230 million barrels of oil equivalent. The integrated gas and liquids concept is about building scalable value from that emerging position. We're planning to drill up to 3 gas exploration wells in 2027 to further define that potential and optimize development concept. A future gas development could be brought back to Devil Creek gas plant to access the domestic gas market and/or toll through adjacent LNG processing infrastructure to provide access to the export markets. It's early stage, but the ingredients for a material high rate of return future production hub are there. And now that we are nearing the end of the current capital-intensive investment phase, we're keen to get back to focusing on moving this opportunity forward. Moomba CCS has established a proven operating model for large-scale carbon storage. The seventh priority is extending that capability through development of a Northern Australia CCS hub. Northern Australia is well positioned to become a CCS center, supported by significant geological storage capacity and proximity to regional emitters. We have completed critical technical work underpinning a development for Bayu-Undan, which has the potential to be one of the world's largest CCS projects. With existing wells and facilities already in place, Bayu-Undan could provide low-cost, large-scale commercial storage for regional CO2 volumes. In parallel, we are progressing feasibility work on additional storage options in the Bonaparte Basin, including G-11. That upcoming work program is focused on expanding Australian storage capacity and building a scalable hub framework. The eighth priority is to conduct a strategic review of our Australian integrated oil and gas portfolio, including the Cooper Basin, West Australia and Narrabri. This review is underway, and we will share further details at our Investor Day in May. In closing, the momentum we built in 2025, driven by strong base business performance and first production from Barossa, carries directly into 2026. With first LNG from Barossa and our execution agenda already underway, we are focused on disciplined delivery and continued value creation for shareholders. Thank you. It's now time for questions. Operator: [Operator Instructions] The first question today comes from Rob Koh from Morgan Stanley. Robert Koh: Congrats on the high quality of your results and Santos team. My first question just relates to Barossa. I wonder if you can give us any commentary on the CO2 that's coming out of the field in the early days. And then I guess related to that, looking at your climate strategy document, you're kind of looking like Bayu-Undan CCS FID readiness in about 2027. And just wondering if you could outline some of the critical path towards that, if that's correct. Kevin Gallagher: Yes. Thank you, Rob. I'm not quite sure about the first question. I'll try and answer that as I understand it. But I think you mean during the commissioning phase. So yes, there is always a little bit more CO2 emissions as you do some flaring as you're commissioning activities. But obviously, once we go into full production, it will be in line with our environmental plan commitments for the production phase. And as you probably are aware, under the safeguard mechanism rules, Barossa has to offset all of its reservoir emissions from day 1. And so that will be our plan until we are able to develop a CCS solution for that project. So we will be offsetting those emissions from day 1. In terms of the second part on Bayu-Undan, yes, we're FID-ready now. We've completed the FEED work, a little bit of work to do before we take FID. So I'd say we're FEED-complete, and there's a little pre-FID phase where we require to do basically the finalized costs and cost estimates from contractors. But the engineering design work is fundamentally done for that project. That would be an excellent project, and we're in discussions with the regulators about moving forward and trying to progress the approvals to support that project. And it's really those activities that are required before we can go to the next step and take FID. Our estimate of how long that would take. Yes, I think 2027 second half is probably realistic in terms of as quickly as we could get there. But really, it depends on how we get on with the 2 governments -- the 2 national governments in terms of getting the various approvals, cross-border approvals for the transport of CO2 and the development approvals in Timor-Leste. Robert Koh: Okay. Great. That's super helpful. My second question is on the topic of decommissioning. And just wondering -- you've given us guidance for this year. Just wondering if you can maybe give us a steer on the longer-term outlook. And then also, I guess, during 2025, I think you came in a little bit under budget at [ Newton near Exeter ], except for the cyclone impact. So I'm just wondering if you can share any kind of learnings for future efficiency of decommissioning. Kevin Gallagher: Look, first of all, I'd like to say the majority of our decommissioning activities are in Western Australia. And the team there under Jason Young have performed fantastically over the last 2 years. We've given them the challenge of expediting decommissioning in an extremely cost-efficient industry-leading way. And they've come through with lots of innovations in order to take cost out of that because as we all know, it's a cost -- every dollar you spend on decommissioning comes with no return on it, yes? So I can't think of it as investment spend. It's necessary spend, but it's not investment spend. And the guys have done a fantastic job. Over the last couple of years, I think we've liquidated something like USD 600 million to USD 700 million of liability off of the balance sheet. And as much as the liabilities have only come down a little bit in that time, that's because as we build new projects like Barossa and Pikka, they go back on to the decommissioning liabilities on our books. But of course, they're 20-plus years out. And so we're liquidating a lot of that near-term stuff. And we'll continue to do that for the next 2 or 3 years. I think anywhere from the sort of $200 million to $300 million per year is probably a good way to think about the level of activity over the next few years. You point to some of the cost underspend on some of these projects. There's been many scopes that the team have been able to deliver under budget. And I think the WA job you're referring to is about $22 million overall under budget for our scope of work last year. There are lots of learnings, and we're continually recycling some of that stuff back through the organization so that we can continue to drive the costs required to decommissioning our activities down. But the entire team -- and it's not only the operations team, it's the commercial teams looking at good commercial solutions. For example, we're able to sell a vessel rather than have to decommission it for someone else to use it last year, and that was a bit of a win for us. And you can see in the Van Gogh FPSO, the time it took from shutting the field down to that vessel exiting the country was a best-in-class. So the guys are pushing every boundary, and we're really proud of the effort of turning in there. But there's a lot of work to go over the next few years. We'll continue to drive those costs down, continue to learn. But as you know, in decommissioning, there's a lot can go wrong. So building that capability in-house is something we've put a lot of effort into the last few years to minimize that risk and minimize that cost exposure. Operator: The next question comes from Tom Allen from UBS. Tom Allen: On Santos' free cash flow sensitivity to changes in oil, when Barossa and Pikka Phase 1 are at full run rate, Santos is guiding 40% to 50% stronger free cash flow sensitivity per $10 barrel change in oil price. So the higher production volumes and lower headcount are clearly a key driver. But what else? The changes to baseline CapEx are implied there, too, or broader cost reduction initiatives? Kevin Gallagher: Yes, Tom, all of those things matter, right? And as does FX, there's a lot of variables go into that. But one of the biggest contributors is, of course, the fact that if you think from 2027 onwards, 60% of our production is LNG, 20% will be from Alaska and 20% from our Australian integrated oil and gas assets. Those higher margin barrels that are coming in from Barossa and coming in from Alaska are driving that free cash flow sensitivity in the right direction. And so from '27, I'd like to think Santos is now a company that if you go back a decade or so ago, we had a 13.5% investment in a Tier 1 asset. And at the time, we're running a sale process for that because we have balance sheet challenges at the time as an organization. If you look at us today or certainly from '27, we'll have 3 Tier 1 assets, we'll be 51% in Alaska equity, 50% equity in Barossa and we're 39.5% equity in PNG. That dominates our portfolio, and that is giving us a much higher percentage of higher-margin barrels, which is increasing that cash flow sensitivity. Tom Allen: Just on your broader options to accelerate deleveraging. So we've seen a couple of capital recycling initiatives last quarter. You sold the stakes in Mahalo and up in the Bonaparte Basin. Can you comment on broader initiatives that Santos has to accelerate deleveraging, perhaps tidy up the portfolio further? I think on the call just now, you've called out on your eighth strategic priority in regard to the strategic review, you made a mentioned at the Cooper Basin, Narrabri and WA. Anything you can share further? Kevin Gallagher: Tom, I admire your effort to get me to tell you what the answer is. I'll give you credit for that. But look, I mean, we've talked about the strategic review, but I go back to the fact that really what's driving that, and we've said all along, is once Barossa and Pikka come online, Santos' portfolio changes because as much as 60% of our production will be coming from our LNG assets and 20% from the oil project in Alaska, the other 20% is from our Australian integrated oil and gas assets. And those 3 Tier 1 assets all have high-value growth opportunities around those as well. And so what changes now is, of course, we've put in place the $45 to $50 all-in free cash flow target going forward for the organization. And within that, we still want to grow the business, right? So it's the best margin, and the highest value opportunities will win. That's where we will invest. And so it changes the way we think about what and where we invest -- what we invest in and where we invest. And so the review then is really looking at how those assets and the opportunities around those assets fit into our future growth ambitions as an organization. And I'm not going to comment on what will likely come out of that review, but we'll share that with you when we get to our Investor Day in a couple of months' time. And what I would say, of course, is we'll continue where it makes sense to clean up the portfolio to do that. We're not going to put targets out there for asset sell-downs or anything like that because we know how precarious that can be from past experience, right? But we'll continue if those opportunities come up to clean up the portfolio. We'll continue to look at that and execute it where it makes sense. Tom Allen: And maybe a follow-up. Your capital framework clearly calls out that you still need to support growth, and you've got quite a broad set of growth options. So can you clarify how you prioritize them? Will projects simply compete for capital based on their forecast returns? Or are there other drivers? Perhaps you've commented now on your future portfolio product mix, but there are other strategic drivers that will bring some projects ahead of others? Kevin Gallagher: We're going to run the business for value. I mean it's really as simple as that. And so we'll be looking at those rate of returns, the best returns projects will win every time. And obviously, we've got a very strong LNG production position. Our high heating value LNG has a very high priority and high value for us because not only does that allow us to get better prices for LNG, allow a lot of portfolio optimization opportunities that are quite seasonal to create more value. We've done a bit of that over the last year or so, and there'll be a bit of that in 2026 as well. So really, I think the best way to kind of describe what our priority, our focus is there, Tom, is that we'll be running it for value. And so it's really the best value outcomes and the best value projects that we're going to win. Operator: The next question comes from Adam Martin from E&P. Adam Martin: I suppose first question, Kevin, just on the gas market review, just any sort of thoughts, any implications for the business going forward, just on the federal gas market review there, please? Kevin Gallagher: Look, thanks, Mark -- Adam, sorry. That's a very good question and good opportunity to communicate a few things we've done. Look, I think the main thing to understand with this is that we see no material value impact to reducing third-party gas intake into GLNG. There's a couple of fields we'll continue to take gas from that were developed specifically for GLNG. But from 2027, GLNG feed gas will come predominantly from equity gas plus those strategic partner fields that we developed for GLNG. And we're working with our partners, and we've already made agreements with partners for certain mitigations in terms of contract reshaping or whatever to limit any liability type impact. But the bottom line is that it doesn't make sense to buy third-party gas off the domestic market to sell into the LNG markets. The free market is working, and those barrels would be zero value barrels. GLNG is actually a better asset without doing that. And so as I say, we see no material impact to Santos. We're going to continue drilling and developing our indigenous resource over the next few years. So you'll see that grow that -- we should expect that to grow between now and sort of 2029, 2030. And we will not be renewing the third-party contracts that still exist as they come up for renewal in a couple of years. And what does that mean now? That mean that the LNG sales will drop back a bit. The production will not be impacted at all. In fact, our production will increase over the next few years. LNG sales will come back. But in terms of margin or our earnings from that project, we don't see them materially impacted at all because, as I say, the third-party gas really is zero margin barrels or very low-margin barrels. What does that mean for the domestic market? Well, that means that some of that gas we won't be contracting can be turned back into the domestic market, and that will relieve pressure on the domestic market and in my view, should alleviate any shortfall concerns for 2027. Adam Martin: And second question, just on the Beetaloo. We've obviously seen some encouraging well performance, well cost data come out from other operators in the basin. What are you looking to do differently this time around? I think your well costs are pretty high. It was a few years ago. And obviously, flow rates are pretty low. But any changes around well design that you need to do differently just for these upcoming wells, I think it's the second half of the year, please? Kevin Gallagher: Yes. Look, I mean, I think when we drilled it, I mean, it was early days of drilling in the basin. And I have to say, it looked like a well that I drilled. It wasn't particularly impressive. But we've got better drillers there now. We've got a very experienced team, a lot of shale experience in the team. We've also seen, of course, the drilling performance of other people as that experience has been built over the last 5 years or so in the basin. So we've got -- we're in the process of contracting rigs and get everything set up for that operation. But Brett, why don't you just give an indication of how you see the drilling plans for 2026, '27 and what the plant's appraisal plan is? Brett Darley: Yes. Thanks, Kevin. So yes, there's been a lot of drilling up there. So there's been 12 wells drilled since we've drilled there last time. And ultimately, we want to make sure we learn from that. Tamboran is a partner in that block with us, and they have obviously been getting some good performance, and we'll be definitely leveraging everything we can from the other operators, including Tamboran. And we are making sure we're learning from what's happening in the U.S. as well. So we're going to embed all the learnings we can, and we've got a team focused on delivering this. It's a very focused plan. Our plan is to drill these 3 wells, fracture stimulate them as if they were production wells and produce them for 12 months plus to get appraisal results that ultimately will allow us to make an FID decision out of this program. So a very, very targeted, and we've got the best people on the job. We will have people from the U.S. involved, whether they work directly for us or through our contractors, to make sure that not only have we learned from what's happened in the Beetaloo Basin over the last couple of years, but the latest technologies from the U.S. And based on the work that we've done, we're actually very optimistic in terms of the cost of supply target that we need to achieve here for the future development opportunity. And we're targeting a total booking from the wells we drilled previously and this appraisal campaign of just under 5 Tcf of 2C resource. So it's a very significant and important appraisal program, which hopefully will result in a significant booking of 2C resource. Operator: The next question comes from Dale Koenders from Barrenjoey. Dale Koenders: Just firstly, on the cost out, the 10% reduction in headcount. Is this in the $150 million savings targeted? Is it net of inflation and other increases? Can you provide a bit more color around those numbers? Kevin Gallagher: Yes. Look, I mean, we see that as quite a natural -- well, a big part of it anyway is a natural transition, Dale, as you transition from the projects' phase, if you like, the 2 big projects we've had ongoing, it's pretty natural that your headcount goes up as you build these projects. And as they come off, a lot of those people roll off the organization, you move more into the operations phase. And some of it's more from efficiencies and technology improvements allowing us to see some headcount or FTE reductions as a consequence of that. I'd see most of that occurring over this year as these projects come online. And so yes, it's pretty short to medium term. It is included in the $150 million number. It's not in addition to. I mean that's important to clarify. But yes, we see it this year, and it's mainly a combination of rolling off from projects and some efficiency gains and improvements just through technology and different ways of working. Dale Koenders: So does that mean it's part of the $45 to $50 per barrel breakeven number and the $7 per BOE OpEx guidance? It's already included in those numbers? Or is it incremental to them? Kevin Gallagher: No, no, it's already included in those numbers. Dale Koenders: Okay. Second question, just on the strategic review. The concept of, I guess, exiting the mature high-cost assets with higher sustaining CapEx requirements to leave a higher-quality LNG core, the idea has been around for a while. Are there any other questions or outcomes or considerations you're thinking of that you can provide a bit more color and a bit more meat around the volumes of the strategic review? Kevin Gallagher: Yes. Look, I mean, what we're not saying is that we're selling anything or buying anything. I think that's very important to clarify upfront. Those may end up being outcomes that come from the strategic review. But we're looking differently at the way we think about those assets, how they compete in the portfolio going forward. If they're not going to get capital, what does that mean? If they're not going to compete against Alaska expansion and growth opportunities or they're not going to compete in near-field opportunities, including oil field drilling and PNG, how are they going to -- what are we going to do with them? What is the plan for those assets? And so everything is on the table in that review, and I look forward to sharing the detail of that at our Investor Day in May, and that our target is to complete the work. We're well advanced in that work. We've been doing it for a little while. We'll complete that work, and then we'll share it with our investors as I say, at the Investor Day in May. Operator: The next question comes from Tom Wallington from Citi. Tom Wallington: Just on Pikka, with development now largely derisked and now having line of sight to first oil and also noting that execution to date has been a standout, could you please refresh us specifically on what milestones or operating performances you might look to be seeing in terms of progressing a brownfield expansion? And just how we should think about the potential timing, noting that you talk about running the business for value and the other growth opportunities that are also competing with this particular opportunity? Kevin Gallagher: Yes. Look, thank you, Tom. Look, I mean, it's not been without our challenges, right? I mean on the execution front, it's been excellent. The drilling has been superb. Costs could have been better, right? We've got to be frank about that. I mean we're not pleased. The team are not pleased themselves that we've spent more than we intended to spend along the way in inflation in the region, the high activity levels in the region have driven inflation there above what we were expecting. So that's not been a great outcome on the cost side. But I have to say the execution of the projects, they're very high quality. I always get nervous talking about like the -- taking the victory lap before you've actually won the game. And so I'm not going to get carried away. We've got that last 5% or so or last few percent of the project to close out, and we're commissioning, and we're getting close to that. We all know that with projects, we've had a few bumps after we started up in Barossa, which is not unusual. I think something like 20% of FPSOs that have come to Australia have departed pretty soon afterwards to go back to the shipyards for one reason or another. And fortunately, touchwood, I've not seen anything like that through the hookup, and commissioning at Barossa has been pretty good, but we've had a few bumps. And no doubt, there'll be a few little things, and we've got the iron out with Alaska as well. But the team is very focused. We're running a very strong commissioning quality assurance process through this process because we want a strong ramp-up. And the key to this project is really starting up and getting the water injection plant up and running so that we have a pressure support for the reservoir because if we can start up early, that's easy. But if we can't go to full rates, if we start producing too fast. Without the water injection support, we'll end up leaving barrels behind. So it's really getting the water injection plant up and running, get the pressure support in place. And then it's all about how quickly we can ramp up to full production to plateau rates. But what I'm very pleased about is the subsurface indications are in line with all the pre-drill expectations. And of course, when you're developing anything in a new basin for the first time, that's one of the key deliverables. You can fix little things on the plant. What you can't fix is you get a bad reservoir outcome. So, so far, that's looking very, very promising. And as I said in my notes earlier on, the last well that we just tested was significantly higher in terms of its productivity or deliverability than the previous -- or the average for the wells to date. So that's very encouraging. In terms of timing, we're still on track for first oil late Q1. But really, it's not about the first oil date. It's really about the ramp-up from that because that ramp-up is determined by how quickly we get the injection system up and running and the pressure support for the reservoir. And so the plan is to ramp up across Q2, reaching plateau at the end of Q2. But of course, if we get the injection up and running and we get a few more wells drilled in that time frame, there's the opportunity that, that could be quicker, yes. Operator: The next question comes from Nik Burns from Jarden Australia. Nik Burns: First one, just a clarification on your $45 to $50 all-in free cash flow breakeven target. Just wondering how prescriptive that number is? Like does that set a hard upper limit on investment every year? Or is it an average over, say, 3 years? Just noting the fact that in 2026, it looks like you're going to come in below that number. So whether that provides some flexibility over the next couple of years to maybe lift it above that range? Kevin Gallagher: I'm going to throw that one to Lachie. That's a good one for Lachie to handle. Lachlan Harris: Thanks, Kevin. Thanks, Nik. Yes, look, we'll guide each year to the -- where we think that, that will range -- will hit on an annual basis. We're going to take a conservative approach within our well-defined parameters, but we'll guide each year to the $45 to $50. Obviously, it aligns with our gearing target of 15% to 25%. And as we said, we do have a lot of investments that we can look to optimize. So we'll give guidance every year, $45 to $50, I think, will be where we'll be targeting across the range. Kevin Gallagher: Yes. And I think we've set out to 2030, that's what our sort of forecast at this point in time would be. And I think what I would add to that is Lachie made a very good point there. 15% to 25% is our target gearing range. At the lower end of that, our interest payments are significantly lower, and that frees up more capital to reinvest in the business within that framework as well. So degearing is actually an important part of the strategy. Nik Burns: So that should mean we should be thinking that over the next 2 or 3 years, you could be well below that number as you look to target lower gearing ahead of a pickup in investment towards the end of this decade? Kevin Gallagher: Well, it could be either/or, right? I mean, it depends. I mean, we're looking -- we talked about some of the development opportunities that we're progressing through appraisal over the next couple of years. So there's no major development spend on the balance sheet in the next couple of years. But depending on the results of those, we might have one in, say, '28, for example, right? And there's nothing scheduled there right now, but whether that was something in the Beetaloo or the Bedout, who knows? We'll wait and see what the results of those programs are, and we'll make those decisions as we go. But it could be either/or, quite frankly. Nik Burns: Got it. My second question is just on Papua LNG. You talked, Kevin, about the improved cost estimates coming through from the operator. There's been some speculation. I think the JV was targeting a reduction in costs from around USD 18 billion to around USD 14 billion. Are you able to sort of quantify whether those costs are coming at around that level? Kevin Gallagher: Well, I saw a transcript the other day from Patrick, it's Tal, and he was talking in the $14 billion to $15 billion range. I think that was public. And well, it's probably now, I guess. But he did actually say that. And the financing progressing, the project financing progressing. Everything is heading in the right direction. There's a few things we still have to get ironed out. But ultimately, ourselves Exxon, Total are working towards a 2026 fit, and we'd like that to be around the middle of the year. So we're hoping that's around the middle of the year. And in that $45 to $50 guidance we've given you, we have assumed Papua is in that. We have assumed that Papua is in. That's very important. Operator: The next question comes from Gordon Ramsay from RBC Capital Markets. Gordon Ramsay: Kevin, I just picked up on this and maybe it's nothing. You previously have stated that the combined production increase from Barossa and Pikka is going to be 25% to 30% by 2027. You're now saying 25%. Is that just being conservative? There's no change there. Is there any kind of risk that you're taking into account that you might not have seen before? Kevin Gallagher: No. Look, I mean, I'd still say it's in that range, Gordon. I've been a bit conservative with the number because you guys always pick me up in that stuff, right? So as you just have done. But look, I'd say we've been a bit conservative there. But it's in that range, right? 25% to 30%. But it kind of -- am I being conservative? Yes, a little. But it's also about phasing and timing and when things come on. And we don't know. I still -- I'll always say we still don't know how Alaska will perform until it comes on. We were assuming 80,000 barrels a day. That's what we're aiming for as a plateau rate. I'm sure we'll get there. The team are confident we'll get there based on the well test. But until it's flowing, I don't want to bank it, yes. Gordon Ramsay: Okay. And just second question, I'll just follow up on Alaska. I mean, congratulations on good IPs and the dual completions that you delivering on these new wells. Can you comment on what annual decline curve you might be expecting from the Pikka wells? I know they're starting up really well, but do you have a feel for what Santos' target would be, let's say, 12 months out or 2 years out on some of these wells? Kevin Gallagher: Look, I actually can't give you that number off top of my head, Gordon. What I can tell you is that we're looking at a 5- to 6-year plateau with about -- I think it's about 2.5 -- let's say, 2 to 3 years of sustaining drilling going forward, just keeping that performing at those levels before it starts to come off plateau. So 5 to 6 years on plateau, and you're probably looking at 8 wells, 9 wells a year or whatever during that period. Operator: The next question comes from Henry Meyer from Goldman Sachs. Henry Meyer: Jumping back to Barossa. Could you share any detail on the challenges that were observed during that early commissioning and what the current state of the FPSO performance is as you ramp over the next few weeks, Kevin, you mentioned? Kevin Gallagher: Yes. Look, I mean, I think the very first thing I would say is that the processing kit is performing really well. So from a process-integrity point of view, which is often one of the biggest issues you have with a new gas plant or oil facility, we've not had leaks and things like that, which has been very, very encouraging. And so my hat goes -- I take my hat off to BWO for the quality of the process that have installed. In terms of the issues we've had, a couple of unusual ones. I think I communicated last year that we had a heat sensor software issue that caused us 2 or 3 weeks to reset the settings on each one of those, 356 of them, I think, across our facilities. And that was more of a software issue. And it's, I guess, part and parcel with the risks you take with all the high-tech stuff we have in our facilities these days. And then following that, our GRE fire water and safety -- or utility water systems, I should say, had some connection failures. That we looked at systemically, and we had to go through a program of strengthening all of those connections across the facility because we figured -- I'm not sure if that was a design error or not, but we figured it's a systemic issue that we want to address for the longer term and not take any risks on that. And that cost us 2 or 3 weeks around Christmas time. Following that, everything has been working well. I mean we've had the usual little kind of tuning type issues you get in any new facility. But there was a product issue with seals on compressors that our main equipment manufacturer issued to BWO. And we've taken the decision to run through -- to run it at half rates just now while we take compressors offline and change those seals now rather than take the risk of any failures occurring further down the line. So it's a bit like when the airlines give you a product-upgrade type alert that you ground the planes and fix them, right? So what we're kind of doing is we're taking some of the compressors offline right now, so running at half rates while we replace them, and we've got them coming on over the next 2 weeks. And then as I say, 2 or 3 weeks from now, I fully expect we'll have the potential to be pretty close to, if not at full rates, yes. Henry Meyer: Excellent. And covering a lot of ground with all the assets, maybe jumping into Cooper Basin. Kevin Gallagher: And what I should have said, Henry, just to close on that. Obviously, we've had a couple of cargoes already shipped and another one in the next few days. So we're still producing and still getting cargoes out just at a slower rate until we get the full rates in a few weeks' time. Henry Meyer: Sounds good. Cooper Basin, just any details on the Moomba Central Optimization program, the CapEx you're expecting there and improvements to cost and production going forward? Kevin Gallagher: Look, that's a really exciting project for the Cooper Basin because that is a project that certainly makes one part of the Cooper Basin become very competitive in our portfolio. And without going into great details about it, Brett, maybe you just want to give a sort of 1-minute summary of the scope and why the cost will be coming down so much with that investment. Brett Darley: Yes, thanks, Kevin. Yes. Look, we've been working on a couple of things over the last couple of years, along with our joint venture Beach, and it's really about trying to maximize the value of the Cooper Basin. Part of that is getting a resource and proving up that we can develop our -- the resources in the future, and we've made some great progress with Granite Wash and our tight Patchawarra formations around -- pretty much around our central facilities. So we've got a basin that's got hundreds and hundreds of oil and gas fields in an area the size of Wales. And what we've been trying to do is get focus on the areas that are going to provide our resources into the future and actually do it at a lower cost. So targeting starts with the rocks, and we've been spending a lot of time there, and we've been proving up the economics of those rocks. And then ultimately, that area, which is closer to Moomba around our central and northern fields, that area holds the most of our future production. But it is also our oldest facilities are least reliable, the ones that require the most manning. So that step with Moomba Central Optimization will be completely modernize the Cooper in that area -- in a very targeted area, increasing reliability, reducing costs incredibly significantly and also allowing greater flow from those areas, which we're currently constrained on producing, so debottlenecking and producing further capacity to bring that gas back to Moomba, and it will completely transform the cost base in the Cooper Basin. Kevin Gallagher: Thanks, Brett. Operator: The next question comes from Mark Wiseman from Macquarie Group. Mark Wiseman: I've just got 2 questions, one on the Beetaloo and one on the LNG marketing book. Firstly, on the Beetaloo, with an improved well design and lower well costs over time, we feel pretty optimistic that you should be able to achieve an economic outcome there. But could you provide some perspective just on pipeline and the GLNG joint venture and the willingness of that JV to process Beetaloo gas through Train 2. It has been one of the more challenging JVs in your portfolio. Is there a risk that you appraise the Beetaloo but face delays on the commercial structuring? Any insight on that would be great. Kevin Gallagher: Well, look, I mean, that's a great question, Mark. There's a lot of parts to it. In terms of timing, as Brett said, we're looking to drill the 2 to 3 appraisal wells starting second half this year through first half of next year and then put them on production for 9 to 12 months, producing them to get the information we need to fully appraise to take us to the point where we would be confident to go forward and develop. That's -- hopefully, that will get us pretty close to 5 Tcf of resource booked that we then get confident about going and developing. We've already done a lot of work in what that sort of development would look like. We've had teams going over looking at Permian developments and stuff like that to identify how to do this very efficiently in the Northern Territory and what the cost of supply would be. We've looked at that cost of supply both to GLNG and also to Darwin. We've started to work with both governments on pipeline approval processes to get the various licenses. And so we're not in that sort of loop that we have been in for a long time, say, with Narrabri, for example. Different regimes and different processes. But making sure we're not going to be held up doing those approvals over the longer term. So we're very confident in the time line. In terms of when would you be ready to take an FID, you're probably looking at earliest, sometime late '28 or something like that, probably earliest based on the time you'd be producing the wells, more like probably early '29. And if you just think of that as being a 3- to 5-year development -- probably 3, 4 years because pipeline is probably the critical path there because the rest of it is just an upstream drilling project. That's the earliest you're looking then at any sort of backfill or feedstock opportunities for, say, GLNG. Look, I'm pretty confident when it comes to GLNG that when that becomes available, the partners would obviously be very keen for any material resource to come through. It's a value -- a value-based decision-making process, I would expect. But if you start to look at GLNG's production profile through GLNG, it's still pretty strong in the early 2030s, still over 5 million tonnes per annum in the 2030s. I think it's still around about a full train in 2040s, 2045, just based on a natural decline curve for the CSG field. So it's a very strong production profile. But there is one train that starts to open up, I'd say, mid 2030s. And that would be a good opportunity for it. But you shouldn't discount the opportunity to go North, to Darwin as well because that's probably a more economic and lower cost of supply option. And of course, Santos does have EIS approval for a second train at Darwin. We're the only project that has an approval for its second train already. We have that. And so with the right partners, the right opportunities, there's also the opportunity to expand Darwin. GLNG would be a more expensive pipeline operation. But of course, you already have a train in place. So that's an advantage for GLNG. But Darwin has the opportunity to expand. And of course, if you start thinking further out to Barossa backfill, a successful Beetaloo development offers backfill opportunities, relatively low-cost backfill opportunities for Barossa in the future as well. So what excites us about the Beetaloo Basin is that it's got the potential to fill all of our LNG operations or assets in Australia for decades to come if, it's a big if at this stage, the appraisal program goes well, and we're able to develop that basin economically. Mark Wiseman: That's fantastic, Kevin. And perhaps my second question on the marketing book. You mentioned 83% contracted over the next 4 or 5 years. Is there more work to do on the LNG book? Are you -- as you gain confidence in Barossa and you start to hit nameplate there, do you layer in more contracts and reduce your spot exposure even further? Kevin Gallagher: Well, look, Mark, I mean, our plan is to try and maintain the portfolio around about the 80% to 85% contracted, leaving a bit of spot exposure in there as well. And that also allows us to do some of that portfolio optimization if we don't have it all contracted as well. So our guys have done a great job. If you look at that chart, I think, on Slide 26, you can see the actual realized prices in terms of slope to Brent, well above benchmark. And you can see on the WoodMac chart that our relative prices to our competition are significantly higher. And the guys, look, we've got a great M&T team led by Sean Pitt, a fantastic team, doing a great job, delivering a lot of value. And you can see the results in that chart. And that's a chart that's done independently of us. But we'll continue to -- I mean, I guess what Sean and the team are doing, we've got some of our portfolio contracted much longer than that, 10 years plus into the future. What we're saying is it's about 83% over a 5-year horizon. And as we keep rolling 1 year to the next, we'll continue to do short and midterm contracting opportunistically that makes sense for us. We'll continue to try and form more new partnerships with end users in our key markets, and we're building very strong relationships, long-term relationships with great partners, great customers in Japan and Korea, and we'll continue to do that going forward. Now I'm getting the hook. I believe I'm 50 minutes -- 60 minutes over to you. So I think there's 2 or 3 people left in the line that I'm not going to be able to go to. So I apologize for that, and I look forward to catching up with some of you on a road show over the next week or so. So thank you very much.

86天前Insight Analytics约5分钟阅读

PHO.OL 2025 Q4 财报电话会议

Daniel Schneider: All right. Well, good afternoon, good morning to everyone. This is Photocure ASA Fourth Quarter and Full Year 2025 Results. I'm Dan Schneider, President and CEO. Today with me is Erik Dahl, CFO; and Priyam Shah, our Vice President of IR. Just a reminder, the usual disclaimers are in effect for today's presentation. So I'd like to start off with the strategic priorities and initiatives of Photocure. Our strategic priorities guide how we execute and allocate resources across the company. At a high level, our strategy is centered around 3 key pillars: Strengthen the core Hexvix/Cysview business, advance blue light cystoscopy as a definitive standard of care in bladder cancer, and third, expand our reach into a broader uro-oncology and precision diagnostics space. Taking a deeper dive on the first pillar, accelerate and expand, we need to deliver on our financial guidance for disciplined growth in revenue and EBITDA in our core business and continue generating operating leverage. We also need to drive the BLC mobile strategy, ForTec, in the U.S. that hits the hospital markets or the hospitals who otherwise would have access to blue light cystoscopy. And in the EU, it's important we increase our penetration in our high priority growth markets through BLC expansion and additional image quality upgrades throughout the continent and also expand our geographic footprint, for example, most recently Spain last year, and leverage our distribution partnerships throughout the globe. In the second pillar, positioning and access, we are building the foundations for BLC as a primary precision diagnostic tool to facilitate early and appropriate use of new NMIBC therapeutics, detection, surveillance, and therapeutic monitoring. We also need to support high-def BLC technologies that are entering the market, upgrades of key OEM partners and support the efforts to allow other manufacturers into the U.S. market, whether it be reclass or other processes. And finally, partnering with Richard Wolf on building adoption in Europe for the flexible blue light cystoscopy interim solution while we continue to advance the development of the high-def 4K state-of-the-art and the world's only BLC Flex system for global use. These efforts will not only drive near-term growth, but also will solidify our long-term competitive positioning. The third pillar, acquire and transform. We're looking ahead and actively assessing opportunities within non-muscle invasive bladder cancer and other uro-oncology indications with a focus on the rapidly growing interest in precision diagnostics indications, things such as biomarkers, artificial intelligence, and new technologies, diversifying our portfolio and building upon our commercial footprint and bladder cancer expertise. Two real-time examples of this are our collaborations with Richard Wolf and ForTec to bring 4K Flex and mobile solutions by leveraging our existing global commercial infrastructure in the broader uro-oncology segment. And secondly, further in the life cycle of management as demonstrated by our recent strategic collaboration with Claritas ICS to develop the world's first and only BLC AI system. M&A is a focus in 2026 in an effort to expand our uro-oncology footprint, grow faster, and increase our ability to generate strong cash flow. So Q4 highlights. Product growth, overall, we had 9% product growth revenue, 10% on the total year ex-FX. In North America, we delivered 13% unit growth and 17% product revenue growth ex-foreign exchange, offsetting the continued Flex unit decline. Flex currently is less than 5% of our total U.S. business. The installed base of Saphira blue light equipment continued to increase with 1 tower placement and 6 upgrades in the U.S. in Q4. And I'd like to make a comment that the fourth quarter of last year, KARL STORZ was running a promotion, and we believe that some of the sales will flow into first quarter of this year as the POs have been cut. We had a fantastic 19% unit growth in the rigid surgical market, inclusive of ForTec Medical's mobile solution. As a reminder, ForTec added 6 more rigid Saphira to their national fleet in September and began deploying them, and this is all underscoring the growing demand for BLC. And the number of active accounts has now increased by 22% year-over-year to 384 active accounts, setting the stage for continued momentum into the future. In Europe, revenue was up 4%, units up 4%. We continue to execute in EU with strong growth from the DACH and Nordic countries driven by Olympus upgrades and continued execution focus. The launch early in 2025 of the Olympus Visera III equipment continues to gain momentum with now 60 new installs in the field. Upgrades throughout the world have proven to increase the usage of BLC with Hexvix and Cysview and remains a very important part of our strategy. We also generated positive EBITDA of NOK 1.9 million, NOK 8.4 million commercial EBITDA. It's our 11th quarter in a row of positive EBITDA, which continues building operating leverage throughout 2025, and we believe into 2026. A strong balance sheet with NOK 238.9 million cash and no term debt. And as a reminder, we also completed our 500,000 share buyback program last year in quarter 2. Later in today's presentation, I will share several key performance metrics underscoring the growing business of scaling and operational leverage. Important news flow in Q4 data publications, presentations, and abstracts. On November 19, we published the new budget impact model study in 4 European countries concludes that BLC use offers a clinically meaningful and economically rational approach to non-muscle invasive bladder cancer. On December 8, the impact of avoiding recurrence, the new BRAVO study abstract at SUO 2025 demonstrated cost neutrality in blue light versus white light cystoscopy comparison. In industry news, on November 28, we received a prestigious 2025 innovation prize from the Norwegian Cancer Society. The prize is recognition of our commitment to advancing cancer diagnostics and improving patient outcomes in bladder care. In partner news, on October 15, as previously announced in the Q3 earnings call in October, we formed a partnership with Intelligent Scopes Corporation, signed an agreement for a strategic partnership to develop artificial intelligence to couple with blue light cystoscopy. And on January 12 post period, new publication of Hexvix trial data from China, pivotal trial by Asieris showed that BLC significantly improves the detection of bladder cancer using modern high-def equipment. The data shows proportion of patients with additional bladder cancer lesions detected by BLC was 43.3% during the rigorous trial and the updated equipment. So let's go to segment trends. Strong unit growth in both regions. Both North America and Europe delivered continued growth. In North America, the business has significantly overcome the continued decline of Flex surveillance market, while the rigid surgical market delivered a 19% unit growth in Q4, an all-time high. In Europe, Q4 units surpassed previous Q4 high watermark as momentum continues to build throughout the region. Europe is beginning to see the impact of the Olympus Visera III upgrade rollout, particularly in the DACH, France, and Nordic countries. Sixty installs through Q4 with more in the pipeline, especially in that region of Europe. Upgrades continue to deliver positive double-digit impact. Reminder on the impact of these upgrades, 40% of the Europe is dominated by Olympus. So it's very important that this remains an important part of our strategy throughout the European continent. Turning specifically to North America. We see adjusted rigid growth increasing 19% with the addition of ForTec Mobile Solution, while Flex units are now less than 5% of total sales, which were 17% to 20% of the total North American business. There were 7 new Saphira installed, 6 upgrades, 1 new. As I mentioned, a promotional program did run in the fourth quarter and has continued into this first quarter of this year and account growth of roughly 22% year-over-year. This bodes very well for quarters ahead. ForTec Mobile Solution is now reaching 134 accounts as of the start of the service. That's plus 13 from the end of Q3 with -- and over 230 different physicians are now trained since launch, demonstrating growing momentum and demand. The ForTec Mobile Solution Saphira upgrades are key drivers to the U.S. business. Access to BLC in the U.S. remains a top priority as demonstrated by our ongoing efforts in the FDA reclassification and reimbursement initiatives. I want to repeat, supporting the growth are many discussions, presentations at U.S. medical congresses such as SUO recently in December, where there is a growing belief that BLC's ability to see more assures physicians of their ability to perform a more complete TURBT, which leads to more accurate pathology, staging, and risk stratification and ultimately helps urologists make an informed precision medicine decision. Europe also remains strong with solid growth in the DACH and Nordic countries, which is -- which make up as a majority of the revenue. The priority markets continue increasing, France, Italy, and U.K., we're seeing double-digit growth. And as I mentioned earlier, there have already been 60 Olympus upgrades in Europe through Q4 of last year. Taking a look at the U.S. specifically, significant growth of 22% in active accounts. And remind you, the definition of active accounts are accounts that have been ordered in the last 12 months. I get often asked what inactivates an account. And a lot of times, it is old standard definition of equipment that has gone down and the account is waiting to either upgrade or go to the mobile solution. So we do have ebb and flow within the active accounts, but we are up on a total net of 22%. This includes ForTec mobile accounts that are building momentum. The program already is exceeding everyone's expectations as well as accounts due to BLC upgrades. We believe the balance of the old stores standard definition blue light machines will be upgraded over the next 2 years. This is an important initiative as upgrades provide double-digit uplift in sales in those accounts. We see continued momentum in the overall interest and adoption of blue light cystoscopy with Cysview in the U.S. So the U.S. is a highly underpenetrated market for BLC with potential for exponential upside growth. This is an illustrative representation. Despite the progress we are making, we are still in the very early stages in the U.S. as the U.S. remains the single largest opportunity for Photocure and is still significantly underpenetrated with less than 10% market share today. We have a long runway for growth as awareness, access, and equipment availability expand. Bladder cancer represents a major unmet need in the U.S. Each year, there are approximately 85,000 new cases and more than 730,000 patients living with the disease. You have the total number of TURBTs and surveillance cystoscopies in the U.S. here on the upper right. And in the U.S. and Europe, there are over 700,000 surgical procedures with 1.6 million surveillance cystoscopies done in offices annually. The total addressable market for flexible cystoscopy alone exceeds USD 1.3 billion globally. The blue light cystoscopy is uniquely positioned to capture a meaningful portion of that opportunity. Add another 700,000 for rigid and the total TAM for BLC is USD 2 billion with the majority in the untapped U.S. market. We expect several catalysts, and that's what's depicted in this representation to drive the next wave of growth in the U.S. market. First, we continue to work towards improved CMS reimbursement, which we are pursuing through direct conversations with CMS and through legislative efforts in Washington, D.C., both would further support the adoption of BLC across academic and community settings. We also see the return of Flex system to the market that will enable broader access for outpatient and office-based procedures. We also see the entry of additional OEM partners, what would expand the installed base dramatically and provide more choice to urologists and all types of institutions. And finally, FDA reclassification of blue light cystoscopy equipment for which there is an ongoing citizens' petition, could be a potential milestone that would significantly lower the barriers and accelerate uptake nationwide. And finally, and probably one of the most dramatic things going on is the momentum in the macro environment as reinforced at major medical congresses and increasing publications. The expensive precision therapeutics that are hitting the market are turning to precision diagnostics like blue light cystoscopy and bladder care, it is necessary to find the right patients who can benefit. Taken together, these drivers support the long-term growth trajectory for the U.S. business that is both scalable and sustainable. The bottom line is we have a proven product, a growing clinical endorsement, and in a traded market, giving us potential for exponential upside as these catalysts materialize in the near term. Growth initiatives. As I mentioned, first, let me talk about our organic growth initiatives. We now have 134 ForTec using accounts with over 230 different users gaining experience. These are physicians and patients who otherwise would not have access to BLC. Our development partnership with Richard Wolf is progressing well, while a flexible BLC interim solution has been made available in advance of the future launch of the state-of-the-art system that has both high-def 4K. This is a $1.3 billion TAM market between the U.S. and the EU5. The third box, and the trends are clearly blowing in the favor of BLC, the momentum and pressure continues to build behind the notion of accurate diagnosis and complete resections in line with precision pathway for bladder cancer patient care. We believe BLC can play a central part in determining the precision pathway. As previously announced in the last earnings call, our recent partnership with Intelligent Scopes Corporation, a U.S.-based subsidiary of Claritas HealthTech is to develop AI software for real-time tumor detection using BLC. Through this collaboration, Photocure and ISC are combining complementary strengths. Photocure's leadership in bladder cancer detection and ISC's deep artificial intelligence expertise to build an intelligent diagnostic platform designed to improve accuracy and consistency in tumor detection. The pilot program that we underwent analyzed data from over 200 BLC procedures with over 80,000 images, demonstrating early performance and very strong performance in detecting high-risk and early-stage lesions that otherwise would not be detected. Joint development work is underway and the ENAiBLE clinical study has been initiated in both the U.S. and Europe, following which we plan to pursue both FDA and CE submissions with Photocure holding the exclusive global commercialization rights once the software receives clearance. This initiative extends Photocure's technology moat towards data-driven precision care, paving the way for future AI-enabled diagnostics in uro-oncology, importantly, it adds high-margin, scalable software component to our business model, creating durable value beyond current consumable base. And why do we feel strongly about organic BLC adoption? The environment for adoption for BLC is stronger than ever. The guidelines from AUA, EAU and various other bodies now recommend BLC and the newer guidelines are only getting stronger. The Italian Society of Urology was the most recent addition in the third quarter, which now recommends BLC for the first TURBT, the second resection, and recurrence of non-muscle invasive bladder cancer in populations of high risk. The science itself from over 300 publications in multiple well-powered randomized studies provides a wealth of clinical evidence. Over 40 independent studies have confirmed improved detection and reduced recurrence, and we have the world's largest bladder cancer registry. And then again, our OEM partners are investing on anticipated volume growth and rising ties in bladder cancer diagnostics. By upgrading their systems with rollouts of 4K and high-def capabilities, the new OEMs are increasingly wanting to enter the U.S. market to offer BLC. As mentioned earlier, publications are now providing evidence that BLC significantly improves the detection of bladder cancer using modern high-def equipment. Data shows proportion of patients with additional bladder cancer lesions detected by BLC was 43.3% during a rigorous Chinese trial by Asieris with the updated 4K high-def equipment. And there's a rapidly evolving therapeutic landscape of bladder cancer care. Another major source of tailwinds behind the interest in bladder cancer diagnostics is a rapidly evolving therapeutic landscape. Bladder cancer remains a prevalent malignancy with high recurrence despite the standard therapies. BCG is a cornerstone of treatment for non-muscle invasive bladder cancer. However, nearly half of the patients experienced relapse or develop resistance, highlighting the need for alternative strategies. Recent advancements in immunotherapy have reshaped the therapeutic landscape in bladder cancer. Immune checkpoint inhibitors restore T cell function and show clinical activity in BCG unresponsive disease. Viral vector-based approaches provide localized immune activation, while cellular platforms such as CAR-T or CAR-NK therapies offer precision targeting of tumor antigens. Concurrently, other novel delivery systems and antibody drug conjugates enhance efficacy and safety by improving tumor-specific cytotoxicity. Collectively, these strategies significantly -- signify a paradigm shift from traditional intravesical therapy towards a personalized and durable immunotherapeutic intervention. After decades of little advancements, there are now 6 FDA-approved drugs on the U.S. market, 3 were approved in the second half of last year, and there are 26 total unique therapy-focused NMIBC trials ongoing currently. That's a positive development. What it also does is raise the bar for diagnosis. As these therapies are becoming more advanced, they are also becoming more expensive and missing disease becomes even more costly. Every NMIBC case will become more complex with all the new personalized treatments and combo immunotherapies and bladder sparing options. Improving outcomes and guiding the future of management of bladder cancer will depend on precision pathways, starting with precision diagnostic like BLC along with monitoring to offer a more comprehensive approach to risk assessment, surveillance, and treatment planning in the complex NMIBC cases. Hence, our ambition goes beyond single product and organic BLC equipment enhancements. The future of bladder cancer is precision diagnostics and combining high-resolution imaging, both rigid and flexible BLC, along with the potential expansion to various other advanced cytologies, computational histology, biomarkers, artificial intelligence, and longitudinal monitoring will be critical in bladder cancer patient care continuum. Blue light cystoscopy is the foundation of that ecosystem, and Photocure is building towards an integrated future of molecular digital framework. We have spent significant time and effort in evaluating the right areas of focus to expand our portfolio offerings, and we believe that these are the targeted areas that will truly allow us to further our additional aspects of the continuum of care in bladder cancer diagnostics and management. We anticipate having more granular updates for you throughout 2026. And finally, we'll talk about Asieris, a value-generating program. Our partnership with Asieris continues to progress favorably. We have now taken in over USD 18 million in milestones across both Hexvix and Cevira programs, with the potential for additional milestones and royalties as the programs advance through regulatory and commercial goalposts. As a reminder, key points about Hexvix's commercial partnership with Asieris. Hexvix has already received marketing authorization in China. What they're waiting for is the Chinese approval for the Richard Wolf system for blue light cystoscopy. We expect the commercial launch following device approval this year. The timing of that is unknown, but we believe is imminent. The key points about the Cevira out-license approach to Asieris, so the Cevira NDA remains under regulatory review as we await clearance. We are in regular dialogue with Asieris. We are aware that Cevira is still under regulatory review, and it is following the normal information exchanges between the applicant Asieris and the NMPA. Any additional questions should be submitted to Asieris as this is their product. If and when it's approved, it would be one of the first products approved in China and before the rest of the world. Asieris has had pre-submission meetings with the EU and U.S. regulators to determine a way forward in both of these large markets. And Asieris has also disclosed they have interest in pursuing a secondary indication for Cevira, which brings additional milestone payments upon approval. I'd now like to turn it over to Erik and the financials. Erik, to you. Erik Dahl: Thank you, Dan. Please stay on Slide 16, please. In this section, the financial section, we will review the consolidated income statement, segment reports for our 2 main segments and finally, headlines from the cash flow and the balance sheet. A couple of words about foreign exchange before we get started. U.S. dollar, as I guess everybody know, weakened in the quarter, resulting in about NOK 5.6 million, unfavorable impact on revenue from foreign exchange. In Europe, on the other hand, the revenues were not materially impacted by foreign exchange. Final comment before we start on the analysis. I will always use Norwegian kroner, and please bear that in mind. If there is another currency, I will mention that. Moving on to Slide 17, the consolidated income statement. Looking at consolidated Hexvix/Cysview product revenue, for the quarter, NOK 135 million, it's the highest ever and 9% above Q4 2024 in constant currency. Including FX impact, the year-over-year growth was 5% in the quarter. Full year Hexvix/Cysview revenue was NOK 530 million, growing 10% year-over-year in constant currencies and at the top end of our guidance for the year. The revenue growth was driven by volume growth as well as price increases in both regions. Hexvix/Cysview market unit sales, in-market unit sales increased 13% in North America and 4% in Europe in Q4. For the full year, the increase in volume was 9% in North America and 4% in Europe. The sales have, to some extent, been negatively impacted by the phase down of Cysview usage in the flexible BLC setting in U.S. On the positive side, we have seen strong development in the sale and distribution by our partner, ForTec. Total revenue, including milestones was NOK 136 million in Q4, and the decline from 2024 is due to a NOK 12.1 million milestone in 2024, and we have no milestone revenues in 2025. Full year total revenue was NOK 532.6 million year-over-year, an increase of 1%, impacted by milestone revenues of NOK 34 million in '24 and none in 2025. Cost of goods sold in Q4 2025 was NOK 10 million compared to NOK 7.5 million in 2024. The increase in COGS was driven by sales volume increase as well as onetime IFRS inventory value adjustments and FX movements as well as activities to increase productivity capacity -- production capacity. And we expect COGS to move back to normal levels throughout this year and next year. Total operating expenses, excluding business development expenses was NOK 119.9 million in Q4, a year-over-year reduction of 2%. Full year operating expenses, excluding business development expenses was NOK 444 million, an increase of 2% year-over-year. The increase included investments in medical programs, merit, and inflation, partly offset by FX. Business development expenses were NOK 4 million in Q4 compared to NOK 5.2 million in Q4 2024. Operating expenses within business development are related to cycle management for Hexvix -- life cycle management for Hexvix/Cysview, our cooperation with Richard Wolf on the flexible BLC system as well as business development efforts that can diversify our business and significantly increase our growth rate. The expense level obviously may vary from quarter-to-quarter given the one-off nature of these expenses. EBITDA in Q4, excluding milestones and business development expenses was NOK 5.9 million compared to NOK 1.6 million in 2024. Full year EBITDA, excluding milestones and business development was NOK 46.2 million compared to NOK 24 million full year 2024. Depreciation and amortization, NOK 7.4 million in Q4. Main cost item is the amortization of the intangible assets related to the return of the European business from Ipsen in 2020. Net financial items was a net cost of NOK 3.9 million in Q4, driven by Ipsen earn-out payment, partly offset by interest income and FX gain. And tax expenses is a net income of NOK 1.5 million for the quarter. After tax, we have for Q4, a net loss of NOK 8 million and for the full year a net loss of NOK 1.5 million. Now to the segment performance. Next slide, please, Slide 18. For the segment reporting, we will focus on the 2 main segments, North America and Europe. The North America segment includes U.S. and Canada. And revenue for the North America increased 17% in Q4 in constant currencies. The main drivers are volume increases of 13% and increased average prices of 4%. FX impact was negative 10%. Revenues were negatively impacted by the phase down of Cysview usage in the flexible BLC setting, however, to a lesser extent than previous quarters. On the positive side, we have seen strong development within the sale and distribution of our partner, ForTec. Q4 direct costs decreased 1%, driven by FX impact, which was offsetting increases driven mainly by product -- project expenses, merit, and inflation. And Q4 contribution was NOK 10.8 million compared to NOK 7.8 million in 2024. Full year contribution was NOK 31.8 million, an improvement of NOK 10.8 million from 2024. Full year EBITDA negative NOK 14.5 million, a year-over-year improvement of NOK 6.6 million. Looking at the European business, we had year-over-year a revenue increase of 4% in Q4, mainly driven by volume in the DACH region and high priority growth markets. Direct costs decreased year-over-year 5% in Q4, driven by FTE adjustments, partly offset by merit and inflation. And we ended Q4 with a contribution of NOK 34 million compared to NOK 31 million in 2024. Full year EBITDA, NOK 76 million, a year-over-year improvement of NOK 12.4 million. As a conclusion on the segment reporting, what we see is significant growth and improved profitability in both regions. Now to the cash flow and balance sheet. Next slide, 19, please. So first, cash flow from operations in Q4, negative NOK 0.5 million. For the full year, cash flow from operations was NOK 26 million compared to NOK 76 million in Q4 2024. The full year change was mainly driven by milestones from Asieris in 2024 and negative working capital movement in 2025 due to increased product revenue year-over-year. Cash flow from investments in Q4 and full year include interest received and paid as well as investments in tangible and intangible assets, including production capacity. Cash flow from financing in Q4 and full year was negative, driven by earn-out payments to Ipsen and for the full year, also the share buyback program. In total, we paid NOK 29.6 million for the 500,000 shares we acquired in the year. This total gives a net cash flow in Q4 negative NOK 8.9 million compared to positive NOK 2.8 million in 2024 and full year net cash flow was negative NOK 55 million and in 2024, positive NOK 4.4 million -- NOK 34.4 million, sorry. And with this net cash flow, we ended 2025 with a cash balance of NOK 238.9 million. Going on to -- moving on to the balance sheet. We ended the year with total assets of NOK 707 million. Noncurrent assets was NOK 321 million at the end of 2025, and this included customer relationship with NOK 79 million and customer relationship is the intangible assets identified in the purchase price allocation for the Ipsen transaction. Noncurrent assets also include goodwill from the Ipsen transaction of NOK 144 million and a tax asset of NOK 56 million. Inventory and receivables were NOK 146 million at the end of 2025, and the increase from 2024 is NOK 16.8 million and driven by increased revenue as well as inventory. Long-term liabilities was $116.9 million and include the liability related to Ipsen transaction totaling NOK 100 million. Finally, equity at the end of the year was NOK 484 million, which is 68% of total assets. And this concludes the financial section. Thank you. Dan, back to you. Daniel Schneider: Thank you, Erik. All right. For this section, we thought it would be important to share with you 2 slides on key performance metrics, underscoring the fast-developing scale and leveraging within the core business. This graphic is on the second page of the earnings report. Over the last 3 years, we have delivered consistent profitable growth across all key operating metrics while keeping headcount flat. Product revenues increased 42%, unit volumes grew 18%, while North America rigid and mobile volumes grew 40%. The gross profit expanded 39%, while OpEx has remained relatively flat. The most notable development over this period has been operating leverage. Commercial EBITDA improved from negative NOK 35 million to a positive NOK 56 million, with margins improving from 7% to 11% and continuing. This reflects sustained procedure adoption, growing utilization and the durability of our commercial model, which is shown in the graphical format on the next page. Taken together, these trends demonstrate that we are not just growing, we are scaling. We have shown that incremental revenue increasing drops through to the EBITDA. These performance trends clearly demonstrate our ability to scale the business, all while maintaining a focused commercial footprint. So let's go into summary. So fourth quarter revenue and EBITDA overall, a solid quarter with 9% product revenue growth in Q4, 10% on the year. We now have had 11 quarters in a row of positive EBITDA. The commercial EBITDA at NOK 8.4 million ex-BD and Milestones, NOK 5.9 million, but we continue to invest in key growth initiatives that we believe will, one, position us for long-term success; two, generate future revenue growth; and three, increase our operating leverage. The Flex and surveillance market now and in the future, Richard Wolf and Photocure's joint development program is well on track and will bring Flex back to the surveillance market. We are now 15 months into development, which is going quite well, and we estimate a market readiness in 2027. In the interim, we are beginning to reintroduce interim Flex by Richard Wolf in Europe. The first cases took place in late June and early July in the U.K. and the purpose of this interim solution is to keep interest high and collect data. North American account growth of installs and upgrades in mobile. North American unit sales grew 19%. We grew our active U.S. accounts by 22% year-over-year. New and reactivated accounts by upgrades, for example, and we believe this is a great indicator of our performance. We continue to work with KARL STORZ to grow the installed base of BLC equipment in the U.S., a key priority for KARL STORZ, and we expect this to continue to expand. KARL STORZ initiated the promo program last year, and I believe it has a little bit of a lag-time in purchase orders that we will fulfill here in the first quarter of this year. The ForTec national mobile rollout continues to gain traction and contribute to our growth, creating a new business by expanding access to otherwise inaccessible accounts with a novel mobile business model. There are now over 120 accounts that have tried the solution with nearly 200 users, and the momentum continues to build, bringing BLC access to so many desperate bladder cancer patients throughout the United States. In the EU, revenue was up 4%, 3% unit growth, particularly driven by DACH and double-digit growth in the priority markets. We continue to facilitate the imaging quality upgrades in nearly -- in our nearly 600 targeted accounts, and we believe that the Olympus Blue Light upgrade will help strengthen this initiative. So far, 60 Visera III upgrades have been installed since January 1, primarily in Germany, France, Nordic, and Austria and a strong pipeline and aligned interest with Olympus exists. We have a strong cash balance of NOK 239 million. And finally, we continue to advance several business development initiatives in next-generation precision diagnostics, including the partnership with Intelligent Scope Corporation/Claritas, which is the artificial intelligence software that we're developing in real time to help in blue light procedures. So the anticipated milestones, we are guiding 7% to 11% top line growth, all while continuing to show operating leverage on our commercial business. We will continue increasing Cysview and Hexvix account utilization through upgrades, installs, and a mobile solution, in particular in the U.S. The advanced development of the next-generation state-of-the-art 4K high-def Flex system to access and unlock the potential within the next 1.2 million surveillance procedures done in the U.S. and EU5. In addition, we want to expedite the strategic partnership with ICS to develop the blue light AI system, what we believe will be a game changer in bladder cancer precision diagnostics. We'll continue to generate data and present, in particular, data on health economics, positioning blue light cystoscopy as the go-to precision diagnostic in bladder care. We also want to increase access to BLC in the U.S. vis-a-vis the citizen's petition or the alternative pathways to U.S. approvals. And finally, we'll continue to support Asieris' progress across both Hexvix and Cevira with potential to receive significant milestones. And with that, I think we can open up to questions. Unknown Executive: The first question is if you could put some flavor on the Tower development in the fourth quarter. Daniel Schneider: Yes. As I mentioned, last half of 2025, KARL STORZ initiated a promotional program. They -- we believe or what we're hearing is that it -- some of the installs they expect in the fourth quarter will flow into first quarter this year. But one thing I do want to remind everyone, we are highly focused on throughput of existing towers right now. The swell of interest in precision diagnostics and blue light cystoscopy being the foundation of bladder cancer care, it's extremely important that we're there supporting it. The second part is KARL STORZ in the U.S. has roughly 1/3 of the market. So when you think about installs and then also mobile coming in with it, we take a look at it more in terms of account growth rather than installs. And the account growth was 22% in the fourth quarter. So we're very pleased with that. Unknown Executive: The next question is about Ipsen and if there have been any discussion with them to pay a onetime amount and remove the earnout? Erik Dahl: This is Erik. Yes, they are in discussions. We have approached them. However, we didn't agree on the amount and the yield. So, well, takes 2 hands to clap. Unknown Executive: Then there are questions about the guidance. Note that there are several similar questions being submitted, which although some have been thoroughly outlined by the management in the presentation. But the first question on guidance is, in your guidance, can you clarify what continued operating leverage flow-through means? Priyam Shah: Sure. I can take that one. So the Hexvix/Cysview commercial business has a strong operating leverage. What that means is that a significant portion of incremental revenue flows straight through to the commercial EBITDA because most of the costs are fixed. We demonstrated that in 2025 with the commercial EBITDA margins going up from 7% to 11%. So every additional procedure unit sales -- sold contributes disproportionately to profit growth. That's what that implies. Unknown Executive: On your 2026 guidance, how do you see growth rate in North America versus Europe? Should we expect it to be similar to 2025? Daniel Schneider: Yes. I think you can expect it to be fairly similar. We expect growth rates in the high teens in North America, primarily driven through rigid and mobile solutions. Flex still remains a very small drag on the business as it represents less than 5% of the business, but it's still 5% of the business, and it could drop out completely, but we overcome that. In Europe, we expect, again, same sort of mid-single digit, reminding everyone that the DACH, Germany, and Austria are fairly mature markets, but the priority growth markets are expected to grow at double digits. And when I say significant, double digits in 2026. So that blended growth rate ends up being sort of in the mid-single-digit growth rate. Unknown Executive: When do you expect Flex approval? Daniel Schneider: We got to get through the development first, and that's well on track. We've seen the prototype. It's a slick system. We're super excited about it. When we announced this, we said it would be a 2-year development. We're 15 months into it. So I think the development and then, hopefully, we have a submission maybe later this year with hopefully approval in Europe for sure. And if we can find our pathway through the U.S., which we believe we can, we get a U.S. approval as well as we look into 2027. We'll give more updates as we go. The development piece is well on track, and it's super exciting. The system is very, very good 4K hi-def. But when we get to the regulatory, we'll give some more updates as we submit and move forward through the process. But we're super excited about it. And let me add one more thing to that, [ Geir ]. The market is really starting to mature for the Flex. I think 7, 8 years ago when they launched all -- the only option out there was BCG. Now with these precision therapeutics coming out, the payer world is demanding proper surveillance and monitoring of these medications that can cost up to USD 1 million. So we think we're hitting the market just perfectly right, and we're super excited about that. And we're going to have the world's only blue light flexible system and have exclusive rights to that, so. Unknown Executive: We are heading towards the end of the Q&A section, but has any new OMM scope manufacturer filed with the FDA for clearance? If not, any input as of when that will happen? Daniel Schneider: We're not aware of any yet, but we do expect it this year. Unknown Executive: Last question, and could you comment some more about the CMS reimbursement discussion and potential impact? Daniel Schneider: Yes. So this is a situation in the U.S. CMS has us in a bundled procedure payment, meaning, basically, if the procedure is reimbursed at, call it, USD 5,000, if they do a white light procedure, they get USD 5,000. If they do a blue light procedure, they get USD 5,000. But in the blue light procedure, part of the cost of that procedure is the medicine itself. So the net -- call it, the net profit is a little bit less. Now it still covers it. It's not a negative economic situation, but it is a negative profit situation. What we want to do is use the analog of the radiopharma business, which 1-1/2 years ago was decoupled. So radiopharma procedures and the product they use get separate reimbursements. We want blue light cystoscopy with Cysview to be decoupled. They would reimburse Cysview separately with a profit margin. And then the procedure would be the same procedural reimbursement, whether it's white light or blue light, it's economically neutral. So that's what we're going for. We're doing this in concert with a couple of other companies who have similar situations. We're the ones sort of orchestrating this. I remain optimistic. The goal is to get this through and get a decision potentially by late summer. And then it would -- if we're successful, this would implement in 2027. And I will tell you that it had a dramatic impact on the radiopharma business. So we believe this is a very much an impactful effort on our part. Unknown Executive: That concludes the Q&A segment, Mr. Schneider. Daniel Schneider: Thank you, Geir. All right. Well, thank you, everyone. Thank you, Priyam and Erik, for joining. Geir for consolidating questions. We look forward to seeing everyone at Q2. Have a great day.

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ESRT 2025 Q4 财报电话会议

Operator: Greetings, and welcome to the Empire State Realty Trust Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Heather Houston, SVP, Chief Counsel, Corporate and Secretary. Thank you. You may begin. Heather Lawson: Good afternoon. Welcome to Empire State Realty Trust's Fourth Quarter 2025 Earnings Conference Call. In addition to the press release distributed yesterday, a quarterly supplemental package with further detail on our results and our latest investor presentation were posted in the Investors section of the company's website at esrtreit.com. During today's call, management's prepared remarks and responses to questions may include forward-looking statements within the meaning of applicable securities laws. These statements reflect management's current views and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Empire State Realty Trust assumes no obligation to update any forward-looking statement in the future. We encourage listeners to review the more detailed discussions related to these forward-looking statements in the company's filings with the SEC. During today's call, we will discuss certain non-GAAP financial measures, such as FFO, modified and core FFO, NOI, same-store property cash NOI, EBITDA and adjusted EBITDA, which we believe are meaningful in evaluating the company's performance. The definitions and reconciliations of these measures to the most directly comparable GAAP measures are included in the earnings release and supplemental package, each available on the company's website. Now I will turn the call over to Tony Malkin, our Chairman and Chief Executive Officer. Anthony Malkin: Good afternoon, everyone. Yesterday, we reported ESRT's fourth quarter and full year results. Today, we will discuss our continued leasing momentum, observation deck execution, latest balance sheet recycling and outlook for 2026. We delivered full year core FFO of $0.87, a reflection of continued performance across our platform. Our leasing team again put points on the board with nearly 460,000 square feet leased in the quarter and 1 million square feet for the year. We have now delivered 4 consecutive years of occupancy growth and positive New York City office rent spreads. As we enter 2026, we have framed in our new investor deck that is available online, the significant transformation to drive shareholder value ESRT has executed over the past 5 years. This transformation was deliberate to strengthen our platform and improve the quality and durability of our cash flows. Since Christina joined as CFO in 2020 and was in 2024, elevated as President to join me at the head of the company, we addressed management succession with key leadership hires and promotions. Steve Horn was promoted from CIO to CFO in 2024; Ryan Kass to Co-Head and Chief Revenue Officer of Real Estate; and Jackie Renton joined us in 3Q as Co-Head and Chief Operating Officer of Real Estate. These management changes, along with others across the organization, strengthened our operating platform and reinforce our ability to execute on our growth initiatives. Our portfolio is now 100% New York City. We completed $1 billion of acquisitions of high-quality real estate and disposed of our suburban commercial assets all without tax leakage. Our acquired assets improved our cash flow and portfolio quality and include high-quality Manhattan multifamily properties, prime retail on North Sixth Street in Williamsburg, Brooklyn, and more recently, 130 Mercer in SoHo, also known as Scholastic's headquarters. ESRT's New York City pure-play portfolio benefits from live, work, play and visit dynamics of the greatest market in the United States. This was all made possible by our proactive balance sheet management that provides ESRT significant flexibility to transact strategically and create shareholder value. We are confident in our position as we look ahead. While known tenant rollover will impact our FFO growth in 2026, we believe the portfolio is well positioned for long-term cash growth. Our office portfolio is 93.5% leased. That reflects the desirability of our top-of-tier modernized, amenitized, well-located sustainability leading portfolio underpinned by a strong financial position. Importantly, there is no new supply at our price point. We continue to see an upward trajectory in net effective rents, and our portfolio continues to perform. Our iconic Empire State Building observation deck remains a market leader and a meaningful contributor to our cash flow. Revenue per capita increased year-over-year. In 2025, we delivered resilient bottom line performance through disciplined cost management and price execution despite a decline in visitation from our cross-ocean international tourist visitors. We continue to grow our domestic demand and be ready for a return of our traditional budget-conscious international visitors. Our sustainability leadership as a lever for measurable business results and reduces our and our tenants' exposure to increased energy and regulatory costs. We partner with tenants to support their sustainability goals. In 2025, ESRT achieved the highest possible GRESB rating for the sixth consecutive year with a score of 93 and an A in public disclosure. In addition, the Empire State Building became the first lead version 5 platinum certified building in New York State. These results reflect the leadership and focus of our organization. Our entire organization remains laser-focused on the Observatory's 5 priorities: Lease space, sell tickets to the observation deck, manage our balance sheet, identify growth opportunities and achieve our sustainability goals. These priorities are simple, repeatable and aligned with our desire to drive long-term shareholder value. Christina, Ryan and Steve will provide more detail on our results and outlook. Christina? Christina Chiu: Thanks, Tony. As Tony mentioned, in the past 5 years, we've been very active and fully recycled out of lower growth, higher CapEx suburban commercial assets on a tax-efficient basis into prime New York City assets, aggregating over $1 billion, of which $750 million are unencumbered with superior long-term growth characteristics and lower capital requirements. In 2025, we executed $417 million of all cash acquisitions of well-located, high-quality office and retail assets comprised of 130 Mercer and 86-90 North Street and completed the disposition of Metro Center. In the fourth quarter of 2025, we completed financing that aggregate $420 million and result in no unaddressed debt maturities until March 2027. These include a $175 million unsecured notes issuance and a $245 million term loan recast. The cumulative impact of all the transaction activity in the past 5 years is the successful transition to a 100% New York City portfolio that drives resilient cash flows to the bottom line through high-quality assets that benefit from live, work, play and visit. And this is backed by a proactively managed balance sheet with strength and flexibility. As we look ahead, our focus remains to grow and improve the quality of our portfolio and cash flows and deliver shareholder value through prudent capital allocation. Adding more color to our recent investment activity. In December, we acquired 130 Mercer for $386 million. Our ability to move quickly and close with certainty is a significant advantage in today's market. This was enabled by our proactive balance sheet management, strong liquidity and low leverage. We acquired the asset all cash on our balance sheet and have significant optionality on the building's long-term capital structure. 130 Mercer is a high-quality 396,000 square foot office and retail asset in prime SoHo between Prince and Spring Street with an attractive risk-adjusted return profile. It provides both a solid initial yield and meaningful embedded upside. The property delivered a mid-5% initial cash yield at 70% occupancy, supported by a 15-year office lease with Scholastic and fully leased street retail with approximately 8 years of remaining term in a AAA location anchored by Sephora and Capital One. We expect growth towards a stabilized yield of approximately 8% through the lease-up of a 3-floor vacant office block of over 110,000 square feet with large, efficient floor plates. Our mandate here is straightforward, lease 3 floors. The market for large block institutional quality office space in this submarket is supply constrained, while demand remained strong. This creates a unique opportunity for ESRT to leverage our operating platform and best-in-class stewardship to drive occupancy, rents and returns. The disposition of our final suburban commercial asset, Metro Center in Stamford, Connecticut and repayment of the related mortgage debt in December is consistent with our objective to recycle capital to improve the quality of our portfolio and cash flows. The previously announced acquisition of 86-90 North Sixth Street represents a redeployment of these proceeds. A 86-90 North Sixth Street is a prime redevelopment property that we closed in June 2025 and announced a long-term lease with a high-quality retail tenant shortly after. It is located on a strategic corner along North Sixth Street, where we now control 4 key street corner locations and further strengthens our dominant position along the corridor, where foot traffic, residential density and tenant demand remains strong. In aggregate, our acquisitions along North Sixth Street through year-end 2025 total approximately $250 million. These transactions reflect our disciplined capital allocation approach. Our capital recycling activity over the last 5 years an exit from suburban commercial assets will result in an estimated $90 million of cumulative incremental property level cash flow between 2025 and 2030. This reflects the superior growth and lower capital requirements of what we acquired versus what we sold. We continue to reassess our portfolio to uncover opportunities to recycle capital that are accretive to growth and cash flows. Opportunistic share repurchases remain a strategic part of our capital allocation framework. During the fourth quarter, we repurchased $6 million of shares at an average price of $6.73. For the full year, we repurchased $8 million of shares at an average price of $6.78. Since the inception of our repurchase program in 2020, we repurchased approximately $302 million of shares in aggregate. Our well-positioned and flexible balance sheet remains one of our key strengths. Pro forma for recent investment activity, we maintained ample liquidity and lower leverage versus sector peers at 6.3x net debt to adjusted EBITDA and a well-laddered maturity schedule with all debt maturities in 2026 address. From a capital allocation perspective, we continue to actively underwrite new investments across New York City office, retail and multifamily, evaluate strategic capital recycling opportunities that are accretive to long-term cash flow and assess opportunistic share repurchases. Transaction activity has increased, and there is strong institutional capital interest in New York City and recognition of the strength of its underlying property fundamentals. We remain focused on opportunities where our operating and repositioning expertise can create meaningful value, and our strong balance sheet provides flexibility to act decisively when conditions align. We remain excited about the path ahead for ESRT. We look to continue to improve the quality of our pure-play New York City portfolio and cash flows through thoughtful prudent capital allocation. We also continue to look for ways to operate more efficiently and drive shareholder value. I'll now turn the call over to Ryan to review our leasing activity. Ryan? Ryan Kass: Thanks, Christina, and good afternoon, everyone. In 2025, our property team delivered another year of exceptional performance. We leased over 1 million square feet and grew occupancy to 90.3%, up 170 basis points year-over-year. Our office portfolio is 93.5% leased, our 12th consecutive quarter above 90%, which is a testament to the strength of our leasing platform and execution. In today's bifurcated market of have and have nots, ESRT remains a clear have. Demand is concentrated among top quality, modernized, amenitized, transit-oriented buildings owned by financially stable landlords with proven operational performance. Our best-in-class portfolio has enabled us to push rents, reduce concessions and extend lease terms. The fourth quarter marked our 18th consecutive quarter of positive mark-to-market lease spreads in our office portfolio and underscores our consistent pricing power. We finished the year strong. In the fourth quarter, we signed over 458,000 square feet of new and renewal leases. We achieved positive mark-to-market lease spreads in our Manhattan office portfolio of 6.4%. Key leases signed in the fourth quarter include a 10-year 46,000 square foot early renewal with T.J. Maxx at 50 West 57th Street, an anchor investment-grade retail tenant; a 7-year 42,000 square foot early renewal with Nespresso at 111 West 33rd Street; a 16-year 36,000 square foot expansion with Burlington at 1400 Broadway, which represents 20% footprint growth; and a 16-year 15,000 square foot retail lease with LinkedIn at the Empire State Building, which brings their total square footage to 540,000 square feet. Average lease duration was 11.6 years for new leases executed in the fourth quarter. We continue to deliver an exceptional tenant experience and superior service, which contributes to our impressive track record of tenant retention and expansion. In 2025, we completed approximately 274,000 square feet of early renewals with existing tenants where we proactively extended lease expirations. Since our IPO in 2013, we have signed 317 tenant expansion leases for over 3 million square feet. New York City's office leasing market is the strongest we have seen since 2019, which creates a favorable backdrop for us to execute. Tenant demand is strong and diverse with industries such as finance, professional services, TAMI and consumer products. Similar to last year, there may be temporary dips in our lease percentage over the course of the year. but we feel confident in our year-end occupancy guidance of 90% to 92%. At 130 Mercer, we kicked off our marketing campaign in January to lease our 3-floor block of over 110,000 square feet. Initial activity is healthy as it is a unique availability of institutional quality product in a supply-constrained submarket. As Christina mentioned, our mandate is straightforward, lease 3 floors. More to come. Lastly, our multifamily portfolio continues to deliver excellent performance with occupancy just under 98%. Revenue increased 9% year-over-year in the fourth quarter and 10% in the full year. These results reflect strong market fundamentals and our focus on operational excellence. Thank you. I will now turn the call over to Steve. Steve? Stephen Horn: Thanks, Ryan. For the fourth quarter of 2025, we reported core FFO of $0.23 per diluted share. For the full year 2025, core FFO was $0.87 per diluted share. Same-store property cash NOI, excluding lease termination fees, increased 3.4% year-over-year for the fourth quarter and 60 basis points for the full year, after adjusting for approximately $2 million and $7 million of nonrecurring items recognized in the fourth quarter of 2024 and full year 2024, respectively. Excluding these items, same-store cash revenue increased 2.5% and 2.1% for the fourth quarter and full year, respectively, while operating expenses increased 1.7% and 3.4%, respectively. Operating expense growth for the year was primarily driven by higher real estate taxes and cleaning related labor costs and was partially offset by higher tenant reimbursement income. Our Observatory business generated approximately $24 million of NOI in the fourth quarter and $90 million for the full year. Expenses totaled approximately $11 million in the fourth quarter and $38 million for the full year. Revenue per capita increased 6.9% year-over-year in the fourth quarter and 4.4% for the full year. For the full year 2025, FAD CapEx shrunk by approximately $21 million or 11% year-over-year. While the decrease was seen on all fronts across tenant improvements, leasing commissions and building improvements, the primary contributor to the decrease was an $18 million reduction in CapEx dollars spent on building improvements as we previously spent the CapEx required to develop our portfolio in preparation for the positive lease absorption we recognized. Now to our 2026 outlook. At a high level, we expect 2026 FFO and same-store cash NOI to be consistent with our 2025 results. This expectation stems primarily from a lag between the disclosed FDIC expiration and the lease commencement of the related backfill we executed in advance of the anticipated vacancy. Importantly, we expect to exit 2026 with higher occupancy and lower run rate G&A. The occupancy improvement is not expected to have a material positive impact on our 2026 results due to timing. To drill down further into the components of our guidance, we expect core FFO to range from $0.85 to $0.89 per diluted share. Our guidance assumes same-store property cash NOI growth of negative 1.5% to positive 2%. Within this range, we expect positive cash revenue growth with anticipated commercial occupancy of 90% to 92% by year end 2026 compared to 90.3% at year-end 2025. On the expense side, we expect property operating expenses and real estate taxes to increase by approximately 2% to 4% in aggregate, which we expect to be partially offset by higher tenant reimbursement income. Our 2026 same-store pool now includes our multifamily and North Sixth Street retail portfolios. This change reflects our transformation over the last 5 years, which includes our exit from suburban markets and transition to a 100% New York City portfolio. As expected, FDIC vacated 119,000 square feet at Empire State Building subsequent to year-end. While the space has long been backfilled by LinkedIn at a favorable mark-to-market, the temporary downtime impacts our 2026 core FFO by approximately $0.03 and reduces the same-store property NOI growth by approximately 270 basis points. Excluding this downtime, the midpoint of our 2026 adjusted same-store property cash NOI growth guidance would be approximately 3%. We expect cash rent commencement for the space to begin in the second half of 2027. For the Observatory, we expect 2026 NOI of approximately $87 million to $92 million and expenses of approximately $10 million per quarter. Included in this guidance is an expected $2 million net decline in license fee revenue earned from the gift shop operator at the Observatory and a shift in the timing of such revenue to be more heavily weighted to the fourth quarter. This reflects a COVID era license amendment that provided for fixed payments to the Observatory through 2025. Starting in 2026, these payments were reduced as are the annual percentage-based payment thresholds, which provides us with the upside tied to the recovery of international visitation. From an operating perspective, we remain focused on the levers within our control, to enhance the guest experience, broaden our marketing reach and drive efficiencies. Longer term, the observatory remains a durable high-margin cash flow business. Lastly, we expect calendar year 2026 G&A to aggregate approximately $69 million to $71 million as compared to approximately $73 million in 2025. We are on a path to reduce run rate G&A by approximately 5% to 10% by year-end 2026 relative to 2025, driven by compensation reductions and other cost reduction initiatives. We expect these savings to be in place by the third quarter. That concludes our prepared remarks. I'll now turn the call back to the operator to begin the Q&A session. Operator? Operator: [Operator Instructions] Our first questions come from the line of [ Manas Abic ] with Evercore ISI. Unknown Analyst: Good to see a strong decent quarter in the fourth quarter. Just wanted to see if you can provide some more color on just the outlook kind of seeing how the first quarter has turned so far in terms of either pipeline or leasing activity if that's kind of continued to hold up into '26 and kind of like if you see any specific submarkets in your portfolio stronger than others. So any color would be appreciated. Ryan Kass: The market tenor remains strong. We continue to see a bifurcated market of the have and have-nots and where we have. We have just over 170,000 square feet of leases in the pipeline that we anticipate closing in the first and second quarter. Unknown Analyst: Got you. Okay. And maybe one follow-up question. On the release, I didn't see a sales price that was given for the Stanford asset that you disposed of in the fourth quarter. So I wanted to just see if there's any further information you can kind of give us around the transaction and when it closed or for how much? Christina Chiu: Yes, it was mid-$60 million. And then with some credit and adjustment, it gets to right around the debt balance. And from an NOI perspective, it's around [ 7 ] cap rate. Operator: Our next question has come from the line of John Kim with BMO Capital Markets. John, can you please check if you're self muted? John Kim: Sorry about that. On that -- just following up on the Metro Center sale. Why not just walk away from the mortgage debt given the sale price was a little bit underneath the outstanding principal amount? Christina Chiu: We achieved an execution that was right around that area. And so it made sense. It's consistent with our capital recycling and allows us to redeploy proceeds into assets additive to the rest of our portfolio. So it was good execution overall. John Kim: Okay. Our mayor Mamdani has proposed a 9.5% increase in property taxes that balance in New York City budget. Can you just remind us of your ability to pass those increased taxes to your tenants? And if you can, how will this affect your ability to push rents going forward? Anthony Malkin: Well, let's just, first of all, say that the proof is always in the pudding, and I don't think anything's even ingredient-wise is in the kitchen yet. So we'll see how things go with the Merit agenda and the budget, number one. Number two, Ryan can comment on how we handle our pass-throughs on the tenants and number three, the market is what the market is, so we're going to lease and if rent increase -- if we get our rents, we get our rents and if we have a higher base year on real estate taxes for new leases, well, that will be a higher base year for real estate taxes on new leases. . Ryan Kass: And as Tony said, that would be in the future on the existing leases that any increase would be passed through on a tax escalation to the tenant. John Kim: Okay. And then my final question is, I know this gets asked a lot on office calls, but the impact of AI on tenants. Last week, we had the latest AI scared trade and the impact it's had not just on software companies, but all types of professional service companies, have you seen any impact on leasing decisions as a result of latest news? Anthony Malkin: The first thing I'll say, John, is we've seen a lot of people who are on book tours or seek to have more people come on to their blog where they can make advertising, make all sorts of decorations. We can only tell you that we've seen strong demand for high-quality office space in New York City amid low availability. Tenants continue to expand, and AI itself has been a positive for the leasing market and the source of incremental tenant demand, though, from our perspective, we're very sensitive to highly volatile infant industries as far as tenancies are concerned. So we, again, can only speak to 2024, '25, '26 leasing and trends, and we're very busy. Ryan gave you a number of 170,000 square feet of leases in discussion. We've got proposals in excess of that going back and forth. And we're very busy. At this point, we're more hindered by the availability of space to lease than anything else. Operator: Our next questions come from the line of Seth Bergen with Citi. Nicholas Joseph: It's Nick here with Seth. Maybe just following up on the new mayor in New York, obviously, you said the ingredients aren't even in the kitchen. But just broadly, how much of the rhetoric or policy impacted your conversations around leasing decisions or business sentiment more broadly? Ryan Kass: It has not impacted any of our leasing discussions. I mean... Anthony Malkin: We can maybe give you a little more color of it really hasn't impacted our leasing discussions, but demand is high. And look, we are in an incredibly volatile world. Let's face it. Capital markets are kind of crazy. We may be at war in Iran within the next week or 2. We just do what we can do here at ESRT, got a balance sheet that allows us to do our business, have a balance sheet that allows us to take advantage of opportunity. And we will make money where we can make money. And we've got a varied portfolio of focus to what we think is the best market in the world. And we'll see how the mayor get things done, and we'll live in whatever world he impacts. Nicholas Joseph: Got it. And then just on the Observatory, I guess you gave some color on the -- in your opening remarks. But what are you seeing in terms of competition? And what's the economic and tourism outlook embedded for the 2026 guide? Anthony Malkin: Well, I can give you some background on the general tourism trends, and then I'll let Christina or Steve comment on what goes into our guide. I'll just also let you know that Steve is alone in a conference room somewhere. He's come in because he has the flu, but he has intermittent Internet at his apartment. So if we're at all slow on the transition between Christina and Steve, it's because he's in another room. We feel safe, by the way, because we have MERV 13 filters and active bipolar ionization, so we feel highly unlikely that Steve will infect anyone else in the office. But going back to your question, we did see a very meaningful change -- set of changes in the Observatory. We used to be 2/3 roughly international, and now we're more than 50% domestic. We did see actual changes from the composition of our visitors. Our direct retail purchaser is way up, highest revenue per person we've seen. And at the same time, we have seen meaningful decline in past programs and particularly past programs from overseas visitors. And just so you know, for anyone who's not familiar with the past program, that's where a number of attractions are bundled into one price and visitors have a choice of to where they might go. One of the past program businesses ceased operations in early 2025, and the other two are materially down in their businesses. So we've pivoted and achieved very good results on our direct marketing. And at the same time, we've maintained excellent relationships with our past program partners that we value very highly. We've worked very hard on our online travel agent relationships and how we conduct our business there. And from that perspective, we adjust to what the market serves us. Much more active from our side, it's much less we take a toll from people across our bridge. And as far as competition, SL Green's reported on their own activities at the Summit. The edge is definitely very weak. One World Trade Center is very weak. Both of those have experienced significant deterioration in their businesses and do extensive discounting. On top of the rock is private and doesn't give out data, but we think they're pretty steady in relation to how business has gone in general. Do you want to talk about -- Christina or Steve. Steve, you'll take that on, the modeling. Stephen Horn: Yes. There's not really much a lot to add from what you said. But from the guidance perspective, we account for just a range of various outcomes throughout the year. So the range that we have of the $87 million to $92 million, the midpoint is flattish. And so that contemplates those potential variances. Operator: Our next questions come from the line of Blaine Heck with Wells Fargo. Blaine Heck: I was hoping you could dig into the occupancy forecast a little bit more for 2026. The 91% midpoint seems maybe a little light just given that you are 93.6% leased at the end of the quarter. But I do understand you're expecting about 250,000 square feet of vacates during the year. So with respect to that, is FDIC included in that 250,000 square foot number. And I guess, what's your level of certainty with respect to the rest of those move-outs? And lastly, are there any other headwinds that might be a little bit less obvious? Ryan Kass: Thanks, Mike. So I'll take that one. We feel very confident in our year-end occupancy guidance of that 90% to 92%. A lot of that is driven by timing of vacancies. If you take a look at Page 15 in the supplement, you'll see first and fourth quarter, we do have large move-outs, that fourth quarter is mainly driven by a 70,000-foot tenant at the Empire State Building, who has been in this space for a very long time. So I think that's impacting the numbers, and we're excited to get that space back in a substantial positive mark-to-market. Blaine Heck: Okay. Great. That's helpful. Switching gears, in the past, I think you've said 6x debt-to-EBITDA as your kind of loose target for the upper bound of leverage. I think this is the first time I've seen your net debt to adjusted EBITDA above 6. So I guess how are you thinking about moderation in that metric and whether that limits your ability to be active on the investment front or share buyback front? Christina Chiu: Yes. We have always mentioned we evaluate the market based on continued access to capital. We've been able to continue to access the debt market, have a number of conversations going on with interest in our assets. So we'll continue to navigate. We've also said that from time to time, we may tick up on net debt to EBITDA, it's not a strict limit. We're not looking to run the company at high risk or high balance sheet leverage. And at the same time, when there are great opportunities where we can utilize our balance sheet, close with certainty, you may pick up from time to time, and we'll have a game plan as we navigate going forward to maintain appropriate levels of leverage. So for us, this is consistent, and we'll continue to have activity in the coming year. All of our debt maturities are addressed, and we'll continue to manage the balance sheet prudently. Anthony Malkin: I just might add to Christina's comment, anyone who's followed us over the more than decade since we've been public, I always have said that the right opportunity where we think it can lead to growth, we will make moves on the balance sheet. That's why we have the balance sheet, and we are still peer-leading in our balance sheet position. Operator: Our next questions come from the line of Dylan Burzinski with Green Street. Dylan Burzinski: Maybe just going back to the Observatory. I appreciate your comments thus far, but are you able to say sort of what added lift or benefit is imputed in the guide as it relates to any expectations for the World Cup to drive an increased activity on the international visitor side of things? Anthony Malkin: So we've developed marketing strategies to capture demand around the World Cup. We're optimistic it will benefit our business with the biggest upside really around co-branding opportunities. So we still think it's early in the year. Many factors can impact demand. We don't rely on just one event. There are only a certain number of people who will fit into the stadia around New York City, where the World Cup will take place. And the good news for us is that costs are so bloody expensive around that period of time that we're really in a position in which our best customer right now, which is someone who really pays full price and get significant additional purchases out of what we offer for upgrades, that will fit right in there. We do see, and we are in discussion continuing on our branding side, opportunities both generate advertising value equivalency and co-branding dollars. Dylan Burzinski: Appreciate that color. And then maybe just switching over real estate alert. I think late last month, mentioned that you guys have, I think it's 250 West on the market. Just sort of curious how you guys are sort of viewing -- you guys and the Board are viewing sort of the disconnect between where the stock trades today and maybe where underlying private market value is for your guys' portfolio? Christina Chiu: Sure. I think it's no secret we trade at a discount to underlying real estate values as the rest of the office sector. So clearly, there's a disconnect. But what we focus on and as we've reiterated is we focus on the things that are within our control, and we continue to execute on the business. We've always said that we are open to capital recycling, first step with getting out of the suburban office market and reinvesting those proceeds into assets that are additive to the portfolio, add to the quality, add to the cash flow characteristics of what we're trying to build. Now that we're on the suburban, we can look within New York City as well. And the asset that we have on the market is an asset where we've added a bunch of value, and we continue to underwrite opportunities in the marketplace where we can add more value. It appears to us as you see in the transaction market, there's a lot of interest in New York City, and we'll see how that goes. So happy to own it, also happy to potentially pursue a sale and look for additional opportunities and more details will come as the process plays out. Operator: Thank you. We will now turn the call back over to Tony Malkin, Chairman and CEO, for some closing remarks. Anthony Malkin: Thank you all very much. We remain focused on a clear and consistent set of priorities, lease our space to drive observatory performance, maintain a strong and flexible balance sheet, allocate capital with discipline and lead in sustainability. These priorities keep our organization focused and aligned as we drive the business forward. Supported by a high-quality portfolio and a strong financial foundation, we are well positioned to execute in the quarters ahead and create long-term value for our shareholders. We look forward to the chance to meet with many of you at non-deal roadshows, conferences and property tours in the months ahead, onward and upward. Operator: Thank you. This does now conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time, and enjoy the rest of your day.

86天前Insight Analytics约5分钟阅读

EQT 2025 Q4 财报电话会议

Operator: Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome you to the EQT Fourth Quarter and Full Year 2025 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Cameron Horwitz, Managing Director, Investor Relations and Strategy. Cameron, please go ahead. Cameron Horwitz: Good morning, and thank you for joining our fourth quarter and year-end 2025 Earnings Results Conference Call. With me today are Toby Rice, President and Chief Executive Officer; and Jeremy Knop, Chief Financial Officer. In a moment, Toby and Jeremy will present their prepared remarks with a question-and-answer session to follow. An updated investor presentation has been posted to the Investor Relations portion of our website, and we will reference certain slides during today's discussion. A replay of today's call will be available on our website beginning this evening. I'd like to remind you that today's call may contain forward-looking statements. Actual results and future events could materially differ from these forward-looking statements because of factors described in yesterday's earnings release, in our investor presentation, the Risk Factors section of our most recent Form 10-K and in subsequent filings we make with the SEC. We do not undertake any duty to update any forward-looking statements. Today's call also contains certain non-GAAP financial measures. Please refer to our most recent earnings release and investor presentation for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures. With that, I'll turn the call over to Toby. Toby Rice: Thanks, Cam, and good morning, everyone. 2025 was another stellar year for EQT, one in which we were able to clearly demonstrate the power of our platform. Over the past several years, we've been intentionally building scale, vertical integration, operational excellence and financial strength. That work is showing up in measurable ways in our well performance, in our cost structure, in our free cash flow generation and in how we performed under pressure. This morning, I'll walk through 4 areas that highlight that platform strength. First, our operating performance is the foundation of our platform. In 2025, we saw continued structural improvements across operational drivers, reinforcing the durability of our maintenance capital program. Second, our financial strength brings power to the platform. In 2025, we translated operational outperformance directly into meaningful free cash flow generation, allowing us to fortify our balance sheet and increase financial flexibility, providing a strong foundation to capture value opportunistically during market dislocations. Third, winter Storm fern. Recent extreme weather events provide an opportunity for us to showcase both the operational strength of our platform and the value creation power that our scale and integration delivers for our stakeholders. I'll wrap up by discussing the future of our platform with our 2026 plan. Our budget is underpinned by a disciplined maintenance capital program while beginning to invest the first dollars of post-dividend free cash flow into selective high-return growth investments. It's a continuation of the strategy that has driven our transformation, staying laser-focused on capital efficiency and cost structure while making smart investments at the right time to maximize per share value creation. Now let me dive deeper into our operating results. Production consistently topped expectations throughout 2025, driven by compression project outperformance and robust well productivity. Compression projects executed last year generated 15% greater-than-expected base production uplift and positively impacted well productivity. In fact, third-party data shows that EQT saw the strongest improvement in well performance of any major operator in Appalachia last year. Our tactical approach to volume curtailments and marketing optimization resulted in price realization outperformance throughout 2025. The cumulative benefits of our marketing optimization resulted in more than $200 million of free cash flow uplift last year relative to guidance, highlighting the tangible benefit to shareholders from this effort. EQT's position as the second largest marketer of natural gas in the U.S. ahead of all upstream and midstream peers, coupled with persistent price volatility means our marketing optimization efforts should have recurring positive impacts on financial performance going forward. Operating costs and capital spending also beat expectations last year, which represents the return on our water infrastructure investments, midstream cost optimization and upstream efficiency gains. Our team set multiple EQT and basin-wide operational records yet again during the fourth quarter, including our fastest quarterly completion pace on record and the most lateral footage drilled in a 24- and 48-hour period. Efficiency gains resulted in our average 2025 well cost per lateral foot coming in 13% lower year-over-year and 6% below our internal forecast coming into the year. Additionally, per unit LOE was nearly 15% below our expectations last year and approximately 50% lower than the peer average. The cumulative result of our operational outperformance delivered $2.5 billion of free cash flow attributable to EQT in 2025 with NYMEX natural gas prices averaging approximately $3.40 per million Btu for the year. Our free cash flow generation significantly outperformed both consensus and internal expectations, underscoring the power of our low-cost integrated platform and our ability to consistently deliver differentiated shareholder value. Importantly, our ability to deliver wasn't just visible in our financial results. It was demonstrated operationally in one of the most challenging environments in recent times during Winter Storm fern. I want to take a moment to recognize our upstream, midstream and marketing teams for their outstanding coordination and execution during the storm. The team's effort helped keep millions of American homes heated and businesses running, while also allowing us to capture peak cash market pricing during periods of elevated demand. This is a great example of how EQT's integrated operations, resilient infrastructure and commercial alignment come together to deliver differentiated value for both our customers and our shareholders. Winter Storm Fern also provides a stark reminder for just how important natural gas infrastructure is to the reliability of the U.S. energy system. During the storm, our Mountain Valley pipeline flowed 6% above its 2 Bcf per day nameplate capacity, which effectively backstopped 14 gigawatts of power generation across the Southeast region or enough energy to heat more than 10 million homes. And yet, even with this capacity flowing full, cash prices at Transco Station 165 spiked to over $130 per million Btu, highlighting a system that remains structurally constrained. These price signals are unmistakable. The country needs more pipeline infrastructure and a permitting framework that allows the industry to get back to building critical infrastructure again. Expanding natural gas infrastructure isn't optional. It's essential to delivering reliable, affordable energy to U.S. consumers and support long-term economic growth. However, when supply is constrained due to lack of infrastructure, prices rise and affordability suffers. Luckily, the solution is simple. We need to get back to building and connecting low-cost natural gas supply to the demand centers that need it most. Simply put, if we build more, America pays less. And at EQT, we're not just advocating for infrastructure, we're investing in it. We recently elected to exercise our option to purchase additional interest in MVP Mainline and MVP Boost from an affiliate of Con Edison. The interest in MVP Mainline will be purchased by EQT's midstream joint venture with Blackstone and the interest in the MVP Boost expansion will be acquired directly by EQT. EQT is expected to fund approximately $115 million of the total consideration for the acquisition. Upon close, our ownership in MVP Mainline and MVP Boost will increase to approximately 53%. We estimate the purchase price equates to roughly 9x adjusted EBITDA and delivers a low-risk 12% IRR to EQT, inclusive of MVP Boost growth CapEx and expansion, which is highly attractive given the long-duration annuity cash flow stream underpinned by 20-year contracts. Shifting to our 2026 outlook, we are initiating a production forecast of 2.275 to 2.375 Tcfe with continued outperformance of operational efficiency and well productivity likely to drive upside bias to this range. As it relates to our investments, we have established a maintenance capital budget of $2.07 billion to $2.21 billion, which includes a full year impact from the Olympus acquisition. With our balance sheet deleveraging nearly complete and total debt rapidly approaching $5 billion, we are electing to ramp up investments in our high-return growth projects. We are allocating the first $600 million of post-dividend free cash flow to these projects in 2026, which is largely comprised of compression projects, water infrastructure, the Clarington Connector Pipeline into Ohio and strategic leasing. Our investments in these growth projects are expected to strengthen our platform, lowering future maintenance capital, reducing LOE, improving price differentials, replenishing inventory at attractive prices and setting the stage for sustainable upstream growth in the future. Not only do our growth projects generate attractive returns, but they continue to fundamentally improve the characteristics of our business and provide EQT a differentiated way to compound capital for shareholders. At recent strip pricing, we expect to generate 2026 adjusted EBITDA attributable to EQT of approximately $6.5 billion and 2026 free cash flow attributable to EQT of $3.5 billion, which includes the impact of approximately $600 million in growth investments. Prior to the investments in these elective projects, free cash flow attributable to EQT would be over $4 billion. Cumulative free cash flow attributable to EQT over the next 5 years is projected to total more than $16 billion, highlighting the tremendous value proposition embedded in EQT stock. I'll now turn the call over to Jeremy. Jeremy Knop: Thanks, Toby. Our strong execution resulted in nearly $750 million of free cash flow attributable to EQT in the fourth quarter, approximately $200 million above consensus expectations. This marks the sixth quarter in a row where we have exceeded consensus free cash flow estimates with an average beat of 40%. We outperformed across every financial metric during the fourth quarter with strong price differentials, again underscoring the recurring value created by our gas marketing capabilities. We exited the year with net debt of just under $7.7 billion, inclusive of $425 million of working capital usage during the quarter. Recent gas price strength on the back of winter Storm Fern, combined with our opportunistic approach to hedging should drive historic results for EQT in the first quarter, with the potential for free cash flow in the month of February alone to approach $1 billion after we sold approximately 98% of our production at first of month pricing, which settled at $7.22 per MMBtu for M2 and $7.46 per MMBtu for Henry Hub. We estimate January and February performance already exceeds consensus Q1 free cash flow expectations by more than 30%, setting the stage for record free cash flow generation in the first quarter and for full year 2026. As a result, we expect to exit the first quarter with less than $6 billion of net debt. This rapid deleveraging enhances our capital allocation flexibility. We are well positioned to fund high-return infrastructure growth projects, continue our track record of base dividend growth and accumulate cash to opportunistically repurchase our shares. The benefits of our opportunistic hedging strategy were on display as we came into the fourth quarter with minimal production hedged, purposely leaving significant upside optionality into winter given the likelihood of asymmetric upside if cold weather materialized. We tactically added collars and captured call option skew into sharp price rallies in the fourth quarter and over the past few weeks, including adding a company record amount of hedges in a single day in December as the market peaked. With these tactical adds, we are now nearly 40% hedged in the first quarter of 2026 with an average floor price of roughly $4.30 per MMBtu and an average ceiling of $6.30. For Q2 and Q3, we're approximately 20% hedged with $3.50 floors and nearly $5 ceilings. And we are also roughly 20% hedged for Q4 with $3.75 floors and $5.15 ceilings. This hedge position provides downside protection, ensuring we can execute on all of our capital allocation priorities while maintaining upside exposure should prices continue to strengthen in the summer. Turning to fundamentals. The natural gas market has tightened significantly over the past 6 weeks. Winter to date is 5% colder than normal, driving significant demand on top of production disruptions. This cold weather tightened inventories by 225 Bcf compared to prior expectations and reduced inventories below the 5-year average. We forecast storage exiting winter around 1.65 Tcf under normal weather conditions through March. With LNG exports continuing to grow, the U.S. gas storage situation in 2027 looks even tighter. As a result, we anticipate seeing both 2026 and 2027 prices rising further to ensure inventories remain within a comfortable range. Importantly, for EQT, cold weather this winter has been concentrated in the East. Eastern storage levels are now 13% below the 5-year average. Basis differentials later this decade continue to strengthen on the back of growing in-basin demand with 2029 basis, as an example, now trading at a $0.70 discount to Henry Hub, which is a $0.50 improvement compared to the last few years. From a global perspective, fundamentals are also improving more than consensus realizes. European storage levels are well below normal following robust winter withdrawals. Current projections point to Europe exiting winter with storage at the lowest level since 2022, and that is despite the surge in LNG supply since then. Beyond LNG, power demand is accelerating faster than previously anticipated. Natural gas turbine orders have increased meaningfully. And once units ordered since 2023 are fully commissioned, they represent roughly 13 Bcf per day of demand in the United States alone, providing clear visibility to substantial incremental gas burn moving towards startup. While not all these turbines are tied directly to data centers, meaningful portions are connected to new large load projects, including AI and cloud infrastructure. Separately, we have line of sight to approximately 45 gigawatts of data center capacity currently under construction, including 12 gigawatts in our core operating footprint. Together, turbine backlogs and data center construction activity reinforce the structural demand growth that is building across the power sector. Given the location of this load and the depth of our resource base, we believe EQT is positioned to capture an outsized share of this incremental demand. To wrap up, I want to provide additional color on the growth projects that we chose to include in our 2026 budget, which will be funded with the first dollars of post-dividend free cash flow. Starting with compression, the well outperformance we've seen since acquiring Equitrans motivated us to accelerate compression investments in 2026. The benefits of these investments show up as stronger base production and improved well productivity. Over time, these benefits compound, reducing decline rates and improving capital efficiency. On water infrastructure, our investments in 2026 will connect EQT's legacy water systems with the water network we acquired from Tug Hill. This interconnection will create an integrated water system throughout EQT's operating footprint and one of the largest water networks in the country. This expanded connectivity is projected to improve uptime, reduce reliance on trucking, lower LOE and improve frac efficiency. The Clarington Connector is a 400 million cubic feet per day pipeline that will move natural gas from Pennsylvania into Ohio, allowing more of our gas to reach data center demand and the receipt points of several interstate pipelines. We expect the Ohio dry gas Utica inventory to be largely depleted by the end of this decade. driving stronger pricing in the Ohio region. This pipeline perfectly positions EQT to begin backfilling these volumes and creates another avenue to capture premium pricing. On land acquisitions, we plan to continue expanding our leasehold position at attractive prices. Since 2020, we have leased approximately 100,000 net acres, effectively replacing 60% of our development and perpetuating our runway of core inventory. The return on these investments will show up in our financial statements through higher production, lower capital spending and LOE, higher third-party revenue and better price realizations, driving top line growth while continuing to reduce our cost structure. The financial outperformance we saw in 2025 was a direct result of similar investments we made in prior years, giving us confidence that our growth initiatives will translate to tangible free cash flow generation and differentiated shareholder value creation. In closing, 2025 was a stellar year for EQT and a clear demonstration of the power of the platform that we've strategically constructed. We delivered record operational results, drove material free cash flow outperformance and significantly strengthened our balance sheet. Winter Storm Fern demonstrated the power of EQT's integrated model in real time as our teams worked seamlessly across operations, midstream and commodities trading functions to keep natural gas flowing and provide heat for millions of Americans during one of the most challenging winter events in recent history. Our strong results are not just incremental. They compound over time to create exponential value. Every element of our business is feeding another, driving steady and significant performance gains. We are extremely proud of what our teams delivered in 2025, but we are only getting started and the momentum we've built across the organization gives us tremendous confidence in what lies ahead for EQT. With that, I'd now like to open the call to questions. Operator: [Operator Instructions] Your first question comes from Doug Leggate with Wolfe Research. Douglas George Blyth Leggate: I guess I'd like to focus to try and summarize everything you've said today to one issue, which is the trend in your portfolio breakeven and sustaining capital. Can you give us an idea where you think that sits on a levered basis for 2026? And my follow-up is the deleveraging comment you made, Toby, is about -- I think you said as we get to the end of our -- I don't want to put words in your mouth at the end of our deleveraging process. But it seems that you're potentially generating a ton of free cash flow as you've indicated for 2026. What's the priority for that free cash flow? Does that continue to grow the balance sheet as well? And by the way, I got a quick shout out to your tremendous videos over the storm. We enjoyed those. Toby Rice: All right. Thanks, Doug. Yes, on the last question, the capital allocation, the deleveraging has been rapid, and we're in a great position right now where we sit. And I think we're all the confidence the world will bust through our $5 billion long-term target. I think we're going to continue to look to pay down debt over and above that. But as we mentioned and you see with our 2026 plan, first, free cash flow is going to be going towards the sustainable growth projects that we have on the infrastructure. That will be a theme as long as we have high-quality projects to put on the schedule. We'll continue to do that. But certainly, leverage is still the priority. We'll continue to expand on that. And I think the punchline is we can start thinking about being opportunistic in the future. And that day has come a lot sooner than what people expected. Were you going to do color on the cost structure, 26? Jeremy Knop: Yes, Doug, if you want to think about breakeven cost structure, I mean, we -- just like we're doing with our capital expenses, you have the maintenance side of our CapEx and you have this growth side. I think for comparability purposes, as we think about free cash flow really compared to peers in the market and also as it relates to breakevens, we look at it really at that maintenance level. Everything beyond that is elective. So when we assess that, we're around 220 on a levered basis. That levered number is coming down rapidly this year, and you'll see us soon repay a bunch of debt we have outstanding in the market. So that levered number is falling towards the unlevered number pretty quickly. Operator: Your next question comes from the line of Neil Mehta with Goldman Sachs. Neil Mehta: Toby and Jeremy, your perspective on F was helpful. I mean maybe you could talk about quantifying the uplift associated with that. You gave us some disclosures in the release and in your comments. And then just lessons learned from Fern because I think volatility is going to be a constant on the go forward. So how are you ensuring that your marketing team is going to continue to be on the right side of these type of events? Toby Rice: Yes. So Fern really was a great example of the culture we built here at EQT and our ability to respond to stimulus, our company value evolution on full display, executing the environment we're in. It's important for people to know we started planning for winter storm fern back in the summer, and we were making preparation for winter storms. Reliability is going to be a big feature, a big attribute that people are focused on, and we're excited that the teams all stepped up and knocked it out of the park, not just operationally, but on the commercial side as well and being able to capture this opportunity that was presented to us. Just to quantify some of the uplift, I mean, we look at -- we were excited about our performance during the storm. The way we look at it, our normal routine operation uptime is 98%. That's our target. During the storm, it was 97.2% -- we got even more excited when we saw how that benchmarked versus Appalachian peers, and we saw a 2x factor outperformance on that front. So it's certainly been an area of the organization where we really wanted to dial up the intensity and this team proven that they actually delivered. Here's my takeaway on what we see. Volatility is here in natural gas. And I think people can have an attitude that they try and shy away from volatility and try and protect against it. We are trying to take advantage of volatility, and we think the results that we generated in winter storm fern are going to be future opportunities that we see going forward, and this is a sign, and this will persist until we get back to getting infrastructure built to debottleneck these markets. Until then, we're going to be able to be opportunistic and take advantage of this world-class commercial team we have here at EQT. Jeremy Knop: Yes. Neil, I would add to that, too. I mean, our commodities team is focused on 2 things primarily. First, focused on balances or really minimizing imbalances is probably the best way to put it. And that really comes down to extreme coordination with our operations teams and our control centers to make sure that we know exactly how much volume is coming into the system so we can keep our sales in balance. The second is arbitrage capture. A really good commodities team is not able to focus on things like arbitrage capture if they're constantly trying to figure out where volumes are. And during winter events like storm, when our operations teams are delivering and we have good visibility into both the midstream operations and upstream operations, they're able to dedicate their time to capturing that opportunity. But I mean, look, some of the trades that we executed during the end of January and early February were, I mean, absolutely outstanding, making sure volumes got to where they needed to be, shutting down all of our Gulf capacity and reselling it in basin when prices were $30, $45, making sure we had full deliverability through our MVP capacity, selling it at $130 MMBtu for certain days, making sure that we have confidence in the volumes that will show up in February and being able to nominate at levels like we did at 98%, which is probably an all-time high for EQT. But again, when we see the opportunity to sell gas on a month forward basis in the mid- to low 7s or to sell into Station 165 at over $11 for a month, you have to be able to depend on your operating teams to do that and capture the value presented. And that's what we're able to do uniquely at EQT through the platform we've put together. Neil Mehta: And then the follow-up is just on the gas macro. I wonder if you could address 2 parts of it. One is we've seen production surprise. I think relative to consensus expectations, Toby, something that you outlined was likely to happen at our conference in January. I think that is materializing. Has that affected the way you're thinking about the outlook for U.S. gas? And then the follow-up is around M2 basis. You guys have a differentiated point of view that M2 basis futures need to continue to tighten up, something that we are seeing some evidence of. So if you could talk about the U.S. profile for gas, but then specifically the M2 basis profile as well, that would be helpful. Toby Rice: Yes. We got a lot of questions when we said that we saw U.S. supply exiting '26 closer to that 114, 115 Bcf a day range. That's still our view. I think things we're looking at are going to be these Permian pipes when they come online and how much they'll be full on the supply side. And then obviously, people are pretty well read into what's going to happen on the demand side with LNG and the power story is going to show up. I'd say probably what's new for us on a macro perspective, the biggest catalyst that's hitting energy markets right now is the public's concern over energy prices and affordability. And we think that this narrative is only going to continue to strengthen, and that's going to create even more opportunities to get infrastructure built and with our platform that will create opportunities for EQT. Jeremy Knop: Yes. And I guess to your question on M2 basis, we've been talking about this for like a year, if you look back at our -- what we put out quarterly. And that's continued to move our direction. We came into this year with only about 35% of our local sales hedged because we have had this broader thematic view that basis should improve. Historically, we probably would have had about 90% hedged. That's something we normally don't openly disclose. But again, it's a tactical repositioning that we've intentionally executed on over the past year or so. And again, we're also leaning more on our physical curtailments in those down markets as opposed to feeling like we need to financially protect ourselves. And that just provides a better sort of all-in market solution and allows EQT to save its volumes for when the market really needs them like during the winter time. Operator: Your next question comes from the line of Arun Jayaram with JPMorgan. Arun Jayaram: Jeremy and Toby, I wanted to see if you could talk about how you see your strategic growth CapEx evolving over the next couple of years as we think about projects like MVP Boost, Southgate, the Clarington Connector. But how do you see that evolving over the next couple of years? Jeremy Knop: Yes, it's a great question. And that is Arun, why we were so intentionally trying to bifurcate maintenance capital, which I think is the true measure of year-over-year performance and just efficiency in the base business versus where we're choosing to elect to reinvest capital and create additional value. we're trying to create more and more of these opportunities, again, across our integrated platform. I think we see more than most companies do across the value chain. A year ago, I probably couldn't have told you about half of these projects that we have in our budget this year. So I have no doubt the teams will continue to originate a lot more really good deals. But right now, I think beyond what we have in the queue for this year, the focus is really on the Mountain Valley projects that we've talked about, both Southgate and Boost. Those are probably the biggest spend items as we move into 2027. There's a number of things we're working on that I think are pretty exciting, but that's all got to come to fruition. But look, our goal is when we have not a lot of debt, we're generating $3 billion, $4 billion of free cash flow before growth CapEx, say we invest the first $450 million, $500 million to a base dividend, the next $500 million of that or so, maybe more like this year, depending on the quality of the opportunity, we think it's important for that to go into some sort of organic growth project -- and importantly, and I think to differentiate against what you hear from some of our more direct upstream peers, there's a way to grow value and free cash flow that doesn't include just drilling more wells or drilling less wells. There's a lot more to it than that, and that's really what we're trying to underscore and emphasize and how we're trying to differentiate how we reinvest capital. And when you step back and think about the right way to really, in our view, step into something like upstream growth at some point down the road, there are certain prerequisites to that. In our mind, you have to be the lowest cost producer, which is box we've certainly checked. It's getting down to a very low to no leverage profile, which, again, we're very rapidly executing on. But I think most critically, it's partnering and creating real structural demand for those volumes. And that's what you see us doing through the MVP expansion through the Clarington Connector project, through the in-basin just demand opportunities that we're connecting to with our midstream platform. And once all those boxes are checked, that's when we would think about growth potentially beyond the infrastructure. But this infrastructure is really paving the road for us to get there. And at the same time, I mean, it's the type of returns that get us really excited where we're not taking your classic commodity price risk and chasing prices. Arun Jayaram: And just a follow-up is in terms of your investments in compression, it looks like this year, you're going to be investing about $180 million in terms of pressure reduction projects and gathering. Where are you in terms of the life cycle of investments kind of in compression? Toby Rice: Yes, Arun, these projects will get us pretty close to catching up and getting our systems operating at pressure that would be steady state. So future compression projects would probably show up in the maintenance CapEx portion of our budgeting. Operator: Your next question comes from the line of Betty Jiang with Barclays. Wei Jiang: I want to start with a question on your gas sales strategy. Jeremy, you mentioned that you're selling 98% of first of month. Can you just unpack like how much would be the ideal amount that you sell first of month? How much you want to sell into the cash market? I'm asking this because as you said, the volatility, gas market is only going to get more volatile, which means that you want to get more exposure to cash markets or prices where as we have seen this winter. So how does that influence your -- how you sell your gas and how much of the gas gets dedicated to first of month versus cash market? Jeremy Knop: Yes, Betty, it's a great question. So we have a fundamentals team internally. And we -- I mean, we try to always have a view. We're not never trying to pick price. What we're really trying to understand is where the asymmetry sit and the potential outcome. If you think about effectively what first-to-month pricing means coming out of bidweek, it's really the market's best estimate of what those 31 days over the next month will average out to in the cash market. Over the long term, there shouldn't really be a statistical advantage electing to one or the other, but one provides more stability when you elect most of the volume first to month. Otherwise, your traders are having to be in the market and clear a lot of volume every day. But look, when we looked at February as an example, this was a very conscious decision we made, and we assessed what was going on in the market and effectively said, fundamentally, in our view, you probably would have had to have one of the coldest Februaries in the past 100 years to justify pricing being at that level. And so we simply said, is that really a bet we're willing to make and leave that open exposure? Or are we willing to take off an amount of value that if we're producing, call it, 200 Bcf a month and we have $5 to $6 of margin baked in, do we just take the money and derisk it? I think your typical producer is selling probably 75% to 80% first a month, and the rest of it is left open as operational flexibility for downtime. I think EQT is unique in the sense that we have so much control over the value chain and visibility into operations through the vertical integration, we can dial that up to a higher level. And so when you see opportunities like this, we can take that value off the table. But just for perspective, if you look at where gas daily has settled month-to-date and where balance a month pricing is, I mean, you're averaging like it's about $390 million at Henry Hub and mid-3s at M2. So if we had not made that election, our average pricing for the month would be several dollars below where we elected it to be. So there is -- hard to overemphasize how much value there is to be able to take off the table if you can be on top of this sort of stuff and have the visibility that we do. And again, going back to what Toby said, our real goal is to be more of, I guess, more like an anti-fragile philosophy where we benefit from when there's more volatility. You saw it in Q4 in October, what we did with our curtailment strategy. We were able to really take advantage of awesome opportunities to squeeze extra margin out. And then the market got volatile on the other end of the spectrum in January, February, and we again, I think you'll see us squeeze an immense amount of value out of the market by positioning around volatility and profiting from that rather than just playing defense. Wei Jiang: Very helpful context. My follow-up is on growth. In Toby's comments, you guys talked about the midstream investments setting the stage for sustained upstream growth. And I just want to ask about your philosophy around that because we are seeing more volumes and growth from other operators growing into the local market. EQT has one of the lowest cost production basin. If you don't grow effectively, you're ceding market share to others. So how do you think about balancing growth? And I'm a bit conflicted myself on thinking about how much you should be growing in this environment, too. Toby Rice: Yes. I think philosophically, it's important to note that I think we've learned what happens when you set activity levels chasing price signals. That hasn't typically worked out too well. So philosophically, we've shifted more towards we will respond to demand. And then as far as seating market share is concerned, a lot of this demand that we're meeting, actually all of it is going to be connected through EQT infrastructure with EQT gas supply deals. So I feel like we've got a really good look at what the market needs and our ability to supply that. But the infrastructure needs to get built. These projects need to get built. That demand needs to show up, and that's probably a '27, '28 time frame for us. So we're focused on the infrastructure right now, securing the demand, and then that will be an option for us in the future. Operator: Your next question comes from the line of Kalei Akamine with Bank of America. Kaleinoheaokealaula Akamine: My first question is on MVP. Going back to Slide #10. It shows really strong performance on the main line above nameplate capacity. Just kind of curious what you guys are learning about the effect of the capacity on that system and if there are any learnings that we can extrapolate to the expansion projects. Toby Rice: Yes. As far as learning on like total flow potential, I mean, it will be dependent on weather conditions. I mean colder weather will be able to flow more volumes there. So I mean, this new record of over 2.1 Bcf a day sort of shows where that limit is. But I think more importantly is looking at the price on that chart, there's a tremendous amount of demand there needs to be more volume brought into this area, and we think Boost is going to be a great project for us to address that market need. And we anticipate these projects having pretty high utilization. Kaleinoheaokealaula Akamine: The follow-up is on Clarington Connector. That project was upsized from 300 million cubic feet per day to 400 million cubic feet per day. Just kind of curious what's behind that design decision. Is it demand pull? And then once at Clarington, can you talk about what market options you have to clear that gap? Should we think about Rex somewhere in the Midwest? And are there any opportunities for premium pricing, maybe a direct supply agreement on top of that? Jeremy Knop: Yes, Kalei, I think you're on to something. I mean it's a couple of things. And I really think the Ohio market opportunity in the next 5 to 10 years is one of the greatest ones for us. Not only is it the new demand you're talking about, you have a lot of the FT contracts on like Rover, on REX, on NEXUS rolling over in the next 5 to 10 years. And at the same time, in our view, I mean, also owning Ohio Utica gas assets, we really don't see much inventory there beyond like 2030. So we view that as a gas play that will go into structural decline. And so we're sitting there right on the doorstep to it with a huge infrastructure footprint. And I think the ability to build pipes directly into that region and allow those pipes to pull gas back from our much deeper inventory base on the Pennsylvania side will not only help us capture premium pricing, but actually set the stage for us to grow volumes and do so in a structurally like sustainable way like Toby just talked about. So I think this is part of us kind of looking ahead with a longer-term view and positioning around that longer-term opportunity. But I think there's big time ways for us to win on both pricing and also volume to drive top line growth in the coming years. Operator: Your next question comes from the line of Lloyd Byrne with Jefferies. Francis Lloyd Byrne: Congrats on capturing the volatility. I know it's been a focus for you guys. I want to circle back to Betty's comment on growth a little bit. And I know, Toby, you've talked about what a BCF means to your free cash. But if I look at consensus, there's just no growth that people have in the model. And I was just wondering like when do we start to see this growth emerge? And we're looking at almost 5 to 8 Bs of in-basin demand. I don't know if you guys feel the same way, but when do we hear more on Homer City, shipping ports, coal retirements, manufacturing plants, et cetera? Toby Rice: Yes, what was the first question on growth was what? Francis Lloyd Byrne: Yes. Just like when -- it looks like consensus just has no growth, and it's super important to your free cash and going forward. And so when do we get more details with respect to that? Is that in a year? Is that in 2 years? Is that when the infrastructure is built out? Toby Rice: Yes. Well, first thing I'd say about '26, I think our track record of beating production estimates, there is risk embedded in that production forecast. We keep that risk on. And as the year evolves and things play out, we update that accordingly. So I'd say that just look at the track record. As far as thinking about sustainable upstream growth in the future, I think that's probably a story that we start talking about maybe '27, we start thinking about it once we get a more clear picture on some of the start times, some of the projects that you mentioned like Homer City and some of the in-basin data center. We don't see the world any differently than you on what we're seeing for in-basin demand. On Slide 22, we laid out our estimates of 6 to 7 Bcf a day. What's changed a little bit, power demand for data centers has gone up. Coal retirements has been pushed back a little bit, but net-net, it's still a healthy source of in-basin demand. Francis Lloyd Byrne: Okay. And let me just follow up to be a little bit on -- given your resource depth and your breakeven. Just how much production are you comfortable with going forward? Could you add 2 Bs, could you add 3 Bs and still be comfortable? Toby Rice: Yes. I mean this is a question we've asked here. I mean, realizing the full potential of EQT when we came in here, we think about, what's the full potential of this almost 2 million acre resource base we have here. Obviously, we're super disciplined to making sure that we're pairing up with demand. But we believe that we have a productive capacity of about 12.5 Bcf a day. Think about that for -- when we think about the amount of opportunities that we could create on the midstream and infrastructure side of things and still be able to take advantage of the benefit of that integrated platform and capturing the margins on the upstream side, which is where we feel like the largest source of value capture is going to be -- is going to occur. That's sort of how we look at it. But I mean, that's aspirational for us, and this is one of the reasons why we're pushing so hard with our growth engines to capture this demand and create these infrastructure opportunities for us. Jeremy Knop: Lloyd, I'd add to that, too. I think when you look back at our industry over the last decade or 2, so much of growth comes down to companies really irresponsibly chasing price signals that are fleeting. I think as we think about growth, it comes back to those 3 prerequisites I mentioned earlier. And as we think about it, it's not something where you'll probably ever hear us come out and say like, hey, we're just going to grow for the next 12 months, right? Or hey, we think if prices are higher, we're going to add a little bit of volume. That's not how we think about it. I don't think any company gets rewarded for that. If anything, you're just introducing uncertainty and sort of gambling on price. The way we think about it is when that demand is structurally showing up, whether it's the MVP projects coming online, like Clarington data centers, whatever it might be, that is structural demand of multiple Bcf a day that we are really underpinning. And if we grow it, it probably looks more so like we grow 3% for the next 5 years on like a CAGR basis, and we have a business, a balance sheet, a cost structure and integrated platform that allows us to do that really no matter what gets thrown into the macro mix. So if you're an investor, you can capitalize that and count on it happening. as opposed to having to pull back on capital then lean in back the capital depending on the broader price environment. I think the way we think about it is at the point in time when we do that, if you do see a down cycle in the middle of that growth -- long-term structural growth profile, you'll see us buying back stock during the pullback and curtailing volumes during the weak period, but not having to change our operational cadence. It's a totally different position than I think any other company is really in that has talked about growth to date, but that's because they don't have the attributes that we've built into our business to date. So again, when we do it, we will do it very intentionally. We'll do it with a lot of discipline with a long-term focus, but you're not going to see us come out and chase price signals. Operator: Your next question comes from the line of Phillip Jungwirth with BMO Capital Markets. Phillip Jungwirth: It might be early, but can you update us on any discussions or plans this year around placing LNG offtake between Asia and Europe or securing regas and just how you think purchases are looking at Henry Hub versus oil-linked deals beyond 2030? And just because you're having discussions with counterparties, are you surprised at all by international buyer motivation to own physical Henry Hub-linked gas with recent M&A? Jeremy Knop: Yes. We've -- our team has been super active on this front. It's actually been, I mean, really educational at the same time, just building out those international relationships. I mean the demand, I think, is a lot more real than what you read about. I think that market is very opaque. I think what you learn on a firsthand basis, interacting with the marketing teams and the executives of some of these international businesses just gives you a different perspective on this. But I would say -- I'd just characterize it as I think that demand is a lot more real than people realize. I think there's a lot more demand for volumes, especially when LNG prices are not $20, they're, call it, $8 to $12. I think you're going to see a lot of that gas picked up. And it goes back a little bit to my -- what we said in our prepared remarks around just where European balances are right now, despite all the gas added in the last couple of years, you're still looking at really low inventory levels. So I think that is -- I think that's indicative of just how that gas globally is being absorbed. But look, I'd say there's been a unique level of interest in our volumes and buying from a producer. When you look at the existing LNG players in the U.S., all of them is like liquefaction facilities are set up to be like short Henry Hub and the offtakers are short Henry Hub. And when you work with EQT, you actually -- I mean, effectively like vertically integrate through the chain through that purchasing pipeline. What you're seeing with buyers coming to the U.S., it's not that, for example, Asian buyers are coming and wanting to grow a bunch of Haynesville volumes or East Texas volumes. It's just to own that physical molecule so they're not short anymore. So I wouldn't expect to see them chasing price signals either in the same way. But it is leading to just so much interest in our resource base. And I think there's been a lot of realization from both European, really like super majors all the way to buyers across Asia that the Gulf Coast, in particular, the Haynesville is just super short inventory. And if you're looking at securing physical molecules for 2030 and beyond, you just don't have it, right? And so it's like a mismatch maturity for the liability you have when you sign up for offtake. And so we're increasingly actually seeing a lot more interest in molecules coming out of Appalachia or the Permian. I think from our standpoint, that's really where long-term gas supply will come from to feed the LNG demand. It's not the Haynesville. And I think everyone is really starting to realize that internationally as well. Phillip Jungwirth: That's great. And then you guys have over 40 Bcf of gas storage, which came from Equitrans. I mean it doesn't get a lot of airtime and you're effectively managing the reservoir storage at times. But do you see value in adding storage further from the wellhead as part of a broader gas marketing strategy? And really just a quick one. Now that your own 53% of MVP with the bolt-on, are you planning to consolidate that venture? Toby Rice: Yes. Just high level on storage and how it fits into our strategy, and I'll let Jeremy expand on some of the details here. One of the biggest focuses that we see is going to be on the reliability of energy, and that simply means delivering volumes to the market when the market needs it at the level that the market needs it. So storage is going to be a big part of the focus. We're doing that right now with our strategic curtailment. That is a really big lever that we pull, and we've pulled that pretty consistently over the past couple of years. That's a really great tool for us. And we'll look for other tools out there that will enhance the reliability of the energy that we produce at EQT. Jeremy Knop: Yes. I mean, look, it all comes down to returns for us, just like these growth projects. We have storage capacity on the Gulf Coast already. in addition to the storage we have in Appalachia. Really what the market needs, though, is not necessarily storage in Appalachia, it needs salt storage along the Gulf Coast region to really help balance and buffer what I think of as like ground zero volatility over the long term with the seasonal swings and maintenance cycles of those LNG facilities just because it's so concentrated geographically. So it's something we're studying and spending more time thinking about. I do think you have to, as an operator, like as much value as I think our team has and could squeeze out of a lot of storage capacity. If I'm an investor, that's a hard thing to model and understand. I think that's the type of cash flow that's going to get a pretty low multiple on it. So we're trying to be cognizant of that at the same time and make sure however we go about expressing a view of like long volatility through storage is whether it's an operator like we are today or someone leasing capacity, which we also do, we do it in a way that actually converts to value for shareholders. So it's an area we're spending more time, but it's probably one of also the greatest opportunities for infrastructure investment in the country right now and really the world overall, just to help make sure there is a buffer in the system. Operator: Your next question comes from the line of Nitin Kumar with Mizuho. Nitin Kumar: Congrats on a great quarter. One follow-up on Arun's question around growth CapEx. I know sometimes in an integrated model, the spending on infrastructure can dilute the ROE, but your investments are very tied to your upstream portfolio. Have you -- is there a way for you to quantify what is your ROE on this growth CapEx or anticipated ROE on this growth CapEx? Toby Rice: Yes. On the infrastructure we have for '26, we can look at a free cash flow yield like holistically, some between 20% and 30% across the projects is how we think about it. So typically, when you think of infrastructure, you think of returns lower than that. And I think part of this -- while these returns are so good are just investing within our operating footprint. And so those are the type of opportunities we're looking for organically on the infrastructure side. That being said, it pales in comparison to developing upstream Marcellus with a $3.50, $4 gas price. But we've got to be very thoughtful about that and make sure the demand is set up before any upstream volumes are brought in. Jeremy Knop: Yes. Nitin, just remember, too, I mean, we're focused on returns on shareholder capital. I think a lot of just classic upstream companies get so focused on things like single well IRRs, and that's just apples and oranges versus what creates stable annuity-like cash flow streams for investors that drive things like free cash flow and free cash flow yields. So when you think about it, if you're drilling a well that gets you a 100% IRR to get a return on your enterprise value equal to your WACC, like that's generally kind of -- it's like a 10:1 sort of ratio. So if you want a 10% return, you probably need to -- on enterprise value, you probably need something like 100% well return. So companies are out there talking about like 15% like wellhead return breakeven, you're probably generating like a 1% return for shareholders relative to your WACC. That doesn't make any sense. I think it's just missed in the equation overall. When we think about it, you have to look at something like infrastructure cash flows, which are annuity-like in nature. All the capital we're putting in here is recurring cash flow that comes out of this over the long term. And if we're yielding, just call it, 10% on average on enterprise value, but we're investing in other annuity-like cash flow projects that 20%, 30% cash flow yields, that's driving real sustainable value uplift for shareholders even though that headline IRR is just -- is not the same. Just to give you another example of that, like to earn the same multiple on your investment drilling a Marcellus well versus a Haynesville well, your Haynesville well needs double the IRR to get the same multiple of invested capital, right? You're not really creating value, but that hyperbolic decline really skews that calculation. And so again, for us, like we don't really focus on the IRR so much. It's apples and oranges. For us, it's really about what drives cash flow uplift to shareholders and how to do it durably. And that's really what's going to drive value over the long term. And look, when you step back and think about all the infrastructure investments we've made, even buying Equitrans when we did -- it really comes down to that as like a foundational sort of insight we had years ago and also what kept us out of going into plays like the Haynesville. But again, like a lot of people look at our stock and say, well, you trade at a higher multiple than peers. Well, we did a couple of years ago. We've outperformed virtually every peer since then, and we still trade at a similar level, right? So I think you have to parse this apart to really understand like where is value coming from and why. Nitin Kumar: Yes. I think you certainly have proved the value of what you embarked on 2 years ago with the Equitrans acquisition. My follow-up, Jeremy, is on the balance sheet. You have some very impressive goals, which do seem achievable for balance sheet reduction. How do you think of the balance sheet beyond '26? Typically, it's seen as a buffer against volatility, but you've designed the organization to actually ride volatility a little bit better than peers. So how should we think about the balance sheet going forward? Jeremy Knop: Yes. I mean, just consistent with what we've said in the past, Nitin, $5 billion we see as our long-term max debt level. I would expect our net debt level to fall below that. I don't think you're -- again, as we've said for years now, I don't think you'll ever see us come out with a programmatic buyback. I think the way we think about it is while in theory, in a spreadsheet, your return on cash sitting on the balance sheet is very low, it's hard to overemphasize how valuable that is on just the optionality of that in a very cyclical volatile industry. You've seen that if you just look back the last 3 to 4 years, just how volatile even our equity has been. I think beyond limiting the volatility in our equity by having low debt, I think being able to step in and be an opportunistic buyer when there's big pullbacks, whether it's related to natural gas or whether it's broader in just the macro environment, that's what we're trying to set up for. So I would expect our net debt to fall. We're not afraid at all to hold several billion dollars of cash on the balance sheet opportunically. And we've really been encouraged by our top shareholders to actually do that because they understand just the nature of the cyclicality. And when those options come, they're tremendous. And it's really one of the best long-term things we can invest in, but you have to be patient. Operator: Your next question comes from the line of Neal Dingmann with William Blair. Neal Dingmann: Toby, my first question just on the '26 guide. It seems looking at that Slide 6, no question, your operational efficiencies continue to lead to production growth on less capital spend. So I'm just wondering are you seeing anything different for this year when you look at those '26 expectations? Or is the guide more just kind of being conservative given the bottle gas tape? Toby Rice: Yes. We're adding on a maintenance perspective, probably get that extra $100 million, and that's largely due to Olympus. So I mean there's some conservatism baked in here. We're taking the momentum that we've established operationally in '25 and sort of baselining that. Some of the opportunities we're going to be working on to improve that. There's a couple of small science tests that are coming out that could tweak some of our well design. I mean, as you know, we do invest in science, so there could be some opportunities on that front. On the water logistics side of things, we're going to continue to build that out. That will continue to bear fruit and give opportunities for us to streamline logistics and operational efficiencies going forward. Just for perspective, we pipe about 80% of our water right now. So that's the opportunity for us to continue to increase the logistics support on the completion side. And on the produced water side, we're only piping about 40% of our produced water. So these investment in water systems, I think, are going to be value-add for years to come. And then I'd say on the service side, we're going to be really aggressive in rebidding a lot of our services. It's -- I think there's some tools that we have from an AI perspective that will allow us to pinpoint some of those efforts. And we think there could be some opportunity for us to grind costs down, probably low single digits on the procurement side, but we're not just focused in the field. We're also focused on the procurement and the backside, too. Jeremy Knop: Neal, one thing I'd add to that Yes, just on the upstream side of things, I think it's tangible evidence to this. There is some noise in our numbers year-over-year because we were so transactional in 2024 and then also with the midyear Olympus close in '25. If you really step back and think about it and just the level of efficiencies Toby is alluding to that we also continue to expect going forward, we're producing about 6.3 Bcfe a day in 2024. We sold our non-op interest down to Equinor. That was about 600 a day. So we were at 5.7. We buy Olympus, you add about half a be back, so you're at 62 as a baseline. The production forecast we've given for this year is about 6.4 Bcfe a day. So in effect, while we don't talk about it, we, through our operational improvements and efficiency gains have actually grown about 200 million a day over the past, call it, 2 years. I think that's being missed just due to the kind of the noise year-to-year. But I do think that's important tangible evidence to just like the volumetric results of what we're doing that are easy to miss. So I'd take that into account. And again, like Toby said, I would expect that to continue. Neal Dingmann: Great. And then just very quickly, Telly, on the power projects opportunities going forward, do you anticipate those being structured any differently than Homer City now any of your previous deals, it seems you've got now more of a competitive advantage. I'm just wondering should we think about potentially further power deal structure any differently? Toby Rice: No, it will just depend on what services the specific site requires. I mean, gas supply across the board. And then the opportunity on the midstream side will be a unique factor on a case-by-case basis. Operator: We have time for one more question, and that question comes from the line of Kevin MacCurdy with Pickering Energy Partners. Kevin MacCurdy: Great. And I'll just keep it to one question. Kind of coming back to the production growth, we noticed that the 2026 turning line count is higher year-over-year. And just curious on the cadence of those turning lines throughout the year? And does that level give you some flexibility or optionality to grow in 2027? Jeremy Knop: Yes. Right now, we're not -- we haven't tried to see up growth into 2027. I mean, to some degree, I think what you're seeing is just lumpiness as you would expect from a company our size when we're pursuing combo development. But this is not setting up for 2027 growth right now if we come out and intentionally mean to grow beyond what I'd call like the accidental growth of being -- just getting so much more efficient of the $200 a day I referenced in the prior response, we'll come out and say that, but we're not ready to pursue that. We don't think the market is ready for it yet. Kevin MacCurdy: And you alluded to combo development. Can you kind of expand a little bit on that? Toby Rice: Yes. I mean, combo development has been the core operational pivot that we instituted here when we took over 6 years ago, moving -- taking full advantage of our large-scale asset base moving from drilling, call it, 1 or 2 wells off the site. They're now drilling 6 to 10 wells off of a site and doing that across 3 or 4 sites sequentially. So we're developing 20, 30 wells at a time, that's been the change in operational efficiencies and the logistics that supports that. So that's a core part of our program that we'll continue to execute going forward. Operator: Ladies and gentlemen, that does conclude today's conference call. Thank you for your participation, and you may now disconnect.

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BELFA 2025 Q4 财报电话会议

Operator: Good morning, and welcome to the Bel Fuse Fourth Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the call over to Jean Marie Young with Three-part advisers. Please go ahead, Jean. Jean Young: Thank you, and good morning, everyone. Before we begin, I'd like to remind everybody that during today's conference call, we will make statements relating to our business that will be considered forward-looking statements under federal securities laws, such as statements regarding the company's expected operating and financial performance for future periods, including guidance for future periods in 2026. These statements are based on the company's current expectations and reflects the company's views only as of today and should not be considered representative of the company's views as of any subsequent date. The company disclaims any obligation to update any forward-looking statements or outlook. Actual results for future periods may differ materially from those projected by these forward-looking statements due to a number of risks, uncertainties and other factors. These material risks are summarized in the press release that we issued after market close yesterday. Additional information about the material risks and other important factors that could potentially impact our financial performance and cause actual results to differ materially from our expectations as discussed in our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K and our quarterly reports and other documents that we have filed or may file with the SEC from time to time. We may also discuss non-GAAP results during this call, and reconciliations of our GAAP results to non-GAAP results have been included in our press release. Our press release and our SEC filings are all available at the IR section of our website. Joining me today on the call is Farouq Tuweiq, President and CEO; and Lynn Hutkin, CFO. With that, I'd like to turn the call over to Farouq. Farouq? Farouq Tuweiq: Thank you, Jean, and good morning, everyone. We appreciate you joining our call today. I want to begin by expressing a big thank you to our global team for making customer service and meeting demand their top priorities and for delivering innovative technologies as a key partner to our customers. As a result, 2025 was a milestone year for Bell, with record revenue and EBITDA. We delivered net sales of $675.5 million for the full year, a 26.3% increase over 2024 and achieved a record GAP and non-GAAP EPS. We Fourth quarter sales reached $175.9 million, up 17.4% year-over-year. Our gross margins expanded to 39.1% for the year, reflecting strong execution and operational discipline. Aerospace and defense, including space, continued to be strong drivers for us in 2025. For the full year, A&D accounted for 38% of our consolidated sales with 28% from defense and 10% from commercial aerospace. Recovery in the networking end market and growth in AI applications also contributed to higher sales in 2025. Order volumes remained strong across multiple end markets throughout the year, resulting in the full year book-to-bill ratio of 1.1. We have seen continued improvement and strength heading into Q1. This sustained momentum in incoming orders highlights a healthy demand environment across our end markets and positions us well as we move into 2026. Our team delivered these record results despite headwinds from material pricing, particularly gold, copper and PCBs and unfavorable FX movements in the peso, renminbi and shekel. We're actively monitoring these factors and have and will continue to take pricing actions to mitigate incremental cost, ensuring continued margin strength. Operationally, we successfully completed the closure of our China facility in Q4, transitioning operations to a third-party supplier without interruption to the business. This move is part of our ongoing efforts to optimize our global footprint and drive cost efficiencies. We also made significant progress in strengthening our balance sheet, paying down our debt by $90 million during 2025. We -- this has created additional capacity and flexibility for future investments and potential acquisitions as we continue to pursue growth opportunities. Looking ahead to 2026, we anticipate continued growth in aerospace, defense, space and AI, the same revenue drivers that have benefited Bell over the past few quarters. Additionally, we have seen positive shift in sales across the networking, consumer premise wiring markets as well as through our distribution channel. The rebound in these areas are expected to continue into 2026. We also foresee increased raw material input costs and a weaker USD, which will require us to proactively manage pricing and pass costs along where appropriate. Our pipeline for M&A activity remains active, and we are excited about several opportunities currently in various stages of evaluation. We anticipate a better backdrop in terms of M&A opportunities as the market noise settles down a bit in 2026. As announced a few weeks ago, we're excited to welcome Tom Smelker to our executive team. Tom joins us from Mercury Systems, bringing valuable experience and a fresh perspective in aerospace and defense. His leadership will help us better align our organization with changing customer needs and industry trends. As we continue to evolve, we are reviewing our segment structures to ensure we're well positioned for future growth. With aerospace and defense now representing a significant portion of our business, we see opportunities to further tailor our leadership and strategy to the unique demands of these markets. Before turning the call over to Lynn here, I would like to take a moment to recognize Pete Bittner, President of our Connectivity Solutions business, who will be retiring in April after 23 years with Bell. Pete has been instrumental in shaping and growing this segment and leaving it in the great conditions as he pursues his next chapter, and we thank him for his many meaningful contributions. We wish you great luck, and you'll be missed, but will surely enjoy his time with his wife and family. I'd also like to take a moment to recognize Dan Bernstein, who transitioned out of the CEO role in May 2025. This last year has been 1 of significant transition for Bell, and I want to sincerely thank Dan for making it a seamless one. Our business transformation, which began years ago under Dan's leadership, laid a strong foundation for the company's continued success. His vision and commitment to Bell's growth have positioned us well for the future, and we're grateful for the guidance and dedication. On behalf of the entire organization, thank you, Dan, for your outstanding contributions and for setting Bel up for success. With that, I'll turn the call over to Lynn to run through the financial highlights from the quarter and provide color on the outlook for Q1 2026. Lynn? Lynn Hutkin: Thank you, Farouqu. From a financial standpoint, we had another strong quarter and year with continued margin expansion and solid sales growth across all segments. Fourth quarter 2025 sales were $175.9 million, up 17.4% from the same quarter last year. Full year 2025 sales totaled $675.5 million. a 26.3% increase over 2024. On an organic basis, sales grew by $41.5 million or 7.8% over 2024. All 3 product segments delivered organic growth for the quarter, demonstrating the strength of our diversified portfolio. Profitability improved alongside sales with gross margin rising to 39.4% and Q4 25, up from 37.5% in Q4 '24. I -- for the full year 2025, gross margin was 39.1% compared to 37.8% in 2024. This margin expansion was driven by improved absorption of fixed costs in our factories due to higher sales volumes and by strong execution within each segment, maintaining discipline around SKU level profitability. These results highlight our ability to drive value through operational efficiency and strategic focus. Now turning to our product groups. Power Solutions and Protection delivered another exceptional quarter with sales reaching $92.5 million in Q4 '25, an increase of 18.5% compared to the fourth quarter of last year. The sales growth in the Power Solutions segment was driven by several key end markets, including a $1.5 million increase in sales of our front-end power products, serving the network networking end market and Q4 '25 compared to Q4 last year. Fourth quarter sales into AI-specific customers reached $4 million in Q4 25 up from the $3.3 million in Q4 '24. Fuse product sales were up by $1.4 million in Q4 '25, a 31% increase from Q4 '24. Sales into consumer applications increased by $1.8 million in the current quarter, up 32% from Q4 '24. And just to note, in our Power segment, this is also where we had the acquisition last year. So there was some organic growth on the defense side as well. These areas of growth were partially offset by a decrease in sales of our rail products by $4 million and e-mobility sales were down $1.1 million as compared to Q4 '24. The gross margin for the Power segment was 44.5% for the fourth quarter of 2025, representing a 390 basis point improvement from Q4 '24. This improvement was primarily driven by higher power sales into the aerospace and defense end markets, a favorable shift in product mix and better absorption of fixed costs at our factories. Our Connectivity Solutions group achieved sales growth of 15.1% during the fourth quarter of 2025 as it reached $60.5 million compared to Q4 '24. This improvement was due to the continued strong performance in commercial aerospace applications, where sales totaled $18.2 million, an increase of $3.8 million or 26% year-over-year. Sales into space applications amounted to $2.6 million in Q4 '25, up 53% from Q4 '24. Connectivity sales through the distribution channel were up $3.8 million or 20% versus Q4 '24, primarily due to shipments into the defense end market through the distribution channel. Profitability within the Connectivity segment continued to improve with gross margin for the group rising to 37.2% in Q4 '25 from 36.6% in Q4 '24. This margin expansion reflects the benefits of operational efficiencies achieved through improved revenue, a more favorable product mix and facility consolidations completed last year. These positive factors were partially offset by minimum wage increases in Mexico. Lastly, our Magnetic Solutions group sales delivered a solid quarter with sales reaching $22.9 million in Q4 '25, a 19.1% increase compared to Q4 '24. This performance was primarily driven by higher shipments to a major networking customer. Gross margin for the group was 27.3% in Q4 '25 and down from 29.1% in Q4 '24. This margin differential was due to minimum wage increases in China, an increase in material costs, primarily in gold and PCBs and unfavorable foreign exchange impacts related to the renminbi. Research and development expenses totaled $8 million in Q4 '25 in representing an increase of $1.1 million compared to Q4 '24. This increase was primarily attributable to the inclusion of Entercom's R&D costs, which amounted to an incremental increase of $1 million during Q4 '25. We anticipate that R&D expenses in future quarters will generally remain consistent with the Q4 '25 level as we continue to invest in new technologies and solutions to support our customers and drive long-term growth. Selling, general and administrative expenses for the fourth quarter of 2025 and were $32.6 million, down $2.2 million from the $34.8 million in Q4 '24. -- primarily driven by lower acquisition-related legal and professional fees in 2025 compared to 2024. Turning to our balance sheet and cash flow. We closed the year with $57.8 million in cash, down $10.5 million from last year, primarily driven by our proactive efforts to strengthen our balance sheet, including paying down $90 million in long-term debt, resulting in $197.5 million of total debt outstanding at December 31, 2025. Additionally, we made $3.5 million in dividend payments and we invested $12 million in capital expenditures to support growth and efficiency initiatives. These outflows were partially offset by $7.8 million in proceeds from property sales, and $1 million from the sale of held to mature securities earlier in the year. During the full year 2025, we generated cash flows from operations of $80.6 million. Taking into account our swap agreements, the weighted average interest rate on our debt balance at December 31, 2025, was 4.4%. Looking ahead to the first quarter of 2026, we continue to see strength across all 3 segments. Historically, our first quarter tends to be our lowest sales quarter of the year, given the impacts of the Lunar New Year holiday in China. In light of this historical trend and based on the information available as of today, we expect Q1 26 sales to be in the range of $165 million to $180 million. Gross margin is expected to be in the range of 37% to 39% and given anticipated headwinds related to higher material costs and the unfavorable FX environment we are in. Overall, our consistent performance strategic investments and operational excellence have positioned Bel for continued success. We remain committed to driving shareholder value, innovating for our customers and capitalizing on growth opportunities across our markets. I'd now like to turn the call back to the operator to open the call for questions. Operator: [Operator Instructions] The first question is from Bobby Brooks from Northland Capital Markets. Robert Brooks: So I wanted to touch on kind of sales initiatives moving forward. So you guys brought in the new head of sales about a year ago, right? And I'd just be curious to hear where he sees the most interesting opportunities for growth. Obviously, for Roop, when you initially joined as CFO a handful of years ago, you had a massive shift in the margin profile of the company, which A lot of that was sort of low. A lot of that was sort of like low-hanging fruit that you targeted. So I'm just curious to hear if that sort of same scenario. If Ooma has seen that sort of same scenario and again, like what he sees as the largest opportunities to go after. Farouq Tuweiq: Yes. Thanks, Bobby, and good to speak with you here. I think that's a pretty nuanced question. As a reminder, we are largely in a medium- to long-term design cycle businesses, right? So as we think about influence, and we think about A&D, I'd probably suggest the largest part of E&D for 2026 is going to be simply receiving orders from the customers as they get funding and deployment. So if we were to think about sitting early on in the year here about new wins and when they get funding, you're at least a year out probably 1 to 2 years before you monetize them. And some of our shorter design cycle businesses on the other end, I would say something like fuses you could probably see a win a couple of quarters out, and that translate into some sales of some of our consumer business. So we are a long-cycle design business. There's no quick claims here. We sell technology. We want to get in with the customer. We want to do the hard stuff. -- and therefore, that does take a while. If we look at the past few quarters on some of the benefits I have in there, that has been a reflection of the work that the team has done at a global level. within the various businesses, right? So I would suggest that the wins and the performance that was probably not much due to sales efforts that happened in Q4, right? This is stuff that probably happened early on in 2026. So we are seeing the benefits of the global team folks in doubling down. When we look across the business, we have new wins across probably all of our end markets, maybe a little bit less so in places like e-mobility or maybe some of our, I'd say, rail is kind of a little bit of a slow year. But I would say more often than not, we always have new wins. And when we think about the funneling process, right, we want to make sure we're going after a robust set of opportunities that are good opportunities and try to convert them to sales. And that process, we started a while back. Now that's not to suggest that we don't have work to do. On the last call, we talked about CRM implementation in Q4. We did 3 -- a little over 3 dozen worth of contracts with our reps in the U.S. to really lean into new opportunities. So we're trying to move the whole system forward from compensation structures to software and data to a shift and it's been happening, right? It's evolutionary. So we've seen the wins. Where is it going to come from? I mean we think probably there's a lot of money going into A&D data centers, AI, a lot of obvious interest going in there. But quite frankly, our consumer business did very good last year. So I think what we like about us is we touch a lot of end markets, and we like the way they're looking today heading in 2026, a little bit more maybe than early '25 or '24. So a long answer to your I just want to caution, we're not a quick turn business, and we're trying to sell more design-in type work or modified solutions versus just purely off-the-shelf stuff. Robert Brooks: Absolutely. Really appreciate that detail color for. And then -- maybe just turn into the 1Q guide, very, very impressive, but just wanted to maybe unpack that a little bit more and maybe hoping to get a little bit more granular on the expectations for growth across the 3 segments? Lynn Hutkin: Sure, Bobby. So as we look to the first quarter, and I guess I'll compare it to this recent Q4 that just ended here. We're seeing a lot of the same areas of strength across all 3 segments. So not seeing much in the way of significant shifts or changes from Q4 to Q1. I think the only variable in there is the Lunar New Year holiday, which impacts primarily magnetics and then to a lesser extent, power. So those are the areas where we may see a little bit of softness from Q4 to Q1. But Other than that factor, everything is pretty similar to the Q4 drivers. Robert Brooks: Got it. I appreciate the color there. Congrats on the great quarter. Operator: The next question is from Christopher Glynn from Oppenheimer & Company. Christopher Glynn: I just want to build on Bobby's question about developing the commercial funnel. So you mentioned focus on designing and modified by modified burs off-shelf is how you're developing the funnel that makes sense. We've heard that. Curious if you're noting any traction in win rates for us historical as you mature this -- these strategies. Farouq Tuweiq: I think we're doing a better job at defining what a win is and how we want it to be at certain levels of margin. The other thing I think we are moving more towards 2026, and we talked about last call, is we want to really try to bring the whole Bel portfolio to our customers. I think historically, we've been really more focused around selling specific products like fuse or a connector power supply. And we do need to do a better job at doing a little bit more systems type sales to our customers. Now this is a little bit of a longer journey. . But the idea there is we want to get more alignment to the customer, solve more of their problems and challenges and really be a little bit more of a solutions address the difficult things for our customers. So it's not just simply about more shots on goal, which we are seeing. We're seeing better shots on goal, but we still want to continue to evolve to higher content on goal. So Yes, we're seeing better also the markets a little bit better place, right, so which creates more opportunity for us. I think the team also remember, we spoke on the last call, where we started creating new internal groups and structures to align to that. So for example, we created a key accounts group, right, which we have not had that most of the time it was kind of sitting inside the BUs, now we want to have a more Bel focused key account groups that bring all of our products to the customers because we do have a lot of SKUs. Same thing on the business development efforts. We're [indiscernible] the teams around end markets as we think about products and directions. So I would also argue customer service is an extremely important part of this as we create an easier user experience for our customers. And we just have a lot of different e-mail addresses to customers in different forms and everything and the like or different pricing list to our distribution partners. So I think calling these things out to not underemphasize that there is a robustness in what we're doing that needs for you a pervasive in our holistic approach to the market. So the short answer is yes, there, Chris, but it's also more than just trying to get more shots on goal. Christopher Glynn: Great. That was great color, for. And then on the AI customer base, you mentioned that as one of the continued drivers of growth next year. You've often described it as being in early stage. I think with single source to well funded more start-ups for us the headline, big 3 or 4. Just curious if any of those customers are potentially positioning for adoption curve to their technology where you can cotail, not necessarily first half of '26, but more conceptually. Farouq Tuweiq: Yes. I think the answer is yes in short. The body language from our customers, I'd say, across the networking side. But specific to your question around AI, yes, and that is obviously reflected based on the bookings that came in towards the end of the year last year, the discussions that are ongoing with our customers and obviously, the ultimate outlook that we put out there in the quarter. So the answer is yes, we're seeing the positive momentum scaling and continuing to move forward. And also, let's not forget, there's a networking set of customers that bundle our product into their solutions that ultimately make it to folks like hyperscalers, right? So when we think about networking, it is obviously AI, and that is not an insignificant number for us, which is nice to see the team's efforts pay off there, but also networking side is just as important because we do touch AI in a couple of different ways, right? Christopher Glynn: Yes. Understood. And then just defense, just wanted to clarify. I get a lot of questions about the mix. I think you're pretty broad-based rotor, fixed wing, munitions, comms, radars, maybe even just curious if all those categories, if that is accurate, where the weightings are. Farouq Tuweiq: Yes, in short. Christopher Glynn: Okay. Okay. Great. Understood. I understand it... Farouq Tuweiq: Yes, I would say we want to be careful with kind of talking about at our side here, right? But all the kind of mean -- we're on all the major programs and some not major programs. So it's a very diversified portfolio anywhere to the things that you called out, munitions, things that fly, right? And we're doing more ground obviously, space is a little bit tangible to that as well. But we cover encryption communication, right? So all the things that you talked about, we probably touch it. Christopher Glynn: Great. And last one, just a housekeeping -- any thoughts on share class consolidation. I think 1 of your holders had generated a headline. Farouq Tuweiq: Yes. I would say I think from the gist of it, the -- our shareholder structure is a little bit more nuanced from the perspective of the economic differential between the 2 shares, right, versus just a vote, no vote. So that's one. I would say, as an appropriate due course, we'll have a company response and views on that at the appropriate time. I don't want to speak on the behalf of the board, but at the appropriate time, we'll address that. And also we -- I think the -- what we're trying to do here, Chris, and we've really been at this for the last handful of years here, is we want to our fiduciary dairies to serve the best interest of all of our shareholders, As and the Bs. And as we build a company that's set up for the future, with good performance and investing in our employees and our customers, ultimately, that's kind of what moves the needle. So I just wonder, we're very aware of the fiduciary duty, but I think the Board at the appropriate time, will have a response. That's a little more formal to this. Operator: The next question is from Theodore O'Neill from Litchfield Hills Research. Theodore O'Neill: Congratulations on the good quarter. . Farouq Tuweiq: Thank you, Theo. Theodore O'Neill: So are you guys seeing any impact from the spike in prices on memory? . Farouq Tuweiq: I was going to say, our customers, I would say, largely are the ones that feel it. We not directly are impacted by that. Obviously, we have our other let's say, spike in prices that we're dealing with, like gold and copper we spoke about. But on the memory specifically, it's more, I'd say our customers are influenced by that. Theodore O'Neill: Okay. And on the gold, copper and print circuit board side and the weaker dollar, do you have the ability to hedge some of those? Or do you pass the pricing on? How do you adjust for that? Farouq Tuweiq: Yes, that's a good point. Today, we hedge our FX exposure from a raw material perspective, we're in the business of providing solutions to our customers and technology. So we want to focus on what we're good at. We're not running a prop desk care trying to hedge everything, right? So I think our approach has been we want to try to do our best to mitigate and offset price increases, but to the ability -- and work with our customers to the extent that we can't. We, unfortunately, have to pass that along, and I think that's not unique to us and really kind of in line with the supply chain behavior. But ultimately, we want to be great partners to the extent we can offset it. Sometimes we will find alternative sources. We want to be a solutions provider really to our partners. But in cases we can't, we need to do the unfortunate decision of passing it along. Theodore O'Neill: Okay. And finally, on the Aerospace side, do you have any exposure to the drone market. Farouq Tuweiq: I would say we generally do, yes, I think the drill market is going through some interesting things, right, where there is, let's call it, more consumer that tends to get retrofitted as we're seeing out in the world in, like Ukraine. That's not really our market. We're more in the military kind of U.S. primes and some of the European and Israeli OEMs, the stuff they manufacture. So we're not in the, let's say, drones that you and I are maybe buying or in the more sophisticated drone game. . Operator: The next question is from Greg Palm from Craig-Hallum Capital Group. Unknown Analyst: This is Dany Egerton for Greg today. Maybe just hitting again on A&D and maybe unpacking how you saw that develop in the quarter maybe between Enercon and Corbel and maybe what you saw in some cross-sell business. And then obviously, we know kind of about the increased spend. But as you look into 2026 here, what gets you excited about the growth in this business? And what kind of visibility do you have here? Lynn Hutkin: Yes. So Danny, I'll take the first part of that question. So the growth that we saw when we talk about defense, it's both in our legacy singe business and through Enercon -- we definitely saw growth in the Enercon business. As we look at the business, I think it's important to also keep in mind what we sell through our distribution channel. So there are direct sales and then there are sales through distribution, which we don't really break out into those end markets today. But we did see, as we mentioned in the commentary, we did see a nice increase in distribution that related to growth in defense for that fine business. So I would say that it was pretty split between the 2. So both Sinch and Enercon had robust growth in defense in Q4. Farouq Tuweiq: One thing we would just add [indiscernible] 6, right? We're seeing the build rates on the plan side continue to increase and head in the right direction. Also a lot of the programs around munitions and given kind of what's going on in the world, these are well-funded programs. So we think there'll be a prioritization to make sure those get to fruition and the finish line. So as we look at the amalgamation of that, we feel pretty good as to where we stand compared to what's funded out there. . Unknown Analyst: Okay. No, that's very helpful. Then maybe if I can just touch on gross margin here, which was pretty strong in the quarter, especially in power. I know you mentioned some of those headwinds with FX and input costs, but any way to quantify those? And then as we kind of have that push-pull between input costs and passing on price in any way to think about potential margin expansion in '26? Lynn Hutkin: Yes. I think as we look at the fourth quarter, I think we thought that we may have had some additional FX headwinds in Q4. But we have had hedging programs in place, as Bruce mentioned. So we're still seeing the benefits of those prior hedging programs come through the current period. So as we look we do foresee some margin pressure there on FX. I mean if you look at the peso rent and chuckle, they're all moving in an unfavorable direction. And we do hedge probably half of that, but that's going to start rolling off -- so we definitely see pressures there. And then even on the material side, that's something that -- it takes time to ultimately come through our numbers, right, as we're buying raw materials today, that's something that will flow through our financials at a later date. So we do think that we will see margin pressures in '26. And this is why we're really being mindful of pricing actions that we may need to take with customers. Farouq Tuweiq: And 1 thing to just kind of flag in the pricing, right? It's a little bit of -- it's not as simple as we wake up and raise our prices, right? There's a little bit of cadence to that. So some of the contemplations are do you reprice the backlog, do you come up with an updated pricing list for distribution, which takes, I think, something like 30 days before it's effective. So there's a little bit of a time issue. The other thing I would say, and we've talked about this in the past, while our margins are great, and we'll always continue to try and push margin expansion, we have pivoted from a margin gain to a growth game. So we need to make sure that we are winning our fair share of business and opportunities out there that we can get in on. And to enable that, there is some potential investment that we've been doing a little bit around the go-to-market, the systems piece of it and the people piece of it. So I just want to make sure -- and I know the margin gets a lot of discussions on the Bell earnings. And obviously, we're very proud of our margins. But we are hitting some headwinds that we've got to make sure that we have in the middle of this kind of growth that's coming that we're positioned appropriately for not picking up too much. Operator: The next question is from Luke Junk from Baird. Luke Junk: Just wanted to double click on what we've been talking about in terms of what you've been doing to realign the sales force really thinking more about how do you attack markets or key customers, but something that you said in the script, kind of caught my attention in -- with oncoming in to head the connectivity business, that there might be some like opportunities even further down in the organization. Am I hearing that right in terms of aligning operations, maybe even from a, let's say, manufacturing footprint to better attack some of these discrete opportunities? Farouq Tuweiq: Thanks for the question there. Look, I would say a couple of things to maybe answer it from the back way of your question here. So on the operational side, we I can't remember 7, 8 facilities. We've done a lot. So what's going to dictate facility moves is the current state of the business and the customer demand, right? We pride ourselves and were our customers. So obviously, for a while, there was a lot of discussion around China and India than that froze. If that kind of starts up for some people at a startup, we were going to move to some of our products to India. So I would say, given the geopolitical world that we live in and the realignment of localization of supply chains, we are in these, let's say, active discussions, right? But in terms of Bel as a stand-alone basis in putting a political supply chains, our facilities are pretty good. So we have to react to the fundamentals of the market. I think our biggest opportunity here is around the go-to-market and sales piece of it. I think maybe just to highlight on moving a facility for us is a big task, and it's not simply is just moving equipment, building some buffer supply, moving equipment from place A to place B., you need to set up a lot of kind of the legal structures. And if you're talking about A&D, there's a lot of regulatory hurdles to jump through. As we're setting up, for example, our Slovakia factory to be more A&D facing to the European markets we're living through the complexity and spider web of getting all the clearances and certifications on defense weaponry control. In addition to that, customers usually always have to want to come up to your facility and do audits and usually there's feedback and that takes a whole issue. So it's not easy. We don't take these decisions on moving facilities lightly. So we need our customer market changing dynamics to force our hand on a facility move. Go-to-market our products today that we have that can be bundled together that can be brought to bear as we talked about, the key accounts group earlier, that is our biggest opportunity at hand. And then operations, there's always things to be done, sure. But I think we've done so many of them that we need to live in growth land. And if we're not going to move a facility unless it's going to help us grow, right? Luke Junk: Yes. That's super helpful. Near term, just curious from a guidance standpoint, New Year, obviously, having a seasonal impact as we've normally seen the business, but it's pretty late this year. I think it's almost as late as it can be just from a calendar standpoint. Would you normally have maybe a little better feel for that seasonal impact in the fiscal year? Is there any conservatism just because of your timing and the guidance? Farouq Tuweiq: I think as you know, Luke, in public land, right, everybody is always trying to figure out the optimal way to guide the Street. Our perspective from guidance is we want to land in a range and we build it to around the midpoint, right? So we're not trying to -- we don't build it to the high end point of our range and hope to guide we go over a range. We build it to the midpoint. -- right, to allow for some room for shifting from quarter-to-quarter. Obviously, we're in A&D, that tends to be kind of sometimes funny business. If we allow for some overordering fuses, yes, given how late we are in the quarter, talking about Q4 right here, we are roughly in the back of February, yes, we have better visibility. But to put your comment on question specifically about Chinese New Year, it's 2 weeks off, right? Everybody can trust down. It's not just us. It's all the CNs, it's all our customers in the Far East, right? So as a result of that, everybody goes pencils down for 2 weeks. And when they come back, it doesn't just turn on a dime. Usually, there's a week of, let's say, tough start time getting back into the groove, getting things going. So you're probably talking is somewhere between 2 to 3 weeks loss on a 3-month period, all right? That's not insignificant. So I wouldn't say conservatism. I would say we wanted to do what we say we're going to do and we're in our best guess. So we're not trying to be conservative on that. Luke Junk: Fair enough. And then I just want to zoom out for my last question. The Power side of networking. Obviously, you've got some exposure there. I mean, the higher levels of power that power these more capable chips really becoming quite apparent in that world right now. And I'm just wondering to what extent you're seeing any pull-through from a design cycle point of view for high-voltage components from either your Tier 1 customers or your direct customers in that world? And especially if there's any IP that might be leverageable either, I think, rail or mobility, both have some high-voltage IP that might be interesting. Farouq Tuweiq: Yes, I would just say -- I think there's a couple of things to unpack there, right? Specifically the AI networking world, it's always going to go to more high power, higher density, less energy right, more efficiency. So that's a constant theme over ever. Now we are seeing, I would say, some new designs coming in relatively maybe in a short period of time, maybe back of the day, it was a 3- to 4-year device cycle, things are coming in a little bit sooner. So we are, for example, selling some products -- but we're already working on the next gen stuff. So that has happened a little bit quicker. I will also say, generally, right, we do have exceptions, but we're not really an IP business, right? We R&D to fix or address a problem. And then what we want to do is we want to -- we do a pretty good job at this inside of each of our business units is how do we leverage what we've developed for somebody to either standardize it or select modifications and then we extend the recap products, whether we do distribution or other similar customers. The other thing we are seeing, which is actually interesting in some of our actual e-mobility products, given the nature of those products, we are starting to see some military folks looking at, let's say, high-end products and services but not quite military grades. So kind of I guess, we're calling semi military being used. So we are seeing that extension of the R&D effort that has gone to e-mobility into other markets. Now we haven't won anything yet, but we're feeling good about potential wins coming if that makes. So that's how we extend our R&D dollars. We're not looking to reinvent the world every time. Operator: The next question is from Jacob Parsons from Needham & Company. Unknown Analyst: I'm just asking a question on behalf of Jim Ricchiuti. So we've been kind of hearing a better tone in the commercial aerospace market. Really, particularly with the leading domestic players in the marketplace. So how are you guys thinking about this area of the business in 2026 and potential for better growth within the Connectivity Solutions area. Farouq Tuweiq: So as it relates to commercial air specifically, right? I mean for better or for worse, we are -- from an OEM perspective are attached to the hit to our largest North American customer. And the way that we're going to make more money and to be clear, we service that customer both our Connectivity and our Power A&D business. So the way we're going to grow revenue is a direct correlation to increase build rates right? And we've lived the ugly side of that when there was kind of the all the union negotiation. If you recall, I think it was Q4 last year, there was a shutdown at kind of threw our business a little out of whack or back in the days of the grounding of the MAX. So we are going to see how that correlates to the build right. So what we always point close to is, I think they're very public about build rates and what's going to get approved and not approved. So take a view on that, and that should have a direct correlation back to us. On the Connectivity business, so not the Power business, there is an element to it, right? So as we think about MRO cycle, I can think about are people on the planes flying being consumed and miles are being put on these planes. And up to every so often, those mine to be kind of retrofitted or MRO, right? So we think flights and when we look at the earnings of the -- some of the flight operators out there, people are flying and planes are moving. So we feel both good on the OEM and MRO side. Unknown Analyst: Yes. That's all super, super helpful. And if I can just kind of get 1 more in. So I'm curious, how's the book-to-bill ratio varied much by market vertical and which areas of the business have you guys seen the biggest changes relative to last quarter? Lynn Hutkin: Yes. So I think on the book-to-bill side, Farouq had mentioned we were at 1.1% for the full year. I think our book-to-bill has strengthened as the year progressed. In Q4, our book-to-bill was 1.3. And I would say that strength was seen across all 3 product segments. So there's not 1 segment that is really high, while someone else is below 1. All 3 are very strong in Q4. Operator: The next question is from Hendi Susanto from Gabelli Funds. Hendi Susanto: I have several questions. Park, can you help unpack more details on your AI opportunities in terms of end products or devices to help us build better ideas. Some products that come to mind are like power modules, network switches, traditional compute, AI surfaces and optical networking. Perhaps you can help us build better ideas of your devices? Farouq Tuweiq: Yes. I would say, Hendi, we want to be a little bit careful here, but our products are going to are more around the power side of the business, and the Bel Power is kind of where it's at. I would say from a direct where we know things are going for AI. Obviously, our magnetics business is also beneficiary from the networking guys and then they're kind of the RJ-45s kind of what we call magnetic solutions, which is really more maybe a potential interconnect product. So that's how we go at it largely. Our connectivity business doesn't do too much into those end markets given that we're really more low volume, medium volume harsh environment applications in that product that coupled with it being more copper based. So that's how we kind of go at the AI piece of it. Generally, we do some stuff with the hyperscalers, but that's not really our focus market. So if you remember, we got in trouble there back in 2020. So we want to make sure we pick slots where technology and service matters versus just a copy product with a race to the bottom on pricing. Hendi Susanto: Yes. And if I may quickly check if there are products that may carry some opportunity for physical AI or humanoid robots? Farouq Tuweiq: I think the humanoid market is still getting settled. Today, it's definitely not a big dollar amount. It's very much R&D-centric. I think there's a question around from a humanoids perspective, is that ultimately a consumer product like auto, or is that going to be a technology play? I still think we're far out from mass production. But today, it has not been a discussion level for us. That's a dominant one. Hendi Susanto: Okay. And then what are your latest view and outlook on pockets of market recovery and inventory rebuild activities among customers? Farouq Tuweiq: I don't think we -- right. I think the inventory rebuild is kind of stacking up the shelf really on the customers. I think given that everybody, I'd say, went through a pretty difficult lesson back in '23 and '24 and overlaid with the tariff geopolitical world we're in, I'd say people are generally ordering more to demand versus building up the shelf. And quite frankly, I think that's probably a good thing in the sense, right? If you want to be able to shelf then you've got to deal with the hangover. So today, we feel largely and I'm sure there's exceptions. Obviously, we touch a lot of markets. But largely, we feel to shift to demand versus ship to put on a shelf and build a buffer stock because obviously, with tariffs, if things move, the things that you put on the shelf all of a sudden really changed pretty quickly. So I think there's a little bit of nervousness around that from our customer perspective. Hendi Susanto: Yes. And then, Lynn, I have a question on seasonality of sales in aerospace and defense. Is there a -- like if I look at Enercon cells, I'm trying to figure out what seasonality we need to model? And then plus considering that you are -- you may also like winning like more design. So what kind of seasonality can we expect in 2026 in aerospace and defense? Farouq Tuweiq: I'd say generally, aerospace and defense is not a seasonal business where we play, right? North America, Israel, Europe, right? I would say it's really more around sometimes they move for a core to the other when things get funding, right? That's kind of where the choppiest comes from. But it's not really a seasonal to seasonal play, I would say, if there was a seasonality I mean not to the Enercom business, obviously, our connector business. But there is some less working days generally in Q4 just with the holidays and Thanksgiving but -- and some of the Jewish holidays in October. But other than that, I would not say it's a seasonal business. Hendi Susanto: Okay. And then I have a question on capital allocation and debt payment, especially following the $90 million of debt payment in 2025. What is your playbook for capital allocation and debt payment? Farouq Tuweiq: Yes, Go ahead, Lynn. . Lynn Hutkin: So I think as we look at capital allocation, Priority #1 is reinvesting in the business through CapEx. We have regular weight dividends that we continue to pay. Barring anything on the M&A front, debt paydown is where it would be. And I think from a dollar perspective, the last couple of quarters, it's -- they've been robust debt paydowns to the tune of, call it, between $20 million and $30 million a quarter. and we would look to continue doing that going forward. Now keep in mind, Q1 tends to be a cash -- heavy cash utilization quarter just with our annual bonus payment, insurance payments, things like that. So I expect Q1 would be on the lower side. But as we look to Q2, 3, 4, that would be around the level of debt paydown, assuming there isn't anything on the M&A front. Operator: The next question is from Bobby Brooks from Northland Capital Markets. Robert Brooks: So just wanted to circle back and ask specifically kind of on Enercon and cross-selling opportunities there. Obviously, obviously, you mentioned this spend more specifically with aerospace and defense, these are long-cycle programs, right? So these aren't happening in 1 quarter and seeing the outcome the next. But just curious to hear if maybe that's still on the back burner just because demand was so robust in 2025 and the segments kind of just had a deal with the demand that they were seeing. So just kind of curious to hear more on that. Farouq Tuweiq: Yes. No back burners here. Yes, we understand we've got to prioritize. But also remember, we have to live in new wins, land, right, because we can't influence when orders come from our customers, right? When the program gets funding, can they sell it, right? What does the military budgets look like? And then you get an order. The thing that we can influence is going after new programs and aligning ourselves to new wins and new design cycles, right? So as we go after these, we are doing a better job at collaborating I think we're doing a better job at ensuring that both the connectivity and the power side of the house understand what they're going after, weekly calls and putting in some incentives along the way, we can do a little bit better job, but that process is in place. . And what's interesting is we're definitely seeing some of this, let's say, go to market. So there was some -- a couple of interesting quotes in Israel, where I was lining to earn from our e-mobility products that there was a need locally in Israel that our team flagged, but they didn't need quite the, let's say, high levelness of the military stuff but they need really complex products, which are e-mobility and Slovakia teams do a great job at. So we're trying to quote those into Israel. So I classify that as kind of a real-time opportunity that we're chasing. And we've seen a few of those as well. Another example of this is there was a cabling need at our let's say, U.S. Enercom business, which our competivity Group can assist with. So they're working on kind of getting all that qualified and approved normally, in this case, Entercom had to go outside and deal with others, but we're able to capture more of this. And so the opportunities are real but in the spirit of greeting is, we'd always love to do more. But I think as we're getting more bids out there now at a joint level, we're seeing some nice traction. Hopefully, we continue to do that and kick that to gear a little bit more. Operator: There are no further questions at this time. I would like to turn the floor back over to Farouq Tuweiq for closing comments. . Farouq Tuweiq: Thank you for that. Again, I could not be more proud of the team for the great year. Again, also thank you for all of you guys joining the call today, taking interest in what we think is a very, very exciting time for Bel. So thank you, and look forward to speaking to you in a couple of months from now. . Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

86天前Insight Analytics约5分钟阅读

REI-UN.TO 2025 Q4 财报电话会议

Operator: Good day, ladies and gentlemen, and welcome to the RioCan Real Estate Investment Trust Fourth Quarter 2025 Conference Call and Webcast. As a reminder, this conference call is being recorded. I would like to turn the conference over to Ms. Jennifer Suess, Senior Vice President, General Counsel, ESG and Corporate Secretary. Ms. Suess, you may begin. Jennifer Suess: Thank you, and good morning, everyone. I am Jennifer Suess, Senior Vice President, General Counsel, ESG and Corporate Secretary of RioCan. Before we begin, I am required to read the following cautionary statement. In talking about our financial and operating performance and in responding to your questions, we may make forward-looking statements, including statements concerning RioCan's objectives, its strategies to achieve those objectives as well as statements with respect to management's beliefs, plans, estimates and intentions and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. These statements are based on our current estimates and assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from the conclusions in these forward-looking statements. In discussing our financial and operating performance, and in responding to your questions, we will also be referencing certain financial measures that are not generally accepted accounting principle measures GAAP, under IFRS. These measures do not have any standardized definition prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other reporting issuers. Non-GAAP measures should not be considered as alternatives to net earnings or comparable metrics determined in accordance with IFRS as indicators of RioCan's performance, liquidity, cash flows and profitability. RioCan's management uses these measures to aid in assessing the trust's underlying core performance and provides these additional measures so that investors may do the same. Additional information on the material risks that could impact our actual results and the estimates and assumptions we applied in making these forward-looking statements, together with details on our use of non-GAAP financial measures can be found in the financial statements filed yesterday and management's discussion and analysis related thereto, as applicable, together with RioCan's most recent annual information form that are all available on our website and at www.sedarplus.com. I will now turn the call over to RioCan's President and CEO, Jonathan Gitlin. Jonathan Gitlin: Thank you, Jennifer, and good morning to everyone joining us today. We're pleased to report RioCan's fourth quarter and full year results. At our 2025 Investor Day, we were clear about our priorities, driving growth through our productive retail core and supporting that growth through disciplined strategic capital allocation. We're delivering on those commitments. In the fourth quarter, the strength of RioCan's portfolio and the effectiveness of our retail-focused strategy were once again demonstrated by 4.5% same-property NOI growth. This was propelled by the continued outperformance of our core retail assets. We delivered on our capital allocation priorities, repatriating $742 million of capital to strengthen the balance sheet and support NCIB activity. Net debt to EBITDA was reduced to 8.6x, and we repurchased $179 million of units through 2025 and year-to-date 2026. Our NCIB activity reflects our conviction that the current unit price does not capture the value and earnings power of our business. We're investing in a portfolio with tremendous growth prospects. Our performance is underpinned by a proven future-focused platform. We continue to strengthen our operational and technological capabilities while maintaining top-tier employee engagement results even as we further reduced G&A. RioCan's disciplined execution is complemented by strong ESG performance, including our #1 ranking among North American retail peers in the 2025 GRESB real estate assessment. Taken together, our results reflect the power of our productive retail core, the quality of our assets and a platform that delivers consistent performance. In a market characterized by a shortage of well-located retail space, RioCan continues to deliver consistent and durable growth. RioCan's operating momentum remained strong through the fourth quarter. Retail committed occupancy ended the year at 98.5%. Leasing performance continued to be exceptional with record full year blended leasing spreads of 21.1%. Our 2025 retention ratio of 93.1% underscores the value tenants place on RioCan's locations and its operating capabilities. It also enables us to enhance income quality, improve portfolio resilience while minimizing capital outlay. Commercial same-property NOI growth accelerated to 4.5% in the fourth quarter and totaled 3.6% for the full year, highlighting the consistency and resilience of our cash flows. These results are not coincidental. They are the direct outcome of a portfolio concentrated in Canada's largest and most desirable markets anchored by necessity-based retailers and supported by structurally constrained new supply. We're seeing the benefits of what we believe is a leasing super cycle for our portfolio. This is a time when many long-term leases that were signed in the early 2000s are expiring. Shorter-term leases negotiated during the pandemic are also maturing. This gives us flexibility and discretion to shape our tenant base. We are retaining and resetting rents for high-quality tenants. We're equally deliberate in replacing those tenants that no longer align with our strategic objectives. RioCan is an independent Canadian REIT. Our independence means we are accountable solely to our unitholders with no parent company or sponsoring owner influencing our leasing or operational decisions. This independence, combined with strong retailer demand and the depth and expertise of our leasing team puts us in the advantageous position of being highly selective. We can choose the right tenants on the right terms. Premium retail space in Canada's major markets is scarce. And in my opinion, given the high barriers to entry in the Canadian market, this will be an enduring condition. Retailers are focused on well-located centers with strong demographic attributes and compelling co-tenancies. This precisely describes the centers in RioCan's portfolio. In recent years, we introduced grocery to a significant number of assets. Today, 86% of our sites include a grocery component. This anchors daily traffic and supports consistent performance through all market cycles. Beyond grocery, we're deliberately curating the ideal tenant mix for the communities that we serve. We know these communities well, and we understand the daily needs of their residents. As a result, the vast majority of our portfolio is aligned with necessity-based daily uses, including retailers such as Loblaws, Metro, Sobeys, Shoppers Drug Mart and Dollarama. These are the retailers that fulfill essential everyday shopping needs and drive reliable repeat visits. These attributes create daily use destinations that generate consistent traffic, strong sales productivity and resilient income through all market cycles. Our tenants are not simply maintaining their footprints, they're actively investing and expanding. This sustained demand continues to validate the long-term strength of our retail platform. Our leasing strategy continues to unlock meaningful mark-to-market opportunity throughout our portfolio. In 2025, we completed leases for 5 million square feet. The average net rent for new leases was about $29.65 per square foot, which is approximately 28% higher than our overall average rent. This highlights the mark-to-market growth potential embedded in RioCan's portfolio. This result isn't a one-off. Rents on new leases since 2022 were on average about 27% above those of existing leases. We expect this trend to continue for at least the next 3 years. During this period, we have 10.1 million square feet of leases maturing, hence, my reference to a leasing super cycle. Combined with contractual rent steps and disciplined capital deployment, there is a clear and sustainable runway for continued core FFO growth. As we move into 2026, our business is simpler, focused and exceptionally well positioned to capitalize on favorable retail fundamentals and the significant embedded mark-to-market opportunity within our portfolio. Our leasing momentum, together with long-term contractual rent steps and disciplined capital deployment into the high-return retail opportunities flows directly into the durability and predictability captured in our core FFO. Core FFO provides a clear measure of the durable earnings power of our retail platform. It represents an important evolution in how we reflect the performance of our business. Core FFO captures the recurring earnings generated through leasing execution and disciplined capital deployment while removing items that are not representative of the underlying operating strength of the portfolio. Because it is driven primarily by occupied space, contractual rents and the intentional allocation of capital to high-return uses, core FFO provides a clear line of sight into the stability and predictability of our income. As we look ahead to 2026, we're guiding to same-property NOI growth of 3.5% to 4% and core FFO of $1.60 to $1.62 per unit. This core FFO guidance is in line with the 3-year outlook we provided at Investor Day. In many ways, core FFO best captures what differentiates RioCan today, a high-quality, necessity-based retail portfolio operating in supply-constrained markets where leasing momentum and disciplined capital allocation work together to provide consistent, repeatable results and high risk-adjusted returns. Our outlook reflects confidence in our ability to deliver resilient income, sustainable distributions and long-term value creation. This quarter's performance is not an outlier. It is another clear validation of the strength of our portfolio and our strategy. In closing, RioCan enters 2026 with considerable momentum, an exceptional portfolio and a disciplined strategy that consistently generates results. We're in the midst of a multiyear value creation phase underpinned by visible and sustained growth that we believe is not fully reflected in RioCan's current unit price valuation. Our team remains highly focused. Our capital is positioned to drive ongoing growth and our portfolio is well aligned with the evolving needs of retailers and communities. Thank you for your continued trust and support, and I will hand the call over to Dennis Blasutti, and then look forward to your questions. Dennis Blasutti: Thank you, Jonathan, and good morning to everyone on the call. I'll start with some additional detail on our 2025 results, and then I'll walk through our 2026 outlook. Starting with FFO. We delivered $1.87 per unit in 2025, near the high end of our guidance range. This performance was underpinned by same-property NOI growth of 3.6%, slightly ahead of guidance, reflecting continued strength in our retail-focused strategy. Record operating KPIs such as 21.1% blended leasing spreads were key drivers. This strong organic growth excludes onetime items such as lease termination fees and highlights the strength of our team and portfolio. Core FFO for the year was $1.55 per unit, in line with our Investor Day projections. We view core FFO as a durable earnings base that we will grow from compounding value as our income grows. We have reached the natural conclusion of our development cycle with several key projects now complete, the capital intensity of our business is moderating. Total development spend in 2025 came in at $254 million, and we expect this to significantly decline next year, which I will touch on later. During the year, we delivered 366,000 square feet of completed developments from PUD to IPP. This included 102,000 square feet of retail. These deliveries included finalization of The Well, parks and crossings new Winners and HomeSense [indiscernible] Dollarama and Service Canada as well as residential projects such as Fort Street Lofts and Queen & Ashbridge. We also made strong progress on capital recycling. We sold $406.6 million of RioCan Living assets and closed $221.7 million of condos for a total of $628.3 million. Subsequent to year-end, we also went firm on the disposition of our Underwood residential building in Calgary for $46.5 million. Taken together, we are halfway towards our $1.3 billion to $1.4 billion target with a number of other assets in negotiations. Through successful condo closings, we have reduced our residual condo balance to $130 million, which is immaterial in the context of RioCan's balance sheet. In addition, we sold $113.4 million of noncore and lower growth commercial assets, bringing the total capital repatriation to $788.2 million. Through this disciplined capital recycling program, we continue to improve our portfolio quality while funding growth and improving our balance sheet. We allocated much of this capital to debt reduction and unit repurchases. As a result, net debt to EBITDA improved to 8.6x, a half turn improvement from the 9.1x at the end of last year and well within our target range. Our balance sheet is in a strong position, supported by a suite of improved credit metrics. We ended the year with $1.5 billion of liquidity. Our ratio of unsecured debt to total debt improved to 63% from 56% last year, which, as a result, increased our unencumbered asset pool by $1 billion to $9.2 billion. We continue to view unit repurchases as an attractive use of capital, particularly when our units traded at a significant discount to our historical norms. At current prices, our units imply a forward multiple of approximately 12x using 2026 core FFO, representing a 20% discount to our long-term historical average of 15x. Our IFRS NAV, which is valued bottom up, also implies a multiple of 15x, consistent with our long-term average. Given the improvements we've made to our business and our positive outlook, we believe this dislocation in our valuation presents a highly attractive entry point for investors. Since the beginning of 2025, we have allocated $179 million to unit repurchases. And since 2022, we have repurchased 19 million units or 6% of the company, reinforcing our focus on long-term value creation for unitholders. Subsequent to year-end, we closed on the previously announced acquisitions from the HPC JV. All backfill tenants at Georgian Mall and Oakville Place are now signed. Total capital for these build-outs is less than previous projections at approximately $20 million or $100 per square foot with a stabilized NOI yield of 20% on cost with annual growth in the leases thereafter. Turning now to our forward-looking targets. Our 2026 guidance is in line with the framework that we outlined at our Investor Day, striking the appropriate balance of opportunity and risk. We expect core FFO per unit of $1.60 to $1.62, representing a growth rate consistent with our Investor Day projections. This is supported by same-property NOI growth of 3.5% to 4%. We have strong visibility into this target given that approximately 75% is contractually secured through rent steps and ramp-up of previously signed leases. With the strong operating backdrop, we expect to steadily grow this high-quality earnings stream. We also continue to see opportunities to invest within our existing portfolio. In 2026, we expect to invest $95 million to $150 million into retail-focused projects, including Yonge Eglinton Center Improvement Plan, the new Costco at Burloak, Georgian Mall and Oakville Place backfills, including the addition of grocery to both those centers, Westgate Shopping Center de-malling in addition of a grocery store and additional infill pad density at Windfield Farms. Consistent with our Investor Day framework, we apply a 9% unlevered IRR hurdle rate for these types of projects. For the projects included in our 2026 plan, we expect to outperform this target with a going-in yield averaging 8% to 9% plus future growth averaging approximately 3%. We expect mixed-use development expenditures of $45 million to $55 million in 2026, a significant decline from prior years. 2026 spending represents a small amount of cost to complete and pipeline advancement costs. Maintenance CapEx is expected to return to normalized levels of approximately $55 million, a decrease of $16 million from 2025. Note that we report our AFFO using a normalized CapEx, so this decrease in spend will not impact our reported AFFO growth rate, which will approximate our FFO growth rate. However, for any of you who use actual CapEx when calculating AFFO results, this lower spend will lead to a higher year-on-year growth rate in this metric. We are reaffirming our target range for net debt to EBITDA of 8 to 9x, a range that when taken together with our suite of balance sheet metrics, results in low financial risk. We continue to manage financial risk by growing our unencumbered asset pool with a percentage of unsecured debt to total debt expected to be in the high 60s by the end of 2026 as we progress toward our 70% target. We also remain focused on maintaining a well-balanced debt ladder and ensuring that we have strong liquidity. Lastly, we continue to advance our RioCan Living disposition program. While execution and timing remain market dependent, the quality of this portfolio gives us confidence to achieve our $1.3 billion to $1.4 billion target. In closing, we have a highly productive retail portfolio that is positioned to deliver resilient durable cash flows. We have the capital to grow and a strong balance sheet that derisks our growth trajectory. As we execute our plan over time, we believe the value of our business will be appropriately reflected in our unit price. With that, I'll turn the call back over to the operator for questions. Operator: [Operator Instructions] Our first question comes from the line of Sam Damiani with TD Securities. Sam Damiani: I just want to say it's great to see the results coming in with expectations and the predictability of the new core FFO metric. So it just makes following the company much easier. I guess, first off, just on the guidance for core FFO, it's a very tight range of $1.60 to $1.62. I'm just wondering if there's any reason why you didn't start with a wider range. Jonathan Gitlin: Thanks for your earlier comment. The reason is because core FFO is quite predictable. It's quite hard to come by additional core FFO, and it's quite hard, we hope to lose core FFO given that it's rooted in a lot of very predictable operational outcomes. And so we felt that it was prudent and also more accurate in giving that tighter guidance range. We felt this would help shape a lot of analyst views as well as investor views, and we have quite a bit of confidence in that tighter range. So that's the backdrop. Sam Damiani: I appreciate that. And just, I guess, going back to Q4, the core FFO print came in sort of right at sort of the outlook, the guidance, but I think the guidance was technically for -- at a minimum of $1.55 for 2025. Is there any reason why the results didn't exceed the minimum of that guidance for 2025? Jonathan Gitlin: I think that ultimately, the guidance was in line with what we suggested at Investor Day. It might have been on the lower end of the guidance, but I think it was just a matter of timing on certain income that we had coming in. I don't think there's any technical reasons, Sam, that I can give you at this point. Dennis, I don't know if there's anything you can offer? Dennis Blasutti: No, I wouldn't expand much on that. I think there's just maybe a bit of timing items on whether it's costs or other things as well. So it's just a few little small things like that. Just -- it was never expected to be that much different than $155 million anyway. So we're just, I think, pleased that it came in as expected. Sam Damiani: Yes, for sure. And it was a small amount regardless. Last one for me, just on -- and you did address this, Dennis, in your comments, but any more specific commentary you can offer in terms of the quantity and cadence of RioCan Living dispositions in 2026 beyond the under wood, of course? Jonathan Gitlin: We're feeling good about it, Sam. There's a high quality of assets and therefore, a high degree of interest in those assets. The market will do what the market will do, but we've had a lot of preliminary -- actually, I'd say, advanced discussions on a number of the existing RioCan Living assets. And so we feel quite confident that there's going to be a nice consistent cadence throughout the course of the year. And as Dennis suggested in his remarks earlier, we feel confident that the ultimate target of approximately $1.3 billion is very much achievable whether that falls on either side of '26 or early '27, again, like I said, some of it is market dependent. But as a whole, we feel quite confident that we'll achieve that number. Operator: Our next question comes from the line of Lorne Kalmar with Desjardins. Lorne Kalmar: Maybe just sticking with the disposition side, but switching over to the commercial side because you guys have done some good work there. Wondering if you can give us an idea of the quantum of noncore commercial dispositions you expect to do in 2026. Jonathan Gitlin: We haven't put out guidance in that regard. We are obviously always in -- we're getting a lot of inbounds, Lorne, for what has become a highly sought after product type in necessity-based open-air shopping centers. And really, we've also pruned our portfolio such that we don't have a lot of noncore retail assets. That being said, if there are certain low-growth assets, then we would consider entering into either joint ventures or selling them on a wholesale basis. And -- but we did not provide any specific guidance along the lines of how much we would dispose of any commercial assets. Lorne Kalmar: Okay. Fair enough. And then I guess with all this repatriation of capital, there are a few levers to pull here. Obviously, debt is a priority. But beyond that, you've been active on the NCIB. Just wondering how you make the capital allocation decision, whether to go on the NCIB or acquisitions or prioritize debt. Jonathan Gitlin: Well, the first priority is keeping the balance sheet in good shape, Lorne, as we suggested at our Investor Day in November, it's critical for us to have between 8 and 9x net debt-to-EBITDA, along with a whole suite of other debt metrics, including liquidity, including debt service coverage ratios, including unencumbered asset pool. And all of those things we feel are in good shape. And because of that, it permitted us to take some of our additional capital and put it towards NCIB which at this point is such a logical use of capital. It's really a way of giving back to our shareholders. And I really do feel that we are -- and obviously, it's a biased view, but I do believe that RioCan's units are undervalued relative to the future performance perspective we have. And therefore, we thought that buying back units in that type of pricing range was a very prudent use of capital and in line with what we had suggested at our Investor Day. So that was really the decision-making process. There are other uses of capital that Dennis had alluded to in his remarks, such as putting money towards our property, building out pads and strips and also just reshuffling tenancies in certain properties like at Burloak where we've -- we're in the process of erecting a Costco. And I think those will also be part of the decision-making process. But in this type of market, it is definitely -- NCIB stands out as a very clear-cut accretive use of capital. Dennis Blasutti: So the only thing I'd add there is that I think one thing to kind of think about in this environment is rates have come down with spreads tightening and the underlying is moving to a level where paying down debt is simply not accretive to FFO per unit or value. And so it's something to just sort of think about when we have so many other stronger opportunities from an accretion perspective, that we've kept our range intentionally a little wide to -- on net debt to EBITDA to allow for us to take advantage of opportunities to reinvest in our own portfolio, et cetera. And then really thinking about the balance sheet from a financial risk perspective, anywhere inside that range in conjunction with our ladder and all the other suite of metrics that Jonathan mentioned is a low-risk balance sheet in our view. So we do -- we've intentionally left ourselves flexibility to take advantage of accretive opportunities. Things like acquiring Georgian and Oakville, those are accretive opportunities. We're going to add a ton of value through the re-leasing effort. But at day 1, it is a negative impact on net debt to EBITDA because you have to wait for the EBITDA to ramp up. But 4 quarters later, it's a positive impact, right? So there's -- you can get a timing lag in the metrics. But ultimately, we think buying those assets was -- is going to be a very good -- it's going to bear out to be a very good decision. Lorne Kalmar: Okay. And then maybe just sticking with that one last one. Is there a reality where you guys go below the 8x net debt to EBITDA? Or you don't see much point in that? Jonathan Gitlin: Anything is possible. It really depends on what the other opportunities are. But when we have such accretive and logical uses of capital outside of just paying down debt, we are going to take advantage of those. And we see that we have a runway with respect to our stock price being where it is and the availability of capital because of the repatriation of RioCan Living assets. So I think for the foreseeable future, that's where we'll focus our efforts along with some of the other property level improvements and build-outs that I was talking about before. But again, we're committed to that range of 8 to 9x going below that. it's not something in the short to medium term that we see happening. Operator: Our next question comes from the line of Mike Markidis with BMO. Michael Markidis: Just a quick question on the reinvestment CapEx of $95 million to $115 million of the existing portfolio. Is that sort of what we should be thinking about what you're capable of delivering? Or is there a potential for that to ramp higher in '27 and '28? Jonathan Gitlin: So I think it is a fairly good estimate for going forward. It will depend, Mike, on what the opportunity set is in '27 and '28. But right now, I think that as a run rate is a reasonable assessment. Michael Markidis: Okay. Great. And then, Jonathan, you had mentioned some -- or you alluded to strong demand for the types of asset RioCan owns. What's the acquisition market like out there? I mean, obviously, the pricing is tight. Is there a lot of product available for sale? And if so, would RioCan potentially look at doing -- I mean, I think you mentioned JVs on some noncore assets, but what about on core assets in terms of trying to extend your platform? Jonathan Gitlin: Sorry, to buy or to sell, Mike? Michael Markidis: Well, it could go both ways. You could see the JV and then continue to expand. Jonathan Gitlin: So yes, the market is tight at this point. There's a lot of very strong retail that's held by a lot of very well-heeled entities, whether they're REITs or pension funds. And there's just no push or need to sell them. So you're not seeing a lot of high-quality assets that would fit RioCan's existing high-quality retail profile available to acquire. And when they do become available, they're at cap rates that are extremely tight and they're generally getting those. So that allows me to flip to the other perspective, which is the ability to sell certain interest in assets. And that's something we definitely are exploring where we take, let's say, lower growth assets that are of high quality, bringing in a partner, and we use our platform to create value through a fee stream, but also repatriate capital that we could put to work in a very accretive manner. I think that's something we would avail ourselves of, and we alluded to it in our MD&A that there are certain discussions taking place at this point in time in that regard. And I think that's a model that is definitely -- again, it really -- it shows the strength of RioCan's platform, and I think a lot of partners would covet that type of management oversight. And then once you have that type of partnership, I'm going to use an old term here, but it gives you a bit of a hunting partner, especially if you have a well-heeled institutional partner who has equal sensibility around what is good to own. So I do think if we are -- if we have capital available to us and we have the opportunity to utilize someone else's balance sheet, but we get a fee stream, it certainly makes acquisition a little more palatable. But in today's existing market for us just to go out and buy 100% of a high-quality retail asset, I think it would be very hard pressed to go over our 9% unlevered hurdle because you're just -- if you're finding an asset that has 3% growth, it's not going to be at a 6% cap, it's going to be something lower. So that's the quandary that we'd be in from just a straight-out acquisition perspective. And quite frankly, Mike, just going back to the point I made earlier, I've got an awesome portfolio right in front of me that I know, that I love. And if I could buy a piece of that at what is a much higher yield than what the open market or the private market would permit, I would do that all day long, hence, the $175 million of NCIB that we participated in since early 2025. Michael Markidis: Okay. Got it. And then last one before I turn it back. I know you said exploring in discussions, that's probably -- you may want to punt this question, but what would be the sort of potential range or quantum of assets that you would be looking to potentially sell to a JV partner? Jonathan Gitlin: I mean -- again, it's -- it really -- we don't have it in our business plan at this point. So there's no specific number. We would just balance as we always do, the considerations around what could we do with the capital and what the type of accretion would be from a fee stream perspective. And so there's no set quantum, Mike, but we would balance it with all the other considerations. I know it's a bit of a vague answer. Operator: Our next question comes from the line of Mario Saric with Scotiabank. Mario Saric: Just sticking to the potential kind of dispositions that are not in the plan. Jonathan, you mentioned or referenced kind of low growth assets as being a possibility relative to your kind of 3-year, 3.5% kind of same Park NOI target, what would you kind of consider as being low growth? And what percentage of the portfolio could that comprise? Jonathan Gitlin: Yes. So we put out guidance, as you know, Mario, of between 3.5% to 4%. We said at our Investor Day that we -- for us, we expect to get at least 3.5% same-property NOI. And that came through -- those guidance numbers came through a very in-depth review of the entire portfolio, every single property, every single tenancy from bottom up. And it gives us in doing that exercise and in very intense asset management, gives us a good perspective of what assets are going to contribute over the next 3 years and what assets are going to take away from that objective. And thankfully, the vast majority of our portfolio will contribute. There are some, however, that have larger anchor tenants that have, let's say, flat projections going forward. I'll give you, for instance, Walmart, we know that a lot of their historic leases have limited growth, if any. And -- but they're high quality. They're excellent and predictable creators of an income stream, which a lot of institutional investors, I think, would covet in this type of environment. So for us, those don't necessarily contribute to the quantitative output of 3.5%. But from a qualitative perspective, they're good, they're predictable and they're very strong assets with limited risk. So for us, if we could keep a 50% interest, sell a 50% interest and get a fee stream, all of a sudden, it takes a lower growth asset and it makes it a little more aggressively growth oriented because of the fee stream that is attached to it. So for us, that's -- there's a few of those assets in our portfolio, not, as I said, an overwhelming amount because of all the work we've done over the last few years to really curtail the portfolio through dispositions and the addition of excellent properties through developments or acquisitions. Mario Saric: Okay. And it may or may not be related, but you -- I was hoping you could expand on the commentary pertaining to RioCan's tenant independence. I think you also highlighted that in the letter to unitholders this quarter, perhaps maybe some examples where you think that benefit has been crystallized. Just curious on some expanded thoughts on... Jonathan Gitlin: Sure. Look, we have a landscape in Canada where we've got a lot of exceptional REITs, but there are some of them that are affiliated with other entities. And operationally, I would have to think that there are certain constraints and limitations around what the landlord could do based on what the interest of the tenants are. We, of course, have similar considerations. We always take into consideration the needs of our tenants long term, but we are the ultimate decision makers. There is absolutely no influence from any other entity other than our own. And I think that does in a growth environment like we're in today, this super cycle that I think we're in, it allows us to really take the governors off and do what is best for our unitholders without having consideration to any other constituents. So it really -- I think it puts us in a very advantageous position going forward relative to some of those that might have to take a much deeper view and consideration of their anchor tenants wishes and desires. And it just means for things like if you have a vista, you can obstruct it a little bit even if -- I would say that if you have an anchor tenant who is a more influential party, they would tell you not to do that, we can go ahead and do that. So there's just -- there's little things like that. But of course, it also allows us to drive rents as aggressively as possible. And I think if you look at some of the sponsored REITs, there are lower rent lifts than we get. And I think that's now starting to be demonstrative of the fact pattern I just talked about. Mario Saric: Got it. Okay. My last question, more of a qualitative question. Your comment on expected strong blended lease spreads over the next 3 years. You talked about a bit at the Investor Day. How much of that confidence would you say is RioCan specific versus a call on broader market expectations? And kind of can you delve into a couple of the factors or top factors or trends that you think can sustain these types of blended lease spreads for that long, 3 years is not a short time frame? Jonathan Gitlin: So Mario, I missed the first part of your question. I think you just said general retail fundamentals? Or was there something more specific? Mario Saric: Sorry, no, I was just -- I was asking about your comment on the call earlier just talking about the expectation for strong blended lease spreads over... Jonathan Gitlin: Leasing spreads, sure. Mario Saric: How much of that is RioCan specific versus the broader market? Jonathan Gitlin: Sure. So I feel very -- I mean, the team feels very confident in our ability to continue to generate leasing spreads. I think it's a byproduct of the fact that, yes, it is a very strong retail market that will impact every on all retail landlords in a similar manner. We just think it will be more acute with RioCan because we do start from a bit of a -- the mark-to-market opportunities are quite evident with our average rents across the portfolio being about 28% lower than what we're getting now on new rents. And so I think that really helps us. I also think we've got a very significant improvements to our portfolio over the last little while and a high demographic profile that tenants are really, really following and in favor of. And I think that allows us to really push rents and get them closer to where the overall market would permit. And I can't speak for our peers, but I certainly know that it gives us a great deal of confidence in capturing that mark-to-market, and that will drive growth for us going forward. We're -- as I said, we've gone through each one of our assets, each one of our tenancies, tenant by tenant, space by space to get a good sense of what we can extract from them. And that's what is rooted in that guidance or at least that's what the guidance is rooted in, and we feel very confident in our ability to capture that going forward. Operator: Our next question comes from the line of Dean Wilkinson with CIBC. Dean Wilkinson: Just want to hook back on the leverage, the share buyback and some of the other stuff around that. Would it be fair to say as you drift more towards 8x on net debt to EBITDA that we could see a ramp-up in that share buyback and the $50 million that we've seen so far this year, kind of perhaps that's what you're looking at on a quarterly basis, absent any other opportunities? And is that factored into that guidance number, Dennis? Jonathan Gitlin: Dennis, do you want to take that? Dennis Blasutti: Sure. So I don't think we've really spelled out exactly how we would allocate capital. I think we are sort of leaving ourselves the flexibility to allocate capital as based on the opportunities in front of us. So we haven't put a specific number out on NCIB. We did put a number out in our Investor Day, just looking at our ability to allocate excess capital every year as well as we still would have another nearly $700 million of capital coming back from RioCan Living. So certainly, share buybacks would be a priority, but it will be dependent on where the share price sits at a given point in time when the capital is available to us and of course, trading off against -- we're constantly trading off, as you'd imagine, against other opportunities. So that's how I would explain that. I think the volume of capital turn gives you a sense in terms of the sale -- of the asset sales. Dean Wilkinson: Right, right. I guess the other one to look at then in just terms of retained capital is the distribution and increases. Now that we're looking at a core FFO or core AFFO number, do you have a target payout ratio in mind there on that metric? And how are you thinking about sort of the dividend or distribution as we go forward? Jonathan Gitlin: So the target payout ratio, we had projected that at Investor Day. And I think that is a number that we fully anticipate sticking with. We -- our dividend or distribution policy is something that is going to be a year-by-year consideration, and it really depends on what else we could do with those funds. For us, it's all about having a high amount of discipline. And we have such great opportunities for that capital at this point. And we feel that the NCIB is just an alternative way of giving back to our unitholders. So it really is going to be a consideration of what other alternatives we have at that point as to whether or not the distribution gets raised. And at this point, we have a pretty robust distribution relative to our peers and given the strength of our portfolio. So we feel pretty confident about it. But it's going to be something that we will revisit next year for sure, and we will make the appropriate recommendation to our Board based on where things sit at that point in time. Dennis Blasutti: Yes. So the target we put out is, just as a reminder, is approximately 70% core FFO and approximately 80% core AFFO. So I think that's just -- and we should be able to stick in around that range. And then as our income grows, potentially grow the distribution or as Jonathan said, there's other ways to return capital to shareholders and NCIB right now appears to be the more efficient and value-accretive method of doing that. And our yield, we do, as Jonathan said, believe our yield is quite attractive. And it's actually reasonably tax efficient as well. We're about 60% taxable, which matters to some certain unitholders out there. Dean Wilkinson: For sure. It's a big consideration. Just then the last one for me, just looking at the RioCan Living and obviously, there's been a lot of talk in the condos, all the rest of that stuff. We don't need to go through that. You've got some operating weakness there, which would be expected given the environment that we're in. Are you looking at kind of building some vacancy in the portfolio to allow for potential purchasers to have a bit more of attractive upside there? Or just how are you thinking of managing that over the next 12 months or so given that it's something that you're looking to offload? Jonathan Gitlin: Sure. I'll start, and I can hand it over to John Ballantyne, if he has any further color. But we operate these assets as though we'll own them forever. We are not creating vacancy. Whatever vacancy you're seeing is a byproduct of a market that is tougher given the face of a lot of condo deliveries, which serve as a competition for some of the RioCan Living assets at this point. But no, we're not going about creating vacancy to create more upside for potential purchasers. Quite frankly, the market is sort of doing that for us. If you could see our occupancy, it has slipped over the last few quarters. And I think that's plenty. But John, do you have any further... John Ballantyne: No, I would just add to what you said, Jonathan. We're managing these properties very carefully, both on the efficiency basis on the cost, but as well as working incentives and really keeping a close eye on market rates, particularly in the GTA, where it has been very volatile. So no, we're actually looking to maximize the revenues where we can on these properties and making them sale ready. Operator: Our next question comes from the line of Fred Blondeau with Green Street. Frederic Blondeau: On the Yorkdale HBC sublease matter, how do you see insolvency proceedings moving ahead now that the court has disallowed the receivers or proposed tenant Fairweather to take up the vacated space? Jonathan Gitlin: I think the court rendered its decisions. Now we're considering next steps, and we'll keep everyone apprised. But I think at this point, that's all I would comment about it. And again, as we've already suggested, Fred. And from a financial perspective, we've already through a combination of offsets and write-downs, we think it has de minimis impact, if any, on RioCan financially going forward. Dennis Blasutti: And just a really fast summary on that, Fred, sorry, just a quick summary on just the overall JV, not just the Yorkdale asset. Every other asset is either sold or for sale or we foreclosed on it. So out of the 13 assets, this Yorkdale one is the only one that's sort of left to be dealt with. And as Jonathan said, there is no expected financial impact from this JV going forward. So from our perspective, this chapter is behind us, and the assets have been dealt with or there's a couple that are still in the sale process with a broker. That's easy enough to deal with and really that's in the hands of the creditors. So from a RioCan perspective, this is a closed chapter. Frederic Blondeau: Yes. Absolutely. But I guess my real question would was more like should a tenant not be found in time? Would there be any damages that the REIT could possibly face and it looks like from your previous answer, like it's pretty much dealt with at the moment. Jonathan Gitlin: That is correct. No damages that are of any materiality. Frederic Blondeau: Okay. And one last for me, maybe a bit more -- a bit easier. Given that the Canadian tenant pool is not that deep, I was wondering which particular tenant types would allow for the growth in new lease rents over the next, call it, over the next 2, 3 years? Jonathan Gitlin: So the Canadian tenant pool, I mean, I think it is pretty deep relative to the amount of retail space we have, if you're comparing it to the United States. We have about 60% of the retail space that they have per capita. And I think I've given that, our tenant pool is pretty deep and growing. And so we think that there's a lot of very strong tenants that are expanding in scope, but also very -- I would say, very intelligently. If you look at a lot of the new stores that we're doing, they are grocery stores, but they're the discount banners for a lot of the existing incumbent grocery stores. So for instance, a lot of the new Loblaws deals we're doing, they're not full-line Loblaws. They are either No Frills or they're TNT. For Sobeys, I'd say the same thing with FreshCo. And that's the theme across our portfolio. We're doing a lot of Dollarama deals, a lot of good life fitness deals or their discount banner. And we're seeing a lot of tenants like TJX thrive in this kind of environment because they do offer -- well, they do offer products that are going to be attainable in any type of economic backdrop. And that's really the type of tenant that we seek out to fill our centers. But Oliver Harrison, do you have any further commentary on some of the other retailers that are really providing strength to our growth profile? Oliver Harrison: No, it's more of a portfolio opportunity, which is just we also have, as Jonathan said earlier, the leasing super cycle, we do have a number of long-term leases that are now sort of coming to maturity. And as a result, we have a substantial opportunity to bring those up to market. A lot of them are grocers. A lot of them are value retailers that have performed extremely well over the period of time where they've been in this fixed rent structure, which creates a great opportunity for us to maximize the leasing opportunity while still ensuring that they are financially stable. Operator: Our next question comes from the line of Pammi Bir with RBC. Pammi Bir: I just want to come back to the comments around the lower CapEx at Georgian Mall and Oakville on some of those replacement tenants. What were some of the drivers there that drove some of the costs down? Jonathan Gitlin: Well, I think we ended up doing a single tenancy at Oakville, which really spares us of any demising costs. And it was really just some good work by our leasing team and ensuring that the commitment for landlords work and TIs was generally reduced. And I think that's a byproduct of the fact that the space was so desirable that we had a bit of leverage in those negotiations. But then also, it was our construction team who's done a good job of ensuring that we're getting the best possible pricing on any of the landlords work we have to do. So it's a combination of factors. But ultimately, we're very pleased with the result because it attaches to a significant lift in both the tenant quality as well as the income coming in from that space now. So it's a really big win for RioCan, and it's just made bigger by the fact that the costs have been reduced. Did I miss anything, Oliver? Or is that... Pammi Bir: Great. Okay. Sorry. And just maybe -- I just want to come back to The Well actually. In terms of the retail, it has been a few years. Can you maybe just talk about how the performance has sort of gone relative to maybe your underwriting? And I'm just curious if it might be approaching perhaps in terms of the retail at least that target organic growth guidance that you set for the overall portfolio in the 3.5%, 4% range? Or is it still early days there? Jonathan Gitlin: Sure. So as expected, the first-generation tenants, we knew there would be some volatility in it or at least some opportunity to play around with that mix to ensure that we ultimately get it right. When you're starting de novo and you're creating a unique space like that, you know that you're going to take some shots on tenancies that just don't work out, and we knew that going in. So our plan when going in had a fairly liberal view on what could happen in terms of certain tenants not working out. And I think what we've seen is actually very much in line with that liberal view. And some of the good news is that it's created so much momentum and specifically over the last year, we've seen so much foot traffic increase that the second-generation tenants that we are bringing in or we expect to bring in over the short term are going to be of higher quality, far more durable and also, I think, more in fitting with that community. So we feel very strongly that we're actually at a good point with the Well, where we're getting to a point where it is close to stabilization. And I think that the -- again, the continued traffic, the continued kind of like attention it gets in that downtown West neighborhood will continue to improve the visits there. And the last thing I'd say is that we've done a good job of filling up the office. We had it leased up, but now we've actually got it occupied. And I think that will also help move some of the retail a little bit more aggressively. But again, we've never relied on the office tenancies to make the retail work. But it's not the worst thing that we get people actually in the offices there. Oliver, do you have any further color on that? Oliver Harrison: Just that we've been doing this for a long time and having kind of experienced opening up new shopping centers. We were very intentional in terms of the structures that we put in place vis-a-vis a lot of these tenancies, whether it was rent structure, whether it was control options in the landlord's favor. So we've created a situation where we now have the ability to capitalize on the traffic that the site is driving, both from an upgrade from a tenancy perspective, but also significant lifts from a rent perspective. And as a result of that, we're very confident that in addition to improving the tenant mix in the retail at the Well over the short to medium term, it's also going to be a great performer from a same property NOI perspective. John Ballantyne: Yes. And I would just add to that. In addition to the lifts we're seeing on the tenant side, we are seeing significant ups in both activations, digital signage and parking revenues as well. So as the site traffic -- trapped to the site continues to grow, those revenues are growing as well. Pammi Bir: That's great. Just last one on -- are these next generation of tenants are more of them on net lease deals as opposed to points? Or are you seeing that at this point still kind of maybe leaning a bit more to percentage rents? Oliver Harrison: No, it would be a more conventional rent structure, i.e., minimum rent plus additionals, less reliant on percentage rent, save and except for them outperforming their natural breakpoints, but that's not going to happen for a little while. Operator: Our next question is a follow-up from Sam Damiani with TD Securities. Sam Damiani: Just had a quick follow-up. I think Dennis your comment that New Yorkdale is kind of the last location being dealt with. But wasn't the Ottawa property also you had some plans there. I'm just curious if those plans are still moving forward or if you've kind of walked away there. Dennis Blasutti: So we, in fact, could not get to a position where we thought we could get a sufficient return on incremental capital that would be required to move that business plan forward. So it has actually been moved into a sale process. Operator: I am showing no further questions at this time. I would now like to pass the conference back to President and CEO, Jonathan Gitlin. Jonathan Gitlin: Thanks very much, and thanks, everyone, for joining. I just wanted to end with saying that RioCan is entering its next chapter from a position of strength. We focused on our retail core, resilient assets, disciplined capital allocation and a platform that is built for the future. We believe the conditions are firmly in place to deliver steady, durable growth and lasting value. Thanks, everyone, and we'll speak to you next quarter. Operator: That concludes today's call. Thank you for your participation, and have a wonderful rest of your day.

86天前Insight Analytics约5分钟阅读

FDP 2025 Q4 财报电话会议

Operator: Good day, everyone, and welcome to Fresh Del Monte Produce's Fourth Quarter and Full Fiscal Year 2025 Conference Call. Today's conference call is being broadcast live over the Internet and is also being recorded for playback purposes. [Operator Instructions] For opening remarks and introductions, I would like to turn today's call over to the Vice President, Investor Relations with Fresh Del Monte Produce, Ms. Christine Cannella. Please go ahead, Ms. Cannella. Christine Cannella: Thank you, Kate. Good morning, everyone, and thank you for joining our fourth quarter and full fiscal year 2025 conference call. Joining me in today's discussion are Mr. Mohammad Abu-Ghazaleh, Chairman and Chief Executive Officer; and Ms. Monica Vicente, Senior Vice President and Chief Financial Officer. I hope that you had a chance to review the press release that was issued earlier via Business Wire. You may also visit the company's IR website at investorrelations.freshdelmonte.com to access today's earnings materials and to register for future distributions. This conference call is being webcast live on our website and will be available for replay after this call. Please note that our press release and our call today include non-GAAP measures. Reconciliations of these non-GAAP financial measures are set forth in the press release and earnings presentation, which is available on our website. I would like to remind you that much of the information we will be speaking to today, including the answers we give in response to your questions, may include forward-looking statements within the safe harbor provisions of the federal securities laws. In today's press release and in our SEC filings, we detail risks that may cause our future results to differ materially from these forward-looking statements. Our statements are as of today, February 18, 2026, and we have no obligation to update any forward-looking statements we may make. During the call, we will provide a business outlook, along with an overview of our financial results, followed by a question-and-answer session. With that, I will now turn today's call over to Mr. Mohammad Abu-Ghazaleh. Please go ahead. Mohammad Abu-Ghazaleh: Thank you, Christine. Good morning, everyone, and thank you for joining us. Fiscal 2025 marked a clear inflection point for Fresh Del Monte. It was not just a year of performance, it was a year of preparation. Our results this quarter underscores a fundamental shift in our approach for the past 2 years. We have moved from a broad market strategy to a relentless focus on our core strengths. By streamlining our portfolio and divesting from noncore distractions, we have ensured that our best-performing categories receive the capital and focus they deserve. This strategic narrowing is supported by a culture of rigorous financial discipline and accountability. Rather than pursuing scale indiscriminately, we have prioritized operational efficiency and high-return investments. Together, those choices strengthened our balance sheet, expanded margins and generated the cash flow needed to preserve flexibility and reinvest for long-term leadership. Those choices were deliberate. They were about focus. They were about discipline, and they were about ensuring that when the right moment arrived, we were ready to act from a position of strength. That moment is now. As many of you have been following, we are in a process of acquiring select assets from California-based Del Monte Foods through a court supervised bankruptcy process. Earlier this month, the U.S. Bankruptcy Court approved Fresh Del Monte as the purchaser of global Del Monte brand, along with select core assets. With that approval, we moved meaningfully closer to closing. We expect the transaction to close before the end of first quarter subject to customary regulatory approvals, including HSR antitrust clearance and remaining closing conditions. This decision is not about expansion or -- for expansion sake. It's about alignment. For nearly 40 years, the Del Monte brand has existed across separate platforms. Today, we have the opportunity to unify the brand under a company with a deep agricultural roots, global operating scale and decades of experience managing complex food systems across geographies and categories. There is a strong sense internally that this feels like a reunion. For me, this moment is deeply personal. Bringing Del Monte back together has been a long-held conviction of mine. And it is coming to fruition on the 30th anniversary of when I acquired Fresh Del Monte in 1996. I truly believe that uniting the fresh and staple food under a single strategy honors the Del Monte legacy while positioning the brand for continued relevance and growth. It allows us to show up more consistently for consumers and to build a stronger, more flexible platform focused on efficiency innovation and long-term value creation. Del Monte is 140 years old brand and one of the most recognized names in food worldwide, built on trust, quality and longevity. These are established businesses with experienced teams, strong customer relationships and products that consumers know well. Our first priority is continuity. As we move through the remaining regulatory reviews and closing conditions, our focus is on stability for customers, retailers, partners and employees. Post closing, the acquired business will function as a dedicated unit, ensuring immediate operational continuity while we take a measured approach to integrating capabilities. By utilizing a light touch integration strategy, the Food division will retain its autonomy to preserve its agility and customer focus. We will serve as a growth accelerator, empowering the unit with our capital resources, supply chain scale and logistic infrastructure. Our Food division teams, both commercial and production across Latin America, Europe, Africa and the Middle East will work hand-in-hand with our Food division in North America to expand and leverage on the capabilities of each other. Fresh Del Monte has spent decades operating at global scale across fresh and value-added categories. This experience give us confidence not just in completing this transaction, but in managing what comes next. We see a clear opportunity to build a more unified platform that supports durable long-term value creation. As we look ahead to 2026, our priorities remain clear, disciplined decision-making, thoughtful capital allocation and execution anchored on our core strength. With that, I will turn over to Monica to discuss our financial results. Monica Vicente: Thank you, Mr. Abu-Ghazaleh, and thank you, everyone, for joining us today. Before getting into the financial results, I would like to highlight several important developments. First, as Mr. Abu-Ghazaleh mentioned, we recently received court approval to pursue the acquisition of select assets of Del Monte Foods Corporation. The assets include the vegetable tomato and refrigerated fruit businesses, primarily under the Del Monte, S&W and Contadina brands. The transaction also includes global ownership of the Del Monte brand and related intellectual property subject to existing licensing agreements. Operationally, we expect to acquire 4 facilities in the United States, 2 facilities in Mexico and 1 operation in Venezuela as well as related customer and supplier contracts and inventory at closing. The purchase price is $285 million plus the assumption of certain liabilities. The transaction remains subject to HSR antitrust clearance with closing expected in the first quarter. Given the court supervised nature of the process and the carve-out of assets from an integrated business, it is premature to comment on accretion, synergies or fair value at this time. Details on segment reporting, expected financial contributions and integration priorities will be provided during our first quarter 2026 earnings call. Turning to our fourth quarter. We continue to simplify and optimize our portfolio. We sold 3 older break bulk vessels as part of our ongoing efforts to modernize and rightsize our logistics footprint. As a result, our own fleet now consists of 6 modern vessels, appropriately sized to support our global supply chain while maintaining operational flexibility. We also completed the previously announced divestiture of Mann Packing which closed in December 2025. This represents an important milestone in simplifying our portfolio and exiting a business that was no longer aligned with our long-term strategic and financial objectives. Accordingly, today's discussion will reference results both as reported and where appropriate on an adjusted basis to provide a clear view of the underlying performance of our continuing business. Turning to our financial performance, starting with the fourth quarter. As Christine mentioned, reconciliations are available in today's press release and earnings presentation on our website. Net sales were $1.02 billion, driven by higher net sales in our Other Products and Services and Banana segments, reflecting strong demand for our third-party ocean freight business, and the Banana segment benefited from higher per unit selling prices. These gains were supported by tariff-related price adjustments in North America as well as favorable foreign exchange related to the euro. The increase was partially offset by lower net sales in our fresh and value-added segment, which was largely the result of reduced sales volume in the fresh-cut vegetable product line following the strategic operational actions we took in late 2024. On an adjusted basis, net sales were $968 million. Gross profit was $106 million, reflecting higher gross profit across all business segments. The increase was due to higher per unit selling prices, partially offset by higher overall per unit distribution costs as well as increased production and procurement costs in our banana segment. Gross margin increased to 10.4%. Adjusted gross profit was $109 million and adjusted gross margin increased to 11.3%. Operating income was $46 million, which was driven by higher gross profit, partially offset by lower gain on the sale of property, plant and equipment, reflecting the prior year sale of our Toronto distribution center. Adjusted operating income was $48 million. Fresh Del Monte net income was $32 million and adjusted basis Fresh Del Mante net income was $33 million. Our diluted earnings per share was $0.67 and adjusted diluted earnings per share were $0.70. Adjusted EBITDA was $67 million. Turning to our full year 2025 financial performance. Net sales were $4.3 billion, driven by higher net sales across all our business segments. The increase reflected higher per unit selling prices in the fresh and value-added and banana segment. The effects of tariff-related price adjustments in North America as well as favorable impact from foreign exchange rates related to the euro and British pound. The increase was partially offset by lower sales volume in our fresh-cut vegetable product line following the strategic operational actions previously mentioned. Adjusted net sales were $4.1 billion. Gross profit was $399 million, driven by higher net sales in our fresh and value-added segment. The increase was partially offset by higher per unit production and procurement costs in our banana segment, along with increased distribution costs. Gross margin increased to 9.2%. Adjusted gross profit was $427 million and adjusted gross margin increased to 10.4% Operating income was $137 million, reflecting higher asset impairment charges related to low productivity in banana farms in the Philippines and charges related to the divestiture of Mann Packing, along with a lower gain on property disposal of property, plant and equipment. The decrease was partially offset by higher gross profit. Adjusted operating income was $222 million. Fresh Del Monte net income was $91 million, while on an adjusted basis, net income attributed to Fresh Del Monte was $178 million. Our diluted earnings per share was $1.88, and adjusted diluted earnings per share was $3.68 per share. Adjusted EBITDA was $300 million. I will now go more into details of the full year performance for each of our business segments, starting with fresh and value-added product segment. Net sales were $2.6 billion, driven by higher per unit selling prices in our pineapples and higher per unit selling prices and sales volume in our fresh-cut product line, supported by strong market demand. Pricing also benefited from tariff-related increases in North America and favorable exchange rate from a stronger British pound. The increase was partially offset by lower net sales in our fresh-cut vegetable product lines, reflecting the previously mentioned operational changes. Adjusted net sales were $2.4 billion. Gross profit was $299 million, driven by the higher net sales in our pineapple product line, reflecting a favorable mix of our premium pineapple varieties. The increase was partially offset by higher distribution costs. Gross margin increased to 11.4%. Adjusted gross profit was $328 million and adjusted gross margin increased to 13.7%. Moving to our banana segment. Net sales were $1.5 billion, driven by higher per unit selling prices in North America, reflecting tariff-related adjustments and lower industry supply, supported by increased market demand and favorable foreign exchange from a stronger euro. Sales volume also improved in the Middle East as the prior year was impacted by shipment disruptions related to the Red Sea conflict. The increase was partially offset by lower sales volume in Asia due to reduced supply and softer market demand. Gross profit was $71 million. The decrease reflects higher per unit production and procurement costs due to adverse weather in our growing regions, processes, including Black Sigatoka, higher distribution costs and an allowance recorded on our receivable from an independent grower in Asia related to low productivity. The decrease was partially offset by higher net sales. Gross margin decreased to 4.8%. Adjusted gross profit was $70 million and adjusted gross margin was 4.7%. Lastly, our full year results for Other Products and Services segment. Net sales were $210 million, driven by higher net sales in our third-party ocean freight business, reflecting increased volume and a more favorable cargo mix as well as higher net sales in our Specialty Ingredients business. The increase was partially offset by lower net sales in our Jordan poultry and meats business due to reduced sales volume and lower per unit selling prices. Gross profit was $29 million, driven by higher net sales, partially offset by higher production costs. Gross margin decreased to 13.7%. Now moving to select financial data for the full year 2025. Our income tax provision for the full year was $37 million, reflecting changes in the global tax and regulatory environment and higher earnings in certain jurisdictions. Net cash provided by operating activities was $245 million, driven by net earnings and changes in noncash items. Working capital movements also impacted operating cash flow, reflecting lower accounts receivable balances compared to the prior year, partially offset by lower accounts payable and accrued expenses due to the timing of customer receipts and supplier payments. At year-end, long-term debt was $173 million, and our adjusted leverage ratio remained below 1x EBITDA. We entered 2026 with a strong capital structure that supports both our ongoing investments and the acquisition we expect to close in the first quarter. Capital expenditures for the full year totaled $64 million. Investments during 2025 focused on enhancing our banana and pineapple operations in Central America, upgrading operations and production facilities in North America and improving pineapple operations in Kenya. As announced in our press release, our Board of Directors declared a quarterly cash dividend of $0.30 per share payable on March 27, 2026, to shareholders of record as of March 4, 2026. On an annualized basis, this equates to $1.20 per share, representing a dividend yield of approximately 3% based on our current share price. During the year, we repurchased 866,000 shares of our common stock for $30 million at an average price of $34.44 per share. As of December, we had $120 million available under our share repurchase program. Together, our dividend policy and share repurchase activity reflect our disciplined approach to capital allocation. In addition to sustaining a competitive and reliable return to shareholders, we continue to prioritize strategic investments that support long-term growth, including the Del Monte Foods transaction. We believe this balanced approach positions us well to create long-term shareholder value. Turning to our outlook for the full year 2026. We will share expectations for our business segments and outline our key financial priorities, including SG&A and cash flows. Our guidance reflects baseline assumptions and the information available to us today. Our 2026 outlook excludes the divested Mann Packing business, which we exited in December 2025 and does not include any contribution from the Del Monte Foods pending transaction. As always, our guidance incorporates a range of risks and uncertainties, including macroeconomic conditions, industry dynamics and other factors outside of our control. We expect net sales on a continuing operating basis to be 1% to 2% higher for the full year, driven by higher per unit selling prices. As far as gross margin by segment, in our fresh and value-added segment, we expect gross margin to be in the range of 12% to 14%. Demand for our premium pineapple varieties remain strong. However, industry-wide supply constraints limit our ability to fully benefit from increased market demand. In our banana segment, we expect gross margin to be in the range of 5% to 6%. This outlook reflects ongoing cost pressures, including disease management in our own farms and competitive conditions across contracted and spot fruit sourcing. We also expect some disruption from logistic challenges, including weather-related impacts and congestion at key ports. Notably, our Q1 projections account for headwinds caused by the extreme snowfall and freezing conditions across the United States earlier this quarter. These weather events disrupted domestic distribution networks and slowed throughput at several of our primary Northern terminals in addition to shutdowns at some of our fresh-cut facilities and distribution centers during that period. Market demand in North America and Europe remains strong. The Middle East is stable and market demand in Asia, particularly Japan and Korea continues to trend lower year-over-year. For our Other Products and Services segment, we expect gross margin to be in the range of 12% to 13%. Moving on to our selling, general and administrative expenses. We expect to be in the range of $210 million to $215 million, reflecting wage inflation and targeted investments in technology and organizational support. For the full year, we expect net cash provided by operating activities to be in the range of $220 million to $230 million. This concludes our financial review. We can now turn the call over to Q&A. Kate? Operator: [Operator Instructions] Your first question comes from the line of Mitchell Pinheiro with Sturdivant & Company. Mitchell Pinheiro: So I got a bunch of questions. First, it was -- what really stood out in the quarter to me was margins in your fresh-cut -- your value add, I should say, your value add. And I'm curious, you talked about in your guidance, a gross margin in the 12% to 14% range. The adjusted gross margin in this last quarter was 14.8%. Are you taking a little bit of a conservative view? Or -- you talked about pineapples and some cost pressures there and just in general, is it a conservative view? Or is 14.8% something that you think you could attain on a more sustainable basis longer term? Monica Vicente: We feel comfortable with the guidance we're giving of 12% to 14%. As you may recall, we actually are increasing it by the 100 basis points. So we feel comfortable with 12% to 14% for the year. Mitchell Pinheiro: Okay. And within the fresh and value add, you didn't talk a lot about fresh-cut. Could you talk a little bit about the trends there in the fourth quarter and how -- what you expect for 2026? Monica Vicente: Fresh-cut is performing very well. Demand is strong. Our volumes are up and as well as pricing. So one of the things we expect next year or 2026 is continued strong demand for the fresh-cut line with good margins. Mitchell Pinheiro: Okay. And is that -- yes. And is that demand geographically broad-based? Or is there any particular geography that's outperforming? Monica Vicente: Well, the U.S. is our largest fresh-cut business, but the U.K. is also very strong. So that has been performing very well as well. Mitchell Pinheiro: Okay. And so can you talk a little bit about your pineapple business? You talked about -- obviously, there's strong demand, but you have supply issues. Any update on maybe when supply expand a little bit. And also talk, if you could, about how you're looking with the Honeyglow and the Pink pineapple. Mohammad Abu-Ghazaleh: As far as the pineapple concerned, it is a fact that the market demand is higher than the supply as we speak right now. Our idea is that we are expanding our production in Costa Rica. We are -- as we speak, we are planting new acreage. So that would be mainly for North America and some to Europe. But we are as well expanding production into Brazil to support our European market, but that will take 2, 3 years from now to be able to supply this market. So we, in general, are expanding somehow our volumes through new plantation. However, don't forget that there is a restriction on land availability as well as government approvals to -- it's becoming an issue, of course, in Costa Rica that you cannot plant everywhere and there are restrictions regarding environment and other reasons as well. So in our opinion that the market for pineapples, in particular to us is stable, continuing stable. Now as far as pink pineapple, as we mentioned, I mean, on many occasions before, Mitch, that we did not increase our acreage. And so whatever we have right now is going -- at full production is going into the market. And now it is -- the pricing, of course, it's a different category from the main gold pineapple. So that is also helping us. The Honeyglow is also a growing category. But you know that this is also restricted by weather and by the way that they manage the farms. We do have a good percentage of our volume now coming as Honeyglow into the market. And that, of course, achieves a premium pricing to the main variety. But all in all, I think that demand continues to outstrip supply as we speak, especially for Del Monte. Del Monte has a different quality, different pineapple from the rest of the industry. Mitchell Pinheiro: Great. Okay. And then -- so on the banana side, you still got, obviously, the cost pressures with your -- and it remains competitive. I was curious in the last quarter, I didn't see any breakdown, but how did North America fare relative to Europe and the rest of the world, Middle East and Asia in bananas? Mohammad Abu-Ghazaleh: North America has been doing quite reasonably well. We have -- as you know, that we did not go for volume, we went for profitability. And we have said that before on many occasions that we are not going out for volume, but rather than for the bottom line. And if any business makes sense to us, of course, we do the sale. But -- and that's why you see our banana business maybe in volume has gone down, but we maintained our margins and our profitability. So that's the kind of policy we are going to be following going forward, maintaining that we deliver the highest quality product to the market, but also at a price that can make sense to us and bring the margins that this business should generate. Monica Vicente: And Mitch, what really impacted our margins in banana this year was Asia mostly. So unfortunately, that dragged the margin down. Mitchell Pinheiro: Okay. Okay. And then a couple of other things. Monica, did you -- if I missed it, did you give the -- your capital spending estimates for 2026? Mohammad Abu-Ghazaleh: No. I think as we are going into the acquisition of Del Monte Food, we prefer that we can postpone this to the next quarter. So we will have better idea. Mitchell Pinheiro: Okay. And outside of Del Monte, anything unusual this year in terms of your capital purchases or relatively normal? Mohammad Abu-Ghazaleh: No, relatively normal, Mitch. It will be more or less in the same range of the past few years. Mitchell Pinheiro: Okay. And then when you look at the Del Monte, the potential asset purchase here, is there -- I know we're not giving accretion and guidance along those lines. But can you talk a little bit about perhaps sales growth of that business, how -- the parts that you're purchasing, do you have any sort of idea like and expected sales growth? And also, as you look at margins, would this be something accretive to your current gross margin? I mean, just give us some idea of the profitability of the business? Or anything you can help add there would be helpful. Monica Vicente: I know everybody is anxious to hear this, Mitch, but we'd rather wait until Q1 to really give some good guidance on how we feel about this business. As you understand this, this was a process through a bankruptcy court, and it's been -- we'd rather wait until Q1. Mitchell Pinheiro: Okay. Well, that's fair enough. Does Mohammad, you talked about this has been a long held conviction of yours to get the Del Monte brand back together again. So as much as it's part of that, is the long-held conviction, is it because you see the opportunity to really drive some extended profit growth out of that? Is there something -- or is it just combining it just helps -- I don't know, just helps the story better? Or is there really a profit accelerator here that is driving your conviction? Mohammad Abu-Ghazaleh: Well, my conviction always is to make money. My conviction is not -- I love the word unifying the brand together. Of course, that's a great achievement and the legacy to bring back Del Monte under one roof. But at the end of the day, our shareholders will be looking for what this means to them, and that's what exactly what we are looking for. But I can assure you that our objective is how can we accelerate margins and accelerate profitability on both sides of the aisle. And I just want to highlight one thing here, which is a fact that Del Monte will become the only multinational in the food industry that has 2 divisions, fresh and food. There is no other company equal to Del Monte in the future. That, I think, by itself is something that will not be easily repeated anywhere in the world. Don't forget that Fresh Del Monte as we are, we are a multinational across the world with everything on the map from production to supply chain to logistics to -- you name it. And now with the addition of the food, then we will become not only a consumer goods company, but we will be the only unique company in the world that will have fresh and packaged or processed or can in all aspects. So that, in my opinion, is a unique advantage and a unique position that Del Monte will enjoy going forward in the future. Operator: I will turn the call back over to Mr. Mohammad Abu-Ghazaleh for closing remarks. Mohammad Abu-Ghazaleh: I would like to thank everyone for joining this call, and I wish you a great day and look forward to speaking with you on our next call. Thank you, and have a good day. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

86天前Insight Analytics约5分钟阅读

IMG.TO 2025 Q4 财报电话会议

Operator: Thank you for standing by. This is the conference operator. Welcome to the IAMGOLD Fourth Quarter 2025 Operating and Financial Results Conference Call and Webcast. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference call over to Graeme Jennings, Investor Relations for IAMGOLD. Please go ahead, Mr. Jennings. Graeme Jennings: Thank you, operator, and welcome, everyone, to our conference call this morning. Joining us on the call are Renaud Adams, President and Chief Executive Officer; Maarten Theunissen, Chief Financial Officer; Bruno Lemelin, Chief Operating Officer; Annie Torkia Lagace, Chief Legal and Strategy Officer; and Dorena Quinn, Chief People Officer. We are calling today from IAMGOLD Toronto office, which is located on Treaty 13 territory on the traditional lands of many nations, including the Mississaugas of the Credit, Anishinaabe, the Chippewa, Haudenosaunee and the Wendat Peoples. At IAMGOLD, we believe respecting and upholding indigenous rights is founded upon relationships that foster trust, transparency and mutual respect. Please note that our remarks on this call will include forward-looking statements and refer to non-IFRS measures. We encourage you to refer to the cautionary statements and disclosures on non-IFRS measures included in the presentation and the reconciliations of these measures in our most recent MD&A, each under the heading non-GAAP financial measures. With respect to the technical information to be discussed, please refer to the information in the presentation under the heading Qualified Person and Technical Information. The slides referenced on this call can be viewed on our website. I will now turn the call over to our President and CEO, Renaud Adams. Renaud Adams: Thank you, Graeme, and good morning, everyone, and thank you for joining us today. Last year was a monumental year for IAMGOLD. It is a year in which the company reported record revenues of nearly $3 billion enjoying gross margin of over 40% and generating operating cash flow of over $1 billion, which is notable $702 million generated in the fourth quarter alone. Now everyone on this call is aware that this is a historic time in the gold market, as the gold price increased nearly $1,700 per ounce over 2025 and exiting the year at just over $4,300 an ounce, which is still more than $600 an ounce lower than where we are today. So while we're not alone in realizing this gold market, we believe IAMGOLD is particularly well positioned to capitalize on this market for the benefit of our shareholders, stakeholders and partners. In 2025, IAMGOLD achieved significant milestones, including record quarterly productions across all sites. The first full year of production at Cote Gold, the establishment of a framework at Essakane that enables cash movements to be made at any time of the year, and the consolidation of assets in Chibougamau-Chapais, Quebec, to position the Nelligan mining complex as among the largest preproduction asset in Canada. On the financial side, we closed out the legacy gold prepay obligation midyear, delivered the balance sheet through the repayment of the $400 million high cost term loan and established a share buyback program that purchased $50 million in IAMGOLD shares in December and an additional $50 million so far in 2026, and we will continue to do so, driving up our per share valuations, all things being equal. This is a company that is taking a leadership position in the industry. IAMGOLD is a modern gold mining company that is proudly Canadian with strong cash flow and significant long-term growth opportunities ahead. We mine with a mining redefined purpose in mind, putting safety responsibility and people first. We hold ourselves accountable and embrace change, and drive innovations at every level from smarter systems to better ways of working. Now there are many highlights to discuss for IAMGOLD today. So let's get into it. Looking at the highlights from the year and the fourth quarter, we start with our safety record. Over the course of the year, our total recordable injury rates was 0.60, which was down from the year prior. We are focused on advancing our critical risk management program, including an important integration of contractor into the IAMGOLD way of safety management with a goal to reduce high potential incidents. On production, IAMGOLD closed out the year with a very strong fourth quarter in which all our mines reported record gold production. On a consolidated basis, attributable gold production for the fourth quarter was 242,400 ounces, a 28% improvement quarter-over-quarter, driving total production for the year to 765,900 ounces achieving the midpoint of the company's 2025 production guidance. The strong fourth quarter operating results helped to drive down costs on a per ounce basis. All-in sustaining cost per ounce sold was $1,750 for the fourth quarter and $1,900 for the year within the guidance range of $1,830 to $1,930. As discussed last year -- last quarter, costs this year have faced upward pressure due to the record gold prices directly translating to higher royalties. The impact of these royalties on cash costs continue to increase through the year to where they accounted for an average of approximately $330 per ounce or 24% of cash cost in the fourth quarter 2025. As we look ahead through this year where we will uncover opportunities to grow the value of our asset, we will stay diligent on our commitment to operational excellence and discipline. While we will not be able to control the gold price, we can control our cost structure and ensure that cost improvement opportunity [ compounds ] with our production profile. At Cote, we will continue to fine-tune our mining, milling and maintenance practices to position the project well for the upcoming expansion phase. With that, I will pass the call over to our CFO, to walk us through our financial highlights. Maarten? Marthinus Theunissen: Thank you, Renaud, and good morning, everyone. It was indeed a transformational year for IAMGOLD, as our solid operating results, coupled with record gold prices helped to fast track our strategy to unwind the financial leverage put in place to both Cote and allowed us to also start returning capital to shareholders in December. In the fourth quarter, the company generated record mine-site free cash flow of $626.6 million, bringing the year total to $1.2 billion. On an asset basis, in the fourth quarter, Essakane contributed $340.4 million and Cote contributed $197.0 million of attributable mine-site free cash flow. The record mine-site free cash flow was used to improve our financial position as the company's net debt was reduced by $468.8 million to $344.4 million at the end of the year, while also returning $50 million to shareholders. On the balance sheet, we completed the repayment of the $400 million term loan and also paid $50 million on our credit facility, reducing the balance to $200 million as at the end of December. IAMGOLD had $422 million in cash and cash equivalents at the end of the year and approximately $446 million available on the credit facility, resulting in total liquidity at the end of the fourth quarter of approximately $868 million. Excess cash at Essakane is repatriated through dividend and shareholder account payments, of which the company receives its share on its ownership net of withholding taxes. The shareholder account structure was introduced in 2025 and functions like an intercompany loan and allows for the company's portion of the dividend to be paid monthly using cash generated in excess of working capital requirements. The new structure allowed for cash flow in the fourth quarter, resulting from strong operating results and record gold prices to be repatriated in record time, and IAMGOLD received $291 million of payments from Essakane through the fourth quarter. Approximately $197.5 million of our consolidated cash balance was held by Essakane at the end of the year. And subsequent to year-end, these funds, combined with free cash flow generated in January, was used to make further payments against the shareholder account by Essakane, and IAMGOLD received $171 million so far this year. The other notable event was the establishment of the share buyback program. In December, the company repurchased and canceled approximately 3 million shares for approximately $43 million at an average price of $16.87 per share through a share buyback program. Subsequent to quarter end, up to the timing of our results release, IAMGOLD has purchased an additional 2.6 million shares for $50 million. For the remainder of the year, we are planning to use the cash repatriated from Essakane in 2026 to fund our buyback program. And at a gold price of $4,000 per ounce, we estimate that this could be between $400 million and $500 million during the year. The NCIB allows for the purchase of approximately 10% of IAMGOLD's public float that was outstanding as of November 2025. All common shares purchased under the NCIB will be either canceled or placed under trust to satisfy its future obligations under the company's share incentive plan. This initiative reflects management's confidence in the company's long-term value and its commitment to disciplined capital allocation. We believe the alignment of strong cash flow generation from this account and our share buyback program represents a clear value accretive opportunity for the company and our shareholders. The company intends to use the free cash flow generated by Essakane as a base level to repurchase shares under the share buyback program as the cash is generated and repatriated over the course of 2026. Naturally, the actual amount of common shares that may be purchased, if any, and the timing of such purchases will be determined by the company based on a number of factors, including the gold price, the company's financial performance, the availability of cash flows and the consideration of other uses of cash, including capital investment opportunities returned to stakeholders and debt reduction. Turning to our financial results. On a full year basis, revenues from operations totaled $2.9 billion from sale of [ 817,800 ] ounces on a 100% basis at an average realized price of $3,549 per ounce excluding the impact of the gold prepay arrangement. The strong operating results and record gold price resulted in adjusted EBITDA of approximately $1.6 billion in 2025, compared to $780.6 million in 2024 and $338.5 million in 2023. At the bottom line, adjusted earnings per share for the year totaled $1.23 up from $0.55 the prior year. Looking at the cash flow reconciliation for the year. It is a good visualization of the major drivers of our financial position to end 2025. The significant operating cash flow allowed for the delivery and conclusion of the gold prepay arrangements midyear, funding all capital programs at operations, significant delevering of the balance sheet, payment of a record dividend of Burkina Faso that allowed us to set up the shareholder account that we used to repatriate funds into Canada and the start of the NCIB program in December. As we look into this year, our priorities from a financial and capital allocation perspective are to deploy funds to areas where we see the most value add to our company, which includes the continuation of the share buyback program, utilizing cash flows from Essakane, becoming net cash positive following the repayment of the remaining balance of the credit facility, fund our operations as outlined in our guidance to ensure they are positioned well exiting the year and ensuring that we have the financial capacity to support opportunities to improve our business. And with that, I will pass the call to Bruno Lemelin, our Chief Operating Officer, to discuss our operating results. Bruno? Bruno Lemelin: Thank you, Maarten. Starting with Cote Gold, as Renaud noted, it was a very strong end to the year for Cote fourth quarter attributable gold production of 87,200 ounces or 124,600 ounces on a 100% basis. The success of Cote beyond just the fourth quarter. In its first full year of operation, Cote has produced 399,800 ounces on a 100% basis, achieving the top end of our guidance estimates. During the year, our Cote teams achieved success after success every day on many fronts, operational stability, maintenance, environmental monitoring or workforce engagement. Cote Gold completed the ramp-up and demonstrated nameplate throughput of 36,000 tonnes per day over a period of 30 consecutive days ahead of schedule in June. It was a very strong 2025 with Cote now adding strong 3 consecutive quarters in a row of the mine hitting its target and its stride. Focusing back to the quarter, mining activity totaled 11.1 million tonnes. Ore tonnes mined were a record of 4.5 million tonnes in the quarter with a strip ratio of 1.5:1. Mill throughput in Q4 totaled 2.9 million tonnes. Head grade for the fourth quarter was a record of 1.44 grams per tonne as a result of the combination of higher grade direct feed ore, a low strip ratio over the quarter and stockpiling of lower grade ore. The installation of the additional secondary crusher was completed in November and commissioned in December with both cone crusher tested and operating in parallel. As we discussed later, last quarter, we elected earlier in the year to bring in a temporary contractor aggregate crusher to supplement Cote's crushing capacity to improve the availability of the secondary crushing circuit. This allowed the plan to achieve its throughput milestone but at a higher cost as well -- as we will discuss on the next slide. With the 2 secondary cone crushers now operating, the company plans to phase out the temporary crushing circuit over the first half of 2026. Looking at costs, Cote reported fourth quarter cash costs of $1,265 per ounce and all-in sustaining costs of $1,688 per ounce. We continue to see mining and processing unit costs above where we would like them to be. A major driver of cost this year has been associated with the temporary crusher. The decision to move ahead nameplate by 5, 6 months allow for maximizing [ tonnes ] versus waiting for the installation and ramp-up of the second cone crusher in an important time for the project in the market. Looking at mining costs on an annual basis, they averaged $4.20 per tonne in 2025. We expect to see cost improvement through 2026 as further operational improvements are made, including the elimination of the contracted aggregate plant and reduction of contractors. Milling unit costs on an annual basis averaged $20 per tonne. There is a direct relationship with the amount of ore crushed with the temporary crusher in our processing costs. We expect that the removal of the aggregate plant will reduce processing costs by $4 to $5 per tonne. Additional savings are expected as we improve the life cycle of the HPGR rollers and fine-tune our maintenance cycles. Looking ahead, 2026 is the year in which our operations team is focusing on fine-tuning Cote at 36,000 tonnes per day. This year, the operations team will be focusing on unit cost improvement to stable and efficient mining and milling practices. It is important for our team to be able to operate Cote with an expected specification before we expand the operation further. On cost, all-in sustaining costs are expected to be in the range of $1,725 to $1,925 per ounce sold, which reflects an additional $50 million or about $185 an ounce of nonrecurring sustaining capital investments to improve the operating efficiency, and the long-term operating cost structure. These include the implementation of our refeed system for the coarse ore dome, additional maintenance facilities and improved dust mitigation measures. Expansion capital this year is estimated at $85 million for IAMGOLD. As we look to grow Cote, it is clear we can accelerate basic expansion projects. This includes a strategic pushback that will provide both operational flexibility in the near term and optionality for the expansion as well as the acceleration of certain expansion related improvements to the processing plant, including an additional vertimill in early 2027. This leads us to what is next for Cote, the Cote Gosselin expansion mine plan. In the fourth quarter of this year, we will release the details of the updated mine plan that envision a near-term expansion of the Cote plan, targeting a significantly larger ore base from both Cote and Gosselin. Alongside our financial results last night, IAMGOLD announced its updated mineral resources and reserves estimates. In the estimate, we saw a significant upgrading of ounces from inferred to measured and indicated at Gosselin, which now is estimated to have 6.9 million ounces of indicated ounces and 1 million ounces of inferred sources. Combining Cote and Gosselin, the Cote Gold project currently is estimated to have M&I resources inclusive of mineral reserves and on a 100% basis of 18.2 million ounces and an additional inferred mineral resources of 2.2 million ounces. Work will be ongoing this year to incorporate the end-of-year drilling and then combine their minimum resources estimate and pit shells into a single model. As currently designed, Cote has the mining capacity to average an annual ore mining rate of 50,000 tonnes per day versus our current nameplate processing rate of 36,000 tonne per day. As part of the 2026 technical report, we will look to find the right balance between an increased processing rate with mining rates targeting the combined Cote Gosselin super. Turning to Quebec. In the fourth quarter, we saw Westwood produced a record 37,900 ounces since mine restart as the underground returned high grades coupled with strong throughput in the plant. Underground mining activities in the fourth quarter average 1,129 tonnes per day, translating to 105,000 tonnes in the quarter, a record volume from underground since the mine restart with an average underground mine grade of 9.87 grams per tonne. During the first 3 quarters of the year, mining activities on the ground operated to lower-grade stope and adjust blasting technique. In the fourth quarter, Westwood refined stope design, sequencing and blasting while returning to higher grade stopes as per mine plan. Mining of the Grand Duc satellite open pit continued in the quarter with 174,000 tonnes mined with a head grade from the open pit averaging 1.19 grams per tonne. Grand Duc open pit life has been extended into 2027. We expect Grand Duc to contribute a similar amount of ore to the plant this year with -- at a slightly lower grade of between 1.1 to 1.2 grams per tonne. Mill throughput in the third quarter was 299,000 tonnes at an average grade of 4.21 grams per tonne and average recoveries of 93%. Plant utilization was 92% in the quarter, up from 75% in Q3 and in line with the average expected for 2026. As a result of the strong fourth quarter, costs on a per ounce basis declined notably. Cash costs in the fourth quarter averaged $1,288 per ounce and all-in sustained costs averaged $1,719 per ounce, well below the average of the year of around $2,100 per ounce. The cost improvement was also assisted by lower unit costs while with mining costs -- the milling unit cost declining due to the high volume of ore mining mill. Looking ahead, to this year, Westwood production is expected to be in the range of 107,000 to 113,000 ounces. Mill throughput is expected to average 1.2 million tonnes in 2026 with blended head grade expected to average 3.44 grams per tonne over the course of the year with a fairly flat production profile quarter-over-quarter to the year through the year. Cash costs at Westwood are expected to be in the range of $1,500 to $1,650 per ounce sold and all-in sustained costs in the range of $1,950 to $2,100 per ounce sold. Sustaining capital expenditures guidance is $55 million primarily consisting of underground development, renewal of the mobile fleet, upgrades in the mill and general maintenance. Expansion capital is expected to increase this year to $30 million, which is primarily associated with development works and drifts to support the study of options to extend the mine in the eastern parts of Westwood underground that could potentially be amenable to bulk mining. Looking at our mineral resources and reserve update, Westwood more than replaced depletion over 2025, with 1.1 million ounces of mineral reserves to date. Further, M&I resources inclusive of mineral reserves increased by 682,000 ounces or 40% to 2.4 million ounces as of December 31, 2025, with an additional 1.5 million ounces of inferred ounces. We are looking forward to conducting additional drilling underground at Westwood this year as we believe there is still significant potential at depth to the east and west of our current underground operation. Turning to Essakane and continuing with the Q4 team, the mine reported record production of 138,100 ounces on a 100% basis equating to 117,300 ounces on our 85% mining interest. Mining in the fourth quarter totaled 9.4 million tonnes, an increase from the prior quarter with higher ore tonnes mined of 4.1 million tonnes for a strip ratio of 1.3:1 in the quarter. The average grade of mine ore in the fourth quarter was the highest grade mine in the year as the mine sequence deeper into Phase 7. The mill reported strong throughput in the fourth quarter of 3.2 million tonnes at an average head grade of 1.5 grams per tonne considering the quarter-over-quarter step-up we have seen this year. The plant achieved recoveries of 88% in the quarter, which was below the 90% average for the year as Essakane typically sees higher graphitic carbon in the higher-grade zones, though this is mitigated with blending. Similar to Westwood, Essakane saw an improvement in cost per ounce and unit cost per tonne on the higher volumes. For the fourth quarter, Essakane reported cash cost of $1,471 per ounce and all-in sustained cost of $1,674 per ounce. As Renaud noted in his earlier remarks, royalties in the current gold market are having a measured impact on industry cost structure. And this is even more pronounced in Burkina Faso, where the new royalty decree was implemented in 2025 with royalties now uncapped and tied to gold price. In the fourth quarter, royalties accounted for $460 per ounce or approximately 36% of Essakane's cash cost. Accordingly, when we look at this year, we have guided to cash costs excluding royalties and cash costs including royalties at the gold price assumption of $4,000 per ounce. Cash costs excluding royalties are expected to be in the range of $1,150 to $1,300 per ounce sold and including royalties in the range of $1,600 to $1,750. All-in sustaining cost is expected to be in a range of $2,000 to $2,150 per ounce sold. On the production side, Essakane attributable production is expected to be in the range of 340,000 to 380,000 ounces or 400,000 to 440,000 ounces on a 100% basis, similar to production in 2025. With a production profile expected to be fairly flat quarter-over-quarter this year, mining activity will target Phase 6 and 7 in the Lao pit that is adjacent to the Essakane main zone. Our mineral resources and reserves -- Essakane reserves decreased by 640,000 ounces due to depletion and geologic model adjustment for a total of 1.7 million ounces. However, measured and indicated mineral resources reported a 50% increase in funds, offsetting a 26% decrease in grades for a total of 4.4 million ounces in measured and indicated, and an additional 853,000 ounces of inferred. We are currently studying the Block 3 project, which would add an additional 5 years of life of mine expanding Essakane until at least 2032. With that, I will pass it back to Renaud. Renaud Adams: Thank you, Bruno. I just want to take a moment to highlight the exciting development from the fourth quarter in which IAMGOLD acquired Northern Superior and Mines d’'Or Orbec consolidating their assets and properties with our assets in the Chibougamau-Chapais region of Quebec to form the Nelligan Mining Complex, which is now composed of the following deposit and high-value target. Nelligan, Monster Lake, Philibert, Chevrier, Lac Surprise, Croteau and Muus. The Nelligan Mining Complex already has a significant mineral inventory of over 4.3 million measured and indicated ounces and 7.5 million inferred ounces, positioning the project among the largest preproduction-stage gold project in Canada. The close proximity of the primary deposits to each other supports a conceptual vision of the central processing facility being fed from multiple ore sources within the 17-kilometer radius. This year, we are substantially increasing our budget to allow for a comprehensive exploration program, which will look to expand the mineralized footprint of both Nelligan and Philibert while testing Monster Lake at depth in addition to a regional exploration program or high priority targets to further grow the potential of the project. Our teams are very excited for this project, and we will be putting the pedal to the metal to have a preliminary economic assessment on the Nelligan complex in 2027. With that, I want to thank our shareholders for your great support. We truly believe it will be an exciting year for IAMGOLD with significant value growth opportunities ahead and many catalysts ahead. And now I would like to pass the call back to the operator for the Q&A. Operator? Operator: [Operator Instructions] And our first question today comes from Mohamed Sidibe from National Bank. Mohamed Sidibe: Maybe I'll start with Essakane and with the M&I increased year-over-year and the potential extension of the mine life of that asset. How should we think about Essakane within your broader portfolio and specifically, as the license is potentially expiring into 2029, please. Renaud Adams: I'll give some first comment, and I'll ask Bruno to complete more on the potential we have here. But we've been going really on the step by step. I thought we had a wonderful '24, '25. The team is working hard. You've seen the increase in the resources. We see more and more possibility of expansion. The most important thing is what I would call the acceptance of all of it, right? So we understand the geographic and geopolitic and so forth. But the reality is we've been operating this mine pretty steady state, no interruptions for nearly 3 years now. We found and -- congrats Maarten and his team and Bruno has found a very creative way to allow for cash flow. At those prices, we see a good opportunity of using this cash flow to reward our shareholders. So I think over the next few quarters, we just need to continue to beat the drum and execute on our plans and continue to repatriate and reward our shareholders. And as we advance in '26, Bruno and his teams will complete some work. We definitely see an expansion potential, which we need to continue to work and prove. But we're not there yet, but I think we've come a long way to make Essakane a very strategic element of our portfolio. Bruno, if you want to add anything? Bruno Lemelin: Yes. So thank you, Mohamed, for your questions. I've been at Essakane, like I started with IAMGOLD at Essakane in 2014 and since then, the life of mine has not stopped getting extended. So it should not come too much of a surprise. What is really good is we were able to find those additional resources within the fence north of Phase 7. So we have now Phase 8 and Phase 9 and 10 north of where we are currently mining. In South, we have the Lao pit that is also getting -- we're seeing an extension of the current Lao pit that also tried to connect South of the Essakane main zone. So there's a saddle zone and now we believe those 2 connects together. So it gives us confidence that we could be targeting at another 5 years of life of mine. That's what we're going to be coming with when we're going to start engaging with the government. It shouldn't be like too much of a problem when we first meet with the officials in terms of having the license to be extended by another 5 years, which would bring us closer to 2032, 2033. Renaud Adams: So we're not -- again, decision to be made probably later as we advance in the year in preparations for '27 plan. But meanwhile, we expect another great year and maximum free cash flow out of the asset repatriated and apply towards the shareholder program, share buyback. So more to come. Mohamed Sidibe: Maybe I'll switch to Cote Gold, specifically on the unit cost. I think, Bruno, you touched on the milling cost potentially improving $4 to $5 by the second half 2026. Could you give us a little bit more color on mining costs and where you expect to exit maybe 2026 and what we should be thinking in terms of modeling there for Cote Gold? Bruno Lemelin: Yes. So the mining costs for 2026, as we are making adjustments, some adjustments are taking time. So now we're implementing [ any one or some ] plan. There will be some testing. We should be at the year at around $370, $380 a tonne as we are getting -- we brought new equipment, new drills. We are also doing the pushback, Mohamed. And by doing this pushback, there's several infrastructure that needs to be relocated like the towers for the autonomous suite and everything. So there's a lot of activities surrounding the mining activity, that's the reason why we see [ diminishment ] in unit costs. However, it's going to take some time to see the long-term mining costs, not for this year. Renaud Adams: So what I could add to this is like at the early stage, we've seen some -- yes, we've seen some deficiencies, some areas that need some improvement. We put more capital this year addressing some like Bruno just mentioned, if you want to optimize your mining costs, well, you need to optimize your OEE, your overall performance. To do that, you need now a larger pit. You need like maintaining your -- this has all been taken into account. It may not be all achieved in '26, as Bruno mentioned. But as we file and as we present our long-term plan, we will, if needed, integrate some additional improvement in '27, '28. But the objective is over the next -- with a big chunk in '26, but over the next 2 to 3 years. We really see a path forward with the possibility of reducing the cost and bringing Cote into one of the best unit costs for this large-scale Canadian. And then when you combine with the average grade and the possibility to uplift that we've seen the grade this year and the low strip ratio of Cote, everything is in place at Cote as we optimize the cost to make it a very attractive overall all-in sustaining costs. We've discussed the royalty. There's not much we could do more than we do have a provision of buyback, which we would really pay attention to as we unlock our full potential of this scenario. So we're in a good position. We appreciate that there's a lot of work to do, Bruno and his team this year. But we feel very confident that we have a path forward and we'll try to make it as much as possible this year, but it may extend a bit in '28. Operator: Our next question comes from Sathish Kasinathan from Bank of America. Sathish Kasinathan: My first question is on Cote. On Slide 11, you mentioned that the mine plan for Cote is likely to include stage capital. Can you maybe provide a bit more color on what it means? Are you still targeting the 50,000 tonnes per day run rate or maybe even more? How should we think about it? Renaud Adams: I think the reference to the stage capital here is to being capable to focus from expansion to tailings down the road, to opening Gosselin. So what we're saying is that there is not a need to do everything on a day 1 to make an expansion at Cote Gold. As a matter of fact, you -- the Cote itself is enough to justify the expansions and eventually Gosselin. So when we say stages, we see now 6, 7 and 8, Bruno and his team is accelerating some aspect in the pit and opening the pit and so forth. So that's going to be in place by the time. And we say '29 is a focus on the expansion, '29, '30 and we have enough tailings capacity in place. So there would be a stage impact. So we just want to clarify that. It's not like you need to build everything and have everything in place on day 1. The capital will be staged capable to be fully funded through the free cash flow of the asset. Sathish Kasinathan: Okay. That is clear. Maybe one question on Essakane. So you received $171 million of cash this year at the start of the year, of which $50 million was spent -- was already used of buybacks. And you still have $219 million left from the last year's dividend declaration. So for the full year, is it fair to assume like a minimum of $390 million of share buybacks could be achieved in 2026 and depending on how much dividend is declared for this year, we could see potential upside to the number? Marthinus Theunissen: So we had $408 million of the shareholder accounts outstanding at the beginning of the year. And as you mentioned, we already received $171 million against that back. We expect that remaining balance to be repaid by the end of the second quarter, during the third quarter. But then when we get into that period, we will be declaring the 2025 dividend where the shareholder account will be reloaded again. So based on our projection, there would be more than enough shareholder accounts available this year to continue with the program where we can move money out of Burkina Faso every month as the asset generates free cash flow above its excess working capital. And then -- so the free cash flow attributable to IAMGOLD this year should -- we should be able to match that to buy back shares in the program. Sathish Kasinathan: Okay. Congrats on the strong quarter. Marthinus Theunissen: Thank you. Operator: Our next question comes from Anita Soni from CIBC. Anita Soni: Congratulation on a strong quarter and a strong year. I just wanted to ask a little bit more about Cote and Gosselin. I think you noted in the MD&A that there would be an update on the reserve -- another update on the reserves and resources for Gosselin in Q2. And my apologies if you addressed it in the opening comments, I was hopping between... Renaud Adams: Thank you for asking, Anita on this. So it's cutting here. So sorry about that. So go ahead. Anita Soni: I was just going to say, what were you expecting to provide with the Q2 update? Renaud Adams: Thank you for asking this. As Bruno showed in his portion, talking about the mineral reserve, mineral resources. So not a surprise on the resource side. It was just a depletion, as you know, like the big consolidating both Gosselin and Cote through. On the resources side, we've come quite a bit a long way and have delineated some, but this is kind of an ongoing work. So to your point, we expect to complete probably late Q1 and maybe like we're talking about Q2 potentially, but the target is by the end of Q1, somewhere there, we would complete the resource update, if you call. The final one that would serve for the plan. We're comfortably sitting in more than 18 million ounces, but there is more drilling to be incorporated. There is a merge of the block models as well. We're still discussing the final price to be used and so forth, but we had this objective of the saddle zone as well as Bruno just pointed out to me. So as you combine the block model, so you create that saddle zone that we've drilled as well. So it's not the final -- not to look at the resource update at Cote has the final work toward about our objective of 20 million ounces and we're still planning to discuss those results late Q1, early Q2. Anita Soni: Okay. And how much more drilling would that have incorporated versus what you just did? I think you converted 2 out of the 3 million ounces of inferred into M&I category. But how much more would that bring on stream? If you could just tell me like as a percentage of the drilling update? Or if you want to tell me they have the number of ounces, that would be great, too. Bruno Lemelin: We still have 29 -- 25 holes to be included. And we have also the campaign on the saddle zone that needs to be included as well. Renaud Adams: So enough -- and again, like the merge of the block model as well, like technically should also create some. So we feel very, very strong, Anita, if without giving a final number because we haven't seen it, but we feel very comfortable towards objective of 20 million ounces MI plus. Anita Soni: Yes. And then I just want to follow up on the Essakane reserves and resources as well. I noticed the grade declined. Is that -- have you -- I mean, I'm just -- I guess, you've had positive grade reconciliation at the asset. How are you basically calculating your depletion at the asset? I'm just -- like are you just basically saying, okay, well, we ended up -- we thought this ore body would be 1.2 and it ended up being 1.5. So we're deducting the 1.5 off of the average. Is that the way you're doing it? Or did you include the positive grade reconciliation in the calculations? Bruno Lemelin: Yes. So the -- we changed the block model and the block model that we'll be using this year has taken -- we have to do some adjustments. But moving forward, the block model is going to be [ cool ] to be a little bit more conservative. Therefore, that's the reason why you see the grades are going down. It does not exclude the possibility that we will see faster reconciliation specifically when you get those higher grade zone like we were doing in Phase 7. What we're trying to cap a bit is that kind of positive reconciliation in our future resources estimate. So we have something more about [indiscernible]. Operator: [Operator Instructions] Our next question comes from Sam Overwater from Scotiabank. Tanya Jakusconek: It's Tanya. I have a few questions, if I could. I just wanted to follow up on Anita's question on the reserves and resources that's coming out on Cote in Q2. So just so that I understand, so we're still targeting that 20 million out overall number. What the reserves and resources and other will show is just more of a conversion or an upgrade into the M&I and reserve category with those additional 25 holes. Is that a proper way to think about it? Renaud Adams: The way to look about it is we feel strong that when the exercise is done, we will achieve our objective of 20 million of MI and from which Bruno and the team will put the mine plan to it and convert as much as we can within an economic plan to reserve. So obviously, the reserve that we have released at the end of the year is only reflecting the all plan depleted. So we're moving from this to the new plant consolidated from which new economics mine plan. So we're definitely going to see and expect a significant increase in reserve. We just need to complete the work. But the starting point will be hopefully a 20 million-plus MI resource base, and we feel very strong about the economics of those pits. So more to come, but we feel strong about a significant increase in reserves. Tanya Jakusconek: Okay. Okay. And then how should I be thinking about this capital because you talked about a lot of this capital now being spent with $85 million or thereabout at Cote this year. How should I be thinking of the study? And I think at one point, we were thinking of $100 million to $200 million in capital. How should I be thinking about the capital for all of this? Renaud Adams: I guess if I would have all the detail, Tanya, we would have probably been a little more because we're still in trade-off. So the way to look at it is I think the growth capital that we're going to be deploying over the next few years should normally bring the pit to a point of expanded capable to provide for the -- now the mill itself, which will be the main capital of '29, '30, we're still in the trade-off and so forth. No, I do not believe you build an expansion today for $100 million to $200 million total capital but we believe that it could probably be achieved below the $500 million, but we still have to do the work. Tanya Jakusconek: Okay. I'll take a look further into it. Just on 2 other things, Bruno, I think you gave some guidance for how the year is panning out for us quarter-on-quarter stable for both Essakane and Westwood. What about Cote? Bruno Lemelin: Okay. Fair question. Cote is going to be lower for the first half of the year because we have the maintenance plan for the HPGR [ tire roll ] change in March or April. That's going to be a 5-day shutdown. We will have supplement fines ore material to feed the mill, but we're going to be running at a slower pace. We also have -- we did a very good end of the year 2025 and we took advantage of Q1 to take a lot of other maintenance. So overall, we need to expect Q1 and Q2 to be lower than Q3 and Q4. And generally, summertime at Cote is very good, like last year, Q2, Q3, Q4, we produced 36,000 tonnes per day almost like 36,000 ounces a month in average. So that gives you a bit like the kind of seasonality that we have, like we have a seasonality due to winter conditions in Q1. In Q2, we do some planned maintenance on the HPGR, and after that we are rolling until the end of the year. Tanya Jakusconek: Okay. So should I be thinking like a 45-55 or is that... Renaud Adams: Yes. I guess, anywhere between like the zone of around 40, 45, as you say. Definitely, H2 will be much stronger season-wise, second crusher fully up and running, HPGR reline and plus any other optimization that's going to come. So yes, I think it's fair to think that our second half could be at the 55% of the year. Tanya Jakusconek: Okay. And Renaud, I have you on for my one final question. Dividend, I mean we had talked on one of the previous conference calls that you were potentially thinking that once all this is done, the dividend plan could be implemented. Where are you on that? Renaud Adams: I think we feel very strong that on the step by step. I mean, as Maarten discussed, I think the first thing first is on the share buyback. There is no doubt that let's call the Canadian platform would most likely be an excess cash as well in those prices, something we're going to revisit with our Board at the end of Q2, see how the share buyback goes. Is there an opportunity to increase the share buyback using a bit of the Canadian excess? Do we start incorporating dividend? So I think we're going to have this conversation post Q2 for the second half as we realize the free cash flow on the Canadian side as well. So we feel very strong that Essakane should normally go towards share buyback. The question is after what is the next in the row. And I think we're going to postpone the decisions for the second half of the year. Operator: And this will conclude today's question-and-answer session. At this time, I'd like to turn the floor back over to Graeme Jennings for closing remarks. Graeme Jennings: Thank you very much, operator, and thanks to everyone for joining us this morning. As always, should you have any additional questions, please reach out to Renaud and myself. Thank you all. Be safe, and have a great day. Operator: This brings to a close today's conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.

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WING 2025 Q4 财报电话会议

Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Wingstop Inc.'s Fiscal Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded today, Wednesday, February 18, 2026. On the call today are Michael Skipworth, President and Chief Executive Officer; Alex Kaleida, Senior Vice President and Chief Financial Officer; and Sarah Niehaus, Senior Director of Investor Relations. I would now like to turn the conference over to Sarah. Please go ahead. Sarah Niehaus: Thank you, and welcome to the fiscal fourth quarter and full year 2025 earnings conference call for Wingstop. Our results were published earlier this morning and are available on our Investor Relations website at ir.wingstop.com. Our discussion today includes forward-looking statements. These statements are not guarantees of future performance and are subject to numerous risks and uncertainties that could cause our actual results to differ materially from what we currently expect. Our SEC filings describe various risks that could affect our future operating results and financial condition. We use certain non-GAAP financial measures that we believe can be useful in evaluating our performance. Presentation of such information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations to comparable GAAP measures are contained in our earnings release. Lastly, for the Q&A session. We ask that each of you please keep to one question and a follow-up to allow as many participants as possible to ask a question. With that, I would like to turn the call over to Michael. Michael Skipworth: Thank you, Sarah, and good morning. We appreciate everyone joining our call. As we enter 2026, I could not be more excited about what is in front of us here at Wingstop. Our 2025 results showcase the resiliency of our asset-light, highly franchised model and demonstrated the opportunity we have to scale Wingstop to over 10,000 restaurants globally. We surpassed a milestone of 3,000 restaurants and launched six new international markets outside of the U.S. This resulted in system-wide sales growth of 12% despite a decline in same-store sales of 3%. While this was our first same-store sales decline in 22 years, I continue to be reminded of how our business has scaled in the last three years, which on a stacked basis was an impressive 35% in same-store sales growth and has allowed us to reach average unit volumes of $2 million. And as we set our sights on $3 million AUVs central to our strategy is our unit economics and our brand partner profitability. Our corporate restaurants with AUVs now approaching $2.5 million provide a great example with margins in the mid-20% range. Our brand partners see the long-term potential in their returns and are signing up for a record number of commitments, evidenced by approximately 2,300 restaurant commitments as of the end of 2025. Lastly, with an adjusted EBITDA growth of 15% in 2025, we continue to demonstrate the durability and consistency of our asset-light, capital-efficient model. I firmly believe we'll look back at 2025 as a transformational year for Wingstop with the national rollout of the Wingstop Smart Kitchen and the development of our first loyalty program. 2026 will leverage these strategies by expanding awareness and consideration to bring in new guests and increase frequency among our current guests. We have a clear view into our demand space, our core consumer and the opportunity in front of us. Our core demand space is an off-premise occasion, typically involving two or more adults eating together where a high-quality indulgent experience matters most. Flavors, variety and cook to order are top of mind for our targeted consumer and are core to what Wingstop has delivered for decades, but we also know these consumers expect a fast and consistent experience. Today, we are only capturing roughly 2% of this demand space, underscoring the significant runway ahead to the 20% we consider to be our fair share. I'm confident we are executing the strategies that will close that gap. At the center is the Wingstop Smart Kitchen, a new kitchen operating platform that fundamentally raises our game and our ability to deliver on speed and provide a consistent, high-quality experience at scale. In 2025, we set an ambitious goal to roll out Wingstop's market in more than 2,500 restaurants in less than 10 months, a scale and pace that represents the excitement our brand partners have. I'm pleased to share that as we closed out 2025, the Wingstop Smart Kitchen has been installed in all of our domestic restaurants. With the Wingstop Smart Kitchen fully deployed, the focus now shifts from rollout to execution. We have introduced new operating standards centered on our objectives with speed and accuracy supported by clear expectations and accountability. The Wingstop Smart Kitchen is a considerable culture shift for how we operate our restaurants. Our restaurants are evolving from a back-of-house operation that was based on paper kitchen tickets to an AI-enabled state-of-the-art custom-built technology that enhances the team member and guest experience. With the rollout complete, we are now measuring the new Wingstop standard, and our brand partners are including these elements in their team member incentive compensation programs. These are two best practices we have demonstrated in our corporate restaurants that will drive results. While our focus in 2025 has been on the rollout and operationalizing the Wingstop Smart Kitchen, we are already seeing early proof points. Last quarter, we discussed the progress we've seen in the Southwest region, which continues to see a mid-single-digit delta in same-store sales versus the U.S. average. Now with more restaurants operating in the Wingstop Smart Kitchen, we're seeing results across a broader set of restaurants, operating on the platform and delivering on the 10-minute speed of service. These restaurants are showing improved customer frequency compared to restaurants that have recently launched on the platform or that are not delivering our new speed standard consistently. We also see an increase in transactions at the lunch daypart, reflecting both speed of service improvement and an enhanced guest experience. The data is very encouraging. However, we can also see opportunities in specific dayparts or in key windows, such as a busy Friday or Saturday night during dinner. While we are seeing a significant improvement in speed of service in these key dayparts relative to our prior operations, consistency and a reliable experience is what our guests expect of us. And for restaurants that are delivering 10-minute times, guests are rewarding us for it, which really speaks to the long-term opportunity we have in front of us. The speed of service the Wingstop Smart Kitchen enables can meaningfully increase consideration among delivery consumers, where speed is a critical factor. We're making good progress here. On average, restaurants are consistently seen a delivery time reductions of approximately 15% year-over-year. This change in delivery times has increased menu to order conversions on our aggregators since launch. But that being said, we are not seeing the reduction in our overall delivery times match, the reduction we're seeing in the speed of service within our restaurant operations. This is something we are working on closely with our delivery partners to ensure we are realizing the full benefit of the improvements we are making in speed. It's about consistent execution at every moment we interact with guests. We have a level of visibility into our operations we haven't had before, providing us the ability to identify opportunities for retraining and execution improvements in almost a real-time basis. As our restaurants attract new guests into the brand, ensuring that first experience meets our standards is critical to driving repeat visits and long-term loyalty. That means paring speed and accuracy with the hospitality and quality that defines Wingstop. This focus on operating discipline is a critical part of how we are setting the business up for 2026. Shifting from strategic investments to activating this growth engine that will drive us towards our goal of $3 million AUVs. With the Wingstop Smart Kitchen as an enabler, we are now in a position to widen the top of the brand funnel to bring in new guests and showcase those everyday occasions that Wingstop can deliver. That's where our new brand campaign comes into play, which we're calling Wingstop is here. Wingstop is a center-of-the-plate occasion for everyone, and our campaign is focused on showcasing these occasions to expand awareness and consideration, a significant gap we've benchmarked to levels of larger or more mature national brands. Even in this current operating environment as pressures on lower income guests have persisted we continue to see resilience across key occasions and customer cohorts. Dinner remains our largest and best-performing daypart, overall guest satisfaction scores continue to improve and higher-income households, particularly those earning between $50,000 and $100,000 remain the fastest-growing cohort within our digital customer base. As we win more of our fair share of our demand space, we fully expect to diversify our customer base across income and age categories from a more concentrated base today. The early results from our new advertising campaign suggested is performing well, delivering record high brand recall, reinforcing our ability to broaden consideration and attract new guests and win our fair share. Our brand health metrics continue to remain strong. In fact, a data point to support this was in early February during the Super Bowl, a day that set a record for our business. To us, this was a powerful signal of the health and relevance of the Wingstop brand. Even in a more dynamic consumer environment, guests are still choosing to treat themselves and bring Wingstop into those moments that matter. It was our highest sales day on record. We acquired over 100,000 new guests in just 1 day and set record ticket levels. As execution strengthens through Wingstop Smart Kitchen, we are well positioned to win even more of these occasions over time. Alongside our opportunity to acquire new guests, it's equally important, we strengthen retention and drive frequency. We're still a low-frequency occasion with guests averaging only 1 visit per month. We see our new loyalty program. What we're referring to is Club Wingstop is a powerful way to deepen engagement and further enhance an already compelling value proposition for our guests. A loyalty program that we believe will be differentiated, a loyalty program designed to strengthen the emotional connection to our brand through rewards, personalization, access to experiences and a best-in-class digital ordering platform. During the fourth quarter of 2025, we launched a successful pilot of Club Wingstop to test the technology early features, enrollment strategies and reward models. This pilot has allowed us to gather enough learnings to be ready for a national launch at the end of the second quarter of 2026. While the pilot was focused on validating the functionality of the technology and the program, there are plenty of compelling signals in the data that are an affirmation of our strategy. Nearly 50% of active guests in the pilot market have already enrolled, including a majority of our heavy users. Frequency increased 7% among guests in the program versus their trend prior to the launch of the pilot. New guest retention rates are higher than benchmarks outside of the pilot market with over 30% of new guests signing up for the program. With a digital database of more than 60 million users and the Wingstop Smart Kitchen fully rolled out across the system, we believe we have the foundation in place to activate loyalty effectively. As with any program of this scale, we anticipate that the impact of loyalty will build over time as enrollment grows and engagement deepens, coinciding with feature releases and enhanced personalization strategies, we expect Club Wingstop to contribute meaningfully to our strategy of scaling AUVs to $3 million. While we continue to focus on AUV growth, a significant part of our growth story is unit development, which we believe represents a structural competitive advantage for Wingstop. For the full year, we opened 493 restaurants globally, a significant achievement against our long-term opportunity of 10,000 restaurants globally. System-wide sales grew to over $5 billion. This marks another record year in development, and in our view, is one of the strongest indicators of the health of our business. What gives us confidence looking at is not just the pace of openings, but the visibility we have into future commitments, development demand remains broad-based across our brand partners, and our committed pipeline provides line of sight into delivering mid-teens unit growth in 2026, well above our long-term algorithm of 10% plus. This growth continues to be executed through playbooks developed at the market level, allowing us to scale in a disciplined and sustainable way while protecting our industry-leading returns. As we continue to fill white space and grow our restaurant base, development itself becomes a demand driver, a larger, more visible footprint increases brand awareness, amplifying the impact of our marketing. This advantage extends beyond the U.S. as well. In 2025, we expanded into six new international markets and opened more than 100 restaurants outside of the U.S., both first for our brand. The response from consumers globally is incredibly exciting. An example of this is our recent House of Flavors that we opened in Milan during the Winter Olympics. This concept first introduced in Paris is an experiential venue that allows us to show consumers from across the globe what's special about the culture of Wingstop. We're excited to share that we'll be launching House of Flavor in key markets during the World Cup this summer. We have a proven market entry playbook and our success opening restaurants globally is fueling a strong business development pipeline. We anticipate opening our first flagship in Milan following Olympics, and building off the momentum from the House of Flavors in that country. Another new marketing entry we're excited about is India, a market that represents a significant long-term opportunity of more than 1,000 restaurants, where we are targeting an entry in 2026. Our global development reflects the confidence our brand partners have in the model and the proven portability of the brand, the investments we're making in talent and the substantial runway we see for Wingstop globally. Our focus remains on the long term, expanding the top of the funnel to capture more of our demand space executing our new operating standards through Wingstop Smart Kitchen and launching our differentiated loyalty program, Club Wingstop. All of which positions Wingstop to return to same-store sales growth as we move through 2026 and continue to grow system-wide sales. At the foundation of our strategies are our people and culture. We have taken deliberate steps to ensure our leadership structure is aligned with enabling this next phase of growth. In January, we reinstated the Chief Operating Officer role with the appointment of Raj Kapoor. Raj is a seasoned global leader who joined us nearly 3 years ago from a large prominent global business, we helped more than double the business at scale from 25,000 stores to 50,000 plus. Since Raj joined us, he's built and developed his team to execute our international playbook. A great example is the opening of six new markets this past year. He also has a lot of experience delivering on 10-minute speed of service, an operating standard that has been in place in our international markets for years. Raj will lead global operations in development and is an incredible talent who has experienced operating scale brands globally. We've studied how other successful global growth companies have scaled and applied those learnings at Wingstop. In addition to the COO role, we've taken an opportunity to optimize our leadership team to streamline decision-making, unlock growth opportunities for the talent we've been investing in and create greater clarity across the organization. This structure enhances operational consistency and accountability across the system globally while importantly, positioning our talent and company for our next phase of growth. One important element of the changes in our structure was informed by the investments in our technology innovations. As we are approaching our loyalty launch, we saw an opportunity to create two teams that I believe will keep technology innovation, data analytics and insights as a competitive advantage. The first is the formation of what we are calling a commercial team that will harness our rich database and insights to execute our personalization strategies, including the national launch of Club Wingstop. The second is the formation of an analytics center of excellence to build capabilities, unlock deeper insights and accelerate best practices at scale. 2025 was a transformational year for Wingstop with the rollout of Wingstop Smart Kitchen, building our loyalty program, accelerating our global footprint and setting up an organizational structure that is positioned for this next phase of growth. 2026 will be about executing these strategies, and I couldn't be more excited by the progress we are making. Before I hand the call over to Alex, I want to thank our brand partners, team members and shareholders for their continued support and confidence in Wingstop. With strong fundamentals and a robust development pipeline, we are executing a clear plan to drive AUV expansion, protect industry-leading unit economics and scale towards our long-term opportunity of more than 10,000 restaurants worldwide and our ambition to become a top 10 global restaurant brand. With that, I'll turn the call over to Alex. Alex Kaleida: Thanks, Michael. 2025 was marked with a high degree of uncertainty, but we see it as a year that drove further clarity and confidence with the strategies we are executing. We remain focused on protecting our best-in-class returns, expanding our global footprint and returning to same-store sales growth in 2026 and beyond. In Q4, we system-wide sales increased to $1.3 billion, approximately 9.3% versus 2024, driven primarily by 124 net new restaurants partially offset by a decline of 5.8% in domestic same-store sales, which is attributable to the macro pressures our core consumer continued to face. The acceleration in unit growth translated into an 8% increase versus the prior year in royalty revenue, franchise fees and other revenue for a total of $81.9 million. At the restaurant level, company-owned margins remained healthy and company-owned restaurants continued to outperform the broader system. Our company-owned same-store sales increased 1.6% in Q4. A combination of factors, including operating our new standards consistently and enabled by having the Wingstop Smart Kitchen in place for over a year. The customer mix in our Dallas restaurants also is more diverse than some of the more concentrated demographics in our system overall. The performance in our corporate restaurants illustrate the opportunity ahead. The combination of improved speed and consistency from the Wingstop Smart Kitchen pair with our new brand campaign is begin to show how these initiatives can work together to positively impact performance over time. Overall, company cost of sales in the fourth quarter were 75.6%, an improvement of 200 basis points versus 2024. Food costs were largely stable as a percentage of sales, benefiting from lower wing costs in our supply chain strategy, which continues to provide strong visibility and predictability into food costs. For modeling purposes, we anticipate company-owned cost of sales to be in the range of 75% for 2026. These results highlight the strength of our unit level economics, which remain among the best in the industry and continue to fuel brand partner demand for more Wingstops. SG&A increased $2.1 million versus the prior year comparable period to $33.3 million in the fourth quarter of 2025, driven primarily by headcount-related investments to support the growth and scale of the business, along with continued investments in technology. These increases were partially offset by lower incentive-based compensation versus the prior year. Overall, we remain disciplined in how we invest while ensuring we are appropriately resourced to support our long-term strategies. Our profitability remains strong. Adjusted EBITDA in Q4 increased approximately 10% versus 2024 to $61.9 million, underscoring the durability of our model. The strength of our model allowed us to deliver adjusted earnings per diluted share of $1, an increase of 5% this quarter versus 2024. This includes an $0.18 per share impact from the additional interest expense associated with our $500 million securitization transaction completed at the end of 2024. Development continues to be a major contributor to our financial model. We have scaled from 255 net new restaurants in 2023 to 349 in 2024, and now to 493 for the full year in 2025, providing meaningful growth in system sales, royalty revenue and adjusted EBITDA. Importantly, this growth is supported by attractive unit economics, with domestic AUVs at $2 million on a low upfront investment of roughly $580,000. And our asset-light model continues to generate strong free cash flow which allows us to invest in the business while also returning capital to shareholders in a disciplined and consistent manner. During 2025, we returned over $250 million of capital to shareholders through a combination of dividends and share repurchases. On February 17, 2026, our Board of Directors authorized and declared a quarterly dividend of $0.30 per share of common stock to be paid on March 27, 2026, to stockholders of record as of March 6, 2026, totaling approximately $8.3 million. In the fourth quarter, we repurchased and retired 248,278 shares at an average share price of $241.65. At the end of 2025, $91.3 million remained available under our existing share repurchase authorization. Since inception of our share repurchase program in August of 2023 we have repurchased and retired over 2.5 million shares of common stock at an average price of $258.64. Our ability to consistently return capital remains an important component of our strategy to maximize shareholder returns. Let's now move to guidance for 2026. We are continuing to execute against the long-term strategies that we have reinforced throughout 2025, strategies designed to return Wingstop same-store sales to growth. Similar to what we shared on our last call and as we entered 2026, we expect that the consumer environment to remain choppy with continued pressure on our core consumer. That said, we believe the strategies we have in place position us to navigate this current operating environment. As the Wingstop Smart Kitchen execution continues to unfold, loyalty launches nationally and our marketing efforts continue to broaden the top of the funnel, we believe these strategies will lead us to a return to same-store sales growth. With that, our 2026 outlook for domestic same-store sales is flat to low single-digit percent growth. Global unit development remains a key contributor in 2026 as embedded in our outlook. Based on the strength of our committed pipeline and the visibility we have today, we anticipate global unit growth to be between 15% and 16%, well above our long-term algorithm of 10%. This growth is driven by broad-based demand across our brand partner base and continued expansion internationally. As we look to the cadence of openings this year, we expect the first half to be a bit lighter relative to the balance of the year. This is largely related to the fact that we unveiled a new restaurant refresh design, a design that drew inspiration from our international restaurants. And while a change was not mandated, many of our brand partners have proactively elected to retool construction plans to incorporate this new design into restaurants scheduled for early 2026, which extends construction time lines modestly. Importantly, however, this does not change our full year expectations. SG&A guidance is estimated to be between $151 million and $154 million, which includes approximately $32 million of stock-based compensation expense and $3 million of restructuring charges associated with the organization changes Michael discussed earlier. By utilizing these inputs and for modeling purposes, our adjusted EBITDA growth rate translates to approximately 15% in 2026. Our financial performance in 2025 underscores the strength of Wingstop's model. We delivered double-digit revenue growth, mid-teens adjusted EBITDA growth, record unit development and provided significant capital returns, while continuing to invest behind our long-term growth strategies. We are proud of the progress we have made against our strategies and confident in our position as we enter this next phase of growth. What impresses me most about Wingstop is the people and culture that transcend the brand. While 2025 is a year with a lot of uncertainty, our team remains focused on executing our strategies and have us on our path to scaling Wingstop into a top 10 global restaurant brand. With that, operator, please open the line for questions. Operator: [Operator Instructions] The first question today comes from David Tarantino with Baird. David Tarantino: Michael, I just wanted to ask about the guidance for comps to turn positive this year. So I guess two parts to my question. One, are you already seeing signs of improvement in the first quarter relative to what you did in the fourth quarter? And then secondly, I guess, you laid out all the initiatives to try to understand, but I was hoping you could just talk about your degree of confidence in the turn there in light of all the macro cross currents. Michael Skipworth: Good morning, David. I guess to start with the first part of your question, maybe I'll start a little bit with the fourth quarter. And I would say, generally speaking, the trends played out pretty much in line with our expectations. On our last earnings call, we talked about trends had stabilized, and we saw that continue into the start of 2026. I will tell you, we're not usually want to talk about weather, but we did have with -- associated with some of the winter storms a few weeks ago. We did have at its peak over 700 restaurants that were closed and then the second wave there, another 400 restaurants. And so that obviously impacted our trend as we look at it in 2026. But as we think about the year, we anticipate sequential improvement as we progress through the year and a return to growth as these strategies come together. And what I would really say, David, is 2025 was focused on the rollout and operationalizing Smart Kitchen in 2026. We're laser-focused on execution and delivering a consistent 10-minute speed of service, and what we're seeing in the data and the results is really encouraging. Operator: The next question comes from Chris O'Cull with Stifel. Christopher O'Cull: Michael, what percentage of the system is already achieving the 10-minute ticket time consistently? And then can you give us a sense of the initiatives or training you think is going to be necessary to get the remainder on track to achieve those times? Then I had a follow-up. Michael Skipworth: Yes, Chris, it's a great question, and thank you. What I would say is, and I think we mentioned it earlier, we would say, if you look at it, roughly 50% of the restaurants are hitting 10 minutes, but that's us looking really at kind of daily and weekly averages. And what's super important and one of the things we've really started to lean into is it's every order. It's every guest occasion where we deliver that 10 minutes. And so we're really starting to cut the data and look at it super closely. And the way we're attacking this, really, it's not anything I would say new for our brand, and these are some initiatives that we actually deployed in our company-owned restaurants over a year ago. One of them starts with just an operation scorecard, where we are measuring performance against this new Wingstop standard and continuing to track progress against that. And then the other thing is our brand partners as we started 2026, and they launched their new incentive comp programs for their teams. They have incorporated these metrics, which we know from history will drive the right behavior. And so that is already having an impact as we look at just total number of orders that are delivering on a 10-minute speed of service. Just from the beginning of this year to today, we've already seen a 10 percentage point improvement. And so we're encouraged by the progress we're making, and we're focused on the execution and delivering on that 10-minute speed of service because we can see the impact of when we do and the numbers and how guests engage with our brand. Christopher O'Cull: Helpful. And then you mentioned delivery times, we're not seeing the same level of progress as the speed of service improvements in the back of the house. Why do you think that's happening? Alex Kaleida: Chris, this is Alex. Yes, it's an interesting question. I think we've got really good partners with us on our delivery marketplaces. And we talked about before just the algorithms taking some time to improve. But similar to how we're measuring success with our restaurant teams. We also have some operational things we're working through with driver performance on delivery times. So we're working through that. But we've had a step down of about 15% delivery times. And to Michael's point on the improvements we've seen this year, we're also seeing those improvements in delivery times. One other data point is on our dinner daypart on Friday-Saturday night, where a majority of new guests are coming in. We're delivering about 10 minutes about -- 30% of our restaurants are delivering 10-minute service times, but if you look at the delivery times of those getting under 30 minutes, you could probably cut that number in half in terms of percent of restaurants. So it speaks to the opportunity we're working on, that we're laser-focused and to Michael's point is all about execution this year. Operator: The next question comes from Jeffrey Bernstein with Barclays. Jeffrey Bernstein: My first question was just on the long-term guidance. I believe in the past, you've talked about mid-single digit for the next 3 to 5 years. I know that's a moving target. But what indicators would lead you to tweak that downward. I know your long-term guidance beyond that time frame is low single digit, and that is the 2026 guidance for flat to low. So I'm just wondering or maybe you're assuming a return to mid-single digit next year. Just wondering how you think about the framework of that currently assumed mid-single digit for the next few years? And then I had one follow-up. Michael Skipworth: Jeff, I think clearly, we've acknowledged and you've heard other brands acknowledge just the current environment we're in right now. But I would say what we're focused on this year is really things that we can control, and that's around execution, delivering a consistent 10-minute speed of service. And then as we look to the back end of Q2, the national launch of our loyalty program, which we're really excited about. And doing that in a way that we think will be best-in-class. And we think the combination of those two things will drive our business and allow us to return to growth, and that's what we're focused on and think that will allow us to deliver on the outlook that we shared in our prepared remarks this morning. Jeffrey Bernstein: Understood. And my follow-up is just so I was looking back for a second in terms of maybe some learnings from 2025. You called it a transformational year, but seemingly disappointing with the comp below your plan and maybe what you were initially targeting and obviously being the first negative in a long, long time. But if you were to look back, I mean, what do you believe were internal versus macro? Maybe what would you have done differently, things that maybe were in your control, or would you say you know what the entirety of the disappointment on comp was macro-driven? Michael Skipworth: Jeff, I would say when we look at 2025, we talked about it throughout the year, I think, quite a bit. But we looked at really the underlying health of the brand. And we saw really strong signals there. We saw frequency holding. We saw quality and satisfaction scores increasing. And we look at our dinner daypart as an example, a key daypart for us. It remains strong. And we did see some pockets of softness in certain dayparts like lunch and snack, but we really focused on 2025, and I think what we're really proud of is in over 2,500 restaurants, we implemented something like Wingstop Smart Kitchen, a new kitchen operating platform in 10 months, which is pretty remarkable. And so the effort by our brand partners, by their team, by our team is pretty remarkable. And so it could have been easy for us to really get caught up and solving for the short term, but our focus was making sure we're investing strategically and setting the business up for that next phase of growth. And as we look at 2026, that's what we're really excited about. Operator: The next question comes from Christine Cho with Goldman Sachs. Hyun Jin Cho: Really great to hear the impact of Smart Kitchen on speed of service, and how guests are rewarding you for that consistency. But I'd love to learn more about how it's impacting the staff and the restaurant team specifically. I think you've previously mentioned, it helps to reduce the time to train the new staff and improve kind of staff retention. Are there any early signs or metrics you can share on how it's impacting the labor productivity in the stores? Michael Skipworth: Hi, Christine, good morning. I think we shared a few times throughout 2025, that in our corporate-owned restaurants, we were experiencing some of the lowest turnover we've had. And I think that is a strong indication of the team members' experience with this new kitchen operating platform. And quite simply put, it provides a high degree of focus, and generally speaking, it makes it easier for them to do the job we're asking them to do to take care of our guests. And so that's been super encouraging. But it can't be taken lightly just the culture change this is for our restaurants where we were a brand that has shifted or evolved from operating our kitchens with paper kitchen tickets to now this new technology platform. And so change management and navigating that has been a big focus. But generally speaking, the -- as I've gone out into restaurants around the country and talk to teams, the excitement and engagement with this new kitchen operating platform is really positive. Hyun Jin Cho: Great. My follow-up is related to the advertising could you discuss how you are assessing kind of the performance of the new Wingstop this year campaign? Any early indicators that you're seeing that is helping you capture kind of a larger share of everyday dining occasions and bringing kind of new guests into the brand. Michael Skipworth: Christine, yes, that's a great question. And we're really encouraged by what we're seeing in our Wingstop is Here campaign. We mentioned it in our prepared remarks, but that -- this new spot we're running right now is delivering the highest brand call we've ever had on record, which is super encouraging to see. But one of the things we look at is really our digital database, which gives us the most visibility and insight into our overall business and to the customers. And it's easy to kind of look past the fact, if you look at 2025 and the environment we're operating in, to look past the fact that our digital database grew by 20% in 2025, which is pretty remarkable. And as we look and study that data, we're seeing still Gen Z being one of the highest growth cohorts that we have. And what's been really interesting and kind of when we look at this new ad campaign, quarter-over-quarter, we're starting to see growth emerge in other demos such as Gen X, the highest growth being in that 50,000 to 100,000, but we're actually seeing growth in the 100,000 to 150,000. And what's interesting about that cohort is they're demonstrating the frequency that's very similar to our core. So I think as I look at all of this together, I think we're really encouraged by what we see in our ad campaign, and how it's working for us. But yes, it just highlights the opportunity we have in front of us to win our fair share of our core demand space, which also we believe will translate into an opportunity to diversify our customer base a little bit. Operator: The next question comes from Brian Harbour with Morgan Stanley. Brian Harbour: Michael, could you just elaborate on some of the leadership changes that you made, and why you thought now was sort of the right time to do those? Michael Skipworth: Hi, Brian, good morning. As I take a step back and look at our business and just look at it over the last few years, the reality is our business has doubled, whether you look at it restaurant count size, systems, sales, EBITDA, significant growth. And as we looked at this next phase of growth in front of the brand, I would really distill this all down to really, it's just us playing offense and making sure we're positioned for this next phase of growth. We have the clarity around decision-making. We're unlocking the opportunities and really investing in the talent that we've hired over the last few years and setting that bench up and continuing to grow that. This new design is really around driving greater clarity around operational consistency, increasing accountability. But again, it all comes down to really just positioning the brand for this next phase of growth and our ability to execute against that. Brian Harbour: Okay. Got it. And then on the third-party delivery platforms, what do you think will sort of further optimize the times there? And I guess, secondarily, I think those guys are beta testing sort of agentic AI ordering on their platforms. Have you discussed with them how you sort of present in that scenario, how to make sure that Wingstop sort of is prioritized and still is kind of ranked highly in that situation? Michael Skipworth: Yes, Brian, I would say I don't think anything has changed. If anything, maybe it strengthen as it relates to our partnerships with our third-party delivery providers. And we've talked about it over the years, but they value our business like our business. It's good for their business. And so this is an opportunity, I think, for us to continue to grow and strengthen our businesses together, whether it's through continued innovation, as you referenced. But one of the things that's really powerful about Wingstop Smart Kitchen is it's given us a level of visibility that we didn't have before. And so we know exactly when orders are prepared when they're ready, and it's allowing us to have a little bit elevated visibility, drive accountability and make sure that we're delivering on that guest's expectation around speed as it relates to third-party delivery. And so it's something we're going to continue to work at and our partners are committed to improving that experience and increasing those times that guest experience. We're pretty excited about continuing to partner with them. Operator: The next question comes from Zack Fadem with Wells Fargo. Zachary Fadem: On the topic of value, there was a lot of success around your 20 for 20 deal over the summer. And considering the deceleration afterwards, just curious to hear the thought process around not bringing that deal back. And with wing costs still favorable, any thoughts on leaning more into value in 2026? Michael Skipworth: Yes. I think when we think about value, we actually look at the overall proposition, and it's not just price. It's the quality, it's the experience, it's the speed. It's delivering on the guest expectations. And obviously, price is a component there. And I think that's where we're going to focus as we continue to scale the brand. I think I mentioned earlier, we did see in our business in 2025, some pockets of softness in certain dayparts like lunch and snack. And there could be an opportunity targeted towards certain cohorts towards certain dayparts where we can showcase existing value on our menu today, whether that's an entry-level price point for chicken sandwich or tenders. And so I think there's some opportunity there. But I think for us, it's about winning our fair share, delivering on the total guest experience, which obviously we think quality, price and speed are going to be -- and a consistent experience are elements that allow us to win. Zachary Fadem: Got it. And then as you think through the dynamics of double-digit unit growth and comps more challenged in '25. Could you walk through some of the data and KPIs that you're looking at that give you comfort that cannibalization hadn't been worse in 2025? Alex Kaleida: Zach, this is Alex. One of this -- our approach is that really helps us guide the plan for development is these market-level playbooks that we develop that line up to our 6,000-plus restaurant target in the U.S. And we have visibility into sales predictions and data that surrounds the restaurants we make choices. And then we measure the result of those restaurant openings. And I think what gives us confidence to continue at the level of growth ever seen is the results from the restaurant openings we've had in the last few years. And we haven't seen a material change versus historical trends in cannibalization to size up for you in 2025, it might have been 40 basis points more than what we had in prior years. And when we cut the data in 2025, 90% of the impact that we're seeing is from brand partners making strategic decisions to impact the restaurants as they fortress the market. And then when you look at the characteristics of the restaurants that were impacted, and we've talked about this before, is typically restaurants that have higher volume are tend to be an older vintage or have maxed out capacity in the restaurants from these small boxes that they operate in. So nothing that we see that concerns us, and we're continuing to stay focused on that unit growth opportunity for Wingstop. Operator: The next question comes from Sara Senatore with Bank of America. Sara Senatore: Just I guess, I'll start with the follow-up and then I'll ask the real question. The comp gap between franchisees and the company, I guess it narrowed a little bit. Should I interpret that as kind of half glass half full, which is the franchisees are kind of ramping up the learning curve. I just know last quarter, you saw a really wide gap and that seemed to signal kind of the building tailwind in your company stores from the Smart Kitchen. So anything to comment on there? And then I'll ask my question. Michael Skipworth: Sara, we appreciate the question. What I would say is there's -- obviously, our company-owned restaurant portfolio, it is a small number of restaurants. And so there can be nuances within that, whether it's little things like a fire in the back of house or some other electrical issue that could cause the restaurant to be down. We're encouraged by those results that we have in our corporate restaurants. But I think if you take a little bit of a step back and look at a broader sample like the entire DFW market, it actually outperformed our corporate restaurants, which to us continues to just be further proof points around the opportunity we have with Wingstop's market. We're super excited and encouraged by the progress that we're seeing throughout the system. I referenced it earlier, where over 50% of the restaurants, they're delivering an average speed of service day in and day out. But as we start to pull it apart, and look at daypart specific, that's where we're focused, and it really comes down to execution. And we're already seeing progress against execution in 2026. And so we're going to continue to focus on that and deliver on the guests expectation around speed. Sara Senatore: Got it. That's very helpful. And then on the loyalty question, the loyalty program that you're launching, I know you mentioned it's kind of a lower frequency occasion once a month. I guess the 7% increase in frequency, you saw among guests in the program, from other across the sort of restaurant industry, we hear a wide range of what joining loyalty might mean for increased frequency. Sometimes it can be much higher than that, although I don't know how sustainable it is. Would you expect that to increase sort of further as you deploy more of this sort of targeted marketing that 7%. I just think about one time per month average frequency is maybe low for traditional QSR, but perhaps more typical fast casual. So I'm just trying to figure out how high that frequency could go, and what loyalty could do for it. Michael Skipworth: Yes, Sara, we think loyalty is going to be an incredible driver for us as we think about frequency long term. And we've talked about it before, but we're not trying to be overshoot here at all. Just one more visit a quarter from our average guest is a meaningful step towards that $3 million AUV target. And what we are seeing in our loyalty pilot gets us pretty excited. I mean this pilot, it was obviously centered around testing the technology, the features, the enrollment process, but the early signals we're getting out of it have us pretty excited about what this can mean for our business long term. We have over 50% of our active guests have enrolled. We're seeing the strongest level of adoption through our highest-value guests. And what's really exciting for us is, we're seeing over 30% of new guests signing up. This is already translating in the pilot to an improvement in retention, a slight improvement in frequency, and that's without really any national support. So as we think about additional features, us supporting the launch nationally, we're excited about what loyalty can mean for our business, not just for 2026 for long term as we think about our path to $3 million AUV. Operator: The next question comes from Jon Tower with Citi. Jon Tower: Maybe just a quick follow-up on the last point on loyalty. Are you guys embedding any sort of a headwind from an accounting standpoint related to implementing the program. Alex Kaleida: Jon, this is Alex. There's nothing material at this point to consider. And one aspect, maybe just to share a little bit differently from others is that we do anticipate, to Michael's plan, to build the $3 million that this will be margin accretive over time. And I think a lot of other loyalty benchmarks also include offer components that elevate maybe kind of discounting, ours is about rewards that can be redeemed for other things such as merge and experiences, other aspects that really drive that emotional connection for the brand. Jon Tower: Got it. And then I guess, one of the comments, Michael, you had made regarding the smart kitchens as you're starting to see more consumers kind of pivot to lunch relative to stores that don't have smart kitchen. I'm just curious, have you seen any other -- or any impact on mix as a result of that? Michael Skipworth: No, I wouldn't say anything to call out as it relates to mix. We're just seeing when we can deliver on that speed expectation, which it's pretty clear is associated with the lunch occasion and do that on a consistent basis, we're seeing strength in those restaurants in that daypart. Operator: The next question comes from Gregory Francfort with Guggenheim Securities. Gregory Francfort: My question is on international. I mean, obviously, a lot of openings this quarter. And I guess I'm just curious as you think about the unit growth guidance for next year, do you think international could run up kind of close to 30% store growth again? And how has the business performed either from a comp or AUV perspective recently? Michael Skipworth: Appreciate the question about international. And it's an area of the business that we've been talking about for what feels like years talking -- referring to it as being supercharged for growth, and it's exciting to see that come alive in the business. And I think as it relates to your comments around unit growth for international business in 2026, I think that's a good way to think about it. Those businesses are opening really strong. We're continuing to expand and build out markets. The average unit volumes we're seeing in most of these new markets is well above what we experienced here in the U.S. business. And as you can see from the excitement from our partners and the pace of development, the returns they're seeing are really strong as well. So we're encouraged by the progress we're making there and continue to see that as a really exciting part -- long-term part of the growth story here. And I think we referenced it in our prepared remarks that we have additional new markets coming online this year, one of those being India that we're really excited about and the potential there. Operator: The next question comes from Danilo Gargiulo with Bernstein. Danilo Gargiulo: Wondering if you can comment how the outside Hispanic consumer viewership at the Super Bowl may be thanks to Bad Bunny, was impacting your customer acquisition that week? Maybe if you can give some composition of your 100,000 new users on that day alone. What learnings do you draw from that experience? And how do you think that's going to be informing your advertising strategy, especially during the World Cup this summer. Michael Skipworth: Danilo, thank you for the question, and good morning. Super Bowl, we were -- we're pretty excited about what we saw in Super Bowl. It was our first Super Bowl with Wingstop Smart Kitchen deployed across the system. It's pretty incredible to think we're actually able to deliver an average speed of service on that day of 20 minutes. Clearly, that's above our 10-minute target. But I can remember the days when most restaurants would turn off their digital ordering platform because demand and volume was so high. And so we believe we saw something pretty special. As we look at the business on that day, it was a record day of sales for our business, but we brought in over 100,000 new customers. Really encouraged by what we saw in the business on that day. And I don't think it will fundamentally shift our advertising strategy as we think about 2026 or even the summer around the World Cup. You're going to see us deploy, which we referenced in our prepared remarks, deployed this House of Flavors concept in a few cities, which we think will be a great tool to continue to expand brand awareness, but we see the opportunity we have with our core demand space. It's about continuing to broaden, the top of the funnel versus maybe getting more narrowly focused on a specific cohort. Danilo Gargiulo: Great. And then I would like to follow up on the delivery opportunity because it sounds like you're working with this market and to control what's within your control, right? It's accelerating reducing the core time accelerating even just the speed of service, but there is another component of delivery, which does not depend on you, right? It depends on the third-party aggregators. And so the way that you show up on aggregator platform does not fully depend on you. You might be depending also on third parties. And I'm wondering, when you say we're still collaborating on third-party aggregators on how we show up on this platform. What kind of levers do you have at your disposal to make sure that the brand is a little more relevant for a consumer who is actually just searching for wings or more broadly in the category? Alex Kaleida: Hi, Danilo, good question. And that's part of our strategy as we partner with the marketplace to talk about how we invest together on advertising their platforms. You can almost think about them as a different vehicle to drive awareness. And so when we're -- each month, each week, we're talking about different ways to elevate Wingstop visibility. And so Michael's earlier points on the call today, they're highly motivated to invest buying Wingstop and grow our business because of the characteristics of our transaction. And so we have a lot of those partnership conversations as we go through the year to ensure that we're getting the elevated visibility in the platform through banners or listings or areas like that. Operator: The next question comes from Andy Barish with Jefferies. Andrew Barish: I wanted to circle back and double-click on the international side of things. Just a quick kind of refresher on what's changed sort of in your strategy in entering new markets? And any information on the partner in India that you guys may have put out at this point? Michael Skipworth: Andy, I would say as it relates to international and our new market entry playbook, I would say it's something that we really started to hone in and dial in within the U.K. and our entry there, and it's been something we've continued to refine and build on, and we continue to see it strengthen as each new market comes online, and the demand and the acceptance and the relevance of the brand that we're seeing with consumers around the world is pretty remarkable. We referenced in our prepared remarks, the House of Flavors that we are -- where we popped up in Milan to prepare for that new market entry here in a few months -- a couple of months. And the receptiveness of a market that is really known for being critical about food is the way I'll describe it. The receptiveness is remarkable. The demand, the number of people we've served there is super exciting to just showcase that the portability of the brand and the strategy that we're executing. And so you're going to see us continue to lean into that. It's working, and we're encouraged by what we see in each new market that we open. As it relates to India, we haven't really disclosed specifically who that partner is, and we'll get into that, but it's someone that we know very well and has proven and excited about bringing Wingstop to the India market, which we mentioned on our prepared remarks is an opportunity that represents over 1,000 restaurants. Operator: The next question comes from Peter Saleh with BTIG. Peter Saleh: I guess my first question, operationally with the Smart Kitchen. Do you feel like you need to have consistent 10-minute ticket times to feel comfortable in the launch of the loyalty program at the end of 2Q. I just worry if you launched a loyalty program, you have all this demand coming through if you're not ready operationally, so just thoughts on that would be helpful. Michael Skipworth: Peter, I might answer your question a little differently. And that is I am highly confident based on the level of focus from our brand partners, the level of focus from Raj's team, the level of focus from our teams that we will be at a consistent 10-minute speed of service as we progress through the year. And so it really doesn't have anything to do with or doesn't influence how we're thinking about loyalty. That execution is something that's within our control, and I'm confident we will deliver on that. The launch of loyalty is really around the opportunity we see, a lever we've known for years that we've had to pull, and it does have to do with the fact that we know that consumers want this. They've told us that they want loyalty with Wingstop, but we're able to do it in a very differentiated way. And clearly, delivering on consumer expectations around speed and consistency is just going to be a further catalyst to what loyalty can do for our business long term. Peter Saleh: Great. And then just lastly, can you talk a little bit about maybe how -- once you get to the 10-minute speed of service and you're comfortable, how do you communicate that faster speed of service to the consumer? Is there a way to do that or do you just let this happen organically? Alex Kaleida: Peter, it's really a bit of both. And it's kind of what we're seeing in our restaurants that are consistently operating at 10-minute service times. We are seeing that organic change and how the guests engage with us, whether you look at new guest retention, frequency, the delta and same-store sales performance, all those factors have come into play without us communicating differently. Michael also mentioned some opportunities just as we talk about the overall value proposition for the guests. And I think there's examples at a lunch or late-night daypart, where we can bring forward these compelling entry points into the brand with chicken sandwich or tenders, but they'll also -- in a daypart that speed expectations are much different than dinner. And so we think the combination of those 2 and how we bring forward these menu items will be an opportunity to showcase our speed as well. Operator: This concludes our question-and-answer session and concludes the conference call today. Thank you for attending today's presentation. You may now disconnect.

86天前Insight Analytics约5分钟阅读

GRMN 2025 Q4 财报电话会议

Operator: Hello, everyone. Thank you for joining us, and welcome to the Garmin Ltd. Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] I will now hand the call over to Teri Seck, Director of Investor Relations. Please go ahead. Teri Seck: Good morning. We would like to welcome you to Garmin Ltd.'s Fourth Quarter and Full Year 2025 Earnings Call. Please note that the earnings press release and related slides are available at Garmin's Investor Relations site on the Internet at www.garmin.com/stock. An archive of the webcast and related transcript will also be available on our website. This morning's earnings call includes projections and other forward-looking statements regarding Garmin Ltd. and its business. Any statements regarding our future financial position, revenues, segment growth rates, earnings, gross margins, operating margins, future dividends or share repurchases, market shares, product introductions, foreign currency, tariff impacts, future demand for our products and plans and objectives are forward-looking statements. The forward-looking events and circumstances discussed in this earnings call may not occur, and actual results could differ materially as a result of risk factors affecting Garmin. Information concerning these risk factors is contained in our Form 10-K filed with the Securities and Exchange Commission. Presenting on behalf of Garmin Ltd. this morning are Cliff Pemble, President and Chief Executive Officer; and Doug Boessen, Chief Financial Officer and Treasurer. At this time, I would like to turn the call over to Cliff Pemble. Clifton Pemble: Thank you, Teri, and good morning, everyone. As announced earlier today, Garmin achieved another quarter of outstanding financial results, driven by strong broad-based demand for our products. Consolidated revenue increased 17% to more than $2.1 billion, which is a new fourth quarter record and our first quarter to exceed $2 billion. We experienced strong double-digit revenue growth in 3 business segments, reflecting the strength of our highly diversified business model. Gross margin was comparable to the prior year at 59.2% while operating margin expanded 60 basis points to 28.9%. This resulted in record fourth quarter operating income of $614 million, up 19% year-over-year and record pro forma EPS of $2.79, up 16%. 2025 was another year of remarkable growth and achievement for Garmin with record consolidated revenue, record operating income and record revenue for all business segments. We attribute this strong performance to our strategic focus on market diversification and creating superior products that are essential to our customers' lives. This approach has been a winning strategy for us since we were founded more than 36 years ago. Consolidated revenue increased 15% to $7.25 billion, which is a new annual record and up nearly $1 billion over 2024. Gross margin of 58.7% was comparable to 2024, which is a significant achievement considering the impact of generationally high tariff structures that took effect early in the year. Operating margin expanded by 60 basis points to 25.9%, resulting in record full year operating income of nearly $1.9 billion, up 18% year-over-year. Before sharing our full year outlook, I want to provide insights on what is important to us when considering forward-looking guidance. Our primary objective is to deliver the best result for Garmin on a consolidated basis. There are many factors that influence individual segment results. And we have said before that the diverse nature of Garmin's business gives us multiple paths to achieving consolidated goals. This makes individual segment growth targets less relevant, especially when viewed in isolation. With this in mind, we will continue to provide consolidated guidance measures and we will provide qualitative forward-looking insights for segments when it is helpful to do so, but we will no longer emphasize individual segment growth targets. This approach aligns with our primary objective to deliver the best results for Garmin on a consolidated basis. With this in mind, we anticipate 2026 to be another year of strong top and bottom line growth. We expect revenue to increase approximately 9% to $7.9 billion, and we expect operating income to exceed $2 billion for the first time. Many are wondering how industry-wide memory constraints will affect us. Our guidance considers everything we know about the supply chain environment, including recent cost pressures on memory components. It's our practice to continually seek efficiency throughout our entire supply chain by leveraging our vertically integrated business model and scale to optimize our cost structure. We've always used inventory as a business tool, and we have intentionally increased inventory levels of certain components and products to ensure we can meet long-term demand. We also have strong relationships with our suppliers and are working closely with them to meet the expected demand for our products. While no one wishes to see supply chain challenges, we believe we are well prepared. Our strong results and positive outlook give us confidence to propose an annual dividend of $4.20 a share, reflecting a 17% increase over the current dividend amount, which will be considered by shareholders at the upcoming annual meeting. In addition, our Board of Directors recently approved a $500 million share repurchase program, effective through December 2028. Doug will discuss our financial results and outlook in greater detail in a few minutes, but first, I'll provide a few remarks on the performance of each business segment. Starting with fitness. 2025 was another exciting year of growth as customers embrace the healthy active lifestyles our brand represents. For the year, fitness revenue increased 33% to $2.36 billion, surpassing $2 billion for the first time and was driven by wearables as we continue to benefit from both market share gains and market growth. Gross margin was 60%, a 130 basis point improvement over the prior year. Operating income increased 50% year-over-year to $726 million, and operating margin expanded 360 basis points to 31%, reflecting both improved gross margin, and operating leverage. During the quarter, we announced our collaboration with health care payments provider, Truemed, to assist customers using pre-tax Health Savings Account and Flexible Savings Account funds for qualifying purchases of select Garmin products. We recently published our annual Garmin Connect data report, which shows that on average, our users increased activity levels by 8% during the year, reflecting a high level of engagement with our products and app platforms. At the 2026 consumer electronics shows, the Venu 4 and the Forerunner 970 received innovation awards for novel features in digital health and fitness, and we announced exciting enhancements to our premium Connect+ service with nutrition tracking and insights powered by AI-based active intelligence to help users achieve nutrition goals. Looking forward, we expect another year of strong performance for fitness driven by demand for our current product lineup and contributions from new product introductions. We also expect that the fitness segment will be our strongest contributor to 2026 consolidated growth. Moving to Outdoor. Full year 2025 revenue increased 5% to $2.05 billion, also exceeding $2 billion for the first time. Growth in Outdoor was primarily driven by adventure watches with a full year of contributions from the highly successful fenix 8 series that was launched in 2024 followed by the launch of the fenix 8 Pro with inReach technology in September of 2025. Gross and operating margins were 66% and 34%, respectively, resulting in operating income of $690 million. During the quarter, we launched the inReach Mini 3 Plus satellite communicator with voice, text and photo sharing. This compact and rugged communicator offers essential SOS safety features and reliable communication that explorers can use to stay connected with loved ones while adventuring beyond cell phone coverage. And with up to 2 weeks of battery life in the 10-minute tracking mode, inReach Mini 3 Plus can be used on multi-day trips without added worry of battery charging. Several Outdoor products also received CES Innovation Awards, including the fenix 8 Pro MicroLED version, Blaze Equine Wellness System and the Descent S1 Buoy, which highlights our commitment to exploring new product categories and developing groundbreaking innovation. Looking forward, we expect full year growth in Outdoor to accelerate in 2026 compared to 2025 driven by a significant number of new product introductions. We also expect stronger performance in the back half of the year due to the timing of product launches. Looking next at aviation, full year 2025 revenue increased 13% to $987 million with growth contributions from both OEM and aftermarket product categories. Gross and operating margins expanded year-over-year to 75% and 26%, respectively, Operating income increased 22% to $257 million. During the quarter, we launched the D2 Air X15 and the D2 Mach 2, our latest aviator smartwatches with cockpit connectivity and advanced aviation, health, fitness and smartwatch features. We announced that the Garmin G5000H cockpit system was selected for the Brazilian Air Force UH-60 Black Hawk helicopter, part of a growing list of military modernization programs based on our advanced commercially available integrated cockpit systems. On December 20, 2025, our Autoland system was used by a customer for the first time, returning the aircraft and crew safely to the ground following rapid depressurization while operating in instrument flight conditions over the Rocky Mountains. This incident illustrates how our cockpit systems can improve the safety margins of flight. We are very proud of our aviation team for creating our award-winning Autoland technology. Looking forward, we expect aviation revenue will continue to grow in 2026, in line with historical norms. Turning to the marine segment. Full year 2025 revenue increased 10% to $1.18 billion, driven by growth across multiple categories led by chartplotters. Gross and operating margins were 55% and 21%, respectively, resulting in operating income of $251 million. We recently introduced the flagship GPSMAP 9000xsv lineup to further strengthen our offerings in the chartplotter category. The GPSMAP 9000xsv offers stunning 4K resolution displays, 5 gigahertz WiFi networking and industry-leading sonar performance. Also during the quarter, we launched Garmin OnBoard, a versatile man overboard and engine cutoff system that uses wireless technology, offering users freedom to move around the boat while still enjoying the protection of this important safety system. Garmin OnBoard was selected as the winner of the 2025 DAME Design Award in the Safety and Security Award category at the recent METSTRADE Marine exhibition in Amsterdam. During 2025, we received multiple awards, including being named Most Innovative Marine Company by Soundings Trade Only for the third consecutive year, NMEA Manufacturer of the Year for the 11th consecutive year, and we received the National Boating Safety Award for the fifth consecutive year. This is an unprecedented level of industry recognition, and we attribute our success to the outstanding products we offer and our strong commitment to serving customers. In 2026, we expect marine segment growth to be consistent with the prior year based on improving market conditions. Moving finally to the auto OEM segment. Full year 2025 revenue increased 9% to $665 million, primarily driven by growth in domain controllers. Gross margin was 17%, and the operating loss was $49 million for the year. At the recent Consumer Electronics Show, we introduced our next-gen Unified Cabin domain controller that adds digital key capability, seat specific audio and video and an AI system designed to make vehicle interactions more conversational and powerful. We also announced our collaboration with Meta to explore new ways of interacting with the vehicle. We continue to achieve important milestones leading up to the launch of our next domain controller program. I'm pleased to report that this program is with renowned global automaker, Mercedes-Benz and will broadly apply across their portfolio of passenger car models with significant volumes ramping up in 2027. In 2026, we expect revenue to decrease year-over-year as we have reached the peak of BMW domain controller volumes and as certain legacy programs approach end of life. We expect operating losses to narrow in 2026 as we shift certain auto OEM R&D resources to accelerate product roadmap development in other segments. That concludes my remarks. Next, Doug will walk you through additional details on our financial results. Doug? Douglas Boessen: Thanks, Cliff. Good morning, everyone. I'll begin by reviewing our fourth quarter and full year financial results, provide comments on the balance sheet, cash flow statement, taxes, our 2026 guidance. We posted revenue of $2.125 billion for the fourth quarter, representing a 17% increase year-over-year. Gross margin was 59.2% comparable to the prior year. Operating expense as a percentage of sales was 30.3%, a 60 basis point decrease. Operating income was $614 million, 19% year-over-year increase. Operating margin was 28.9%, a 60 basis point increase from the prior year. Our GAAP EPS was $2.73, and pro forma EPS was $2.79, a 16% increase from the prior year pro forma EPS. Looking at our full year results. We posted revenue of $7.246 billion, representing a 15% increase year-over-year. Gross margin was 58.7% comparable to the prior year. Operating expense as a percentage of sales was 32.9%, a 50 basis point decrease. Operating income was $1.876 billion, 18% increase. Operating margin was 25.9%, a 60 basis point increase from the prior year. Our GAAP EPS was $8.59, pro forma EPS was $8.56, 16% increase from the prior year pro forma EPS. Next, look at our fourth quarter revenue by segment and geography. During the fourth quarter, we achieved record revenue on a consolidated basis. We achieved double-digit growth in 3 of our 5 segments led by the fitness segment with 42% growth followed by marine segment with 18% growth, aviation segment with 16% growth. By geography, the Americas region achieved strong double-digit growth of 21%, resulting in quarterly revenue exceeding $1 billion for the first time. EMEA region, APAC region had 14% and 8% growth, respectively. For full year 2025, we achieved record revenue on a consolidated basis and record revenue for each of our 5 segments. Our geography, we achieved 18% growth in EMEA, 40% growth in Americas and 12% growth in APAC. Looking next, operating expenses. Fourth quarter operating expenses increased by approximately $80 million or 14%. Research and development increased by $36 million, primarily due to personnel-related expenses. SG&A increased by $44 million, primarily due to increased advertising and personnel-related expenses. A few highlights on the balance sheet, cash flow statement, dividends and share repurchase. We ended the quarter with cash and marketable securities of approximately $4.1 billion. Accounts receivable increased sequentially and year-over-year to approximately $1.3 billion due to strong sales in the fourth quarter. Inventory balance increased year-over-year to approximately $1.8 billion. For our fourth quarter of 2025, we generated free cash flow of $430 million, a $30 million increase from the prior year quarter. For the full year 2025, we generated free cash flow of approximately $1.4 billion, a $24 million increase from the prior year. Our full year 2025 capital expenditures were $270 million, an increase of $77 million over the prior year. For 2026, we expect free cash flow to be approximately $1.4 billion, approximately $400 million of capital expenditures. The expected year-over-year increase in capital expenditures primarily due to a new manufacturing facility in Thailand, we expect to be operational in early 2027. During 2025, we paid dividends of approximately $664 million. Also, we announced our plan to seek shareholder approval for a $0.60 increase in our annual dividend beginning with the June 2026 payment. This is a 17% increase from our current annual dividend $3.60. We proposed a cash dividend of $4.20, $1.05 per share per quarter. 2025, we purchased $181 million of company shares. Also, our Board of Directors recently approved a $500 million share purchase program through December 2028 to replace the remainder of the previous $300 million authorization. Our full year 2025 pro forma effective tax rate was 17.4% compared to 16.7% in the prior year. Increase in the current year effective tax rate is primarily due to the 2025 U.S. tax legislation, which changed capitalization requirements of certain R&D costs, resulting in a decrease in certain U.S. tax deductions and credits. Turning next to our full year 2026 guidance. We estimate revenue approximately $7.9 billion increased approximately 9% for 2025. We expect gross margin to be approximately 58.5%, a 20 basis point lower than our 2025 gross margin due to higher product costs, partially offset by favorable segment mix. We expect an operating margin of approximately 25.5%. 2026 pro forma effective tax rate is expected to be 16% a 140 basis point decrease compared to 2025. Expected year-over-year decrease in 2026 pro forma effective tax rate, primarily due to an increase in certain U.S. tax deductions, result of certain provisions in 2025 U.S. tax legislation, which came effective 2026. This results in expected pro forma earnings per share approximately $9.35, a 9% increase over 2025 pro forma earnings per share. This concludes our formal remarks. Jade, can you please open the line for Q&A. Operator: [Operator Instructions] Your first question comes from the line of Joseph Cardoso from JPM. Joseph Cardoso: Maybe if I could, for the first one, just wanted to touch on the memory side of things. Like Cliff, I appreciate the comments that you made, but I was curious if you could help contextualize more, like how material of an impact you're expecting memory to be on your 2026 guide and which areas of the portfolio are more or less impacted there? And then as we think about mitigation factors, you obviously mentioned the inventory. However, how are you thinking about other levers like de-specking or pricing to offset any headwinds here? And then I have a follow-up. Clifton Pemble: Joe, I think in terms of quantifying the impact, we don't quantify individual components of our cost structure. So we won't be sharing that. Definitely, there's pressure on memory costs. There are certainly a lot of items in our overall BoM that are pricier items like displays and that kind of thing. So we simply just manage the entire BoM to be as cost efficient as possible. There's other opportunities to make the BoMs more efficient and also make our overall supply chain more efficient, looking for cost opportunities across the spectrum. So we're working all different angles, and there isn't 1 area to identify that we would isolate because it's the entire picture. I would remind everyone that our overall margin structure is higher, and that's because we're a vertically integrated company. And so therefore, when we see some variation at the BoM level, of course, the impact to the overall margin is less impactful. Joseph Cardoso: Got it. I appreciate the color there. And then maybe just as my follow-up, obviously, another strong quarter -- actually a year for wearables and in fitness. You highlighted share gains and obviously, the market growth around product refreshes as key drivers. I'm assuming pricing has also been a tailwind this year for Garmin, correct me if I'm wrong there. But could you maybe just talk about how each of these factors have contributed at least at a high level to the wearables growth this year? And as we think about growth for 2026 that you highlighted as being a larger contributor, at least as it relates to the fitness segment as a whole. How are you thinking about each of these factors and any kind of shift in terms of contribution there. Clifton Pemble: Our 2025 results in fitness and outdoor was influenced heavily by wearables. And definitely, volume was the driver. There's some minor impact from ASP, but most of it was really volume driven. And as we look forward to 2026, we feel like the momentum in the market for our brand and for our products is still there. That's why we're basically on the qualitative side of things, saying that we expect the growth to continue, and we also expect that fitness will be the larger contributor because of the broader product line across running and advanced wellness. Joseph Cardoso: And Cliff, maybe just anything between how much is new customers versus existing customers refreshing from '25 looking at '26? Clifton Pemble: Yes. I think we're still seeing -- most of our new customers are new to Garmin. So that's a very encouraging thing, and we see strong pull-through rates on registrations, showing that as products go into the channel, they're selling out and customers are activating those. So we feel very positive about the customer trends and very positive about the retail landscape. Operator: Your next question comes from the line of Erik Woodring from Morgan Stanley. Erik Woodring: Cliff, maybe just touching on auto OEM. Back in early 2023, you first introduced the idea that this business could grow 40% annually. I think the target was scaling to $800 million of annual revenue. You didn't quite get there, but I would just love to, like, better understand from you what you learned about this business over the last 3 years, that gives you the conviction to kind of double down as we go forward? And just to carry on that is just what details can you share with us about the next evolution of this business with Mercedes as we think about 3-year growth rates or customer diversification targets or target margins. I would just love to understand kind of what you learned and how that influences the next 3 years of this business, please? And then a follow-up. Clifton Pemble: Okay. Yes. So our view in 2023 was based on what we knew at the time, which was based on projections given to us by our automotive OEM partners and of course, like everything, they go through cycles and some of their assumptions are not always correct. And in that case, I think the outlook was more positive then than what it turned out to be because of changes in the overall -- their market structure and their geographic results, whether it's between Asia, Americas or Europe. So that's the situation we found ourselves in. In terms of what we learned, I think we have been managing this business really for 2 goals. One is to achieve scale, and we're working and making good progress towards that. The other is to invest for the future so that we can demonstrate to automakers that we have the innovation capability and the operational capability to meet their needs. And I think we've definitely achieved that as well. And so as we look forward, one of the adjustments we're making is to shift some of those R&D resources that we've been using to develop new business and concepts and develop our other product lines, and we feel like we've reached a point of critical mass where automakers realize that we can do this job for them, and it would then allow us to work on the scale part of the equation. Erik Woodring: And then maybe just following up, I was kind of taken aback by your outdoor comments on 2026 or it was at least eye-catching, you're alluding to accelerating growth in new product features. I guess I was just going through the IDC data quickly. And fenix is the large majority of wearables revenue in the outdoor segment. And if history is a guide, the next fenix wouldn't launch until January 2027. So I guess, just I'm wondering inherently in your messaging about outdoor, if you're maybe messaging different timing for fenix launch or if maybe you're expecting to launch all new models in this segment? Just trying to kind of get a better understanding of exactly how to think about new product launches and the potential for acceleration in outdoor this year? Clifton Pemble: Well, we don't comment on specific product launch timing. The only thing that we would like people to know is that we do have a very active year plan for outdoor. And I would expect that many of our launches would occur in the back half of the year, which is why I commented that we expect the revenue to be stronger in the back half. So that's our plan, and we'll continue to update people as we go along throughout the year. Operator: Your next question comes from the line of Tim Long from Barclays. Alyssa Shreves: You have Alyssa on from Tim Long's team. Just a quick question on aviation. With the Black Hawk win, should we kind of assume higher military exposure in the aviation segment? Is this an area of expansion for you? Just kind of trying to think about if there's different go-to-market strategy there? And then I have a follow-up. Clifton Pemble: In terms of a project like the Black Hawk helicopter, they're using commercial off-the-shelf components from our cockpit system lineup to retrofit those aircraft and fully modernize them. And this is an example of a great program. There's lots of these kinds of programs around where they don't necessarily have to be the same kind of hardened military requirements for what people might think of for fighter jets and that kind of thing. But we still can provide modern cockpit systems to these workhorse aircraft that the military depends on. So it definitely is a growth opportunity, but they're incremental in our view. So they add to the total, and they're good wins, and we continue to pursue more. Alyssa Shreves: That's helpful. And then just a follow-up, how is -- any update on how Connect+ uptake is tracking? Clifton Pemble: So Connect+ is definitely an exciting adder to our business. We added the nutrition features I mentioned earlier. The nutrition feature really accelerated the number of free trials that we have. And so that was really good to see. And also, the conversion rate of those trials is very, very high. So we think that's a winner feature and we'll continue to expand and enhance Connect+ in order to add more value to customers there. Operator: Your next question comes from the line of Ben Bollin from Cleveland Research Company. Benjamin Bollin: Cliff, could you talk a little bit more about Mercedes in this ramp opportunity? Is this for 2027 model years, so it commences in late '26. Is this commencing in later '27 for 2028 model year? Just any thoughts on when we can start to expect some contribution from that effort? Clifton Pemble: I think there'll be some limited contributions in late 2026. It's really, I would say, inconsequential, but the ramp is really early 2027 and it's a very aggressive program and ramp with significant volumes that will be achieved over the life of the program. Benjamin Bollin: The other one I wanted to touch on is you commented a little bit about channel inventory overall. Have you seen any change in behavior of your retail partners as they've recognized that hardware costs are going up broadly in other consumer electronics. Do you think that's influencing their commitments or their visibility they're providing you? Any thoughts on pull forward that you might be seeing? That's it for me. Clifton Pemble: Yes. I think retailers really are enthused about carrying our brand. We saw a much higher level of engagement from certain retailers over the holiday season as they were happy to offer something from Garmin that was different from everything else that they typically offer. And I think their enthusiasm is really triggered by their customers. They see customers coming into the store, the customers are buying. So I feel like, overall, the retail picture, especially some of the brick-and-mortars, has been very positive. Operator: Your next question comes from the line of David MacGregor from Longbow Research. David S. MacGregor: I wanted to just start on fitness and ask you about the Truemed collaboration and how meaningful the 2026 revenue growth allowing HSA/FSA funds to be used in the purchase of select Garmin products could turn out to be. Clifton Pemble: Truemed is a way by which people can purchase the product on our website using their HSA funds. And it really is a great program, and each product that's in the program has to be evaluated and approved, but it allows people another payment approach basically on our website. So the customers come directly to our website. They purchased the product that's available to be purchased with this program. And it has quickly become one of our significant outlets, if you will, if you consider it a stand-alone outlet for our products. David S. MacGregor: Okay. Let me just follow up by, again, within fitness. Just thinking about within the wearables category, sort of nontraditional form factors, how are you thinking about the opportunity for Garmin there and from a timing standpoint? How likely we are to see developing something and introducing something there. Clifton Pemble: We don't share our future product plans in what direction we might go with those. I would point everyone to our history, which is that we explore new product categories and new form factors and deliver really great products to our customers. So that's what we'll continue to do to drive and grow the segment. David S. MacGregor: Okay. If I could just squeeze in a third one quickly. Are you able to quantify the benefit to Garmin, if the Supreme Court overturns the IEEPA tariffs? Clifton Pemble: Yes. We probably won't share specific dollar amounts, but as you can appreciate, the 20% tariff and now moving to 15% is a significant cost adder to our products. So as we mentioned in our remarks, we've done an excellent job. Our teams across the world have done phenomenal in mitigating that. And I think we've come out on the other side of that in a very, very good position and if it goes away, then certainly that changes the game in terms of our cost structure and things, but there's offsetting factors, too, with the supply chain constraints and memory issues that are going on right now. So there will be puts and takes, but we're not really counting on one approach or the other. We're assuming that everything stays pretty much as it is with regard to tariffs. Operator: Your next question comes from the line of Ivan Feinseth from Tigress Financial Partners. Ivan Feinseth: Congratulations on another great quarter and phenomenal year. While some of my questions have been answered as far as tariffs and memory concerns, it's incredible that your supply chain and your integrated manufacturing capabilities have helped to mitigate that. With the launch of your new products that have connectivity like the fenix 8 Pro and the expanded capabilities in the new inReach Mini 3. What kind of uptake are you seeing on the subscription services? And what percentage, for example, of people buying the fenix 8 Pro are opt-in for the LTE and satellite connectivity. Clifton Pemble: Yes. I think fenix 8 Pro is a product that's built around connectivity. So when somebody buys that product, they're definitely interested and motivated to activate the inReach service. We've already seen SOS events with the fenix 8 Pro, where people bought the product, are wearing them on adventures and they needed help or needed some other kind of service while they were out there, and they were able to achieve that right on the wrist. So we think it's a breakthrough platform. It's certainly not for everyone. But on the other hand, it's an important adder to our product line, and we'll continue to expand on that to add that capability to more products. Ivan Feinseth: And my follow-up question is, what kind of halo effect are you seeing on products from your acquisition last year of MYLAPS, including there was some optimism that would help with, for example, the Garmin Catalyst, and I see just launched an upgrade to the Catalyst was that -- did that have an effect and then you just launched some competitive track capabilities on the new Zumo XT3. Clifton Pemble: Yes. So MYLAPS allows us the opportunity to improve the overall race experience for customers from the sign-up process on through to race day, in race results and the devices that they wear during the race. So we feel like this is going to give us a high level of fidelity with customers as they embrace and pursue these race activities. And in terms of the other markets, one of the benefits of MYLAPS is that it's across many different markets, so running is one, but they also do, as you say, the racing and also moving into equine as well. So we just feel like that opens up new avenues for us to apply our innovation and our unique products into new areas. Operator: Your next question comes from the line of Noah Zatzkin from KeyBanc Capital Markets. Noah Zatzkin: I guess maybe zooming out, if you could just kind of share any thoughts maybe around the global wearables market, how that's kind of been trending? Has it been kind of stagnant or a tailwind to your trends? And any changes that you've seen over the last year or so, either competitively or just in overall growth rates? Clifton Pemble: So from our perspective, what we believe is happening is that the overall market has been on a growth path. I would call it in the steady growth in the mid-single to up to 10% kind of range. Everyone will get confirmation on that as data comes out for the full year. But that's our belief of what's happening in the market. So that's one driver of our overall growth, but market share has been a really important one for us as well as we've been able to take share both above and below us, from different players. And so I think people recognize the value of our products and the uniqueness of the features that they offer, and we're seeing the results of that with our market share. Noah Zatzkin: Great. Really helpful. And then maybe just one more on marine, impressive growth there in '25, given kind of the choppiness in the end market. So I think you mentioned maybe kind of consistent growth expected in '26. What's kind of underlying that from a kind of industry perspective? And in general, like any thoughts around the marine industry looking out this year would be great. Clifton Pemble: Well, what we see in marine is that the market has been -- I'd say, finding its footing and is incrementally positive as we move into 2026. So the underlying market seems, I would say, healthy. The boat shows seem very active. And it's a similar story where especially those larger boats with more equipment, they tend to be very popular and a lot of our equipment goes on those boats. And of course, in the fishing story with our products and the industry-leading sonar capability and chartplotters and mapping all of those things are driving market share for us as well. Operator: Your next question comes from the line of Ron Epstein from Bank of America. Ronald Epstein: So yes, maybe just changing gears a little bit in the aviation direction. Cliff, can you talk a little bit to the recent acquisition facility you guys bought in Meta and what your goal is for that and what that can bring to the table for Garmin? Clifton Pemble: Yes. So we were really excited to find that facility. We have lots of projects and lots of equipment that have to go into all kinds of aircraft. As you know, the process of taking our products to market is not as simple as just creating the product. They all have to be certified on each type of aircraft. And this facility allows us not only very, very significant hanger space to bring in very large aircraft, but it also allows us to build a completely new staff of people that can do certification work in aircraft modifications. So we believe over the long term that will help us reach new opportunities and more aircraft with more equipment. Ronald Epstein: And if I can read between the lines a little bit, does the facility like this give you the capability to maybe offer things on larger airplanes? Clifton Pemble: Well, it's a very large hanger. Yes, I'm excited about that. Ronald Epstein: All right. And if I may, just a quick follow-on here. Following up on -- I think it was Alyssa's question earlier about some of the defense stuff you guys are doing? With the changes in the defense acquisition system, the Department of War, Department of Defense, whatever you want to call it, has been trying to do more stuff on commercial terms with commercial contractors broadly. And you guys are almost exclusively commercial. Is that opening any doors for you to do other things that maybe weren't -- I don't know, in the plan just a year ago before they really started to push more commercial just because one would think potentially, given everything that's going on, maybe that is more opportunity for you all. Clifton Pemble: We believe that will bring more opportunities even though some of these discussions and the shift has started to gain some momentum. The actual selection and identification of programs and all of that still takes time. So we view it as a long-term opportunity, but a nice shift as people look at the equipment that's available and realize that military especially could benefit from the commercial products that we offer. Operator: Your next question comes from the line of Erik Woodring from Morgan Stanley. Erik Woodring: Just one quick follow-up, Cliff. I would just love to know how you're thinking about kind of the ratable side of your business. Over the last 3 years, that revenue capture over time has marginally decreased to around 5%, that's really seems to be mostly part of your success in the transactional business. So I'm just wondering how much of a priority is growing this ratable kind of part of your business? And is there any way. I know it kind of constitute subscriptions and services. But is there a way to help us think about margins on the ratable business versus the point-in-time business? Clifton Pemble: Yes. I think like every kind of subscription-based business, the margins tend to be higher. Service-based businesses are definitely higher that way. Our objective is to grow those within Garmin, but we also are not focusing on that as the only growth path. And so we're growing everything around it. The nice part is that our subscription base business has been growing as strongly or even stronger than the overall business, but everything else is growing around it so much that it still hasn't triggered that 10% threshold yet. So we feel like we're in a good position. We have lots of ideas of things that we can offer people going forward. And we're going to continue to build that business across every one of our segments. Operator: At this time, there are no further questions. I will now turn the call back to Teri Seck for closing remarks. Teri Seck: Thanks, everyone, for joining us today. As usual, Doug and I are available for callbacks. And we hope you have a great day. Bye. Operator: This concludes today's call. Thank you for attending. You may now disconnect.

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