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Operator: Ladies and gentlemen, welcome to the Basilea Pharmaceutica Full Year Results 2025 Conference Call and Live Webcast. I am Mathilde, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to David Veitch, Chief Executive Officer. Please go ahead. David Veitch: Thank you. Hello. I'm David Veitch, CEO of Basilea, and I would like to welcome you to our conference call and webcast, presenting our financial results and key achievements for the full year 2025, as well as highlighting our priorities and future value drivers for 2026 and beyond. For further detailed information, please see the ad hoc announcement issued this morning and also our annual report. These documents are both available on our website at basilea.com. I would like to mention that this call contains forward-looking statements. Joining me on our call today are Adesh Kaul, our Chief Financial Officer; and Dr. Marc Engelhardt, our Chief Medical Officer. Looking back at 2025, this was a year of great execution across our business. Starting with our commercial portfolio. Cresemba continued its strong momentum, global in-market sales up 27% to USD 693 million for the 12 months to September 2025. Our second commercial brand, Zevtera was successfully launched in the U.S., and we expect to see increasing commercial uptake from the second quarter of 2026. We also delivered a robust financial performance. Royalty income grew by 15% year-on-year, reflecting continued strong demand from Cresemba. In addition, we received significant non-dilutive funding for our research and development projects. These contributed to total revenue of CHF 232 million, an 11% increase versus 2024. We continue to substantially reduce our convertible debt which now stands at CHF 76 million. At the same time, our net cash position has more than tripled. Overall, our 2025 financial results surpassed guidance and reflect a strong performance. Our financial position also enabled us to expand our pipeline by in-licensing the Phase III-ready asset ceftibuten-ledaborbactam. This is intended for the treatment of complicated urinary tract infections and opens a new market for Basilea. In parallel, we advanced other pipeline programs, including the initiation of a second Phase III study with fosmanogepix, our lead clinical stage product in invasive fungal infections. Our current pipeline and product portfolio combines multiple R&D programs with 2 commercial products, Cresemba and Zevtera. Since October 2023, we have significantly expanded our anti-infective portfolio with 4 new assets, 2 of which are now in our Phase III pipeline. Fosmanogepix is being evaluated in 2 parallel Phase III studies designed to support a rare treatment label covering both invasive yeast and invasive mold infections. The recently added antibiotic ceftibuten-ledaborbactam is now in preparation for Phase III, which is scheduled to start in early 2027. In the Phase II and earlier pipeline, the antifungal BAL2062 and the antibiotic BAL2420 are progressing forward to their next milestones. Overall, this represents a diversified and well-balanced pipeline built to deliver value consistently over time. I will now hand over to Adesh. Adesh Kaul: Thank you, David. I would like to start by highlighting that through our partner centered business model, we have truly global reach. 0.5 million patients in more than 75 countries have been treated with Cresemba and Zevtera to date. We partner with leading companies that manage commercialization and ensure broad patient access. While we focus on our core strength in developing clinically relevant and commercially sustainable assets. This low-risk partnership-based model minimizes operating costs and has the potential to provide attractive return on investment for our assets. Cresemba is an excellent example of how a global brand can be successfully built through partnerships with regional and local champions. Cresemba's global in-market sales in the 12-month period to the end of September 2025 amounted to USD 693 million, representing a 27% year-on-year increase. Growth remains strong in established markets, while China and Japan increasingly contribute as both markets have moved beyond the launch phase. As a result, Cresemba is now the global market leader by value. Let me turn to Zevtera. The U.S. market represents the most important commercial opportunity for Zevtera. The key milestone for Zevtera in 2025 was, therefore, the U.S. launched by our partner, Innoviva Specialty Therapeutics. For novel hospital antibiotics, the key focus in the initial 9 to 12 months of the launch phase is on establishing broad market access and on supporting positive clinical experience. Against this metric, our partner has made very solid progress since launching the drug in July 2025. Zevtera has achieved multiple important formulary wins gained inclusion in Medicaid and 340B pricing programs, received a new technology add-on payment designation to support affordability and obtained a J-code to support outpatient billing. There were also repeat orders from major hospitals, which is a positive indicator of customer experience and acceptance. We are, therefore, pleased with the progress in this initial launch phase. In 2025, we have been successful in securing new nondilutive funding for our R&D portfolio. All our clinical programs, as well as BAL2420 which is expected to enter clinical development this year are supported through existing contracts with BARDA and CARB-X, respectively. Under these agreements, we have been awarded more than USD 430 million, of which more than USD 100 million have already been committed. This nondilutive funding is attractive from the financial perspective. It preserves shareholder value by avoiding dilution, enhances return on investment by reducing our own R&D spend and lowers financial risk as it's not debt and does not require repayment. Moving now to key financial figures for 2025. Unless otherwise stated, all numbers from here on are in Swiss francs. 2025 was another year of strong financial performance for Basilea. We surpassed our financial guidance and delivered our fourth consecutive year of net profit and positive operating cash flow. Cresemba and Zevtera-related revenue totaled CHF 194.4 million. Within this, royalty income grew by 15.4% year-on-year to CHF 111.6 million, driven by strong market demand for Cresemba. Milestone and upfront payments totaled CHF 32 million, broadly in line with the average annual level seen in recent years. Other revenues rose to CHF 38 million, bringing total revenue to CHF 232.4 million, up 11.4% year-on-year. Cost of products sold was CHF 39.3 million, and operating expenses were CHF 141.5 million, reflecting increased investments in R&D. As a result, we achieved an operating profit of CHF 51.5 million and a net profit of CHF 40.2 million. Finally, cash and cash equivalents and restricted cash increased by 30% to CHF 162.3 million. After deducting outstanding convertible bonds, this results in a net cash position of CHF 86.9 million at year-end, tripling the net cash at the end of 2024. Cash flows from operating activities remained strong at CHF 62.1 million. We did not only absorb increasing R&D investments as we progress our existing portfolio, but also the costs associated with the in-licensing of ceftibuten-ledaborbactam. With that, the $12 million upfront and milestone payments related to this transaction, our operating cash flow would have remained at the same level as in 2024. Alongside funding the expansion and progression of our pipeline, we further strengthened our balance sheet. Since January 2022, we have reduced our debt by CHF 145 million in fully nondilutive way, including CHF 21 million in the reporting period, bringing our outstanding convertible debt down to CHF 76 million. We expect 2026 to be another strong year from a financial perspective. We expect continued growth in Cresemba and Zevtera-related revenue to around CHF 200 million, driving an increase in total revenue of approximately 10%. Research and development expenses are expected to increase by approximately 20%, reflecting our investments into our 2 ongoing fosmanogepix Phase III studies the start of a new Phase I study with BAL2420 as well as Phase III preparations for ceftibuten-ledaborbactam. The strong commercial performance, combined with non-dilutive funding is expected to offset our increased R&D investments. As a result, we anticipate a disproportional increase in operating profit of around 20%. To fully understand the strength of our commercial business, it is important to have a closer look at our revenue mix, which is expected to shift towards higher-margin revenue streams. Royalties and milestones are expected to increase, while product revenue is expected to decrease due to the previously announced reduction in product supply to Pfizer goes on as both partners transition to manufacturing most of our own supply. The lower product revenue is expected to result in a decrease in cost of products sold. As a result, we expect to increase the cash contribution from our commercial business from CHF 155 million in 2025 to CHF 170 million in 2026. In the next few minutes, I would like to look beyond 2026. When looking at the anticipated impact of the loss of exclusivity for Cresemba and Basilea's revenues, one needs to take into consideration the geographic distribution of our revenues and the timing of the impact from generics. Our revenue doesn't perfectly align with the geographic distribution of in-market sales. In 2025, the U.S. accounted for almost 50% of in-market sales, while only 35% of our Cresemba revenues were based on U.S. sales. This means that 65% of our revenues were related to Cresemba sales outside of the U.S. In the U.S., we expect Cresemba to continue growing through a significant portion of 2027 with the impact from generics anticipated from Q4 2027 onwards. In Europe, we expect growth to continue throughout 2027 and through the first half of 2028 with generic impact beginning in the second half of 2028. As a result, the full year impact of Cresemba's loss of exclusivity in both the U.S. and Europe on Basilea's revenues is expected to become fully visible only in 2029. Importantly, revenues from Japan and other markets are expected to keep on growing beyond 2028. We, therefore, expect Cresemba to keep on making significant cash contributions well beyond the initial loss of exclusivity. It is, however, clear that we need to look beyond Cresemba to ensure long-term growth for Basilea. As David mentioned earlier, our portfolio is now well balanced with commercial products generating value today while our Phase III pipeline is well positioned to deliver the next wave of product launches and midterm growth. Assuming successful clinical outcomes, fosmanogepix is expected to be our next major launch, it could enter the market in early 2029. Ceftibuten-ledaborbactam is expected to follow around a year later, further expanding our commercial portfolio as our fourth product. In the meantime, we expect Zevtera to gain further traction, especially in the U.S. and to contribute to Basilea's growth until its loss of exclusivity in the U.S. in 2034. We are, therefore, well positioned for sustained growth for years to come. Let me conclude by bringing all this together and highlighting how well Basilea is positioned for sustainable growth under our agenda 2030. As of December 31, 2025, Basilea held CHF 162 million in cash, cash equivalents and restricted cash. Over the next 5 years, we expect to generate approximately CHF 600 million in cumulative cash flow from Cresemba and Zevtera, supported by strong market demand and continued commercial execution. Furthermore, approximately USD 330 million of potential additional nondilutive R&D funding remains available on the Basilea's existing border agreements. These funds may be committed in future tranches to support the development of fosmanogepix, BAL2062 and ceftibuten-ledaborbactam. Taken together, this provides Basilea with significant financial strength and flexibility to execute on 3 key priorities. First, to bring our next growth drivers, fosmanogepix and ceftibuten-ledaborbactam successfully to the market; second, to continue advancing our earlier-stage pipeline to secure long-term growth; and third, to seize external growth opportunities by acquiring or in-licensing new high-potential assets. On top of that, there are several potential upsides not reflected in these figures. These include a later-than-anticipated entry of Cresemba generics in the U.S. and Europe, new nondilutive R&D funding agreements and first revenues from fosmanogepix and ceftibuten-ledaborbactam. Our financial strength allows us to focus on strong execution to ensure sustainable growth and long-term value creation for our shareholders. I will now hand over to Marc for the portfolio update. Marc Engelhardt: Thank you, Adesh. Today, we have 2 Phase III programs, fosmanogepix and ceftibuten-ledaborbactam, which we expect to read out in 2028 and 2029, as mentioned by Adesh. Fosmanogepix is currently being evaluated in 2 global Phase III studies, fast IC and forward IM, both are expected to read out in 2028 with a subsequent regulatory process. The Phase III program is supported by compelling real-world evidence, which provides important insights into the potential benefits of fosmanogepix and which I will present shortly in more detail. Ceftibuten-ledaborbactam, which we in-licensed in August 2025 is expected to enter Phase III in early 2027. The readout of this program and regulatory process is expected in 2029. This program benefits from a well-established Phase III design, aligned with published FDA guidance for complicated urinary duct infections, which provides a well-defined clinical development path for this program. Based on our knowledge of the antifungal and antibacterial space, we estimate peak sales of about USD 1 billion for fosmanogepix and about USD 500 million for ceftibuten-ledaborbactam. This means that together, our current Phase III pipeline has potential double to days in market sales with Cresemba and Zevtera, which are approximately USD 750 million. In the next slides, I will explain why these drug candidates addresses significant unmet medical needs, we believe translate into substantial commercial potential. Fosmanogepix is the product of manogepix a first-in-class antifungal with a novel mechanism of action that reduces pathogenicity and causes fungal cell death. It demonstrates broad-spectrum activity against both yeasts and molds, including multidrug-resistant yeast strains such as Candida auris or Candida glabrata and against difficult-to-treat molds like aspergillosis and fusariosis. These pathogens are challenging to treat and represent a growing global health concern. Fosmanogepix has wide tissue distribution, including difficult-to-reach sites such as the central nervous system and is available in both IV and oral formulations, which is an important advantage for clinical factors. Fosmanogepix has received QIDP, Fast Track and Orphan Drug Designations from the FDA, enabling accelerated review and extending U.S. market exclusivity for a longer commercial runway. Beyond the ongoing clinical Phase III program in invasive candidiasis and invasive mold infections, fosmanogepix is available through a global expanded access program for patients with severe invasive fungal infections, who have no other treatment options. As you can see on the graph, since the program started in 2020, when fosmanogepix was still in Phase II development, there has been extraordinary and unprecedented global demand for fosmanogepix for a broad range of resistant or refractory mold and yeast infections. To date, more than 430 patients from 20 countries have been treated with fosmanogepix through this program, particularly notable example is the 2023 fusarium meningitis outbreak at the U.S. Mexican border where fosmanogepix, at that time, still in Phase II development was recommended as therapy by the U.S. Centers for Disease Control and Prevention. Adding fosmanogepix the standard antifungal treatment regimen in these patients resulted in a remarkable reduction in the in-hospital mortality and enabled managing patients in outpatient setting with oral fosmanogepix until resolution of the infection. These real-world experiences underscore the life-saving potential of fosmanogepix and reinforce our confidence in the future success of this drug candidate. Turning now to ceftibuten-ledaborbactam. Ceftibuten is an established beta-lactam antibiotic. However, various material strains, especially in the order of gram-negative bacteria called Enterobacterales, have developed resistance to it. Ledaborbactam novel beta-lactamase inhibitor when added to ceftibuten enables restoration of the activity of ceftibuten against these resistant strains, resulting in potent activity and bacterial killing. Importantly, this combination is developed as an oral option for infections that today often require intravenous therapy. This can avoid hospitalization or enable earlier discharge from the hospital both clinically and economically meaningful benefits. Ceftibuten-ledaborbactam is active against Enterobacterales including multidrug-resistance strains, such as extended spectrum beta-lactamase or ESBL producers in carbapenem-resistant Enterobacterales, pathogens that have become increasingly resistant to current therapies and present significant treatment challenges. Complicated urinary tract infections or cUTIs are infections that extend beyond the bladder accompanied by local and systemic symptoms. They are among the most common bacterial infections in both hospital and cumulative settings and are associated with considerable morbidity and health care resource utilization. Gram-negative bacteria from the Enterobacterales, particularly uropathogenic E. coli are leading cause of cUTI, a significant proportion of multidrug resistant and this resistant profile is effectively addressed by ceftibuten-ledaborbactam. Ceftibuten-ledaborbactam is being developed specifically as an oral therapy for cUTI caused by Enterobacterales. It addresses a clear medical need and recent launches of beta-lactam antibiotics in the gram-negative space for strong market acceptance for these new therapies. For example, the intravenous antibiotic Avycaz has reached global sales of approximately USD 680 million to date. This supports the significant commercial opportunity for ceftibuten-ledaborbactam as an oral cUTI treatment that complements IV options. The program holds QIDP and Fast Track designations providing accelerated regulatory review and extended market exclusivity in the U.S. With this, I'll hand it back to David. David Veitch: Okay. Thank you, Marc. During the last year, we've made significant progress and delivered on every goal we set for 2025. A key commercial milestone was the successful U.S. launch of Zevtera, bringing the brand to its highest value market. In parallel, Cresemba continues to perform extremely well with strong and growing in market demand translating into consistently increasing revenues. On the R&D side, we advanced our portfolio across both clinical and preclinical programs. This includes the initiation of the second Phase III study with fosmanogepix for invasive mold infections and new collaborations that bring new technologies or approaches into preclinical development. We also strengthened our Phase III pipeline by in-licensing the oral antibiotic ceftibuten-ledaborbactam, which is scheduled to enter Phase III in early 2027. In parallel, we secured USD 70 million in nondilutive funding to support our R&D activities during the year. Taken together, these achievements reflect disciplined and focused execution they reinforce our strategy of creating a continuous stream of future product launches setting the stage for substantial value growth in the years ahead. Looking ahead, our priority remains clear, delivering sustainable growth and long-term value. We aim to further increase revenue from Cresemba and Zevtera, leveraging Cresemba's strong global momentum and Zevtera was expanding presence in the U.S. Our lead clinical program, fosmanogepix will continue progressing through Phase III development, while preparations are underway for the Phase III program of ceftibuten-ledaborbactam. We will also advance our Phase II and earlier stage pipeline programs is moving towards their next milestones. In parallel, we will actively pursue additional in-licensing and acquisition opportunities to further strengthen and diversify our portfolio. And as always, we will look to secure additional nondilutive funding building on the successful collaborations we have established with BARDA and CARB-X. Let me close with 3 messages. First, Basilea is financially strong. Our cash position and expected future cash flows provide a solid foundation for sustained growth. Second, our Phase III portfolio is a major growth driver. Fosmanogepix and ceftibuten-ledaborbactam have the potential to double today's in-market sales level, creating significant value in the future. Third, we have the ability and the opportunity to do more, through targeted acquisition and in-licensing of additional high-quality assets, we can accelerate growth well beyond the existing pipeline. Together, these elements reflect our focus on innovation, execution and delivering value to our shareholders, not just today but consistently into the future. Thank you for your attention, and we'll now open the line to any of your questions. Operator: [Operator Instructions] The first question comes from the line of Brian White from Calvine Partners. Brian White: A very quick one, firstly, on Cresemba and loss of exclusivity. Is there any reason not to expect generics in the U.S.? I know that's certainly what you've been highlighting in terms of the September date. I just wonder if there's anything ongoing in terms of litigation, which might change that, and that you could share with us? And then just separately on the in-licensing activity, a lot of which has been in the antibacterial field more recently. Is that because you see more programs there, which are available for licensing or is it because fosmanogepix really answers most of the questions that you have in the antifungal field? David Veitch: Yes. Thanks, Brian. I'll take the first one in terms of the timings that Adesh went through in terms of the loss of exclusivity versus the appearance of generics. I think the easiest way -- well, first of all, in terms of technically, for example, in the U.S., which obviously is the first market where we believe that generics will enter. I mean, in terms of ongoing -- you mentioned sort of ongoing litigation and things. I mean, obviously, we're not the MAH in the U.S. So that would be between Astellas and other parties. But what we can say is that -- and I guess is what's behind your question, understanding how quickly sort of genomics might appear or the U.S. business might decline. And I think what I can say is that we're aware, obviously, we get -- whilst we're not actively evolved in any potential litigations, what we could say is that a generic will not be sort of approved until the LOE date and as to how many they would be, I mean, we're not talking more than a handful that we're aware of, but that doesn't mean there won't be any, but it's not like 10 or 20 generics. It's clearly a handful where it could appear whether or not they do appear, it depends on if they're approved and depends on the timing of that approval and then whether they can then launch in the U.S. market from -- in that Q4 2027 period. So that's probably about all I can say really in terms of that situation. And just to reinforce the point about Europe, it's sort of subtly but importantly different, which is that with the Orphan Drug Designations our understanding and our partners, Pfizer's understanding is that the generics cannot file until the end of LOE, which is why there's this sort of 9 month -- approximately a 9-month gap between the LOE in Europe and then the generics appearing in the second half of 2028, just to make that point clear. On to the subject of the deals -- number of deals and why have we recently been doing preclinical deals versus clinical. Adesh, do you want to take that? Adesh Kaul: So thanks, Brian, for your question. So just as a reminder, there are basically 2 things that drive transactions. One is medical needs, clinical benefit that we're seeing and, therefore, differentiated positioning that would allow for commercial success. And secondly, it's the number of assets being available because you can desire a lot, but are there any assets available. And I think if you take these 2 things together, probably the answer to the first question is we still see actually medical need and opportunity for providing clinical benefit in the antifungal space post-fosmanogepix, while we believe that fosmanogepix is going to be an important drug, if it's successfully developed and delivers on their promises, there is still room for more drugs there, which basically is then the point that there are simply not as many assets available on the antifungal space for partnering that would tick all the boxes as compared to the bacteria, and that's really driving more or less the deal flow. Operator: The next question comes from the line of Laurent Flamme from Zürcher Kantonalbank. Laurent Flamme: Two questions. The first question relates to the CHF 600 million cumulative cash flow from Cresemba and Zevtera of '26-2030. From the guidance for '26 with CHF 200 million revenue to those 2 assets and CHF 170 million cash flow. I would infer that the CHF 600 million cumulative cash flow is based on the gross profit, but a clarification if you will be welcome. The second question is about the commercial milestones related to Cresemba across '26, 2030. What can you tell us to help us refine our modeling particularly for the 2 key geographies, U.S., Europe. And would you expect notably any milestones in '29-2030? David Veitch: Yes. Thanks, Laurent. Adesh, why don't you start off with a clarification of the CHF 600 million and the CHF 170 million this year. Adesh Kaul: Thank you, Laurent, for your question. And you're exactly spot on. So in essence, the way that you have to look at it is we are looking at product and contract revenue, which is basically CHF 200 million to take this year's number. And we deduct from that the cost of products sold, which is basically expected to be about CHF 30 million this year, which delivers CHF 170 million in cash contribution from Cresemba and Zevtera. So you're exactly right, that sort of a gross profit even if it's under U.S. GAAP, not sort of gross profit per se. And then I think your second question was about milestones, '26 to 2030. Two points on that. One is, just as a reminder, we have been fairly consistent with milestone payments across our partners in the recent years within a certain range. So we have always sort of been between CHF 30 million to CHF 40 million. So on average, somewhere in the CHF 34 million, CHF 35 million range over the last few years. What we expect over the coming years is at least for the next 4 years, I would say, because the visibility, of course, gets a little bit less pronounced going forward is we would remain in that range. So if you take '26, '27, '28, '29 on average, that would probably be in the same order of magnitude, when exactly the milestones will happen remains to be seen. Because as a reminder, especially the milestones with Pfizer are on a cumulative basis. And that means, if they don't happen, for instance, in December, they may be triggered in January. And here again, the further out we go, the more the question is where exactly do they fall period-wise. But I think the important point is from a value perspective, to factor in about CHF 30 million to CHF 40 million on average over the next 4 years. David Veitch: Does that answer your question, Laurent? Laurent Flamme: Yes. That's perfect. And -- maybe a follow-up question on the taxation rate. I think in the recent past, you mentioned that we could factor a 12% tax rate going forward. From my calculation, I assume that Basilea would have the first cash outlays related to corporate tax in '27 after full consumption of the loss tax loss carry forwards. Would you agree with that? And would you agree with the 12% rate for any cash outlays in the future? Adesh Kaul: So yes, thank you for the follow-up question. Indeed, we have about CHF 11 million in deferred tax assets remaining. And if you do -- if you follow basically our guidance for '26, you would come to the conclusion that in 2027, that would be more or less like you start without the without expiring. On a full year basis, I would say probably that still means that we wouldn't have a cash outflow. We equivalent of 12% because partially, we would still be able to benefit from tax loss going forward in '27, but underlying also your assumption of 12%, maybe slightly on the higher end of expectations, but this varies probably anywhere between 11% and 12% is a reasonable assumption. Operator: We now have a question from the line of Jyoti Prakash from Edison Group. Jyoti Prakash: Congratulations on the results. My first question relates to Zevtera and we see that it's been securing some reinvestment in the U.S. Just want to understand the early cadence in terms of ordering and adoption is in line with the internal launch benchmarks? David Veitch: Jyoti, actually, it wasn't easiest to hear your question, but I think you were talking about the sort of uptake and the cadence of Zevtera in the U.S. And -- but basically yes, it's exactly in line with -- as Adesh said, we get -- obviously, we're in regular communication, obviously, with Innoviva Specialty Therapeutics, our partner in the U.S. we get their KPI reports on -- and that's what Adesh was sort of reporting on in terms of the market access achievements. And then that's why what we understand from our partner is that we should start to see a real movement in net sales from the Q2 onwards going forward. So actually, that's always been sort of like our expectation. And so we've been hitting the targets in terms of market access. And then as we want to see, and our partner wants to see, then we expect the net sales to start really increasing from Q2 onwards. Jyoti Prakash: Okay. And then just on ceftibuten-ledaborbactam moving well towards Phase III. So I just wanted to understand if there is more clarity on the trial design and plan? And if 2 trials will be required and can you provide some color on that? David Veitch: Okay. So I think, Marc, it's about the trials that will be required for ceftibuten-ledaborbactam for the Phase III program. Marc Engelhardt: Yes, Jyoti. So the Phase III program will be performed in complicated urinary tract infections and will be aligned with current health authority recommendations, as I said, there are guidelines to follow that are clear. The program is going to be discussed with FDA and EMA in the next months. And our plan is to conduct at least 100 study with approximately 1,500 patients comparing ceftibuten-ledaborbactam versus an IV carbapenem, and we will discuss with the regulators whether a second study may be required. So that's subject to the discussions with the regulators. Operator: [Operator Instructions] The next question comes from the line of Ram Selvaraju from H.C. Wainwright. David Veitch: Are you there, Ram? Raghuram Selvaraju: Can you hear me? David Veitch: Yes, we can now. Raghuram Selvaraju: Sorry about that. Okay. So yes, so I wanted to ask, first of all, if you could comment on 2 aspects of the commercial side. Firstly, what your current expectations are regarding peak annual sales of Zevtera in the U.S. specifically? And with respect to Cresemba, how large do you think the market opportunity is for this drug in Japan? And then secondly, on the clinical development front, I was wondering if you could provide us with some additional details on the timing to reach full enrollment in the fosmanogepix Phase III program and when you expect to reach full enrollment in the ceftibuten-ledaborbactam Phase III program? David Veitch: Okay. I mean, in terms of Japan, let me take the middle question actually for myself, which is the Japan. I mean, actually, the IQVIA sales, so the CHF 693 million IQVIA sales report from the in-market demand sales of Cresemba for the 12 months to September 2025. And if my memory says me correctly about CHF 36 million already in like the third year of launch of the product are already Japan. So when we talk about the growth rate globally being 27% if my memory serve me correctly, Japan is growing at about 220%. So that's why we're quite excited about Japan. China is growing at about 56% of that growth rate versus the 27% globally. So in terms of the more mature markets, obviously, U.S. and Europe, they're still growing healthy double digit, but they're not at the rates of Japan and China. So we are -- so that gives you a sort of feel -- in terms of how big it can be. I mean it's very difficult to say because actually, it's probably gone past out an early expectations to where we thought it would be. So we're not quite sure where it will end up. But what we do know is it's growing really fast, and it's already above expectations of ours and our partners. So -- and it's got a long runway. It's got exclusivity to the early 2030s. So this can become really quite big in Jan, which is really quite exciting for us. In terms of the peak year sales for Zevtera in the U.S. Adesh? Adesh Kaul: So here we'll have to resort to what we have been seeing in the past and due to analyst reports because to some degree, I think we'll have to say that Innoviva Specialty Therapeutics has to give some indication about what they believe the sales is going to be. analysts have it at around CHF 200 million to CHF 300 million in the U.S., which is not entirely inconsistent, but other drugs have been doing in the U.S. David Veitch: And then in terms of your fosmanogepix accrual and with the patients the crude into the Phase III studies, maybe Marc, you take. Marc Engelhardt: Yes. Our projection is that we will complete the enrollment of the fosmanogepix Phase III studies in the second half of 2027. I have a readout in early 2028, and ceftibuten-ledaborbactam is approximately 9 to 12 months after this, so just add approximately year to it, and that will be the time line for ceftibuten-ledaborbactam. Operator: [Operator Instructions] We have a follow-up question from the line of Laurent Flamme from Zürcher Kantonalbank. Laurent Flamme: Yes. The question relates to BAL2062. When do you expect the -- to start the Phase II enrollment? And what kind of potential time line for the results of this Phase II? Also considering that BAL2062 is targeting as all resistant invasive aspergillosis, that would be interesting to hear from you what kind of level of resistance you see in invasive aspergillosis currently with Cresemba in the key geographies. If you have any data on that? And what kind of perspective would you have for our future Phase III protocol. So would you select patients with as a resistant invasive aspergillosis as with a view for a second line indication? Or would you position this asset more as a first-line asset? David Veitch: Thanks, Laurent. I mean just from a sort of big picture point of view, then Marc can come back with the detail to your question. But obviously, when we acquired or in-licensed ceftibuten-ledaborbactam last year, clearly, with one fosmanogepix is already in Phase III, ceftibuten-ledaborbactam we're progressing into preparing for Phase III. So our priorities as a company and we believe it's in the interest to create the sort of more midterm, long-term value is to push the Phase III assets as quickly as possible to the market to replace Cresemba and Zevtera. So clearly, that's been our priority for the last -- definitely since we had the 2 compounds. So actually, in terms of -- for BAL2062, it's also important, as we've said, to have a pipeline behind our late-stage Phase III compounds. And that in terms of timing would be the product immediately after the 2 Phase III assets. We have an ambition, and we've stated this in the press release that we are planning to -- we are finalizing -- we've been doing preclinical profiling over the last year, and we're now armed with that information. We are planning to go to the regulators this year to finalize the Phase II/III program. In terms of what it could look like timings and azole resistance or not first line. Maybe Marc, you can address the detail to Laurent's question. Marc Engelhardt: So I think from a vision and goal for the development of BAL2062, our current approach is to develop it for a broader indication of invasive aspergillosis so to not solely focus this on an azole resistant population. And this is based on the potent efficacy in vivo, the good safety profile in the clinical Phase I study and the lack of [ drug ] actions that we assume. So this would be a Phase III non-inferiority study larger study to get this into first line. Of course, due to the novel mechanism of action and the coverage of azole resistance aspergillosis, it will be used for resistant pathogens too. The occurrence of azole resistance varies largely between different regions. So in Europe, in Belgium and the Netherlands, there are regions where up to 30% of aspergillosis -- clinical aspergillosis isolates are azole resistant, the latest numbers from the U.S. go up to 26%. And we believe this will be an increasing problem and then will constitute a portion of the use of BAL2062, but our current development strategy is really to develop it for first-line due to the efficacy and the safety profile. Operator: [Operator Instructions] We have a follow-up question from the line of Laurent Flamme from Zürcher Kantonalbank. Laurent Flamme: And maybe my last question relates to [indiscernible] we expect that Basilea would look for new agreement with BARDA for R&D funding of these assets or would be September '24 OTA envelope already signed with BARDA who suffice beyond the financing of fosmanogepix and BAL2062? David Veitch: Yes. Thanks, Laurent. I think I got the question. So BAL2420, the LptA-Inhibitor, would we seek BARDA funding for that Phase I program. I think the short answer is actually BARDA tends to fund after Phase I. So Phase II, III studies rather than Phase I. But actually, CARB-X, which we've obviously currently got funding from for the preclinical work, they do fund Phase I work. So actually, we would seek to try and get funding from CARB-X for the Phase I study, which we're planning to start in the first half of this year. So yes -- that's the short answer. We are seeking funding. The technical thing won't be BARDA. It would be CARB-X if it was agreed that they would give us funding for that program, and we will seek that out. In terms of down the line after Phase I, if it's successful through Phase I and we push it into Phase II, the agreement, this OTA agreement, and I think you were implying this, and you're correct, the OTA agreement is such an agreement whereby product can go in and go out of this funding sort of package, so to speak. So actually, depending on the progress of the existing assets and new assets coming in that could fit that in agreement with BARDA, it could potentially fit into the OTA. But that would be -- I can't say that today because it will be a 2-way discussion with BARDA based on the funding required, the progress of the product and the progress of the other portfolio compounds in the OTA. So that's, in essence, the answer. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to David Veitch for any closing remarks. David Veitch: Well, thank you, everyone. Thank you for joining us today in our webcast and for your continued interest in Basilea. And yes, thank you, enjoy the rest of your day. Thank you very much. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the Basilea Pharmaceutica full year results 2025 conference call. You may now disconnect your lines. Goodbye.
Mia Nordlander: Hello, everyone, and very welcome to Sinch Q4 2025 presentation. My name is Mia Nordlander, and I'm Head of Investor Relations and Sustainability. And with me here in the room today, I have our CEO, Laurinda Pang; and our CFO, Jonas Dahlberg. So today, you will hear Laurinda and Jonas present the quarter and thereafter, we will have time for questions. [Operator Instructions] So once again, very welcome, and I hand over to you, Laurinda. Laurinda Pang: Thank you so much, Mia, and thanks, everyone, for joining us today. 2025 was a year of disciplined execution where we achieved record high profitability while regaining our growth momentum. The fourth quarter marks a strong finish to the year, and I'm pleased to report another period of continued organic gross profit growth and improved profitability. Let's turn to Slide 2 to look at the highlights from the quarter. The fourth quarter shows that we are firmly on the path to regained growth with solid momentum in our largest businesses, the Americas and our API platform, which was partially offset by headwinds in EMEA and APAC. We are closing the year with record high profitability. Gross profit grew 3% organically, and our gross margin expanded by 2 percentage points to 35%. Combined with our disciplined cost control, this resulted in an adjusted EBITDA margin of 14%, an increase of 1 percentage point year-over-year. And our cash conversion for the quarter was a solid [ 84% ] Finally, we continue to return value to our shareholders. We have now repurchased 8.8% of our outstanding shares, and we have called an Extraordinary General Meeting later this week to seek approval for canceling these shares. This cancellation is a strategic step as it will enable the Board to decide on additional buybacks within the 10% limit until the 2026 AGM. Please turn to Slide 3. Our performance this quarter and throughout 2025 is a direct result of our strategy built on 3 pillars: reaccelerating growth, expanding our EBITDA margin and active capital allocation. Our focus on healthy product mix, commercial discipline and operational efficiency is driving our progress, and we remain firmly on track to deliver our midterm financial targets. Now let's look back at the full year on Slide 4. When we put that strategy into perspective, you can see on this slide that 2025 was the year our disciplined execution has placed us on a strong trajectory toward our midterm goals. We achieved exactly what we set out to do. We rebalanced regaining our growth momentum while simultaneously delivering record high profitability. This performance was powered by solid development in the Americas region and in our API platform products. I'm pleased with the progress we are making towards our key financial targets. And in fact, with an adjusted EBITDA margin of 14% this quarter, we have already reached our target range that we set for the end of 2027. With gross profit growing 4% organically year-over-year, we are firmly on our way towards our 7% to 9% year-on-year financial target for the end of 2027. And we continue to be focused on building a resilient and sustainable business through diversifying our customer base, winning in next-generation messaging and e-mail as well as improving our commercial terms, which supports top line revenue growth and continued profitability. Also, our performance is being recognized externally. We were named a market leader by both IDC and ROCCO. For the third consecutive year, Gartner named Sinch a leader in its "Magic Quadrant Leader for CPaaS," which is a powerful validation of our global reach, competitive position and consistent platform leadership. On Slide 5, you can see our progress on our growth priorities. Our progress is anchored in a clear strategic framework built around four growth drivers. I will briefly touch on each of them here and then go deeper on selected areas in the following slides. The foundation of predictable, high-quality growth comes from four core drivers, as I mentioned. Our enterprise customer base grew a consistent 5% with leading brands such as Google and Albertsons among the top contributors to gross profit growth. At the same time, our high-margin self-service products delivered another stable quarter of 10% on a year-to-date basis. Building on this stable base, next-generation messaging is an important growth driver. Adoption of RCS continues to increase with volumes growing 260% year-over-year. Customers, including PayPal and OneMain Financial ranked among our top 10 customers by volume in the fourth quarter. Finally, we are expanding our partners and ecosystems channel, which serves as our strategic gateway to the AI economy. This includes signing new innovative AI partners such as Lovable. In parallel, we are also deepening relationships with established global leaders across our ecosystem. A strong example is Adobe, where we closed several significant deals in the fourth quarter. Now let's look closer at the quality of our enterprise customer base on Slide 6. This chart clearly illustrates a key strategic achievement. We are building a more diversified and resilient customer base. Growth is increasingly driven by a broad set of enterprise customers beyond our top 10. This deliberate shift reduces our exposure to highly competitive, lower-margin traffic and is a key driver behind our margin expansion and improved earnings quality. At the same time, it's important to note, though, that this is not a story of substitution. We continue to maintain our strong and stable position with some of the world's largest CPaaS customers who rely on our global network and platform for their communications. We are simply layering on new high-quality growth. Let's turn to Slide 7. Our market leadership is now translating into strong and accelerating commercial momentum, particularly in our largest market of North America. This is not a coincidence. It's actually a result of the deliberate changes in our go-to-market strategy and operations that we put in place last year. Those changes were focused on creating a more disciplined, accountable and effective commercial organization. We started by aligning our entire commercial team around a segmented operating model to focus our resources on the highest potential customer tiers. This strategic alignment was underpinned by true operational rigor, including a significant simplification of our job architecture to create clearer roles and accountability. That structural clarity is brought to life by a culture of high performance. We radically streamlined our sales compensation plans, which have directly led to improved quota attainment and integrated tools like our new CRM to establish a disciplined data-driven business cadence. The results of this transformed approach are clear. In the fourth quarter alone, our team delivered significant wins, including securing a 7-figure multimillion-dollar deal with a leading HR software company. Expanding our partnership with a leading hotel chain to over 100 countries and landing a 7-figure voice deal with a large U.S. health insurer. These are not just isolated victories. They're actually proof points of a strategic transformation that is delivering sustainable, high-quality growth. Let's turn to Slide 8. Our leadership in next-generation messaging is a key pillar of our growth and nowhere is this more evident than with RCS. We are at the forefront of a major technology shift with our RCS volumes in the fourth quarter increasing by 260%. The driver is simple. RCS delivers better outcomes because it changes what messaging can do. It turns one-way notifications into rich interactive experiences that can generate up to 10x the engagement of standard SMS, translating into higher conversion rates and stronger ROI for our customers. But here's the most exciting part of this for us. Despite this incredible growth, RCS still accounts for only 3% of our total messaging volume. We are in the early stages of a multiyear technology shift and capturing this transition from SMS to RCS is a significant and durable growth tailwind for Sinch. When our clients see a step change in engagement, they don't just send more alerts. They create entirely new conversational journeys. This expands their total interactions and spend on our platform, delivering -- driving revenue growth. At the same time, enabling these higher-value interactions embeds us as a strategic partner, and that strengthens our customer relationships, reduces churn and increases lifetime value. Let's turn to Slide 9, please. Our strategy for winning in the AI economy is built on a proven playbook. Since our founding, Sinch has been the communications backbone for the major technology shifts from mobile to the cloud. And we are a key part of the tech stack for leaders in each of these eras, and we are now the indispensable backbone for the AI era. We are the trusted execution layer within the AI ecosystem itself. We are embedding our technology with both established AI leaders and on platforms like our new partner Lovable, where the long tail of new AI native businesses is being born. This strategy creates an incredibly efficient growth engine. It allows us to capture the next wave of agent-driven communication volumes at its source, building a durable strategic moat for the decade to come. We are ensuring the next wave of global innovation runs on the Sinch platform. So as I hand the word over to Jonas to take you through the financials and details, let me summarize quickly. We have delivered a strong year of profitable growth as a result of delivering value to our customers and partners and by executing with discipline. We're confident in our strategy and our ability to continue creating value for our shareholders. Thanks for listening here today, and I look forward to taking your questions shortly. Jonas Dahlberg: Thank you, Laurinda. Without further ado, let's get into the numbers. So let's flip to Page 11. So as in previous quarters of 2025, we faced strong FX headwinds in the fourth quarter, actually pronounced headwinds. And the negative FX impact was minus 10% on net sales and minus 11% on gross profit. Adjusted for FX, we have a reduction on organic revenue, mainly driven by reduction of low-margin contracts. But combining this also with a positive mix shift, this yields a continued positive organic GP growth of 3% in the quarter at a similar level to the 4% average we've had throughout the year. The Americas is the engine. So let's look at that in more detail by flipping to the next Page 12. So Americas is our most important region by size. It's more than 60% of our gross profit and is the group's growth engine in the year and in the quarter. Americas delivered 7% gross profit growth with a 3 percentage point increase of the margin to 36%. And what's also great to see is that the largest business we have in Americas, the API business with enterprise messaging and e-mail is the main contributor to growth. The growth in the API business was strong and outpaced the decline we've seen in verification with e-mail and messaging. Also, network connectivity shows stable underlying performance. What's important, though, to understand here about network connectivity is that in Americas, we had a hit on the revenue of approximately SEK 60 million related to a traffic dispute with a customer. At the same time, we have a positive contribution from almost the same amount, completely unrelated in API platform related to traffic fees from a supplier. Combining these 2, the effect on Americas gross profit and group gross profit is nil, but you will see some movements between the segments. Moving over to EMEA. We see strong growth in applications. Also the core part of API messaging grew strongly, but we continue to face headwinds from the fixed price contracts in EMEA. These contracts are being phased out to -- well, material being phased out. And as of the end of the first half, we expect no impact from continued phase out of these contracts. In APAC, we have strong growth in the API business, except continued decline in India and also some competitive pressure in Australia. So it looks like a mixed bag, but the important takeaway here is the most important business we have, which is on a regional level, the Americas, and on product categories being the API business in e-mail and messaging, they are doing very well. So let's flip page and look at what's happening on margins. It's actually a record high delivery. We have continued improvement of margins in the quarter. We have strong gross margin of 35% and for the year, the highest gross margin and EBITDA so far. We've already covered actually most of the important drivers. It's about the mix shift on product level and reduction of low-margin contracts. And combined, this drives this very solid and continued gross margin expansion. On the EBITDA margin side, also what contributes is disciplined cost control and continued synergy extraction. Real quick flip to Page 14 to look at the cost development. So here, the nominal number shows actually a decline of OpEx with 8%. But also here, we have FX effects at play. But if we adjust for the FX effect, we still have a very disciplined development of cost with only a 1% organic increase in OpEx. Combined all, we have an organic growth of EBITDA -- of adjusted EBITDA of 6%. And we have an even higher improvement of non-adjusted EBITDA. What we have here is last Q4, a SEK 700 million provision on indirect taxes in the fourth quarter. Moving over to cash flow. That's on Page 15. Super strong cash conversion, seasonally strong quarter, 84% cash conversion. That's free cash flow of SEK 1.5 billion over the last year, and that's a 40% cash conversion. It is within our guidance range of 40% to 50%. Important to remember, last year, we had 60% cash conversion. Now it's 40%. If you look over time, our cash conversion is 50%, but we have some working capital swings. And you can see that in the cash flow on the right-hand side of this chart. But just to prove the point that you shouldn't be concerned about this. It's more normal swings. We turn to Page 16. As you can see, working capital here, net working capital is still in a favorable position. That means we have a negative working capital. And what you see here in the quarter is a seasonal increase in payables that contributes to a positive cash release. So in a nutshell, some swings between quarters, but truly continued solid working capital. Turn to Page 17, looking at leverage. We're still at a solid 1.6x leverage. This is a slight increase from the trough in Q2, driven basically by the share buybacks we've done. We bought 62 million shares during this period for close to SEK 1.9 billion. And in addition, we bought shares through an equity swap arrangement of SEK 364 million on top of that. Still have SEK 3.7 billion available in use in credit facilities that we can use for general corporate purposes such as buybacks. Now to the topic of buybacks, move to Page 18. So back to our strategy, it is to have an active capital allocation strategy. And we have returned cash to shareholders through the buyback program. So in the 2025 AGM, we got a mandate from the AGM or the Board got a mandate from the AGM to buy back 10% of the shares, and that started after the report of the second quarter. Then we have stepped up treasury shares to first 1.8% end of Q3 to 7.3% at year-end. And currently, we hold 8.8%. And with this background, the Board of Directors have convened an extraordinary general meeting for shareholders on Thursday, to vote on the cancellation of the existing treasury shares and a positive vote would enable an additional 10% buybacks until the ordinary AGM in May. And the question is obviously then how much shares can we buy back. I'd like to first be clear that the Board will, at every point in time, decide what they think is in the best interest of the shareholders. So this is more an illustrative example. But we've had an average free cash flow conversion of 50% over the last few years. And with the current situation, we can easily buy back 10% of our shares per year. Add on top of that, our current GP growth rate and our existing margins, we can more than double profit per share in 5 years. And this is what I would call the bedrock case for Sinch. On top of that, obviously, as we step up towards our organic GP growth target, this can be even more favorable. So with this background, the Board of Directors believe it's in the shareholders' interest with flexibility for accelerated buybacks. So just before we open up for Q&A, just to remind you about our strategy on Page 19. We will continue to execute for growth reacceleration, continue working with our profitability within the target range and then active capital allocation, including share buybacks. And with that... Mia Nordlander: Thank you so much, Laurinda and Jonas. [Operator Instructions] First, I have Erik Lindholm-Rojesta from SEB. Erik Lindholm-Rojestal: I'll start with two here. So you have highlighted sort of several headwinds to growth, most of which seem to have been present already in Q3. But I mean, from your point of view, is there really anything new in terms of headwinds that started to impact here in the quarter? Any changes in the sort of competitive intensity? And then secondly, I just wanted to ask sort of on the AI part. Twilio seems to be having a solid acceleration in AI use cases and AI customer intake, particularly around voice. I mean, have you seen any sort of impact, increased customer intake or increased usage from AI agents here? Laurinda Pang: Erik, this is Laurinda. Thanks for the questions. First of all, with regards to headwinds, we don't see anything new to your point, which is correct, we did call them out in the third quarter, and we saw them again in the fourth quarter. We also said this morning that we expect similar trends in the first half of this year in terms of the headwinds, but we also see the momentum continuing in both the Americas and API. So very similar to the second half of 2025. With regards to the AI use cases, we made the announcement with regards to Lovable being a strategic partner -- and it is just an example of the use cases that we are both pursuing as well as winning. We've established an AI partnership team that we are deploying around the world to pursue these partnerships so that we can natively integrate with these AI native companies, both in terms of the LLMs as well as those who are building platforms to enable other AI native companies and applications to be created. And so we're very optimistic about this opportunity. And the reason being is because we believe that we have the exact right infrastructure and capabilities to execute in this AI economy. Agents, to your point about the agent use cases or agents really proliferating and exploding customer communications, we agree with that sentiment, and we do see communication volumes starting to increase. And we believe that we have the appropriate channels of communication at scale in a trusted environment to be the best poised partner for those AI companies. Erik Lindholm-Rojestal: All right. Excellent. Just one follow-up, if that's all right. Just on the gross profit growth that you mentioned there, just quantifying what you said, is it fair to say that you see sort of -- you see similar growth as in H2 now into H1 on gross profit? Laurinda Pang: Yes. Mia Nordlander: Okay. Next one, we have Laura Metayer from Morgan Stanley. Laura Metayer: Three questions from me, please. On the network connectivity business, was the weaker organic growth only due to the customer dispute? Or was there anything else to call out this quarter? Second question on the midterm organic growth targets. I know you've talked a little bit about the drivers for that growth acceleration. I'm curious to hear if there is one driver that you would call out that would be the main one that you expect will drive acceleration of growth to the [ 7% to 9% ] target that you've set? And then last question on your midterm guide for the margin. So obviously, you've already reached the top end of that guide. Do you still see more opportunities to continue increasing the EBITDA margin? Laurinda Pang: Sure. Thanks very much, Laura. In terms of network connectivity, to your point, we called out that one-timer of SEK 60 million. There's nothing else that we would call out around network connectivity. We'll continue to manage that business as we have been, which is to manage it for cash ultimately. And so that's been a pretty stable business for us. In terms of the midterm targets, to your point, we called out four growth drivers, and that was around enterprise growth, self-serve, conversational messaging and e-mail and then finally, partnerships and ecosystems. If I were to pick one, I mean, all four are important, but if I were to pick one, it would be around partnerships and ecosystems. We see enterprises starting to purchase more and more through partnership and also the AI ecosystem very specifically requires a tremendous amount of integration to be built in the broader ecosystem. So I think that particular area of focus around partnerships and ecosystems is the one that we absolutely need to nail. And then finally, in terms of the midterm guidance or targets, I should say, with regards to our adjusted EBITDA, for everybody's purposes, we have targeted 12% to 14%. And to your point, we're at the top end of that range. We're going to stick with that -- those targets at this moment in time. We are always looking for opportunities to create efficiencies within the business. You should expect to see us do that as a normal course of business practice. But we also need to ensure that we're investing in growth. And so we're going to retain that financial target at this time. Mia Nordlander: Next one, we have Thomas Nilsson from Nordea. Thomas Nilsson: With your current modest leverage, how should investors think about the balance between share buybacks, M&A opportunities and debt reduction over, say, the next 12 to 24 months? Jonas Dahlberg: Yes. I think we have a clear capital allocation strategy. And currently, we think it's in the shareholders' interest to continue the buybacks, and that's why the Board has recommended shareholders to vote for this cancellation of shares and hence, that provides more flexibility to commence the buybacks. So -- and if the share would rerate significantly, it could be that M&A becomes more attractive, and then we switch gear basically to M&A. The Board will, at every point in time, assess what's the best capital allocation. When it comes to leverage, I mean, we have a leverage target, which is that we should be below 2.5x. We could, for periods go over 2.5x, but 2.5x is the target. Mia Nordlander: And now we have Fredrik Lithell from Handelsbanken. Fredrik Lithell: I just had sort of a housekeeping. The fixed price contracts that you ended and that you have described and talked about since last summer, are there any other of those new types of contracts that you sort of cancel or discontinue? Or is it the same that we talked about as you talked about in the fall? So that's pretty much the first question. Could you -- Laurinda, could you talk a little bit more about America and what drives the growth for you because it's quite healthy right now, and it also looks quite broad-based when you look at the type of clients you're signing up. Are there you that are more active in new sales? Or is it the market that is turning more sort of growth oriented or so could you talk about that? Laurinda Pang: Sure. Yes, absolutely. Fredrik, why don't you take the first one, Jonas, and I'll jump back on the two. Jonas Dahlberg: Yes. So when it comes to the fixed price contracts, these are the same contracts that we talked about earlier. And many of these contracts have a 3-year duration, so it takes some time to phase out. Laurinda Pang: Fredrik, I appreciate the question on the Americas. It's a combination of a number of things. This was the largest region that had probably the most complexity in it when I look at Sinch, meaning that all of the acquisitions that we had done historically, they all had meaningful presence in the Americas. So when we attempted to transform this part of the business, we had a lot of consolidation coming from a lot of different entities bringing these sales teams together. So the way that I think about it is the North Star was defined for the go-to-market channels, which meant that we had a full Sinch portfolio across all of the different channels of communication, and we wanted our sales teams to be able to offer that full portfolio to their customers ultimately. That took some time, of course. It requires training and enablement. It requires changes of incentive plans, which also take time for salespeople to absorb and understand how to operate within their incentive structures. It requires tooling and visibility into their customers. And so a lot of the work has been done in the background to make sure that the sales teams have that enablement, that visibility and also are focused in on the highest growth opportunities. So a big part of what took place during the -- really the last 18 months or so in the Americas was a big effort around segmentation, making sure that we had the right capabilities and the right talent focused in on the highest potential customers. And that translates differently by segment. So it's a number of things. Certainly, the market is strong. We see that with some of our competition. And had you given me this market 2 years ago or 3 years ago, I don't think Sinch Americas would have been in a position to capitalize on it, but we are now. Fredrik Lithell: Do you feel also the same sort of the response from large enterprises that they recognize you in a different way today after all your internal efforts to sort of also have a better window to the clients? Laurinda Pang: Yes. I think the large enterprises were frustrated by us in prior periods because we did not face them in a unified way. That's not the case now. There's a very specific account relationship and account-based marketing, quite frankly, that we face off to these customers. And so -- and the conversations are also elevated within the enterprise. So you're no longer just speaking with engineers or marketeers, you're speaking at a higher level within those organizations to be able to discuss and negotiate larger commercial opportunities. Mia Nordlander: Next one, we have Victor Cheng from Bank of America. Hin Fung Cheng: Maybe just two from my end. Going back to the point about buybacks and M&As and the balance of it. Have you seen maybe some of the targets that you're tracking valuation coming down? Is it an opportunistic moment to maybe look at more acquisitions or maybe on the private side, that hasn't really reflected some of the derating that we saw on the public side? And then secondly, just on the whole kind of AI-driven conversational messaging narrative, can you help me understand maybe overall what levers they are to monetize AI? Have we thought about like maybe different pricing model, outcome-based pricing or whatnot? Laurinda Pang: Jonas, do you want to take the first one, please? Jonas Dahlberg: Yes. So to your first question, what we're looking at and how those valuations are changing. I can't really or don't really want to comment that. But obviously, valuations in general are being challenged by the market. And if opportunities arise, we will act on that. And so far, we found it to be more attractive to do share buybacks. Laurinda Pang: And on the second one with regards to AI and more broadly conversational messaging. When we think about the role that Sinch is playing within the AI ecosystem, it is to enable or execute the communication layer. And as more and more agents are tasked with workflows and certain business outcomes, they will decide ultimately who they choose to send communications through. What we're doing now is trying to natively integrate with these AI platforms and these AI native companies to ensure that Sinch is the obvious choice for those agents. In terms of pricing models themselves, I don't think that we've figured out a new interesting way to do it just yet. I mean, obviously, each commercial agreement and relationship does tend to have nuances to it, so they could differ. But I do think that there is an opportunity to layer intelligence and orchestration into this model in a way that hasn't existed before. So those are areas that we have a right to win in and that we will continue to explore in order to further monetize this opportunity. Mia Nordlander: Next one, we have Deepshikha Agarwal from Goldman Sachs. Deepshikha Agarwal: I just had like a little bit of a housekeeping sort of a question. The first one was basically like up until the third quarter, it was indicated that there will be sort of a reversal of the revenue impact that was there in network connectivity in Americas that would impact in the fourth quarter. But again, we have sort of a COGS reversal as well, which is sort of like netted off. So just wanted to understand like this dynamic and how to think about it going forward. And the second one -- and then again, also on the top line, it's basically like understanding the bridge between the current like 3% organic growth fourth quarter in terms of -- and how -- like how should we think about it in FY '26 in terms of the growth trajectory for the gross profit? And the third one is basically like there was a tax provision of like about SEK 700 million, which was recorded in 2024, which was supposed to be paid out over the course of the next 2, 3 years. Just wanted to understand like what exactly will that be? And how will the dynamic look from a cash out standpoint on that? Laurinda Pang: Sure. Do you want to take the tax provision piece, Jonas, and then I'll come back with one and two. Jonas Dahlberg: So on the tax provision, so this -- our best estimate now is there will be about SEK 200 million cash out for the tax provision during this year and the remainder in the future. But I would like to emphasize this is a preliminary estimate. Deepshikha Agarwal: Okay. And then just to -- just to clarify, there was no payout this year would be the way to think about it? Jonas Dahlberg: There's been a minor payout so far, but it's very limited. Laurinda Pang: With regards to network connectivity going forward, I mean, we -- the reason why network connectivity has performed as well as it has is we took very specific actions around it. But remember, what we've always said about network connectivity is it's a fairly flat business in the market. And we would continue to manage that business for cash ultimately. But the actions that we took over the course of the last year and will continue to try to affect the actual results of network connectivity is two things. One was negotiating the pricing side or the cost side, I should say, with our suppliers and then also re-rating some of the pricing that we had with regards to our customers. So I think you should continue to think about network connectivity in the same way. In other words, relatively flat growth, and we will manage it for cash. In terms of the organic growth at the GP level, it was 3%, to your point, in fourth quarter. We said last year that the first half of the year would equal the second half. It did exactly that, and we averaged out at 4% for the full year. What we've said today is that we expect the same trends in the first half of this year, meaning that we see the tailwinds and the momentum that we're seeing in the Americas as well as in the API business to continue, but we also expect those tailwinds that we called out around the fixed price contracts winding down and the pressure in India and Australia to continue also in the first half. So you can do your calculations to come up with what that means ultimately. Mia Nordlander: Next one, we have Bharath Nagaraj from Cantor. Bharath Nagaraj: Just a couple from me, please. How are you preparing in terms of what could be the potential impact when there is more rollout of passkeys instead of onetime passwords? I've heard recently somewhere in the news that some countries are proposing this, and there could be -- this could happen in other regions as well. I do know that Sinch has like all sorts of security approval processes, but just wanted to see if there's any impact and if there's anything else you need to do to prepare for that? And secondly, if I may, what else do you need to do in 2026 and 2027 to unlock, let's say, further growth within the main lever that you suggested that the partner ecosystem. Is there any investments you need to make, development, et cetera, as well? Or is it already all done and you think that you're in a good place to deliver on the targets of 7% to 9% growth? Laurinda Pang: Thanks, Bharath. In terms of the -- basically the security side of things and verification, the business that we currently have today with regards to onetime passcodes is relatively small in the overall messaging business that we have. That being said, we do have several different verification and security type of products to be able to offer out into the market. But we also, like many others out there, looking at the selling verification and basically Verification 2.0 so that we can enable or leverage network APIs around verification. So I'm not sure if that's answering your question explicitly, but that's how I think about it. In terms of the second piece and what needs to unlock further growth, we're on a trajectory to that midrange growth target. I don't think that there's anything new in terms of investments that we need to make in order to meet that 7% to 9% target that we've put out for ourselves by the end of 2027. Like I said, we've grown 4% in 2025. The target is 7% to 9% by the end of 2027, and we've got 1.5 years in between. And we always said that it would be a steady march towards ultimately that growth. Are there opportunities to invest? Yes. And we will continue to evaluate those and make sure that we get the appropriate returns within the business and for our shareholders. Mia Nordlander: Next one, we have Erik Lindholm-Rojestal from SEB. No, maybe that was one -- thank you. So thank you, everyone, for listening to us today. We will be back for the Q1 presentation on 7th of May. If you have any questions, feel free to reach out to the IR department. And once again, thank you very much, and goodbye.
Operator: Good morning, and welcome to the CNH 2025 Fourth Quarter Results Conference Call. [Operator Instructions] I will now turn the call over to Jason Omerza, Vice President of Investor Relations. Sir, please go ahead. Jason Omerza: Thank you, Krista, and good morning, everyone. We would like to welcome you to CNH's fourth quarter earnings presentation for the period ending December 31, 2025. This live webcast is copyrighted by CNH and any recording, transmission or other use of any portion of it without the written consent of CNH is strictly prohibited. Hosting today's call are CNH CEO, Gerrit Marx; and CFO, Jim Nickolas. They will reference the material available for download from our website. Please note that any forward-looking statements that we make during today's call are subject to the risks and uncertainties mentioned in the safe harbor statement included in the presentation material. Additional information pertaining to factors that could cause actual results to differ materially is contained in the most recent annual report on Form 10-K as well as other periodic reports and filings with the U.S. Securities and Exchange Commission. Our presentation includes certain non-GAAP financial measures. Additional information, including reconciliations to the most directly comparable U.S. GAAP financial measures is included in the presentation material. I will now turn the call over to Gerrit. Gerrit Marx: Thank you, Jason and welcome to everyone joining the call. We are calling today from our plant in Wichita, Kansas, where we build loaders for our construction business. There were bright spots for us to celebrate at the year -- as the year ended, even though there are continuing challenges in the markets that we serve. We had a successful Tech Day presentation at the Agritechnica Show in November. If you haven't seen it yet, we encourage you to watch the replay and learn about the advancements we have made and we'll continue to make in the pursuit of serving farmers on their soil. At Agritechnica, we showed how CNH tech powers digital solutions for our world-class iron from factory fit to retrofit aftermarket solutions, we have the technology to help farmers be more productive with their equipment. We also introduced a new lineup of midrange tractors for the global market, but which specifically addresses a particular need in Europe for large mid-range high-horsepower tractors. This new tailored offering of tractors helps us compete better and facilitate pull-through sales of combined sprayers and planters. We also showcased our leadership in combine harvesters with our award-winning CR and AF Series machines. We have ramped up our efforts to strengthen and consolidate our dealer network with several flagship transactions already completed. This is a critical piece of our long-term strategy, and we are very pleased with the initial reaction from our dealer partners. We are proud of the progress we have made with our quality and operational excellence initiatives that we outlined at our Investor Day last year. We took out $230 million of cost from the Agriculture segment in 2025, which puts us on pace to achieve the $550 million cumulative savings target by 2030. Those savings plus incremental actions that we will take will help us eventually offset the entire tariff cost impact incurred. We also continue to make progress on our near-term goals. Agriculture dealer inventories were down another $200 million in the quarter for a full year reduction of about $800 million. That is a little shy of the target that we had initially set at the beginning of 2025. but it is because we shipped out a bit more company inventory to the dealers than we had originally expected in Q4 on the back of the European market showing some green shoots. But commodity prices remain low. And as the single largest contributor to farm income, it is hard for farmers to operate their farms let alone purchase equipment. The trade environment remains in flux, which makes it difficult for CNH farmers and builders to have a sense of certainty when making capital investments. So we do our best and focus on the things that we have in our own control. So while market conditions were very dynamic, and are forecasted to remain so in 2026, the CNH team is focused on solutions today and in the future that delight our farmers and builders and that will deliver returns for our shareholders. With that, let's turn to the results. On a year-over-year basis, our Q4 results are very encouraging. We are, however, comparing to a very low Q4 of 2024 when we had severely cut our production levels. We will talk about our 2026 guidance in a moment, but I want to caution against using this Q4 improvement as a run rate into Q1. Fourth quarter consolidated revenues were $5.2 billion or up 6% from Q4 of 2024. Our Ag segment sales were up 5%, with EMEA up 33% and North America down 10%. Construction sales were up 19% on an easy comparison with 2024. Industrial adjusted EBIT was $234 million, up 21% year-over-year, mainly as a result of positive pricing, higher production, cost-saving actions and lower corporate expenses, which together offset the tariffs and geographic mix headwind. Adjusted net income was $246 million with adjusted EPS for the quarter at $0.19. Looking at the full year, we faced another challenging period for the ag industry. 2025 consolidated revenues were down 9% year-over-year, while industrial sales decreased double digits. 2025 Industrial adjusted EBIT margin was 4.3%, primarily driven by the higher tariff costs and unfavorable geographic mix, partly offset by pricing and cost litigation actions. We remain confident that our North and South American markets will deliver growth in revenue and profit pools in the coming years as trade flows stabilize and farmers migrate to larger machines with connectivity solutions. We grew market share in large tractors and combine harvesters in North America during 2025. And as we move into 2026, EMEA is on a great path to further recover from its low margin levels through our transformation, cost efficiency programs and market share gains in midrange tractor segment. Sustainability has always been one of our main priorities because it is vital to our farmers. As we discussed at the Tech Day, land is the most valuable asset for former and soil health is of prime importance. That is why we have always stressed sustainability in our operations and in our machines. For us, sustainability is not only about protecting the environment, it is also about ensuring the long-term profitability of our farmers, which is central to our conviction of what true sustainability means. We are proud to have been ranked among -- ranked #1 in our industry on S&P's Global 2025 Corporate Sustainability Assessment and to have received an A for climate and an A- for water and CDP's 2025 scores. These results recognize our leadership in environmental actions and disclosure across our products, operations and supply chain. With that, I will turn the call over to Jim to take us through the details of our financials. James A. Nickolas: Thank you, Gerrit. Fourth quarter industrial net sales were up 8% year-over-year to nearly $4.5 billion, mainly driven by favorable price realization and positive foreign exchange impacts. Adjusted net income increased to $246 million with adjusted diluted earnings per share at $0.19, up from $0.15 in Q4 2024. Even though we had lower production levels in Q4 2025, they were higher than the very low levels in the same period of 2024. So the year-over-year increase in sales and income is mostly related to a relatively easy comparison. Industrial free cash flow in the quarter was $817 million, essentially in line with Q4 of the previous year as the lower year-over-year change in net working capital was offset by better EBIT and cash taxes. Agriculture Q4 net sales were about $3.6 billion, up 5% year-over-year, driven by favorable pricing and positive currency translation. On a regional basis, the year-over-year sales decrease in North and South America was more than offset by the EMEA increase, which was mostly in Central and Eastern Europe, along with the Middle East. Positive pricing was the most pronounced in EMEA and North America. Adjusted gross margin was 20%, down slightly from 20.6% in Q4 2024, affected by the tariff costs and unfavorable geographic mix, partially offset by purchasing efficiencies, lower warranty expenses and a 15% increase in production hours. Agriculture adjusted EBIT margin was 6.5%, down from 7.2% in Q4 2024, as positive pricing and lower R&D partially offset negative product and regional mix and higher SG&A related to variable compensation. On a full year basis, gross tariff costs had a 110 basis point impact on EBIT margin and unfavorable geographic and product mix had a 90 basis point impact. Construction net sales in the quarter were up 19% year-over-year to $853 million, driven by better sales in North and South America. Q4 gross margin was 11.5%, down 340 basis points year-over-year as tariffs weighed on the quarter's profitability. Favorable purchasing and manufacturing efficiencies were more than offset by $35 million of tariff costs. Those are all netted together in the product cost category of the EBIT bridge. As was the case in agriculture, construction SG&A was unfavorable due to variable compensation and labor inflation. Q4 adjusted EBIT margin was 0.6%. On a full year basis, gross tariff costs had a 225 basis point impact on EBIT margin. In Financial Services segment net income in the quarter was $109 million. The 18% year-over-year increase came from interest margin improvements across all regions, only partially offset by higher risk costs in Brazil and lower volumes in North America and EMEA. Retail originations in the third quarter were $2.8 billion, and the managed portfolio ended the quarter at $28.6 billion. Credit collection rates have been relatively steady in most regions despite the market downturn. Delinquency rates in Brazil have stabilized, albeit at elevated levels. Our capital allocation priorities remain the same: reinvesting in our business while maintaining a healthy balance sheet and then returning cash to shareholders. During Q4, we repurchased $45 million worth of CNH stock at an average price of $10.02 per share. For the full year, we returned $432 million through $333 million in dividends and $100 million in share repurchases. I'll come back in a moment to discuss our 2026 guidance. But first, let's take a look at the progress on our long-term targets. Gerrit? Gerrit Marx: Thank you, Jim. Our company strategy is centered around 5 key strategic pillars: expanding product leadership, advancing our iron and tech integration, driving commercial excellence, operational excellence and quality as a mindset. These pillars keep our team focused and united in our shared purpose to feed and build the world we live. Today, I would like to give you an update on our progress on each of these areas. Innovation is a constant at CNH, and we have a robust pipeline of new product launches. We are using rising technologies such as Gen AI to increase the velocity of our product introductions. At our Investor Day, we outlined plans for more than 15 new tractor launches, 10 in harvesting, 19 in crop production and over 30 precision technology releases between now and the end of 2027. You can see on the slide the progress we have made -- already made in 2025, and we had about as many minor product launches as the major ones during the year. And the pipeline is full for 2026 and 2027, underscoring our commitment to continuous improvement and purposeful innovation. Expanding on this a little bit, I want to highlight just a few of the innovations that we introduced at Agritechnica. Some things in development and some are already commercially available. In addition to our green on brown and variable rate application technology, which are already available, we highlighted some of the progress that we have made on green on green spraying in conjunction with our partner, ONE SMART SPRAY. This solution is targeted to launch in 2027 and will improve farmers' profitability and sustainability. We also spent some time explaining how active and passive implement control can help correct the field conditions that would otherwise comprise tilling or planting. FieldOps has introduced new features such as AI-enabled field boundary management and we are constantly adding new features to this tool. More to come in 2026, such as additional machinery support and further remote display abilities. We partnered up to introduce the FLEETPRO line of aftermarket kits for the EMEA region at a very competitive price point in a commoditizing market. These guidance and steering kits provide a value offering for legacy products of all makes while our state-of-the-art Raven technology will equip our recent and new machines in full connectivity with our FieldOps system. These and other innovations will help us achieve our goal to nearly double the amount of precision tech components within our ag sales to 10% by 2030. We are on track to achieve that with the eventual rebound of the North American market, which tends to favor a richer mix of precision tech components. One of the key pillars of our long-term strategy is driving commercial excellence by working with and strengthening our distribution network. This is a long journey, and benefits are more back-end loaded in our plan. As disclosed in our last annual report, in 2024, we had about 2,500 ag dealer owners, operating about 6,000 points of sale. Our goal is to reduce the number of first level owners by about 1/3, while maintaining very competitive point of scale and service coverage -- by point of sale and service coverage. Feedback from our forward leaning and ambitious dealer partners, both large and small, has been enthusiastic. Our progress on this front will create some noise in the channel as it should but the expanded reach of the dealers can be leveraged for better investments in facilities and service technicians. We are also giving dealers access to new and better tools like the AI tech assist. That tool is getting rave reviews with over 1,500 users worldwide who have used it already over 0.5 million times. Our 2030 target is to have around 60% of our ag sales coming from dealers who sell both brands in their network, up from 30% in 2024. 2025 was already 35%. You can see examples of some notable transactions we have already done on this front. The message here is not Case IH is taking over New Holland or the other way around, the message is giving dealers access to all the great products that we have regardless of their branding. We finally focus our collective and unrivaled attention on competing with companies with green color products. That was not always the case in the past. Our in-flight operational initiatives have runway to continue underlying margin expansion. Our strategic sourcing initiative uses data-driven insights and supply partnerships to improve cost efficiency while maintaining quality and reliability and it delivered $34 million worth of savings in agriculture in 2025 alone. Our lean manufacturing projects boost productivity, reduce downtime and streamline workflows. We realized $45 million in savings at our plants in 2025 as a result of these efforts. Quality is one of our most important focus areas. Enhancing product reliability and refining manufacturing processes helped us realize over $150 million in quality cost savings in 2025. Now admittedly, that excludes the warranty true-ups that we did in 2024. But beyond the cost improvements, we see our dealer and customer satisfaction survey results reflecting the improvements that we are making in this area. Our Net Promoter Score went up 8 percentage points in '25 versus '24 which has ongoing benefits to our reputational value. Quality pays back in 3 ways: lower costs, better ability to price and growing market share in a self-reinforcing virtuous circle. All told, our cost savings initiatives already add up to $230 million in 2025, making us well on the way to our $550 million savings target. Again, the pace of the savings will moderate in 2026 because of the warranty one-timers, but you'll see the cumulative savings grow over the next few years. Let's now put this in context of our margin goal. Our commitment is to raise agricultural EBIT margin to 16% to 17% by 2030 on an industry mid-cycle basis. That commitment was made prior to the expansion of Section 232 tariffs but our intent is to offset those costs and still reach the EBIT margin target at mid-cycle volumes. Netting the savings that we just discussed against investments that we are making as planned in R&D and in the network development, we improved the margin profile of our ag business by 85 basis points. In 2026, we will further improve the margin profile between 50 to 75 basis points, which is admittedly hard to see in the consolidated figures as we are impacted by a temporary adverse regional and product mix in sales and margins, as Jim will explain in a moment. We are laser focused on improving the underlying profitability, and we did sound -- make sound progress in year 1 on our path to 2030. With that, Jim will now discuss our 2026 guidance. James A. Nickolas: Thanks, Gerrit. Let's first look together at our agriculture industry outlook for 2026. Commodity prices remain low, below many farmers breakeven point, and they want more confidence in their end markets before making equipment purchases over and above the replacement demand. North America lagged the other regions into the downturn. And so now it is the region expected to decrease the most in terms of large equipment industry retail demand. Conditions in South America remain weak, but we forecast a more flattish demand in EMEA with tractors slightly up year-over-year and combined slightly down. In aggregate, we forecast global industry retail demand to be at around 80% of mid-cycle or down around 5% from 2025 levels. 2026 should represent the trough of the cycle. As Gerrit mentioned, we do expect that the North America revenue and profit pool will grow significantly over the next 5 to 10 years as demand grows for even larger machines and fully connected production systems. CNH is well positioned to capture a larger share of those tools on all the advancements that we've made in harvesters, tractors and tech. We will still be underproducing to the retail demand in order to reach our dealer inventory targets with overall production levels flattish with year-over-year. In addition to industry demand stability in Europe, we are gaining strength in that market on the back of recent product launches, our focus on quality and the network consolidation. Consequently, we are forecasting ag net sales to be flat to down 5% when compared to 2025, and that includes favorable currency translation of 2% and positive pricing of 1.5% to 2%. We continue to take advantage of the slow months of production to improve our industrial processes. Gerrit mentioned that our cost initiatives will improve ag margins by 50 to 75 basis points in 2026. However, the tariff headwind is expected to grow from 110 basis points in 2025 to about 210 to 220 in 2026, as we continue to work to fully offset tariff impacts through sourcing, production moves and additional pricing. The mix shift between North America and EMEA has disrupted our usual decremental margins, and that had a drag on our 2025 EBIT margins by about 90 basis points. We estimate mix -- reaching mix to have an additional drag of up to 50 basis points in 2026. With the North American market inevitably recovers, we'll see our incremental margins revert back to the normal levels in the low 30s. With all that, we expect ag EBIT margin to be between 4.5% to 5.5%. In construction, we forecast flattish demand in both light and heavy equipment with the exception of South America, where we expect further demand pressures on heavy equipment. We expect strength in certain nonresidential construction markets to be offset by persistent weakness in residential construction. Construction production levels and net sales will be about flat year-over-year, including about 1% of favorable currency translation and 2% of pricing. EBIT margin is forecasted to be between 1% and 2%, mainly due to taking a full year of tariffs, which are now estimated to have a gross impact of around 500 basis points of margin. Putting together all those elements, we forecast 2026 industrial rent sales to be flat to down 4% year-over-year and industrial adjusted EBIT margin between 2.5% and 3.5%. We plan R&D expenses to be about flat year-over-year, while CapEx will be between $600 million and $650 million. Industrial free cash flow is forecasted to be between $150 million and $350 million. Our effective tax rate is expected to be in the usual long-term range of between 24% to 26%. Adjusted EPS is forecasted to be between $0.35 and $0.45 in assuming an average share count of about 1.29 billion shares. To help with your modeling and to prevent any surprises, I'll provide some additional considerations for our first quarter. In the quarter, we will continue to produce at low levels in order to achieve our internal dealer destocking target. As a reminder, Q1 is historically the weakest quarter of the year in terms of sales and margins. On average, the sequential percentage drop in sales from Q4 to Q1 is in the low to mid-20s. For construction, the 2026 drop should be similar to past years. But in ag, you should expect sales to be down sequentially in the low 30s, as some of our Q4 2025 sales were effectively a pull ahead of what we had originally expected to sell in Q1 2026. We are continuing to advance our cost reduction initiatives. And while these actions will not fully offset Q1 headwinds, they are gaining traction and will deliver increasing benefits as the year progresses. The low production levels, the unfavorable geographic mix and the full impact of the tariffs will likely result in a breakeven Q1, plus or minus, for both the Agriculture segment EBIT and company-wide earnings per share. Construction EBIT will likely be negative in Q1 due to tariff headwinds. The Agriculture segment's Q2 will be much better sequentially, albeit likely a bit lower versus Q2 2025. When we get into the second half, we are forecasting overall profits and margins to be higher on a year-over-year basis despite the tariffs, exiting 2026 with a clearly positive trajectory. Free cash flow in the quarter will be an outflow as is typical due to the company inventory buildup at the beginning of the year as we prepare for the spring selling season. We expect this quarterly outflow to be larger than in Q1 2025, mainly driven by the lower EBIT generation. With that, I'll turn it back to Gerrit for some closing remarks. Gerrit Marx: Thank you, Jim. While we may have hoped for greater stability in the trade environment by this point, the reality is that we must remain agile in our approach. While we carefully observe market conditions, we will be deliberate with our production and inventory planning. Production swaps are full for Q1 and for Q2 and ag is full -- for Q2, ag is 3 quarters fall in construction is half full. We're excited about the commercial launch of our new midrange tractors and our internal organizational changes are helping us to improve the speed of our product launches by a great deal. That goes for both our iron and our tech, and you will see an increased frequency of our technology releases. We're also making progress in our development of new product categories, such as our cotton harvester that is coming. We have made great strides already on our long-term targets for quality and for operational excellence, and we will continue to do so in 2026 with an incremental 50 to 75 basis points margin improvement. That will be offset by the incremental tariffs and regional mix, but we will continue to work with our dealer partners on finding the right network configuration in each of the markets that we serve. The right answer will vary by region and brand, but we will remain focused on what makes the most sense for servicing our customers. Even in the face of the most significant downturn in our industry in decades, we are delivering better products with higher quality while improving our underlying margin profile. The markets are moving slowly, but CNH is moving fast to deliver our commitments. As there is today, there will always be a full suite of competitive construction equipment, branded as Case or New Holland construction available through our construction dealer network and our agricultural dealer network as well. With no urgency or pressure for outcome, we have restarted discussions with several players about the partnering options for our Construction business. To fully leverage our brand strength and reach, we will explore partnership options to regain a strong footing in the recovering global construction industry. When there is news to share, we will include those in our earnings calls in 2026 or 2027. This concludes our prepared remarks, and we can now start the Q&A session. Operator: [Operator Instructions] We will take our first question from Steven Fisher with UBS. Steven Fisher: Just wanted to clarify the inventory situation. It sounds like you didn't hit the $1 billion, but it's really just because of Europe. Can you just comment a little bit on the progress in North America? And then just to frame that in terms of how you see the setup for 2027. It sounds like your second half of the year seems like it's going to be a little more positive in ag than the first half? Is that sort of a reflection yet of the setup for '27 or is it just easier comps? Gerrit Marx: Steven, let me take that one. We have made good progress. And by design, we slowed down a little at the dealer destocking, particularly in Europe, as I mentioned, because of the market coming back and us getting ready for the season. We had similar stock-ups in some lines by design in South America in order, again, to be ready for the season 2026 to come. So for us, this , let's say, it was about $100 million, $150 million shortfall where the target we gave ourselves at the beginning of the year, which was around $1 billion, we landed at $800 million. This is a great accomplishment by the CNH team globally. But now as we are now scratching more and more towards the lower levels of inventory, we got to be pretty smart about where -- how deep do we want to dip in inventory because when the market returns and it won't return in a sudden rush, it will return steadily. We want to be ready with high-quality machines and the full lineup in all the regions where we operate as we go through 2026. But the dealer destocking, by and large, is accomplished in the last 2 years. 2026 is now a bit fine-tuning by product lines and by market depending on how the different segments are moving. So as we will continue to talk about here and there some dealer stocking, as Jim said, also we'll talk about underproducing retail pace in Q1, this is now for us more like the last innings of that journey. And we'll see when the market starts to show signs of lives and a better trajectory as we finish '26 and enter into 2027. So now it is about not going too low actually, and we'll see what that means by market and by region. Operator: Your next question comes from the line of Kristen Owen with Oppenheimer. Kristen Owen: Really appreciate all of the incremental color on the guidance and in particular, Q1. As I'm furiously writing down these notes, I'm wondering, can you maybe help us put it all together in something that would look like an EBIT bridge for 2026? How much of that incremental savings that you're expecting versus the offset of mix versus the offside of geo? Can you kind of build a bridge for us just so we can put that together into the context of the 2026 margin guidance? James A. Nickolas: Good question, Kristen. So happy to answer that. For ag, I assume you're focusing on ag. Volumes are about 190 basis points of reduction in margin walking from 2025 to the full year margin. Geo mix, we said between up to 50 basis points to, call it, 25% for purposes of modeling, 25 basis point negative. Price call it, 175 basis points midpoint of our price guide 1.5% of 2%. Operational improvements -- tariffs, tariffs about 110 basis point headwind. And then operational improvements combined with the higher SG&A netting about 25 basis points improvement. So that should get you at around 5% midpoint for 2026. Operator: Your next question comes from the line of David Raso with Evercore ISI. David Raso: Just following up on that, I just want to clarify first before my question. The first quarter ag profitability, I just want to make sure I heard correctly about the plus or minus Ag segment EBIT. Is it basically around breakeven for the quarter, just to clarify? James A. Nickolas: Yes, that's right. David Raso: Okay. I'm just trying to think about the guide, what it implies for the rest of the year, right? The first quarter is down -- talking ag, right, down 5% on revs year-over-year breakeven -- it means the rest of the year, sales are still down 2%, the subsequent 9 months, but your margins are up a little bit year-over-year. And I'm just trying to figure the cadence of that, assuming those numbers are right, the cadence of that, when do we start to see the margin improvement despite sales still down and maybe the cadence on the... James A. Nickolas: Yes, you'll see margin improvement beginning in Q3, but I'll just call it second half, better margins, better profits in total. Q2, we expect to be better -- much better than Q1 sequentially, but not quite as good as Q2 of 2025. Operator: Your next question comes from the line of Tim Thein with Raymond James. Timothy Thein: Jim, maybe just going back to your comment on when you kind of walked through the dynamics on margins in ag. Can you -- on the 150 to 200 basis points of price, can you maybe just give us some regional color as to the expectations for '26, what's in backlog and just how you're thinking about the contribution? Is there a notable geographical contribution or difference as you think about that? James A. Nickolas: Yes. I'd say North America is probably the leader in terms of price growth, followed by EMEA that's where we're getting most of the pricing in 2026. Operator: Your next question comes from the line of Mig Dobre with Baird. Peter Kalemkerian: This is Peter Kalemkerian on for Mig this morning. Quick one here for me on South America ag. Your industry forecast, call it, down 5% to 10% between tractors and combines. That's a bit more negative than your peers who've outlined more of a flattish retail environment. Is there any color you can provide on what you're seeing in that market? And is there any significant difference between Brazil and elsewhere on the continent? Gerrit Marx: Yes. Look, the -- I think we're just cautious here in the market. We have elections coming up. We are very, very close to our dealer partners as well as our farmers directly. And we have carefully listened, particularly as we closed last year to what they expect to happen in 2026. And I think there is a fan of outcomes for South America in total. It depends on several factors, one of which is the global trade and is China going to really start buying those 25 million metric tons of soy from North America or more or less or -- and how and who is running in Brazil for presidency. I think there are so many unknowns that we took a cautious view here on the market in South America. And I think, look, Argentina has shown signs of momentum also politically, there was quite some support, but I wouldn't necessarily call it out as a bright spot in South America. I mean, Brazil is clearly what pulls the region. And there's not an upside to be expected from Venezuela in case you were wondering about that. So this is -- the entire region is predominantly Brazil, followed by Argentina and -- we see replacement demand now forcing a continuous -- a level that we currently see in the machine sales, but I wouldn't go that far and say this is now going to be a rebound in 2026 as we actually did expect last year to see more life in South America this year. But at this point, with all the factors that I mentioned, we still need to see and watch a few more quarters to see what happens. But that's why we are a bit more cautious on this end. But in the end, the market is the market, and we'll see but we are less forward-leaning here. Operator: Your next question comes from the line of Kyle Menges with Citigroup. Unknown Analyst: Hi, good morning. This is Randy on for Kyle. Just going back to some of your targets you laid out on the target to reduce the ag dealer owners by 1/3 by 2030 and then also increase sales of dual-branded dealers over the same time frame. Should we be thinking about progress on these 2 initiatives as kind of linear over the next couple of years, a little more back-end weighted? I guess just how should we be thinking of your progress in the timing that we should be expecting to see some of those things flow through? Gerrit Marx: Randy, it was kind of hard to understand what the question was, was about sales and inventory development? James A. Nickolas: Through dual-branded dealers, the progress. Gerrit Marx: Okay. So through dual-branded dealers. Look, this is -- it's a steady advancement on this number. I mean, you've seen a number of deals. We just had another one announced in Q1, which is a pretty sizable large deal we did in Northeastern Germany, where we basically converted the largest network of one of our smaller competitors completely to CNH effective immediately more or less. And these moves are all going to be multibrand out of the gates. And we have picked up a lot of positivity and as expected, by the way, and forward-leaning attitude from our strongest dealer partners. And strongest means not only in terms of size, largest, but also most ambitious dealer partners to be consolidator in their respective regions with multi-brand attitude. So I think from the multi-branding percentage point of view, we expect that to be a steady growth. We will have a few bigger hits in the earlier years, but then it will be a long grind to the tail of network where we possibly here and there, decide to not have all the brands in a particular region, because, again, our target is not to have all the brands everywhere. This we never said. We said where it makes sense, we will have dual-branded dealerships in North America, South America, where it makes sense as well as in Europe. And there might be regions where we just have New Holland or we just have Case, because it is the farming in the region that requires only one brand. So we'll be smart about it. So that is how to think about it. It's steady with a few big ones coming over the more near term and then a long grind through the tail of the network overall, setting ourselves up to once and for all, finally, focus on who competition is, and that is not the other CNH brand. Operator: Your next question comes from the line of Joel Jackson with BMO Capital Markets. Joel Jackson: Just a 2-parter. Looking at North America, we've seen really farmer sentiment come down across a whole bunch of different metrics and articles and things that associations talk about. So the first part of the question would be, can you comment about just what's going on with farmer sentiment in the States, how your view of it is, how it may play out for your sales? Second part of the question would be, we've also seen in the U.S. in the political arena, a lot talk about equipment and crop inputs and what the government might want to do on some initiatives going forward. Any views on that? Any things you want to talk about that thing? Gerrit Marx: Joel, the farmers sentiment in North America is not great. And you're reading the same articles plus we have a lot of conversations directly with them. And the farmer's income for 2026 is projected to be more or less flat. I mean, slightly up. You need to dig into the data to see some positive elements here, but it all comes back down to the commodity prices for the usual commodity, soy and corn. And at this point, there is no relief really in sight for those. And hence, there is -- the farmer sentiment remains where it is at this very moment. We'll see what happens, what the administration in the United States has in store. There is a great level of attention to farmers and to agricultural industry in total, and there is a great deal of help being prepared. And I don't know exactly what is going to happen. We have a list of things that are under discussion, but we'll see what the administration is going to put in place over the next couple of months and, let's say, the near term in 2026. As a matter of fact, I'm actually on my way to Washington tomorrow to meet my peers and to have meetings to exactly discuss these points. Operator: Your next question comes from the line of Angel Castillo with Morgan Stanley. Angel Castillo Malpica: I just wanted to revisit a little bit more on the comments around Europe earlier. You had mentioned some green shoots, if you could unpack that a little bit more. And Gerrit, you outlined a pretty robust product launch pipeline here. Just can you talk about which of these we should be watching closely in terms of particular product lines that you're perhaps most excited about in terms of maybe unlocking or having a more meaningful impact on your ability to compete and gain share, particularly in Europe, but if any other region stands out, that would be helpful. And then just more broadly, if you could talk about the competitive environment in Europe, that would be helpful. Gerrit Marx: Okay. I mean asking me about product risks the rest of the call. So let me take a few items here that are particularly exciting for me. We showed that the Agritechnica completely renewed short mid-based and long mid-based mid-range tractor lineup with horsepower ranges that we've never had before. I mean, our horsepower range was all the way up to 300, 340 in the European mid-range tractors and we are now offering a lineup all the way up to 450 where we never played and the feedback from farmers who now pay our brand and our color over the other that they usually have is really, really encouraging. And with our attitude and focus on quality first, we'll supply these machines with great care at low quantities in 2026 before we start scaling in the market comes back. That's super exciting. I mean the feedback we've received on our next-gen combine over the last 2 years is overwhelming. When we look at the shipments that we have, whether it is to Australia, New Zealand, to North America, across North America and Europe, this point at a really, really good of the, let's say, next-gen combined in the field across and around the world. So that's pretty good. Another thing that is super exciting for me and maybe you think this is like small, but it is not, is the cotton picker. That's why I mentioned that. We will be the only other manufacturer with a round baler integrated cotton picker that is going to be one of the center machines in the farming system for farmers in South America for farmers in Australia, but also in the southern states of the United States in order to build a multicolor fleet here versus just a single color. I mean that is the cotton picker that we were missing for quite a while. We have our new compact tractors coming out of India as we speak right now, all new, they reach these shores very soon and the new utility light tractor lineup, which we didn't have really at this level of technology before is also entering production in 2026. So we are all over the place on the products and with quality as a mindset, these things will start to show at low quantities in '26 and then accelerate in quantum and financial impact in '27 and going forward. Well, when you think about Europe, I mean, Europe, there are a couple of positives that are clearly around the resilience of that region and good momentum and state support in markets like Germany, Poland, Eastern Europe here and there that has actually helped mainly the tractor sales in Europe, while combines are still low, and you know we are pretty strong in combines there. So that is an adverse product mix. It was an adverse product mix in '25, and it's still a little drag in '26. So it's mainly a tractor Europe, mainly Germany, German-speaking, Eastern Europe a bit pull that we have seen and observed in Europe. But I would not call this a recovery or a swing in the market necessarily. This very much depends also on the global trade environment. Mercosur is out there and farmers have already reentered the cities with a tractors protesting against the Mercosur agreement. So I think it's -- it is the region with the best growth potential in terms of TIV for our industry in '26 and maybe also '27, but we got to be cautious there because it's still a little fragile. And you know the stability and the solidity of the European Union and their ability to make a coordinated decision-making when it comes to such important interest groups like farmers. We'll need to see where this will land. But it is from all the signs that we see the region with a better momentum of all the big ones. Operator: Your next question comes from the line of Daniela Costa with Goldman Sachs. Daniela Costa: Maybe just a clarification on something I didn't -- well, maybe you didn't hear correctly on sort of where did the prebuy come. Did you just say that it came from Europe, particularly? And then my main question was regarding whether everyone is talking a lot about AI and potential for cost savings and system simplifications and given you have so many self-help actions going on? Are you finding any some simplifications and given you have so many self-help actions going on, are you finding any incremental pockets where maybe AI could help you push faster with savings? Gerrit Marx: Daniela, so yes, the positive is mainly around Europe. So that's true. It's mainly Europe, and it's mainly tractors. That was my comment here. That is what we see in the near term. We'll see -- what we do see is basically, if you start on the other side of the world, like Australia, New Zealand, that is basically all replacement driven. That region is not really impacted by tariffs, and it's a fairly steady market, and we have seen that this is going to bottom out, and it's already on a positive trajectory as we can see. . We are holding our ground in China quite well. And actually, we are gaining here and there in the non-Chinese brand universe there. So that is okay. In India, we have had the highest-ever market share of CNH in the region. We are scouting for on the next site for a small and compact tractors and continue to grow market share there and make this a hub for utility and compact for CNH Global. Yes. And look, the AI application is everywhere in our company. We are distinguishing between not only the generic but also agentic AI. We have launched it in our FieldOps platform where we basically connect different agentic AIs in order to provide a fully connected experience. We have in our machines, contextual AI running as we speak. And when it comes to back office and structure costs, we are looking at AI applications in order to speed up and drive efficiency into our processes. Because overall, I think in CNH, we have a pretty substantial upside in getting leaner when it comes to processes and there is a good potential here for the application of solutions that are driven by either generic or agentic AI, and we're on top of these things. But I'm not committing any percentage number to AI at this point because what we experienced actually is that it drives the outcome a much faster, more efficiently, and we are getting more for the same at this point, while obviously also cost savings are part of the mix. Operator: Your next question comes from the line of Ted Jackson with Northland Securities. Edward Jackson: First question is just pretty straightforward. You had a pull forward you said in fourth quarter that normally would have been in the first quarter. And if I kind of pill around with your guidance and stuff, I mean, are we talking somewhere between $50 million, $100 million in terms of revenue in the fourth quarter that you would have normally expected to happen in the first quarter? That's my first question. And then I have one more behind it. James A. Nickolas: Yes. It's Jim. I'd say about $100 million, $150 million of those sales that happened in Q4, we would otherwise expect it to occur in Q1. Edward Jackson: Okay. And then normalizing out for that and kind of thinking through your inventories are for conversational sake, at this point, your retail inventories are aligned with demand. You've generally been underproducing to demand for a period of time. Is it a fair scenario to think that as we get to the back part of '26 that you might be able to put up some revenue growth just simply because you'll be able to produce retail demand and not below it and that we will be able to see that continue into first half of '27, absent even a turnaround in the cycle? James A. Nickolas: Yes, I think that's very fair. That's the way we're thinking about it. That's right. Operator: Your next question comes from the line of Tami Zakaria with JPMorgan. Tami Zakaria: I wanted to ask about SG&A. I think you saw a sequential step down more so than what we saw last year. So anything to call out then how we should think about SG&A growth in 2026 versus 2025? James A. Nickolas: Yes. It's Jim. We -- SG&A came down in Q4, largely due to lower variable compensation expense. And so that was versus full year '25 versus full year '24. For purposes of modeling and guidance, we're assuming a normalized level of variable comp, among other things. So SG&A, I would expect to grow next year by about 40 basis points or so headwind from SG&A growth. Operator: Our last question comes from the line of Kristen Owen from Oppenheimer. Kristen Owen: Just because it wasn't discussed in any of the other questions, I was hoping you might be able to touch on the free cash flow guidance, and in particular, your CapEx outlook. It seems like a pretty sizable step up year-on-year. So I'm just wondering if you can provide some color on that, if that's related to what you're doing on the dealer side or anything else we should be considering? James A. Nickolas: Yes, happy to answer that. It's a great question. So there's multiple reasons we're driving it's growing in '26 versus '25. The primary use of that extra CapEx is to enhance and improve our manufacturing facilities. The best time to get that done and deployed is when the factors are slow, and we want to get that done before the upturn and things pick up in a bigger way in '27. So that's the majority of the extra CapEx. But to your point, it's also being used for, to some degree, dealers, dealer enhancements and also our strategic sourcing plan and program. We have to -- we buy new tooling for that as well to help keep those -- that pipeline of savings coming forward as well. So it's mostly manufacturing, some manufacturing footprint moves. As you know, we're calling you today from Wichita, some of the equipment is being moved from Burlington to Wichita among other places. So there's some money in there for those kinds of things as well. But primarily enhancing our manufacturing, get lower costs, more efficiencies, dealer enhancements and also our strategic sourcing program. Operator: And ladies and gentlemen, that does conclude our question-and-answer session, and it does conclude our call for today. Thank you for your participation, and you may now disconnect.
Operator: Hello, and welcome to the Franklin Electric Reports Fourth Quarter 2025 and Full Year 2025 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. It is now my pleasure to introduce Director of Investor Relations, Dean Cantrell. Dean Cantrell: Thank you, Andrew, and welcome, everyone, to Franklin Electric's Fourth Quarter 2025 Earnings Conference Call. Joining me today is Jennifer Wolfenbarger, our Chief Financial Officer; and Joe Ruzynski, our Chief Executive Officer. On today's call, Joe will review our fourth quarter and full year business highlights. Then Jennifer will provide additional details on our financial performance, and Joe will make some additional comments related to our key growth and value drivers, along with our outlook. We will then take questions. Before we begin, let me remind you that as we conduct this call, we will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to various risks and uncertainties, many of which could cause actual results to differ materially from such forward-looking statements. A discussion of these factors may be found in the company's annual report on Form 10-K and today's earnings release. During this call, we will present both GAAP and certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in the appendix of our earnings presentation. All forward-looking statements made during this call are based on information currently available and except as required by law, the company assumes no obligation to update any forward-looking statements. Earlier today, we published a slide deck to accompany our prepared remarks. The slides can be found in the Investor Relations section of our corporate website at www.franklin-electric.com. With that, I will now turn the call over to Joe. Joseph Ruzynski: Thanks, Dean, and good morning, everyone. Thank you for joining today's call. I'm excited to share the outcome of a year of great progress, transformation and strong results today. Let's start on Page 2. We had a strong Q4 and full year results in all segments. Sales were up 5.4% and segment operating income was up 9.6% for the full year, each representing high points for Franklin in both revenue and segment operating income. Our solid Q4 had our sales up 4.4% and operating income up 9.2%. We grew volume for the year, had strong price realization and managed a sometimes turbulent global market with focus. Our order book and backlog remain healthy as we move through -- move to 2026. Our cash conversion was 126%, representing our third year of cash conversion over 120%. Our balance sheet remains strong even as we completed about $120 million of acquisitions and $160 million in share buybacks. We've made some important changes in 2025 and are positioned well for 2026. If we move to Slide 3, I'd like to talk about some of these efforts. In 2025, we made some great progress, and I want to take a moment to thank our team for the focus, execution and leading through change. We'd like to share a few highlights that won't show up in our overall financial results. Starting with our priority to accelerate growth. While we serve our customers globally and in some dynamic markets, we saw strong results in each segment. We focused on our biggest opportunities and took share in many of our markets. We believe innovation and new products are a leading indicator for growth and added over 35 products that will deliver over $160 million in revenue by year 3. We are positioning Franklin as an innovation and growth company, and our team is ready. As we look at our margins, I'd first like to highlight the great progress in our Water treatment and Distribution businesses. Our Water treatment business is a key part of our Water segment. We entered this business in the past 5 years and exited 2025 at $200 million in sales. More impressive is our effort to make life easy for our customers and streamline this business as we serve them, which was highlighted by impressive sales growth and improvement of over 400 basis points operating margin in 2025. Also we began our Distribution business in the late '20 teens. We have grown this business to over $700 million with impressive services like our on-site inventory program, and leading portal technology to seamlessly order and communicate needs. We focused on efficient service business in 2025 while bringing new solutions to market. We've grown and improved our operating margin in this business by 210 basis points in 2025. Furthering our margin focus. In 2025, we added a key transformation element with the launch of our Value Acceleration Office. Here, we are using 80-20, smart AI and process engineering to streamline our portfolio, create powerful and simple internal systems, and manage costs more effectively. We expect strong contribution to our margins in the coming years based on this promising start in 2025. For investments in capital, we are known for great cash conversion and a strong balance sheet, but there is more we want to do. We have completed two important acquisitions in 2025 and added some smaller important deals at the end of the year. As we look to round out our right to win in important markets and regions, filling out our portfolio and reach will be our focus. We bought back about 1.8 million shares as we feel our future is bright. We have also increased our capital spending to make sure our investments position us for this growth. Finally, on talent. Our strong culture has been focused on treating our employees and customers the best in our industry. Our focus on attracting great talent and building our engine for the future will bring elements of collaboration, innovation and velocity to our everyday practices to prepare us for a fast-changing world. Our team is strong, ready for growth, and we are making it more resilient every day. With that, I'll turn the call back over -- I'll turn the call over to Jennifer to discuss the financial results in more detail. Jennifer Wolfenbarger: Thank you, Joe. Moving to Slide 4. Our full year 2025 fully diluted earnings per share was $3.22 versus $3.86 for 2024. Diluted earnings per share for 2025 was negatively impacted by the pension settlement charge of $41.5 million, net of tax benefit or $0.91 of EPS, as well as $0.01 of restructuring charges in the year. Adjusted diluted earnings per share was $4.14 in 2025 versus adjusted 2024 of $3.92, an increase of 6%. The full year effective tax rate was 23.6% compared to 21.7% in the prior year. The change in effective tax rate was due to a mix of foreign earnings taxed at rates different than the U.S. statutory rate, as well as less favorable discrete items. Moving to Slide 5. Fourth quarter 2025 consolidated sales were $506.9 million, a year-over-year increase of 4.4%. The sales increase in the fourth quarter was due to the incremental sales impact from recent acquisitions and favorable price. Franklin Electric's consolidated gross profit was $171.5 million for the fourth quarter 2025, up from the prior year's gross profit of $164.2 million. The gross profit as a percentage of net sales was 33.8%, unchanged in the fourth quarter 2025, compared to the prior year as we offset the impact of higher costs from tariffs with additional price in the market, as well as volume growth in our Energy and Distribution segments. Moving on to SG&A expenses. We have seen a 70 basis point improvement in our SG&A as a percent of sales metric from year-over-year as a result of cost improvement actions taken in the last year. SG&A expenses were $119.6 million in the fourth quarter of 2025, compared to $117.8 million in the prior year. The increase in SG&A expense was primarily due to the additional expense impact of our 2025 acquisitions. Absent acquisition-related SG&A expense, the company experienced a decrease in SG&A expense year-over-year of approximately $3 million or 3%. Consolidated operating income was $51.6 million in the quarter, up $8.6 million or 20% from $43 million in the prior year. The increase in operating income was primarily due to price, productivity and SG&A cost management. Operating income margin was 10.2%, up from 8.9% from the prior year. The effective tax rate was 18.7% for the quarter, compared to 15.8% in the prior year quarter. The change in effective tax rate was due to a mix of foreign earnings, tax at rates different than the U.S. statutory rate, as well as less favorable discrete items. Moving to Slide 6. We will review our 2025 full year results. Full year 2025 consolidated sales were $2.1 billion, a year-over-year increase of 5.4%. This was driven by favorable price, organic volume growth in Energy and Distribution, and the incremental sales impact of recent acquisitions. Franklin Electric's consolidated gross profit was $755.9 million for the full year 2025, up from the prior year's gross profit of $717.3 million. The gross profit as a percent of net sales was 35.5%, unchanged in 2025 compared to the prior year as we offset the impact of higher costs from tariffs with additional price in the market as well as productivity savings. Full year SG&A expenses improved 50 basis points on a year-over-year basis, including the impact of acquisitions. Absent the impact of acquisitions, SG&A improved 130 basis points year-over-year, driven by structural cost actions taken in our Distribution and Energy businesses in the past year. Consolidated operating income was $269 million in 2025, up $25.3 million or 10%, from $243.6 million in the prior year. The increase in operating income was primarily due to price, productivity and cost management. Operating income margin was 12.6%, up 50 basis points from the prior year. Moving to Q4 segment results on Slide 7. Global Water Systems sales were up 4.3% compared to the fourth quarter 2024, driven by strong price and additional volume from our recent acquisitions. Water Systems in the U.S. and Canada were down 4% compared to the fourth quarter 2024, driven by softer HVAC markets in Q4. Water Systems sales in markets outside the U.S. and Canada increased 15% overall. Excluding the impact of acquisitions and foreign currency translation, sales in the fourth quarter of 2025 decreased 1%, led by higher sales in the European region, more than offset by sales declines in Latin America and Asian regions. Global Water Systems operating margin was $41.8 million, up $6.2 million or 17% versus the prior year. The increase in operating income was primarily due to higher sales and price offsetting inflation. The fourth quarter operating income margin was 14.3%, an increase of 160 basis points from 12.7% in the fourth quarter of 2024. Energy Systems sales were $74.7 million, an increase of $5.9 million, or 9% compared to the fourth quarter 2024. Energy Systems sales in the U.S. and Canada increased 6% year-over-year. Outside the U.S. and Canada, energy sales increased 19%. Energy Systems operating income was $22.6 million in the fourth quarter, compared to $24.7 million in Q4 2024. Operating income margin was 30.3% compared to 35.9% in the prior year, a decline of 560 basis points. Operating income margin decreased primarily due to the unfavorable geographic mix of sales and the impacts of tariffs. Distribution fourth quarter sales were $161.6 million versus fourth quarter 2024 sales of $157.2 million, an increase of 3%. The Distribution segment sales increase was primarily due to higher volumes and price realization. The Distribution segment's operating income was $5.3 million for the fourth quarter, a year-over-year increase of $4.8 million. Operating income margin was 3.3% of sales in the fourth quarter, an improvement of 300 basis points versus the prior year, driven by higher volumes, positive price realization and improved margins as a result of margin and structural cost improvement actions taken in the last year. Moving to full year segment results beginning on Slide 8. Global Water Systems full year sales were up 6% compared to 2024, driven by strong price and the addition of our two acquisitions in early 2025. Water Systems sales in the U.S. and Canada were up 3% compared to 2024. At a product level, sales of large dewatering equipment increased 7%. Sales of groundwater pumping equipment increased 1%. Sales of water treatment products increased 6%, and sales of all other surface pumping equipment decreased 1% compared to 2024. Water Systems sales in markets outside the U.S. and Canada increased 10% overall for the full year. Foreign currency translation was relatively flat on sales and recent acquisitions added roughly 10% to sales. Excluding the impact of acquisitions and foreign currency translation, sales for 2025 increased slightly, led by strong sales in the European region, somewhat offset by sales declines in Latin America and Asian regions as a result of soft market conditions. Global Water Systems full year operating income was $207.2 million, up $9.3 million, or 5.2% versus the prior year. The increase in operating income was driven by higher price and productivity offsetting inflation. Full year operating margin was 16.5%, a decrease of 20 basis points from 16.7% in 2024. The decrease in operating margin was driven by higher -- by acquisition-related costs. Moving to Slide 9. Full year Energy Systems sales were $299 million, an increase of $25 million or 9% compared to 2024. Energy Systems sales in the U.S. and Canada increased 8% year-over-year. The increase was broad-based and across most product lines, driven by strong investment in retail fueling stations. Outside the U.S. and Canada, Energy Systems sales increased 13%, led by increased sales in India and European markets. Energy Systems full year operating income was $99 million compared to $93.6 million, an increase of $5.4 million, or 6% versus 2024. Operating income margin was 33.1%, compared to 34.2% in the prior year, a decline of 110 basis points. Operating income margin decreased primarily due to an unfavorable geographic mix of sales, investments for growth in SG&A for new products and markets, and the impact of tariffs in the year. Moving to Slide 10. Distribution's full year sales were $700.7 million versus 2024 sales of $685.5 million, an increase of 2%. The Distribution segment sales increase was primarily due to higher volumes and price realization. The Distribution segment's full year operating income was $39.8 million, a year-over-year increase of $15.5 million, or 64%. Distribution operating margins expanded 210 basis points full year from 35.5% in 2024 to 5.7% in 2025, driven by margin enhancement initiatives as well as structural improvements made within the last year. Moving to the balance sheet and cash flows on Slide 11. The company ended 2025 with a cash balance of $99.7 million and with $30 million outstanding under its revolving credit agreement. We generated $239 million in net cash flows from operating activities during 2025 compared to $261 million in 2024. The company repurchased approximately 350,000 shares of its common stock in the open market for roughly $34.3 million during the fourth quarter of 2025. At the end of the fourth quarter, the remaining share repurchase authorization is approximately 0.8 million shares. On January 26, the company announced a quarterly cash dividend of $0.28. The dividend will be payable February 19 to shareholders of record on February 5. This represents a 5.7% increase from the prior quarterly dividend. This dividend will mark the 34th consecutive year that Franklin Electric has increased its dividend, demonstrating its commitment to returning cash to shareholders and confidence in the outlook of our business. Now I will turn to Slide 12, where I will share insight on our full year 2026 guidance. Beginning with 2026, we will provide guidance on an adjusted EPS rather than GAAP reported EPS. We believe these forward-looking non-GAAP measures more closely align with how management evaluates the business, reflect ongoing operational performance, and provide investors with additional useful information regarding our expected financial results. These non-GAAP measures will be presented in addition to, and not as a substitute for, the most directly comparable GAAP measures. Reconciliations to the corresponding GAAP measures will accompany our guidance disclosures. Turning to our full year guidance. The company expects its full year 2026 sales to be in the range of $2.17 billion and $2.24 billion, and an adjusted EPS to be in the range of $4.40 to $4.60. This puts our midpoint sales growth at just over 3% and our midpoint EPS at approximately 9%, reflecting commercial and operational momentum, and our commitment to continue to grow the business and expand earnings per share. Now I will turn the call back to Joe. Joseph Ruzynski: Thanks, Jennifer. Please turn to Slide 13. Before we turn it over for questions, I want to share our view of the Franklin portfolio and position, and why we're positive about our future. We are in great businesses. As a flow control company focused on Water and Energy, our strategy starts with a clear view of the markets and where we can win. We see attractive markets where we can focus and grow faster. Our Water business is a leader in groundwater and water treatment, and we are positioned to capitalize on urbanization, the desire for high-quality water, increasing mineral demand and the exponential growth of computing power. Our Distribution business has built a reputation for delivering the highest quality products and a wide offering in groundwater, water treatment and wastewater. Our differentiation is the technology, service and support in how we execute every day. We use proprietary tools to manage inventory and information and our on-site inventory, or OSI programs, to ensure our service doesn't diminish to the farthest reaches of our regions. Our Energy business started with a focus on managing fluids, but has grown by harnessing data, information and energy in the most creative and simple-to-use ways in our industry. Our leading solutions like EVO and OVERSITE give our customers the confidence to run their business more efficiently and to get the best value out of their operations. Franklin has a long history of innovation, and we are investing and accelerating this. Our new product pipeline will more than triple these next few years, and we see this as a catalyst for growth. As efficiency and data requirements increase, we will be on the forefront with our solutions. Our opportunity to increase our return is significant, using our Value Acceleration model and our Value Acceleration Office, and Franklin Operating System, we are working through some key transformations that will continue this path of expanded and resilient margins. Our strong balance sheet enhances our ability to produce -- to provide strong returns to our shareholders while supporting our attractive list of M&A opportunities and investments. And finally, when you walk in the door at a Franklin site, or spend time with our team in the field, you will see a team that cares and a culture that values our employees as we work to grow, innovate and serve. We are an attractive business with some great room to grow and improve. I'd like to turn it back to Andrew for questions now before we -- before some closing comments. Operator: [Operator Instructions] Our first question comes from the line of Matt Summerville with D.A. Davidson. Matt Summerville: I was hoping, maybe first, you could talk about when you look at kind of the revenue guide for the year, what type of organic outlook across the 3 segments would be implied in that guide? And of that, how much is volume versus price? And then I have a follow-up. Joseph Ruzynski: Yes. If you look at -- for the Water business, we're looking at a number that's probably in the 3% to 5% range. From a price versus volume, so there's a bit of acquisition carryover. We didn't close those deals until end of Q1 last year. So there's a little bit of acquisition in there. And then there's a good blend between volume and price. We've passed on -- so this is for all 3 -- all of our segments, we basically passed on kind of standard price increases in the beginning of the year, and we see some good realization of those numbers. For the Energy business, growth looks over 3-ish percent. And as last year, a good mixture of probably a little more volume than price in that business, but we did pass on some price to recoup the tariff exposure that we saw at the end of last year. And then Distribution, if you look back the last few years, the price degradation based on some of the commodities has been part of our story. We've shifted to good price realization last year. Their growth was about 50-50 price in 2025. You're going to see about the same spread next year and that growth rate is kind of the 3% to 4% range for that business. Matt Summerville: Got it. And then maybe just looking at it specific to Water, maybe dimensionalize it a little bit differently and do a bit of a walk around the key end markets and product lines within Water, and add a little bit of geographic overlay as far as demand expectations this year. Joseph Ruzynski: Yes. Good question. So as we exited last year, there was really two soft spots in that Water business. Otherwise, we are on pace for good volume expansion. But the RSS business, which is about $150 million business, we saw HVAC weakness in the U.S. in Q4. That looks to have stabilized. Some of that was destocking of the channel. We've started the year at a nice spot. We expect growth in the U.S. kind of comparable to that rate that I talked about overall. The other softer spot was the Mexican market, and that looks like it has stabilized. There was obviously some pressure in that market in the middle towards the back half of last year. Those rates look to have come back. We expect more normal volume in that Northern Latin America region. If you look at the story kind of around the world for the year, we had good underlying growth in the U.S., Europe. Southern Latin America was a great story for us. So we see -- we don't see any spots that are going to have pronounced weakness. We saw strong growth, and some of this is due to some recent acquisitions over the past few years in the South Asia, the Pacific region. And then Asia is relatively small for us, but we expect it to be fairly stable. So there's really nothing that we see continuing. I would say -- I would call out in the U.S. that groundwater business, residential business and then the fleet, or the dewatering business, all seem to be on track here as we start the year. And based on our forward look, there's really nothing that sticks out that tells us there's going to be weakness. We have not baked in any housing recovery in our numbers. So just to call that out as well. Operator: And our next question comes from the line of Ryan Connors with Northcoast Research. Ryan Connors: Jennifer, you mentioned HVAC as a headwind in fourth quarter. And if I heard you right, drove, I think, a 4% decline in U.S., Canada in Water in 4Q. Can you just unpack that for us a little bit, specifically what that is, and how long that's expected to last? Jennifer Wolfenbarger: It was really kind of a little bit isolated to -- what we saw was really isolated to the back end of Q4. And I think you would have seen that a similar sort of trajectory in some of more of the HVAC industry. It was a little bit softer towards the tail end. We have -- we do expect that, that should normalize, and we're seeing a little bit of that normalization coming through in here in January. We really feel like that was kind of isolated to the end of the year. Ryan Connors: Got it. Okay. And then, Joe, you mentioned just there the outlook for large dewatering still very solid heading into 2026 here. But 7% was the growth rate you cited in fourth quarter. That was coming off a pretty easy comp from a year ago. I think it was down 30-some percent in the prior year. So any color around why a little bit of a deceleration there in 4Q in large dewatering? Joseph Ruzynski: Yes. I think part of it is just as it's a capital spend, you tend to see a little bit of a pause at the end of the year. Obviously, we saw that in '24. We saw a little slowdown in 2025. We can see the orders. I mean that business looks healthy for us here in 2026. We can see the orders a little further in that business than some of our other areas. So the backlog is healthy. We look -- we had a nice bounce back year last year. And as we've talked about before, that tends to run in 18- or 24-month cycles. So a strong year last year. That growth won't quite be the same because we had a good year last year, but the outlook looks healthy in that dewatering fleet business. Ryan Connors: Got it. Okay. And then just one last one for me. On Energy, you talked about the tariff pass-through being a bit of a headwind, or a big contributor, I guess, to the headwind in margins for Energy Systems. Any color around why that's proven more difficult in that business than elsewhere and the outlook there as well for '26? Joseph Ruzynski: Well, there was two parts of the margin in Q4 for that Energy business. One is, I think Jennifer commented almost 20% international growth. We've been working on a growth plan in the U.S. -- or I'm sorry, in Europe and in India, largely some other regions as well. So I think part of it was mix. From a tariff standpoint, we had basically planned to stick with our price increase process. We had raised some price in -- end of Q1, beginning of Q2 for some of the shorter-term tariffs. And then we did another increase in December. We knew there was going to be a little bit of a timing issue there, and I think that's what you saw in Q4. Price realization for that business, Energy is expected to realize another 1.5% to 2% price increases this year with some of that carryover from last year. We see good realization. The market has generally accepted it. So you're going to see those margins bounce back. We expect the Energy margins to be up slightly this year versus last year. So we're back on that track of those mid-30 margins and the price increase will get us set here as we get into the year. Operator: And our next question comes from the line of Bryan Blair with Oppenheimer. Bryan Blair: I was hoping you could offer a bit of color on Barnes and PumpEng integration, how the deal plans are progressing there? How your team is thinking about incremental P&L contribution in 2026? And then how your M&A pipeline overall looks entering the new year? Joseph Ruzynski: Yes. Maybe to start with Barnes and PumpEng. The PumpEng deal is on, I would say, ahead of track. That kind of the mineral space, the dewatering space for us has been a good growth area. Small as a part of our overall portfolio. But what we found is the integration has been relatively smooth. Those products are needed. As we've brought a bigger portfolio to market in some of those regions and those markets for dewatering, we found further opportunities. So we're excited about the backlog as well. So the growth synergies there seem to be reading out and '26 looks like a good year. The Barnes deal, there was two things, I would say. One is from an integration standpoint, we feel good about that progress there. The company is well integrated. We like the products. We like the regions. Their second biggest market was the Mexican market. So in terms of the growth and the readout of some of that model, we're probably behind a little bit there just because the kind of the recessionary market shrinking environment in Mexico in the back half of last year definitely put a little bit of a longer process there in terms of us seeing that readout. Conversely, though, it looks like it's stabilized here as we exited the year kind of the very end of the year, December into January. So we don't have some of those same headwinds that we had in the back half of last year. I would say for the overall M&A pipeline, probably what you're hearing from a lot of our peers is the market looks to be busy this year. I think there's a little bit of stability. Hopefully, the tariffs and the disruption and some of the uncertainty is a little bit more, let's say, known. Obviously, we live in a pretty crazy world here. But the pipeline looks healthy. And our approach is basically, I think as I mentioned on the call, is we're looking at our portfolio. We're looking at our right to win and where we can round out from channel-geog, or if there's specific products that help us go faster. We got some -- we have some good ideas. Obviously, we're still in a healthy leverage spot from a balance sheet standpoint. Our Biz Dev team and the folks that are looking at that are definitely busy. So we expect some good progress. Had some good small deals at the end of last year, but we're looking for deals that can give us a little more impact here in 2026. Bryan Blair: Understood. Appreciate that color. And it would also be great to hear a little more on the Value Acceleration Office. One, I like the ring of that. But that being said, respecting there are -- these are CI type initiatives, so some of the framework would already be in place. When was the program or office formalized? How much near-term impact should we expect from Quad 4 actions in terms of 80-20 implementation? And is the plan, at least over time, to offer discrete targets for transformation savings or margin level? Joseph Ruzynski: Yes, it's a good question. We actually -- we built the office governance kind of seeded it with the opportunities through our strat development process, kind of starting the middle of last year. And we looked at transformation a couple of different ways. It is CI, but I'd say it's more than that. A company like Franklin that has grown acquisitively over the last decade plus, we saw a lot of opportunities for just good old-fashioned process reengineering, back-office alignment, making sure that as we look at global launches of products that we have all cylinders firing and we get those on time, on budget and we get them to our market. So we talk a lot about scale and velocity. There's a growth element to the Value Acceleration Office, which you won't find, I would say, in some of the other 80-20, kind of, traditional CI type transformation offices. And we like that. I would say from a productivity and efficiency and a benefit standpoint, our expectation is some of those projects we've actually got up running. Some of them are completed. We expect readout this year of that. We have some of that baked in our plan for expanded EPS here, but we think that there's opportunity to do more. So yes, we're excited about it. We've got it staffed. We've got a new AI director that started here in Q1 and a leader for that office. Yes, so it's a little bit homegrown, but it's something that given my history, and the history of some of the other officers, we like how we put it together. And it's been -- we've got a lot of hands raising to participate, which is what you want in this. So yes, more to come on that, but we expect some good readout this year and in the future. Jennifer Wolfenbarger: Bryan, I just want to emphasize a point Joe made, the value acceleration, the nomenclature there is critical because it is more -- it's definitely more than just cost improvement, the typical 80-20. It's about leveraging technology. It's about finding opportunities to leverage technology to drive leverage, but also growth is really key to that. So definitely a differentiator, I'd say, than what you would see in the typical 80-20 space. Operator: And our next question comes from the line of Mike Halloran with Baird. Michael Halloran: Just a quick follow-up to that. Where do you see the most opportunities when you look across your product segments, across the 3 segments, but more at the product line level as you're implementing the strategy? Joseph Ruzynski: The opportunity to make some improvements or the opportunity to grow? Michael Halloran: Yes, it was related to Bryan's last question, right? So it's just when you take this value-driven approach, where do you see the most opportunities at a product -- on a product line basis to really drive value? Whether it's commercially at the margin line, just what specifically do you -- where specifically do you see the most opportunity? Joseph Ruzynski: Yes. I think maybe a couple of areas. One is if you look at our kind of our core submersible business, we're obviously producing motors, pumps and assemblies in all regions. There is some overlap of that portfolio where we've got product that can essentially do the exact same thing that we don't need to be producing, the number of SKUs and in the multitude of locations that we are today. So one example, Bryan, is if you look at we're -- and I think we called this out in 2025, we're making some investments in our sites in Turkey and India, is to basically bring together some of the similar SKUs to come up with common platforms to be able to serve wider regions. And there's more for us to do there. I would say as well, from an acquisition standpoint, if you look at some of the ones that we did -- or that we've done recently, we talked about PumpEng. We did Minetuff before that. There's some overlap in those products and making sure that it's clear to our customers in terms of what you're trying to do, the application that you're trying to support and the product that we have to serve it. There's some alignment opportunity there, which will bring efficiency. It will bring margin, but also it will bring the productivity in terms of our operations to be able to serve. Here's another maybe non-product answer to that. If you look at our Water treatment and our Distribution business, just the effectiveness of how we serve our customers, getting true hub and spoke, getting logistics that are streamlined. We've done a lot of work with our partners to make sure that we can not only serve our end customers, but we do it as efficiently as possible. It's how many times we touch that product, how many miles we cover to get that product to our end customer. So we've gone through some streamlines, some rooftop consolidation based on acquisitions in the past few years. And we find our service metrics. We actually had an internal service metric that set a record for us this year in terms of fulfillment rates and on time. We see further opportunity to do that. So it's not just in the product, it's also in how we serve our customers. And I think there's opportunities in both spaces. Michael Halloran: And then two quick guidance-related questions. One, partially a follow-up to Matt's original question. How does sequentially -- how do the sequential patterns work out through the year relative to normal seasonality? Or is there any nuance to that? And then the follow-up to that would be somewhat related, I suppose. You talked about margins up a little bit on the fueling side. Any sense for how the other couple of segments track on the margins inside your guidance? Jennifer Wolfenbarger: Yes. So we -- in terms of just the seasonality, I'll address that one first. We expect the typical seasonality that we see in our business throughout the year. As you do -- as you look at it across our guide, we are expecting growth in terms of good price realization, volume growth across all quarters, but following that typical seasonal pattern where we're a little bit lighter in Q1 and Q4, and more of our peak periods in Q2 and Q3. Joseph Ruzynski: But growth across all quarters. We're not -- there's not a back-end or front-end load here in terms of our performance. I think normal seasonality, but consistent growth across all quarters, so. Michael Halloran: And the margin question. You gave some guidance on fueling up year-over-year? How should I think about the other two segments on the margin line this year? Jennifer Wolfenbarger: Yes, similar across all of our segments, we're projecting growth, margin expansion across each of the segments, including Energy. We had said, kind of, we landed the year last year with energy in the low 30s. We expect some growth in that space in our energy business in terms of margin expansion year-over-year, but still kind of maintaining that low to mid-30s, as Joe mentioned earlier. Joseph Ruzynski: And you're going to see, Mike, a continued focus on that Distribution business. Obviously, they took a nice step forward last year. There's a number of underlying initiatives to get those efficiencies, some of which we talked about is related to the VAO, but probably margins expanded a little bit more there. Energy and Water, maybe slightly less than that. But those distribution margins, I would expect another 70-plus basis points expansion there. Water and Energy may be slightly under that in that space. Operator: Our next question comes from the line of Walter Liptak with Seaport Research. Walter Liptak: I'll try on 80-20 too. I remember about 5 years ago, there was a presentation about 80-20 that was done by one of your leaders. And so it seems like you guys have been doing that for a while. I wonder if you could talk about maybe what inning you're in and where 80-20 is -- which segments have done the most sort of 80-20 work? And what's the next focus? Joseph Ruzynski: Yes. I'd say, well, most of the 80-20 opportunity for us exists in that Water Systems business. That's where the design, the manufacturing, the global footprint for operations is there. In the -- just in the Energy space, it's a fairly focused business. They've gone through and have a very streamlined portfolio, I would say. So some of the adds there are really bringing new products to market. In the Water space, from an 80-20 standpoint, I would say we're in the first 3 innings or so, a baseball game term there. There's more for us to do. And I think what -- the work that's been done there thus far is looking at what are some of those fractional, what are some of those small sizes that don't sell a whole lot. We've done the same work that other companies have done to make sure that our portfolio is clean. We can basically solve your problems with smart drives with VFDs versus having the proliferation of motor sizes and pumps, et cetera. So there's been some good work done there. There is more for us to do there. What's been fun for me to see here over the last couple of years, we've talked a lot about new products. If you look at our new in-line spec pack and our VR spec pack, some of the new boosting technology and also some of the new work that we're doing in terms of bringing products to market post acquisition is using those opportunities to clean up that legacy portfolio. So it's taken us a little bit longer. We didn't go just through an exercise of cut and a line. We've kind of been doing, let's launch a new product and let's clean that portfolio up. So I would say there's a good set of opportunities in front of us to see more of that benefit here over the next couple of years. Jennifer Wolfenbarger: Distribution, also great work there. I mean really great progress across our teams in Distribution across 2025, with still more opportunity to continue to expand margins into 2026 with the work that we've done on SKU rationalization. Buy better, spend better, as well as [indiscernible] pull-through within that business. Joseph Ruzynski: Yes. Maybe just to add to that. I think 80-20 from a Distribution standpoint, probably not a lot of companies talk about it. But Jennifer, we've gone -- we've had a 2-year effort of normalizing all of our part numbers to make sure that if it's a comparable part, a similar application that we're consolidating that, which helps us in a couple of ways. One is for inventory and movement of product, but the other one is the upstream negotiation with our suppliers to make sure that we're getting the best price and bringing that through. So that's been -- that's taken us a bit of time, especially as we've continued to acquire over the last few years. But we hit a good milestone in October this year of getting those part numbers aligned and furthering that work upstream. Walter Liptak: Okay. Great. And then the fueling outlook is -- looks pretty good for this year. One of your competitors, though, talked about the growth rate being higher than what you presented. I wonder if you could talk about above ground versus below ground. And any, I guess, timing of projects or visibility of projects? Joseph Ruzynski: Yes. I think the build schedule looks good this year. I don't want to comment on our peers' outlook, but there's two things that we're really looking at here. One is we can see the build schedule for most of our major partners, and it looks positive. So I think that growth rate there -- we obviously overdrove what our projected growth rate was for 2025. I think those opportunities exist. Given the capital market and sometimes unpredictable schedule in terms of capital deployment, we want to be careful there. We do see the international market strong, and we see the U.S. market strong as well. So I think that those mid-single-digit growth rates that we see for Energy, it should be another nice year and a strong year for that business. And then below the ground versus above the ground, maybe just a comment. If you look at new products that we've launched here in the last year or so, we've talked about OVERSITE and EVO ONE and some of those other new products. I would say above ground is probably going to be a little bit stronger. We also see that grid business, small, but having another good year with some of the new products and new channel that we're expanding there too, so. Operator: I'm showing no further questions. So with that, I'll hand the call back over to CEO, Joe Ruzynski, for any closing remarks. Joseph Ruzynski: Thanks, Andrew. And if you could please turn to Slide 14. 2025 was a strong year, and our outlook for 2026 is positive. We look to build on our momentum of transformation, innovation and growth to address our best opportunities in 2026. We're confident in our strategy, and we like the businesses we're in. Thanks, everyone, and have a great week. Operator: Ladies and gentlemen, thank you for participating. This does conclude today's program, and you may now disconnect.
Till Leisner: Thank you, Sandra, and good morning, everyone, and welcome. It's a pleasure to see so many of you here again in Zurich at the Metropol. I'd also like to extend a very warm welcome to all of the participants joining via our live webcast. It's great to have the opportunity to connect with such a broad audience across the globe. I'm Till Leisner, Head of Investor Relations, and I'm delighted to be joined today by our CFO, Ido Wallach; and our CEO, Stefan Butz. Before we begin, the general reminder to look at the presentation and the including disclaimer, which you find on our web page in the Investor Relations section. For those who are attending virtually, again, you find that on the web page at dksh.com. With that short introduction, I'm very happy to see all of you again, and I hand over to Stefan to get us started. Thank you so much. Stefan Butz: Thank you very much, Till. Hello, everyone. Good morning, and welcome to the presentation of our 2025 full year results. Joining me here today is our CFO, Ido, as well as our Investor and Media Relations team. As today marks the first day of the Chinese New Year, I wish especially all our Asian colleagues a Happy Lunar New Year. So today's agenda foresees a short recap of our highlights of the past year. I will then continue with a review of the business units in 2025. After that, Ido will follow up with a more detailed financial update. And to conclude, I will provide an outlook before we then open the Q&A session. We are very pleased to report that DKSH achieved another year of improved results with an even better acceleration of growth in the second half of 2025. We continue to translate our strategy into consistent execution in 2025, delivering growth, increased margin and high cash generation in a muted market environment. As in previous year, I will primarily be commenting on our results using constant exchange rates as this better shows the operational performance and ensures better comparability with previous years or results. Despite a very challenging environment, net sales increased by 2.9% at constant exchange rates to CHF 11.1 billion in 2025. In the second half of the year, net sales grew even faster at 3.6% with a pickup in growth in the business units Healthcare and Consumer Goods, thereby achieving GDP growth. Core EBIT amounted to CHF 349 million, 6.7% higher than in 2024. Core EBIT margin increased from 3.1% to 3.2%, in line with our midterm goal to expand core EBIT margins by at least 10 basis points year-on-year on average. In the second half of 2025, we delivered improved profitability with a core EBIT increase of 8.1% faster than the first half of the year. Our free cash flow remained high at CHF 215.5 million with a cash conversion of 95.2%. This marks the sixth year where we achieved a cash conversion above our target of 90%. We also delivered on our midterm road map regarding capital allocation as we announced 9 accretive M&A transactions in 2025 and proposed to increase the ordinary dividend by 6.4%, which corresponds to CHF 2.50 per share. This resilient performance in challenging times once again demonstrates DKSH ability to consistently create value for our clients, customers, employees and shareholders. Based on the acceleration of growth in the second half of 2025, we will continue to deliver on our midterm road map in 2026, driven by our focused strategy execution and resilient business model. Let me now focus on the highlights of 2025. We executed our accelerated M&A strategy and announced 9 transactions across the business units, Technology, Performance Materials and Consumer Goods in various markets. We continue to drive our business development by enlarging our client portfolio across all BUs and various markets. We signed a strategic partnership with Bayer for their pharma business in Singapore, Malaysia, Thailand and in the Philippines. In Singapore, we began collaborations with Eli Lilly, started working with Nestle in Malaysia, Thermo Fisher in Japan and Polygal in Europe and the United States. Additional highlights include the achievement with respect to our high-performance culture. Being recognized as a great place to work in even more markets and as one of the Fortune 100 best companies to work for in Southeast Asia 2025 highlights our continuous ambition to create an excellent work environment. We remain committed to talent development and diversity as reflected in our representation of women in leadership roles. We achieved several milestones in our sustainability efforts. We have been recognized as an industry leader in the ISS ESG Corporate Rating 2025. The science-based target initiative validated our targets, and we are on track to achieve net 0 greenhouse gas emissions across the value chain by 2050, having already reduced our CO2 emissions by 65%. With these achievements across multiple areas, we demonstrate our diligent strategy execution and commitment to creating value for our clients and customers in Asia, Europe and North America. We also create sustainable value by implementing AI initiatives across all our business units in key areas such as M&A, finance, IT and supply chain management. To support these efforts, we have established a dedicated team. AI acts as an enabling factor that seamlessly integrates with our existing processes by continuously leveraging our extensive data resource through AI we create additional opportunities for growth and enhanced operational efficiency. AI on the one hand, enhances demand forecasting or optimizes pricing, which drives top line growth. On the other hand, AI enhances our operational efficiency. For example, in our consumer goods business unit, we utilize a modular commercial excellence AI platform. This enables us to perform forecasting and segmentation, gain additional customer insights, obtain route optimization data and plan shelf layouts more efficiently -- effectively sorry. As a result, we achieved sales force excellence through increased customer revenue, improved client acquisition and retention and optimized cost to serve. Our business benefits from high entry barriers. By leveraging our strong sales force, extensive distribution network and robust cash collection processes together with advanced AI initiatives, we further evaluate these entry barriers, giving larger distributors like us the competitive edge. As in previous years, we continue to invest our capital in business with above average margins. We follow an accelerated high-impact M&A strategy backed by leverage headroom for approximately 2x net debt to EBITDA. Last year, we explored major transactions that ultimately did not materialize. Despite the volatile M&A environment, we announced 9 transactions surpassing the average number closed annually in previous year. Over the past 6 years, we accelerated our M&A activity as we have more than doubled the number of transactions. From 2012 to 2019, we completed 16 acquisitions whereas between 2019 and 2025, the total rose to 35%. As a result of these acquisitions made in 2025 and our existing deal pipeline for 2026, we expect increasing EBIT contributions from M&A in 2026. Looking ahead, our strong balance sheet allows us to pursue a wide range of strategic options. We remain committed to accelerating our M&A strategy, including the potential for expansion beyond Asia Pacific in our Business Unit Performance Materials, Healthcare and Technology. Our strong cash generation not only allows us to accelerate our M&A activity but also to continue our progressive dividend policy. Therefore, our Board proposes an increase of the ordinary dividend to CHF 2.50 per share, which is equivalent to a growth of 6.4%. For U.S.-based investors, this represents an increase in dividends, by the way, of more than 25%. This proposal marks our 13th consecutive year of dividend increase confirming our dividend aristocrat status. Notably, our ordinary dividend per share has achieved an average growth of 5.1% in the last 5 years. Let me now provide you with an update on the progress in our business units, starting with Healthcare. Our largest business unit, Healthcare, maintained its track record of profitable growth in 2025. We continued our development above GDP grades as net sales increased by 4.6% to CHF 5.8 billion. especially in the second half of the year, we accelerated organic growth. Core EBIT achieved CHF 174.2 million with a core EBIT margin of 3%, an improvement compared to the previous year. This marks the fourth consecutive year of margin increase on our full year results. These strong results were driven by broad-based growth across multiple markets and by new, as well as existing clients. We entered new partnerships with notable companies like Bayer, Eli Lilly, Reckitt, et cetera. Patrick Grande, a well-seasoned leader with more than 20 years of experience in the global pharma industry and part of DKSH since 2022 has been appointed as the new head of the business unit following Bijay Singh's planned transition into retirement. Under this new leadership, the business unit will continue to focus on higher-value segments and services. We will increase the share of commercial outsourcing while maintaining a strong focus on our own brands business. Moving to the Business Unit Consumer Goods. Business Unit Consumer Goods achieved net sales growth of 1.2%, with a marked acceleration of 2.8% in the second half of 2025. This growth was driven by strong performance in Malaysia, Vietnam and Singapore, alongside improved business development, especially in higher-margin business with new clients such as Nestle and Del Monte. Core EBIT increased to CHF 89.7 million, reflecting a growth rate of 5.4% and resulting in an approximately 10 basis point margin expansion. While core EBIT declined by 4.3% in the first half of 2025 growth recovered strongly in the second half. In the past 6 months, we achieved core EBIT growth of 14% and a core EBIT margin of 3%, reflecting improved earnings momentum and operational leverage. The exit of our business in Indonesia as well as the acquisition of Zircon-Swis Fine Foods in Singapore, which delivered performance ahead of the business plan further supported those results. In our Business Unit Performance Materials, net sales grew by 1.4% to CHF 1.4 billion. The Asia Pacific region, which accounts for around 60% of the business unit net sales delivered the strongest performance with growth of 5.5%, demonstrating a clear outperformance in an overall declining market. The resilient performance of the business unit was reinforced by strong business development with key clients such as Synthomer, Kronos, Polygal alongside 3 M&A acquisitions and a very strong pricing discipline supported by gross margin expansion. Core EBIT increased by 1.9%, with the core EBIT margin improving to 8.2%. The core EBITA reached CHF 120.4 million driving the core EBITA margin to 8.9%. Looking ahead to 2026, streamlined leadership with Natale Capri as the sole head of the business unit, cost optimization initiatives and already signed M&A transaction will provide additional growth momentum in 2026. Last but not least, let us focus on our business unit technology. Against the macroeconomic backdrop characterized by short-term uncertainty and delayed investment decisions, the business unit delivered resilient results around 2024 levels. The business unit further focused its portfolio. We completed 5 strategic acquisitions within the Scientific Solutions segment. The share of our business line, semiconductor and electronics increased highlighted by the integration of CLMO in Malaysia and Taiwan, while the business line precision machinery also grew, driven by the strong performance with key clients. We also divested our cable business in Australia and Taiwan, focused more on consumables and services, and it's achieved very strong digital sales growth. In 2026, the business unit will continue to capitalize on consolidation opportunities in Asia Pacific and other regions. With a promising business development pipeline, the business unit is well positioned for a stronger year ahead. Now I hand over to Ido who will guide you through our financial results in more detail. Thank you very much. Ido Wallach: Thank you, Stefan. Thank you, Till. I would like to extend my warm welcome to all of you also from my side, especially for those of you who are able to join us today. I know that your time is valuable, and thank you for spending it with us. I am very pleased, as Stefan was to share more details about our 2025 results. As always, to best reflect the comparability of our operating performance, I will also focus on our results at constant exchange rates. The global economic environment in 2025 was marked by heightened uncertainty, particularly in the first half of the year. Against this backdrop, we are particularly pleased to have once again demonstrated the resilience of our business model and our ability to navigate challenging conditions. We have proven this during the pandemic shutdowns in the postpandemic inflationary environment, and we confirm it once more throughout 2025, as reflected in our key financial metrics. Net sales growth amounted to 2.9% at constant exchange rates. Core EBIT increased by more than twice the rate of net sales at 6.7%. Core EBIT margin increase of 0.1 percentage points to 3.2%. This represents the fifth consecutive year of core EBIT margin expansion. Core profit after tax stood at CHF 226.4 million, an increase of 3.3% at constant exchange rates. Building on our asset-light business model, we generated CHF 215.5 million in free cash flow. This represents a cash conversion of 95.2%, the sixth consecutive year above our target of at least 90%. To sum up this section, we have once again delivered as predicted, top and bottom line growth, margin expansion and substantial cash generation. Let us now examine the composition of our net sales and core EBIT development in more detail. Organic net sales growth reached 2.5% marking growth acceleration in the second half. The step up from 2.1% in the first half to 3.6% in the second half was particularly evident in business units health care and consumer goods. M&A contributed 0.4% to our growth. Combining organic and M&A, our net sales growth at constant exchange rates totaled 2.9%. The appreciation of the Swiss franc negatively affected net sales by 3.1%. This figure however is slightly smaller than 3.8% negative impact recorded in 2024. Let us continue with the development of our core EBIT. We are pleased with our continued core EBIT growth. We grew our core EBIT organically by 5%, twice the rate of our organic net sales growth and driven by our intentional focus on high-margin businesses, cost efficiencies and the scalability of our business model. M&A added 1.7% to core EBIT growth, also ahead of its contribution to top line growth, and validation of our strategy to acquire higher-margin businesses. All business units contributed to core EBIT expansion throughout M&A, and we are confident that profit contribution for M&A in 2026 will exceed that of 2025. Net sales growth, combined with continued strong focus on value-added services, operational excellence and resource optimization delivered an overall core EBIT margin improvement of 0.1 percentage points. Similarly to net sales, the translational FX had a meaningful and negative impact on our core EBIT amounting to minus 5%. The investment materials that we published on our website today include details of the items that we consider nonoperational of a one-off nature or in short, noncore. The main items that fall into this category in 2025, our restructuring cost of $7 million, onetime project cost of CHF 3.9 million and disposal of trademark licenses to the tune of CHF 1.8 million. To wrap up the core EBIT section, it stood at CHF 349 million, representing another landmark achievement in the 160 years history of DKSH. The sustained long-term effects of our diligent strategy execution, the attractiveness of the business we're in and the resilience of our business model become very evident when we review performance metrics over a 5-year period. We successfully and consistently convert our operational achievements into financial value creation for business growth, cost controls and return on invested capital. Since 2021 in constant exchange rates, our net sales increased by a compound annual growth rate of 4.2%. This is higher than the average annual weighted GDP of our markets. Our core EBIT rose at an even faster upward trajectory of 11.6% CAGR. Consequently, our core conversion margin defined as core EBIT as a percent of gross profit increased sequentially. Having exceeded the 20% mark in 2024, we lifted by further 70 basis points to 21.4% in 2025. Furthermore, our core EBIT margin followed a similar upward trend. The 3.2% core EBIT margin in 2025 correspond to a total of 60 basis points margin that we delivered sequentially over the last 5 years. I would also like to highlight to you today the significant improvements that we have achieved over the past 5 years in the area of logistics and distribution. By diligently focusing on operational excellence and leveraging digital tools, including AI technologies, we decreased our logistics and distribution costs by around CHF 35 million, thereby supporting our core EBIT margin by 30 basis points over the past 5 years. A key source of our resilience and agility to respond to ever-changing market conditions lies in our low-risk asset-light business model. We operate primarily with leased offices, lease distribution centers and leased transport fleets. This becomes apparent when looking at our capital expenditure. It's still between 0.3% and 0.5% of net sales across the last 5 comparative periods, with a very lean level of 0.3% maintained over the last 3 years. Building on our ongoing efforts to drive efficiencies across the organization, we are proud to report that we optimize our working capital even further in this reported period, matching the 8.6% of annual sales recorded 2 years ago. Subsequently, over the same period, we delivered constant and high free cash flow, exceeding our objective of 90% conversion in each one of the last 5 years. To sum up, our year-by-year results demonstrate once again the high quality and predictability of our earnings, sustainable in nature, repeatable in execution, and mirrored by strong cash generation. Let us now move on to our balance sheet. Building on the financial performance achieved in 2024, we further enhanced the quality of our balance sheet and returns in 2025. Core return on equity increased by 30 basis points year-over-year to 12.4%, reflecting stronger profitability and very disciplined capital allocation. We continue to operate with a positive net cash position supported by an efficient and disciplined deployment of liquidity. At the same time, we maintained a high core RONOC close to 20% evidencing our sustained focus on value creation and capital efficiency. We operate a low-risk asset-light business model that drives a high and consistent free cash flow for our capital allocation. In 2025, we funded 9 acquisitions while distributing a higher ordinary dividend to our shareholders, all with existing cash. 2025 was a 12th consecutive year of progressively higher ordinary dividend. We also reduced our gross debt position by almost CHF 50 million, which resulted in more than CHF 4 million savings on interest expenses in 2025. With an improved equity ratio of a 1 full percentage point to 33.1%, we maintained a significant leverage headroom to grow our platform through industry consolidation. As we already shared in the past, we continue to carefully assess deals and only acquire if we find them value accretive, scalable and available for a reasonable price. Let me also provide you with some additional financial indications before we return to Stefan to elaborate on future prospects. In terms of M&A, we estimate that our recent acquisitions will contribute around 0.8% to net sales in 2026. This is based on acquisitions which we have closed until now. We expect more deals to materialize in 2026 and naturally, those will provide further growth upside. While the currency development remains volatile, we expect a slight negative FX translation impact, assuming December rates prevail for the remainder of the year. Tax rate, our 28.7% tax rate on core earnings in 2025 was at the upper end of our midrange of 27% to 29%. We continue to guide this range for 2026. Capital expenditure is expected to remain between 0.3% to 0.4% of net sales for the full year. With that, I would like to thank you again for your attention today and then over back to Stefan. Stefan Butz: Thank you, Ido, for the comments on our financials. Our results reaffirm the robustness of our business model and reinforce our role as a reliable anchor for clients and customers even in times of change and challenges. Before we come to the outlook, I would like to comment on the changes in our Board of Directors. Andreas Keller, Member of the Board of Directors since DKSH founding in 2002 will not stand for reelection at the next AGM. Andreas Keller joined Diethelm & Co in 1976. He initiated and led the merger of the 2 Swiss trading companies Diethelm and Edward Keller in 2000 and supervised the creation of DKSH in 2002 together with Adrian, Keller and others. The Board members and all my colleagues from the Executive Committee wish him continued success in his future endeavors and delighted that he as the Chairman of the Board of Directors of the Diethelm Keller Holding, will continue to be connected to DKSH. We are all very pleased to propose Julie von Wedel-Keller as a new member of the Board of Directors. As a direct descendant of the Keller family, her election as the fifth generation would ensure continuity and stability, underlying the family's long-term commitment to DKSH. Looking ahead, we remain confident to deliver sustainable core EBIT growth and reaffirm our midterm road map. We expect core EBIT in 2026 to be higher compared to 2025. As always, this outlook assumes economic growth in Asia Pacific exchange rates to prevail at current levels and excludes any unforeseen event. Asia Pacific remains the most attractive region for global trade, highlighted by Asia's resilient growth of expected 4.6% in 2026. Recent GDP forecasts indicate strong economic growth in Asia Pacific, driven by less significant tariff impacts and Asia's pivotal role in transforming global trade. With 2/3 of the world's middle class expected to reside in Asia by 2030 and its leadership in future industries like AI, the region is well positioned to reshape global trade alliances. Strong export dynamics and intraregional trade will continue to support the economic momentum across the rapidly growing Asian economies. DKSH remains very confident in Asia Pacific's long-term potential. Supported by its resilient business model, we are well positioned to benefit from favorable long-term market industry and consolidation trends in Asia Pacific and beyond. With that, I thank you for all your attention and invite you now to address your questions in our Q&A session. Thank you very much. Till Leisner: Thank you very much, Stefan and Ido. We will start the Q&A session, and we'll begin here in Zurich, give Gian-Marco on the first floor, the opportunity to kick it off. Thank you. Gian Werro: Thank you. Three questions from my side, if I may. The first one is on the consumer segments. There, we can really see a trend in the change -- a change in the trend about the top line development, also the margin development. I remember from recent discussions that there was quite a bit of an issue that Western consumer companies had a problem really to diversify themselves, especially in the food business. Is this also related now to trend change that you observed maybe in APAC that those brands become more powerful again? And then the second question is on the cost optimization, interesting that you mentioned efficiency improvements with AI on the growth as well. So I would really wonder if you could quantify maybe at this point in time already from a growth perspective, what opportunities you see there to increase your revenues? And then also, of course, your improvements in the logistics costs have been impressive, I think, with the CHF 35 million that you mentioned. But on the other side, you also had some FX tailwind in this perspective, reducing your FX overall weight. So I would wonder this question by how much have your logistic costs have really reduced organically? And how much tailwind did you have from FX? Ido Wallach: Okay. Thank you, Gian-Marco. Good to see you, and I'll start with -- because many of the questions were more on the financial side, and Stefan will chip in. On the consumer goods we -- well we serve more than Western suppliers. We have a fair bit of Japanese Asia Pacific suppliers. So it's no longer the case of just Western DKSH bringing Western goods into Asia. We have -- I think the change that you see is coming out of the strategy pivot that we announced in Capital Markets Day where we said that gradually, we'll move from better before, bigger to better and bigger business for consumer goods. We have done -- we have said that we are going to look at increasing our distribution, increasing our sales force efficiency, focus on higher premium categories. And what you see in the last 6 months is realization of the strategy. We still expect the consumers to be muted to foreseeable future. We know what's going on in the world. It's also what the big consumer goods companies are publishing so far, those that are published for this year. So perhaps not yet declaring victory, but very, very encouraged by the results that we see in the last 6 months. On the profit side, I think it's not new news because if you go back to 5 years ago or 2019, so that's 6 years ago, the consumer goods was at 1.7% margin. We are now at 2.7%. We have then launched a strategy to get to 2.5%. We've already delivered that last year at 2.6%. So I think on the EBIT side growth, that's not new news, and that we have achieved through the various savings focusing on more profitable clients and what brings me to your second question, which was logistics and distribution, which, of course, being one of our bigger business units with the one that is delivering the bigger boxes because the health care tends to be -- medicine tends to come in smaller boxes. This is where the bulk of the saving was made. It is true that the number reflects FX, but if you look at our annual reports over the last few years, you'll see that the -- unfortunately, because of the strong Swiss franc the -- in Swiss franc level, the sales are at CHF 11 billion over the last few years. And the improvement is of 30 basis points over this CHF 11 billion, which means that these are pure 35 at current exchange rate savings to our bottom line from logistics and distribution. We have done that from significantly automating and digitalizing our warehouses. We have done it for rerouting into more efficient and packing more into each truck which reduce our costs overall. And this is the main story behind those savings. I think your other question on AI was how it can translate also into revenue growth. And that's a very rich opportunity out there, which we are yet to fully capitalize. Stefan Butz: Maybe a few remarks on that one, Gian-Marco. As you know, we are sitting on a ton of data with the hundreds and hundreds of clients. We have thousands and thousands of customers and almost millions of different SKUs. This creates a huge amount of complexity on a daily basis. If you want to optimize which products go in what stores, what are the perfect sales routes and customer visits for our thousands and thousands of sales agents. And here, clearly, AI is an opportunity to look into the data and within minutes, give recommendations how you -- how a salesperson can optimize the visits of customers, what products he or she best recommends to our clients, give recommendations in terms of pricing on shelf location, et cetera. And that is where we believe there's a significant opportunity to further accelerate our top line growth. And then on top of that, obviously, we have many internal processes which can, in an accelerated way, digitized and supported by AI at the end of the day to save manual labor. But it's too early to tell. We have now 14 pilots, which are already running within the organization and another 15 will be rolled out in Q2 and maybe in the second half of the year, we can give you further feedback in terms of potential, especially the saving potential, which could be achieved by those projects. Michael Foeth: I am Michael Foeth, Vontobel. My first question is on the health care business and the shift towards more or higher margin businesses? If you can comment on that and where you stand in that road map. And if at one point, you should see a further acceleration here actually in the -- in that progression? And the second one, actually very much similar to what was just asked on AI. On the real results in terms of efficiency or productivity gains, if that is something that you expect to be reflected on the margin progress in future years because you're still basically obviously at the same midterm ambition there? Or if those gains are effectively then basically passed through to your customers over time, how do you expect that to play out? Stefan Butz: Okay. Let me start with the first question regarding healthcare. I think you have seen that over the last 5 years, continuously, we were able to increase the margin in the healthcare business by 10 bps. And that is rightfully as you say, driven by a higher focus on high-margin business in the portfolio. The trend for outsourcing, full commercial outsourcing, that means that we also run the full sales and marketing function on behalf of the client is continuously increasing, and we are gaining some very strong market share and new business with our client base. A few years back, the contribution from commercial outsourcing to EBIT was 40%. Last year, it was slightly over 50%. In 2025, we moved that to 55%. And on top of that, the contribution of our own brands business is also continuously growing. So right now, we don't foresee an end. We rather believe that we can further accelerate the share of commercial outsourcing over the years to come and can confirm the midterm outlook that every year, we are accelerating the margin also in healthcare by 10 bps year-over-year. Ido Wallach: Yes. On the AI potential for cost, revenue and ability to pass on some of the savings to our suppliers. A key component of our business is to manage complexity that our suppliers don't want to or cannot at the same economic efficiency that we can. In many of our jurisdictions in Southeast Asia, bureaucracy is still part of daily life. A lot of paperwork when we sell, buy, when you file for taxes, when you do everything, which is regularly required. So our business has a fair bit of administration of those things. And over the years, even before the AI revolution, which has just started, we have moved a lot of those repeatable tasks into our shared services center in KL. Our global IT team is based there and also the financial services are based there, where we process a big part of what is happening in the countries over there. The AI revolution offers us to make that a lot more efficient than before because we now apply all those tools and machine learning on paperwork. And we honestly -- the full potential is yet to be understood and realized but it is going to be big because by definition, this solves what human repetitive tasks are currently doing. It is probably too early for us to increase the guidance of 10 basis points per year, which has been our guidance for several years now. We have delivered this year. We have delivered the year before. We actually delivered for 5, 6 years now. And we also delivered in 3 of the business units in -- out of the 4 in 2025. So we'd like to continue with this guidance. Some of those savings, we will invest back in our business also in IT and in other elements that we would like to invest. And in the future, if we see more, we will, of course, communicate a change of that guidance. Chiara Di Giammaria: Chiara Di Giammaria from Berenberg. I have 2 questions, if I may. The first one is on Performance Materials. So I guess, in the industry in general, one of the main concern is the Chinese competition. Can you explain how you are protected from this? And the second question is on the USD denominated sales. If you can share a split -- so how much more or less of your sales come from the USD sales? Stefan Butz: Yes. Thank you very much. Look, if you -- very clearly, the chemical markets are being challenged now since 3 years. The difference between our setup and the setup of many of our dear competitors is that 2/3 of our business is in Asia. We have very good and very strong connections to Chinese suppliers, and we also distribute business within China. So close to 8% of our overall PM business is within China. And we are very successful in Asia across the board because we have a very broad customer base and very deep and long relationship with those customers. So we currently don't see significant challenges of Chinese player in Asia. And that was the reason why also in Asia, we were able not only in this challenging end market environment to deliver over 5% of growth. As you might have recognized, we were also able across the full globe of our operations to increase the gross margin and to increase the EBIT margin. In terms of the sales in North America, this is under 8% of the total business. But obviously, if you do the math, you will see that also in Europe and in North America, our chemical business is also being challenged. But Asia is very strong, and we expect a very solid performance also in 2026 in Asia in Performance Materials. Ido Wallach: With regard to the share of U.S. dollar sales, it's actually very small. It's about 1% to 2%. But I would also like to add that we -- our currency risk is a translational risk. In terms of transactional, we hedge all our -- everything that we buy in non-U.S. dollars and sell in U.S. dollar, we hedge on the rate that ensures the margin that we make on the deal. So we only suffer translational, which has an impact. Till Leisner: The next question in the room, please. For the time being, no question in the room, operator, can we please have the questions from the call. Operator: The first question comes from Nicole Manion from UBS. Nicole Manion: A couple for me, please. Firstly, just a follow-up on Performance Materials. Could you comment maybe on how trends developed through Q3 and Q4 and how you've seen things evolve so far in early 2026. And then the next question, could you talk a bit about the tariff environment in, I guess, in India and China within APAC, particularly on the pharma side? Anything you're sort of seeing there in terms of impacts? And then perhaps just more generally on inventory levels. It looks as though group stock turns are still 7x to 8x. But within that, can you comment on any regions or products that you think are still elevated? That would be very helpful. Stefan Butz: Nicole, can you please repeat your second question on was that the impact of tariffs? Did I understand that correctly? Nicole Manion: Exactly. Yes, if you could just comment on anything that you've seen particularly, I guess, in the region in India and China, maybe on the pharma side, if there's any impacts that you can call out there? And then, yes, the related question was just about inventory levels in general. Stefan Butz: Okay. Maybe then I start with the first 2, and then Ido is commenting on the inventory. So yes, I mean, Performance Materials, it was a very rocky year 2025. I'll start with Q1 where we have seen some good developments. In Q2, we discussed it during the half year results was a complete disaster after the uncertainty being created with all the tariff discussion. Then in Q3, actually, there was a bounce back happening. So we had a very strong Q3, whereas then in Q4, there was a more normalization and the results were slightly negative across the full portfolio. Looking into 2026 and maybe a few of you have seen that there is some very light optimism coming back to the market also triggered by a report from Goldman Sachs last week. We are optimistic, especially for our Asian business in 2026. Regarding the tariffs, I would like to summarize it in a way that at the end of the day, I think everyone recognized that the impact, especially for Asia will be more limited than what was originally feared towards the end of Q2. What we do see is that the supply chains are moving slightly and there is a decoupling from China into Southeast Asia. You just have to look into the GDP growth rates in Southeast Asia for the second half of 2025 as well as the outlook for 2026 where you see there's a very strong development in Vietnam, which is out of the material economy, the fastest-growing one, where I think we can expect up to 8% GDP growth this year but also Malaysia is doing very well. Singapore is doing very well. Taiwan is forecasted to do very well in 2026. And what I would really like to highlight is also Japan. We have high expectation in terms of Japan. I think there is a giant which is being re-waked and we have seen already some good development in 2025. And I say with the political environment there, we can expect a further acceleration coming out of Japan. And yes, then I would hand over to Ido regarding the inventory level. Ido Wallach: Nicole, just specifically on your question on the pharma business in India and China, we actually had a very solid year in those jurisdictions in this category. So we don't see the effect, as Stefan just mentioned. I did not quite get the question about the inventory. Can you please repeat it? I'm sorry that the line is not great today. Nicole Manion: Yes. Sorry, no, I was just asking it looks as though stock turns for the group are around, I think, 7.5x. But I was just asking if there are any regions or products that you think are kind of elevated within that or anything interesting to call out on a regional or product basis, essentially, just any detail? Ido Wallach: No, I think that overall, our inventory level is a very healthy level. And so is our working capital, as I mentioned before in our -- in my speech. There's -- if there's anything in particular to report is that it's very lean. And I think we're going to start the year with the right level of inventory and good quality inventory, meaning low level of excess or bad inventory. So we're quite pleased with the achievements there across all the business units. Operator: The next question comes from Jon Cox from Kepler Cheuvreux. Jon Cox: Just on consumer, just to come back to that, you're talking about encouraging results coming through in consumer in the second half. Can you just talk us through that a little bit just in terms of maybe the countries you're seeing improvement or which parts of consumer is seeing the improvement? Because obviously, the overall economy and a lot of your big markets, notably Thailand hasn't been great. And I'm just wondering if you could talk a little bit about what those improvements are a bit more specifically. And then just to come back to Performance Materials, you're talking about Asia should be pretty decent this year. I can see you're a bit loath to talk about the U.S. and Europe. Are you seeing any signs of improvement there at all. And I'm just wondering, is the weakness really in the industrial segment, and it's really about the Chinese competition. Or is it across the board and it's not just the Chinese competition, it's just businesses in general, being pretty nervous. Ido Wallach: Thank you, Jon. I will start with the CG question. Stefan will follow on PM. I think in the same countries as Stefan mentioned before, that have been quite successful for us in both PM and Healthcare also successful in CG. These are core markets. Vietnam, Malaysia and Singapore had a particularly strong year for CG. You're right to point out that things are a little bit more lukewarm in Thailand. But I would also like to say that over the last 3 years, we have outperformed the overall GDP in Thailand. So some slowdown is something that we were going to expect in 2025. Certain categories, I think Beauty Care is coming back. Also, food and beverage are coming back. What we see is consumers are going back to brands that they can trust and value, okay? So we're not talking necessarily about higher value, lower value. But after a certain shock 2 years ago from the inflationary pressure, they're coming back to brands because they -- this is what they trust. So overall, slightly stronger consumer confidence, but it's very volatile times. I mean we cannot be overly optimistic at this stage. We are optimistic though. Stefan Butz: Yes, Jon. I'm talking about Performance Materials. First of all, in the U.S., we see really very, very light indications of -- you might recall that our business there is primarily an industrial specialty chemical business related to the so-called K segment, which heavily goes into the housing market. There are some very soft early indications that there is actually a shortage on housing in the market and some investments are rolling into the market also in terms of renovation. So I would say maybe we see the light at the end of the tunnel, but there is still some -- there's still some tunnel right? In terms of our European business in Europe, we have a very healthy life science business across the board, which is in Europe, more resilient than the industrial business, which is further hit by the overall economic environment and the production is just diverting out of Europe, which is also an effect. I think just focusing on some Chinese materials or ingredients is a little bit shortcoming. And in that summary here, I would also like to point out that we have a very healthy client base across our portfolio from American or North American clients, European clients as well as Asian clients, which is also giving us some healthy stability. And by the way, one last comment is that within Asia, our industrial specialty chemical business was in Asia, even growing slightly faster than our Life Science business, which is underlying my statement before that there is some production is moving into Asia. Jon Cox: Just want to just keep going. Just on the technology business, that seemed to have a pretty soft second half. And I know maybe your exposure is somewhat limited. Taiwan is doing really well. There's a lot of stuff going into AI and CapEx and that sort of stuff. Are you not really exposed to that, and that's why you're not seeing much of a pickup in that technology business? Stefan Butz: We do have some exposure in our -- with our semiconductor business into those markets. not only in Taiwan, but also in Singapore and Malaysia, and that is where we still have seen some business growth but there was just a huge amount of uncertainty in the technology sector in 2025 and many investments and orders were delayed and canceled. Having said that, if we look in our pipeline of 2026, what we have signed up for 2026 and the business, which is moving from '25 into '26 because of the delays or the pushover plus some additional business coming out of the investments in data centers, even in data centers in Thailand is giving us the optimism that in our presentation here, we talk about a strong rebound of our technology business in '26. But '25 was, yes, was not a great year for them. Till Leisner: Thank you for the questions, Jon. Operator, is there any further question in the call? Operator: So far, there are no further questions from the phone. Till Leisner: And an opportunity here in Zurich. Gian-Marco has a few more questions. Gian Werro: Gian-Marco, Zürcher. I'll just take the opportunity to ask 2 more questions, if I may. First one is you mentioned for the Technology business, some promising business development pipeline for a better 2026. So can you elaborate a little bit on that, that would be interesting. And then your own Healthcare business, I assume according to your slides that you kept the EBIT margin there quite on a high level, over 20%. And if I assume also that this grew by around 5% or so, then, however, this would mean over CHF 2.5 million additional EBIT for Healthcare. Is that a fair assumption? And why then despite the strong performance that you had in Healthcare was the EBIT growth in Healthcare not stronger? Stefan Butz: Okay. Let me start with technology and then Ido can drill down into the EBIT margin analysis. In technology, as I was just saying before, there are 2 things or a few things happening. One is we have seen some projects, some investments, which were being delayed into 2026. So that is obviously giving us some good backlog for this year. Secondly, especially in scientific instrumentation, where many of our customers were a little bit cautious we have some good order intake for 2026. And then last but not least, as mentioned already in the question from Jon, there is significant investments also going into data centers where we supply, obviously, not the core business, but some equipment down to even generators and whatnot, where significant investments are going to happen in '26. And if you put those 3 together that is building the strong backlog and pipeline we have for '26, giving us the confidence that we say this business is bouncing back material from the, yes, disappointing results in 2025. Ido Wallach: On the own brands in Healthcare, first of all, we always welcome your questions, so you can do even more than 2. We are being a little bit victim of our success also in the other categories because we had a very good year in commercial services and full agency in healthcare that are growing proportionately as much as own brand. Hence, the overall mix did not change. In specific own brands, we had some difficulties. Myanmar had been traditionally a very strong market for us for own brands, and that is a very soft market at the moment for geopolitical reasons that I'm sure you're aware. So we have lost some business there. The rest of the own brand portfolio has performed quite well, but that's why it explains it didn't grow overall from the mix. The math that you made is correct. If we can grow that at the proportion that you mentioned, we will grow disproportionately our EBIT. And yes, those are fine jewels that we are constantly searching to buy and expand. And when we have the opportunity, we do that. We did it a couple of years ago with one of our acquisitions. And hopefully, we'll find something in 2026. Till Leisner: Thank you, Gian-Marco. Any more questions in the room? Seems not the case. Then from our side, big thank you for all of the participants today here in Zurich, but also in the conference call. Wishing you all a good rest of the day, and we are all available also here in Zurich for questions afterwards. There's a little bit of catering. So please stay with us, and we are happy to engage. Thank you so much.
Operator: Hello, and thank you for standing by, and welcome to today's Coca-Cola Europacific Partners Q4 and Full Year 2025 Trading Update Conference call. [Operator Instructions] I must advise you this conference call is being recorded today. I would now like to hand the conference over to Vice President of Investor Relations and Corporate Strategy, Sarah Willett. Please go ahead, Sarah. Sarah Willett: Hello, and thank you all for joining. I'm here with Damian Gammell, our CEO; and our CFO, Ed Walker, who will make prepared remarks followed by Q&A. Before we begin, our cautionary statements. This call will contain forward-looking management comments and other statements reflecting our outlook. These should be considered in conjunction with the cautionary language contained in today's release as well as the detailed cautionary statements found in reports filed with the U.K., U.S., Dutch and Spanish authorities. A copy of this information is available on our website on which a full transcript will be made available as soon as possible. Unless otherwise stated, metrics presented today will be on a comparable and FX-neutral basis. They will be presented on an adjusted comparable basis reflecting the results of CCEP and our Australia Pacific and Southeast Asia business unit, APS as if the Philippines transaction had occurred at the beginning of last year rather than in February when it completed. Now over to Damian. Damian Gammell: Thank you, Sarah, and thank you all for joining us today. First, I would like to thank all our colleagues for their hard work and dedication to this great business. Our strong brand partnerships and our people continue to drive us forward whilst making CCEP a great place to work. We are executing on our value creation strategy. Over the last 3 years, we've generated EUR 4 billion of value for our retail customers, returned EUR 4 billion to shareholders through dividends and buybacks and delivered a healthy 90% TSR. We are a consistent top and bottom line compounder and generate significant cash, enabling core investment and growth. 2025 has been another strong year for CCEP, leading the way in FMCG and creating value for our customers across our markets and in our innovative and growing categories. We delivered robust top line growth, especially in our away-from-home channel and grew market share. I'm particularly pleased with our progress on mix, which Ed will talk more to later. Productivity efficiency supported resilient profit growth, we generated strong free cash flow and grew shareholder returns, all while having laid the foundations for 2026 and beyond, including delivery of strategic portfolio changes, which are now largely behind us. Across all key financial metrics, full year 2025 has been a record year for CCEP, as we approach our 10th birthday in May for revenue, profit, free cash flow and returns. Revenue reflects strong execution and solid revenue per case gains. Volumes grew in both home and away-from-home with strong growth in Zeros, up around 6%. This helped offset portfolio changes, softer trends in Indonesia and softer volumes in Germany and France, impacted by the higher sugar tax. The category remains really attractive for our consumers and customers and indeed is as competitive as ever. Price relevance across all locations remains key with value continuing to play a role for shoppers in our developed markets. In our emerging markets, we continue to focus on entry-level affordability to build the category. In 2025, we continue to build our total beverage offering, leveraging our diverse brand and pack range and our capabilities in revenue and margin growth management. The NARTD category remains profitable and growing, up around 6% in value terms, that included volume growth with Europe up 2% and APS up 5%. We were the #1 in FMCG with value share of 20 basis points, driven by APS. OpEx efficiency supported operating profit growth of 7.1% with margin expansion both in Europe and APS. This all supported strong free cash flow of just over EUR 1.8 billion after investing well over EUR 900 million in capacity, coolers, technology and digital. And we returned just under EUR 2 billion to shareholders, including EUR 1 billion from last year's buyback program. Ed will cover the financials in more detail shortly. Our performance reflects our great people, great brands, great execution, all done sustainably. Now I'd like to take a quick look back at each. We were again recognized as Top Employer, and we welcomed over 100 new colleagues via our new shared service center in Manila, a key enabler for future productivity. And we're continuing to build the capabilities of our teams. For example, we're accelerating digital and AI training to equip everyone at CCEP with the mindset, skills and the confidence to unlock value from our investments in tech and AI. A little bit more on that later. Now on to our great brands. Just to touch on a few points given the detail in today's release. We started making bolder moves with Coke in both original taste and Zero Sugar with new eye-catching and impactful campaigns. In Diet Coke, we launched This Is My Taste, supporting an improved performance, particularly in its biggest market, GB. In flavors, new variants and zeros are an increasing focus. For example, Sprite did well supported by the new Green Apple X, and new listings. Monster had another terrific year with volumes up nearly 20%, driving share gains of over 200 basis points. New launches like Juice Rio Punch, the runaway success of Lando Norris, the enduring success of core variants and more coolers supported the performance. In ready-to-drink tea, the Nestea transition in Iberia was a success with Fuze Tea now leading the category. The ARTD category grew by around 10% in value, and we grew share. We introduced multipacks in grocery, launched Bacardi and Coke in flavor variants of the wider offerings, and we commenced the transition away from Suntory. And finally, the sports category continued to perform well, driven by Aquarius in Spain and Powerade in Australia. Great execution focuses on selling to more people more often through increased penetration, incidents and spend per trip. With more volume, we leverage our revenue and margin growth management to create more value, delivered every day by our field sales force of over 12,000 colleagues. This slide just gives a few examples. Through amazing displays, social media channels or increasingly via retail media, our own MyCCEP customer portal closed the year delivering a huge EUR 2.5 billion of CCEP's revenue. We've made great progress with rolling out more Coke and Monster coolers to drive greater distribution and impulse purchase, placing over 75,000 more coolers in 2025. We continue to focus on choice, including premiumization, be it through mini cans in France and Spain, mini PET in Australia or more returnable glass. And with affordability remaining relevant for more consumers, we're also focused on delivering value for money through extra fill on PET or extra cans in our multipacks. And now on to sustainability. We remained on CDP's Climate A list for a 10th year. Packaging collection progress continued, including the imminent launch of DRS in Portugal and preparing for GB next year. And we invested in new cleantech solutions via our CCEP Ventures. This all contributed to our decarbonization journey, proof of which you see here. Now over to Ed to talk about the financials in a little bit more detail. Ed? Ed Walker: Thanks, Damian, and thank you, all of you for joining us. We delivered revenue of EUR 20.9 billion, an increase of 2.8% with comparable volumes marginally ahead. For the year as a whole, transactions were in line with volume, though ahead in Europe. The trend, however, improved in quarter 4 with immediate consumption of single-serve volumes running ahead of future consumption formats. We delivered strong revenue per case growth of 2.9%. Over 1/3 of this came from brand and pack mix, which we're really pleased with, driven by areas such as immediate consumption growth, more coolers and the growth in Monster. Our revenue per unit case growth also reflected headline pricing and promotional optimization whilst ensuring affordability on key packs and the impact of the French sugar tax increase. Cost of sales per unit case increased by 2.7%. This reflects our increased revenue per unit case, driving higher concentrate costs through the incidence pricing model and the increase in soft drink taxes in GB and France. OpEx as a percentage of revenue was 22.1%, an improvement of 40 basis points, driven by continued productivity gains. These elements all combined to drive operating profit of EUR 2.8 billion, up 7.1% and an operating margin of 13.4%, an expansion of around 50 basis points, including an improvement in our gross margin. We delivered earnings per share of EUR 4.11, up 6.2% on a comparable basis. The share buyback drove EPS accretion, though this was offset by the expected increase in our effective tax rate to 26% and the higher interest as we refinance maturing debt at higher interest rates. Free cash flow remains a key priority, and we delivered another strong result of just over EUR 1.8 billion. This was after CapEx investment of nearly EUR 1 billion in key projects such as new aseptic capabilities, a new canning line at our Queensland site, the start of construction of a new site outside of Manila, new ARTD capacity, more coolers and the continued development of digital, AI and SAP S/4HANA. And our investment continues to deliver strong returns with ROIC up 70 basis points to 11.5%. And finally, we returned EUR 1.9 billion to shareholders through our dividend at EUR 2.04 per share and the buyback of EUR 1 billion. Before moving on to talk about productivity and cash, we wanted to highlight a couple of markets. Starting with GB, our largest single revenue market, which has just celebrated its 125th anniversary since the sale of its first Coke. GB had a fantastic year with revenue growing almost 6% and volume growth in both channels with away-from-home benefiting from several new customer wins like Arsenal Football Club, Fullers and Jet2. Our Zero portfolio saw another strong performance from Coca-Cola Zero and Diet Coke supported by Jamie Dornan, This Is My Taste campaign, and the Diet Coke and Cherry flavor extension. Given the greater size of the energy category versus other markets, GB enjoyed more benefit from the growth of Monster, supported by the launch of more multipacks for at-home consumption. Another top performer was Dr Pepper, where a push on Zero and the latest Cherry Crush variant helped the brand become the fastest-growing sparkling soft drink in Europe. Now to APS and Australia, which delivered top line performance, excluding alcohol, of an impressive 7%, its strongest growth for many years. Share gains in sparkling, energy and sports supported low single-digit volume growth, driven by Coke Zero in single-serve and multipack PET, Monster Ultra White and the new grape variant of Powerade. We also saw good growth in our coffee brand, Grinders, which supplies beans and ground coffee to the home and away-from-home channel. While we continue with the transition away from Suntory this year, the new ARTD brands aligned with the Coca-Cola Company are now entering the market, providing a great platform for growth. A bit more on that later. Now on to efficiency and productivity, where, as you know, we have a proven track record with a consistent reduction in OpEx as a percentage of revenue. Our current program will deliver between EUR 350 million and EUR 400 million of savings by 2028 and is on track. We continue to optimize our network. During the year, we reduced the number of distribution sites in Germany, consolidated production in Paris into our Grigny facility and closed 3 single-line sites in Indonesia. And as Damian mentioned earlier, we opened a new shared service center in Manila, enabling us to centralize activities, harmonizing processes and driving efficiency, all enabled by technology. Turning now to cash and the balance sheet. Another strong year of free cash flow generation with over EUR 1.8 billion translating into a healthy free cash flow conversion to net profit ratio. And within this, we invested over EUR 1 billion in CapEx and restructuring initiatives. The strength of our cash generation has driven sustained deleveraging with net debt-to-EBITDA of just below 2.7x, comfortably in our guidance range of 2.5x to 3x. Our debt has a balanced weighted average maturity of around 5 years. Given we refinance around EUR 1 billion per year, much of which related to the acquisition of Amatil when rates were lower, we do expect a modest increase in annual interest expense whilst retaining an overall low averaged and weighted average cost of debt of 2.5%. Which brings me on to our capital allocation framework, which is unchanged. We remain focused on ensuring we maintain a strong and flexible balance sheet, operating ideally towards the bottom end of our leverage range and with a strong investment-grade rating. Our guidance on capital investment is unchanged for 2026, and we continue to remain alert to value-accretive M&A, should an opportunity arise. We remain committed to delivering growing shareholder returns. These comprise our annual dividend payout ratio of around 50%, which grows with earnings, and we are pleased to announce a further EUR 1 billion share buyback to be executed over the coming year. Thank you. And now back to Damian. Damian Gammell: Thank you, Ed. Always good to hand over after a EUR 1 billion share buyback. So as you can see today, we're delivering strong results, but our focus is also for me on creating and winning tomorrow. We're winning business because we operate in growing profitable categories with meaningful share and unmatched scale and execution across our supply chain and most importantly, our frontline teams. Our geographic expansion from Europe into APS provides us with a powerful and diverse platform. We're scaling capabilities, investing behind our brands, with our partners and driving the impact of tech and digital from revenue right the way through to productivity, all whilst executing a multiyear ROIC-accretive investment plan that sets us up for long-term value creation. And above all, we remain committed to maximizing returns for all our shareholders. A brief reminder of the slide we shared before. Simply put, we are in the right categories. We are well positioned from a portfolio, channel and geographical perspective across 31 wonderful markets. And we've got meaningful share of our core NARTD, the largest in FMCG category in retail. We have the privilege to move, make and sell the world's best beverage brands. We have a total beverage portfolio that addresses all drinking occasions across the day. The category is growing, not just in total, but across all subcategories and even more so within Zeros. So having a Zero option for every occasion and across pack sizes too provides our consumers with a matchable choice making our portfolio more accessible than ever. Which brings me on to our revenue, margin and growth management strategy, which, of course, goes way beyond pricing as we continue to balance premiumization with affordability. We know that value is playing a role for a lot of consumers, but we also know they love innovation and excitement. As a category leader, we take the role of bringing this to the consumer, more taste innovation with new flavors, more pack innovation and more promotional innovation with more win mechanics and value add. All of this is brought to life with examples on this slide and those that follow, with plenty more to go for as we become even more sophisticated leveraging data, AI and insights. So now, what's in store from our brands in 2026? Starting with Coke. As I've talked to before, we need bolder moves to drive category volume. 2025 had plenty of highlights. But we've only just begun, and I'm really excited about what is coming this year with almost too much to put on one slide. High-profile activations linked to the FIFA World Cup, and the English Premier League are already in play. We are continuing to reinvigorate Diet Coke through the exciting The Devil Wears Prada movie sequel. And we have a number of packaging innovations like the Gen Z-focused graphics on the new 500 ml Coke classic can, new retro flavors like cherry float and a new black 007 identity for our caffeine-free platform. There's also lots to come across flavors and sports. More innovation, including sour cherry and apple is on the way for Fanta, focusing on faster-growing Zeros whilst stepping into Gen Z passion points through gaming platforms. You'll be seeing new packaging for Sprite with an icy explosion of sensory chill refreshment from a new fresh lemon mint flavor. In sports, we will see new flavor additions in Powerade, a new sports cap packs alongside World Cup activations. And BODYARMOR has just been launched in a variety of flavors in Spain and in New Zealand. I referenced earlier the strength of energy last year with strong share gains and volume growth in a category that has evolved from functional to mainstream with a broadening consumer appeal. There remains plenty of headroom for growth, and our focus is clear: more coolers, more distribution and more innovation. This includes Zeros, continues to drive incremental growth supported by great marketing assets. Lando Norris was the #1 energy SKU in Europe last year in retail. So let's see what happens with Viking Berry and others coming this year. We're also strengthening in ready-to-drink tea and in our alcohol ready-to-drink segments. Suntory distribution has now ended, positioning us for a stronger, more integrated platform whilst leveraging nearly 20 years of expertise in the category. While this creates a near-term headwind, it is the right decision for the long term. And more broadly across CCEP, there is so much more to look forward to this year including the launch of Bacardi Spice Rum and Coke. The Fuze Tea transition in Iberia I've already touched on, which I'm confident will only get stronger from here. And in Indonesia, Fresh Tea was relaunched with new flavors and a new look. Early days, but the Black Current variant closed this year as the #1 flavored tea, which now brings me on to Indonesia. Indonesia had a challenging year with the macroeconomic slowdown impacting consumer demand, affecting local and international brands alike. NARTD volumes excluding water, were down double digits, and our own volumes were consistent with that trend, albeit with an improving performance in the second half. Sparkling performed better with an encouraging exit rate supported by Zeros, where mix increased from 3% to 7%. Black tea, however, remained under pressure, although flavored tea continued to perform better. We continue to push on a pace with our transformation as we unlock the long-term opportunity for growth. We have a strong innovation and brand plan in place, focusing on sparkling and tea. And we've delivered major network change moving from 8 plants to 5, whilst optimizing our logistics through third-party partnerships. And despite a significant change again in [ gender ], including a new route to market, which I'll briefly talk to next, our people are energized by the changes being made, and we've been recognized again as a top employer status. Our new distributor-led route to market enables us to expand availability and optimize cost to serve. We've talked to this before. It is anchored in building a robust network of bigger and better distributors, partners with deep regional knowledge and strong ties to local communities, wholesalers and retailers. These distributors have true accountability, shifting from a service provider mindset to active sellers with skin in the game. We've grown our distributor base from 0 to 182 partners, operating across 300 distribution points now with a sales force of more than 1,700 people in the market and increased by around a quarter. Early results were encouraging, with more distribution points being gained on a sustained basis. The Philippines delivered another great year despite cycling strong comparable adverse weather. Unlike Indonesia, they are not immune from some of those macros I talked to earlier. However, revenue grew 3%, delivering record high sparkling value share of 77% supported by customer wins like the 1,300 strong Angels Burger chain. EBIT margins expanded by around 150 basis points, so well on track to its 10% target, driven by profitable top line growth and efficiency delivery. Ed and I were over there last month for the annual field sales rally, and you can really sense the high energy levels and optimism coming into 2026. We saw solid commercial plans led by Coke trademark where we expect Coke Zero to continue to gain momentum, having grown 20% last year. We're building on the energy opportunity, having really only entered the category recently. And to support our growth ambitions, we broke ground on the largest infrastructure investment to date, the new plant in Tarlac just outside Manila. As we've mentioned already, our CapEx investments include digital and tech, and we're investing more than ever in growing our digital capabilities and the use of AI. AI, particularly machine learning has featured widely across the business for many years, but it is accelerating. We're focused on areas in commercial supply chain and shared services designed to unlock growth, improve operations and enable smarter, faster decision-making. This includes optimization of promotional spend and enhanced demand forecasting to help drive growth and deliver better customer service. But also, AI in our operation is helping to maximize our asset utilization, whether looking at production schedules or assessing the impact of introducing new products to our network. We're also transforming how commercial teams access customer insights. First, through a significant investment to unify our data and now by using gen AI to allow faster access to complex queries under diagnosis of performance. Agentic input is a potential game changer for our sales force, and we have a couple of applications using agents. But really, our goal is to embed it in shaping and enhancing customer contact and support. Driving data and AI across CCEP is not simply a technology challenge. Of course, fundamental to all of this is exploration and learning. Our AI incubator allows us to gather and prioritize ideas from the business, creating an environment to experiment and test solutions before committing at scale. And as I mentioned earlier, we're getting our people ready, rolling out digital and AI training at pace for all CCEP roles to really change mindsets and ways of working. And all of this feeds into our midterm objectives, which remain unchanged. They reflect our confidence in the business. We believe that the top line guidance of 4% on revenue and 7% on profit is sustainable and achievable over the midterm. It provides the framework for us to invest in our business for growth, making us an attractive multiyear creation story. Which brings me on to our full year 2026 guidance, reflecting our current view of market conditions, touching briefly on areas by exception. We remain resilient operating in vibrant categories, even though the consumer environment remains challenging. In that context, we expect revenue growth of 3% to 4% driven by volumes and revenue per unit case. This also reflects the Suntory exit impact. We expect cost of sales to grow by around 1.5% per case. As you know, our concentrate costs are tied to our revenue per unit case growth. On relatively benign commodities, we are approximately 80% hedged for full year '26. We do continue to see inflationary pressures in labor within manufacturing partly offset by our efforts on efficiency. All other metrics remain the same as last year. And our new EUR 1 billion share buyback program will commence imminently to be executed over the course of the year. 2025 has been another solid year for CCEP, and I look forward to the same again in 2026, our 10th birthday year. We have a fantastic total beverage portfolio, and we're operating in growing categories supported by strong relationships with our customers and our brand partners. Our innovation pipeline is bigger than ever before, and we remain focused on value and affordability in Europe. Not everything is perfect. Of course, we continue to learn with even more focus on Zeros, driving more innovation at pace, bringing more magic to Coke Original Taste, and adapting even faster, leveraging tech to strengthen our pricing and promo efficiency. This is all backed up by investments. We're investing more than ever in top line growth and greater productivity to drive those expanding operating margins. Portfolio changes are now largely behind us, and we look forward to a more normalized outlook for the Philippines and an improving outlook in Indonesia. Our full year '26 guidance, combined with the growing dividend and a further EUR 1 billion of share buybacks demonstrate the strength of this great business and our ability to deliver attractive and consistent shareholder value. Thank you for your time. Ed and I would now be very happy to take your questions. And I'll hand the call back over to you, operator. Operator: [Operator Instructions] We'll go ahead with the first question. First question today is from Sanjeet Aujla from UBS. Sanjeet Aujla: A couple for me, please. Damian, I was wondering if you could just go through how Europe played out through the quarter, in particular, the exit rate through December? And it seems like the headwinds are really in Germany and France. What are you doing in terms of your commercial plans for 2026 to get those businesses to stabilize or back to volume growth? My follow-up is really for Ed, on free cash flow guidance. I think you're talking about at least EUR 1.7 billion, that would imply maybe flat to slightly down on the '25 base despite another year of talking about 7% EBIT growth. Can you just help us square that, please? Damian Gammell: Sanjeet, yes, I mean if I just look at the quarter, I mean, clearly, we exited it really well. We had a very strong Christmas campaign in Europe, summer campaign across Asia Pacific, so really happy with the momentum. Really happy with the execution we delivered in store. Had the benefit to be out in a lot of our markets and with more pallets on floor, more coolers and more product available and really strong pack communications. So I think this year, we really stepped up with the quality of our on-pack communication. So quarter started a slow, but clearly gained momentum as we got towards year-end. Yes, you're spot on. If you look at Europe, I mean, a lot of our markets were ahead of our expectations in 2025. Obviously, GB being the standard. And then on the other side of the equation, clearly, France and Germany were more challenged. I think the French situation is more transparent. Really, we had that tax increase on Coke Classic, which is a massive brand for us in France. To be honest, the brand performed stronger than I would have expected, given the size of the tax that we passed on to the consumer. So that was a positive, albeit it still was a drag on volumes. Clearly, as we move into 2026, we've got a number of activities going on in France. One is, a continued push on our great Zero portfolio. There's still a big opportunity in France around Zero and sugar-free. And then also, we're looking at our brand pack architecture around Coke plastic, given that new tax, and trialing some smaller pack variants to hit better price points, but also looking at value on our large 1.75 liter. So more to come on France, but I would say very transparent. Yes. Clearly, Germany was the other market. Really, we had a better second half in Germany, but clearly, the first half was quite difficult, mainly driven by higher promo prices, Sanjeet. So what we've seen is a number of our customers took up some promo pricing above levels that maybe for the consumer, given some of the macros, proved a bit more challenging. We did reinvest some more money and value in the second half of the year into Germany. That certainly helped. But obviously, making up for a slow first half was challenging as we got through. But again, the exit rate in Germany I'm pleased with, also pleased with the plans we have in place around that promo value proposition as we move into 2026. And Ed, do you want to talk about... Ed Walker: Sanjeet, yes, on free cash flow, so we're very pleased with 2025. We delivered over EUR 1.8 billion. And '26, we're guiding to at least EUR 1.7 billion, which is in line with our objectives. We are investing a little bit more on a net basis in CapEx in 2026 and 2025. And we see -- because we see opportunities to invest strong business cases with great returns. So we don't really want to constrain our ability to invest by quoting a number too high on the free cash flow. So we think EUR 1.7 billion is a good number to start the year with. Obviously, we'll review as we go through the year and should things improve, we'll let you know. Operator: We'll now move to our next question. This is from Bonnie Herzog, Goldman Sachs. Bonnie Herzog: I had a quick follow-up question on Europe. I guess wondering how big of a tailwind you're expecting from the World Cup? And any early sell-in ahead of the events as you work to increase activation? And then I do have a question on your guidance. Your top line guidance this year is just slightly below your medium-term targets. So just hoping to hear a little more color behind this and maybe the key puts and takes? And ultimately, what are you expecting in terms of the balance between volume growth and price mix? Damian Gammell: Bonnie, so maybe just to start with World Cup. I mean, as I hopefully demonstrated in some of the slides I shared this morning, we have a fantastic calendar of activity starting now. So if you're actually in our markets now, we've really tried to bridge the World Cup all the way through to the event itself. Also, we've got obviously the EPL, which is a massive asset for us in GB. So World Cup activations really starts now and will run all the way through to the event in July. So lots of on-pack activity, lots of win activity. I mean one point I touched on, as Ed mentioned it, we recognize value has been a key need for some of our consumers. What we really recognize that excitement and innovation is absolutely essential. So while we will offer value, we also know there's lots of consumers who want to engage with brands like our brands, that give them something a bit more, whether that's more on taste or package innovation or particularly more on great consumer promos. So winning tickets, guessing the goals at the Premier League, having a chance to secure only Coke Can assets for us is going to be critical as we build out FIFA. So from a consumer engagement perspective, we've got super plans right away through 2026. From the guidance side, it's really reflecting what we talked about in 2025. I mean, broadly speaking, if you look at the exits that we're dealing with in the Suntory space, very high revenue products. And effectively, when you put all that together, it's about 0.5 to 1 point of growth, right? So there's nothing else really beyond that and that we're just reflecting that in our '26 guidance because we know we'll be through it in '26. Beyond that, if you look at our performance last year, it was bang in line with our midterm guidance. So we still feel very confident about the 4%. And as you can see from our activity calender, there's a lot to support that and potentially, as we move forward, look to even beat it with a lot of innovation coming down the line. So nothing more really on guidance. It's just a pure reflection on the changes that we're already in the middle of. Ed? Ed Walker: And then, Bonnie, on your question about the shape of the '26 revenue, so we're expecting about 1/3 from volume, 1/3 from mix and about 1/3 from price. So we're very pleased, as we said earlier, in 2025 to see mix come back and play such a prominent role in the revenue growth. And we're looking forward to seeing that continue into '26. And as we talked about earlier, I mean, volume growth is critical for us in the long term and certainly the plans from a marketing and consumer and innovation perspective are all built around that volume growth for '26. So we expect about 1/3, 1/3, 1/3 for this year. Damian Gammell: Maybe just to build on Ed's point because I think it's really exciting. We've put a lot of effort into reenergizing away-from-home. We talked about that, I think, on all our calls last year. We put a lot of effort into more cooler placements. So it was a record year for us in 2025. And it's great to see that coming through in the P&L through mix. And we know that a sustainable 4% will be a healthy mix of top line volume, reasonable pricing and brand and pack mix. And that brand and pack mix sentiment was very strong in '25, and we're really happy to see that coming through. Operator: We'll now take the next question. This is from Edward Mundy from Jefferies. Edward Mundy: So just a quick point of clarification and then my question. So the clarification is that like the last 2 years or so, there have been quite a lot of sort of one-off technical portfolio changes, Cadbury, Fuse, Beam. If you back all these factors out, what do you think your underlying growth would have been the last 2 years? And then my question is really around the changing of the guard at the Coca-Cola Company. We've seen this both in Europe with Luisa, and then in Atlanta. What do you think this means, if anything, for CCEP's next chapter? Damian Gammell: Thanks, Ed. I mean we'll get a more accurate number than I'm going to give you, but all of the work we've done in terms of backing out all of those changes you talked about, which, let's be honest, will set us up for a stronger platform going forward. It's between 0.5 and 1 point of growth, right? So if you strip that out, we'd be bang in line with our midterm guidance. And that's what gives us confidence in reiterating our midterm guidance today. And also, we've just decided to reflect that in the 3% to 4%, bearing in mind, we already know that for a period of this year, we'll be at the final phase of that exit. When you strip it all out, anyhow that's what gives us a lot of confidence for '26 and beyond. We get bang on that 4%. And I think that's a great number given everything else that we're looking at. On your comments around the Coca-Cola Company and the system, I would say change is good with both Henrique coming into role, and then as you mentioned, Luisa in Europe. It's always a great time for us to get executives who've had experience outside of our markets coming in and looking at how we do things. Obviously, they learn, but also they can challenge, bring new learning from different geographies. I think that's one of the strengths of the Coke system is that, we can lift and shift and learn from different parts of the world. And as we've got a very diverse group of markets now from very developed, emerging right away to developing, having executives like Henrique and Luisa, who worked in multi-jurisdictions really helps us. So overall, those changes are good, brings new energy. And as I said, really new curiosity and learning, and I always think that helps any business. Operator: We'll now take our next question. This is from Matthew Ford from BNP. Matthew Ford: My question is just on energy. Obviously, you saw a very, very strong performance, 19% volume growth from energy in the year and you had various innovations. You've spoken in the past and today as well around the strong innovation pipeline next year and beyond. But obviously, the 19% growth was quite a bit stronger than we've seen over the last couple of years in the business. How are you thinking about the kind of the quantum of that growth next year and beyond? I mean, should we be expecting a similar level of growth? Or would you expect that to moderate after what was potentially a particularly strong year? Damian Gammell: Yes, it's been a fantastic category for us over a number of years. Some of that CapEx and cash, that Ed talked to, has gone into some more accounting lines to make sure we're ahead of the demand. So that's a really nice problem to have as a bottler, to be honest. I expect that category to remain in its kind of 2- to 3-year cadence of mid-teens. I think there's no reason why we don't see it on the back of a number of fundamentals. One, we still have a job or a work to do as a bottler in terms of distribution and bringing those brands to more locations on the back of higher cooler placements. The Monster organization is doing a fantastic job bringing really strong innovation, and we see that. I think I mentioned when we last spoke, I enjoyed a visit to our innovation lab and had a view of the innovation, not just for '26, but for '27 and our thoughts on '28. So that's going to keep coming. So all of that gives me confidence that the energy category will remain the leading NARTD growth category. We're well positioned. We're a share leader or very close to share leadership in all our markets. And on the back of that, I see those growth levels being maintained. Will it be another year of 20-plus percent? Who knows. It certainly has the potential. Will it remain at that mid-teen growth level? I see no reason why not. Ed Walker: I think one thing that's very encouraging as well is that about half the growth for energy each year comes from the core and about half the growth comes from innovation. So I think that's very healthy. It wasn't the '25 was just built on innovation and is a one-off. So yes, I think to Damian's point, we see there's no reason why the trajectory won't stay the same. Damian Gammell: And Zeros are playing a much bigger role, much bigger role, which also, I think, gives it more accessibility to a different profile to consumer and the taste profile on the Zero products is fantastic. So yes, a lot to be positive about. Operator: We'll now take the next question. This is from Nadine Sarwat from Bernstein. Nadine Sarwat: Two questions for me, one on the quarter and one bigger picture. So on the quarter, good to see you guys call out moderating volume decline in Indonesia in the fourth quarter. Could you perhaps provide some more color as to what's driving this and how Q1 is going so far and what your guidance for the full year bakes in for the country? And then my second bigger picture question. As you called out in your presentation, revenue growth management has been a hugely powerful lever. You guys have been able to utilize to deliver, both top and bottom line growth. And in your mature European markets now, how do you view the potential for further revenue growth from this lever that you have? Is all the low-hanging fruit achieved in these mature markets? Or do you see continued significant opportunities? And if so, could you give us a few examples? Damian Gammell: Nadine, thank you. Maybe I'll start with your second question, on the whole revenue and margin growth management. I see immense opportunity going forward. I think we've done a lot. But if you look at our results over the last number of years, '25 stands out as being the first year in a while where we've seen mix really coming back into our revenue delivery, which is fantastic. Some of that's channel mix, particularly with away-from-home performing well. Some of it is category mix as we move into ARTD. But a lot of it's coming from smarter decisions around pack pricing, pack offerings, whether it's mini cans, small PET. So when you look at the options beyond that, there's still a lot out there that we can play for. We've got massive manufacturing flexibility in terms of pack formats and sizes. What we need to do better is run that through some of the AI, I referenced, and some of the analytic tools just to sharpen exactly either the price point or the exact pack offering. We have an 850 ml out in trade now, both in France and Germany, we need to review that as an idea to enter small single households. We've got a 12 pack 300 ml PET in Australia. That's doing phenomenally well. That's only really in Germany and Europe. So we know we've got an opportunity there. We've launched a 500 ml Coke can. So for those of you in the same age bracket as me, that was a super can when I was growing up. We brought that back. So there is a lot of opportunity in revenue and margin management. And I haven't even touched on, which is my personal passion, how we spend our promotional money. That can be a massive driver of value and mix accretion going forward. We're getting better. But as I've called out, obviously, our decisions on promo in Germany didn't work last year. And we've seen that impact our business. So we know we can continue to get smarter on what is a lot of cash that we reinvest with our customers behind promo points. So in some ways, we're not at the beginning, but certainly, there's a long way ahead of us in terms of OR and MGM. We deliberately included margin in that capability a number of years ago, because we do think revenue growth for revenue sake may be good. Revenue growth with margin is great, and that's what we're really focused on with our teams. On Indonesia, definitely a stronger finish to the year, definitely a good start of the year. I would just caution that with, you know, Ramadan is 10 days earlier every year. So our teams in Indonesia now are really looking forward to that key and very special period for all of our consumers and our employees in Indonesia. And then obviously, we'll have Eid following that. So myself and the team are down in Jakarta in April, that will be able to allow us to look back at our business in terms of the momentum from Q4. Clearly, we see momentum in Q1. What we got to just look at and see is that momentum is sustainable and at what level into Q3 and Q4. But really happy with our Ramadan execution, really happy with our performance across some of our key packs. To your question on guidance, we haven't materially reflected anything significantly different in Indonesia. We expect Indonesia to grow this year, both on volume and revenue. That is clear. But the size of the potential, we haven't reflected in our guidance. I think it's only prudent to get a good few quarters under our belt in Indonesia, and then we can talk a little bit more about how that may impact that top line for our guidance going forward. At the moment, I'm just happy we finished the year stronger. We started the year really well. We're benefiting from an early Ramadan, that's been really well executed. And then we'll take a look and see, and take a view on how the rest of the year is performing. The macros look a bit more favorable. Consumers are spending a bit more money. We see sparkling doing well. As I called out, my message is, tea is still a little bit of a headwind for us, but we cycled through that. So from an absolute volume growth perspective, we should see that coming in '26 and we will be on the back of sparkling. Operator: And the next question is from Lauren Lieberman from Barclays. Lauren Lieberman: First, I just had a clarifying question. Damian, you mentioned in Indonesia that you're not anticipating a big acceleration or change in trend for 2026. But I think you said you expect the business to grow. And I think in the presentation, you mentioned that volumes were down double digits. So I just wanted to clarify what's built -- is there an improvement built in or not? And if I'm right in reading the way you presented the Indonesia stats in the presentation? Damian Gammell: Yes, for sure, Lauren, there is an improvement built in, absolutely, and we see that coming out of Q4 and into Q1. And I suppose it is about comps. When you look at the year we had last year, growing volume in 2026 is in our plan. I suppose when I think about Indonesia, I have much bigger ambition and plans for that market in terms of it being sustainably impacting our long-term revenue algorithm. It will help in 2026, but really, it will be probably a single-digit volume turnaround, which is very happy to see and off a new cost base. So we're very pleased with that. But honestly, it's the unlocking of that future growth potential that gets me excited. And we will see that in '26. Yes, so we'll be, I'll say, turnaround is a word I don't normally use about Indonesia, but I do see big improvements in the end of last year and starting this year. Ed Walker: And I think, Lauren, it's just worth reminding ourselves that from a materiality perspective, from a profit and revenue perspective, it's small for CCEP, a bit more impactful from a volume perspective, for sure. But when you look at the revenue, I think the decline this year only had a 0.2% impact for CCEP overall. Lauren Lieberman: Okay. Understood. And then just mentioning earlier that the balance you're looking for the revenue build, 1/3 each across volume, price and mix. When I look at the second half performance for '25, it looks like that's about where you were. So would you say you're kind of -- is that a fair assessment? Kind of your strike in the second half of the year overall kind of struck that right balance between the 3 elements of organic revenue growth. And then the idea for '26 is just a little bit better across all fronts. Because I know from KO, a huge focus on volume overall through the system this year. But if I look at your performance in the second half, it looks, overall, again, like your volume is kind of contributing at the pace you might anticipate within the overall revenue build. Damian Gammell: Yes, I think as we look into '26, I mean pricing is pretty much where we want it to be. And as you know, Lauren, we talked last year, we did invest a lot in incremental value activity, particularly in the second half. So I think on pricing, we're in a good place, and we're in a good place in value as well, which is great. Mix, as we talked about, is also coming through nicely. That's on the back of not just chasing price because, as I called out, I firmly believe that this category is so valuable to our customers and also to our consumers in terms of excitement and innovation. So we've really got to focus on what grows the category. So flavor innovation, pack innovation, great marketing, and consumer connection is key with some value to make sure particularly those shoppers that need it can access our products. And we delivered that in 2025. That will continue in '26. So you will see a nice balance of pricing that reflects some of those macros, mix that reflects innovation and premiumization and excitement and then obviously, volume coming through as well. And we saw that in the second half of the year, and that's really our model going forward. Operator: The next question is from Andrea Pistacchi from Bank of America. Andrea Pistacchi: So I have a question on the operating profit, please. So you've delivered again on the 7% operating profit growth, despite top line falling a bit shy of expectations. The same in 2024. In fact, you did 8% EBIT growth then. And for '26, again, you're guiding to 7% in line with your mid-term algo, although top line guidance is slightly below the midterm. So with, I guess, a bit less leverage from top line than you would have anticipated, what drivers are enabling you to still consistently deliver on operating profit? Is it the solid revenue per case drop-through, the COGS environment, which is, I guess, pretty favorable? Or are you having to push a bit harder with the cost savings, please? And I may have missed it, but did you give a cost saving number, please, for 2025? Ed Walker: So yes, we're very pleased with our '25 operating profit doing 7% despite the fact that the revenue could have been a little bit higher in some areas. It was a great result to still deliver that 7%. It comes from many areas. We talked about some of them already. I think mix was clearly a great lever for us both on the revenue side but also on the profitability side. Strong R&M GM and making sure those promos really work and generate a return, and we end up with a bit better revenue per case than our cost per case in the margin. And then also critical is our productivity and transformation agenda. So again, we were delighted that our revenue grew faster than our OpEx in 2025 and continuing that kind of improvement as a ratio of 40 basis points in the year. And we see that continuing as we go into 2026. So yes, very pleased with the profit performance. I think going into next year, we do expect more of the revenue growth to come from volume as a whole for the year than in 2025. And obviously, although that's still accretive at the profit line, it generates a bit less profit than revenue per case or a pure rate increase. So that's why even with a slightly higher revenue number, we're still at the 7% profit line for '26 in our guidance. Andrea Pistacchi: If I'm able, sorry, to squeeze in a quick follow-up for Damian, please, on the channels in Europe. So you had a strong performance this year in away-from-home in Europe. And of course, it was a big, big focus for you. Do you expect this momentum to continue in away-from-home? As we go into 2026, how would you see the balance of performance of the channels in Europe? Damian Gammell: Yes, I expect it to continue. I mean our investment and strategic intent hasn't changed. That will continue into '26 and into '27 built off what we did in '25 around more coolers, driving more incidents, winning new business and working with the Coca-Cola Company and Monster on driving consumer relevance for those channels, both on pack and in-store. So that's a multiyear program. So I see no reason why that won't continue into 2026. Operator: We'll now take the next question. And this is from Richard Withagen from Kepler Cheuvreux. Richard Withagen: On the sports drinks, you're putting more efforts and resources behind those sports drinks, but you have Aquarius, you have Powerade, you have BODYARMOR. So how should we think about positioning of the different brands? And how do you avoid cannibalization? Damian Gammell: Yes, we are blessed with lots of brands that come with some choices. So I think Aquarius is a fantastic brand for us really in two markets, really, Belgium and Spain. Our main sports platform will always be Powerade, and we continue to build that out both in terms of functionality, pack sizes, flavors. And then we've got, obviously, large assets like the FIFA World Cup coming. We have a fantastic Powerade business in Australia and New Zealand that I'd love to keep replicating in Europe. So that will be our main platform. I think around that, though, we see that hydration and wellness opportunity even bigger, and that's where brands like BODYARMOR, which are quite different in terms of functionality and ingredients to a Powerade or an Aquarius. So both of those can exist very well together in the segment, and it's a growing segment. So yes, I think Aquarius is probably a little bit more niche. We have tried Aquarius in different market. It didn't quite take off as well as Powerade. So Powerade will be our main platform, and then we'll supplement that with brands that we think can add more value like BODYARMOR and clearly keep our great business in Spain and Belgium with Aquarius. Yes, good choices to have to make, to be honest. Richard Withagen: Exactly. And in terms of the growth drivers of these businesses, is it a lot of distribution gain? Is it innovation? Damian Gammell: Yes, it's a little bit of everything. I mean, innovation is key, particularly on the product. So we've got some Powerade Zero water. We've got enhanced Powerade. We've got 1 liter Powerade now coming to Europe, which is great. That's a pack we've had in Australia for a while. And then it's clearly -- yes, still distribution, particularly out of retail, but also markets like GB, a great market for us. We really only have 2 SKUs in GB, 2 flavor variants. So when you stand back and look at a business like Australia where you've got multi-packs, you've got small single serve, you've got 1 liter, and then you compare it to a market like GB, we still have a big, big opportunity. Operator: We'll now take the next question. This is from Eric Serotta from Morgan Stanley. Eric Serotta: Two quick ones. First, from a housekeeping basis, you called out in the press release, as you have previously, the selling day impact for the first quarter and the fourth quarter, the impact on revenue. How should we think of that in terms of the impact in terms of the profit cadence for the first half versus the second half? And then the second question, bigger picture for Damian, would be clearly a nice -- you guys clearly had a nice uptick in mix in the ending 2025. I know you said roughly 1/3, 1/3, 1/3 between price, mix and volume for '26. Can you talk a bit about the mix drivers going forward? And I guess, what you've been doing to really enhance that mix contribution exiting 2025? Ed Walker: Maybe I'll start, Eric, on the selling days. So yes, the 6 extra days in the first quarter and therefore, in the first half, so that does affect absolutely the volume, and we'll see that for sure in our quarter 1 results. I think overall, though, when you look at the operating profit, which is, I think, behind your question, we actually think the operating profit will be fairly balanced for the year. So although we have the benefit of the extra days in the first half, we also have the last bit of the exit from Suntory all in H1. And obviously, that's a higher revenue per case and a higher profit. So there's lots of puts and takes, as always, on the phasing, but we expect an operating profit pretty evenly phased between H1 and H2. Damian Gammell: And just your second point, Eric, I mean it's a key focus for us in terms of driving mix and it comes across a number of different aspects. So obviously, category mix as we move into ARTD; energy, we talked about BODYARMOR on the previous question. We continue to look at categories that generate a better mix. Then you look at channel. Clearly, we're seeing the benefit of away-from-home recovering after a number of years, and that clearly is a positive for our mix. Then we drop into packaging. So generally, smaller is better when it comes to mix. So cans, half liter, we're doing a lot around mini cans, more pack innovation. Then we also got to look at price promo, so making sure our price promo strategy drives mix. And then the last point that I'll keep calling out because I do think it's really, really important is the more added value we can bring to our brands is a real driver of mix. So when you look at, for example, our half-liter PET pack today in GB, it's got an excellent EPL promo on it. Guess the goals, very engaging, nothing to do with price, pure value add. And clearly, the more we can bring that to the right packs, it's an enhancement on revenue and it's an enhancement on mix. So I still believe, although consumers and shoppers do struggle for value with cost of living, and we will meet that occasion, and we are meeting that occasion, we can't lose sight of the role we play in terms of bringing excitement, engagement. And for a relatively small price, fantastic tasting products that can put a few smiles on people's places during the day. So value is key. But for me, longer term, continuing to build out the excitement through flavor, through packaging, great taste will also be a big driver mix. So we're very fortunate given the diversity of our channels and the categories we operate within, but we have a number of areas where we can really lean on mix to help that revenue growth. Operator: Next question is from Charlie Higgs from Rothschild & Co Redburn. Charlie Higgs: My first question is just on the Manila shared service center that you spoke about upgrading. I was wondering if you could just expand a bit more on what the remit of the shared service center will be? We saw some very strong margin expansion in the Philippines there. But will it also help contribute to margin expansion more broadly? And how do you see it interplaying with your existing Bulgaria shared service center? And then my second one for Ed, is just on leverage, where I think on my math, even with the EUR 1 billion buyback, you'll still be running at sort of the low end of your 2.5x to 3x range. How do you think about using the balance sheet at the moment? And what are your key priorities when it comes to capital allocation in 2026? Ed Walker: Charlie, very well thanks. And if I pick up your question starting then with Manila. So we're very excited about the opening in Manila. I think we've already got well over 100 people in the first 8 months. And there's amazing talent in that market. We've been super impressed with the capabilities we found. As we look at the role of the center, it's really to provide global capabilities. So it's not there just to support the APS region. It's an opportunity to centralize more activities and also some new activities using the capabilities that we've got there. But it's also an opportunity for us to reduce the risk profile a little bit. We obviously have a lot of activities today based in Bulgaria. And so having multi-hubs allows us to spread that risk a little bit. And although it's not a regional center, certainly, it does help from a time zone perspective, and being able to directly contact customers and suppliers in markets like Australia and New Zealand and much more time zone friendly in terms of our employees and also the customers. So we see it as a huge asset for us going forward. I think, therefore, it won't really impact the margin specifically in the Philippines. I mean it's a global asset. So it's a key part of our overall productivity and transformation agenda. So we'll see it in the delivery of the overall numbers. On the capital allocation framework, so no change there really in terms of our framework and capital allocation priorities. So we want to maintain that investment-grade rating, and that means keeping that leverage in that 2.5x to 3x. We continue firstly, to generate -- to spend the cash the business generates on what we need to do to grow the business. And as mentioned earlier, investing over EUR 1 billion CapEx again in 2026. Absent any M&A, then we return that cash to shareholders. I think with a EUR 1 billion buyback as you say, we think our leverage will continue to modestly decrease as in fact, it has done in '25 versus '24. And we think that's a healthy way -- healthy trend for it to continue. I think with the current interest rate environment, there's plenty of access to money. We still can borrow at competitive rates. We think leverage in that 2.5x to 3x remains the kind of the efficient level for our balance sheet. So we expect that to continue. Operator: We'll now take the next question, and this is from Robert Ottenstein from Evercore ISI. Robert Ottenstein: Great. Just one question for me. Damian, you mentioned earlier that how you spend the promo money is a personal passion, which makes a lot of sense. So can you maybe just elaborate on how big an opportunity that is? And also perhaps tie in kind of exactly what happened in Germany and what the learnings from that was? Damian Gammell: Robert, yes, if you speak to all of my colleagues, they'll also confirm it is a passion point, for a couple of really valid reasons. One, it's a huge amount of money; and two, it has a significant impact on our performance. So it certainly -- it warrants the focus that we're giving it, not just me, to be fair, the whole team. It's a key part of our technology platform build-out, and we have been doing better year-on-year in terms of our promo efficiency and effectiveness, but it's like a never-ending opportunity. So if you just step back and look at it, we are fully funded from a promo investment perspective. We put a bit of extra money in at the end of last year. We saw that benefiting. So from now on, it's really more about promo effectiveness rather than quantity, and it's just finding ways to use those euros and dollars smarter to get a better return for our customer and also a better return from our shareholder. And again, that is sometimes live market tests are an easier way to figure out how consumers will respond. We run a lot of analytics, both through Bulgaria. We'll also do in the future through Manila, the try and model. We've got elasticity survey. So pretty much what any organization in our space will be working on. If I step back and just talk a little bit to Germany, what we saw last year in Germany was obviously an ongoing macro value environment, which we were playing in, and we continue to play in. But a number of our promotional packs did go above certain price thresholds. And I think that's where we saw a little bit of hesitation from our consumers at those higher price points. That hesitation can sometimes be, well, I'm going to wait until the price comes down again or it can be, I'm going to buy a little bit less. And that's really what we've seen. So it's more an impact on frequency. And that's something that we're working on with our team and learning from. So yes, when you look at the number of packs and SKUs we have, we've got a very rich opportunity by pack, by brand, by channel, and that's what we keep using. So I think it's something that will continue to be a key focus of our data and AI. Obviously, in Europe, customers set the pricing on shelf. And some of those dynamics can also be driven by our customers and nothing to do with us. And that's something that we got to deal with. Clearly, the category is super profitable for our customers. And for me, that's the most important. So we continue to get great relevance and great focus from our customers. And they grew their revenues faster than we did last year. And I think for long-term health, that's not a bad outcome. Operator: We will now take our last question. And the last question is from Usama Tariq from ABN AMRO. Usama Tariq: Just one quick question from my side on capital allocation. So I heard that you indicated that we remain committed to any accretive M&A opportunity if it comes. If I'm correct, that is one of the earliest times that you have been more positive on it. Can you indicate to me at what scale are you looking into or what geography would you be more interested in? Would it be APS or Europe? And would it be small or big? I'm just trying to gauge your level of interest, if an opportunity comes in this year? Damian Gammell: Usama, well, that position hasn't really changed at all. I mean, since we created CCEP, we've been always focused on having a balance sheet and a free cash flow that will allow us to consider M&A that we think will make value for our shareholders. I think whether that was the Philippines or previously Amatil, that hasn't changed. And I don't know whether it was a comment or wording, but certainly, there's nothing significantly different in that space as we close out 2025 and look into 2026. As I said before, we'll always remain curious. I think our performance delivery with the Coca-Cola Company is an essential element of even having the opportunity to look at potential M&A, but we don't really see that in the near term mainly due to the fact of available quality assets. That can change quickly. We always know that, but certainly, nothing has really changed in that space. So if that was one of the takeaways from one of our comments, that's probably not reflecting the reality. So we're pretty much where we were going into '25, same going into '26, focused on delivering the value add of the Philippines, getting Indonesia to where we want it to be and continuing our journey in our other markets around quality top line revenue growth. And if at some stage, a good quality M&A opportunity comes up, we definitely consider it. We've got the balance sheet to do it. Operator: I would now like to hand the conference back over to Damian Gammell for his closing remarks. Damian, please go ahead. Damian Gammell: Thank you, operator. And again, a big thank you to everybody joining us today and for your questions. 2025 was another great record year for CCEP. We're very much now focused on delivering a really strong start to 2026 and looking forward to a great summer activation across all of our markets in Europe, and enjoying a great summer activation now in APS. And as I mentioned earlier, across all of our markets, clearly, Ramadan will be celebrated, and we look forward to that as well. So really excited about our brand plans. I hope you got a flavor today of the quality and depth across multiple categories. Excited to see mix playing a bigger role to see that continue. And obviously, we look forward to updating you on our Q1 revenue performance a little bit later on in the year. But again, a big, big thank you, and I wish everybody a great rest of the day. Thank you. Operator: Thank you. That concludes our conference for today. Thank you for participating, and you may all disconnect.
Operator: Greetings, and welcome to the Valmont Industries, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Renee Campbell, Senior Vice President, Capital Markets and Risk. Ms. Campbell, you may begin. Renee Campbell: Good morning, everyone, and thank you for joining us. With me today are Avner Applbaum, President and Chief Executive Officer; Tom Liguori, Executive Vice President and Chief Financial Officer; and Eric Johnson, Chief Accounting Officer. Earlier this morning, we issued a press release announcing our fourth quarter and full year 2025 results. Both the release and the presentation for today's webcast are available on the Investors page of our website at valmont.com. A replay of the webcast will be available later this morning. To stay updated with Valmont's latest news releases and information, please sign up for e-mail alerts on our Investor site. We'll begin today's call with prepared remarks and then open it up for questions. Please note that this call is subject to our disclosure on forward-looking statements, which is outlined on Slide 2 of the presentation and will be read in full after Q&A. With that, I'd now like to turn the call over to Avner. Avner Applbaum: Thank you, Renee. Good morning, everyone, and thank you for joining us. I'd like to start with the full year highlights and key messages summarized on Slide 4. 2025 was a solid year for Valmont. Our team delivered strong performance as they continue to navigate a mixed demand environment, delivering unique value-added solutions for our customers. We strengthened our core to support future value creation. Our track record of success is grounded in a clear understanding of our customers' need and our core strength in serving them. They're managing multiple demand drivers, including load growth, aging infrastructure and increasing complexity. In this environment, reliability, quality and on-time delivery are critical to their financial and operational performance. Delivering consistently at scale requires disciplined execution and that discipline guided our actions throughout the year. We simplified the business, sharpened our priorities and aligned capital and resources where execution drives the greatest positive impact. As a result, Valmont is more resilient, more aligned and better positioned to support our customers. I want to thank our nearly 11,000 employees around the world for their dedication and efforts throughout the year. Their work has strengthened the foundation of the business and positioned Valmont well for what we expect to be strong growth in 2026 and beyond. Turning to Slide 5. I want to highlight how our actions in 2025 are providing us with momentum as we move into 2026. In Utility, customer demand for large-scale projects to support grid expansion and rising electricity load remains strong. This past year, we increased capacity to serve that demand through targeted investments in equipment, layout optimization and workflow redesign. We also began deploying AI-enabled scheduling and planning tools to improve throughput. Together, these actions position us to support continued growth in 2026 and beyond. In Agriculture, we made progress this year on structural programs that improve profitability. In a challenging market, our customers are looking to their partners to help them do more with fewer resources. We'll continue to drive value through disciplined cost management and improving the customer experience with better parts availability and easier e-commerce ordering. We'll also advance integrated tech and innovation that improves efficiency for growers. Altogether, these efforts are positioning the business to emerge stronger when markets recover. Across the company, disciplined resource allocation, an unwavering commitment to safety and continuous improvement remain foundational to our performance. Now turning to Slide 6 for an infrastructure market update, starting with Utility. Utilities are planning multiyear increases in capital spending to support load growth, grid expansion and resiliency. Data centers and AI-related infrastructure are contributing to that demand. Customers trust Valmont for complex transmission, distribution and substation projects where execution and reliability are critical. We entered 2026 with $1.5 billion in backlog, up 22% from a year ago, largely driven by Utility. As our incremental capacity comes online, we expect to convert that demand and support continued profitable growth. We remain a trusted partner of choice across the full project life cycle due to our market expertise, engineering capabilities and scale manufacturing. Our Lighting & Transportation business enters 2026 with a positive and improving outlook. Transportation markets are supported by ongoing DOT programs and infrastructure funding. In North America, lighting demand is stabilizing. International markets are also contributing to growth. Our focus remains on disciplined execution. We are enhancing service level and operating performance as demand strengthens. Coatings is also positioned for growth in 2026. Demand is supported by infrastructure investment and expanding data center activity. This business remains a critical part of our value proposition. It protects steel structures, extends asset life and supports the reliable long-term infrastructure performance. In telecommunications carrier capital spending has normalized. Our components business continues to benefit from alignment with carrier programs and a high service operating model. During the fourth quarter, we acquired the remaining 40% of ConcealFab. Full ownership of ConcealFab adds control of differentiated technology and an innovative product pipeline to our portfolio. It strengthens our ability to support customers investing in 5G, broadband expansion and next-generation wireless deployment. Overall, Infrastructure enters 2026 from a position of strength. Demand trends are durable. Capacity investments are translating into better execution and improved throughput. Our focus on the right growth areas support continued momentum. Turning to Slide 7. Looking at the demand outlook for Agriculture in 2026, we see North America is stable. International is likely to be down compared to the first half of 2025, but broadly in line with the second half. USDA forecasts suggest a cautious grower environment. Thus, we are not assuming a near-term recovery in North American equipment demand and our outlook reflects a disciplined view of market fundamentals. At the same time, profitability is supported by pricing and cost discipline. Targeted investments in technology and our aftermarket platform are helping mitigate the impact of lower equipment volumes even in a softer market. In Brazil, tight credit availability and delays in government-backed financing continue to weigh on near-term demand. Over the longer term, Brazil remains an attractive growth market, strong agronomic conditions, multiple crop cycles and a compelling ROI for irrigation equipment support future investment. In the Middle East and Africa, project activity is driven by food security priorities. Government-led investment continue to support large-scale irrigation projects. We continue to advance our strategic priorities in technology, aftermarket and international markets. These actions position Agriculture to emerge stronger through the cycle. In January 2026, we acquired the remaining 80% of Rational Mind, a Canada-based engineering firm with expertise in advanced irrigation controls, communication and connectivity. This acquisition strengthens the engineering capabilities of our Valley Irrigation platform and advances our technology road map, enhancing our digital capabilities that support our products, systems and our global dealer network. Turning to Slide 8. As we look to 2026, Valmont is positioned for a strong year of growth with the capabilities and scale to execute and create long-term value. This year, we will celebrate our 80th anniversary. While the company has evolved significantly since its founding in 1946, the core values established at the beginning, passion, integrity, continuous improvement and delivering results remain central to who we are. Guided by those values, we continue to invest in our people, capabilities and products to deliver more for our customers. Finally, I'm pleased to announce that we plan to host an Investor Day on Tuesday, June 16, in New York City. We look forward to sharing a deeper view of our strategy and long-term financial targets. More details will follow, and we hope you'll join us. I'll now turn the call over to Tom to review our financial results and 2026 outlook. Nathan Jones: Thank you, Avner. Good morning, everyone, and thank you for joining us today. Turning to Slide 10. Our fourth quarter results include a few unusual items. So I'll start with a summary of our top-level results and explain the impact of these items on our earnings per share. GAAP EPS of $9.05 includes a tax benefit of $78.5 million or $3.98 per share, primarily due to a U.S. tax deduction associated with the loss on our Prospera investment as we wound down business operations in 2025. The $78.5 million is excluded from adjusted EPS. It is also a cash flow benefit, approximately half of which is reflected in 2025 results and the remainder is expected to benefit first half 2026 cash flows. Adjusted diluted earnings per share was $4.92, up 28.1% year-over-year. Adjusted EPS includes a $16.5 million legal reserve for our Brazil Agriculture business related to cases involving various disputes dating as far back as 2019. In the fourth quarter, we had an adverse court ruling on one of these cases and for the others, entered into settlement discussions with parties involved, both of which led to the reserves. Adjusted EPS also includes $11 million of credit losses in Brazil. As we explained last quarter, Brazil is operating in a tight credit environment, which unfortunately is causing financial distress for farmers. For total year, Brazil Agriculture expenses include $24 million of legal reserves and $26 million of credit losses for a total of $50 million. We believe we have fully accrued and covered our financial exposures in Brazil and do not expect additional unusual expenses in the future. Combined, these expenses reduced adjusted EPS by $0.92 in the fourth quarter and $1.70 for the total year. The remainder of my comments will focus on the adjusted results as outlined in the press release and in the Reg G disclosure in the presentation appendix. Moving to our segment results on Slide 11. Infrastructure sales of $819 million grew 7.2% compared to last year. Utility sales grew 21%, driven by strong market conditions, favorable pricing and higher volumes as a result of the capacity increases we have deployed. Congratulations to the Utility team on their strong performance. Sales in Lighting & Transportation declined 5.3% due to continued weakness in the Asia Pacific market and North America production challenges that temporarily reduced output. In the fourth quarter, North America L&T orders were stable. As we entered 2026, order rates are trending up, and we anticipate having the production challenges resolved in the first half of the year. Coatings sales increased 6.3%, supported by healthy internal and external infrastructure demand. Telecommunication sales were similar to prior year. Solar sales declined due to our decision to exit certain markets. Operating income was $149.6 million or 18.3% of net sales, an increase of 230 basis points as a result of our pricing actions, volume growth in high-value offerings and lower SG&A. Turning to Slide 12. Fourth quarter agriculture sales decreased 19.9% year-over-year to $222.7 million. North America markets remain challenged. International sales declined due to the weakened economic environment in Brazil and lower project sales in the Middle East. Our Agriculture segment had an operating loss of $3.3 million in the fourth quarter. The loss includes the $27.5 million of legal reserves and credit losses mentioned earlier. Excluding these expenses, operating income was $24.1 million or 10.9% of sales. We expect our agriculture segment to have double-digit operating margins in the first quarter of 2026 and remain there for the full year. Turning to Slide 13 and our full year income statement. Net sales of $4.1 billion increased slightly year-over-year. Sales growth in Infrastructure, particularly Utility, was offset by lower Agriculture sales. Operating income increased to $538 million or 13.1% of revenue. Operating income includes the $50 million of expenses for the 2 significant items discussed earlier in our Brazil Agriculture business. Excluding these expenses, operating income would have been $588 million or 14.3% of revenue. Below the line, interest expense decreased due to lower debt. Our adjusted tax rate declined to 23.2% due to the geographic mix of earnings. And adjusted diluted earnings per share was $19.09, an increase of 11.1% over 2024. Moving to Slide 14 for cash, liquidity and capital allocation. Fourth quarter operating cash flows were $111 million, bringing our full year total to $457 million. We ended the year with approximately $187 million of cash and net debt leverage of approximately 1x. We invested $145 million in CapEx, primarily for utility capacity expansion. Free cash flow totaled $311 million, representing approximately 90% of net earnings. We deployed $102 million to acquire the minority shares from some of our joint venture partners. The majority of this was related to ConcealFab, though we also acquired the minority share of Agriculture businesses in Brazil and Argentina. Buying at the minority partners provides us with greater control and flexibility to run these businesses. We returned $250 million to shareholders, including $52 million through dividends and $198 million through share repurchases at an average price of $327.65. Moving to Slide 15. We remain sharply focused on executing our key value drivers. To catch the infrastructure wave, we continue to invest in high return capacity expansion to drive revenue growth. During 2025, we deployed approximately $107 million of CapEx in our North America infrastructure business, which contributed to the $143 million of utility revenue growth. In Agriculture, we continue to invest in our aftermarket and technology businesses. Both of these initiatives are contributing tangible productivity benefits to our Agriculture customers as well as dealers. A milestone in the fourth quarter was that we started shipping our ICON+ control panels, which brings the AgSense 365 functionality to any pivot brand, allowing growers to easily connect older or competitive machines. Lastly, our disciplined resource allocation initiatives are progressing. Corporate expense for the full year declined $13 million to $97.8 million or 2.4% of revenues. I want to congratulate the corporate team for their work to streamline the organization and manage cost. In the fourth quarter, corporate expense declined to 1.9% of revenues compared to 2.9% last year. On the capital allocation front, we executed on our Board authorized $700 million share repurchase program with approximately $200 million repurchased in 2025. We also acquired the minority shares of our joint ventures in Telecom and Agriculture for $102 million. Bringing it all together, we are making progress toward our path to deliver $500 million to $700 million in revenue growth and $25 to $30 in EPS over the next 3 to 4 years. Turning to our 2026 outlook on Slide 16. Net sales are projected to be between $4.2 billion to $4.4 billion. Diluted earnings per share are projected to be in the range of $20.50 to $23.50. At the midpoint, our guidance represents year-over-year revenue growth of 4.8% and EPS growth of 15.2%. Factors that would contribute to performance being at the top end of the range include additional utility revenue that could result from our initiative to enhance factory scheduling or bring on capacity faster than expected and/or an improved market environment in Agriculture during 2026. Factors that would contribute to being at the low end of these ranges include unanticipated delays in our capacity expansion plans, such as equipment or construction delays or changes to tariff regulations that continue to evolve. When tariffs change, we alter our supply chains and adjust pricing. They'll both require time to take hold and mitigate any increase in tariffs. Turning to Slide 17. These graphs illustrate the major drivers of our 2026 guidance at midpoint. Starting with net sales. We expect growth in Infrastructure, both price and volume, primarily in Utility. In Agriculture, growth in aftermarket and technology though a decrease in volume. For EPS, the drivers are earnings growth in Infrastructure, primarily Utility. Improved earnings in Brazil as we covered our legal and credit exposures last year in 2025, improved earnings from our decision last year to exit certain solar markets, increased profits from the businesses we now wholly own such as ConcealFab, a benefit from lower share count due to our share repurchase program, reduced earnings from Ag due to lower volumes. We expect our tax rate to return to a more normal 26%, and we have also adjusted for potential risk, which could include changes in global tariffs, commodity and steel cost or other unforeseen events. All in all, we are confident in our ability to achieve the midpoint of guidance. For the first quarter of 2026, we expect year-over-year growth in revenue and earnings per share. Before we close, we want to thank the entire Valmont team for their focus on moving our value drivers forward. With that, I will now turn the call over to Renee. Renee Campbell: Thank you, Tom. At this time, the operator will open up the call for questions. Operator: [Operator Instructions] And our first question will come from Tomo Sano with JPMorgan. Tomohiko Sano: On the Utility side, could you talk us through your confidence in the continued strong demand for this segment? And have you seen any changes in customer investment appetite or competitive landscape, please? Avner Applbaum: Well, thank you for your question. We feel very confident with the strength in the Utility market that has several strong drivers such as -- we're seeing electrification, we're seeing the AI and data centers, industrial onshoring, aging infrastructure replacement. So there are many drivers that support our outlook. On top of that, we have daily conversations with our customers, and we're tied in to their multiyear plans to make sure we're strongly aligned overall with their growth investments. And it's evident by when you look at our backlog, roughly $1.5 billion. It gives a pretty strong support for our 2026 outlook. We're booking into 2027. And the utility customers are looking out to plans going through 2030 and beyond. So overall, to sum it up, we are very bullish about the utility market over the near and midterm future. Tomohiko Sano: A follow-up on Ag. Could you talk about excluding onetime items, what specific actions are you being taken to restore agriculture margins? And when do you expect to see a meaningful recovery? Thomas Liguori: Thanks, Tomo. Well, we expect to see a meaningful recovery in this current quarter, Q1 of 2026. And we did take some charges in the fourth quarter. The goal was to get these problems behind us. Let me add some color on this. I think it will be helpful. We spent a lot of time with the Brazil team and did a deep dive of their balance sheet, their receivables, customer by customer, inventory and Avner and I went down to Sao Paulo. We met with our outside legal counsel to go through these cases. So we feel like we understand these exposures, and we feel like we have them covered. Now that said, the Brazil economy still has high interest rate, crop prices are low. So we're not saying there will be none, but we feel we have covered it in our guidance going forward. We've taken a number of steps in Brazil to strengthen the foundation. Tomo in the end, Brazil is an excellent market for us, which we believe is going to grow for years to come. They have multiple crop cycles. So the things we have taken, we did hire a new outside legal counsel. We added a lawyer. We replaced our finance leader there. So I think we've taken the appropriate steps there. So given that those are behind us, in the fourth quarter, we were at 10%, excluding those. We -- North America is doing quite well. Do you want to bring out that the North America team in Ag, they've been at a double-digit operating margin throughout 2025. So we think that's going to continue. In the Middle East, we expect to get more project wins as we get into the middle year that will help our margins. And we think Brazil, we're not expecting a lot from Brazil in our guidance for 2026, but we have a great team there and things going forward. So we think -- we believe and we're confident you will see a substantial uptick in our margins in Agriculture in our first quarter. Operator: Our next question comes from Nathan Jones with Stifel. Nathan Jones: I guess I'll start with trying to put a finer point on the Ag margins, double-digit, a pretty big range there, Tom. Is there any kind of finer point you can put on where you expect them to be in the first quarter and where you expect them to be for the full year? Thomas Liguori: We think we'll be in the low teens in the first quarter, maybe approaching the mid-teens by the end of the year. Nathan Jones: That's helpful. I guess the second question I'm interested in is the increasing capital spending in 2026 over 2025, which is probably a good thing, right? I assume that's going to Utility capacity expansions. So can you talk about kind of what you're doing there? I think you guys had talked about $100 million CapEx in that business to add $100 million capacity per year for the next few years. Is that now not enough to keep up with the demand? We need to ramp that up a little bit? And are you expecting to stay above that $100 million for the next few years? Avner Applbaum: Thank you, Nathan. Let me start off with what's behind the step-up in capital. And in our guidance, we said we're going to spend $170 million to $200 million in 2026, primarily directed towards Utility. We continue to see by durable multiyear demand, as I mentioned earlier, by load growth, grid expansion and resiliency. The approach we took, right, we're doing brownfields. We're adding equipment. We're modernizing our lines. We're improving it being our flow, increasing automation, using AI. And all that is in our existing footprint, which will increase our throughput, and it is all supported by the industry, our customer commitments, our customers' view, and that's the disciplined approach we're taking. We're going to see TD&S. We're going to see the Utility business grow high single digits, low double digits over the foreseeable future, probably to the end of this decade. And when we take those investments, they're adding incremental capacity, right? We're getting in excess of 20% on each one of those investments. And as we continue to optimize, we're going to see more than that. So there -- overall, they're very high-return projects. We believe that's the #1 area for us to invest. It supports our ROIC. It supports our path to $30. Now specifically about your questions about $100 million, driving $100 million we're actually very pleased with the output we're getting from their capital. And I can say that we're doing considerably better than $1 of investment for $1 in sale. And it's multiple projects or a little differently, but we're getting very strong ROI from our investments. So just to sum it up, right, it's disciplined scaling. We're adding the capacity where the demand is visible, and it has very strong returns. Operator: Moving next to Chris Moore with CJS Securities. Christopher Moore: Maybe just talk a little bit about balance sheet. Are there certain areas, perhaps product lines where Valmont is using -- could be using its balance sheet to trade better price for less prepayments? Thomas Liguori: Well, we're a leader in the markets. We're differentiated. We get good pricing. So we're not really looking at doing that. What we do see is we see opportunities to use our balance sheet to -- number one, we have low leverage gives us the cash to really explore all different types of opportunities. And Chris, actually, we see an opportunity in things like our working capital to continue to make improvements. I want to say, I think our team has done an excellent job on the inventory and receivables and bringing those down. We have some elevated what we call on the balance sheet contract assets, which is basically the work in process for our Utility customers. That's been kind of elevated because of the volume going through, and we have some growing pains there, but we see an opportunity to bring down our working capital. Long term, it should be 90, 95 days. So I wouldn't say we're going to trade our balance sheet for price. I would say we're going to use our balance sheet for growth. Christopher Moore: Got it. Makes sense. And maybe just on the Ag side in terms of obviously still soft market. But what types of things can you do perhaps to get a higher share on the aftermarket parts side of a soft Ag market. You guys are the replacement process is, I guess, one of your strengths, making things very easy for the farmers and dealers. Maybe could you just talk in terms of kind of the aftermarket side of things and kind of momentum that you might have there? Thomas Liguori: Yes. We've put a lot of resources into this. And I got to say the Ag team did an excellent job with the e-commerce system. The farmer can be in the field. they can figure out what part they need. They can place an order with the dealer and hopefully get it in the next day or so. That's just job well done. What we're working on is making sure we have the proper inventory positioned through the field and I think the latest one is we want to take this and do more of it on our international regions. So more to come, and there's more upside in that. Operator: [Operator Instructions] and we'll go next to Brent Thielman with D.A. Davidson. Brent Thielman: Yes, I want to follow up on Utility. I appreciate the outlook bridge as well in the deck. But the $150 million in growth assumed for the Utility piece, '26 versus '25. I guess if we assume sort of a stable steel price environment, is there still sort of a higher potential ceiling for that business this year? Or does that sort of limit out just based on the capacity you'll have in place this year? Thomas Liguori: I got to say the operations team is doing a great job of getting the capacity in place. And I think you're asking is there some upside in the Utility. And definitely, we think there's some upside there. Brent Thielman: Okay. And then on the Ag side, Tom, I think I heard you mention looking towards some -- maybe some potential wins on the project side, maybe more midyear. Does the outlook for that business sort of assume kind of pressure through first half then a stronger second half contingent on winning these projects? Maybe if you could just clarify that. Thomas Liguori: Yes. I think we'll have a slower first quarter, probably a slower first half and as these come in, that will improve. But... Avner Applbaum: Yes. Let me just add a little bit, right? The underlying demand drivers for that region are intact, right? Food security, domestic production. But we take a very disciplined and selective approach to the projects. It's important that we meet our financial thresholds. There are several opportunities. They didn't reach the finish line yet. We're pretty confident in the pipeline, our ability to convert them with -- in line with our financial criteria. So we're going to make sure when we win these projects, we're happy with the returns. Overall, as you know, it's a lumpy business, but the long-term drivers are solid. Operator: Moving next to Brian Drab with William Blair. Brian Drab: I just wanted to follow up on that Utility growth. This bridge is really helpful. And of course, I think $150 million incremental in utility indicates about 10% growth in the outlook for Utility for 2026. I'm just wondering, is that how to think about it? And then how do you expect price and volume to contribute to that 10% growth proportionately? Thomas Liguori: Yes. So you're correct in your assumptions. And most -- in '25, I would say there was more price than volume. In '26, there's more volume than price. And we're starting to see drop-through from these capacity expansions in the mid- to upper 20%, even approaching 30%. So we feel really good about where the Utility business is. Avner Applbaum: Yes. And I'll just add, right, when you think about the volume and price, right, it really represents the strength in the market. But when you think of price, we have a very strong value proposition for our customers in a constrained environment. It is mission-critical parts with high level of complexity and needs to deliver on time with the highest quality to make sure we could support their operational needs. And it's significant value to our customers, and that is the price that we command in the market. Brian Drab: Got it. And then on the nonutility infrastructure piece, it looks like that will be up about 3%. I'm just wondering, is it fair to assume that you get some more growth maybe in Telecom, but Lighting & Transportation and Coatings is roughly flat? Or do you see any growth in those other pieces? Thomas Liguori: We still have growth in all 3 meaning, Coatings as well. So Coatings, Telecom, L&T. Avner Applbaum: Yes. And the highest level, right, Telecom, we see our carriers continue to invest in -- they are in the execution phase. They're investing in wireless and RAN. So we kind of see that growing in the low to mid-single digits. Coatings has a very strong driver around data centers and AI. And on the Lighting & Transportation, we're seeing good progress about the initiatives that we took in 2025 around by enhancing our leadership, investing in the operations, deselecting of noncore products and overall seeing growth driven by DOT spend and stabilization in the international markets. So at the high level, we should see growth across the Infrastructure segment. Brian Drab: Okay. For Coatings, obviously, tailwind within your intersegment work that you do for your Utility business and data center AI. What other tailwinds does that business see from data center and AI? Avner Applbaum: Yes. So right, structurally, the Coatings business supports our internal business, which is a strong value proposition for our customers. But we have a strong third-party business within the Coatings with the highest Net Promoter Score in the industry, and it's broad-based, but we are taking a strategic approach to support the states, the regions, the industry where we're seeing growth. If you look at the Midwest or Southwest, we're seeing a lot of good investments around infrastructure growth and data centers and AI. So we're aligned well, and we should see that business contribute to our growth in 2026. Brian Drab: And can I just sneak in one more to Tom. Tom, I think on the last call, it was -- you mentioned that the incremental margins -- operating margins on the additional capacity and Utility were coming in. I think you're phrasing was something like well above 20%. How is that incremental margin on that additional capacity looking lately? Thomas Liguori: It's mid- to upper 20% range. And actually, we think through 2026 is approaching 30%. So it's looking very positive. And why is that? That's because when we're adding this capacity, the whole approach is to add incremental capital, get more throughput through that journey, improve the flow, so we're getting a lower unit cost as well as covering fixed overhead. So applaud to the ops team for the work they're doing. Operator: And we have reached the end of the question-and-answer session. I will now turn the call over to Renee Campbell for closing remarks. Renee Campbell: Thank you for joining us today. A replay of this call will be available for playback on our website and by phone for the next 7 days. We look forward to speaking with you again next quarter. Operator: These slides and the accompanying oral discussion contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on assumptions made by management considering its experience in the industries where Valmont operates, perceptions of historical trends, current conditions, expected future developments and other relevant factors. It is important to note that these statements are not guarantees of future performance or results. They involve risks, uncertainties, some of which are beyond Valmont's control and assumptions. While management believes these forward-looking statements are based on reasonable assumptions, numerous factors could cause actual results to differ materially from those anticipated. These factors include, among other things, risks described in Valmont's reports to the Securities and Exchange Commission, SEC, the company's actual cash flows and net income, future economic and market circumstances, industry conditions, company performance and financial results, operational efficiencies, availability and price of raw materials, availability and market acceptance of new products, product pricing, domestic and international competitive environments, geopolitical risks and actions and policy changes by domestic and foreign governments, including tariffs. The company cautions that any forward-looking statements in this release are made as of its publication date and does not undertake to update these statements, except as required by law. The company's guidance includes certain non-GAAP financial measures, adjusted diluted earnings per share and adjusted effective tax rate presented on a forward-looking basis. These measures are typically calculated by excluding the impact of items such as foreign exchange, acquisitions, divestitures, realignment or restructuring expenses, goodwill or intangible asset impairment, changes in tax laws or rates, change in redemption value of redeemable noncontrolling interests and other nonrecurring items. Reconciliations to the most directly comparable GAAP financial measures are not provided as the company cannot do so without unreasonable effort due to the inherent uncertainty and difficulty in predicting the timing and financial impact of such items. For the same reasons, the company cannot assess the likely significance of unavailable information, which could be material to future results. Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.
Shohei Yoshida: We'd now like to start the analyst meeting of INPEX Corporation. Thank you very much for gathering today despite your busy schedule. My name is Yoshida. I'm from the Corporate Communications and IR unit, and I'll be serving as the MC for the meeting today. So please allow me to introduce the speakers today. We have Mr. Takayuki Ueda, Representative Director, President and CEO; we have Mr. Takimoto Toshiaki, a Director, Senior Executive Vice President, Corporate Strategy Planning; we have Daisuke Yamada, Director, Senior Managing Executive Officer, Senior Vice President in Financial Accounting. So we'll spend about 35 minutes for the presentation, and we'll spend about 25 minutes for the Q&A session, 60 minute in total. Today's meeting is going to be a hybrid meeting with online participants as well with simultaneous interpretation between Japanese and English. [Operator Instructions] Mr. Ueda will talk about the business overview to start with. And Mr. Yamada will describe the consolidated financial results for the fiscal year ended December 2025 and our forecast for the year ending December 2026. And Mr. Takimoto will give a progress update for the sustainable growth of the corporate value. So Mr. Ueda will start now. Takayuki Ueda: Thank you, everyone, for gathering despite the busy schedule today. And for those people participating online as well. Thank you very much. And today, I would like to explain about the financial results as well as the forecast for this fiscal year. So to begin with, the results for fiscal year 2025. As you are well aware, our result for 2025 was a net profit of JPY 393.8 billion. But if we adjust for the oil price and foreign exchange rate, what is the number? So that is what we have announced. So on an absolute basis to JPY 393.8 billion, which is the third highest on record. But in 2025, $68 an average the oil price, JPY 149 was the exchange rate on average. And so if we actually do the calculation, and in terms of an absolute number, we we're third highest on history. But if we adjust for oil price and foreign exchange rate, the number for 2025 is the best on record. Of course, we are affected by the external factors, and we don't intend to talk just based on those numbers. But I think we have developed ability to generate earnings. And the share price has continued to increase recently as well, [ your area ]. But we are often asked about our share price. Now for myself, and the fact that the share price has increased is probably the great understanding of investors in our company. And so I'm very appreciative of that to begin with. But the PBR is now nearing 1x as well. But if we compare ourselves against many companies in Japan, for example, the Prime in the Tokyo Stock Exchange, so there are some 86 companies. And so, PBR, on average of 3.8x. Exxon or Shell, the peers on a global basis, the [ PB ] ratio is around 2x. It's at 2.10x, which I think is the average. So the oil and gas companies in Japan, if you look at the PB ratio, 1.3x to 1.4x, I think, is the general level if we take that into consideration for myself, the share price has increased quite significantly. I'm very appreciative of that. But our financial basis, our growth strategy, our shareholder return, if you look at the details, I think we certainly are not second to others. And despite the high level of increase, it's still not a very high level. We feel that we are kind of, I suppose, discounted to, I suppose, peers in that regard. So this is the highlight for this year. So if we just pick up on the numbers, as I said, for the dividend, JPY 100 for the year. So the total shareholder return ratio is 55.4%. And so -- and we have made somewhat of a conservative outlook for the oil price and for the foreign exchange rate, but we're expecting about JPY 330 billion of profit for this fiscal year. We'll talk about this in more detail later on. You may think that this is somewhat low, but I will come back to explain about that later. For dividend, what we are assuming for now, annual dividend of JPY 108 per share and total share return ratio of more than 50%, which is our commitment. So we will make sure that we will stick to that. And so based on our forecast at this point in time, we are expecting to pay JPY 108 per share for the dividend. But let me just talk about the external environment a little and I'll go to the next page. In this page is the one-page description of the changes in an external environment even before the Ukraine war, the oil and gas related external environment for us has changed. And I think we're going through 3 different stages. So before the Ukraine war, many companies were really focusing on energy transition. So a rapid transition towards clean energy including renewable energy, and there were growing concerns over stranded assets associated fossil fuels. And so when we were speaking with investors, they were saying when are we going to leave from fossil fuel, what will happen if they become a stranded asset? But we are saying that oil and gas will not disappear immediately and renewable energy or clean energy, we will make challenges to all those areas as well, but we're still very much focused on doing the oil and gas business as well. So that was the year that we were in for a while. Then after the start of the Ukraine War, the energy security became more important, the stable supply became more important. So great emphasis on security and affordability, the appropriate volume at appropriate pricing was what people had wanted. So not just all decarbonization, but the balance needs to be struck with energy security and that was the new, I suppose, the viewpoint on a global basis after the start of the war. But what is the situation more recently. Energy addition is the recent -- the popular word, so the demand for primary energy is expected to increase by about 30% from the current level to 2050. This is mainly due to electricity, AI or data center has generated a greater demand for energy. In fact, the energy consumption will increase going forward. So on a global basis, will increase. So in that regard, clean energy centered around renewable energy continues to be important. We want to work on that, but that will not be enough. And so how are we going to address the energy addition? How are we going to accommodate that from the supply side? And this is probably the global energy the transition that we've seen over the past year to 1.5 years. So from energy transition to striking the balance between energy security and now energy addition, and so that was 4 or 5 years with the Ukraine war, the recognition regarding energy around the world has changed significantly. So that was a point that I wanted to mention. So that being the case, and if we look at the various forecast right now, and this is IEA and also IEEJ so how would the things change towards 2050 in regards to the energy. Oil may reach a peak somewhere, but the plateau situation is likely to continue for some time. Natural gas, you can see the demand here. So it will continue to increase towards 2040, 2050. Coal will come down, renewable energy will increase. I think this is the expected situation. So natural gas our main products. So let's focus on this a little bit more. So right now, the LNG demand on a global basis, and was about 400 million tonnes per year, so right now and what is going to -- this is going to reach 600 million tonnes in 2030, then 700 million tonnes in 2035 and even up to 800 million tonnes in the future. So more than double the current level. So where would the demand come from? And please look at the map on the right, and it's quite evident. It's quite clear. It's Asia, we will see a significant growth in demand with a shortage of the supply. This is what is expected in 2035. In the United States, Europe, Indian, the Pacific Ocean, we will see increases in demand, but we'll see greater growth in the supply. So if we look at the energy balance around the world, where we will see shortage is Asia. So LNG demand until 2040, 2050 will continue to increase in a straight manner and what -- we will see shortage in Asia. So how we to supply natural gas in Asia? This is the main issue for the energy industry. So this is the basis of our strategy at INPEX. This is the key point. So going to the next page. So I've been talking about the total picture. But talking about this year for Ichthys, this year, we have 112 cargo shipments and the production. We had a shutdown in 2025, and there was some delay in the restart up. But overall, compared to the initial plan, it was close to the initial plan at 112 cargo. And the profit contribution was about JPY 270 billion. And for 2026, what are the views and it's kind of hard to understand. But because of the BCM start-up, so talking about this product, Ichthys, the more you produce, we will be extracting from the basement, and there will be less pressure under the ground and with the lower pressure in order to have a long-term stability in the production, there are about 5,000 tonnes or a booster compressor where the compressor will be used for -- to connect to the CPF, the offshore CPF. And that went well. But in 2026, we don't have a shutdown maintenance, but this booster compressor will have commissioning. And in that process, there will be some stop of the facility. So the production will not be fully recovered. Therefore, it's not like we will have a large recovery in production. More -- compared to this year, there will be increase, but there are about 10 cargoes in a year. And then for the future backfill and the Train 3 expansion for the new asset acquisition, we are working various activities today. And at this moment, it's still hard to mention the details at this moment. However, at some point in time, we hope we can disclose. For Abadi, we had a large production in last year. In August of 2025, we had moved to FEED. And today, the FEED work, which is a basic design that is working steadily today at this moment. And by end of this year, some cost estimate will be clear and marketing as well as financing is the activity we have started. For marketing, from many potential customers, we already have discussions. At this moment, as mentioned at the beginning, the Asian LNG is very precious. And many from America and from Qatar, there are many LNG. But from Asia, there's not so many LNG coming out of the region. So the Asia-produced LNG will not have any homes straight issue and the distance of the ship transportation is short. Therefore, there are a lot of popularity and when it comes to the final binding agreement, we're not able to sign those contracts yet. Wherever there's a lot of needs and we're able to have a good marketing activities. So going forward, as we go into the FID, I would like to go into a more detailed condition negotiations. And then for the financing. Looking at the recent situation in the global market. For the natural gas, the bank and the finance situation is welcoming more than in the past, and that is working well at the same time. And for the permits, we are going to receive shortly, the permits. And for Abadi today, various challenges are still what we are facing, but we are having a steady progress in those activities. And then for Abu Dhabi, unfortunately, UAE actually a president passed away, and we cannot really communicate well. But the production increase in Abu Dhabi is what we are working on today. Between us and Abu Dhabi, Abu Dhabi as a country, 4 million to 5 million BT or, in some cases, 6 million BT is going to be planed, and we are going to make investments. 2026 investment is large and the biggest reason is Abu Dhabi increasing the capacity. So these are the reasons where we will be increasing production and profit will also be increased. And then outside of that, we have Norway, Indonesia and Malaysia, various activities are in place today. Next page, please. And then the so-called clean energy, the blue hydrogen area. As you know, in Niigata last year in November, we had the demonstration project for the blue hydrogen in Niigata, Kashiwazaki, we had an opening ceremony in November last year. And the natural gas -- domestic natural gas will be used for the blue hydrogen production and also the CO2, which is the byproduct in that process. The gas field in the Higashi-Nagasaki area is using the CCS technology will be storing those gas and then that is the CCS activities we are planning. And then we have methanation, the e-methane facility together with Osaka Gas, we have the construction in place in Nagaoka today, and we also started the commissioning. For the renewable energy, as a whole Japan is still in a difficult situation. However, we have the Potentia Energy which is the European company called Enel, and it's a subsidiary of Enel, but we have a 50-50 joint venture in Australia and through this we have this renewable energy investment in Australia. And this is 838 megawatts of production energy generation based on our stake in the project. And then for Indonesia, we have the Muara Laboh geothermal project. And for the expansion, we have the FID. And then also in the Goto -- offshore Goto of Nagasaki Prefecture, we have the first-in-kind in Japan, the floating offshore wind farm. And we are also participating in that project. And then for the electricity side, we have the collaboration with the Hokuriku electricity that we signed the comprehensive contract last year, and we are working on those projects as well. And for 2026, for the profit, as mentioned, we are JPY 330 billion targeting that amount for this fiscal year. And then the Brent is $63 and JPY 151 to a dollar. And both for the oil and the forest, there are a lot of discussions. But today, the oil price is at -- just less than $70 on the Brent. And compared to that, it's quite conservative. But many consultants are saying that today or this year, there will be some supply -- oversupply situation. So considering all of the situation, it's $63 in the assumption, I think it might be slightly conservative, and that's my view. And if you look at the ForEx, it's JPY 151, so it's also difficult to explain. But it's JPY 330 billion per year. But if we are to make adjustments on ForEx in the oil price, JPY 151 and $63 of oil price. If we make adjustment based on next year, and then the one-off, if you exclude the one-offs, and then making adjustments on the oil price in ForEx. If we exclude this one-off profit, the core profit is, let's say, JPY 330 million is JPY 315 million for this year. And then the oil price may go down. So it will be JPY 312.3 billion. So it's mostly the same level as 2025. And the forecast of JPY 330 billion is not so high. So you might say it's too low. However, looking at the current oil price situation, we think we can have this level of profit, and that's the estimate today. For the dividend, we have JPY 108. And also with the profit going down to JPY 330 billion, why we are still increasing dividend? That might be another question. But my view or our view is INPEX' growth basically is still high. We still have a high level of growth with a sound financial situation, and we have a good steady progress in the project, and we have Abadi. However, this year, we are going to -- we have a lot of investment amount, I think you have seen this year for 2025, overall, they were about JPY 400 billion in total. Next fiscal year, we are good to have double to JPY 850 billion or so of investment. And part of that is pushed out from last year to this year. But these investments will be long term for Abadi. But before Abadi in the mid- to short term, we have the existing assets or the acquisition of assets -- production assets and there will be, for the meantime, growth for the meantime, and that's why we have JPY 850 billion. And then for these investments, we have a high accuracy in these investments. So we think that with this investment, we can have a growth in index. So for the dividend, we are having the same view as before, so we are going to have a growth, and then we will be returning -- rewarding our shareholders. And for the profit, because of the oil price, we have JPY 330 billion of profit forecast. But in the mid- to long-term perspective, for the growth of our company. From that direction, there is no change in our views. Therefore, based on that, we will have cash flow and profit also depends on the external environment, but the mid- to long-term growth is still going to happen and we have that confidence. And for the market, the JPY 330 billion is the forecast we have for this year. But just like I mentioned, we have confidence, and we would like to reward our shareholders the outcome of those growth. So that's why we have JPY 108 of dividend for this fiscal year as a forecast. So that's all for me. Thank you. Shohei Yoshida: So next, Mr. Yamada will provide the explanation. Daisuke Yamada: So last fiscal year, for the year ended December 25, I'm supposed to operate the slide myself. So as the CEO has explained, net profit for last fiscal year was at JPY 393.8 billion or so. So it's a decrease but the oil price has come down, then we had the Ichthys shutdown maintenance. And so there were significant factors to push down the profit level, but we have the profit booster or the balance sheet control or we had a significant return of the income tax. And so we ended up with this number of JPY 393.8 billion. So how are we going to assess this? Well, at the oil price in the $60 level and almost JPY 400 billion of profit. And so we have -- this is a proof that we are now able to generate earnings. And as the CEO has explained, if we adjust for oil price and foreign exchange rate, this would be the highest record in history. So we do consider this very positively. This is the analysis of the revenue and profit. And so you can see crude oil at the top and the natural gas below. The crude oil sales volume increase, mainly due to Abu Dhabi and so in terms of unit price, it came down significantly because of the rate coming down. And so the operating -- the profit did actually come down. But for natural gas, the sales volume come down. This was due to the Ichthys shutdown. And for the unit price is linked to Brent down. And so in -- so we saw a decrease here for the natural gas as well. They are more than JPY 4,000. So last year was JPY 393.8 billion. If this is the previous year, it was JPY 427.3 billion, a decrease of JPY 33.5 billion because this is the decrease in the revenue that was due to the oil price and exploration expenses last year, we did not have a successful exploration in Australia last year. So that kind of came back and the divestment on the far right. Now last year, in Southeast Asia, we had earnings from the divestiture. And so these are kind of the comparison against the previous fiscal year. And for this fiscal year, the revenue come down and also exist downstream. And this also links to the oil price, and so this came down in terms of the Shell profit investment account of an equity method but we saw the JPY 153.8 billion positive impact in terms of income tax expenses. And so here -- and that is actually included in the others as well, but the profit booster. And so this is the recycling or the investment the benefit in Europe and the Middle East growth, JPY 80 billion in delta, it was about JPY 60 billion. And so this is essentially balance sheet control. So about JPY 80 billion of these earnings are accounted for by that, which is one of the key earning pillars for us. So the forecast for this fiscal year, JPY 330 billion is what we have placed and so $63 for the Brent price and JPY 151 to dollar. So I may think this is somewhat conservative. Some of you may be aware, but last year, too, so we started with the forecast for the fiscal year at JPY 330 billion. And so the oil price was $75 that we have assumed. But if we look at the end, it was $68. So it was $7 less in terms of the oil price, but we still ended up with where we were. And so about JPY 40 billion to decrease against the start of the last fiscal year and essentially came up with this number of JPY 393.8 billion last fiscal year. So it's not going to be in parallel to what we did last year, but we have a greater ability to generate earnings right now. And as you know, if you look at our balance sheet, we have quite a large amount of fixed asset and we have the financial -- the unrealized gains or losses included. So things that we can do now and can do now, we have those, the profit, booster thing, but we can't include all of that at the budget at the start of the fiscal year. And so you kind of go through the year to turn those into actual earnings. So JPY 330 billion is kind of a kind of starting point in that regard. And these are the factors analysis, and the biggest is the oil price. But in the middle, you have the Ichthys, please have a look at this. So Ichthys, JPY 4.9 billion of increase and there is some up and down in this number. So last year, shutdown impact occurred. So we had about drop of JPY 60 billion or so in the sales volume, but that has recovered. So that is an increase of JPY 60 billion. But on the other hand, as explained by our CEO, we have the booster compressor module connection. And by having this, there will be some drop in the utilization. And then we also have the oil tax. Last year, it was only a 6-month effect but this year, it will be a full year impact. So about JPY 16 billion of decline in profits, and including that, it's plus JPY 4.9 billion. And then for the profit booster next year -- for this year, CEO [ recycling ] about JPY 90 billion. And in Delta, these are the numbers. So that profit, in total, will be JPY 330 billion. So I might be repeating myself, but these are just a kind of a number we have for this interim. And then for the sensitivity of the oil and ForEx so it's JPY 5.5 billion for the oil price and the JPY 3 billion for the ForEx. And then next is the investment. So the cash flow before investment or exploration is shown. But this year, for the growth investment, JPY 850 billion is a large investment we're expecting this year. Last year was JPY 386 million but we have about JPY 463 billion of increase, which is for the pillar number 1, which is mainly around oil and gas for the investment. And as you know, Abadi, before going to Abadi, how much we're going to -- how we're going to generate profit is the question. I think there were some questions. But having these investments from the late 20s to early 30s, we'll have the outcome from these investments. So we'll be focusing on investment this year. However, this JPY 850 billion is a large amount. But if you look at the bottom left, in the midterm, we had the plan -- intermittent plan in '25 was JPY 380 billion, but this year is this amount. So it might be a large amount, but it's a 25% over the 2-year period. So it's a run rate -- based on the run rate. And as you can see, this is the overall breakdown of the JPY 850 billion. So the blue, the dark blue is the Abadi investments. And then the exploration as well as the increase in capacity. So for the Abadi -- Abu Dhabi is an investment. And then the new investment, we cannot mention the detail here yet, but the acquisition of interest and the core area, mainly Australia, Indonesia, Asia, Norway, Japan will be investment -- making these investments overall. And then ROIC, unfortunately, will be some decline this year. It was 7.3% last year, but it's going to go down to 6% or so. And ROE, although it's not stated here, we have about 7% this year. And I'm sure there are [ various views ]. But in terms of the total equity being so large. So if you work on that, it might increase the ROE. But we are not going to lower the equity by lowering the total amount by buyback. We are not thinking of that at this moment, but we have a trustee borrowing, the corporate finance and depending on the credibility of our company, we have to do financing. And considering that, we have to have a certain amount of equity and there might be different views from the creditors compared to the investors. But from the creditor standpoint, we should have a certain amount of equity or else it will be difficult to finance. So we have to maintain a certain amount for the financing standpoint. So that's all for me. Thank you very much. Toshiaki Takimoto: So please allow me to explain about sustainable growth of our corporate value. And in March 2023, the Tokyo Stock Exchange has made a request that we need to work on realizing the management of the company in view of the share price as well as the efficiency. So we were working on that and so I'd like to talk about the -- what we've done last year as well what we will be doing this fiscal year. So next slide, please. So what you can see on this slide is looking at the transition in the share price and the PB ratio. Dark blue is the PB ratio, green is the share price. And at the end of 2022, our share price was JPY 1,396, and that 0.48x was the PB ratio by at the end of last fiscal year. Our share price was JPY 3,127 and PB ratio of 0.77x. And -- so based on the share price, we were at JPY 3,998, so 0.98x, it was where we were at as of today. So as you can see here, and the reason behind why PB ratio increased. And so we have some ongoing initiatives as well as changes in external environment. So first of all, so we have been strengthening shareholder returns and dialogue with investors. We have also worked on enhancing capital efficiency. But above all, there's been significant change in external environment, particularly the natural gas and LNG importance has been revisited and that has now been recognized by the market and our core business, the natural gas LNG business, the importance thereof has led the share price to increase, which has led to improvement in the PB ratio. Next slide, please. So here, we are talking about enhancement of capital efficiency as well as building confidence in our future growth. And as we have been explaining so far, in the early 2030s, the start of Abadi, and that is the significant expectation for our next large growth but from August last year, as you can see on the slide, we have entered into the FEED phase for Abadi. So now we are nearing the start of development for Abadi. I think the market has recognized that. And in the early 2030s, when we start the Abadi production, in the meantime, what type of growth the story can we paint? And that is the more immediate issue for us. And when we speak with investors, then -- of course, performance is not bad. Shareholder returns is not bad as well. And that is a comment that we receive from investors and for IR meeting and the investors have expressed their satisfaction. But the growth story, until we start production from Abadi, how are we going to come up with that? And that may be the only maybe the issue that we need to address. And so acquiring new assets by working on these in a concrete manner, we want to be able to build that competence in the market in regards to our future growth. And we need to also enhance the earnings base. So we will continue -- we are continuing steady production increases in regards to our project in Europe and Middle East and also enhancing our profit base through a profit booster 500. We intend to lift our ROE by some 1% over the next decade. I think we have the ability to do that. And if you look at the graph on the right, and Abadi investment is likely to increase [indiscernible] from 2028 into the early 2030s. But even in that period, we still are able to invest for growth as well as make returns to the shareholders. And of course, debt will increase somewhat. But the net debt-to-equity ratio should be controlled within 0.3x to 0.8x and are able to do both the investment for growth as well as making returns to the shareholders. So that is what the graph on the right show. So the growth investment, we talked earlier for a single year of investment from Yamada-san, but the midterm vision that we announced last year, and we have a 3-year investment plan, which is JPY 1.9 trillion. And growth number 1 -- growth pillar #1, we have the natural gas and LNG investment, especially and there will be, over 3 years, the amount to JPY 855 billion over 3 period and then we have the Abadi exploration expansion, new asset acquisition, JPY 938 billion for growth pillar #1 as well. And then for growth pillar 1 investment, a JPY 1.9 billion and then 2 and 3 are shown. These are the amount for investment for growth pillar #2, #3. So in the vision, as we set the target, the operating cash flow, a 60% increase or the increase of the business is what we like to achieve going forward. Next slide, please. And on the left-hand side, you have the shareholder return and also increase in our dialogue with our shareholders. On the left-hand side, the blue line is the share price trend from 2020 and onwards. In the gray line is the Brent oil price trend over the 5 or 6 years. As you can see, in 2024 from the latter half of that year to the early 2025, and since then, just like an increase in the allocator space, the oil price is going down, but the stock price is going up. So one of the factors is in 2022 onwards, we have started to do a shareholder return of more than JPY 200 billion. And as mentioned before, about the business environment change, practically reducing GHG and furthermore, having energy security as well as affordability of energy. And those are the -- coming from natural gas and LNG and there's more importance of these resources. Therefore, that's the main reason why we have been accepted, we believe. And of course, we don't think that's the only factor. But for the retail investors as well compared to 2019, there is an increase by 17x. So we think that it might be a difference in our credibility and also the fact that we are able to have a frequent dialogue with our investors and explain about the business versus the expectation from the market. We think there is more deepened understanding towards our business and operations. With PBR, 1x, we cannot be satisfied and that was explained from our President and CEO. But with that in mind, we would like to have awareness of these capital costs going forward. The right-hand side, the increase in the dialogue with our investors. Last year, we had 495 dialogues or interviews with our investors and analysts. By this, as you can see on the bottom right, the various initiatives as an example, from our dialogue, there are about 6 or 7 items. So these are the initiatives that we have also been evaluated for our investors. And as explained we have JPY 3,900 or so share price today. So with this, we have been evaluated, and we think that our understanding of our business as well as the support to our business has increased. So I'd like to have these initiatives continued, so that the stock price and also the capital cost will be in our mind through our operation. So that's all for my presentation. Shohei Yoshida: We will now like to receive questions. We will receive questions from this venue first. Then after that, we will receive questions from Zoom. [Operator Instructions] So I'd like to invite questions from the floor. Unknown Analyst: Okay. So I have two questions. The first question is to do with the core earnings, JPY 330 billion. The analysis that you have explained. This was something that we've learned for the very first time. So based on JPY 330 billion. And on Page 16 today, and based on JPY 330 billion, ROE, 7%, the ROIC of 6.0%. Now your ROE medium-term target I don't think you have the quantitative number, but to be more than the equity cost tend to be in excess of WACC. I think that is how we have explained. Now on Page 16, you actually did show WACC and the sales equity cost, the 8% and 6%, respectively. So based on the core earnings, the shareholders' capital, the cost, this is lower. And so for ROIC as well, unfortunately 6% -- WACC 6%, and the conclusion is that you have not generated corporate value. And so based on core earnings, ROE to be more than 8%. So we are right through the midterm data plan right now. Now can that be realized before Abadi starts generating earnings? So that's the first question. And the second question is in regards to the free cash flow. Now last fiscal year, you explained about the investment amount. But in terms of investment cash flow, free cash flow was more or less neutral or -- and this fiscal year, the free cash flow because we are going to be increasing investment, so likely to be slightly positive or even negative. But -- so if we define the investment cash flow has been the free cash flow last year to this year, what are the changes? So that's my second question. Daisuke Yamada: So I will start. So the CEO has explained about the core earnings. And let me explain the logic behind that, and I think that was described on Page 10. So the core earnings is something that we have shared with you for the very first time and JPY 330 billion for this fiscal year, we wanted to say that this is not a bad number. So we ended up with JPY 393.8 billion last year, but the oil price and the exchange rate for this fiscal year, $63 and JPY 151. So if we actually modify to that. And if we exclude for the one-off earnings last year. So if we exclude that, then we end up with JPY 312.3 billion, the JPY 330 billion this fiscal year. And so the oil price and exchange as I say, if you exclude for the one-off number, we end up JPY 315.2 billion. So you may look as though the earnings has come down, but the core earnings itself hasn't really changed. That is what we wanted to communicate through this number. ROE and ROIC. Now we are not using the core earnings as the basis. So we are using net profit for that. And of course, one-off earnings, so that it would be positive or negative from year-to-year and the ROE, the ROIC is calculated based on that. And as we have indicated, and the JPY 330 billion for this fiscal year, ROE is 7%, and what we are calculating, so 8% for the equity costs will fall short of that. ROIC too, we now disclose this number. For this fiscal year, based on JPY 330 billion, we will be at 6% which is more or less the WACC level. So based on these numbers, we are not responding to your expectations. But the JPY 330 billion is budgeted at the fiscal year. So that's the performance at the start of the year. But like with last fiscal year, throughout the fiscal year, and there are a number of things we have in mind, but not something that we can share with you at this point in time, but we started with JPY 350 billion. But we'll give a full year forecast in May or [indiscernible] later in the year as well, and we hope to be able to increase that for our ROE and ROIC at those stages. We're hopeful of those numbers increasing. We need to give it a go, but that's the reasoning behind this number. For the free cash flow, maybe we should go to the investment page, which was this page. So the December 2025, this is cash flow before exploration and investment cash flow, if there is a difference. This is more than JPY 130 billion, so positive. So we had that much of free cash flow, which was quite a steady number, but we were actually making profit. So based on this budget, investment is JPY 850 billion. So that's the investment. And so free cash flow will be negative. In other words, so we are investing more than the operating cash flow. And so unless we raise money, we will not be able to fund investment free cash flow is negative for the first time since March 2019. So we have been making returns to shareholders based on our own cash. But this year, we are going to make a large investment. And so 50% of return, that means that we need to do JPY 156 billion, so we need to raise some money. So free cash flow becoming negative as to whether this is going to be a major issue for our management, not really. And so we will raise funds for the investment. So we raised debt, and I think that's quite healthy. But the key is the financial discipline in doing. So I didn't touch this before, we want to invest this year even if we actually raise some debt. The net ratio will still be at 0.39x. And we are saying that the financial discipline is between 0.3x and 0.5x. So we are going to raise debt to the investor. And we feel that this is not going to be a financial, I suppose, issue. So I'm looking forward to the additions to the core earnings. Yoshihiro Wakita: So I'd like to ask two questions. So number one, this time, the investment plan compared to last year, there will be an increase -- significant increase compared to last year. So as shown on Page 20, looking at these investments, the existing project investment to increase capacity, Abu Dhabi and the Middle East. You mentioned about the increase in the production capacity. But if you can talk more in detail about the content of those investments and also the profit contribution, I think this is for the growth before Abadi. So I think for these existing projects, investment. You can -- if you can talk about the time frame as well as the maybe not so much in size, it might be difficult, equity IRR, in the mid-10% range, whether that is still the case. And in terms of the time line and also what kind of content of investment and how much contribution from the profit side will be made in the time frame. So it's a Middle East project. So I'm sure it's difficult, but if you can maybe give us more details on that. That's number one. And then the second question is regarding the Abadi project, the FEED started from summer last year in a full scale. And by end of this year, is there any expected milestone for this project in this fiscal year? So in 2027, that is the target year. But in '26 -- between the year '26 with the Indonesian government, is there any timing for negotiations or any milestone of such or with the lender, if there's any agreement or any timing for agreement? So in 2026, is there any milestone related to Abadi? If you can explain what is the expected milestone for this fiscal year. Daisuke Yamada: So I'd like to explain first. For that investment question, JPY 850 billion of investments. So these are quite a significant number in the past several years. But Abadi exploration and increase capacity as well as the new investment. So Abadi is the investment for Abadi, and then exploration is as you can see. But expansion of existing assets, these are the investment for the increase in capacity of existing assets. For example, Abu Dhabi increase in the production, we have investment there. And then when it comes to new asset acquisition, these are acquiring new interests or M&A might also be included but these are the type of investments. So for the increase or expansion of the existing assets, we have JPY 282 billion and the new asset acquisition, JPY 106 billion. So in terms of the area, we have the Australia or Perth or Ichthys, the connection or tie-in investment. And then the growth area, which is Asia, in Abu Dhabi or Japan. The oil and gas mainly where we have quite a diversified investments. And then when it comes to exploration, it will take some time for these investments. And we cannot give details around the number of projects. But quite a quick area of investment we also are expecting this year and next year, where we can generate profit quickly from such investments. Those are expected as well. And for these investments. Cash flow actually tends to go up and down. But in 2030, early 2030s with JPY 850 billion times 10%, they'll be up and down, of course, but that's the amount that we can expect of profit or cash flow contribution and that's the expectation. Of course, depends on the project, there might be investment upfront, and that might be the case. But basically, we have the operating cash flow. And then as our CEO mentioned earlier, until we go to Abadi, we have the bridge, and that is the imminent challenge we are faced today. So last year to this year, we have accelerated activities. The environment is not bad, $60 or above with oil price and the acquisition of interest and those new investments are a certain amount we can expect to make investments in, and those are the target. Free cash flow will be negative. And with the financing, even we have to finance, we'd like to try to make these investments for the future outcome. Takayuki Ueda: So the milestone for Abadi, I'd like to answer that question. So basically, this year, we will do FEED. So whether we can call it milestone, we don't know. But the biggest is the environmental permits AMDAL is what we call, but that's one of the biggest milestone. And from the nation government, if we can obtain that from the government, various activities can start. So that's one milestone we're expecting. And then AMDAL. After receiving AMDAL permit, this project is in the rural area of Indonesia. So we have to have engagement with the community and increase that engagement. So those are the milestones we're expecting. More than that, we have been marketing activities for LOI we have already received many agreements. But having that in detail agreements, so that kind of interim activities, the key term sheet is how we call it, but the kind of a term sheet is something we have to work in a more detailed manner. And those are things we are expecting as one of the milestones. And with the Indonesian government, the negotiation on the conditions should come after the FEED outcome, and we cannot go without the outcome, but we also have preliminary activities. What kind of project cost and how much we have to pay, that can bring storming activities already started. So this year, these are the negotiations that will -- or discussions that will go in a more full scale. And as for the investment, as Yamada-san said, in the short term to midterm profit, we have to secure those profit and those are important as well. And there are still many things or some things we cannot mention today. But when we say exploration, we have 6 blocks of exploration in Malaysia that we have already acquired. And we will have about 9 drilling this year. But if there's a lot of pipelines in Malaysia. So if we are able to have a success, we can have a mid- to long-term increase. And we also have Norway -- Pandion with the company called Pandion. We were able to acquire the stakes or interest. And those are things that will increase the profit over the short term to midterm to increase the production as well as profit. And then we also have the assets, and we have very some considerations of these assets. So once these become more specific, then we have this midterm profit securing until Abadi. So this year, we have a certain amount of assets or budgets, but Abu Dhabi is one of the largest, but we have these various investments in plan. Unknown Analyst: So I also would like to ask you a question. The first question is related to investment. And I talk about the interest acquisition. So in terms of interest acquisition, you said the environment is favorable right now. But at the same time, buyers -- sorry, the sellers, if my memory serves me correct, there are always, I suppose, taking quite an aggressive stance. So there is always the fear of buying -- end up buying something that is not too profitable. So in regards to the new investment, could you give more description in regards to the environment? And the second question is regards to the profit booster. I wanted to confirm for this fiscal year, sorry, for December 2025, I think the level was about JPY 80 billion. Is that correct? And for December 2026. So you said the profit boost JPY 500 billion. So the basis is, I think -- you were saying kind of a starting point. The base is JPY 50 billion. And so the JPY 50 billion is already included there may be others that you may be able to add on top. I don't know how much, but you expect for further addition to that. Is that the kind of thinking that you have? So that's my second question. Takayuki Ueda: So first question in regards to investment, as to whether the environment is favorable, not biased may be quite aggressive. But as to whether the environment right now is favorable for buying things or not, I don't know for sure. But as I said before, we need to place the natural gas as the core. So there are many, I suppose -- the players wanting to sell or buying to -- wanting to buy the natural gas assets. So you're probably right, the timing to consider right now. Of course, we set a hurdle rate for the oil and gas business. So the country list does differ from country to country. So we look at the details. But generally speaking, we are looking at the mid -- team as a hurdle rate. So for this fiscal year, that would be the time of project that we seek to invest in. So this is an issue of investment discipline so we are very much mindful of that. So please allow me to respond to your second question. Profit boost of JPY 500 billion. And we've discussed this with you for the first time last year. And one is TA recycling. And so what is included as a part of the foreign exchange translation adjustment, this is put through PL. And the other is the investment incentive effect. And so last year, I've mentioned two numbers, JPY 80 billion and JPY 60 billion. Now what they are is that from the accounting -- these two have contributed to profit by JPY 80 billion. But when we speak with you, we need to kind of define them. So this is something we started from 2025. Now in 2024, we did have those -- the investment -- investment incentive effect. When we speak about the profit boost, on a gross basis, it's JPY 80 billion or so. But in terms of the delta, we need to subtract for the number from the previous fiscal year, which was about JPY 20 billion. So that's the reason we end up with JPY 60 billion. So we actually shared with you two numbers. So from the settlement of account perspective, you've been hearing JPY 80 billion, but the number that we have, speaking with you, we've removed the delta portion so it's JPY 60 billion. And so against the profit-based JPY 500 billion last year, we were able to do JPY 60 billion. So that was the accurate situation. And that number is JPY 90 billion this fiscal year. And so JPY 10 billion more than last year in terms of material recycling. Now -- so throughout the year to generate additional earnings, of course, many things. It's not just based on the balance sheet control, but the reduction or other factors generating earnings. But one thing that we can think about is that, in our case, the tax expenses. As you know, JPY 800 billion or JPY 900 billion, and that's the kind of level of tax that we are paying. So to generate great -- the tax benefit. Of course, we need to pay tax properly. But we shouldn't pay tax that we shouldn't be paying and so paying tax properly means that they're generating proper tax benefit. So we need to target for that. So in that regard, we have a significant balance sheet. Our balance sheet is in excess of JPY 7 trillion. And so for example, our currency translation, all fixed assets. And so given the fact that the oil price and FX are changing on a daily basis, so the financial, our profit and loss, the taxation, profit or loss or taxation based unrealized gains and losses. We have all of these generating at all the times. How can we combine them? So we need to control the balance sheet to generate earnings. And this is something that we intend to do, of course. And so we report based on the IFRS. And so our balance sheet is accurate. And so we do have the balance sheet to reflect the actual situation. And also emphasis that we have the PL, the profit and loss. And so our balance sheet is so correct. And so we need to come up with a P&L, which is accurately reflecting the difference. So what's realized on the balance sheet unrealized profit and the financial profit and losses and taxation profit and loss, we need to combine them well. That is one way of putting a financial position and starting point and the expectations to see additions to that. So inclusive of all of that, we are hopeful generating earnings in that way. I hope I answered your question. Unknown Analyst: So I'd like to ask two questions. Number one is about Ichthys. The low pressure BCM with the connection, there will be an increase in profit. But maybe I didn't recognize this before, but I think we never heard this, so we haven't heard this before. So this BCM with this utilization, we won't have so much production this year. Was that planned from the past or started from '26 or something that you have started to look at this year or recently? And whether that will be fully recognized next year or whether there'll be some shutdown in maintenance at some point. So if you can give some update about the production profile of Ichthys. And then the second question is on Page 17 about the forecast for this year, the impact of oil price. JPY 556 billion of minus impact based on the oil price assumption and the past assumptions. I think there are a lot of a large impact. So maybe the timing issue, maybe it's a timing issue or -- as you mentioned, the JPY 330 billion is the number you have. But whether there will be some conservatism in this number as well. So you'd like to ask whether that's the case or not. Takayuki Ueda: So the production profile of Ichthys over the BCM connection. Of course, this is something that we have been expected as a company. And talking about the low pressure module. So even though the pressure in the well will go down over the future, we will still have a production secured. So for that, we have a booster compressor which will be used for -- to connect to the CPF, the offshore facility, and we have this installed. So at the beginning of last year, we started that installation. And then this year, we have started decommissioning and after installation, we have to collect the lines. So there are huge lines and pipelines in a huge amount of workload. So to do the commissioning, that was the plan before. And then with the actual commissioning, how much time will require and how much drop in production we will have those forecast is something that we were able to come up recently. And so we have not mentioned those details in the past. But those work is something that we have been expecting from the past. And then this is sort of a one-off factor. And of course, the production amount or the -- if the commissioning will be delayed, then that would also impact the schedule, but that is a one-off. And then for 2027, we are going to start planning for this, however, but some sort of maintenance will be required. So how those will be unfolded is something we have to discuss and decide and we have to put that together. Daisuke Yamada: And the second question. The initial budget with the oil price of JPY 52 billion impact. So this is including the natural gas, LNG, the lagging factories included. So if you look in detail, there are about JPY 30 billion on the oil price. And then the -- based on the dropped oil price, there are 4 months delay. So that's the LNG marketing or sales. And the spread is also being adjusted. So that's about a JPY 20 billion of impact. So in that sense, JPY 50 billion breakdown is the breakdown as mentioned. And then from the beginning of this year, if you look at from the beginning of this year, the sensitivity multiplied by these 6.8x to 6.3x the sensitivity, that's not the case. But initially, we have the oil price and then looking at the lagging factor. So in total, we have the oil price sensitivity and JPY 52 billion or so. And then this is different from the earlier factors. But just plainly looking at the oil price, that is the number we have. So thank you very much for the answer. Unknown Analyst: I also have two questions. And I wanted to ask a little more about the low-pressure production facility and the impact of this is likely to come in the first half of the year. Because I wanted to understand the scheduling aspect. And the second question is in regards to cost. Production cost forecast is shown on Page 31. If you could give some background information to that not including royalty we expect some increase. But if you include royalty, it will come down slightly. So could you explain the background to the extent possible? Takayuki Ueda: And in regards to the low-pressure production facility or the booster compressor module, BCM, it's not like a shutdown maintenance stopping everything to link the equipment. So we are actually doing a link up while being in operation. When you are linking pipeline, we need to stop the related facilities. And once the line up, you start the operation again. And so it's not the case that you kind of shut down for a period, we will connect and restart. So it's a little bit different from that type of shutdown maintenance in that regard, where we're going to do this rather than it being a first half of the year or the second half of the year, we are going to do this work gradually throughout the year. So in terms of our cargo number, we are expecting about 10 cargo per month, that is the assumption that we have for this fiscal year. And so reflective of this impact, that's the kind of level of production we're expecting for the year. In terms of the production cost per barrel, and $5.3 was expectation last year and the production volume in the Europe and the Middle East, liquids production volume and OpEx related to this the balance that will have the impact on this number. And so those, including royalty or not, the royalty will have more impact in terms of the European than the Middle East. How much contribution from that business will have that impact. So -- and last year, those that include royalty coming down and those increasing that does not include royalty that the Australian or the associated production volume, that is having the impact. So the cost increase overall is not what you're expecting. It's just a change in balance where the increase from -- the production of acquired cost is higher, that -- yes, for cost reduction, Ichthys project that we are the operators, we are working on further cost reduction. And so the Ichthys portion, we will aim for further the cost reduction. But we have already made a significant progress on this, and we are currently nearing the lowest level. And so to what extent can we still do. And also overall, the production volume. So it's a balance of these 2 that is reflected in these numbers. Unknown Analyst: One question. So this time, about the increase of dividend against the growth in the business and the cash flow is returned, and I think that's really welcomed. But JPY 108, the level of this dividend, what kind of discussion was made? And how did you come to the decision? I think it was an overall comprehensive discussion. But in the past, 30% of payout ratio was the -- that typical case. But this time, from that, it will be 40% or less of increase in payout ratio. So what kind of discussions were in place? And then how did you come to that JPY 180? It's not really a clear number. It's not so clear. Maybe it's kind of a halfway, but how did you come up with that number? Takayuki Ueda: Well, there are a lot of discussions. And one thing is the EPS already profit -- against the profit this year, how we're going to return to our shareholders. And this time, JPY 330 billion, let's say. With that, it will be 50% total payout and then JPY 156 billion or so. But if it's JPY 108 per share of dividend, it's JPY 120 billion of cash required, and there is a difference between those numbers. Therefore, of course, the JPY 330 billion is just an outlook so we don't know whether that will be the exact number. But with the certain visibility, if we have JPY 108 per share of dividend, then in order to achieve that 50% total payout in the interim, we may have an increase in dividend or have a change. But we wanted to have that kind of room in the dividend. That's one number. One idea. And the other side is as we're not increasing so much profit, so we can set the same level of dividend as this year. But because of the inflation or in the past, it was a deflation. So the yield -- dividend yield in the deflation, let's say, if it was 3%, that would lead to returning to our shareholders. But then with the inflationary environment, there will be a decline in real. So it's not a situation welcome situation. So that's why we came up with the number, JPY 180 of share this time. Shohei Yoshida: So we'd like to conclude the session at this as we have reached the scheduled time. And for those that we were unable to respond to, please contact our IR group. Thank you very much for your participation despite your busy schedule today. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Good morning, and welcome to the Energy Transfer Fourth Quarter 2025 Earnings Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Tom Long, Co-Chief Executive Officer. Please go ahead. Thomas Long: Thank you, operator, and good morning, everyone, and welcome to the Energy Transfer Fourth Quarter 2025 Earnings Call. I'm also joined today by Mackie McCrea and other members of the senior management team who are here to help answer your questions after our prepared remarks. Hopefully, you saw the press release we issued earlier this morning. As a reminder, our earnings release contains an update to guidance and a thorough MD&A that goes through the segment results in detail, and we encourage everyone to look at the release, as well as the slides posted to our website to gain a full understanding of the quarter and our growth opportunities. As a reminder, we will be making forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. These statements are based upon our current beliefs as well as certain assumptions and information currently available to us and are discussed in more details in our Form 10-K for the year ended December 31, 2025, which we expect to file later this week. I'll also refer to adjusted EBITDA and distributable cash flow, or DCF, both of which are non-GAAP financial measures. You'll find a reconciliation of our non-GAAP measures on our website. Let's start today with the financial results for full year 2025. Adjusted EBITDA was nearly $16 billion compared to $15.5 billion for 2024. This was up 3% over last year and was a partnership record. DCF attributable to the partners of Energy Transfer, as adjusted, was $8.2 billion compared to $8.4 billion for last year. Operationally, we moved record volumes across each of our interstate midstream NGL and crude segments for the year ended 2025. We also exported a record amount of total NGLs out of our Nederland and Marcus Hook terminals. For the fourth quarter of 2025, we generated adjusted EBITDA of approximately $4.2 billion compared to approximately $3.9 billion for the fourth quarter of last year. DCF attributable to the partners of Energy Transfer, as adjusted, was approximately $2 billion, consistent with the fourth quarter of 2024. During the quarter, we recorded records in each of our NGL fractionation throughput, LPG exports, Nederland terminal volumes and crude transportation throughput. And for full year 2025, we spent approximately $4.5 billion on organic growth capital, primarily in the NGL and refined products, midstream and intrastate segments, excluding SUN and USA compression CapEx. Turning to our results by segment for the fourth quarter, and we'll start with the NGL and refined products. Adjusted EBITDA was $1.1 billion, consistent with the fourth quarter of 2024. We saw higher throughput across our Gulf Coast and Mariner East pipeline operations, Mont Belvieu fractionators and Nederland terminal. Results for the quarter, including a onetime $56 million increase from a regulatory order impacting prior and current period rates. These were offset by $58 million of lower gains related to the timing of the settlement of NGL and refined products inventory hedges, which we anticipate will be recognized during the first quarter of 2026. In addition, loading delays related to fog at Nederland resulted in a $14 million impact, which we are on track to make up in the first quarter of 2026. For midstream, adjusted EBITDA was $720 million compared to $705 million for the fourth quarter of 2024. This was primarily due to volume growth in the Permian, Northeast and ArkLaTex regions. Results were partially offset by a onetime expense increase of $14 million in intersegment NGL transportation fees as a result of the previously mentioned regulatory order. For the crude oil segment, adjusted EBITDA was $722 million compared to $760 million for the fourth quarter of 2024. During the quarter, we saw growth across several of our crude pipeline systems and our Permian Basin gathering system. Results also included a onetime $19 million increase related to the previously mentioned regulatory order. These were offset by lower transportation revenues, primarily on the Bakken pipeline. In our interstate natural gas segment, adjusted EBITDA was $523 million compared to $493 million for the fourth quarter of last year. This increase was primarily due to more capacity sold and higher utilization on several of our pipelines, including Panhandle Eastern, Trunkline, Florida Gas and Transwestern. And for our intrastate natural gas segment, adjusted EBITDA was $355 million compared to $263 million in the fourth quarter of last year. This increase was primarily due to increased pipeline and storage optimization, as well as increased volumes across our Texas intrastate pipeline system due to third-party volume growth. Now turning to our organic capital guidance. As we previously announced, our 2026 organic growth capital guidance range is projected to be between $5 billion and $5.5 billion, excluding SUN and USA Compression. We expect approximately 2/3 of this capital to be invested in projects that will enhance our natural gas assets, including the Hugh Brinson and Desert Southwest pipeline projects, Mustang Draw I and II, as well as continued system build-out in the Permian Basin. In addition, approximately 1/4 of the growth capital will be in the NGL and refined products segment related to the ongoing construction of the Nederland and Marcus Hook terminal expansions as well as Frac IX and Mont Belvieu. These expansions are contracted under long-term commitments and are expected to generate mid-teen returns and considerable earnings growth over the next decade or more. Beyond these projects, we have a significant backlog of opportunities that are expected to support continued growth. For a closer look at some of our major growth projects, I'll start with the natural gas side of our business, where we continue to see significant demand for our services. In December, we announced that we have upsized the mainline pipeline diameter for Desert Southwest Pipeline Project from 42 inches to 48 inches to meet the planned and anticipated customer demand. This will increase the project's capacity to up to 2.3 Bcf per day. A full buildout of the project is expected to cost approximately $5.6 billion, and we continue to expect the project to be in service by the fourth quarter of 2029. Our teams continue to actively engage with elected officials, county leadership and associated communities along the rail to communicate project information and updates, and we have engaged with over 275 stakeholders to date. Our discussions have been very positive, and existing and potential stakeholders are pleased about the economic benefits expected and also realize the critical need for a substantial, reliable supply of gas to help address the significant demand growth in Arizona and the Mexico market. Next, construction of our Hugh Brinson pipeline is going well. As of today, 100% of the 42-inch pipe has been delivered to our pipe yards, and mainline construction of the pipeline is approximately 75% complete. We expect Phase 1 to be in service in the fourth quarter of this year. However, if we stay on our current schedule, we should have the ability to flow some early volumes prior to Phase 1 in service. And we continue to expect Phase 2 to be in service in the first quarter of 2027. As a reminder, this system will be bidirectional, with the ability to transport approximately 2.2 Bcf per day from West to East and approximately 1 Bcf per day from East to West. The pipe is fully contracted from West to East, and we also have a growing amount of volume committed on backhaul that is expected to add significant upside with no additional capital. On Florida Gas Transmission, or FGT, we recently completed open seasons for 2 new projects that are supported by long-term binding agreements from anchor shippers. The Phase IX project, which is designed to expand firm natural gas transportation capacity to multiple new and existing meter stations located across FGT's market area. This project will consist of the construction of up to 82 miles of pipeline looping, as well as new and upgraded compression. This would expand FGT's capacity by up to 550 million cubic feet per day. The project is expected to be available for service in the fourth quarter of 2028. The South Florida Project is designed to enhance the reliability of critical infrastructure and increase overall deliveries in South Florida. It will consist of the construction of a new 37-mile lateral to supply the South Florida area, along with compression in a new meter station. The project is expected to be available for service in the first quarter of 2030. Energy Transfer's share of the cost of these 2 projects is expected to be up to $535 million and $110 million, respectively, depending on the final shipper volume elections. And construction of a new storage cavern at our Bethel natural gas storage facility, which is expected to double our working gas storage capacity at the facility to over 12 Bcf, remains on schedule to be in service in late 2028. Now for a brief update around recent natural gas opportunities for new power plant and data center development. On our last call, we announced we have long-term agreements with Oracle to deliver approximately 900,000 Mcf per day of natural gas to 3 U.S. data centers. We recently began flowing gas on the first pipeline lateral to a data center campus near Abilene, Texas. Two more laterals are expected to be completed in mid-2026. Supply for all 3 of these pipelines will be sourced from our Hugh Brinson and North Texas pipelines. As a reminder, Energy Transfer has entered into a 20-year binding agreement with Entergy Louisiana to provide at least 250,000 MMBtus per day of firm transportation service to fuel their facilities in Richland Parish, Louisiana. Within the last year, we have contracted over 6 Bcf per day of pipeline capacity with demand-pull customers. This includes volumes from end users, data centers and utilities off of Desert Southwest, Hugh Brinson pipelines and other of our natural gas pipeline systems. And we remain in advanced discussions with several other facilities in close proximity to our footprint. Our Oklahoma intrastate power team recently added connections to serve 3 new power plant loads in the state of Oklahoma, totaling approximately 190 million cubic feet per day. These are expected to come online in the second quarter of 2026. These connections are supported by long-term contracts with investment-grade counterparties. In addition, we have also entered into advanced negotiations to serve another 350 million cubic feet per day of new power plant demand in Oklahoma. Outside of Oklahoma and Texas, our team continues to work on multiple transactions with power plants to provide significant transportation revenue across 13 other states, which have a high likelihood of reaching FID. Lastly, construction of a 10-megawatt natural gas-fired electric generation facility continues, and we expect our third facility, which will be located at our Grey Wolf processing plant, to be in service in the first quarter of 2026. The remaining 5 facilities are expected to be fully constructed and ready for service later this year. Now looking at the Permian processing expansions. We continue to expect our Mustang Draw I and II plants to be in service in the second quarter and fourth quarter of this year, respectively. At our Nederland terminal, volumes on our Flexport NGL export expansion project have continued to ramp up, and we exported our first 2 ethylene cargoes in December of 2025. This contributed to record exports out of Nederland for the fourth quarter of 2025. We continue to work with Enbridge on a project to provide capacity for approximately 250,000 barrels per day of light Canadian crude oil through our Dakota Access pipeline, and we expect to take FID on this project by mid-2026. Turning to Lake Charles LNG. In December, we announced that we suspended the development of this project. As we have previously stated, we continue to be extremely focused on capital discipline, and we have directed our efforts toward our significant backlog of projects that we believe provide a more attractive risk/return profile. However, we remain open to discussions with third parties who may have an interest in developing the project as we would expect to benefit from providing natural gas transportation capacity for the project. We're also exploring other projects to better utilize the terminal in a more profitable way. Turning to our guidance. We now expect our 2026 adjusted EBITDA to range between $17.45 billion and $17.85 billion compared to the previous range of between $17.3 billion and $17.7 billion. This change in guidance is solely attributable to the USA Compression's acquisition of J-W Power Company, which closed on January 12, 2026. Looking ahead, we are poised for continued growth in 2026, driven largely by the ramp of our Flexport NGL export project, new Permian processing plants and other projects. We believe our Hugh Brinson pipeline, which is expected online later this year, is extremely well positioned to become a major U.S. header system that ties together with our network of large diameter pipelines and allows us the flexibility to deliver natural gas from Texas to the Desert Southwest, Southern Florida, the Midwest and anywhere in between. In addition to our extensive pipeline systems, we have over 230 Bcf of storage to support the market demands of our customers. This shift provides significant upside in the future and further establish Energy Transfer's natural gas pipeline business as the premier option for customers seeking dependable natural gas supply. We are currently undertaking a large slate of growth projects, including projects that will help address the need for reliable natural gas solutions to support power plant and data center growth plans, as well as the growing international demand for natural gas liquids. As a result, project execution remains one of our top priorities for 2026, and we will continue to place a significant amount of focus on completing projects safely, on time and on budget. We also continue to see new growth opportunities across all aspects of our business and are extremely well positioned to help meet the substantial growth in demand for energy resources over the next several years. Given our extensive backlog of potential growth projects, we continue to be extremely focused on capital discipline, and we'll continue to target projects that are expected to generate the highest returns while balancing project risk. We continue to target a long-term annual distribution growth rate of 3% to 5%. We also expect to maintain our leverage target of 4x to 4.5x EBITDA during this period of meaningful investment opportunities. In summary, our extensive asset base and diverse product offerings is allowing us to deploy capital across our footprint. With several major growth projects coming online over the next several years, we continue to have great visibility into our ability to grow our franchise for many years to come. This concludes our prepared remarks. Operator, please open the line up for our first question. Operator: [Operator Instructions] The first question comes from Theresa Chen with Barclays. Theresa Chen: It's encouraging to see the continued commercialization momentum across your natural gas asset base. Could you talk about the key drivers behind the progress today? And maybe talk about some of your more creative solutions to address market needs, maybe with Hugh Brinson as an example in the multiple life of service and revenue opportunities on that system? And as you look ahead, where do you see the next set of commercialization or optimization opportunities, whether through new customers or end markets or further integration across your footprint? Marshall McCrea: Hello, this is Mackie. Thanks, Theresa. Yes, listening to Tom go through that opening statement, it's hard to not get overly excited. So we couldn't be more excited about the future with our DSW project, a 500-mile 48-inch pipeline, largest pipeline ever built in the U.S. as far as that distance for the 48. And then you look at our Florida Gas pipeline system with another expansion. Actually in the open season, we had more interest than even the 550. So we anticipate in the future, we'll have another expansion off Florida. That's a pipeline that just keeps giving. And then as Tom just spoke about in his opening statements, we've got kind of crown jewel in the middle of our system with Hugh Brinson able to move a lot of volume from west to east, but it also gives us the ability to move volume from east to west as well as source gas from pretty much any basin in the world to the markets along our system as well as to the Gulf Coast into the Southeast. So we are very excited about the assets that we have built. As you talked about -- or you asked about all the other commercialization, we can go on and on about what Tom just spoke about. We're building new cryos this next quarter and the fourth quarter out in the Permian Basin, the most prolific basin in the U.S. That flows into our NGL system. We have an expansion coming on our NGL transportation midyear. That feeds into our frac that comes online in the fourth quarter. That feeds on to the Flexport expansion that we just completed in 2025. So just an incredible future for our NGL business in Texas and beyond. We're expanding our Marcus Hook ethane capabilities up there to export. We're by far the largest transport of NGLs in the Northeast and see that continued upside for our partnership. And then you look at all the assets and all the demand around our pipelines. It's not just data centers. What we're chasing is power plants at general electricity for data centers, for population growth, for manufacturing facilities. All the power plants that Tom just talked about that our team has done such a good job in Oklahoma. To the best of my knowledge, I don't think any of that data center. It's all just for population growth and new manufacturing growth. So we are incredibly excited about our footprint and couldn't be more elated of where we're going to be over the next 10 or 15 years because of our asset footprint throughout the United States. Theresa Chen: And then maybe just a follow-up on the NGL front, understanding that you have a significant amount of organic growth ahead of you with your infrastructure in flight. Just with some of your Permian NGL competitors bring online downstream assets recently and through the year and moving their own volumes back on to their own systems as a result. . Can you remind us how much third-party downstream Permian Y-grade volumes you have across your system as a mix of total volumes at this point? How much Y-grade do you transport and frac at this point that doesn't come from your own processing? Marshall McCrea: Yes. Maybe Dylan can follow up with the exact percentage, but the majority of our gas, more than half is coming from our own facilities. We just talked about the 2 Mustang Draw, both of those together, 550,000 Mcf a day, that's approaching 85,000 to 90,000 barrels alone just from our own cryos. And as we ramp up the rest of our cryos, we've got a lot of additional equity-owned liquids that we will be feeding into our massive intrastate transportation fracking and export business. I don't know the exact percentage. Dylan Bramhall: No, no, you -- we're about 60% of our own volumes, 40% third-party, and that affiliate volume number continues to grow. So we'll keep trending -- that 60% will trend up higher as we move through the year. Operator: The next question comes from Gabe Moreen with Mizuho. Gabriel Moreen: Wondering if you could maybe touch on -- I think last quarter, you talked about converting a pipe from NGL to gas service, potentially where that stands? I don't think you may have touched on it in your opening remarks? Marshall McCrea: This is Mackie again. Let me kind of step back a little bit. Energy Transfer had a strategy since the day we began of looking at every asset we own and can we use it in a more profitable, efficient manner. So that's an ongoing thing that always happens with us. We've converted a natural gas pipeline to crude oil and moving Bakken down to the Gulf Coast. We've converted a liquid line to diesel and moving diesel from the Gulf Coast to the Permian Basin. We've converted a TW line to NGLs. So it's just kind of on and on. So that's just a process we go through. We evaluated that what we've looked at now though is with the growth in the NGLs, both as Dylan just talked about, not only in our systems, but also barrels that we're chasing on third-party systems. We can't afford to take that business. We're going to fill up that NGL pipeline. And if we need to loop another pipeline west to Eastern Texas, that will be a new project for natural gas. Gabriel Moreen: I appreciate that. And then maybe if you can just talk a little bit broadly about how your assets performed during some of the winter weather we've been having and the volatility in the gas market? And also to what extent that may or may not have benefited you guys financially here in the first quarter? Marshall McCrea: Yes. With Tom's leadership and Greg and Daniel and getting our operations team not only offer our assets safely, efficiently and profitably, but we also pride ourselves on times like this when it's critical to move energy to the market and create, in this case, electricity in tough times. We proved ourselves during Uri, paid off in a big way. The same way this last storm that came in, in January, we were prepared as good as we could be. The negative, positive, however you want to look at it is that the industry got prepared. They saw what happens if you have an asset that are prepared, they're line-pack storage. You've got people manned out on your facilities. You can keep gas flowing as much as possible, and you can make a lot of money in those opportunities. So with the industry being, I think, much more prepared, all of us got through that better. We did see volumes come off, like they always do with freeze offs in the Permian Basin. We were able to keep all of our customers whole to our pipeline systems as well as coming out of storage. So yes, we didn't see the type of profits and earnings that we saw a number of years ago with Uri. But as we always do, our team performed excellently during that very cold day period in Texas and throughout the country. Operator: The next question comes from Jean Ann Salisbury with Bank of America. Jean Ann Salisbury: I heard in your comments that there could be some early volumes on Hugh Brinson? I think that with Blackcomb getting pushed to the fourth quarter, there could really be some value to those. Will those volumes go into your third-party customers? Or would that kind of all go to ET? And any sense of how early those could structure in? Marshall McCrea: Yes, this is Mackie again. First of all, let me just say we keep talking about our teams, but we've got 1 of the best E&C teams, probably the best E&C team in the country as we build out these assets. And so we are moving very well ahead of schedule on Hugh Brinson. However, we're going to be real careful on -- things can happen. We don't know with certainty when volumes will come on. At this point, we are confident that we will be able to bring on some volumes earlier than the fourth quarter and how we'll manage that and how we'll operate as how we contractually and regulatory are allowed to do so. But we're going to do everything we can to get volumes, new egress out of the Permian Basin because it's much needed for the producers who are suffering from negative price seeing out of the Waha. And so it's going to be a huge shot in the arm, not only for our assets, but also for the Permian Basin. So we'll see how it plays out. We'll be able to talk more about the next earnings call on kind of what we think the volume might be and how early it might be. But right now, we're going to stand by. We're going to have some volumes early in the fourth quarter. We don't know exactly when or how much. Jean Ann Salisbury: That makes sense. And how do you think about what the limit is for how much Canadian heavy crude could eventually run on the DAPL asset? If Bakken crude production does fall off over the next 5 to 10 years, is there any technical limit to how much the DAPL system could switch over to running Canadian heavy and set? Adam Arthur: Jean Ann, this is Adam. So as we're talking about MLO 2, which I think is what you're referring to, we've definitely done a look. And first and foremost, we're going to make sure that we take care of our Bakken producers and make sure that they can all move their oil out of that basin. . But as you mentioned, as we see Bakken volumes kind of steady off and maybe potentially decline in the future, there's a number of different possibilities on moving additional volumes through DAPL. Right now, the project's scope to move 250,000 barrels a day of light volumes down kind of off the Enbridge mainline system through DAPL and into Patoka to deliver back to them there. But we're definitely looking, and I think Enbridge even alluded to it some on their call about additional opportunities down the road as we see Bakken volumes potentially decline. Operator: The next question comes from Keith Stanley with Wolfe Research. Keith Stanley: So more of your peers are giving multiyear EBITDA growth expectations. How should we think about medium-term growth for Energy Transfer, if you'd put any framework around that? Dylan Bramhall: Keith, this is Dylan. Let us answer the question this way. But when we set our long-term distribution growth rate of 3% to 5% annually, that was very strategically set. That's not meant to be a manufactured growth rate. That's really driven from eating into coverage. But we said that, that basically sets the floor for what we believe we can achieve for our long-term growth rate. Keith Stanley: Got it. That's helpful. Second one on -- so you've talked a lot about Texas NGL recontracting or contract expirations. How should we think about recontracting on the Mariner system? I think some of those contracts expire in a few years, too. So do you see pricing upside there, downside? And how is the Mariner system positioned relative to some of the other NGL takeaway options for producers? Marshall McCrea: This is Mackie again. Yes, what -- you do that. What an incredible set of assets we have up there. We built it a franchise with our Mariner pipelines going west, but also the majority of that going east as we speak. And as you know, we're expanding our ethane export capabilities out of Marcus Hook. We just see that system as continue to perform. We're not going to get into strategies about when contracts fall off and when we'll be renegotiating all that, but let's just leave it this way. We are highly confident that not only will we maintain the level of volume throughput that we're doing today, but that we'll actually be able to grow on that with some opportunities that we're chasing. So it's a great business for us. We'll continue to look ways to expand that business and continue to be the major dominating player for moving natural gas liquids out of the Marcellus, Utica areas. Operator: The next question comes from Julien Dumoulin-Smith with Jefferies. Julien Dumoulin-Smith: Let me just follow up on a couple of clean-up items here. On the Desert Southwest project, can you talk a little bit about the pro forma economics? I mean, obviously, moving to 48, good stuff. But how are you thinking about just setting the expectations on economics there? And then going back to Jean Ann's question from a moment ago. Looking at the DAPL side, can you talk about maybe some of the tariffs and how you think about that maybe relative to what you saw in the last decade on tariffs to give a little bit of a preliminary sense of what pro forma economics might look like for the 250 or more as it maybe that you're looking at there? Marshall McCrea: You bet. This is Mackie. I'll answer the Desert Southwest, and then Adam can follow up on the DAPL question. But we'll say it again, and I just keep thinking about, as Tom read that, how excited I am, and we are, the executive team, about what we've built and the incredible position we're in, in the country and certainly moving more gas toward Phoenix is a big deal. If you talk to some of those larger players out there, they're talking about anywhere between 25 and 35 gigawatts of growth above what's needed today. That's a lot more gas than our 48-inch can transport. But talking about returns, I guess I'd say this. We don't want to over-exaggerate expectations. But right now, that type of project, that pie -- everything coming in the distance and diameter and throughput, we think that will be probably 1 of the better rate of return projects that we've ever built just as far as a one-way flow. We always mention Hugh Brinson is going to generate money in multiple directions. But going from east to west, New Mexico provide natural gas supplies to markets along Southern New Mexico and then into the just fast-growing population, probably data centers, et cetera, et cetera, in Phoenix, that's going to be 1 of the better projects that we've built in a long time. Adam Arthur: Julien, this is Adam. So we just closed on an open season on DAPL, and we're really happy with the result. We were able to actually add some incremental volume, but not only add incremental volume, get some of our base customers extended out well beyond kind of the mid-2030s. And we did that at rates that were good, what we believe good market rates reflective of the value of the assets. And so as we kind of tie the MLO 2 conversation in with that, we expect those rates to be in line with the rates that we're seeing from the Bakken producers in the basin. Julien Dumoulin-Smith: Yes. I hear it. Mackie, just quick super quick on that expansion and further upside on DSW. I mean, it looks like even next year, we could get some real clarity on the 25-plus that you alluded to a second ago. I mean, the scope seems pretty real time that we're going to get that expansion in capacity through the IRP processes. Do you think we could be talking about a further expansion of DSW in some form or fashion here in even the next 12 months? I know you guys just did it here, but not being facetious. Marshall McCrea: We love your thinking. If there's an opportunity to build more pipe, we certainly will do that. I guess I would think about it this way. We own Florida Gas Transmission. We continue to look that pipeline. We've got gas coming into Florida Gas on the East moving back into Texas. We've got gas coming to Louisiana, moving to Texas. And I can go on and on, but we have multiple pipelines in those ditches. We're adding our Phase IX. Very likely, we'll add Phase X at some point in the future. Do we see Desert Southwest being a similar opportunity? Absolutely. As New Mexico grows and as Phoenix area grows with demand for natural gas for a number of reasons, there's certainly going to be opportunities to look at compression, backhaul. Who knows what the future holds, but we certainly will look forward to any of those opportunities on adding additional assets to deliver gas to those markets. Operator: The next question comes from John Mackay with Goldman Sachs. John Mackay: Why don't we stay on DSW. You guys upsized -- that you kept your time line intact. Can you just remind us when do you kind of need to make a call on sizing? And then just in terms of executing towards coming online end of the decade, what are the key kind of milestones you want us to watch from our side as you execute? Marshall McCrea: Yes. I'll say once again, our E&C team is so good. On all these projects, we try to look ahead in the marketplace today, you can really get caught off guard. If you don't order steel, when you price it to your customers, you don't order compression, both from not only a pricing standpoint, but also a delivery standpoint. Mike Morgan and his team did a great job working with Beth on the timing. So we got way ahead of that. We actually secured 42-inch with the option to go to 48-inch in the first part of December. We exercised that option. So that is officially, of course, upsized to a 48-inch. We've already ordered all of that pipe, and we've already ordered all the compression to move the full 2.3 Bcf a day. John Mackay: And then sorry, just in terms of construction timing, the permits, et cetera. Marshall McCrea: Yes. We are ahead of schedule. We have customers out there that want weekly and monthly updates. So we do this very rigorously. As we've said, we've already contacted both local, state and federal constituents all along the way. We have a substantial amount of the right-of-way already surveyed or permission to survey. As we've said before, much of this falls in the existing corridor of pipelines and utilities. So it's in a really good area where we're laying this to, and we're -- right now, a worst case will be in by the fourth quarter of 2029. And we'll see if we can do any better like we do on some of our other projects. But everything is going as planned. John Mackay: Okay. And just a quick second one for me. Lake Charles, you mentioned -- you had mentioned kind of a couple of different options there now that you've kind of suspended your specific project. Can you just walk us through what that could end up looking like? Marshall McCrea: Yes, as we said earlier, we -- as a strategy in transport, we're looking at all of our assets, not just our pipeline assets and repurposing those, but it's also our terminals. And so as Lake Charles, it looks like it's certainly not going to move forward with us being the lead, whether or not somebody else steps in and looks to build a pipeline on our terminal, we'll see. But in the meantime, we're looking at there's no limit to what we're looking at. We're looking at -- it could be NGLs. It could be a crude oil terminal. It could be -- accommodate other commodities. So we'll see how it plays out. But certainly, as I said, we look at all of our assets. And that is such a great location. It's -- it has a really good draft in a really good terminal, and we do expect it to create some kind of business going forward in that terminal. Operator: The next question comes from Manav Gupta with UBS. Manav Gupta: You guys are obviously leading from the front when it comes to signing up with data centers. There's a lot of focus on pipe, and you have some of the best. I wanted to focus a little bit on the storage opportunities. These data centers require what is called like the [ 5-9 ] in terms of 99.99% utilization. So can you talk a little bit about how ET can benefit from the multiple storage opportunities that will arise as you try and build out these data centers along with the pipes you're building for them? Marshall McCrea: You bet. And I'll give accolades to Adam, who's next to me and his team and what they've done in Texas and a few other states. And then Beth and where -- her team are doing in the other areas around data centers. There's even some producers and others that are looking to provide gas to data centers, but nobody can really do it unless you own big diameter pipe and actually, you can come out of storage. So we have done a great job in what's been public and other opportunities that we're working on to provide firm transportation through our big etch pipelines throughout the country. And then as we mentioned earlier, we have over 230 Bcf of storage and expanding on that as we speak to be able to provide the pretty much 100% reliability that's required by these data centers. Manav Gupta: Perfect. My quick follow-up is you mentioned, obviously, Oracle. Obviously, you're dealing with Fermi and Entergy. And so both those companies are indicating a much stronger demand. And I'm just trying to understand if they do decide to upsize their orders and want significantly more gas from you, would you be in a position to supply them with a lot more gas than what you have currently signed them on for? Marshall McCrea: Yes, this is Mackie again. Absolutely. I mean, wherever there is a need for natural gas supply. There's no company in the country anywhere close to the capability with the footprint that we have. In fact, our data team put together a map showing all the fiber optic systems that run through the country. And then we also have the electric transmission system. It's ironic, out -- you can almost lay our pipelines along many of those corridors. So we're extremely well positioned with our big inch gigantic 42-inch pipeline systems throughout really the country, but especially Texas and some of the other states like Louisiana, nobody is better positioned. And yes, we can upsize, loop, add compression and provide whatever natural gas needs that anybody has along our systems. Operator: The next question comes from Michael Blum with Wells Fargo. Michael Blum: Wanted to ask on Waha. Pricing has just been, as you know, very volatilely negative in Q4, expect Q1 with the storm. So can you just remind us how much open capacity you have to capture spreads there? And -- because I know you've also turned up a bunch of that lately. Marshall McCrea: Yes. Unfortunately, or fortunately, we have turned up a lot of that lately. That's what helped us get Hugh Brinson and other projects done. That's just the nature of the business. But we still have about 160,000 Mcf a day that we're benefiting from wherever the spread is from a day-to-day basis. And we're pretty excited about Hugh Brinson coming on, really opening up the basin for everybody and really to benefit the producers. Michael Blum: Got it. And then you and your competitors have all -- are all expanding frac capacity at Belvieu. So I'm curious if you're seeing any change in rates for fractionation with all this new capacity anticipated to enter the market? Marshall McCrea: Yes. Probably of all the segments we have, the NGL transportation and fracking segment has become the most competitive. There tends to be an overbuild. We're heading to an overbuild a little bit in the NGL transport, not sure on the frac. But once again, we always answer questions like this in that we really don't -- I wouldn't say care, but we don't worry about what our competitors are building. Our jobs are to build assets, fill them up and keep them full for as long as possible, and we feel real good about that of -- enjoy filling up our natural gas transportation and then ramping up our Frac IX as we bring it online at the end of this year. Operator: The next question comes from Elvira Scotto with RBC Capital Markets. Elvira Scotto: I guess with the new growth projects that you announced and this big opportunity set that you see ahead, where do you think kind of annual growth CapEx could shake out over the next few years? Thomas Long: Yes. Elvira, thanks for that. Obviously, when you look out and you pull over all these projects that we've been talking about, there's a whole lot more of them in the queue here actually that we're looking at. So it's hard. We don't generally give growth guidance like that out there, but you can see that we've given the -- came out early with the 5 to 5.5. And with everything we're talking about, we feel like it's going to stay pretty strong. So it's probably a little bit early to give that guidance, but it's clearly a lot of good projects that we have to look at. I don't know, Dylan, if you want to add a little bit more to that? Dylan Bramhall: Sure, Elvira. One thing as we look out, 1 thing to remember is when we talk about our growth capital, growth capital guidance that we put out for this year, we're not as concerned about cash flow and staying within cash flow there. When we look at long term, we're really governing this is staying within leverage targets. So as you look out, we have strong growth coming on from a lot of assets going in service over the next couple of years, and that definitely creates more debt capacity for us. And so I think we're really set up well to be able to fund whatever Mackie and the team put together here over the next few years and this great opportunity set that we have in front of us. Elvira Scotto: Great. And then just one quick follow-up on the project with Enbridge. What's it going to take to get to FID? What else is required at this point? Adam Arthur: Yes. So I'll let Enbridge kind of comment on what is required on their side. But from our perspective, we're ready. We've got the design, the systems in place. And there's a little bit of work we need to do, obviously, to make this work. But we're just in the commercialization phase. So continuing to have discussions, productive discussions with customers in Canada. Operator: The next question comes from Zach Van Everen with TPH. Zackery Van Everen: Maybe starting on the Oracle data center. Can you talk to how much gas is flowing today and what the capacity is on those legacy pipelines before Hugh Brinson gets online? Marshall McCrea: Yes. This is Mackie again. But that is kind of confidential. We're not going to really share a lot of that exact volume flow at this time. But we are connected to our North Texas pipeline. We will be connected to Hugh Brinson in the Abilene area by about middle of the year. So we're well positioned to be able to provide whatever gas supplies that they will need as they build out their data center. Zackery Van Everen: Got it. Makes sense. And then one more on Hugh Brinson. You talked to more and more backhaul contracts coming online or getting signed. What, in your eyes -- or what amount of gas do you think will actually make it to Carthage, if any? Or do you guys think most of that will be absorbed in the Dallas, kind of Abilene area? Marshall McCrea: Gosh, if we had that crystal ball, we'd certainly think differently about different pipes and stuff. But who knows? As we think about it, there's going to be 10 or 11 Bcf of new pipeline capacity built out of the Permian. There's several 48-inch pipes and 42-inch pipes being built out of Katy over into Louisiana. We've got a bunch of pipes in North Louisiana heading south, and we have a ton of pipes with capacity. So who knows where the pinch points will be. But the message really from us is this. There's nobody who can predict an answer to that question. Where most of the gas can be, where is the least. But what we can do is take the least priced gas and transport it to the market that's most needed in most areas of the United States. So we love the position we're in, and we'll be able to capitalize on whatever dynamics happened on the production front and the ebbs and flows from Permian Basin to East Texas to Haynesville. We just love the position we're in, not knowing exactly where all this is headed. Operator: The next question comes from Jason Gabelman with TD Cowen. Jason Gabelman: You've mentioned potential to FID or a high likelihood of FID-ing projects across 13 states related to power. That obviously sounds like a high number on the surface. So wondering if you could give us a flavor of what those projects look like if they're more like CloudBurst or the Oracle type projects and if that number has grown since the prior call? Marshall McCrea: This is Mackie. Adam, if he wants to follow up with this, he's closer to a lot of this. But once again, I'll give accolades to our data center teams, both -- one led by Adam and one led by Beth. We're chasing every opportunity to provide gas or natural gas spotter generation for data centers. We're well positioned with all of our pipelines. As we mentioned, we're talking to 150-plus different opportunities, and it seems like a new 1 or 2 come in every day. We have some deals that we've already done, where there are some options data centers can exercise and take some capacity on us. So it's across the board of the opportunities that we are chasing and negotiating. We've been very successful so far. And because of our team and because of our assets, we expect to do a whole lot more deals tied to electric generation behind data centers. Adam Arthur: And this is Adam. I'll just add that in terms of like project scope, they really range in size and go anywhere from kind of the new longer haul new pipelines to just interconnects that are -- like Mackie mentioned earlier, sitting right on top of our system. We're at the crossroads of transmission, fiber and our assets and are simply just installing a new interconnect. So the scope really varies from simple interconnects to bigger pipeline projects. Jason Gabelman: Got it. Great. And my follow-up is more specific to the quarterly results. In the press release, there was a mention of this regulatory order impacting prior period and current period rates. So I wonder if you could provide a little more detail on what specifically that referred to and what that means for the increase in earnings moving forward? Because it seemed like there was a net benefit on the quarter and should provide a modest uplift of future earnings. Adam Arthur: Sure. This is Adam again. I'll hand it over to Dylan for kind of the second half of your question on the looking forward. But to start, let's just say we're extremely happy with kind of the appointment of Chairman [ Sweat ] and the actions that hurt the FERC under her leadership have taken so far. As far as the index issue specifically, in '22, FERC took what was ultimately determined to be an unlawful action in kind of changing the index methodology. And last year, this FERC issued an order allowing pipelines to recover those lost revenues. So that's what those one-timers reflect, and Dylan can kind of chime in on what it looks like going forward. Dylan Bramhall: Yes, Jason. So why don't I just walk you through real quickly here or wrap up on the quarter and the onetime impact so we can kind of help you get a clean quarter to help how things are going to look going forward. On the NGL segment, we had $56 million from this regulatory order that was a onetime positive. Get a little carryover effect from where that sets the rates now, but that's primarily onetime there. We also had a negative $58 million on the timing of the hedge gains around our hedge NGL inventory, and a $14 million impact from the fog in Nederland. Both of those, that $72 million total we expect to recoup in the first quarter. So that's a big boost moving into 2026 there. That's a net negative 16 on NGL. Crude picked up 19 onetime from the regulatory order, and midstream lost 14 from transport fees that it pays on that regulatory order and also had about $20 million from producer shut-ins in the Permian where we saw some shut-in gas due to low, really negative pricing in Waha or negative 34 total net at midstream. And then the big 1 was a $60 million in transaction expenses. It's on related to closing of the Parkland transaction. If you put this all together, clean up the quarter, you've got a net negative about $90 million for that fourth quarter here that you'd want to add back to get a clean quarter. And like we said, you've got $70-plus million that we expect to recoup it that in the first quarter. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Tom Long for any closing remarks. Thomas Long: Once again, thank all of you for joining us today, but also a lot of appreciation for some very, very good questions, very good dialogue and discussion on this. As you can see, we've got a lot of great things to talk about with these projects. Not just for 2026, but for a long time into the future, like Mackie was mentioning. So I thank all of you. We look forward to all your follow-up questions, please get a hold of our IR team, and we're happy to jump on the call with you again. Thanks so much. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Shohei Yoshida: We'd now like to start the analyst meeting of INPEX Corporation. Thank you very much for gathering today despite your busy schedule. My name is Yoshida. I'm from the Corporate Communications and IR unit, and I'll be serving as the MC for the meeting today. So please allow me to introduce the speakers today. We have Mr. Takayuki Ueda, Representative Director, President and CEO; we have Mr. Takimoto Toshiaki, a Director, Senior Executive Vice President, Corporate Strategy Planning; we have Daisuke Yamada, Director, Senior Managing Executive Officer, Senior Vice President in Financial Accounting. So we'll spend about 35 minutes for the presentation, and we'll spend about 25 minutes for the Q&A session, 60 minute in total. Today's meeting is going to be a hybrid meeting with online participants as well with simultaneous interpretation between Japanese and English. [Operator Instructions] Mr. Ueda will talk about the business overview to start with. And Mr. Yamada will describe the consolidated financial results for the fiscal year ended December 2025 and our forecast for the year ending December 2026. And Mr. Takimoto will give a progress update for the sustainable growth of the corporate value. So Mr. Ueda will start now. Takayuki Ueda: Thank you, everyone, for gathering despite the busy schedule today. And for those people participating online as well. Thank you very much. And today, I would like to explain about the financial results as well as the forecast for this fiscal year. So to begin with, the results for fiscal year 2025. As you are well aware, our result for 2025 was a net profit of JPY 393.8 billion. But if we adjust for the oil price and foreign exchange rate, what is the number? So that is what we have announced. So on an absolute basis to JPY 393.8 billion, which is the third highest on record. But in 2025, $68 an average the oil price, JPY 149 was the exchange rate on average. And so if we actually do the calculation, and in terms of an absolute number, we we're third highest on history. But if we adjust for oil price and foreign exchange rate, the number for 2025 is the best on record. Of course, we are affected by the external factors, and we don't intend to talk just based on those numbers. But I think we have developed ability to generate earnings. And the share price has continued to increase recently as well, [ your area ]. But we are often asked about our share price. Now for myself, and the fact that the share price has increased is probably the great understanding of investors in our company. And so I'm very appreciative of that to begin with. But the PBR is now nearing 1x as well. But if we compare ourselves against many companies in Japan, for example, the Prime in the Tokyo Stock Exchange, so there are some 86 companies. And so, PBR, on average of 3.8x. Exxon or Shell, the peers on a global basis, the [ PB ] ratio is around 2x. It's at 2.10x, which I think is the average. So the oil and gas companies in Japan, if you look at the PB ratio, 1.3x to 1.4x, I think, is the general level if we take that into consideration for myself, the share price has increased quite significantly. I'm very appreciative of that. But our financial basis, our growth strategy, our shareholder return, if you look at the details, I think we certainly are not second to others. And despite the high level of increase, it's still not a very high level. We feel that we are kind of, I suppose, discounted to, I suppose, peers in that regard. So this is the highlight for this year. So if we just pick up on the numbers, as I said, for the dividend, JPY 100 for the year. So the total shareholder return ratio is 55.4%. And so -- and we have made somewhat of a conservative outlook for the oil price and for the foreign exchange rate, but we're expecting about JPY 330 billion of profit for this fiscal year. We'll talk about this in more detail later on. You may think that this is somewhat low, but I will come back to explain about that later. For dividend, what we are assuming for now, annual dividend of JPY 108 per share and total share return ratio of more than 50%, which is our commitment. So we will make sure that we will stick to that. And so based on our forecast at this point in time, we are expecting to pay JPY 108 per share for the dividend. But let me just talk about the external environment a little and I'll go to the next page. In this page is the one-page description of the changes in an external environment even before the Ukraine war, the oil and gas related external environment for us has changed. And I think we're going through 3 different stages. So before the Ukraine war, many companies were really focusing on energy transition. So a rapid transition towards clean energy including renewable energy, and there were growing concerns over stranded assets associated fossil fuels. And so when we were speaking with investors, they were saying when are we going to leave from fossil fuel, what will happen if they become a stranded asset? But we are saying that oil and gas will not disappear immediately and renewable energy or clean energy, we will make challenges to all those areas as well, but we're still very much focused on doing the oil and gas business as well. So that was the year that we were in for a while. Then after the start of the Ukraine War, the energy security became more important, the stable supply became more important. So great emphasis on security and affordability, the appropriate volume at appropriate pricing was what people had wanted. So not just all decarbonization, but the balance needs to be struck with energy security and that was the new, I suppose, the viewpoint on a global basis after the start of the war. But what is the situation more recently. Energy addition is the recent -- the popular word, so the demand for primary energy is expected to increase by about 30% from the current level to 2050. This is mainly due to electricity, AI or data center has generated a greater demand for energy. In fact, the energy consumption will increase going forward. So on a global basis, will increase. So in that regard, clean energy centered around renewable energy continues to be important. We want to work on that, but that will not be enough. And so how are we going to address the energy addition? How are we going to accommodate that from the supply side? And this is probably the global energy the transition that we've seen over the past year to 1.5 years. So from energy transition to striking the balance between energy security and now energy addition, and so that was 4 or 5 years with the Ukraine war, the recognition regarding energy around the world has changed significantly. So that was a point that I wanted to mention. So that being the case, and if we look at the various forecast right now, and this is IEA and also IEEJ so how would the things change towards 2050 in regards to the energy. Oil may reach a peak somewhere, but the plateau situation is likely to continue for some time. Natural gas, you can see the demand here. So it will continue to increase towards 2040, 2050. Coal will come down, renewable energy will increase. I think this is the expected situation. So natural gas our main products. So let's focus on this a little bit more. So right now, the LNG demand on a global basis, and was about 400 million tonnes per year, so right now and what is going to -- this is going to reach 600 million tonnes in 2030, then 700 million tonnes in 2035 and even up to 800 million tonnes in the future. So more than double the current level. So where would the demand come from? And please look at the map on the right, and it's quite evident. It's quite clear. It's Asia, we will see a significant growth in demand with a shortage of the supply. This is what is expected in 2035. In the United States, Europe, Indian, the Pacific Ocean, we will see increases in demand, but we'll see greater growth in the supply. So if we look at the energy balance around the world, where we will see shortage is Asia. So LNG demand until 2040, 2050 will continue to increase in a straight manner and what -- we will see shortage in Asia. So how we to supply natural gas in Asia? This is the main issue for the energy industry. So this is the basis of our strategy at INPEX. This is the key point. So going to the next page. So I've been talking about the total picture. But talking about this year for Ichthys, this year, we have 112 cargo shipments and the production. We had a shutdown in 2025, and there was some delay in the restart up. But overall, compared to the initial plan, it was close to the initial plan at 112 cargo. And the profit contribution was about JPY 270 billion. And for 2026, what are the views and it's kind of hard to understand. But because of the BCM start-up, so talking about this product, Ichthys, the more you produce, we will be extracting from the basement, and there will be less pressure under the ground and with the lower pressure in order to have a long-term stability in the production, there are about 5,000 tonnes or a booster compressor where the compressor will be used for -- to connect to the CPF, the offshore CPF. And that went well. But in 2026, we don't have a shutdown maintenance, but this booster compressor will have commissioning. And in that process, there will be some stop of the facility. So the production will not be fully recovered. Therefore, it's not like we will have a large recovery in production. More -- compared to this year, there will be increase, but there are about 10 cargoes in a year. And then for the future backfill and the Train 3 expansion for the new asset acquisition, we are working various activities today. And at this moment, it's still hard to mention the details at this moment. However, at some point in time, we hope we can disclose. For Abadi, we had a large production in last year. In August of 2025, we had moved to FEED. And today, the FEED work, which is a basic design that is working steadily today at this moment. And by end of this year, some cost estimate will be clear and marketing as well as financing is the activity we have started. For marketing, from many potential customers, we already have discussions. At this moment, as mentioned at the beginning, the Asian LNG is very precious. And many from America and from Qatar, there are many LNG. But from Asia, there's not so many LNG coming out of the region. So the Asia-produced LNG will not have any homes straight issue and the distance of the ship transportation is short. Therefore, there are a lot of popularity and when it comes to the final binding agreement, we're not able to sign those contracts yet. Wherever there's a lot of needs and we're able to have a good marketing activities. So going forward, as we go into the FID, I would like to go into a more detailed condition negotiations. And then for the financing. Looking at the recent situation in the global market. For the natural gas, the bank and the finance situation is welcoming more than in the past, and that is working well at the same time. And for the permits, we are going to receive shortly, the permits. And for Abadi today, various challenges are still what we are facing, but we are having a steady progress in those activities. And then for Abu Dhabi, unfortunately, UAE actually a president passed away, and we cannot really communicate well. But the production increase in Abu Dhabi is what we are working on today. Between us and Abu Dhabi, Abu Dhabi as a country, 4 million to 5 million BT or, in some cases, 6 million BT is going to be planed, and we are going to make investments. 2026 investment is large and the biggest reason is Abu Dhabi increasing the capacity. So these are the reasons where we will be increasing production and profit will also be increased. And then outside of that, we have Norway, Indonesia and Malaysia, various activities are in place today. Next page, please. And then the so-called clean energy, the blue hydrogen area. As you know, in Niigata last year in November, we had the demonstration project for the blue hydrogen in Niigata, Kashiwazaki, we had an opening ceremony in November last year. And the natural gas -- domestic natural gas will be used for the blue hydrogen production and also the CO2, which is the byproduct in that process. The gas field in the Higashi-Nagasaki area is using the CCS technology will be storing those gas and then that is the CCS activities we are planning. And then we have methanation, the e-methane facility together with Osaka Gas, we have the construction in place in Nagaoka today, and we also started the commissioning. For the renewable energy, as a whole Japan is still in a difficult situation. However, we have the Potentia Energy which is the European company called Enel, and it's a subsidiary of Enel, but we have a 50-50 joint venture in Australia and through this we have this renewable energy investment in Australia. And this is 838 megawatts of production energy generation based on our stake in the project. And then for Indonesia, we have the Muara Laboh geothermal project. And for the expansion, we have the FID. And then also in the Goto -- offshore Goto of Nagasaki Prefecture, we have the first-in-kind in Japan, the floating offshore wind farm. And we are also participating in that project. And then for the electricity side, we have the collaboration with the Hokuriku electricity that we signed the comprehensive contract last year, and we are working on those projects as well. And for 2026, for the profit, as mentioned, we are JPY 330 billion targeting that amount for this fiscal year. And then the Brent is $63 and JPY 151 to a dollar. And both for the oil and the forest, there are a lot of discussions. But today, the oil price is at -- just less than $70 on the Brent. And compared to that, it's quite conservative. But many consultants are saying that today or this year, there will be some supply -- oversupply situation. So considering all of the situation, it's $63 in the assumption, I think it might be slightly conservative, and that's my view. And if you look at the ForEx, it's JPY 151, so it's also difficult to explain. But it's JPY 330 billion per year. But if we are to make adjustments on ForEx in the oil price, JPY 151 and $63 of oil price. If we make adjustment based on next year, and then the one-off, if you exclude the one-offs, and then making adjustments on the oil price in ForEx. If we exclude this one-off profit, the core profit is, let's say, JPY 330 million is JPY 315 million for this year. And then the oil price may go down. So it will be JPY 312.3 billion. So it's mostly the same level as 2025. And the forecast of JPY 330 billion is not so high. So you might say it's too low. However, looking at the current oil price situation, we think we can have this level of profit, and that's the estimate today. For the dividend, we have JPY 108. And also with the profit going down to JPY 330 billion, why we are still increasing dividend? That might be another question. But my view or our view is INPEX' growth basically is still high. We still have a high level of growth with a sound financial situation, and we have a good steady progress in the project, and we have Abadi. However, this year, we are going to -- we have a lot of investment amount, I think you have seen this year for 2025, overall, they were about JPY 400 billion in total. Next fiscal year, we are good to have double to JPY 850 billion or so of investment. And part of that is pushed out from last year to this year. But these investments will be long term for Abadi. But before Abadi in the mid- to short term, we have the existing assets or the acquisition of assets -- production assets and there will be, for the meantime, growth for the meantime, and that's why we have JPY 850 billion. And then for these investments, we have a high accuracy in these investments. So we think that with this investment, we can have a growth in index. So for the dividend, we are having the same view as before, so we are going to have a growth, and then we will be returning -- rewarding our shareholders. And for the profit, because of the oil price, we have JPY 330 billion of profit forecast. But in the mid- to long-term perspective, for the growth of our company. From that direction, there is no change in our views. Therefore, based on that, we will have cash flow and profit also depends on the external environment, but the mid- to long-term growth is still going to happen and we have that confidence. And for the market, the JPY 330 billion is the forecast we have for this year. But just like I mentioned, we have confidence, and we would like to reward our shareholders the outcome of those growth. So that's why we have JPY 108 of dividend for this fiscal year as a forecast. So that's all for me. Thank you. Shohei Yoshida: So next, Mr. Yamada will provide the explanation. Daisuke Yamada: So last fiscal year, for the year ended December 25, I'm supposed to operate the slide myself. So as the CEO has explained, net profit for last fiscal year was at JPY 393.8 billion or so. So it's a decrease but the oil price has come down, then we had the Ichthys shutdown maintenance. And so there were significant factors to push down the profit level, but we have the profit booster or the balance sheet control or we had a significant return of the income tax. And so we ended up with this number of JPY 393.8 billion. So how are we going to assess this? Well, at the oil price in the $60 level and almost JPY 400 billion of profit. And so we have -- this is a proof that we are now able to generate earnings. And as the CEO has explained, if we adjust for oil price and foreign exchange rate, this would be the highest record in history. So we do consider this very positively. This is the analysis of the revenue and profit. And so you can see crude oil at the top and the natural gas below. The crude oil sales volume increase, mainly due to Abu Dhabi and so in terms of unit price, it came down significantly because of the rate coming down. And so the operating -- the profit did actually come down. But for natural gas, the sales volume come down. This was due to the Ichthys shutdown. And for the unit price is linked to Brent down. And so in -- so we saw a decrease here for the natural gas as well. They are more than JPY 4,000. So last year was JPY 393.8 billion. If this is the previous year, it was JPY 427.3 billion, a decrease of JPY 33.5 billion because this is the decrease in the revenue that was due to the oil price and exploration expenses last year, we did not have a successful exploration in Australia last year. So that kind of came back and the divestment on the far right. Now last year, in Southeast Asia, we had earnings from the divestiture. And so these are kind of the comparison against the previous fiscal year. And for this fiscal year, the revenue come down and also exist downstream. And this also links to the oil price, and so this came down in terms of the Shell profit investment account of an equity method but we saw the JPY 153.8 billion positive impact in terms of income tax expenses. And so here -- and that is actually included in the others as well, but the profit booster. And so this is the recycling or the investment the benefit in Europe and the Middle East growth, JPY 80 billion in delta, it was about JPY 60 billion. And so this is essentially balance sheet control. So about JPY 80 billion of these earnings are accounted for by that, which is one of the key earning pillars for us. So the forecast for this fiscal year, JPY 330 billion is what we have placed and so $63 for the Brent price and JPY 151 to dollar. So I may think this is somewhat conservative. Some of you may be aware, but last year, too, so we started with the forecast for the fiscal year at JPY 330 billion. And so the oil price was $75 that we have assumed. But if we look at the end, it was $68. So it was $7 less in terms of the oil price, but we still ended up with where we were. And so about JPY 40 billion to decrease against the start of the last fiscal year and essentially came up with this number of JPY 393.8 billion last fiscal year. So it's not going to be in parallel to what we did last year, but we have a greater ability to generate earnings right now. And as you know, if you look at our balance sheet, we have quite a large amount of fixed asset and we have the financial -- the unrealized gains or losses included. So things that we can do now and can do now, we have those, the profit, booster thing, but we can't include all of that at the budget at the start of the fiscal year. And so you kind of go through the year to turn those into actual earnings. So JPY 330 billion is kind of a kind of starting point in that regard. And these are the factors analysis, and the biggest is the oil price. But in the middle, you have the Ichthys, please have a look at this. So Ichthys, JPY 4.9 billion of increase and there is some up and down in this number. So last year, shutdown impact occurred. So we had about drop of JPY 60 billion or so in the sales volume, but that has recovered. So that is an increase of JPY 60 billion. But on the other hand, as explained by our CEO, we have the booster compressor module connection. And by having this, there will be some drop in the utilization. And then we also have the oil tax. Last year, it was only a 6-month effect but this year, it will be a full year impact. So about JPY 16 billion of decline in profits, and including that, it's plus JPY 4.9 billion. And then for the profit booster next year -- for this year, CEO [ recycling ] about JPY 90 billion. And in Delta, these are the numbers. So that profit, in total, will be JPY 330 billion. So I might be repeating myself, but these are just a kind of a number we have for this interim. And then for the sensitivity of the oil and ForEx so it's JPY 5.5 billion for the oil price and the JPY 3 billion for the ForEx. And then next is the investment. So the cash flow before investment or exploration is shown. But this year, for the growth investment, JPY 850 billion is a large investment we're expecting this year. Last year was JPY 386 million but we have about JPY 463 billion of increase, which is for the pillar number 1, which is mainly around oil and gas for the investment. And as you know, Abadi, before going to Abadi, how much we're going to -- how we're going to generate profit is the question. I think there were some questions. But having these investments from the late 20s to early 30s, we'll have the outcome from these investments. So we'll be focusing on investment this year. However, this JPY 850 billion is a large amount. But if you look at the bottom left, in the midterm, we had the plan -- intermittent plan in '25 was JPY 380 billion, but this year is this amount. So it might be a large amount, but it's a 25% over the 2-year period. So it's a run rate -- based on the run rate. And as you can see, this is the overall breakdown of the JPY 850 billion. So the blue, the dark blue is the Abadi investments. And then the exploration as well as the increase in capacity. So for the Abadi -- Abu Dhabi is an investment. And then the new investment, we cannot mention the detail here yet, but the acquisition of interest and the core area, mainly Australia, Indonesia, Asia, Norway, Japan will be investment -- making these investments overall. And then ROIC, unfortunately, will be some decline this year. It was 7.3% last year, but it's going to go down to 6% or so. And ROE, although it's not stated here, we have about 7% this year. And I'm sure there are [ various views ]. But in terms of the total equity being so large. So if you work on that, it might increase the ROE. But we are not going to lower the equity by lowering the total amount by buyback. We are not thinking of that at this moment, but we have a trustee borrowing, the corporate finance and depending on the credibility of our company, we have to do financing. And considering that, we have to have a certain amount of equity and there might be different views from the creditors compared to the investors. But from the creditor standpoint, we should have a certain amount of equity or else it will be difficult to finance. So we have to maintain a certain amount for the financing standpoint. So that's all for me. Thank you very much. Toshiaki Takimoto: So please allow me to explain about sustainable growth of our corporate value. And in March 2023, the Tokyo Stock Exchange has made a request that we need to work on realizing the management of the company in view of the share price as well as the efficiency. So we were working on that and so I'd like to talk about the -- what we've done last year as well what we will be doing this fiscal year. So next slide, please. So what you can see on this slide is looking at the transition in the share price and the PB ratio. Dark blue is the PB ratio, green is the share price. And at the end of 2022, our share price was JPY 1,396, and that 0.48x was the PB ratio by at the end of last fiscal year. Our share price was JPY 3,127 and PB ratio of 0.77x. And -- so based on the share price, we were at JPY 3,998, so 0.98x, it was where we were at as of today. So as you can see here, and the reason behind why PB ratio increased. And so we have some ongoing initiatives as well as changes in external environment. So first of all, so we have been strengthening shareholder returns and dialogue with investors. We have also worked on enhancing capital efficiency. But above all, there's been significant change in external environment, particularly the natural gas and LNG importance has been revisited and that has now been recognized by the market and our core business, the natural gas LNG business, the importance thereof has led the share price to increase, which has led to improvement in the PB ratio. Next slide, please. So here, we are talking about enhancement of capital efficiency as well as building confidence in our future growth. And as we have been explaining so far, in the early 2030s, the start of Abadi, and that is the significant expectation for our next large growth but from August last year, as you can see on the slide, we have entered into the FEED phase for Abadi. So now we are nearing the start of development for Abadi. I think the market has recognized that. And in the early 2030s, when we start the Abadi production, in the meantime, what type of growth the story can we paint? And that is the more immediate issue for us. And when we speak with investors, then -- of course, performance is not bad. Shareholder returns is not bad as well. And that is a comment that we receive from investors and for IR meeting and the investors have expressed their satisfaction. But the growth story, until we start production from Abadi, how are we going to come up with that? And that may be the only maybe the issue that we need to address. And so acquiring new assets by working on these in a concrete manner, we want to be able to build that competence in the market in regards to our future growth. And we need to also enhance the earnings base. So we will continue -- we are continuing steady production increases in regards to our project in Europe and Middle East and also enhancing our profit base through a profit booster 500. We intend to lift our ROE by some 1% over the next decade. I think we have the ability to do that. And if you look at the graph on the right, and Abadi investment is likely to increase [indiscernible] from 2028 into the early 2030s. But even in that period, we still are able to invest for growth as well as make returns to the shareholders. And of course, debt will increase somewhat. But the net debt-to-equity ratio should be controlled within 0.3x to 0.8x and are able to do both the investment for growth as well as making returns to the shareholders. So that is what the graph on the right show. So the growth investment, we talked earlier for a single year of investment from Yamada-san, but the midterm vision that we announced last year, and we have a 3-year investment plan, which is JPY 1.9 trillion. And growth number 1 -- growth pillar #1, we have the natural gas and LNG investment, especially and there will be, over 3 years, the amount to JPY 855 billion over 3 period and then we have the Abadi exploration expansion, new asset acquisition, JPY 938 billion for growth pillar #1 as well. And then for growth pillar 1 investment, a JPY 1.9 billion and then 2 and 3 are shown. These are the amount for investment for growth pillar #2, #3. So in the vision, as we set the target, the operating cash flow, a 60% increase or the increase of the business is what we like to achieve going forward. Next slide, please. And on the left-hand side, you have the shareholder return and also increase in our dialogue with our shareholders. On the left-hand side, the blue line is the share price trend from 2020 and onwards. In the gray line is the Brent oil price trend over the 5 or 6 years. As you can see, in 2024 from the latter half of that year to the early 2025, and since then, just like an increase in the allocator space, the oil price is going down, but the stock price is going up. So one of the factors is in 2022 onwards, we have started to do a shareholder return of more than JPY 200 billion. And as mentioned before, about the business environment change, practically reducing GHG and furthermore, having energy security as well as affordability of energy. And those are the -- coming from natural gas and LNG and there's more importance of these resources. Therefore, that's the main reason why we have been accepted, we believe. And of course, we don't think that's the only factor. But for the retail investors as well compared to 2019, there is an increase by 17x. So we think that it might be a difference in our credibility and also the fact that we are able to have a frequent dialogue with our investors and explain about the business versus the expectation from the market. We think there is more deepened understanding towards our business and operations. With PBR, 1x, we cannot be satisfied and that was explained from our President and CEO. But with that in mind, we would like to have awareness of these capital costs going forward. The right-hand side, the increase in the dialogue with our investors. Last year, we had 495 dialogues or interviews with our investors and analysts. By this, as you can see on the bottom right, the various initiatives as an example, from our dialogue, there are about 6 or 7 items. So these are the initiatives that we have also been evaluated for our investors. And as explained we have JPY 3,900 or so share price today. So with this, we have been evaluated, and we think that our understanding of our business as well as the support to our business has increased. So I'd like to have these initiatives continued, so that the stock price and also the capital cost will be in our mind through our operation. So that's all for my presentation. Shohei Yoshida: We will now like to receive questions. We will receive questions from this venue first. Then after that, we will receive questions from Zoom. [Operator Instructions] So I'd like to invite questions from the floor. Unknown Analyst: Okay. So I have two questions. The first question is to do with the core earnings, JPY 330 billion. The analysis that you have explained. This was something that we've learned for the very first time. So based on JPY 330 billion. And on Page 16 today, and based on JPY 330 billion, ROE, 7%, the ROIC of 6.0%. Now your ROE medium-term target I don't think you have the quantitative number, but to be more than the equity cost tend to be in excess of WACC. I think that is how we have explained. Now on Page 16, you actually did show WACC and the sales equity cost, the 8% and 6%, respectively. So based on the core earnings, the shareholders' capital, the cost, this is lower. And so for ROIC as well, unfortunately 6% -- WACC 6%, and the conclusion is that you have not generated corporate value. And so based on core earnings, ROE to be more than 8%. So we are right through the midterm data plan right now. Now can that be realized before Abadi starts generating earnings? So that's the first question. And the second question is in regards to the free cash flow. Now last fiscal year, you explained about the investment amount. But in terms of investment cash flow, free cash flow was more or less neutral or -- and this fiscal year, the free cash flow because we are going to be increasing investment, so likely to be slightly positive or even negative. But -- so if we define the investment cash flow has been the free cash flow last year to this year, what are the changes? So that's my second question. Daisuke Yamada: So I will start. So the CEO has explained about the core earnings. And let me explain the logic behind that, and I think that was described on Page 10. So the core earnings is something that we have shared with you for the very first time and JPY 330 billion for this fiscal year, we wanted to say that this is not a bad number. So we ended up with JPY 393.8 billion last year, but the oil price and the exchange rate for this fiscal year, $63 and JPY 151. So if we actually modify to that. And if we exclude for the one-off earnings last year. So if we exclude that, then we end up with JPY 312.3 billion, the JPY 330 billion this fiscal year. And so the oil price and exchange as I say, if you exclude for the one-off number, we end up JPY 315.2 billion. So you may look as though the earnings has come down, but the core earnings itself hasn't really changed. That is what we wanted to communicate through this number. ROE and ROIC. Now we are not using the core earnings as the basis. So we are using net profit for that. And of course, one-off earnings, so that it would be positive or negative from year-to-year and the ROE, the ROIC is calculated based on that. And as we have indicated, and the JPY 330 billion for this fiscal year, ROE is 7%, and what we are calculating, so 8% for the equity costs will fall short of that. ROIC too, we now disclose this number. For this fiscal year, based on JPY 330 billion, we will be at 6% which is more or less the WACC level. So based on these numbers, we are not responding to your expectations. But the JPY 330 billion is budgeted at the fiscal year. So that's the performance at the start of the year. But like with last fiscal year, throughout the fiscal year, and there are a number of things we have in mind, but not something that we can share with you at this point in time, but we started with JPY 350 billion. But we'll give a full year forecast in May or [indiscernible] later in the year as well, and we hope to be able to increase that for our ROE and ROIC at those stages. We're hopeful of those numbers increasing. We need to give it a go, but that's the reasoning behind this number. For the free cash flow, maybe we should go to the investment page, which was this page. So the December 2025, this is cash flow before exploration and investment cash flow, if there is a difference. This is more than JPY 130 billion, so positive. So we had that much of free cash flow, which was quite a steady number, but we were actually making profit. So based on this budget, investment is JPY 850 billion. So that's the investment. And so free cash flow will be negative. In other words, so we are investing more than the operating cash flow. And so unless we raise money, we will not be able to fund investment free cash flow is negative for the first time since March 2019. So we have been making returns to shareholders based on our own cash. But this year, we are going to make a large investment. And so 50% of return, that means that we need to do JPY 156 billion, so we need to raise some money. So free cash flow becoming negative as to whether this is going to be a major issue for our management, not really. And so we will raise funds for the investment. So we raised debt, and I think that's quite healthy. But the key is the financial discipline in doing. So I didn't touch this before, we want to invest this year even if we actually raise some debt. The net ratio will still be at 0.39x. And we are saying that the financial discipline is between 0.3x and 0.5x. So we are going to raise debt to the investor. And we feel that this is not going to be a financial, I suppose, issue. So I'm looking forward to the additions to the core earnings. Yoshihiro Wakita: So I'd like to ask two questions. So number one, this time, the investment plan compared to last year, there will be an increase -- significant increase compared to last year. So as shown on Page 20, looking at these investments, the existing project investment to increase capacity, Abu Dhabi and the Middle East. You mentioned about the increase in the production capacity. But if you can talk more in detail about the content of those investments and also the profit contribution, I think this is for the growth before Abadi. So I think for these existing projects, investment. You can -- if you can talk about the time frame as well as the maybe not so much in size, it might be difficult, equity IRR, in the mid-10% range, whether that is still the case. And in terms of the time line and also what kind of content of investment and how much contribution from the profit side will be made in the time frame. So it's a Middle East project. So I'm sure it's difficult, but if you can maybe give us more details on that. That's number one. And then the second question is regarding the Abadi project, the FEED started from summer last year in a full scale. And by end of this year, is there any expected milestone for this project in this fiscal year? So in 2027, that is the target year. But in '26 -- between the year '26 with the Indonesian government, is there any timing for negotiations or any milestone of such or with the lender, if there's any agreement or any timing for agreement? So in 2026, is there any milestone related to Abadi? If you can explain what is the expected milestone for this fiscal year. Daisuke Yamada: So I'd like to explain first. For that investment question, JPY 850 billion of investments. So these are quite a significant number in the past several years. But Abadi exploration and increase capacity as well as the new investment. So Abadi is the investment for Abadi, and then exploration is as you can see. But expansion of existing assets, these are the investment for the increase in capacity of existing assets. For example, Abu Dhabi increase in the production, we have investment there. And then when it comes to new asset acquisition, these are acquiring new interests or M&A might also be included but these are the type of investments. So for the increase or expansion of the existing assets, we have JPY 282 billion and the new asset acquisition, JPY 106 billion. So in terms of the area, we have the Australia or Perth or Ichthys, the connection or tie-in investment. And then the growth area, which is Asia, in Abu Dhabi or Japan. The oil and gas mainly where we have quite a diversified investments. And then when it comes to exploration, it will take some time for these investments. And we cannot give details around the number of projects. But quite a quick area of investment we also are expecting this year and next year, where we can generate profit quickly from such investments. Those are expected as well. And for these investments. Cash flow actually tends to go up and down. But in 2030, early 2030s with JPY 850 billion times 10%, they'll be up and down, of course, but that's the amount that we can expect of profit or cash flow contribution and that's the expectation. Of course, depends on the project, there might be investment upfront, and that might be the case. But basically, we have the operating cash flow. And then as our CEO mentioned earlier, until we go to Abadi, we have the bridge, and that is the imminent challenge we are faced today. So last year to this year, we have accelerated activities. The environment is not bad, $60 or above with oil price and the acquisition of interest and those new investments are a certain amount we can expect to make investments in, and those are the target. Free cash flow will be negative. And with the financing, even we have to finance, we'd like to try to make these investments for the future outcome. Takayuki Ueda: So the milestone for Abadi, I'd like to answer that question. So basically, this year, we will do FEED. So whether we can call it milestone, we don't know. But the biggest is the environmental permits AMDAL is what we call, but that's one of the biggest milestone. And from the nation government, if we can obtain that from the government, various activities can start. So that's one milestone we're expecting. And then AMDAL. After receiving AMDAL permit, this project is in the rural area of Indonesia. So we have to have engagement with the community and increase that engagement. So those are the milestones we're expecting. More than that, we have been marketing activities for LOI we have already received many agreements. But having that in detail agreements, so that kind of interim activities, the key term sheet is how we call it, but the kind of a term sheet is something we have to work in a more detailed manner. And those are things we are expecting as one of the milestones. And with the Indonesian government, the negotiation on the conditions should come after the FEED outcome, and we cannot go without the outcome, but we also have preliminary activities. What kind of project cost and how much we have to pay, that can bring storming activities already started. So this year, these are the negotiations that will -- or discussions that will go in a more full scale. And as for the investment, as Yamada-san said, in the short term to midterm profit, we have to secure those profit and those are important as well. And there are still many things or some things we cannot mention today. But when we say exploration, we have 6 blocks of exploration in Malaysia that we have already acquired. And we will have about 9 drilling this year. But if there's a lot of pipelines in Malaysia. So if we are able to have a success, we can have a mid- to long-term increase. And we also have Norway -- Pandion with the company called Pandion. We were able to acquire the stakes or interest. And those are things that will increase the profit over the short term to midterm to increase the production as well as profit. And then we also have the assets, and we have very some considerations of these assets. So once these become more specific, then we have this midterm profit securing until Abadi. So this year, we have a certain amount of assets or budgets, but Abu Dhabi is one of the largest, but we have these various investments in plan. Unknown Analyst: So I also would like to ask you a question. The first question is related to investment. And I talk about the interest acquisition. So in terms of interest acquisition, you said the environment is favorable right now. But at the same time, buyers -- sorry, the sellers, if my memory serves me correct, there are always, I suppose, taking quite an aggressive stance. So there is always the fear of buying -- end up buying something that is not too profitable. So in regards to the new investment, could you give more description in regards to the environment? And the second question is regards to the profit booster. I wanted to confirm for this fiscal year, sorry, for December 2025, I think the level was about JPY 80 billion. Is that correct? And for December 2026. So you said the profit boost JPY 500 billion. So the basis is, I think -- you were saying kind of a starting point. The base is JPY 50 billion. And so the JPY 50 billion is already included there may be others that you may be able to add on top. I don't know how much, but you expect for further addition to that. Is that the kind of thinking that you have? So that's my second question. Takayuki Ueda: So first question in regards to investment, as to whether the environment is favorable, not biased may be quite aggressive. But as to whether the environment right now is favorable for buying things or not, I don't know for sure. But as I said before, we need to place the natural gas as the core. So there are many, I suppose -- the players wanting to sell or buying to -- wanting to buy the natural gas assets. So you're probably right, the timing to consider right now. Of course, we set a hurdle rate for the oil and gas business. So the country list does differ from country to country. So we look at the details. But generally speaking, we are looking at the mid -- team as a hurdle rate. So for this fiscal year, that would be the time of project that we seek to invest in. So this is an issue of investment discipline so we are very much mindful of that. So please allow me to respond to your second question. Profit boost of JPY 500 billion. And we've discussed this with you for the first time last year. And one is TA recycling. And so what is included as a part of the foreign exchange translation adjustment, this is put through PL. And the other is the investment incentive effect. And so last year, I've mentioned two numbers, JPY 80 billion and JPY 60 billion. Now what they are is that from the accounting -- these two have contributed to profit by JPY 80 billion. But when we speak with you, we need to kind of define them. So this is something we started from 2025. Now in 2024, we did have those -- the investment -- investment incentive effect. When we speak about the profit boost, on a gross basis, it's JPY 80 billion or so. But in terms of the delta, we need to subtract for the number from the previous fiscal year, which was about JPY 20 billion. So that's the reason we end up with JPY 60 billion. So we actually shared with you two numbers. So from the settlement of account perspective, you've been hearing JPY 80 billion, but the number that we have, speaking with you, we've removed the delta portion so it's JPY 60 billion. And so against the profit-based JPY 500 billion last year, we were able to do JPY 60 billion. So that was the accurate situation. And that number is JPY 90 billion this fiscal year. And so JPY 10 billion more than last year in terms of material recycling. Now -- so throughout the year to generate additional earnings, of course, many things. It's not just based on the balance sheet control, but the reduction or other factors generating earnings. But one thing that we can think about is that, in our case, the tax expenses. As you know, JPY 800 billion or JPY 900 billion, and that's the kind of level of tax that we are paying. So to generate great -- the tax benefit. Of course, we need to pay tax properly. But we shouldn't pay tax that we shouldn't be paying and so paying tax properly means that they're generating proper tax benefit. So we need to target for that. So in that regard, we have a significant balance sheet. Our balance sheet is in excess of JPY 7 trillion. And so for example, our currency translation, all fixed assets. And so given the fact that the oil price and FX are changing on a daily basis, so the financial, our profit and loss, the taxation, profit or loss or taxation based unrealized gains and losses. We have all of these generating at all the times. How can we combine them? So we need to control the balance sheet to generate earnings. And this is something that we intend to do, of course. And so we report based on the IFRS. And so our balance sheet is accurate. And so we do have the balance sheet to reflect the actual situation. And also emphasis that we have the PL, the profit and loss. And so our balance sheet is so correct. And so we need to come up with a P&L, which is accurately reflecting the difference. So what's realized on the balance sheet unrealized profit and the financial profit and losses and taxation profit and loss, we need to combine them well. That is one way of putting a financial position and starting point and the expectations to see additions to that. So inclusive of all of that, we are hopeful generating earnings in that way. I hope I answered your question. Unknown Analyst: So I'd like to ask two questions. Number one is about Ichthys. The low pressure BCM with the connection, there will be an increase in profit. But maybe I didn't recognize this before, but I think we never heard this, so we haven't heard this before. So this BCM with this utilization, we won't have so much production this year. Was that planned from the past or started from '26 or something that you have started to look at this year or recently? And whether that will be fully recognized next year or whether there'll be some shutdown in maintenance at some point. So if you can give some update about the production profile of Ichthys. And then the second question is on Page 17 about the forecast for this year, the impact of oil price. JPY 556 billion of minus impact based on the oil price assumption and the past assumptions. I think there are a lot of a large impact. So maybe the timing issue, maybe it's a timing issue or -- as you mentioned, the JPY 330 billion is the number you have. But whether there will be some conservatism in this number as well. So you'd like to ask whether that's the case or not. Takayuki Ueda: So the production profile of Ichthys over the BCM connection. Of course, this is something that we have been expected as a company. And talking about the low pressure module. So even though the pressure in the well will go down over the future, we will still have a production secured. So for that, we have a booster compressor which will be used for -- to connect to the CPF, the offshore facility, and we have this installed. So at the beginning of last year, we started that installation. And then this year, we have started decommissioning and after installation, we have to collect the lines. So there are huge lines and pipelines in a huge amount of workload. So to do the commissioning, that was the plan before. And then with the actual commissioning, how much time will require and how much drop in production we will have those forecast is something that we were able to come up recently. And so we have not mentioned those details in the past. But those work is something that we have been expecting from the past. And then this is sort of a one-off factor. And of course, the production amount or the -- if the commissioning will be delayed, then that would also impact the schedule, but that is a one-off. And then for 2027, we are going to start planning for this, however, but some sort of maintenance will be required. So how those will be unfolded is something we have to discuss and decide and we have to put that together. Daisuke Yamada: And the second question. The initial budget with the oil price of JPY 52 billion impact. So this is including the natural gas, LNG, the lagging factories included. So if you look in detail, there are about JPY 30 billion on the oil price. And then the -- based on the dropped oil price, there are 4 months delay. So that's the LNG marketing or sales. And the spread is also being adjusted. So that's about a JPY 20 billion of impact. So in that sense, JPY 50 billion breakdown is the breakdown as mentioned. And then from the beginning of this year, if you look at from the beginning of this year, the sensitivity multiplied by these 6.8x to 6.3x the sensitivity, that's not the case. But initially, we have the oil price and then looking at the lagging factor. So in total, we have the oil price sensitivity and JPY 52 billion or so. And then this is different from the earlier factors. But just plainly looking at the oil price, that is the number we have. So thank you very much for the answer. Unknown Analyst: I also have two questions. And I wanted to ask a little more about the low-pressure production facility and the impact of this is likely to come in the first half of the year. Because I wanted to understand the scheduling aspect. And the second question is in regards to cost. Production cost forecast is shown on Page 31. If you could give some background information to that not including royalty we expect some increase. But if you include royalty, it will come down slightly. So could you explain the background to the extent possible? Takayuki Ueda: And in regards to the low-pressure production facility or the booster compressor module, BCM, it's not like a shutdown maintenance stopping everything to link the equipment. So we are actually doing a link up while being in operation. When you are linking pipeline, we need to stop the related facilities. And once the line up, you start the operation again. And so it's not the case that you kind of shut down for a period, we will connect and restart. So it's a little bit different from that type of shutdown maintenance in that regard, where we're going to do this rather than it being a first half of the year or the second half of the year, we are going to do this work gradually throughout the year. So in terms of our cargo number, we are expecting about 10 cargo per month, that is the assumption that we have for this fiscal year. And so reflective of this impact, that's the kind of level of production we're expecting for the year. In terms of the production cost per barrel, and $5.3 was expectation last year and the production volume in the Europe and the Middle East, liquids production volume and OpEx related to this the balance that will have the impact on this number. And so those, including royalty or not, the royalty will have more impact in terms of the European than the Middle East. How much contribution from that business will have that impact. So -- and last year, those that include royalty coming down and those increasing that does not include royalty that the Australian or the associated production volume, that is having the impact. So the cost increase overall is not what you're expecting. It's just a change in balance where the increase from -- the production of acquired cost is higher, that -- yes, for cost reduction, Ichthys project that we are the operators, we are working on further cost reduction. And so the Ichthys portion, we will aim for further the cost reduction. But we have already made a significant progress on this, and we are currently nearing the lowest level. And so to what extent can we still do. And also overall, the production volume. So it's a balance of these 2 that is reflected in these numbers. Unknown Analyst: One question. So this time, about the increase of dividend against the growth in the business and the cash flow is returned, and I think that's really welcomed. But JPY 108, the level of this dividend, what kind of discussion was made? And how did you come to the decision? I think it was an overall comprehensive discussion. But in the past, 30% of payout ratio was the -- that typical case. But this time, from that, it will be 40% or less of increase in payout ratio. So what kind of discussions were in place? And then how did you come to that JPY 180? It's not really a clear number. It's not so clear. Maybe it's kind of a halfway, but how did you come up with that number? Takayuki Ueda: Well, there are a lot of discussions. And one thing is the EPS already profit -- against the profit this year, how we're going to return to our shareholders. And this time, JPY 330 billion, let's say. With that, it will be 50% total payout and then JPY 156 billion or so. But if it's JPY 108 per share of dividend, it's JPY 120 billion of cash required, and there is a difference between those numbers. Therefore, of course, the JPY 330 billion is just an outlook so we don't know whether that will be the exact number. But with the certain visibility, if we have JPY 108 per share of dividend, then in order to achieve that 50% total payout in the interim, we may have an increase in dividend or have a change. But we wanted to have that kind of room in the dividend. That's one number. One idea. And the other side is as we're not increasing so much profit, so we can set the same level of dividend as this year. But because of the inflation or in the past, it was a deflation. So the yield -- dividend yield in the deflation, let's say, if it was 3%, that would lead to returning to our shareholders. But then with the inflationary environment, there will be a decline in real. So it's not a situation welcome situation. So that's why we came up with the number, JPY 180 of share this time. Shohei Yoshida: So we'd like to conclude the session at this as we have reached the scheduled time. And for those that we were unable to respond to, please contact our IR group. Thank you very much for your participation despite your busy schedule today. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Till Leisner: Thank you, Sandra, and good morning, everyone, and welcome. It's a pleasure to see so many of you here again in Zurich at the Metropol. I'd also like to extend a very warm welcome to all of the participants joining via our live webcast. It's great to have the opportunity to connect with such a broad audience across the globe. I'm Till Leisner, Head of Investor Relations, and I'm delighted to be joined today by our CFO, Ido Wallach; and our CEO, Stefan Butz. Before we begin, the general reminder to look at the presentation and the including disclaimer, which you find on our web page in the Investor Relations section. For those who are attending virtually, again, you find that on the web page at dksh.com. With that short introduction, I'm very happy to see all of you again, and I hand over to Stefan to get us started. Thank you so much. Stefan Butz: Thank you very much, Till. Hello, everyone. Good morning, and welcome to the presentation of our 2025 full year results. Joining me here today is our CFO, Ido, as well as our Investor and Media Relations team. As today marks the first day of the Chinese New Year, I wish especially all our Asian colleagues a Happy Lunar New Year. So today's agenda foresees a short recap of our highlights of the past year. I will then continue with a review of the business units in 2025. After that, Ido will follow up with a more detailed financial update. And to conclude, I will provide an outlook before we then open the Q&A session. We are very pleased to report that DKSH achieved another year of improved results with an even better acceleration of growth in the second half of 2025. We continue to translate our strategy into consistent execution in 2025, delivering growth, increased margin and high cash generation in a muted market environment. As in previous year, I will primarily be commenting on our results using constant exchange rates as this better shows the operational performance and ensures better comparability with previous years or results. Despite a very challenging environment, net sales increased by 2.9% at constant exchange rates to CHF 11.1 billion in 2025. In the second half of the year, net sales grew even faster at 3.6% with a pickup in growth in the business units Healthcare and Consumer Goods, thereby achieving GDP growth. Core EBIT amounted to CHF 349 million, 6.7% higher than in 2024. Core EBIT margin increased from 3.1% to 3.2%, in line with our midterm goal to expand core EBIT margins by at least 10 basis points year-on-year on average. In the second half of 2025, we delivered improved profitability with a core EBIT increase of 8.1% faster than the first half of the year. Our free cash flow remained high at CHF 215.5 million with a cash conversion of 95.2%. This marks the sixth year where we achieved a cash conversion above our target of 90%. We also delivered on our midterm road map regarding capital allocation as we announced 9 accretive M&A transactions in 2025 and proposed to increase the ordinary dividend by 6.4%, which corresponds to CHF 2.50 per share. This resilient performance in challenging times once again demonstrates DKSH ability to consistently create value for our clients, customers, employees and shareholders. Based on the acceleration of growth in the second half of 2025, we will continue to deliver on our midterm road map in 2026, driven by our focused strategy execution and resilient business model. Let me now focus on the highlights of 2025. We executed our accelerated M&A strategy and announced 9 transactions across the business units, Technology, Performance Materials and Consumer Goods in various markets. We continue to drive our business development by enlarging our client portfolio across all BUs and various markets. We signed a strategic partnership with Bayer for their pharma business in Singapore, Malaysia, Thailand and in the Philippines. In Singapore, we began collaborations with Eli Lilly, started working with Nestle in Malaysia, Thermo Fisher in Japan and Polygal in Europe and the United States. Additional highlights include the achievement with respect to our high-performance culture. Being recognized as a great place to work in even more markets and as one of the Fortune 100 best companies to work for in Southeast Asia 2025 highlights our continuous ambition to create an excellent work environment. We remain committed to talent development and diversity as reflected in our representation of women in leadership roles. We achieved several milestones in our sustainability efforts. We have been recognized as an industry leader in the ISS ESG Corporate Rating 2025. The science-based target initiative validated our targets, and we are on track to achieve net 0 greenhouse gas emissions across the value chain by 2050, having already reduced our CO2 emissions by 65%. With these achievements across multiple areas, we demonstrate our diligent strategy execution and commitment to creating value for our clients and customers in Asia, Europe and North America. We also create sustainable value by implementing AI initiatives across all our business units in key areas such as M&A, finance, IT and supply chain management. To support these efforts, we have established a dedicated team. AI acts as an enabling factor that seamlessly integrates with our existing processes by continuously leveraging our extensive data resource through AI we create additional opportunities for growth and enhanced operational efficiency. AI on the one hand, enhances demand forecasting or optimizes pricing, which drives top line growth. On the other hand, AI enhances our operational efficiency. For example, in our consumer goods business unit, we utilize a modular commercial excellence AI platform. This enables us to perform forecasting and segmentation, gain additional customer insights, obtain route optimization data and plan shelf layouts more efficiently -- effectively sorry. As a result, we achieved sales force excellence through increased customer revenue, improved client acquisition and retention and optimized cost to serve. Our business benefits from high entry barriers. By leveraging our strong sales force, extensive distribution network and robust cash collection processes together with advanced AI initiatives, we further evaluate these entry barriers, giving larger distributors like us the competitive edge. As in previous years, we continue to invest our capital in business with above average margins. We follow an accelerated high-impact M&A strategy backed by leverage headroom for approximately 2x net debt to EBITDA. Last year, we explored major transactions that ultimately did not materialize. Despite the volatile M&A environment, we announced 9 transactions surpassing the average number closed annually in previous year. Over the past 6 years, we accelerated our M&A activity as we have more than doubled the number of transactions. From 2012 to 2019, we completed 16 acquisitions whereas between 2019 and 2025, the total rose to 35%. As a result of these acquisitions made in 2025 and our existing deal pipeline for 2026, we expect increasing EBIT contributions from M&A in 2026. Looking ahead, our strong balance sheet allows us to pursue a wide range of strategic options. We remain committed to accelerating our M&A strategy, including the potential for expansion beyond Asia Pacific in our Business Unit Performance Materials, Healthcare and Technology. Our strong cash generation not only allows us to accelerate our M&A activity but also to continue our progressive dividend policy. Therefore, our Board proposes an increase of the ordinary dividend to CHF 2.50 per share, which is equivalent to a growth of 6.4%. For U.S.-based investors, this represents an increase in dividends, by the way, of more than 25%. This proposal marks our 13th consecutive year of dividend increase confirming our dividend aristocrat status. Notably, our ordinary dividend per share has achieved an average growth of 5.1% in the last 5 years. Let me now provide you with an update on the progress in our business units, starting with Healthcare. Our largest business unit, Healthcare, maintained its track record of profitable growth in 2025. We continued our development above GDP grades as net sales increased by 4.6% to CHF 5.8 billion. especially in the second half of the year, we accelerated organic growth. Core EBIT achieved CHF 174.2 million with a core EBIT margin of 3%, an improvement compared to the previous year. This marks the fourth consecutive year of margin increase on our full year results. These strong results were driven by broad-based growth across multiple markets and by new, as well as existing clients. We entered new partnerships with notable companies like Bayer, Eli Lilly, Reckitt, et cetera. Patrick Grande, a well-seasoned leader with more than 20 years of experience in the global pharma industry and part of DKSH since 2022 has been appointed as the new head of the business unit following Bijay Singh's planned transition into retirement. Under this new leadership, the business unit will continue to focus on higher-value segments and services. We will increase the share of commercial outsourcing while maintaining a strong focus on our own brands business. Moving to the Business Unit Consumer Goods. Business Unit Consumer Goods achieved net sales growth of 1.2%, with a marked acceleration of 2.8% in the second half of 2025. This growth was driven by strong performance in Malaysia, Vietnam and Singapore, alongside improved business development, especially in higher-margin business with new clients such as Nestle and Del Monte. Core EBIT increased to CHF 89.7 million, reflecting a growth rate of 5.4% and resulting in an approximately 10 basis point margin expansion. While core EBIT declined by 4.3% in the first half of 2025 growth recovered strongly in the second half. In the past 6 months, we achieved core EBIT growth of 14% and a core EBIT margin of 3%, reflecting improved earnings momentum and operational leverage. The exit of our business in Indonesia as well as the acquisition of Zircon-Swis Fine Foods in Singapore, which delivered performance ahead of the business plan further supported those results. In our Business Unit Performance Materials, net sales grew by 1.4% to CHF 1.4 billion. The Asia Pacific region, which accounts for around 60% of the business unit net sales delivered the strongest performance with growth of 5.5%, demonstrating a clear outperformance in an overall declining market. The resilient performance of the business unit was reinforced by strong business development with key clients such as Synthomer, Kronos, Polygal alongside 3 M&A acquisitions and a very strong pricing discipline supported by gross margin expansion. Core EBIT increased by 1.9%, with the core EBIT margin improving to 8.2%. The core EBITA reached CHF 120.4 million driving the core EBITA margin to 8.9%. Looking ahead to 2026, streamlined leadership with Natale Capri as the sole head of the business unit, cost optimization initiatives and already signed M&A transaction will provide additional growth momentum in 2026. Last but not least, let us focus on our business unit technology. Against the macroeconomic backdrop characterized by short-term uncertainty and delayed investment decisions, the business unit delivered resilient results around 2024 levels. The business unit further focused its portfolio. We completed 5 strategic acquisitions within the Scientific Solutions segment. The share of our business line, semiconductor and electronics increased highlighted by the integration of CLMO in Malaysia and Taiwan, while the business line precision machinery also grew, driven by the strong performance with key clients. We also divested our cable business in Australia and Taiwan, focused more on consumables and services, and it's achieved very strong digital sales growth. In 2026, the business unit will continue to capitalize on consolidation opportunities in Asia Pacific and other regions. With a promising business development pipeline, the business unit is well positioned for a stronger year ahead. Now I hand over to Ido who will guide you through our financial results in more detail. Thank you very much. Ido Wallach: Thank you, Stefan. Thank you, Till. I would like to extend my warm welcome to all of you also from my side, especially for those of you who are able to join us today. I know that your time is valuable, and thank you for spending it with us. I am very pleased, as Stefan was to share more details about our 2025 results. As always, to best reflect the comparability of our operating performance, I will also focus on our results at constant exchange rates. The global economic environment in 2025 was marked by heightened uncertainty, particularly in the first half of the year. Against this backdrop, we are particularly pleased to have once again demonstrated the resilience of our business model and our ability to navigate challenging conditions. We have proven this during the pandemic shutdowns in the postpandemic inflationary environment, and we confirm it once more throughout 2025, as reflected in our key financial metrics. Net sales growth amounted to 2.9% at constant exchange rates. Core EBIT increased by more than twice the rate of net sales at 6.7%. Core EBIT margin increase of 0.1 percentage points to 3.2%. This represents the fifth consecutive year of core EBIT margin expansion. Core profit after tax stood at CHF 226.4 million, an increase of 3.3% at constant exchange rates. Building on our asset-light business model, we generated CHF 215.5 million in free cash flow. This represents a cash conversion of 95.2%, the sixth consecutive year above our target of at least 90%. To sum up this section, we have once again delivered as predicted, top and bottom line growth, margin expansion and substantial cash generation. Let us now examine the composition of our net sales and core EBIT development in more detail. Organic net sales growth reached 2.5% marking growth acceleration in the second half. The step up from 2.1% in the first half to 3.6% in the second half was particularly evident in business units health care and consumer goods. M&A contributed 0.4% to our growth. Combining organic and M&A, our net sales growth at constant exchange rates totaled 2.9%. The appreciation of the Swiss franc negatively affected net sales by 3.1%. This figure however is slightly smaller than 3.8% negative impact recorded in 2024. Let us continue with the development of our core EBIT. We are pleased with our continued core EBIT growth. We grew our core EBIT organically by 5%, twice the rate of our organic net sales growth and driven by our intentional focus on high-margin businesses, cost efficiencies and the scalability of our business model. M&A added 1.7% to core EBIT growth, also ahead of its contribution to top line growth, and validation of our strategy to acquire higher-margin businesses. All business units contributed to core EBIT expansion throughout M&A, and we are confident that profit contribution for M&A in 2026 will exceed that of 2025. Net sales growth, combined with continued strong focus on value-added services, operational excellence and resource optimization delivered an overall core EBIT margin improvement of 0.1 percentage points. Similarly to net sales, the translational FX had a meaningful and negative impact on our core EBIT amounting to minus 5%. The investment materials that we published on our website today include details of the items that we consider nonoperational of a one-off nature or in short, noncore. The main items that fall into this category in 2025, our restructuring cost of $7 million, onetime project cost of CHF 3.9 million and disposal of trademark licenses to the tune of CHF 1.8 million. To wrap up the core EBIT section, it stood at CHF 349 million, representing another landmark achievement in the 160 years history of DKSH. The sustained long-term effects of our diligent strategy execution, the attractiveness of the business we're in and the resilience of our business model become very evident when we review performance metrics over a 5-year period. We successfully and consistently convert our operational achievements into financial value creation for business growth, cost controls and return on invested capital. Since 2021 in constant exchange rates, our net sales increased by a compound annual growth rate of 4.2%. This is higher than the average annual weighted GDP of our markets. Our core EBIT rose at an even faster upward trajectory of 11.6% CAGR. Consequently, our core conversion margin defined as core EBIT as a percent of gross profit increased sequentially. Having exceeded the 20% mark in 2024, we lifted by further 70 basis points to 21.4% in 2025. Furthermore, our core EBIT margin followed a similar upward trend. The 3.2% core EBIT margin in 2025 correspond to a total of 60 basis points margin that we delivered sequentially over the last 5 years. I would also like to highlight to you today the significant improvements that we have achieved over the past 5 years in the area of logistics and distribution. By diligently focusing on operational excellence and leveraging digital tools, including AI technologies, we decreased our logistics and distribution costs by around CHF 35 million, thereby supporting our core EBIT margin by 30 basis points over the past 5 years. A key source of our resilience and agility to respond to ever-changing market conditions lies in our low-risk asset-light business model. We operate primarily with leased offices, lease distribution centers and leased transport fleets. This becomes apparent when looking at our capital expenditure. It's still between 0.3% and 0.5% of net sales across the last 5 comparative periods, with a very lean level of 0.3% maintained over the last 3 years. Building on our ongoing efforts to drive efficiencies across the organization, we are proud to report that we optimize our working capital even further in this reported period, matching the 8.6% of annual sales recorded 2 years ago. Subsequently, over the same period, we delivered constant and high free cash flow, exceeding our objective of 90% conversion in each one of the last 5 years. To sum up, our year-by-year results demonstrate once again the high quality and predictability of our earnings, sustainable in nature, repeatable in execution, and mirrored by strong cash generation. Let us now move on to our balance sheet. Building on the financial performance achieved in 2024, we further enhanced the quality of our balance sheet and returns in 2025. Core return on equity increased by 30 basis points year-over-year to 12.4%, reflecting stronger profitability and very disciplined capital allocation. We continue to operate with a positive net cash position supported by an efficient and disciplined deployment of liquidity. At the same time, we maintained a high core RONOC close to 20% evidencing our sustained focus on value creation and capital efficiency. We operate a low-risk asset-light business model that drives a high and consistent free cash flow for our capital allocation. In 2025, we funded 9 acquisitions while distributing a higher ordinary dividend to our shareholders, all with existing cash. 2025 was a 12th consecutive year of progressively higher ordinary dividend. We also reduced our gross debt position by almost CHF 50 million, which resulted in more than CHF 4 million savings on interest expenses in 2025. With an improved equity ratio of a 1 full percentage point to 33.1%, we maintained a significant leverage headroom to grow our platform through industry consolidation. As we already shared in the past, we continue to carefully assess deals and only acquire if we find them value accretive, scalable and available for a reasonable price. Let me also provide you with some additional financial indications before we return to Stefan to elaborate on future prospects. In terms of M&A, we estimate that our recent acquisitions will contribute around 0.8% to net sales in 2026. This is based on acquisitions which we have closed until now. We expect more deals to materialize in 2026 and naturally, those will provide further growth upside. While the currency development remains volatile, we expect a slight negative FX translation impact, assuming December rates prevail for the remainder of the year. Tax rate, our 28.7% tax rate on core earnings in 2025 was at the upper end of our midrange of 27% to 29%. We continue to guide this range for 2026. Capital expenditure is expected to remain between 0.3% to 0.4% of net sales for the full year. With that, I would like to thank you again for your attention today and then over back to Stefan. Stefan Butz: Thank you, Ido, for the comments on our financials. Our results reaffirm the robustness of our business model and reinforce our role as a reliable anchor for clients and customers even in times of change and challenges. Before we come to the outlook, I would like to comment on the changes in our Board of Directors. Andreas Keller, Member of the Board of Directors since DKSH founding in 2002 will not stand for reelection at the next AGM. Andreas Keller joined Diethelm & Co in 1976. He initiated and led the merger of the 2 Swiss trading companies Diethelm and Edward Keller in 2000 and supervised the creation of DKSH in 2002 together with Adrian, Keller and others. The Board members and all my colleagues from the Executive Committee wish him continued success in his future endeavors and delighted that he as the Chairman of the Board of Directors of the Diethelm Keller Holding, will continue to be connected to DKSH. We are all very pleased to propose Julie von Wedel-Keller as a new member of the Board of Directors. As a direct descendant of the Keller family, her election as the fifth generation would ensure continuity and stability, underlying the family's long-term commitment to DKSH. Looking ahead, we remain confident to deliver sustainable core EBIT growth and reaffirm our midterm road map. We expect core EBIT in 2026 to be higher compared to 2025. As always, this outlook assumes economic growth in Asia Pacific exchange rates to prevail at current levels and excludes any unforeseen event. Asia Pacific remains the most attractive region for global trade, highlighted by Asia's resilient growth of expected 4.6% in 2026. Recent GDP forecasts indicate strong economic growth in Asia Pacific, driven by less significant tariff impacts and Asia's pivotal role in transforming global trade. With 2/3 of the world's middle class expected to reside in Asia by 2030 and its leadership in future industries like AI, the region is well positioned to reshape global trade alliances. Strong export dynamics and intraregional trade will continue to support the economic momentum across the rapidly growing Asian economies. DKSH remains very confident in Asia Pacific's long-term potential. Supported by its resilient business model, we are well positioned to benefit from favorable long-term market industry and consolidation trends in Asia Pacific and beyond. With that, I thank you for all your attention and invite you now to address your questions in our Q&A session. Thank you very much. Till Leisner: Thank you very much, Stefan and Ido. We will start the Q&A session, and we'll begin here in Zurich, give Gian-Marco on the first floor, the opportunity to kick it off. Thank you. Gian Werro: Thank you. Three questions from my side, if I may. The first one is on the consumer segments. There, we can really see a trend in the change -- a change in the trend about the top line development, also the margin development. I remember from recent discussions that there was quite a bit of an issue that Western consumer companies had a problem really to diversify themselves, especially in the food business. Is this also related now to trend change that you observed maybe in APAC that those brands become more powerful again? And then the second question is on the cost optimization, interesting that you mentioned efficiency improvements with AI on the growth as well. So I would really wonder if you could quantify maybe at this point in time already from a growth perspective, what opportunities you see there to increase your revenues? And then also, of course, your improvements in the logistics costs have been impressive, I think, with the CHF 35 million that you mentioned. But on the other side, you also had some FX tailwind in this perspective, reducing your FX overall weight. So I would wonder this question by how much have your logistic costs have really reduced organically? And how much tailwind did you have from FX? Ido Wallach: Okay. Thank you, Gian-Marco. Good to see you, and I'll start with -- because many of the questions were more on the financial side, and Stefan will chip in. On the consumer goods we -- well we serve more than Western suppliers. We have a fair bit of Japanese Asia Pacific suppliers. So it's no longer the case of just Western DKSH bringing Western goods into Asia. We have -- I think the change that you see is coming out of the strategy pivot that we announced in Capital Markets Day where we said that gradually, we'll move from better before, bigger to better and bigger business for consumer goods. We have done -- we have said that we are going to look at increasing our distribution, increasing our sales force efficiency, focus on higher premium categories. And what you see in the last 6 months is realization of the strategy. We still expect the consumers to be muted to foreseeable future. We know what's going on in the world. It's also what the big consumer goods companies are publishing so far, those that are published for this year. So perhaps not yet declaring victory, but very, very encouraged by the results that we see in the last 6 months. On the profit side, I think it's not new news because if you go back to 5 years ago or 2019, so that's 6 years ago, the consumer goods was at 1.7% margin. We are now at 2.7%. We have then launched a strategy to get to 2.5%. We've already delivered that last year at 2.6%. So I think on the EBIT side growth, that's not new news, and that we have achieved through the various savings focusing on more profitable clients and what brings me to your second question, which was logistics and distribution, which, of course, being one of our bigger business units with the one that is delivering the bigger boxes because the health care tends to be -- medicine tends to come in smaller boxes. This is where the bulk of the saving was made. It is true that the number reflects FX, but if you look at our annual reports over the last few years, you'll see that the -- unfortunately, because of the strong Swiss franc the -- in Swiss franc level, the sales are at CHF 11 billion over the last few years. And the improvement is of 30 basis points over this CHF 11 billion, which means that these are pure 35 at current exchange rate savings to our bottom line from logistics and distribution. We have done that from significantly automating and digitalizing our warehouses. We have done it for rerouting into more efficient and packing more into each truck which reduce our costs overall. And this is the main story behind those savings. I think your other question on AI was how it can translate also into revenue growth. And that's a very rich opportunity out there, which we are yet to fully capitalize. Stefan Butz: Maybe a few remarks on that one, Gian-Marco. As you know, we are sitting on a ton of data with the hundreds and hundreds of clients. We have thousands and thousands of customers and almost millions of different SKUs. This creates a huge amount of complexity on a daily basis. If you want to optimize which products go in what stores, what are the perfect sales routes and customer visits for our thousands and thousands of sales agents. And here, clearly, AI is an opportunity to look into the data and within minutes, give recommendations how you -- how a salesperson can optimize the visits of customers, what products he or she best recommends to our clients, give recommendations in terms of pricing on shelf location, et cetera. And that is where we believe there's a significant opportunity to further accelerate our top line growth. And then on top of that, obviously, we have many internal processes which can, in an accelerated way, digitized and supported by AI at the end of the day to save manual labor. But it's too early to tell. We have now 14 pilots, which are already running within the organization and another 15 will be rolled out in Q2 and maybe in the second half of the year, we can give you further feedback in terms of potential, especially the saving potential, which could be achieved by those projects. Michael Foeth: I am Michael Foeth, Vontobel. My first question is on the health care business and the shift towards more or higher margin businesses? If you can comment on that and where you stand in that road map. And if at one point, you should see a further acceleration here actually in the -- in that progression? And the second one, actually very much similar to what was just asked on AI. On the real results in terms of efficiency or productivity gains, if that is something that you expect to be reflected on the margin progress in future years because you're still basically obviously at the same midterm ambition there? Or if those gains are effectively then basically passed through to your customers over time, how do you expect that to play out? Stefan Butz: Okay. Let me start with the first question regarding healthcare. I think you have seen that over the last 5 years, continuously, we were able to increase the margin in the healthcare business by 10 bps. And that is rightfully as you say, driven by a higher focus on high-margin business in the portfolio. The trend for outsourcing, full commercial outsourcing, that means that we also run the full sales and marketing function on behalf of the client is continuously increasing, and we are gaining some very strong market share and new business with our client base. A few years back, the contribution from commercial outsourcing to EBIT was 40%. Last year, it was slightly over 50%. In 2025, we moved that to 55%. And on top of that, the contribution of our own brands business is also continuously growing. So right now, we don't foresee an end. We rather believe that we can further accelerate the share of commercial outsourcing over the years to come and can confirm the midterm outlook that every year, we are accelerating the margin also in healthcare by 10 bps year-over-year. Ido Wallach: Yes. On the AI potential for cost, revenue and ability to pass on some of the savings to our suppliers. A key component of our business is to manage complexity that our suppliers don't want to or cannot at the same economic efficiency that we can. In many of our jurisdictions in Southeast Asia, bureaucracy is still part of daily life. A lot of paperwork when we sell, buy, when you file for taxes, when you do everything, which is regularly required. So our business has a fair bit of administration of those things. And over the years, even before the AI revolution, which has just started, we have moved a lot of those repeatable tasks into our shared services center in KL. Our global IT team is based there and also the financial services are based there, where we process a big part of what is happening in the countries over there. The AI revolution offers us to make that a lot more efficient than before because we now apply all those tools and machine learning on paperwork. And we honestly -- the full potential is yet to be understood and realized but it is going to be big because by definition, this solves what human repetitive tasks are currently doing. It is probably too early for us to increase the guidance of 10 basis points per year, which has been our guidance for several years now. We have delivered this year. We have delivered the year before. We actually delivered for 5, 6 years now. And we also delivered in 3 of the business units in -- out of the 4 in 2025. So we'd like to continue with this guidance. Some of those savings, we will invest back in our business also in IT and in other elements that we would like to invest. And in the future, if we see more, we will, of course, communicate a change of that guidance. Chiara Di Giammaria: Chiara Di Giammaria from Berenberg. I have 2 questions, if I may. The first one is on Performance Materials. So I guess, in the industry in general, one of the main concern is the Chinese competition. Can you explain how you are protected from this? And the second question is on the USD denominated sales. If you can share a split -- so how much more or less of your sales come from the USD sales? Stefan Butz: Yes. Thank you very much. Look, if you -- very clearly, the chemical markets are being challenged now since 3 years. The difference between our setup and the setup of many of our dear competitors is that 2/3 of our business is in Asia. We have very good and very strong connections to Chinese suppliers, and we also distribute business within China. So close to 8% of our overall PM business is within China. And we are very successful in Asia across the board because we have a very broad customer base and very deep and long relationship with those customers. So we currently don't see significant challenges of Chinese player in Asia. And that was the reason why also in Asia, we were able not only in this challenging end market environment to deliver over 5% of growth. As you might have recognized, we were also able across the full globe of our operations to increase the gross margin and to increase the EBIT margin. In terms of the sales in North America, this is under 8% of the total business. But obviously, if you do the math, you will see that also in Europe and in North America, our chemical business is also being challenged. But Asia is very strong, and we expect a very solid performance also in 2026 in Asia in Performance Materials. Ido Wallach: With regard to the share of U.S. dollar sales, it's actually very small. It's about 1% to 2%. But I would also like to add that we -- our currency risk is a translational risk. In terms of transactional, we hedge all our -- everything that we buy in non-U.S. dollars and sell in U.S. dollar, we hedge on the rate that ensures the margin that we make on the deal. So we only suffer translational, which has an impact. Till Leisner: The next question in the room, please. For the time being, no question in the room, operator, can we please have the questions from the call. Operator: The first question comes from Nicole Manion from UBS. Nicole Manion: A couple for me, please. Firstly, just a follow-up on Performance Materials. Could you comment maybe on how trends developed through Q3 and Q4 and how you've seen things evolve so far in early 2026. And then the next question, could you talk a bit about the tariff environment in, I guess, in India and China within APAC, particularly on the pharma side? Anything you're sort of seeing there in terms of impacts? And then perhaps just more generally on inventory levels. It looks as though group stock turns are still 7x to 8x. But within that, can you comment on any regions or products that you think are still elevated? That would be very helpful. Stefan Butz: Nicole, can you please repeat your second question on was that the impact of tariffs? Did I understand that correctly? Nicole Manion: Exactly. Yes, if you could just comment on anything that you've seen particularly, I guess, in the region in India and China, maybe on the pharma side, if there's any impacts that you can call out there? And then, yes, the related question was just about inventory levels in general. Stefan Butz: Okay. Maybe then I start with the first 2, and then Ido is commenting on the inventory. So yes, I mean, Performance Materials, it was a very rocky year 2025. I'll start with Q1 where we have seen some good developments. In Q2, we discussed it during the half year results was a complete disaster after the uncertainty being created with all the tariff discussion. Then in Q3, actually, there was a bounce back happening. So we had a very strong Q3, whereas then in Q4, there was a more normalization and the results were slightly negative across the full portfolio. Looking into 2026 and maybe a few of you have seen that there is some very light optimism coming back to the market also triggered by a report from Goldman Sachs last week. We are optimistic, especially for our Asian business in 2026. Regarding the tariffs, I would like to summarize it in a way that at the end of the day, I think everyone recognized that the impact, especially for Asia will be more limited than what was originally feared towards the end of Q2. What we do see is that the supply chains are moving slightly and there is a decoupling from China into Southeast Asia. You just have to look into the GDP growth rates in Southeast Asia for the second half of 2025 as well as the outlook for 2026 where you see there's a very strong development in Vietnam, which is out of the material economy, the fastest-growing one, where I think we can expect up to 8% GDP growth this year but also Malaysia is doing very well. Singapore is doing very well. Taiwan is forecasted to do very well in 2026. And what I would really like to highlight is also Japan. We have high expectation in terms of Japan. I think there is a giant which is being re-waked and we have seen already some good development in 2025. And I say with the political environment there, we can expect a further acceleration coming out of Japan. And yes, then I would hand over to Ido regarding the inventory level. Ido Wallach: Nicole, just specifically on your question on the pharma business in India and China, we actually had a very solid year in those jurisdictions in this category. So we don't see the effect, as Stefan just mentioned. I did not quite get the question about the inventory. Can you please repeat it? I'm sorry that the line is not great today. Nicole Manion: Yes. Sorry, no, I was just asking it looks as though stock turns for the group are around, I think, 7.5x. But I was just asking if there are any regions or products that you think are kind of elevated within that or anything interesting to call out on a regional or product basis, essentially, just any detail? Ido Wallach: No, I think that overall, our inventory level is a very healthy level. And so is our working capital, as I mentioned before in our -- in my speech. There's -- if there's anything in particular to report is that it's very lean. And I think we're going to start the year with the right level of inventory and good quality inventory, meaning low level of excess or bad inventory. So we're quite pleased with the achievements there across all the business units. Operator: The next question comes from Jon Cox from Kepler Cheuvreux. Jon Cox: Just on consumer, just to come back to that, you're talking about encouraging results coming through in consumer in the second half. Can you just talk us through that a little bit just in terms of maybe the countries you're seeing improvement or which parts of consumer is seeing the improvement? Because obviously, the overall economy and a lot of your big markets, notably Thailand hasn't been great. And I'm just wondering if you could talk a little bit about what those improvements are a bit more specifically. And then just to come back to Performance Materials, you're talking about Asia should be pretty decent this year. I can see you're a bit loath to talk about the U.S. and Europe. Are you seeing any signs of improvement there at all. And I'm just wondering, is the weakness really in the industrial segment, and it's really about the Chinese competition. Or is it across the board and it's not just the Chinese competition, it's just businesses in general, being pretty nervous. Ido Wallach: Thank you, Jon. I will start with the CG question. Stefan will follow on PM. I think in the same countries as Stefan mentioned before, that have been quite successful for us in both PM and Healthcare also successful in CG. These are core markets. Vietnam, Malaysia and Singapore had a particularly strong year for CG. You're right to point out that things are a little bit more lukewarm in Thailand. But I would also like to say that over the last 3 years, we have outperformed the overall GDP in Thailand. So some slowdown is something that we were going to expect in 2025. Certain categories, I think Beauty Care is coming back. Also, food and beverage are coming back. What we see is consumers are going back to brands that they can trust and value, okay? So we're not talking necessarily about higher value, lower value. But after a certain shock 2 years ago from the inflationary pressure, they're coming back to brands because they -- this is what they trust. So overall, slightly stronger consumer confidence, but it's very volatile times. I mean we cannot be overly optimistic at this stage. We are optimistic though. Stefan Butz: Yes, Jon. I'm talking about Performance Materials. First of all, in the U.S., we see really very, very light indications of -- you might recall that our business there is primarily an industrial specialty chemical business related to the so-called K segment, which heavily goes into the housing market. There are some very soft early indications that there is actually a shortage on housing in the market and some investments are rolling into the market also in terms of renovation. So I would say maybe we see the light at the end of the tunnel, but there is still some -- there's still some tunnel right? In terms of our European business in Europe, we have a very healthy life science business across the board, which is in Europe, more resilient than the industrial business, which is further hit by the overall economic environment and the production is just diverting out of Europe, which is also an effect. I think just focusing on some Chinese materials or ingredients is a little bit shortcoming. And in that summary here, I would also like to point out that we have a very healthy client base across our portfolio from American or North American clients, European clients as well as Asian clients, which is also giving us some healthy stability. And by the way, one last comment is that within Asia, our industrial specialty chemical business was in Asia, even growing slightly faster than our Life Science business, which is underlying my statement before that there is some production is moving into Asia. Jon Cox: Just want to just keep going. Just on the technology business, that seemed to have a pretty soft second half. And I know maybe your exposure is somewhat limited. Taiwan is doing really well. There's a lot of stuff going into AI and CapEx and that sort of stuff. Are you not really exposed to that, and that's why you're not seeing much of a pickup in that technology business? Stefan Butz: We do have some exposure in our -- with our semiconductor business into those markets. not only in Taiwan, but also in Singapore and Malaysia, and that is where we still have seen some business growth but there was just a huge amount of uncertainty in the technology sector in 2025 and many investments and orders were delayed and canceled. Having said that, if we look in our pipeline of 2026, what we have signed up for 2026 and the business, which is moving from '25 into '26 because of the delays or the pushover plus some additional business coming out of the investments in data centers, even in data centers in Thailand is giving us the optimism that in our presentation here, we talk about a strong rebound of our technology business in '26. But '25 was, yes, was not a great year for them. Till Leisner: Thank you for the questions, Jon. Operator, is there any further question in the call? Operator: So far, there are no further questions from the phone. Till Leisner: And an opportunity here in Zurich. Gian-Marco has a few more questions. Gian Werro: Gian-Marco, Zürcher. I'll just take the opportunity to ask 2 more questions, if I may. First one is you mentioned for the Technology business, some promising business development pipeline for a better 2026. So can you elaborate a little bit on that, that would be interesting. And then your own Healthcare business, I assume according to your slides that you kept the EBIT margin there quite on a high level, over 20%. And if I assume also that this grew by around 5% or so, then, however, this would mean over CHF 2.5 million additional EBIT for Healthcare. Is that a fair assumption? And why then despite the strong performance that you had in Healthcare was the EBIT growth in Healthcare not stronger? Stefan Butz: Okay. Let me start with technology and then Ido can drill down into the EBIT margin analysis. In technology, as I was just saying before, there are 2 things or a few things happening. One is we have seen some projects, some investments, which were being delayed into 2026. So that is obviously giving us some good backlog for this year. Secondly, especially in scientific instrumentation, where many of our customers were a little bit cautious we have some good order intake for 2026. And then last but not least, as mentioned already in the question from Jon, there is significant investments also going into data centers where we supply, obviously, not the core business, but some equipment down to even generators and whatnot, where significant investments are going to happen in '26. And if you put those 3 together that is building the strong backlog and pipeline we have for '26, giving us the confidence that we say this business is bouncing back material from the, yes, disappointing results in 2025. Ido Wallach: On the own brands in Healthcare, first of all, we always welcome your questions, so you can do even more than 2. We are being a little bit victim of our success also in the other categories because we had a very good year in commercial services and full agency in healthcare that are growing proportionately as much as own brand. Hence, the overall mix did not change. In specific own brands, we had some difficulties. Myanmar had been traditionally a very strong market for us for own brands, and that is a very soft market at the moment for geopolitical reasons that I'm sure you're aware. So we have lost some business there. The rest of the own brand portfolio has performed quite well, but that's why it explains it didn't grow overall from the mix. The math that you made is correct. If we can grow that at the proportion that you mentioned, we will grow disproportionately our EBIT. And yes, those are fine jewels that we are constantly searching to buy and expand. And when we have the opportunity, we do that. We did it a couple of years ago with one of our acquisitions. And hopefully, we'll find something in 2026. Till Leisner: Thank you, Gian-Marco. Any more questions in the room? Seems not the case. Then from our side, big thank you for all of the participants today here in Zurich, but also in the conference call. Wishing you all a good rest of the day, and we are all available also here in Zurich for questions afterwards. There's a little bit of catering. So please stay with us, and we are happy to engage. Thank you so much.
Operator: Ladies and gentlemen, welcome to the Basilea Pharmaceutica Full Year Results 2025 Conference Call and Live Webcast. I am Mathilde, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to David Veitch, Chief Executive Officer. Please go ahead. David Veitch: Thank you. Hello. I'm David Veitch, CEO of Basilea, and I would like to welcome you to our conference call and webcast, presenting our financial results and key achievements for the full year 2025, as well as highlighting our priorities and future value drivers for 2026 and beyond. For further detailed information, please see the ad hoc announcement issued this morning and also our annual report. These documents are both available on our website at basilea.com. I would like to mention that this call contains forward-looking statements. Joining me on our call today are Adesh Kaul, our Chief Financial Officer; and Dr. Marc Engelhardt, our Chief Medical Officer. Looking back at 2025, this was a year of great execution across our business. Starting with our commercial portfolio. Cresemba continued its strong momentum, global in-market sales up 27% to USD 693 million for the 12 months to September 2025. Our second commercial brand, Zevtera was successfully launched in the U.S., and we expect to see increasing commercial uptake from the second quarter of 2026. We also delivered a robust financial performance. Royalty income grew by 15% year-on-year, reflecting continued strong demand from Cresemba. In addition, we received significant non-dilutive funding for our research and development projects. These contributed to total revenue of CHF 232 million, an 11% increase versus 2024. We continue to substantially reduce our convertible debt which now stands at CHF 76 million. At the same time, our net cash position has more than tripled. Overall, our 2025 financial results surpassed guidance and reflect a strong performance. Our financial position also enabled us to expand our pipeline by in-licensing the Phase III-ready asset ceftibuten-ledaborbactam. This is intended for the treatment of complicated urinary tract infections and opens a new market for Basilea. In parallel, we advanced other pipeline programs, including the initiation of a second Phase III study with fosmanogepix, our lead clinical stage product in invasive fungal infections. Our current pipeline and product portfolio combines multiple R&D programs with 2 commercial products, Cresemba and Zevtera. Since October 2023, we have significantly expanded our anti-infective portfolio with 4 new assets, 2 of which are now in our Phase III pipeline. Fosmanogepix is being evaluated in 2 parallel Phase III studies designed to support a rare treatment label covering both invasive yeast and invasive mold infections. The recently added antibiotic ceftibuten-ledaborbactam is now in preparation for Phase III, which is scheduled to start in early 2027. In the Phase II and earlier pipeline, the antifungal BAL2062 and the antibiotic BAL2420 are progressing forward to their next milestones. Overall, this represents a diversified and well-balanced pipeline built to deliver value consistently over time. I will now hand over to Adesh. Adesh Kaul: Thank you, David. I would like to start by highlighting that through our partner centered business model, we have truly global reach. 0.5 million patients in more than 75 countries have been treated with Cresemba and Zevtera to date. We partner with leading companies that manage commercialization and ensure broad patient access. While we focus on our core strength in developing clinically relevant and commercially sustainable assets. This low-risk partnership-based model minimizes operating costs and has the potential to provide attractive return on investment for our assets. Cresemba is an excellent example of how a global brand can be successfully built through partnerships with regional and local champions. Cresemba's global in-market sales in the 12-month period to the end of September 2025 amounted to USD 693 million, representing a 27% year-on-year increase. Growth remains strong in established markets, while China and Japan increasingly contribute as both markets have moved beyond the launch phase. As a result, Cresemba is now the global market leader by value. Let me turn to Zevtera. The U.S. market represents the most important commercial opportunity for Zevtera. The key milestone for Zevtera in 2025 was, therefore, the U.S. launched by our partner, Innoviva Specialty Therapeutics. For novel hospital antibiotics, the key focus in the initial 9 to 12 months of the launch phase is on establishing broad market access and on supporting positive clinical experience. Against this metric, our partner has made very solid progress since launching the drug in July 2025. Zevtera has achieved multiple important formulary wins gained inclusion in Medicaid and 340B pricing programs, received a new technology add-on payment designation to support affordability and obtained a J-code to support outpatient billing. There were also repeat orders from major hospitals, which is a positive indicator of customer experience and acceptance. We are, therefore, pleased with the progress in this initial launch phase. In 2025, we have been successful in securing new nondilutive funding for our R&D portfolio. All our clinical programs, as well as BAL2420 which is expected to enter clinical development this year are supported through existing contracts with BARDA and CARB-X, respectively. Under these agreements, we have been awarded more than USD 430 million, of which more than USD 100 million have already been committed. This nondilutive funding is attractive from the financial perspective. It preserves shareholder value by avoiding dilution, enhances return on investment by reducing our own R&D spend and lowers financial risk as it's not debt and does not require repayment. Moving now to key financial figures for 2025. Unless otherwise stated, all numbers from here on are in Swiss francs. 2025 was another year of strong financial performance for Basilea. We surpassed our financial guidance and delivered our fourth consecutive year of net profit and positive operating cash flow. Cresemba and Zevtera-related revenue totaled CHF 194.4 million. Within this, royalty income grew by 15.4% year-on-year to CHF 111.6 million, driven by strong market demand for Cresemba. Milestone and upfront payments totaled CHF 32 million, broadly in line with the average annual level seen in recent years. Other revenues rose to CHF 38 million, bringing total revenue to CHF 232.4 million, up 11.4% year-on-year. Cost of products sold was CHF 39.3 million, and operating expenses were CHF 141.5 million, reflecting increased investments in R&D. As a result, we achieved an operating profit of CHF 51.5 million and a net profit of CHF 40.2 million. Finally, cash and cash equivalents and restricted cash increased by 30% to CHF 162.3 million. After deducting outstanding convertible bonds, this results in a net cash position of CHF 86.9 million at year-end, tripling the net cash at the end of 2024. Cash flows from operating activities remained strong at CHF 62.1 million. We did not only absorb increasing R&D investments as we progress our existing portfolio, but also the costs associated with the in-licensing of ceftibuten-ledaborbactam. With that, the $12 million upfront and milestone payments related to this transaction, our operating cash flow would have remained at the same level as in 2024. Alongside funding the expansion and progression of our pipeline, we further strengthened our balance sheet. Since January 2022, we have reduced our debt by CHF 145 million in fully nondilutive way, including CHF 21 million in the reporting period, bringing our outstanding convertible debt down to CHF 76 million. We expect 2026 to be another strong year from a financial perspective. We expect continued growth in Cresemba and Zevtera-related revenue to around CHF 200 million, driving an increase in total revenue of approximately 10%. Research and development expenses are expected to increase by approximately 20%, reflecting our investments into our 2 ongoing fosmanogepix Phase III studies the start of a new Phase I study with BAL2420 as well as Phase III preparations for ceftibuten-ledaborbactam. The strong commercial performance, combined with non-dilutive funding is expected to offset our increased R&D investments. As a result, we anticipate a disproportional increase in operating profit of around 20%. To fully understand the strength of our commercial business, it is important to have a closer look at our revenue mix, which is expected to shift towards higher-margin revenue streams. Royalties and milestones are expected to increase, while product revenue is expected to decrease due to the previously announced reduction in product supply to Pfizer goes on as both partners transition to manufacturing most of our own supply. The lower product revenue is expected to result in a decrease in cost of products sold. As a result, we expect to increase the cash contribution from our commercial business from CHF 155 million in 2025 to CHF 170 million in 2026. In the next few minutes, I would like to look beyond 2026. When looking at the anticipated impact of the loss of exclusivity for Cresemba and Basilea's revenues, one needs to take into consideration the geographic distribution of our revenues and the timing of the impact from generics. Our revenue doesn't perfectly align with the geographic distribution of in-market sales. In 2025, the U.S. accounted for almost 50% of in-market sales, while only 35% of our Cresemba revenues were based on U.S. sales. This means that 65% of our revenues were related to Cresemba sales outside of the U.S. In the U.S., we expect Cresemba to continue growing through a significant portion of 2027 with the impact from generics anticipated from Q4 2027 onwards. In Europe, we expect growth to continue throughout 2027 and through the first half of 2028 with generic impact beginning in the second half of 2028. As a result, the full year impact of Cresemba's loss of exclusivity in both the U.S. and Europe on Basilea's revenues is expected to become fully visible only in 2029. Importantly, revenues from Japan and other markets are expected to keep on growing beyond 2028. We, therefore, expect Cresemba to keep on making significant cash contributions well beyond the initial loss of exclusivity. It is, however, clear that we need to look beyond Cresemba to ensure long-term growth for Basilea. As David mentioned earlier, our portfolio is now well balanced with commercial products generating value today while our Phase III pipeline is well positioned to deliver the next wave of product launches and midterm growth. Assuming successful clinical outcomes, fosmanogepix is expected to be our next major launch, it could enter the market in early 2029. Ceftibuten-ledaborbactam is expected to follow around a year later, further expanding our commercial portfolio as our fourth product. In the meantime, we expect Zevtera to gain further traction, especially in the U.S. and to contribute to Basilea's growth until its loss of exclusivity in the U.S. in 2034. We are, therefore, well positioned for sustained growth for years to come. Let me conclude by bringing all this together and highlighting how well Basilea is positioned for sustainable growth under our agenda 2030. As of December 31, 2025, Basilea held CHF 162 million in cash, cash equivalents and restricted cash. Over the next 5 years, we expect to generate approximately CHF 600 million in cumulative cash flow from Cresemba and Zevtera, supported by strong market demand and continued commercial execution. Furthermore, approximately USD 330 million of potential additional nondilutive R&D funding remains available on the Basilea's existing border agreements. These funds may be committed in future tranches to support the development of fosmanogepix, BAL2062 and ceftibuten-ledaborbactam. Taken together, this provides Basilea with significant financial strength and flexibility to execute on 3 key priorities. First, to bring our next growth drivers, fosmanogepix and ceftibuten-ledaborbactam successfully to the market; second, to continue advancing our earlier-stage pipeline to secure long-term growth; and third, to seize external growth opportunities by acquiring or in-licensing new high-potential assets. On top of that, there are several potential upsides not reflected in these figures. These include a later-than-anticipated entry of Cresemba generics in the U.S. and Europe, new nondilutive R&D funding agreements and first revenues from fosmanogepix and ceftibuten-ledaborbactam. Our financial strength allows us to focus on strong execution to ensure sustainable growth and long-term value creation for our shareholders. I will now hand over to Marc for the portfolio update. Marc Engelhardt: Thank you, Adesh. Today, we have 2 Phase III programs, fosmanogepix and ceftibuten-ledaborbactam, which we expect to read out in 2028 and 2029, as mentioned by Adesh. Fosmanogepix is currently being evaluated in 2 global Phase III studies, fast IC and forward IM, both are expected to read out in 2028 with a subsequent regulatory process. The Phase III program is supported by compelling real-world evidence, which provides important insights into the potential benefits of fosmanogepix and which I will present shortly in more detail. Ceftibuten-ledaborbactam, which we in-licensed in August 2025 is expected to enter Phase III in early 2027. The readout of this program and regulatory process is expected in 2029. This program benefits from a well-established Phase III design, aligned with published FDA guidance for complicated urinary duct infections, which provides a well-defined clinical development path for this program. Based on our knowledge of the antifungal and antibacterial space, we estimate peak sales of about USD 1 billion for fosmanogepix and about USD 500 million for ceftibuten-ledaborbactam. This means that together, our current Phase III pipeline has potential double to days in market sales with Cresemba and Zevtera, which are approximately USD 750 million. In the next slides, I will explain why these drug candidates addresses significant unmet medical needs, we believe translate into substantial commercial potential. Fosmanogepix is the product of manogepix a first-in-class antifungal with a novel mechanism of action that reduces pathogenicity and causes fungal cell death. It demonstrates broad-spectrum activity against both yeasts and molds, including multidrug-resistant yeast strains such as Candida auris or Candida glabrata and against difficult-to-treat molds like aspergillosis and fusariosis. These pathogens are challenging to treat and represent a growing global health concern. Fosmanogepix has wide tissue distribution, including difficult-to-reach sites such as the central nervous system and is available in both IV and oral formulations, which is an important advantage for clinical factors. Fosmanogepix has received QIDP, Fast Track and Orphan Drug Designations from the FDA, enabling accelerated review and extending U.S. market exclusivity for a longer commercial runway. Beyond the ongoing clinical Phase III program in invasive candidiasis and invasive mold infections, fosmanogepix is available through a global expanded access program for patients with severe invasive fungal infections, who have no other treatment options. As you can see on the graph, since the program started in 2020, when fosmanogepix was still in Phase II development, there has been extraordinary and unprecedented global demand for fosmanogepix for a broad range of resistant or refractory mold and yeast infections. To date, more than 430 patients from 20 countries have been treated with fosmanogepix through this program, particularly notable example is the 2023 fusarium meningitis outbreak at the U.S. Mexican border where fosmanogepix, at that time, still in Phase II development was recommended as therapy by the U.S. Centers for Disease Control and Prevention. Adding fosmanogepix the standard antifungal treatment regimen in these patients resulted in a remarkable reduction in the in-hospital mortality and enabled managing patients in outpatient setting with oral fosmanogepix until resolution of the infection. These real-world experiences underscore the life-saving potential of fosmanogepix and reinforce our confidence in the future success of this drug candidate. Turning now to ceftibuten-ledaborbactam. Ceftibuten is an established beta-lactam antibiotic. However, various material strains, especially in the order of gram-negative bacteria called Enterobacterales, have developed resistance to it. Ledaborbactam novel beta-lactamase inhibitor when added to ceftibuten enables restoration of the activity of ceftibuten against these resistant strains, resulting in potent activity and bacterial killing. Importantly, this combination is developed as an oral option for infections that today often require intravenous therapy. This can avoid hospitalization or enable earlier discharge from the hospital both clinically and economically meaningful benefits. Ceftibuten-ledaborbactam is active against Enterobacterales including multidrug-resistance strains, such as extended spectrum beta-lactamase or ESBL producers in carbapenem-resistant Enterobacterales, pathogens that have become increasingly resistant to current therapies and present significant treatment challenges. Complicated urinary tract infections or cUTIs are infections that extend beyond the bladder accompanied by local and systemic symptoms. They are among the most common bacterial infections in both hospital and cumulative settings and are associated with considerable morbidity and health care resource utilization. Gram-negative bacteria from the Enterobacterales, particularly uropathogenic E. coli are leading cause of cUTI, a significant proportion of multidrug resistant and this resistant profile is effectively addressed by ceftibuten-ledaborbactam. Ceftibuten-ledaborbactam is being developed specifically as an oral therapy for cUTI caused by Enterobacterales. It addresses a clear medical need and recent launches of beta-lactam antibiotics in the gram-negative space for strong market acceptance for these new therapies. For example, the intravenous antibiotic Avycaz has reached global sales of approximately USD 680 million to date. This supports the significant commercial opportunity for ceftibuten-ledaborbactam as an oral cUTI treatment that complements IV options. The program holds QIDP and Fast Track designations providing accelerated regulatory review and extended market exclusivity in the U.S. With this, I'll hand it back to David. David Veitch: Okay. Thank you, Marc. During the last year, we've made significant progress and delivered on every goal we set for 2025. A key commercial milestone was the successful U.S. launch of Zevtera, bringing the brand to its highest value market. In parallel, Cresemba continues to perform extremely well with strong and growing in market demand translating into consistently increasing revenues. On the R&D side, we advanced our portfolio across both clinical and preclinical programs. This includes the initiation of the second Phase III study with fosmanogepix for invasive mold infections and new collaborations that bring new technologies or approaches into preclinical development. We also strengthened our Phase III pipeline by in-licensing the oral antibiotic ceftibuten-ledaborbactam, which is scheduled to enter Phase III in early 2027. In parallel, we secured USD 70 million in nondilutive funding to support our R&D activities during the year. Taken together, these achievements reflect disciplined and focused execution they reinforce our strategy of creating a continuous stream of future product launches setting the stage for substantial value growth in the years ahead. Looking ahead, our priority remains clear, delivering sustainable growth and long-term value. We aim to further increase revenue from Cresemba and Zevtera, leveraging Cresemba's strong global momentum and Zevtera was expanding presence in the U.S. Our lead clinical program, fosmanogepix will continue progressing through Phase III development, while preparations are underway for the Phase III program of ceftibuten-ledaborbactam. We will also advance our Phase II and earlier stage pipeline programs is moving towards their next milestones. In parallel, we will actively pursue additional in-licensing and acquisition opportunities to further strengthen and diversify our portfolio. And as always, we will look to secure additional nondilutive funding building on the successful collaborations we have established with BARDA and CARB-X. Let me close with 3 messages. First, Basilea is financially strong. Our cash position and expected future cash flows provide a solid foundation for sustained growth. Second, our Phase III portfolio is a major growth driver. Fosmanogepix and ceftibuten-ledaborbactam have the potential to double today's in-market sales level, creating significant value in the future. Third, we have the ability and the opportunity to do more, through targeted acquisition and in-licensing of additional high-quality assets, we can accelerate growth well beyond the existing pipeline. Together, these elements reflect our focus on innovation, execution and delivering value to our shareholders, not just today but consistently into the future. Thank you for your attention, and we'll now open the line to any of your questions. Operator: [Operator Instructions] The first question comes from the line of Brian White from Calvine Partners. Brian White: A very quick one, firstly, on Cresemba and loss of exclusivity. Is there any reason not to expect generics in the U.S.? I know that's certainly what you've been highlighting in terms of the September date. I just wonder if there's anything ongoing in terms of litigation, which might change that, and that you could share with us? And then just separately on the in-licensing activity, a lot of which has been in the antibacterial field more recently. Is that because you see more programs there, which are available for licensing or is it because fosmanogepix really answers most of the questions that you have in the antifungal field? David Veitch: Yes. Thanks, Brian. I'll take the first one in terms of the timings that Adesh went through in terms of the loss of exclusivity versus the appearance of generics. I think the easiest way -- well, first of all, in terms of technically, for example, in the U.S., which obviously is the first market where we believe that generics will enter. I mean, in terms of ongoing -- you mentioned sort of ongoing litigation and things. I mean, obviously, we're not the MAH in the U.S. So that would be between Astellas and other parties. But what we can say is that -- and I guess is what's behind your question, understanding how quickly sort of genomics might appear or the U.S. business might decline. And I think what I can say is that we're aware, obviously, we get -- whilst we're not actively evolved in any potential litigations, what we could say is that a generic will not be sort of approved until the LOE date and as to how many they would be, I mean, we're not talking more than a handful that we're aware of, but that doesn't mean there won't be any, but it's not like 10 or 20 generics. It's clearly a handful where it could appear whether or not they do appear, it depends on if they're approved and depends on the timing of that approval and then whether they can then launch in the U.S. market from -- in that Q4 2027 period. So that's probably about all I can say really in terms of that situation. And just to reinforce the point about Europe, it's sort of subtly but importantly different, which is that with the Orphan Drug Designations our understanding and our partners, Pfizer's understanding is that the generics cannot file until the end of LOE, which is why there's this sort of 9 month -- approximately a 9-month gap between the LOE in Europe and then the generics appearing in the second half of 2028, just to make that point clear. On to the subject of the deals -- number of deals and why have we recently been doing preclinical deals versus clinical. Adesh, do you want to take that? Adesh Kaul: So thanks, Brian, for your question. So just as a reminder, there are basically 2 things that drive transactions. One is medical needs, clinical benefit that we're seeing and, therefore, differentiated positioning that would allow for commercial success. And secondly, it's the number of assets being available because you can desire a lot, but are there any assets available. And I think if you take these 2 things together, probably the answer to the first question is we still see actually medical need and opportunity for providing clinical benefit in the antifungal space post-fosmanogepix, while we believe that fosmanogepix is going to be an important drug, if it's successfully developed and delivers on their promises, there is still room for more drugs there, which basically is then the point that there are simply not as many assets available on the antifungal space for partnering that would tick all the boxes as compared to the bacteria, and that's really driving more or less the deal flow. Operator: The next question comes from the line of Laurent Flamme from Zürcher Kantonalbank. Laurent Flamme: Two questions. The first question relates to the CHF 600 million cumulative cash flow from Cresemba and Zevtera of '26-2030. From the guidance for '26 with CHF 200 million revenue to those 2 assets and CHF 170 million cash flow. I would infer that the CHF 600 million cumulative cash flow is based on the gross profit, but a clarification if you will be welcome. The second question is about the commercial milestones related to Cresemba across '26, 2030. What can you tell us to help us refine our modeling particularly for the 2 key geographies, U.S., Europe. And would you expect notably any milestones in '29-2030? David Veitch: Yes. Thanks, Laurent. Adesh, why don't you start off with a clarification of the CHF 600 million and the CHF 170 million this year. Adesh Kaul: Thank you, Laurent, for your question. And you're exactly spot on. So in essence, the way that you have to look at it is we are looking at product and contract revenue, which is basically CHF 200 million to take this year's number. And we deduct from that the cost of products sold, which is basically expected to be about CHF 30 million this year, which delivers CHF 170 million in cash contribution from Cresemba and Zevtera. So you're exactly right, that sort of a gross profit even if it's under U.S. GAAP, not sort of gross profit per se. And then I think your second question was about milestones, '26 to 2030. Two points on that. One is, just as a reminder, we have been fairly consistent with milestone payments across our partners in the recent years within a certain range. So we have always sort of been between CHF 30 million to CHF 40 million. So on average, somewhere in the CHF 34 million, CHF 35 million range over the last few years. What we expect over the coming years is at least for the next 4 years, I would say, because the visibility, of course, gets a little bit less pronounced going forward is we would remain in that range. So if you take '26, '27, '28, '29 on average, that would probably be in the same order of magnitude, when exactly the milestones will happen remains to be seen. Because as a reminder, especially the milestones with Pfizer are on a cumulative basis. And that means, if they don't happen, for instance, in December, they may be triggered in January. And here again, the further out we go, the more the question is where exactly do they fall period-wise. But I think the important point is from a value perspective, to factor in about CHF 30 million to CHF 40 million on average over the next 4 years. David Veitch: Does that answer your question, Laurent? Laurent Flamme: Yes. That's perfect. And -- maybe a follow-up question on the taxation rate. I think in the recent past, you mentioned that we could factor a 12% tax rate going forward. From my calculation, I assume that Basilea would have the first cash outlays related to corporate tax in '27 after full consumption of the loss tax loss carry forwards. Would you agree with that? And would you agree with the 12% rate for any cash outlays in the future? Adesh Kaul: So yes, thank you for the follow-up question. Indeed, we have about CHF 11 million in deferred tax assets remaining. And if you do -- if you follow basically our guidance for '26, you would come to the conclusion that in 2027, that would be more or less like you start without the without expiring. On a full year basis, I would say probably that still means that we wouldn't have a cash outflow. We equivalent of 12% because partially, we would still be able to benefit from tax loss going forward in '27, but underlying also your assumption of 12%, maybe slightly on the higher end of expectations, but this varies probably anywhere between 11% and 12% is a reasonable assumption. Operator: We now have a question from the line of Jyoti Prakash from Edison Group. Jyoti Prakash: Congratulations on the results. My first question relates to Zevtera and we see that it's been securing some reinvestment in the U.S. Just want to understand the early cadence in terms of ordering and adoption is in line with the internal launch benchmarks? David Veitch: Jyoti, actually, it wasn't easiest to hear your question, but I think you were talking about the sort of uptake and the cadence of Zevtera in the U.S. And -- but basically yes, it's exactly in line with -- as Adesh said, we get -- obviously, we're in regular communication, obviously, with Innoviva Specialty Therapeutics, our partner in the U.S. we get their KPI reports on -- and that's what Adesh was sort of reporting on in terms of the market access achievements. And then that's why what we understand from our partner is that we should start to see a real movement in net sales from the Q2 onwards going forward. So actually, that's always been sort of like our expectation. And so we've been hitting the targets in terms of market access. And then as we want to see, and our partner wants to see, then we expect the net sales to start really increasing from Q2 onwards. Jyoti Prakash: Okay. And then just on ceftibuten-ledaborbactam moving well towards Phase III. So I just wanted to understand if there is more clarity on the trial design and plan? And if 2 trials will be required and can you provide some color on that? David Veitch: Okay. So I think, Marc, it's about the trials that will be required for ceftibuten-ledaborbactam for the Phase III program. Marc Engelhardt: Yes, Jyoti. So the Phase III program will be performed in complicated urinary tract infections and will be aligned with current health authority recommendations, as I said, there are guidelines to follow that are clear. The program is going to be discussed with FDA and EMA in the next months. And our plan is to conduct at least 100 study with approximately 1,500 patients comparing ceftibuten-ledaborbactam versus an IV carbapenem, and we will discuss with the regulators whether a second study may be required. So that's subject to the discussions with the regulators. Operator: [Operator Instructions] The next question comes from the line of Ram Selvaraju from H.C. Wainwright. David Veitch: Are you there, Ram? Raghuram Selvaraju: Can you hear me? David Veitch: Yes, we can now. Raghuram Selvaraju: Sorry about that. Okay. So yes, so I wanted to ask, first of all, if you could comment on 2 aspects of the commercial side. Firstly, what your current expectations are regarding peak annual sales of Zevtera in the U.S. specifically? And with respect to Cresemba, how large do you think the market opportunity is for this drug in Japan? And then secondly, on the clinical development front, I was wondering if you could provide us with some additional details on the timing to reach full enrollment in the fosmanogepix Phase III program and when you expect to reach full enrollment in the ceftibuten-ledaborbactam Phase III program? David Veitch: Okay. I mean, in terms of Japan, let me take the middle question actually for myself, which is the Japan. I mean, actually, the IQVIA sales, so the CHF 693 million IQVIA sales report from the in-market demand sales of Cresemba for the 12 months to September 2025. And if my memory says me correctly about CHF 36 million already in like the third year of launch of the product are already Japan. So when we talk about the growth rate globally being 27% if my memory serve me correctly, Japan is growing at about 220%. So that's why we're quite excited about Japan. China is growing at about 56% of that growth rate versus the 27% globally. So in terms of the more mature markets, obviously, U.S. and Europe, they're still growing healthy double digit, but they're not at the rates of Japan and China. So we are -- so that gives you a sort of feel -- in terms of how big it can be. I mean it's very difficult to say because actually, it's probably gone past out an early expectations to where we thought it would be. So we're not quite sure where it will end up. But what we do know is it's growing really fast, and it's already above expectations of ours and our partners. So -- and it's got a long runway. It's got exclusivity to the early 2030s. So this can become really quite big in Jan, which is really quite exciting for us. In terms of the peak year sales for Zevtera in the U.S. Adesh? Adesh Kaul: So here we'll have to resort to what we have been seeing in the past and due to analyst reports because to some degree, I think we'll have to say that Innoviva Specialty Therapeutics has to give some indication about what they believe the sales is going to be. analysts have it at around CHF 200 million to CHF 300 million in the U.S., which is not entirely inconsistent, but other drugs have been doing in the U.S. David Veitch: And then in terms of your fosmanogepix accrual and with the patients the crude into the Phase III studies, maybe Marc, you take. Marc Engelhardt: Yes. Our projection is that we will complete the enrollment of the fosmanogepix Phase III studies in the second half of 2027. I have a readout in early 2028, and ceftibuten-ledaborbactam is approximately 9 to 12 months after this, so just add approximately year to it, and that will be the time line for ceftibuten-ledaborbactam. Operator: [Operator Instructions] We have a follow-up question from the line of Laurent Flamme from Zürcher Kantonalbank. Laurent Flamme: Yes. The question relates to BAL2062. When do you expect the -- to start the Phase II enrollment? And what kind of potential time line for the results of this Phase II? Also considering that BAL2062 is targeting as all resistant invasive aspergillosis, that would be interesting to hear from you what kind of level of resistance you see in invasive aspergillosis currently with Cresemba in the key geographies. If you have any data on that? And what kind of perspective would you have for our future Phase III protocol. So would you select patients with as a resistant invasive aspergillosis as with a view for a second line indication? Or would you position this asset more as a first-line asset? David Veitch: Thanks, Laurent. I mean just from a sort of big picture point of view, then Marc can come back with the detail to your question. But obviously, when we acquired or in-licensed ceftibuten-ledaborbactam last year, clearly, with one fosmanogepix is already in Phase III, ceftibuten-ledaborbactam we're progressing into preparing for Phase III. So our priorities as a company and we believe it's in the interest to create the sort of more midterm, long-term value is to push the Phase III assets as quickly as possible to the market to replace Cresemba and Zevtera. So clearly, that's been our priority for the last -- definitely since we had the 2 compounds. So actually, in terms of -- for BAL2062, it's also important, as we've said, to have a pipeline behind our late-stage Phase III compounds. And that in terms of timing would be the product immediately after the 2 Phase III assets. We have an ambition, and we've stated this in the press release that we are planning to -- we are finalizing -- we've been doing preclinical profiling over the last year, and we're now armed with that information. We are planning to go to the regulators this year to finalize the Phase II/III program. In terms of what it could look like timings and azole resistance or not first line. Maybe Marc, you can address the detail to Laurent's question. Marc Engelhardt: So I think from a vision and goal for the development of BAL2062, our current approach is to develop it for a broader indication of invasive aspergillosis so to not solely focus this on an azole resistant population. And this is based on the potent efficacy in vivo, the good safety profile in the clinical Phase I study and the lack of [ drug ] actions that we assume. So this would be a Phase III non-inferiority study larger study to get this into first line. Of course, due to the novel mechanism of action and the coverage of azole resistance aspergillosis, it will be used for resistant pathogens too. The occurrence of azole resistance varies largely between different regions. So in Europe, in Belgium and the Netherlands, there are regions where up to 30% of aspergillosis -- clinical aspergillosis isolates are azole resistant, the latest numbers from the U.S. go up to 26%. And we believe this will be an increasing problem and then will constitute a portion of the use of BAL2062, but our current development strategy is really to develop it for first-line due to the efficacy and the safety profile. Operator: [Operator Instructions] We have a follow-up question from the line of Laurent Flamme from Zürcher Kantonalbank. Laurent Flamme: And maybe my last question relates to [indiscernible] we expect that Basilea would look for new agreement with BARDA for R&D funding of these assets or would be September '24 OTA envelope already signed with BARDA who suffice beyond the financing of fosmanogepix and BAL2062? David Veitch: Yes. Thanks, Laurent. I think I got the question. So BAL2420, the LptA-Inhibitor, would we seek BARDA funding for that Phase I program. I think the short answer is actually BARDA tends to fund after Phase I. So Phase II, III studies rather than Phase I. But actually, CARB-X, which we've obviously currently got funding from for the preclinical work, they do fund Phase I work. So actually, we would seek to try and get funding from CARB-X for the Phase I study, which we're planning to start in the first half of this year. So yes -- that's the short answer. We are seeking funding. The technical thing won't be BARDA. It would be CARB-X if it was agreed that they would give us funding for that program, and we will seek that out. In terms of down the line after Phase I, if it's successful through Phase I and we push it into Phase II, the agreement, this OTA agreement, and I think you were implying this, and you're correct, the OTA agreement is such an agreement whereby product can go in and go out of this funding sort of package, so to speak. So actually, depending on the progress of the existing assets and new assets coming in that could fit that in agreement with BARDA, it could potentially fit into the OTA. But that would be -- I can't say that today because it will be a 2-way discussion with BARDA based on the funding required, the progress of the product and the progress of the other portfolio compounds in the OTA. So that's, in essence, the answer. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to David Veitch for any closing remarks. David Veitch: Well, thank you, everyone. Thank you for joining us today in our webcast and for your continued interest in Basilea. And yes, thank you, enjoy the rest of your day. Thank you very much. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the Basilea Pharmaceutica full year results 2025 conference call. You may now disconnect your lines. Goodbye.
Unknown Executive: Good morning, everyone. Thank you for joining us today for those who are here in person and for those who are connected online. We are ready to start our full year results presentation. I will hand over to Ivan, then Mauricio and after the presentation, we will move into Q&A. Ivan? Iván Herrera: [Audio Gap] fully integrated in how we run and grow our business. As global demand for copper strengthens, we were able to look forward to 2026 with a fully financed growth pipeline in construction, having passed peak group level CapEx and a clear pathway to deliver long-term value for all our stakeholders. So I will start as we normally do, sharing with you our safety results. We continue to lead with a safety-first approach delivering another fatality-free year and maintaining key metrics ahead of industry benchmarks. A specific focus for us last year was on what we call high potential incidents as we look to continually develop our understanding of safety-related risks. In 2025, we recorded our lowest number of high potential incidents, reflecting the strength of our culture and our commitment to safe, reliable operations. And across our construction program of major projects, we also achieved safety results in line with the group level outcomes despite now having 18,000 temporary contractors present across our major projects. So I would say, in balance, a very good safety result, which is our #1 priority. And we've been fatality-free now for over 4 years and expect to continue in that path. Now let's talk about copper. Our investment case remains firmly rooted in our position as a leading pure-play copper producer. And we know for some time, and this is likely to continue, copper will remain the metal of preference of choice. We have attractive attributes. We operate in an established jurisdiction, and I will talk more about what that means and what are the advantages of having a very well-known jurisdiction for mining with margins towards the top end of our pure-play peer group, and we have a clear pathway for 30% growth through a pipeline that is in construction today. We have built solid foundations from our strong balance sheet and dividend policy through the resilience of our operating model and leadership on sustainability, all of which are underpinned by our purpose, which is developing mining for a better future. Reflecting now on 2025 more specifically, we delivered another year of strong financial performance in an uncertain world with higher sales and disciplined cost control, leading to wider margins and record EBITDA. In parallel, we advanced the delivery of our growth program and our sustainability priorities continue to be fully embedded within our strategy. And finally, we have maintained a disciplined approach to capital allocation with a final dividend recommended in line with our policy, which has been applied consistently and without interruption for over a decade with a total dividend for 2025, representing 50% of earnings, reflecting our commitment to delivering sustainable returns. We have a strong platform to deliver growth. Our large-scale and high-quality assets enable us to benefit from low net cash costs driven by strong cost control and byproduct credits. Through this, we can remain competitive through the cycle while also strengthening margins as new projects come online. As shown on the right, our 2 large-scale mining districts continue to provide significant long-term optionality with substantial mineral resources endowed at both Los Pelambres and Centinela, which supports the potential for further growth for the long term. The construction projects underway, which will deliver the 30% production increase remain on time and on budget. Let me say a few words about Chile. Chile remains one of the most important copper jurisdictions, holding the #1 spot for global supply for many years. And during this time, the country has developed a wealth of experience and talent associated with holding this position for so long. Looking back at 2025, the country approved modernizing reforms that are aimed at reducing permitting time line, which will continue to strengthen the overall competitiveness of Chile's mining sector. Furthermore, we're also seeing ongoing discussions and measures to improve the investment environment, including proposals to reduce the corporate tax rate for businesses. With a new 4-year presidential term beginning next month, the policy focus is on promoting growth including regulatory adjustments that could be implemented at the executive level, which is a further demonstration as to why Chile is a leading destination for copper investment. Sustainability. We operate as a responsible copper producer. This has been an attribute that we've been building over the years with sustainability fully integrated into our strategy, shaping how we operate, invest and grow the business over the long term. The starting point of sustainability, as we discussed earlier, is our continuing safety performance, which was, again, very solid and robust in 2025. We also made strong progress in pivoting our water use, another very sensitive input for mining in Chile, expanding the Los Pelambres desalination plant and increasing the share of seawater and recirculating water across our sites. As we further strengthen our workforce development with female representation reaching 30%, we continue to recruit and develop the best talent in the mining industry. We're building on a multiyear process of successful community engagement at Zaldivar with approval of the EIA in 2025 to extend the life of the mine. And this is a demonstration of our business on how business can work alongside communities over the long term. So the copper market fundamentals continue to strengthen. As shown here, demand is forecast to grow by around 2% per year through 2035, driven by a need to improve energy security, further electrification, digitalization and the accelerating shift to adopt modern technologies. At the same time, we know that supply remains constrained with global output limited by rate decline, longer project lead times, rising capital requirements and elevated global disruption rates. Taken together, these factors point to a tightening market over the medium term. Against this backdrop, Antofagasta is differentiated by having fully funded projects under construction with projects in multiple stages of development as well as a longer-term pipeline of options, and we'll revisit this later in the presentation. Thank you. With that as an introduction, I'd like to hand over to Mauricio, who will review our specific financial performance for 2025 that we have released today. Mauricio? Mauricio Ortiz: Thank you, Ivan. Well, good morning to everyone, and thank you for joining us today. Today, we have announced record financial performance for 2025, which is a demonstration of the strong foundations of our business. Our consistent financial performance give us flexibility and resilience in our ability to continue allocating capital in a manner consistent with our purpose, which is maximize long-term value. Turning to our growth program illustrated here by Centinela ongoing expansion. Our financial performance enable us to continue with confidence. The growth program is fully funded and will sustain the long-term competitiveness of our operations. And importantly, our performance today protects our future ability to create sustainable value for all our stakeholders. This is supported by 2 main factors: first, a balanced approach to both dividends and funding future growth; and second, maintaining the financial strength to grow in a way that is both responsible and return focused. In 2025, we delivered a strong growth with revenue increasing by 30% to $8.6 billion, supported by higher sales volume and a favorable market environment. Through disciplined cost control, this revenue growth translated into a material uplift in profitability. EBITDA rose 52% to a record of $5.2 billion, and our EBITDA margins expanded to 60%, keeping us toward the top end of our copper focused peer group. And importantly, our underlying earnings strength in 2025 translated into a robust operating cash flow up by -- up 30% to $4.3 billion. This enabled us to, first, maintain our balance sheet strength; second, continue financing our business from a position of confidence; and third, support our shareholder returns. In parallel, we kept our net debt-to-EBITDA ratio broadly flat year-on-year, even as we move through peak Group-level CapEx in 2025 for our current phase of growth projects. Moving to our operations. Copper production was in line year-on-year with grades and recoveries compensating for lower throughputs. As a mining company, cost discipline is key as a global copper production faced increasing technical challenges and cost inflation, in 2025, we delivered pre-credit costs in line year-on-year and 5-year low for net cost with our largest operation, Los Pelambres and Centinela net cost at $0.82 and $0.75 per pound, respectively. As shown in the waterfall chart, this cost performance was driven by a combination of consistent operations, stronger byproduct credits and cost control initiatives, such as our competitiveness program, which once again achieved its annual target with $0.08 per pound benefit this year. More broadly, it's also worth highlighting that we were once again able to balance the rising external cost pressures with a decrease in controllable costs. Taken together, these results demonstrate the resilience of our operating model, which helps us to absorb variability and the strength of our margins give us the flexibility to continue supporting our ongoing growth program. Our earnings performance in 2025 reflects the quality of our portfolio with EBITDA increasing by 52% to a record level, supported by a combination of higher realized pricing for copper and gold, improved sales volume and the flow-through of our disciplined cost control. As you can see in the chart, the main factors here were pricing and volumes with other factors contributing relatively little variation year-on-year. Finally, as I mentioned before, with an EBITDA margin of 60%, we remain at the very top end of our peer group, which has been the case for a number of years now. Our balance sheet remains a core strength of the business, supported by strong cash generation and disciplined capital deployment through the year, allowing us to fund major construction activity while maintaining leverage broadly in line year-on-year. Alongside the strong performance of our subsidiaries, delivering more than $5 billion of EBITDA and the progress in our growth programs, there were tricky factors. First, working capital increased as we flagged in our Q4 announcement in January, reflecting higher shipment in transit and higher pricing at the year-end. Second, driven by higher profit before tax, tax payments were higher, resulting in a full year effective tax rate of 36%. And dividend paid during the year amounted to $760 million, up from the $557 million in 2024. Taken together, these factors underpin our conservative and stable net debt to EBITDA position despite a significant investment and which helps us to retain our investment-grade credit rating. Finally, let's recap our capital allocation framework and its central role in all our financial decisions. Our capital allocation framework is straightforward and consistent and has served us well for a number of years. Our consistency is made possible through our disciplined capital approach, and it's helped us to preserve our investment credit rating, support our growth plans and more importantly, create long-term value for all stakeholders. If approved, we will double our -- if approved, we will double our total dividends for the year to $0.646 per share with more than $3 billion paid to shareholders in the past 5 years, which is a reflection of the strength of our business and our ability to create long-term value and deliver in the short term. And with rooms, cash and fully funded growth plans, we can invest with confidence and return excess cash when conditions allow. Thank you. I will now hand it over to Ivan to take us through for the rest of the presentation. Iván Herrera: Thank you. So I'm going to turn now to our growth pipeline. As we look at our growth agenda, we remain focused on building scale and resilience at our mining districts with a portfolio of brownfield and greenfield projects that can support long-term copper production. Our strategy is underpinned by a fully financed multiyear construction program. The Centinela concentrator -- second concentrator project and Los Pelambres growth enabling projects are designed to lift throughput, enhance operating flexibility and support the Group's next phase of growth. Both projects remain on time and on budget. Beyond these 2 flagship projects, we have a pipeline of near-term debottlenecking alternatives, further brownfield growth and resource optimization and longer-dated growth options, all of which are in highly prospective regions. You will recall this graph from -- is one that we used at the site visit. So it provides a multiyear outlook. And the only update that we've included this time is the inclusion of our 2025 actual results. So Los Pelambres is the first component of our near-term growth sequence, which is shown here. We are expecting full year grades to rise to approximately 0.6% copper, which is a level more in line to historical grades at Los Pelambres, and this follows a 2-year period of lower grades in '24 and '25, and this growth is simply a feature of the mine plan and therefore, requires no capital investment. On the other hand, and in addition, at Centinela, the second concentrator remains the largest component of our near-term growth, providing around 2/3 of the expected increase with construction set to finish in 2027, ramp-up in 2028 and '29 to, therefore, be our first full year of production at full capacity. Furthermore, it should also be noted that this project will add growth both in respect of volumes and margins since it will double Centinela's output of both gold and molybdenum, reinforcing the quality of Centinela's growth. Here, now some pictures of the second concentrator, which continues to advance on track and on budget, and we are pleased to welcome a few of you to see it in person in November. Recent work has focused on key mechanical installations, including major components for the primary crusher as can be seen in one of the pictures and further work installing overland conveyors. We've also made progress in the concentrator with the installation of ancillary equipment for the ball mills and HPGRs as shown here in the picture to the right. Additionally, we've made steady progress with earthworks at the tailings dam and electrical installations across the site, which we know were very critical infrastructures. As we head into the coming period, our focus remains on the mechanical assembly of various pieces of equipment and initial preparations for commissioning in 2027. In the case of Los Pelambres, work has also continued on track and on budget. Work continued in several separated areas at what we call Los Pelambres growth enabling projects. Excavation and pipeline continues along the 120-kilometer route of the new concentrate pipeline and work at the desalination plant is focused on the structural and mechanical installations. And you can see both here in the pictures, the concentrate line on the left and the desalination plant expansion on the right. Looking ahead, our priority in the coming period is to complete key civil works and continue the pipeline and electrical ties, maintaining momentum as we move through this next phase of construction, also for commissioning in 2027. In a more broader context, and beyond our major construction projects, a wider pipeline gives us significant optionality for future growth with projects spanning multiple stages of development, which, as we discussed earlier, is in contrast to the wider market. We rigorously assess all opportunities against the capital allocation framework aiming to identify lower risk options with attractive IRRs and lower capital intensities. As a result, we have a range of greenfield and brownfield opportunities in our portfolio. For example, within the pipeline, we have our projects in construction, which are brownfield and therefore, lower risk and less capital intensive and which have just shown progress that we are achieving in those. We also have further optionality in the Centinela District to extend the mine life of our SX-EW operations that we're currently looking at. The result of this is an attractive range of alternatives with a focus on brownfield projects, but our pipeline also includes some highly prospective greenfield projects, some of which are shown here, Cachorro and Encierro and other greenfield opportunities. Elsewhere, we have a broad footprint of projects and investments, giving us good exposure to prospective geology in established mining jurisdictions. Cachorro, as I referred to earlier, remains one of the most promising early-stage discoveries in Chile with a high-grade resource and the next phase of exploration work is now fully underway following the DIA approval received in late 2025, which will allow us essentially to do more drilling and eventually the construction of an added to be able to get the full characterization and early design of what would be a mine exploitation sequence. At Twin Metals in the United States, we have strategic optionality for the group with a significant resource of 2.5 billion tonnes, which contain critical minerals of copper, nickel and PGMs. And with the changing landscape and policy environment in the U.S., we do expect that we will be able to make some progress in Twin Metals in the near term. Together, these assets form an important part of our future growth platform with the potential to support our growth agenda well beyond the current construction cycle. I want to refer now briefly to innovation. This is something that we've talked with many of you as we visited our sites in Chile earlier or later last year. We see innovation as a key enabler for maintaining our competitiveness, adding resilience and supporting our growth. We continue to advance work on Cuprochlor-T as a case of strategic innovation, a technology designed to unlock primary sulfide leaching, which has the potential to extend mine lives and create new production options. In 2026, and after several years of development, we have in construction now an industrial scale heap leach pad, including an integrated -- fully integrated temperature solution, which will provide updated data and variables such as CapEx, operating cost and scalability, which are an important step in making the technology available. Examples of operational innovation in another field, which is very relevant and critical is in material movement as we try to move material from satellite deposits to our existing infrastructure. And here, we're looking at future haulage solution such as road train, which we will test now in 2026 and light rail transport. If successful, this could allow us to operate at greater scale, improve productivity and support growth at increasingly large and complex mining districts, Centinela being one of them and Centinela oxides being one which is particularly attractive as we could move oxides to our existing infrastructure. And taken together, innovation is then directly supporting growth, enabling us to develop options within our portfolio and helping build long-term value. So finally, and to recap our investment case, you've seen this graph before. We have a clear approach as a pure-play copper producer, we're well positioned as copper plays an increasingly important role in modern society. We have high-quality, long-life assets in some of the world's best copper districts supported by a strong growth pipeline with a focus on lower risk brownfield expansions, which we are executing. These are fully financed near-term growth programs and are supported by a strong balance sheet, which gives us the resilience and flexibility through the cycle that we are witnessing now. And we're delivering this growth in line with the purpose, which is delivering mining for a better future, creating value that is sustainable, disciplined and built to last. So with that, having shared the results with you, you've seen our announcement with the specific numbers. We are happy now to move to Q&A. Daniel Major: Dan Major from UBS. I guess the first question, just thinking about the balance sheet and capital allocation a little bit more. You've got plus $4 billion of cash on the balance sheet. Most of your debt is well termed out. If we think about where the business is going to be in 12 months' time, CapEx should be coming down into 2027. When we think about capital return, should we look at that cash position more than the delta in net debt because it feels that that's a pretty large cash position. And what I'm alluding to, should we be assuming you're going to step up capital returns above the 50% this time next year on the basis of the current market environment? Mauricio Ortiz: Well, I will start saying that, first of all, you need to look at our capital allocation framework. We follow that with a strong discipline, and that is the backbone of all our financial decisions. So looking forward in a year's time, we're going to be ramping up our projects or close to completion, mechanical completion. And for sure, we are going to be in an area different than today that we are very well advanced, but still building. And as I said, following the capital allocation framework, we are going to make the assessment and make the decisions. And in the current -- with the current balance sheet, we said that we have the strength to keep delivering returns to our shareholders in a very good way and attractive returns to our shareholders, along with creating value through developing our growth options, as Ivan mentioned. Daniel Major: Okay. And then the second question, just thinking about opportunities to unlock value in the portfolio, 2 areas. At what stage might you be able to consider unlocking value from the infrastructure, the desal, et cetera, at Los Pelambres? And then the second is a big streaming transaction announced overnight, which seems a pretty attractive valuation for the seller. Have you considered options ever to stream any of the gold at Centinela? Iván Herrera: Yes. On the infrastructure, I mean, I think we initiated a significant step in divesting the water system at Centinela. And I think that's proved successful so far. We've done some of the transmission lines at most of our operations as well. And we will continue to look at those opportunities. I think in the case of Pelambres, we managed to arrange a structured finance, which gave us basically long-term funding by placing the water assets in a separate unit. Now will we go with the further step of actually considering, for example, divesting and following a similar model. I think we have the flexibility to look into that. We want to finish first the construction, and that will take us to 2027. So we wouldn't be doing that ahead of then. And because we don't want any disturbance or change of hands as we finish construction, but that flexibility remains. We're, in fact, encouraged by what we're seeing in terms of others taking up infrastructure and how they're able to operate and deliver good outcomes. In terms of streaming, I think generally, we've taken the view that we like the exposure or to retain the full exposure to the resources of byproducts that we have in the ground. I mean they make a very significant feature of the cost position of both Pelambres and Centinela, moly at Pelambres and gold at Centinela. And so keeping the full loan exposure to what can be undeveloped resource potentials, we think it's important. Some of that typically gets forgone in some of these transactions. And the other one is obviously the spot price. So we've looked at some of these possibilities, but we've sort of landed in our analysis that we have a strong preference to keep that exposure, which has served us well. If you look at our costs, for example, we were at $1.19 net cash cost. That's a 27% reduction compared to last year. We have almost $1.35 or $1.40 in terms of credits and therefore, believe that is a very significant attribute that we want to keep. So we will continue to assess them. But in our equation, we think it's better served our interest to keep exposed given also the strong balance sheet that we have. Unknown Executive: Jason? Jason Fairclough: Jason Fairclough, Bank of America. Just a bit of a question on growth. So you've got a great growth pipeline, an enviable growth pipeline coming through right now. Before this, we went through quite a long period of plateauing, right? So I guess my question is, how do you think about sequencing the next generation of projects to make sure that we don't get a big period of plateau after 2028. I think Mauricio, you and I have talked about this, like why does it take so long to make decisions and approve projects? Iván Herrera: Yes, these are large investments. And I mean, I think we -- our focus now obviously is in finishing the big projects that we're building now. If we hit them on budget and on time, it is as they are progressing, it will be a big value delivery for the company. Now we are, however, and we did show a specific chart this time where we're trying to show other options that we're looking at so to bring that conversation forward. And I would like to point a few things there. We've got, obviously, the projects under construction at the very far right. But then we've got some other alternatives that are in advanced studies. And the Pelambres mine life extension is very important. That has the potential to bring close to 1 billion tonnes of resources into reserves. We're making good progress on that permit, and we think that we will get that early '27 or maybe even before. We've got -- on the cathodes, I mentioned that in the case of cathodes, we are seeing opportunities in the Centinela district of bringing some satellite deposits that we've identified, which we know well and which we can actually action quickly and therefore, we would expect to be able to share more with you of that in the course of this year because we're making good progress there to be able to advance some of the alternatives, one specifically, which looks quite interesting, which is called Polo Sur. And then further down, I mean, we're looking at expanding the current plant. And then we want to make progress this year different in nature at Cachorro specifically because we're looking -- we finished a scope study there. We think there's a method under which we can extract the ore and use some of the infrastructure which exists today. Initially, we thought it would be a good idea maybe to combine it with Centinela and provide some of the input into Centinela, so we don't have to build infrastructure. But now what we're seeing is that it may be even more attractive to do it in Antucoya because Antucoya has also a primary ore body, which could benefit from the installation of some milling capacity. So that is the thinking that we have around some of the options in the pipeline. And we're very keen on -- to the extent that we use existing infrastructure, being able to accelerate the decision cycles around them, keeping the discipline on our capital allocation. Jason Fairclough: Just going to follow up, Ivan, if that's okay. So you're delivering 30% volume growth from here through 2028. How long is it going to take you to deliver another 30% on top of that? Iván Herrera: When these projects are further advanced, we'll share that to you. But the 30% increase, by the way, we expect the first year that we will be running fully at design capacity will be 2029, just to clarify that. But look, I think this is -- it's a great pipeline. I think we -- I would say the building or construction of a second concentrator like Centinela gives us added flexibility, which we don't have today to bring in some deposits, which can either improve grades or bring forward some of our mining opportunities. The scale of what we're doing today is slightly different. And therefore, obviously, the time it took to mature these alternatives was longer. But we're also seeing the benefit of the execution that we're getting out of them because there were projects that we had firmed up very well, both in terms of geology, engineering and the like. So there is a trade-off there. But look, we've got a pipeline. We're working on them, and we've got some interesting alternatives that we're going to try to bring to play soon. Ian Rossouw: A question from Ian Rossouw from Barclays. A few questions. Firstly, just on -- you talked about the options around extending the life at Centinela Cathodes. Some of your peers have talked about sort of opportunities for synergies in the region. I guess some of the other operations have large oxide stockpiles. Have you considered sort of discussing with them optionality around processing -- using infrastructure in the region to process some of these stockpiles? And then second question for Mauricio. Just on the balance sheet, you've obviously built up quite a bit of, I guess, in sort of follow-on from Dan's question, you've built up quite a bit of cash balances at some of the operations like Pelambres. Do you expect to pay out some of those in minority dividends or dividend it up? And just thinking about a cash flow perspective, what should we expect in the first half of this year? And then likewise, just on working capital, obviously, you've had quite a bit of a build as those receivables come down. Just how you think about that into this year? Iván Herrera: Okay. So on the cathodes at Centinela, we've had from time to time, have had conversations around opportunities that others may provide because of stockpilings that they may have. I, however, focus, and that's something that we -- it's become clear, I would say, over the last year or so that the opportunity that we have, in fact, to mine and produce from our own sources is economically, obviously, the most attractive because we retain the full rent out of being able to do so. And we've got 2 main strands there at work. I mean one is these deposits, which -- one of them in particular, which we know well and which has oxides of attractive grades at or close to surface and which we're actually advancing now, I mean, in terms of understanding how quickly we could mine. And we think that actually this could be something that we could develop in the midterm. So that's the priority. And the other one is Cuprochlor. I mean, I think in the case of Centinela, we're looking at our ability to be able to also fill the tank house by way of using Cuprochlor in lower grade stockpiles that we own currently. So I think third parties may be interesting -- providing interesting options to look at. But in the packing order, it would seem that we have 2 other alternatives that come before. Mauricio Ortiz: Regarding balance sheet, thank you for the question, Ian. Well, conceptually, let me describe our cash balance maybe using 3 main buckets. So the first one is we need to secure the financing. As Ivan said and we said during the presentation, we have fully financed project either from our cash balance or also undrawn facilities. So that is the first bucket included in our cash balance. So to secure the financing of our ongoing projects, Pelambres enablers, this year will be in the space of $600 million roughly. And Centinela second concentrator plus Encuentro Sulphides, it will be in a ballpark number in the space of 1.6 billion, 1.5 billion. So that is basically the main -- the first bucket. Then we have a second bucket, which is basically how we manage and diversified risk in our cash balance, which is basically how we diversified and managed risk, as I said, holding a cash buffer reserve in each of our companies for operational purposes. And third, there's additional firepower to keep delivering results to our shareholders, either minoretary or up in the Antofagasta PLC chain. So those are the 3 main concepts, and we are going to follow, as I said to Dan, our disciplined approach and following our capital allocation framework. Regarding working capital, yes, if we look at the price movement over 2025 Q4 we have a very strong price environment and that we have the happy problem to have a higher working capital because of the receivables. I will say that will normalize during the first half of the year because we have seen a much more stable price in the high $5 per pound. Benjamin Davis: Ben Davis, RBC. Two quick questions. One, firstly, on -- obviously, we've had the change of government in Chile and a bit of confusion at the start with the Mines Minister and Economy Minister. I was just wondering, have we seen anything else coming out of this government? I know it's early days yet, but any expectations of them? And then secondly, with the permitting changes early last year, I was just wondering if you've seen any benefits for your pipeline so far? Iván Herrera: Yes. So look, I think it's -- I mean we look positively to the change in government from the point of view of the policy decisions that they've expressed. And I think there's been a few which are interesting. One, they've indicated their willingness to reduce corporate income tax from 27% to 23% and that they would introduce that change early on that provides a relief for us temporarily because we top up with only tax, but it does potentially or could provide a benefit. The second is, they've talked about being able to provide invariability for tax going forward. And we haven't heard anything too specific yet, but that is something that will be available for investments of size in any sector, but mining included. But that is also an element which we look at with interest. And then the third one is that they have been quite keen on indicating that they're able to reduce some of the permitting complexities. And I would say different to what other governments have indicated that their focus would be mostly on actions that they can drive from an executive branch point of view and not having to go through Congress. So they believe that, I don't know, there's many regulations that can be changed or simplified. So overall, I think those are positive tailwinds that the incoming government has indicated figure high in their agenda and which we think the industry can benefit. I mean we have, as you know, the extension of mine life at Pelambres as one of the key permits that we've got in the system. It's very important for the company. We've been -- now we introduced that permit in late '24. We expect to get it in early '27. If we can bring that forward, certainly, that would be a positive. It's significant from the point of view of the reserves that we're able to bring into our balance. And therefore, we do expect to be able to get benefit of that. But those are the kind of things that they've been focusing in. So good -- it seems incoming ideas to act quickly on those fronts. Matthew Greene: It's Matt Greene at Goldman Sachs. If I could just comment on Slide 19, the bubble time line chart. You're showing the Centinela second concentrator expansion as being behind the Pelambres growth project. It's an early-stage study yet you're building a concentrator, it's fully permitted. When I look across all those bubbles there in terms of your brownfield projects, I mean that's the only one really that I think delivers incremental growth. I appreciate Los Pelambres unlocked reserves, but it's really an extension of that mine life. So how are you thinking about -- I mean, what are you studying on that Centinela concentrate expansion? Is there any scope to potentially accelerate that given you don't have to demobilize your crew? And yes, just kind of how are you thinking about that? Iván Herrera: Yes. And just to clarify, I mean, the Centinela, the Pelambres development, I mean, that does eventually provide increased throughput as well because that's sort of embedded into the permit. So we could fast forward that incremental throughput getting the permit earlier than the extension. So there's growth potential there. Now in terms of the Centinela second concentrator, yes, what we've concluded is that it's not an overly complex project. And therefore, we've got it in the phase in which we're doing an update to the engineering, not overly complex and to a large extent, as you witnessed those that visited the footprint of the current plan will allow that to happen fairly quickly. So we think we can move that faster. Now I think our focus is on finishing what we're building today. So we don't want to lose that focus. But that optionality remains. We can accelerate that if we want to. And that's something that -- the work that it's been done today will enable us to do if we chose to do it once we are further advanced with construction, which is quite imminent. I mean we expect to be doing commissioning next year. Matthew Greene: And if I could just have a follow-on just on your TC/RCs, you set the benchmark with some of these smelters at 0 is what's reported to. What's your share of 2026 concentrate sales? How should we think about in terms of benchmark and spot? And perhaps in terms of your unit cost guidance, what have you budgeted for TC/RCs? Iván Herrera: Yes. I would say, I mean, without being too specific on those commercial arrangements. But I mean, generally, around 70% to 80% of our contracts are term contracts and the balance being a spot, so volume-wise. So therefore, that's the percentage that would be under benchmark terms. Now there is a staggered structure. So therefore, you need to consider that. So that's on the TC/RCs. And in terms of cents per pound, we're -- we're probably, I don't know, around -- it's around $0.15 per pound. It used to be close to [indiscernible] or more, but -- sorry, that includes all marketing costs. Now not separating. So that includes treatment and refining charges, freight and other marketing activities. But we've certainly seen a benefit. And we're probably thinking of around $0.15 per pound for all marketing costs. Ioannis Masvoulas: Ioannis Masvoulas from Morgan Stanley. Two questions left from my side. The first, if we look at the Antofagasta share price, clearly, the market has rewarded your consistent performance with a premium valuation to some of your peers and perhaps your historical levels. Do you see this as an opportunity in time to look at inorganic growth options? And if so, would you consider looking outside Chile and potentially even outside Latin America? And then second question, going back to your organic growth optionality. Could you provide an update on how you feel about Zaldivar in terms of the water sourcing solution from 2028 onwards and implications for CapEx depending on the options? Iván Herrera: Yes. So I would say that the -- I mean we feel that we have been working consistently on the delivery of our strategy. And I would echo what you say in terms of, I think that's part of what's reflected in the share price, and that's a positive. Now the simple answer to your question is, we have a strategy which is not dependent on M&A, and we've talked about this in the past. If there are opportunities, we would look at them. There's nothing specific to comment at this stage. But obviously, we feel that we are in the commodity of choice. Copper is a preferred commodity, generally one that all miners are looking to hold. And second, that having a solid valuation does provide more ample opportunities. So we will look at them, but in that context. Zaldivar, we have -- I mean, the way we look at Zaldivar, we have an asset strategy in place, which takes us essentially to operate until 2051, and that includes the mine plan and the permit and the development of the primary resource there. And I think this was an asset and just for recollection, that when we purchased was going to be closed in 2025. And therefore, what we think forward is that we still have a resource base, which is significant, which gives us exposure to higher copper prices when they happen and also to the ability to develop this over time beyond 2025. Now the water solution that we have in place takes us to 2028. And we are, therefore, going to make a decision on the new water solution this year. In the first half, we will make a decision. And this is likely to -- well, involve the construction of a pipeline and most probably drawing from water from alternative sources and not from the sea directly, which we think is cheaper from the point of view of the water and the CapEx involved. We are very well advanced with that. We have been working for several -- a couple of years in this. So we expect that to happen in the first half of 2026, and then we will share the parameters around that decision. But I think that essentially derisks water supply for Zaldivar until 2051. So it provides the full run -- runway to be able to develop the primary sulfide and continue to implement the strategy that we have there. Unknown Executive: Any other question from the room? Chris? Christopher LaFemina: It's Chris LaFemina from Jefferies. Ivan, you mentioned that the changing landscape in the U.S. has made you more optimistic about Twin Metals. We're hearing from some other companies that projects are being delayed because of permit delays due to lack of people in the government to actually look at projects. And so while the headline might be that things seem to be getting better for project development, it actually seems like things are slowing down a bit. I'm wondering if you can comment on that? And are you seeing anything specifically that gives you reasons to be more optimistic? Or is it just generally with the Trump administration talking about critical minerals that makes you more optimistic that project might actually move forward? Iván Herrera: No, I think there's a couple of specific issues. I mean, one of them, in the area in Minnesota, towards the end of the last administration, there was a withdrawal pass, which would essentially hinder mining from being done in a very significant area. There are actions underway to be able to reverse that, which are quite concrete. And therefore, that is positive. Now we're not impacted by that directly because our rights preceded that withdrawal. But nevertheless, that is impacting the whole area and therefore, makes things more challenging. But there are actions which are quite specific and which have been shared recently, which involved reversing that. And it seems that that's now going to Congress, and it's going to happen. So that's good. That's specific. It's -- and the other one is we've been working on getting our leases back. And I'm positive about those discussions and where they're going. So it relates to that specifically. We also have seen, and this is the third element that I will place is that when permitting is required, there is an option for some projects depending on the eligibility that they may or may not have to follow some special corridor of permitting, which is named FAST-41, which wasn't available before for mining. This was essentially available for infrastructure projects before. So that may be another interesting development, and we've seen actually mining projects follow that route. So those 3 things are the ones that we find positive, and we expect to see more of that, specifically in 2026 come to fruition. Cody Hayden: Cody Hayden from Deutsche Bank. Two questions, if I may. First, just on labor negotiations in 2026, just given some of the kind of challenges we've seen in the region, if you could provide an update on kind of how those may progress or just any updates there would be appreciated. And then second, on Buenaventura, just wondering if you could provide a brief update on your strategy there and if there's potentially any partnership opportunities in Peru going forward? Iván Herrera: Jason likes that topic. So on the labor negotiations, I mean, I would say, one, we -- generally, we have a good track record of being able to conclude labor negotiations successfully. Just that we finished several of them in 2025. Some of them were more complex than others, but included Pelambres and Zaldivar. Now in 2026, we've got 3 in Centinela and we've got 1 in Zaldivar. And I think we are approaching them in the same way that we've done others before. Obviously, we have a concentration at Centinela, which we want to try to manage by means of sequencing them correctly. So we have, from that point of view to work on that. But we are positive. I think with Centinela, Centinela has been delivering good results. It's expanding. There's a good story. There's opportunities for people. So we have a very good engagement with our labor unions there. And I think a good platform to reach a solid agreement. So we've seen -- I mean, obviously, with this price environment, these negotiations become a bit more challenging. And -- but I think the fact that we've built strong relationships over time does make a big difference. And some of the strikes that you've seen recently in Chile, probably start from a very different point with respect to where the relationship had been and sort of the background. So I don't think they make a good example for what we are seeing in our case. Now in the case of Buenaventura, look, we -- obviously, Buenaventura has done well since we went in there. I mean, obviously, they've had a good benefit from metal prices, but also they've increased production significantly in some areas, silver being one of them from Yumpag. And what we're seeing is obviously an interested is in the prospect of both developing some of the base metals projects in the copper space. And we continue to work with them in that space. But we do that through engaging at the Board level and with the management of the company and conveying our views. And I think we're making good progress there, but that belongs to that space. And then the other thing I would mention, I mean, Buenaventura is about to start production from a new gold operation, San Gabriel. And therefore, that will hit the market at the right time, probably from the point of view of sort of price environment. So it will be generating cash from gold and silver at the right time. And on the other hand, we think we need to -- or have the opportunity to continue to work on some of the base metals opportunities. Patrick Jones: Patrick Jones, JPMorgan. Just maybe 2 questions. Firstly, on the Los Pelambres side, you mentioned you think that the environmental impact approval could come sometime early next year. Could we see FID on that then sometime in '27 as well and then serious CapEx starting to be spent by '28? Iván Herrera: We're still studying that. But obviously, that would be something that could be attractive, yes. Patrick Jones: And just on Antucoya as well, you mentioned the opportunity to potentially have a mill there and the hypogene project is, obviously, one of the bubbles in the chart and the potential to tie that in potentially with Cachorro. Can you kind of talk a little bit what that could look like? Because I think you still have nearly 20 years of reserve life there at the SX-EW? Iván Herrera: Yes. Yes. We have 20 years at the SX-EW. But we think that we could probably use some of the crushing capacity to be able to dedicate that to a separate line, which would include passing sulfides combined with the higher-grade sulfides coming from Cachorro to be able to feed a mill line. And the reason being is because in the case of Antucoya, the crushing circuit is very big. It's 100,000 tonnes per day. So it's unusually big for a cathode operation. And therefore, you could have a 30,000 tonnes a day ball mill, which could eventually complement the configuration and production that we have today and increase the sort of average grade that we get and increase recoveries. So this is all sort of, I would say, blue sky thinking, but that's what it's sort of coming to mind because Antucoya is closer to Cachorro. I mean we are closer from the point of view of distance. We're testing some of the more efficient transport alternatives like road train and eventually some form of rail lightweight alternative. But if that becomes attractive, then we could be able to at least pivot one of these options with Antucoya. Now timing-wise, we still would have to think that in detail. But remember that Antucoya today is processing 0.3% trade. So if we could -- and Cachorro has what 1.3. So yes, it's further down. It's underground. But if we could move some of that, then the grade differential is quite significant. And we've got the big crushing circuit, which is operating extremely well and very reliably. I mean we've hit very significant and consistently good rates at Antucoya, slightly beyond capacity now for 3 years. So that is the sort of optionality that, that can provide. Unknown Executive: I will now hand over to the moderator if we have questions online. Operator: [Operator Instructions] Our first question comes from William [indiscernible]. [Operator Instructions] As we have no further questions, this concludes the Q&A session. I will now hand back to management for closing remarks. Unknown Executive: And we hand over to Jason for another question. Jason Fairclough: So in the past, we've talked about this giant resource on the other side of the border from Los Pelambres. And a few of us were down in Argentina in December and Salta seems to be booming with mining projects. So I guess my question is, are you losing people to Argentina? Iván Herrera: Not -- no, I would say at this stage. Jason Fairclough: Not yet? Iván Herrera: Well, we work a lot to attract and retain our talent. And therefore -- yes, we haven't seen that so far. But Pelambres especially, which is close to that area, I think has very favorable conditions for work, both in terms of roster proximity and the like. So yes, and we provide a very challenging and rewarding environment. So we will fight that battle. Unknown Executive: Thank you. And with that, I will hand over to Ivan. Iván Herrera: Yes. So thank you very much for coming here and for your questions. I hope that we're able over the next couple of days to answer any other residual query. But just to summarize, I think we've released a strong set of financial results. We had a good year from a financial performance, record in EBITDA. And we continue to, I think, perform and deliver our strategy. Our projects are going well. You were able to see them directly in November. Centinela second concentrator finished the year with a progress, which is slightly above 70%. So we really look forward to completing those projects soon and being able to increase production by the 30% that we've been working at. So thank you for coming.
Operator: Good day, and welcome to the Builders FirstSource Fourth Quarter 2025 and Full Year Earnings Conference Call. Today's call is scheduled to last about 1 hour, including remarks by management and the question-and-answer session. [Operator Instructions]. I would now like to turn the call over to Heather Kos, Senior Vice President, Investor Relations for Builders FirstSource. Please go ahead. Heather Kos: Good morning, and welcome to our fourth quarter and full year 2025 earnings call. With me on the call are Peter Jackson, our CEO; and Pete Beckmann, our CFO. The earnings press release and presentation are available on our website at investors.bldr.com. We will refer to the presentation during our call. The results discussed today includes certain GAAP and non-GAAP results adjusted for certain items. We provide these non-GAAP results for informational purposes, and they should not be considered in isolation from the most directly comparable GAAP measures. You can find the reconciliation of these non-GAAP measures to the corresponding GAAP measures where applicable and a discussion of why we believe they can be useful to investors in our earnings press release, SEC filings and presentation. Our remarks in the press release, presentation and on this call contains forward-looking and cautionary statements within the meaning of the Private Securities Litigation Reform Act and projections of future results. Please review the forward-looking statements section in today's press release and in our SEC filings for various factors that could cause our actual results to differ from forward-looking statements and projections. With that, I'll turn the call over to Peter. Peter Jackson: Thank you, Heather, and good morning, everyone. Driven by focused execution and close customer partnerships, we successfully navigated 2025 despite ongoing housing affordability challenges, weak consumer confidence and depressed commodity prices. We remain committed to reducing barriers to affordable housing and driving a more efficient integrated supply chain. Our ability to perform effectively through each phase of the business cycle reflects the strength of our differentiated value-added solutions, industry-leading technology and unique operating model. Executing from a position of strength, we continue to invest in initiatives that expand our capabilities, enhance our footprint and position us to outgrow the competition as conditions improve. I'm confident in our ability to manage through near-term uncertainty and build exceptional long-term value for our shareholders. Let's now turn to Slide 4. Our full year 2025 results reflect disciplined execution as we sustained healthy profitability despite a soft starts environment, underscoring our operational excellence and strategic investments. This included maintaining a gross margin above 30% and an EBITDA margin above 10%, a clear reflection of the durability of our transformed business. I'm grateful for the dedication of our team members and the ongoing support of our customers as we turn the page to 2026. Let me step back and offer some perspective on the market. The housing market remains weak and is characterized by more headwinds than tailwinds as affordability challenges, muted consumer confidence and depressed commodity prices continue. This was apparent in November and December as our sales fell off more than expected as these cross currents impacted starts and led to a softer Q4. Economists are divided in their outlooks for 2026, with some calling for further declines in single-family starts and others expecting modest growth as macro conditions and regulatory policies remain uncertain. At the same time, prolonged softness in both residential new construction and repair and remodel have pushed OSB well below normal, resulting in a commodity composite below $350 per thousand board foot as we exited 2025. Commodity supply is being curtailed, but not at a pace that we believe will meaningfully lift prices in the near term. Finally, inflationary pressures continue to impact costs, particularly in the insurance and rent categories. Despite these macro pressures, we remain committed to advancing our strategy with a sustained focus on growth, continuous improvement, smart investments, innovation and developing our people. We cannot control the macro, but advancing our initiatives will enable us to realize share gains, improve the way we operate and position us to accelerate growth with any level of recovery. Our single-family builder customers have addressed ongoing affordability challenges by offering smaller and simpler homes as well as incentives such as interest rate buydowns. That creates an environment where there are less sales dollars per start and every start is more competitive on the affordability front. We are working closely with our customers, leveraging our broad product portfolio and bundled value-add solutions to drive cost efficiencies while upholding the highest quality standards. In the multifamily market, activity remained muted through year-end, in line with our previous thinking. We continue to see green shoots in quoting activity as our customers benefit from improved financing costs. As a reminder, our first sale tends to lag a multifamily start by about 9 to 12 months. Given the current project pipeline, an uptick in our multifamily results will not appear until the back half of this year at the earliest. In response to the market weakness, we are prudently managing spending and maximizing operational flexibility, as shown on Slide 5. We are aligning capacity across our facilities, managing fixed and variable headcount and reducing capital expenditures. Pete will provide more detail later in his remarks. We consolidated 25 facilities in 2025, bringing our total to 55 over the past 2 years, while maintaining an on-time and in full delivery rate of 92%. With our industry-leading scale, experienced leadership team and a track record of operating proactively through the cycle, we are confident that we can make the necessary adjustments and deliver exceptional customer service. On Slide 6, we highlight some of the key initiatives under our strategic pillars. In 2025, we invested more than $110 million on new, expanded or upgraded value-added operations across our footprint. We remain disciplined in how we deploy capital. Our consistent strong free cash flow through the cycle gives us the flexibility to invest in organic growth, pursue strategic M&A and return capital to shareholders. This capital deployment is strengthening our competitive position and driving long-term value creation. Operational excellence is crucial to how we run the business as we develop talent, improve agility and embed technology into our operations. We generated $48 million in productivity savings in 2025, primarily through targeted supply chain initiatives. Moving to Slide 7. Our prudent capital allocation strategy focuses on maximizing shareholder returns. In 2025, we deployed nearly $2 billion towards return-enhancing opportunities aligned with our priorities. Drilling down into M&A on Slide 8. We remain focused on pursuing acquisitions that expand our value-added product offerings and advance our leadership position in desirable geographies. We have developed substantial and proven muscle memory to grow through M&A and have a track record of successful integration. As a reminder, we acquired both Builder's Door & Trim and Rystin Construction in October, which together formed the leading provider of door and millwork capabilities in the Las Vegas area. In November, we acquired Lengefeld Lumber, a leading supplier serving Central Texas and Pleasant Valley Homes, a wholesale manufacturer of factory-built housing serving 10 Northeastern states. Pleasant Valley represents an expansion of our prefabricated component strategy to address challenges facing the homebuilding industry such as affordability and access to labor with a cost-competitive factory-built option, which reduces builder cycle times. The company sells HUD-compliant manufactured homes and high-quality semi-custom modular homes to land lease community developers, retailers and homebuilders. We plan to use available factory capacity to offer high-quality semi-custom modular plans to our existing homebuilder customers with the potential to expand the offering to our homebuilder customers in other BFS markets in the future. And lastly, in January, we acquired the assets of Premium Building Components, marking our company's first truss and wall panel operations in New York. Since the BMC merger in 2021, we have made 40 acquisitions, representing over $2.3 billion in annual sales, the equivalent of a top 10 LBM player, demonstrating our ability to execute and integrate seamlessly. And with the industry still fragmented, we see significant opportunity ahead and are confident that inorganic investments will remain an important driver of long-term growth. Let's now turn to Slide 9 and discuss the latest updates on our digital and technology strategy. We continue to differentiate by digitally enabling our team members, customer relationships and value-added product development to drive long-term growth through technology-driven platforms and services. The investments in automation, artificial intelligence and digital integrations highlight our commitment to creating a seamless experience for our customers to help streamline their operations. Since launching in early 2024, our digital platform has processed nearly $7 billion of quotes through 2025, representing a year-over-year increase in excess of 130%. This week at the International Builder Show, we will showcase the next generation of digital solutions for builders. These solutions deploy emerging technologies to unlock rich insights and make every step of the homebuilding process easier, not only for our builder customers, but also for the entire ecosystem of suppliers and technology partners. We do not categorize digital as only being a driver of long-term growth for BFS. It is integral to how we do business every day. We are committed to digitally transforming the operations and continuing to invest in consumer-grade digital solutions designed to improve our team members' efficiency, engagement and performance. Our digital investments are particularly impactful in the sales organization, creating time to capture new market share, expand our product offerings and strengthen our customer relationships. Continuing on the technology front, I'm pleased that we have made steady progress in our comprehensive implementation of SAP after the launch of 2 pilot markets last July. We're applying the valuable insights we've gained from these initial pilots to prepare for the next phase. In Q4, we advanced the development of our solution and refined our deployment plan, positioning us for continued rollout in 2026 and broader deployment beyond. Although these conversions are always challenging, we are working through the details and are excited about the growth and efficiency opportunities to come with this business-driven transformation. Recognizing one of our incredible team members each quarter is one of my favorite parts of our earnings calls. Today, I want to spotlight Charles Green, an inside sales representative at our Wilmington, North Carolina millwork location, who is celebrating an extraordinary 48 years with BFS. Charlie began his career in 1977 as a truck driver. After 13 years on the road, he transitioned into sales, where he quickly became a subject matter expert in the Wilmington market. Charlie developed a loyal following for his customer service, always checking in to make sure the job is done right and for making jokes. Here's one for you, Charlie. Why did the homebuilder get in trouble with the neighbors, for raising the roof? All right. So that one is probably not good enough for you, Charlie. But your dedication to our customers, your teammates and the community reflects the values that are important to all of us at BFS. I'll now turn the call over to Pete to discuss our financial results in greater detail. Pete Beckmann: Thank you, Peter, and good morning, everyone. Our fourth quarter and full year performance reflects disciplined execution in a weak housing market. We remain focused on managing costs, advancing key growth initiatives and harnessing technology for long-term success. As we get into the fourth quarter results, I want to discuss the reasons for our financial performance versus the guidance. Sales decelerated more sharply than expected late in the quarter as homebuilders aggressively delayed starts to work down excess inventory. Additionally, we incurred higher-than-expected insurance cost true-ups, which further pressured performance. In response, we moved quickly to accelerate cost reduction and network optimization actions. With that context, let's turn to our fourth quarter results on Slides 10 through 12. Net sales decreased 12% to $3.4 billion, driven by lower core organic sales and commodity deflation, partially offset by growth from acquisitions. The core organic sales decrease was driven by a 15% decline in single-family, reflecting lower starts activity and reduced value per start and a 20% decline in multifamily, consistent with our expectations amid muted activity levels against stronger prior year comps. Additionally, repair and remodel decreased 7% as consumer uncertainty persisted. As we've noted on recent calls, there are a few key factors reconciling single-family starts to our core organic sales. First, as a reminder, there is roughly a 3-month lag from a start to our first sale. Second, the value of the average home has fallen as size and complexity have decreased over time, creating an additional sales headwind. Third, margins across the supply chain remain pressured by housing affordability constraints. Based on this, we believe our full year and fourth quarter share were roughly flat as we continue to be the industry leader and a trusted partner to our customers. For the fourth quarter, gross profit was $1 billion, a decrease of 19% compared to the prior year period. Gross margin was 29.8%, down 250 basis points, primarily driven by a declining starts environment. Compared to roughly 27% in 2019, our current gross margin highlights the meaningful investments we've made in value-added solutions and our continuous improvement initiatives. Adjusted SG&A of $751 million decreased $13 million, primarily due to lower variable compensation amid lower sales, partially offset by acquired operations. As we touched on earlier, we're leaning further into our downturn playbook with $100 million of cost actions, $75 million in year-over-year cost reductions and $25 million in cost avoidance. These actions include deeper cuts to overtime and temporary labor, adjustments to incentive compensation plans, reduced merit and overhead spend, accelerating the pace of facility consolidations and tighter controls on discretionary spending. This positions us to leverage our costs as the market improves. Adjusted EBITDA was $275 million, down approximately 44%, primarily driven by lower gross profit. Adjusted EBITDA margin was 8.2%, down 470 basis points from the prior year, primarily due to lower gross profit margins and reduced operating leverage. Adjusted EPS was $1.12, a decrease of 52% compared to the prior year. On a year-over-year basis, share repurchases enabled by our strong free cash flow generation added roughly $0.04 per share for the fourth quarter. Now let's turn to the cash flow, balance sheet and liquidity on Slide 13. Our fourth quarter operating cash flow was $195 million, down $179 million, primarily due to lower net income. For the quarter, we delivered $109 million of free cash flow and $874 million for the year, underscoring the strength and consistency of our cash generation profile. Our full year free cash flow yield was approximately 8%. Operating cash flow return on invested capital was 13%. Our net debt to adjusted EBITDA ratio was approximately 2.7x. We have no long-term debt maturities until 2030, supporting operational discipline and flexibility for accretive capital deployment. Moving to fourth quarter capital deployment. Capital expenditures were $86 million, and we deployed $227 million on acquisitions. We have $500 million remaining on our share repurchase authorization. We remain comfortable with our net debt levels, and we'll continue to execute our capital allocation priorities with discipline to maximize long-term value creation. On Slides 14 and 15, we outline our 2026 outlook and assumptions, which are broadly consistent with the middle scenario we shared on our third quarter earnings call. Compared to 2025, single-family and multifamily starts are expected to be flat year-over-year with repair and remodel up 1%. As a result, we are guiding net sales in the range of $14.8 billion to $15.8 billion, adjusted EBITDA of $1.3 billion to $1.7 billion and adjusted EBITDA margin in the range of 8.8% to 10.8%. We expect our 2026 full year gross margin to be in the range of 28.5% to 30%, reflecting the below normal starts environment. We expect free cash flow of approximately $500 million. The year-over-year change is driven primarily by a $300 million swing in working capital and lower EBITDA. In 2025, we benefited from a working capital release through disciplined inventory management and lower sales, but expect to invest in working capital in 2026. Our guidance assumes average commodity prices in the range of $365 to $385 per thousand board foot versus the long-term average of $400. For Q1, we expect net sales to be between $3 billion and $3.3 billion and adjusted EBITDA to be between $175 million and $225 million, reflecting the challenging macroeconomic environment, elevated housing inventory levels and winter weather impacting key markets. The shape of the full year implies a heavier second half contribution as we lap the starts decline due to normalizing housing inventory levels. In closing, we are closely monitoring the current environment and remaining agile to mitigate downside risk in the near term while also investing strategically for the future. Supported by a fortress balance sheet and strong free cash flow through the cycle, we continue to manage capital with rigor, drive for organic growth and productivity and pursue M&A. We remain well situated to compound value through our strategic initiatives. With that, I'll turn the call back over to Peter for some final thoughts. Peter Jackson: Thanks, Pete. While it was a tough quarter, we are taking action to reset our cost profile while continuing to invest in technology and innovation. We have transformed BFS into a materially stronger company, one powered by our leading value-added offerings and digital solutions, a relentless focus on operational excellence and superior capital deployment. With our scale and experienced cycle-tested team, we expect to deliver solid results in the near term and tremendous upside when the market recovers. Thank you for joining us today. Operator, let's please open the call now for questions. Operator: [Operator Instructions] We'll take our first question from Matthew Bouley with Barclays. Elizabeth Langan: You have Elizabeth Langan on for Matt today. I just wanted to start off asking regarding the cadence of the year. Obviously, 1Q will be a little bit softer. You touched on some of the pressures around inventory and weather and noted that the back half will be a little bit stronger. Could you speak a little bit more about how you're thinking on the single-family side versus the R&R side in terms of what you're seeing right now in the market? Peter Jackson: Sure. Yes. As you mentioned, the overlay for the year is pretty modest in all the categories, right? We're not expecting a lot of growth. The way that the year is shaped, when you look at it on a year-over-year comp basis, a lot of that has to do with the shape of '25. So the dynamic in '25 came in hot and the year ended very slowly on the builder side. They pulled back, had too much of the inventory of new homes as they got through the end of the summer and pulled back very, very hard on their starts volume at the end of the year, harder even than we expected. So that left us with a sort of strong first half, weak second half baseline to enter in with '26. In our planning, what we're seeing is a very slow exit to '25. It's ramping well. We're seeing the behaviors that you would expect of builders building for a strong summer. And we would expect that to continue to ramp up as we get into the year to get to a healthy level. I think the easiest part about the second half of '26 is with even a reasonably good year. It doesn't have to be a great year. We'll be able to pretty dramatically outperform last year just because of how weak last second half was. So that's sort of the frame. In general, multifamily has continued to bubble along. It has not turned dramatically, but also, I would say the worst of the downturn is over. It's just sort of stable at where it's at. We're hoping that as the rates continue to moderate, we'll continue to see those quotes turn into orders and start hitting the ground in that multifamily space. R&R, it's been sort of stumbling along. Again, I do think rates will help as we get into 2026. Certainly, there's more and more positive coming out of that space in terms of homebuyers being willing to invest and our positioning in that space where we are around the country. Elizabeth Langan: Great. That was really helpful. And then this is probably more for Pete, but you gave some commentary around the pieces of the cost actions that you guys are planning to take this year. Could you give us a little bit more detail around like the timing of that and how you're expecting that to kind of shape in across the gross margin and SG&A? Pete Beckmann: Yes. So just to clarify, the cost actions that we outlined are 100% SG&A related. Most of those actions are already in place and executed, and it's a matter of time to realize the benefits through the course of the year. We are not giving any really additional details around the specifics of each of those at this time, but just know that we're moving aggressively on the evaluation of our facilities and consolidations, consistent with what we've been doing in the last 2 years, but in a more immediate fashion. So if something is on the fence, we're moving forward with it at this time. And as I said in the prepared remarks, about 3/4 of the adjustments are year-over-year reduction, whereas 1/4 of the cost actions is a cost avoidance. Operator: We will move next with Mike Dahl with RBC Capital Markets. Michael Dahl: I wanted to drill down into the gross margin dynamic a little bit. I mean gross margins even in a weak backdrop for the fourth quarter, they're drifting lower, but they're still very resilient. But then obviously, your guidance is still a wide range, including something that would be kind of notably worse at 28.5%. So I wanted to ask more about kind of what you're seeing on the ground that's driving that range of expectations. I know you said it's still competitive out there, but maybe you can speak to kind of some of the more recent dynamics and also when you think through the cadence, how that paces through the year? Is that 28.5% or is it there because that's what you expect in 1Q? Or you're just giving yourself a buffer? Anything on dialing in 1Q a little bit better would also be helpful to understand that cadence. Peter Jackson: Yes, sure. So as we think about gross margins overall, I think they've been pretty stable, pretty strong. The team has worked very hard to find that sort of equilibrium to ensure that we're not losing share that we're in a position to gain share, but at the same time, protecting profitability. So that's been an important precursor. And I think we've done a pretty good job. The question around the gross margin coming in at the beginning of this year really has to do with the uncertainty on the resets at the beginning of the year. So there's always a new contract period that triggers at the beginning of the year. You have a sense of volumes and contract levels, but compounded by the delevered facilities because things slower in this time of the year, early Q1, in particular, is the slowest time of the year for us. You get a little bit more pressure and volatility on some of those gross margin numbers. So really, that's the storyline there. By and large, we're expecting a fairly stable year around gross margins right around just sub that 30% level, but that's the thing that we spend probably as much time as anything managing and making sure we're structurally aligned around. As you think about '26, obviously, that will continue. Michael Dahl: Okay. Just a clarification. I mean, you're saying stable just under 30%, but then there's the low end of the guide is quite a bit below that. So I just want to be clear, like that is accounting for potential variability that you have not yet seen versus something that you're already experiencing. That's just a clarification. My second question was just making sure I understood the free cash flow dynamic a little bit. It sounds like based on how you expect the comps through the year that maybe that's a, hey, since you expect there to be growth in the back half of the year, even though it's a comp dynamic at minimum, like that's why your working cap is going to swing pretty hard year-on-year. And then would it be kind of getting into next year, it would normalize again? Just want to make sure we understand that. Peter Jackson: Yes. So I mean, I'll field the first one. I'd say my first reaction is yes. It's absolutely a band that tries to give you a sense of the ups and downs based on kind of how we're hearing folks talk about it. We are not seeing that deep downside now on gross margins that we're concerned about, but I want to make sure we're really honest about the dynamic right now in terms of the band of where it could be. But our guide is where we think it is, and that's what we're, I think, experiencing in terms of the trajectory of the year and where we're headed. And then Pete, on the cash flow? Pete Beckmann: Yes. So Mike, your question on the cash flow. So the $500 million guide for 2026 does reflect an investment in working capital through 2026, exiting, as Peter mentioned, with the back half being higher on a year-over-year basis. So your exit point or the point in time in which cash flow is measured is going to be higher, at least in our guidance. So that's going to be the use of cash versus what we experienced in 2025 was a source of cash as we harvested the balance sheet in a declining market. So that's the biggest change with a little bit of impact from the lower EBITDA that we're guiding for 2026. Peter Jackson: Just kind of a general reminder, as a rule of thumb, we're in that 9% to 10% incremental and decremental working capital number as it pertains in particular to that year-end trajectory, right? It matters for where we're comparing in that fourth quarter versus fourth quarter. So the more we grow, yes, we will invest, but the return is quite nice on that. Operator: We will move next with John Lovallo with UBS. John Lovallo: I wanted to talk about the incremental margins just on the business. I mean there's been a lot of productivity initiatives achieved over the past few years, and there's some more cost actions planned for this year. So how should we sort of think about the incremental margins for the business as volume kind of comes back here? I mean, should they be above the historical levels? Peter Jackson: Well, generally, our incrementals are quite good on the way up, primarily because of the tremendous leverage we get in the business. For all of the pride we hold in the value-add space in particular, it requires a fixed overhead investment that we're at the point of leveraging when the market is growing and returning. So in general, yes, I think we do see higher than average when we're growing, particularly as the adoption of that value add tends to accelerate in a growing market. John Lovallo: Understood. And I just wanted to get your thoughts on recent acquisitions, Sumitomo acquired Tri Pointe. I mean the Japanese in general have been pretty big proponents of off-site construction. Curious, other than them trying to diversify away from an aging population in Japan, I mean, do you see this as an opportunity for them to really start pushing forward with some of the off-site construction techniques that could benefit your business? Peter Jackson: Well, I mean, I guess I'd start by saying we're huge believers in off-site fabrication. So I think all of us are looking for ways to add efficiency and productivity and speed into this industry in any way that we can. Clearly, the Japanese have done a good job in manufacturing over the years. And I think there are homebuilding operations in Japan that have leaned far more heavily into this off-site fabrication idea. I think the challenge in any of these is, can you do it efficiently. Now historically, the Japanese companies have had very long investment horizons. When they talk about doing something, they're not talking about a couple of years. They're usually talking about a couple of decades. So we'll see. We'll see where they end up. I would say, in the near term, we have very good partnerships with all of the Japanese owned homebuilders in the U.S. We work closely with them. I think we've got some really interesting things we're doing with them. And I think we'll look for opportunities to partner in the offsite fabrication space as well. So at this stage, interesting, certainly something we want to keep an eye on, but we're believers in the idea. Operator: We will move next with Charles Perron-Piché with Goldman Sachs. Charles Perron-Piché: First, I just want to touch on volume versus price in this environment. The guidance seems to imply relatively flat market share assumptions for you in 2026. The builders have been talking extensively about their desire to lower the stick and brick cost this year. Can you talk about some of the discussions that you have with the builders today? How do you get price for the value-add services that you provide against a pretty competitive backdrop? And are you seeing any change in the appetite for value-add product today? Peter Jackson: Well, there's been a lot of pressure across the board. I think that the builders are harvesting -- what the builders are telegraphing is primarily what they already got. I think they're seeing a full year's benefit of the negotiations that we had during the year. And I mean you can see our margins. It's been a challenging environment. At the same time, I think we've done a good job of finding ways to offer packaged solutions, integrated solutions, more value-add across the service and product profile that has helped us be that key partner to kind of protect our position, which in turn protects our price. I'm not going to make believe that price is easy right now. It's certainly not. But ultimately, all of us are trying to figure out how to build homes more affordably. And I think we have an advantage in that regard in that we've got more options for builders to be able to solve that problem than anybody else. And our ability to execute that is superior to everybody else versus vis-a-vis our size, our subject matter expertise and the quality of our folks and the size of our team. So I think that there's certainly a challenge out there, but we've been fairly successful in keeping that balance. The one maybe subtlety, I'll refute one of the things or argue one of the points you made. There is share growth in here in terms of what we're going after, and we're balancing it against some of the erosions that we've seen that we're lapping as part of 2025. So we are doing both, and I think it's critical that we continue to execute on that. That's the kind of thing that will position us in a very strong way coming into the recovery upcoming. Charles Perron-Piché: Got it. Okay. That's helpful color, Peter. And then just switching to the acquisition of Pleasant Valley Homes this quarter. It sounds like it's a strategic move into modular housing. I think you talked about the East Coast mainly at their market. So when you think about the outlook for modular housing, how should you consider this opportunity as part of your growth strategy in general? Peter Jackson: Yes. It's an exciting experiment for us. It's a great business. The Pleasant Valley folks are a great team. They build a really high-quality house. They've been successful bringing it to market in those Northeast states. I love their footprint. I think they've got a very ingenious approach to the way that they've executed their construction process. And we're interested in exploring whether or not there's a partnership there to be had with our builder customers. To be clear, we're not interested in being a traditional retail HUD and modular home seller. That's not the game that we're in. They certainly have a little bit of that business. We're going to leave that alone. We're happy that, that business exists. But our vision is to reach out to our homebuilder partners around the country to say, where does it make sense for you to have access to manufactured modular high quality in your market that helps you fill particularly that sort of lower-end affordable home category in a way that builders feel like is an advantage to them. And in my sense of it, it works very much the way truss does, right? We own most of the truss plants in this country because we're really good at running them and at meeting the demand for multiple builders. So we keep our capacity filled by being a service provider for various builders. I think that's one of the barriers with modular housing is people trying to go on their own and figure out to fill and maintain that capacity. We think we can do more of that capacity filling by really working with our partners and finding ways to do it in a way that benefits them and us. So it's worth exploring. Certainly, it's early days, but optimistic about where we think it will head. Operator: We will move next with David Manthey with Baird. David Manthey: The first question is on the complexion of the year. I get what you're saying relative to the 2 halves that you experienced in 2025, and it's always a little bit hard to parse out what exactly is base business. But it seems like based on your guidance, the first quarter is maybe like 21% of full year midpoint. And typically, even if you exclude last year over the past several years, it's been more like 23%, 24%. So what I'm trying to get to is how much of this is just typical builder conservatism on your part? And how much of it is sort of maybe we are anticipating a little bit of acceleration even relative to normal seasonality through 2026? Peter Jackson: It's definitely the latter for Q1. Yes. No, I don't want to pull any punches. We're ramping very quickly this year versus prior year or even 2 years prior because of how slow we came out of '25. But it's moving like it's doing what you would expect it to do in order to be able to hit our numbers, we're on track, but it does require a pretty aggressive ramp. I think it's maybe underappreciated how dramatically the big builders slowed when they realized they had too many units going into their year-end. David Manthey: Yes. Fair enough. Great. And then second is a little bit relative to this contribution margin, incremental margin discussion. When you think about your cost structure; over the past 3 years, you guys have really constrained operating expenses extremely well. And if we're looking at an acceleration and some growth in '26 and into '27, beyond just the variable compensation elements which would naturally flex, are there any other sort of catch-up items or things that were deferred previously that might come back into play? Or are we just looking at sort of that, as you mentioned earlier, Peter, the outsized kind of contribution margin relative to your long-term targets in the high-teens? Peter Jackson: Yes, that's a great question. The way I would characterize it is, there was -- and I know we're not the only ones, but I'll be candid. There were expenses that were in this business during COVID and during those massive runs that we allowed to maintain because we were more focused on capacity and meeting customer requirements and expectations than we were on maximizing efficiency, just -- not put too fine a point on it. Even from the BMC merger from other acquisitions we did, there were operations where we maybe had the opportunity to do a consolidation or we might otherwise have, but, boy, we needed every bit of that capacity in order to meet the demands, so we left them. And I think what you've seen are some pretty disciplined operators get a hold of this business in a slower period of time and get back to fundamentals. The plays that we're running, the actions we're taking in order to reduce costs and to be more efficient are very much in line with the playbooks we've had here at BFS for 20 years. So this is what we know how to do. These teams are very, very good at it and what you've seen are consolidations, but being able to maintain on time and in full and customer satisfaction indexes in the market. You've seen consolidations of spans and layers, better efficiency, better utilization of either equipment or fleet, all of that with the payoff kind of through the business of being able to, at some point, match the volume adjustments, obviously, but also to be able to capture productivity. So I don't anticipate there being anything we're behind on. I would say even with the challenging market, we've stayed committed to investing in the things that really matter. I think we feel good about the refreshed fleet in the rolling stock, but we're also investing in innovation like technology on the core IT as well as the digital side and our investments in AI. So we're committed to being ready stronger coming into this next recovery than we even are today, and we're better today than we were 2 years ago or 5 years ago. Operator: We will move next with Rafe Jadrosich with Bank of America. Unknown Analyst: You have [ Sean ] on for Rafe. First, so you talked about the weakening revenue environment throughout the quarter. Just curious, did you see a pickup in competition from peers versus earlier in the year? And then it sounds like you guys are doing a good job closing some facilities. But what are you hearing about competitors? Do you think the capacity in the industry is starting to normalize at this point? . Peter Jackson: So in order, no, we didn't see anything really different in the -- at the end of the year with regard to competition. It was pretty consistent. And yes, we have seen a couple of other competitors shutting down facilities. The thing you got to keep in mind, though, is given our scale, we can shut down facilities, and basically, we're just adjusting our footprint in a market, right? We're maybe adjusting our shipping distances or overlap. When most of our competitors shut down facilities, they're exiting the market. So their decisions are a little more dramatic than ours are when it comes to their ability to serve. We have seen a couple. We've also seen folks who have sort of said they were going to open things, all of a sudden put things on hold. So I think that you are seeing a rational reaction in the industry with regard to capacity, not just in our space, I think it's true in a variety of providers in homebuilding products. Unknown Analyst: Okay. Great. And then switching gears, it sounds like you guys are still seeing growth on the installed side of the business. Can you talk about what the size of that was in 2025 and your expectations for 2026 growth in install? And then just a little bit on how margins are trending in that business versus the overall business? Pete Beckmann: So I would say with the install business, it's largely on par with where we were from a percent of our overall business around 16%, 17% of overall. It outpaced, so it didn't decline as much as the single-family overall business. So it was outpacing the market, which means we're gaining more inroads with the install capabilities in our offering across the platform. And the margins for install are generally in line with the categories that you're installing. So that hasn't changed from what we've communicated previously. It's a good business. We see it as another growth lever for us, and we're going to lean into that. And this is a natural extension from what we do with value-added products and the off-site fabrication. So it's a vector that we're going to continue to invest in and strengthen our capabilities. Peter Jackson: And I think it's important to point out that the builders' desire to have a seamless job site. Someone else that can take responsibility for making sure that things are done properly, that reliability is critical. And I don't think that's changed in this market. Yes, there's certainly a finer pencil on everything that we do by virtue of the decline in the market and the affordability challenges. But with the labor situation broadly in our sector with the requirement for these operators, the building -- the homebuilders to really want to run a tight ship, I think our ability to do that alongside them is important reason why we've had continued success in this space. Operator: We will move next with Trey Grooms with Stephens. Trey Grooms: So I guess, first off, on working capital investments in second half this year versus what was the opposite in '25. Is that -- the way we should be looking at that, is that more of a view into your kind of expectations for '27 prepping your inventory levels for a more robust environment there as we kind of enter '27, is that the best way to kind of read that inventory management you're expecting? Pete Beckmann: The way I would kind of adjust what you're thinking, Trey, is as you think about the sales pace as you exit '25 versus the sales pace that we're anticipating for 2026, even a higher sales per day is going to lead to a higher AR balance -- receivables balance, which is an investment in working capital and the value of commodities, assuming that we return to a more normal level by the end of 2026, it's a higher investment on its own for inventory, let alone any positions that we're taking for what we think to come. We generally don't have to take positions on inventory. We manage it very consistently and regularly through the cycle because we have a platform and a network that's very large, and we can withstand any short-term swings and we're in a great spot. I hope that helps. Trey Grooms: Yes, yes, it does. It's more of just kind of the way the year is expected to progress versus what we saw in '25 more than anything. Pete Beckmann: Exactly. We're not confident in '27, Trey. It doesn't mean we're not confident in '27. It just means we don't have to load up. Trey Grooms: Yes. Got it. Perfect. And then last one for me is, obviously, you guys are clearly under earning, if you would, I guess, right now given the macro. But you guys in the past have given us a view into your earnings power in a more normalized housing environment of, I think it was 1 million to 1.1 million starts and you guys are kind of expecting EBITDA in that $2.1 billion to $2.4 billion range, 30% to 33% gross margins, you've given us a lot of detail around that. Is that still kind of the best way for us to be thinking about the earnings power of the business in that more kind of normalized environment or has there been anything that has swung your view into that one way or the other? Pete Beckmann: No, I think you're thinking about it right. We haven't changed our thinking on it. We had that on our scenarios page last quarter, which we didn't have scenarios this quarter, so it's just not in the materials, but it doesn't change the way we're thinking about that earnings power with a normal environment and we're going to continue to look at that through the course of this year and share more expectations around that when we get to Investor Day. Peter Jackson: The biggest problem with our base business chart, Trey, is we're sort of close to the number. The edits away from the base business out of it as well is pretty modest. So you're right, it's far more about the current macro environment that's driving our outcomes, and that normalization that, you and Peter are talking about, is really the storyline for where we're headed. Operator: We will move next with Ivy Zelman with Zelman. Ivy Lynne Zelman: Just thinking through the acquisitions you made maybe just in general, first question, just how much multiple compression have you seen? And then just secondly, when you look at your CapEx for 2026, how much of that is related to investments for AI initiatives? And maybe walk us through what AI is doing to transform the business? Are you reducing headcount? Did you reduce headcount in '25, do you expect to reduce headcount? I can keep going, but I'll stop there, Peter. . Peter Jackson: Yes. Well, welcome to the call, Ivy. It's nice to hear your voice. We've got a lot of stuff going on in that. I guess I'll start with AI and then circle back. I think that the investments we're making in the business around AI, we're trying to be very pragmatic in terms of keeping it focused on things that are going to drive outcomes that are going to make a difference in the business. I think that the idea of introducing Copilot and things that help in the back office, we're doing that, of course, and that's good, and I think it's positive. I think the far more powerful opportunities are ones that we see when we face the operating team at the field level to drive customer-facing benefits. So things we're working on, particularly effective in the estimating space, where we've seen our ability to process plans more efficiently, our ability to speed up the estimating process to get turnaround times to customers more quickly. The goal really is to enhance the experience of the salespeople, to empower them with tools at pace that they haven't seen. We've seen very little in the way of cost reductions in terms of headcount reductions so far. I think we're waiting like everybody else to see where the impacts come, particularly in the back office space. Does someone figure out the solutions that make it easy to adopt and apply in a business environment. I'd say we're far more benefited from pace and capacity to drive sales and to be more focused on growth and customer relationships. I think that's where we've seen the most benefit. In terms of investments, we've done most of what we've been up to internally. Consultants and third parties obviously being brought in to assist with that. But by and large, that's done by our internal team. Only a modest amount of that is capitalizable in any given period. Both on the digital side and on the core IT side is where we are seeing that spend hit. Ivy Lynne Zelman: Great. And then on the multiples for the companies you acquired? Peter Jackson: Yes. So the multiples are kind of in our historical range in terms of the businesses that we've been acquiring in the recent time. Now there's no question that over the past few years, as we've made some of those acquisitions, the payback has been extended because the volumes have declined more than the models have. Now downside wise, I think we're still within the downside band, but it's certainly been.. Ivy Lynne Zelman: Within the range. Peter Jackson: Yes, it's been within the range lately. I think -- as you know, we look at a lot of different deals and a lot of different opportunities. Our ability to lean in where we see real value, where our opportunities to capture synergies are meaningful and we can create value for shareholders, I think we've been -- I'd like to say we're undefeated in getting the assets that we want. So we still feel good about that. It's just a matter of maintaining that discipline in an environment where it's -- you're looking into the future to get your payback for some of these assets that are fighting through the competitive dynamics. Ivy Lynne Zelman: No, that makes sense. And thinking of that for Pleasant Valley Homes, just to clarify, factory-built HUD modular versus manufactured housing, to clarify. And then just any cost differential that you can highlight to your builder customer. When you think about the Pleasant Valley Homes, what are the attributes that modular bring? I know everybody talks about it and the builders are using it, but really, are there any real cost savings relative to stick and brick on-site. Peter Jackson: Yes, that's a great question. Yes. So what we do in that facility is both, right? It runs down a single line from an ability to run a similar size road transportable footprint, you're running HUD down the same line as modular, but they are semi-custom modular. So they're meaningfully modified from the traditional HUD. There's no steel chassis, like it's a traditional modular home designed to various specifications with a lot more variability than maybe the traditional models. It also allows us to customize in some modest ways that make it more applicable to consumer demand and need. So that's the powerful thing from our perspective. The ability to be interchange on that line is what made this particular asset desirable for us and allowed us to experiment while not really harming or disrupting the core business. It's a good business. They make nice money, it's a nice business to add to portfolio, but to be able to do that in is pretty exciting. And for us... Ivy Lynne Zelman: Is there any cost differential, Peter, relative to site built? Peter Jackson: I think there is, and that's what we're in the process of proving out. When we've done the initial analysis, we believe we could do it at or below what it costs builders to do on the job site for these homes. It's all the advantages that we talk about, right? The efficiency of the line, the getting out of the weather, the ability to have flow, coverage, leveraging multiple layers of staffing, it's all of those things that we think are part and parcel to a well-run offsite fabrication that we can apply in a more comprehensive way. Operator: We will move next with Sam Reid with Wells Fargo. Richard Reid: Just wanted to drill down a little bit on your start assumptions for 2026, but more from the context of square footage per start or value per start. I know you alluded a little bit to rate buydowns potentially influencing that. But just contextualize kind of what's embedded in your guidance in terms of average square footage to the extent you've got a view there? Pete Beckmann: Yes. Thanks for the question. So when we think about 2026 and the value per start, it's really a flattening out relative to 2025. So square footage about the same, not seeing a material change up or down, so just shooting the middle. Not seeing a lot of change in the inputs or substitutions within the house at this point, more of a leveling off basically across the line on most everything that we're seeing in those adjustments. So size of the home, the substitution products, the cost inputs as well as the pricing puts. Now we've had some of the overtime and the lapping. There's been some murmurs around some cost increases from certain manufacturers. So we'll have to keep an eye on it as we think -- as we move forward on what that looks like. And cost increase is a good thing for us, and it benefits our overall, as we pass that through, where we had talked about it previously in the value per home shrinking as when we were seeing cost declines and manufacturers lowering the cost basis. Richard Reid: All helpful color. Switching gears on the P&L. So wonder if you contextualize some of the SG&A expenses that are outside of your control? You alluded to some things like insurance and rent. And those are expense buckets that some of your peers have also called up -- called out as maybe being a little bit more inflationary than expected. Just maybe walk us through what's embedded in your guide around those expense buckets and anything outsized we should be mindful of? Pete Beckmann: Yes. So rent, absolutely, an inflationary item that we are subject to, given the portfolio of our locations that are under a third-party lease agreement. Those increases are embedded in our expectations for 2026. As far as the insurances go, we have our expectation based on early analysis from the actuaries and others on where cost of benefit insurance as well as casualty insurance is going. But that's all subject to utilization and what we experienced through the course of the year, so we're trying to factor all those into what we expect for 2026 and mitigated as many surprises as we can. So we don't like the surprises and unfortunately, they show up usually at year-end. Operator: We will move next with Collin Verron with Deutsche Bank. Collin Verron: I just wanted to start on the M&A. How are you guys thinking about the opportunity for incremental M&A in 2026, just with leverage ticking up with EBITDA coming down, free cash flow seeing some of that working capital investment. And then you've also seen a well-capitalized distributor officially enter into direct competition for M&A. So I guess I'd just be curious to your near-term impacts there as well. Peter Jackson: Well, we still think we have opportunity to do M&A. Admittedly, the market has been fairly quiet. It's certainly quieted down over the last, I would say, 3, 6 months by and large, that one big asset, notwithstanding. But we think there's still opportunities for us to continue to add high-quality assets that create value to the portfolio. The reality is having a well-capitalized player talking up the industry, I think, just reinforces we've got a good industry, and there's opportunity. I do think his strategy is a little bit different in terms of how he envisions being successful. I think our ability and our focus on leaning in to support the core homebuilder and major remodeler customer with the subject-matter expertise and capabilities they need to be successful will be the winning strategy at the end of the day. And I think as long as we're sticking to our knitting and doing what we're good at, we will continue to deliver on that, and we know how to add assets very effectively to that pool and capture the synergies that go with. So I still think we've got plenty of track record for folks to look back on and believe in and that we're going to continue to deliver on that into the future. Collin Verron: Great. That's helpful color. And then I just wanted to touch on the guide a little bit for multifamily. I know you're talking about flat starts in 2026, but there is a sizable lag there. And I mean the has been positive in '25. Can you just talk about your expectations for multifamily sales in '26 a little bit more explicitly, just given the lag and sort of your exposure to the high storey and below wood structures, which doesn't necessarily line up with the Census Bureau data? Pete Beckmann: Yes. So it's a great question. As we think about multifamily, it does have that 9- to 12-month lag. As Peter mentioned in his prepared remarks, we've said that the last several quarterly calls. We're seeing some activity in green shoots that we've been quoting. I think we mentioned this on our prior earnings call. That's still the case, but it's waiting. It's pent-up and it's waiting to really take off and I think it's the cost of capital equation that those multifamily developers are waiting on. Now when you think about our sales from a multifamily standpoint. We talked about it all year in 2025 where we really saw it level out, but we were lapping a stronger prior year comp throughout the year compared to 2024. When we think about 2026, even though we have flat starts, there's still some of that normalization that we had throughout 2025 from a margin standpoint and a few other categories that provide us with a headwind, and that's all embedded in our margin guide specifically. Otherwise, we're still excited, and we're pleased with the multifamily business. It's a great portion of what we offer and -- if we have an opportunity to grow in that area, we're going to continue to look for those opportunities to lean into. Operator: We will move next with Ketan Mamtora with BMO Capital Markets. Ketan Mamtora: Just a quick question around sort of Q1. Can you provide any color or context around sort of the activity levels that you are seeing as you've kind of started '26? And how much of an impact recent weather events are having in your guidance? Just trying to understand how much of this is sort of very unique to what happened in January? Peter Jackson: It's both. Yes. No, we started slow. We're starting to see really nice as-expected ramp into January. That weather was as bad as advertised. It shut down big swaths of the homebuilding markets that generally go through those winter months. Texas, Carolinas, parts of Florida, it's just -- it was very disruptive. We didn't call it out because as we say in the past, it's good, it's bad. It's a number that we think over time will level itself out over the first half of the year, but it was certainly was impactful on us. Pete Beckmann: Yes. So just to expand on that, it was about $30 million to $40 million in sales impact for the last week of January that may be lapped into February a little bit. So not a huge number on its own relative to our overall sales projections, but just something that will impact the percentages as we evaluate the year-on-year. Ketan Mamtora: Got it. That's very helpful. And then just coming back to balance sheet and M&A. I'm just curious, as you think about these opportunities and you think about leverage in the short term, understanding that this is kind of a cyclically challenged time, how are you all thinking about sort of leverage in the short term for the right opportunity? Peter Jackson: I would just reinforce, we've always said in the short term, we'll do the right thing strategically for the business knowing that we've got very firm and consistent cash flow throughout the cycle. So we don't generally look at it on a quarter basis. We try and look at it for the full year. In terms of really focusing on that leverage ratio because of the seasonality of our business and what we have going on we feel very confident where we are in terms of the strength of the balance sheet, the liquidity we have available and the way we're running the business and generating cash flow even in a relatively weak market. So it certainly wouldn't deter us from buying the right asset and creating the right value. But that backdrop is always there. We're certainly focused on maintaining that discipline around how we think about capital deployment. Operator: We will move next with Alex Rygiel with Texas Capital. Alexander Rygiel: Any broader comments on Washington policy and how that is sort of being contemplated in your guidance? Peter Jackson: Yes, it's been a really interesting dynamic over the past few months. With regard to the focus being placed on housing and housing affordability, the recognition of how important our sector is to sort of the spirit of our nation, right, in a way that really hasn't gotten this level of attention, at least to my memory. A lot of ideas floating around. I would say not all of them coming to fruition, not all of them having the same level of impact, but people are trying. And I think that the incremental benefits are promising. . Probably the most interesting things to me is this alignment between what the federal government is describing as trying to drive alignment between funding -- transportation funding in particular, and local and municipal compliance with reasonable standards around regulation, right, whether it be codes or easements or density, whatever it is, the Fed is taking a little more heavy-handed stance when it comes to -- we're not going to give you a funding to build out a train station, if you're not going to put density around the train station because there's no point, things of that nature. I think it's interesting. I think it reinforces what I've heard some state governors trying to do in terms of overcoming some of the more destructive components of NIMBYism. And I understand there's going to be a balance, right? There's going to be state and local control in all these environments. But some of it is to the point of problems. It is generating societal problems because the restrictions are too tight. And there is this awareness of it and movement in a way that I think is positive. I'm not going to tell you that it's been massive. I'm not going to tell you there's been a significant impact yet. But the fact that we're having the conversations and incremental steps are occurring is incredibly encouraging versus where we were 2, 3, 5 years ago or can be really over the last 50 years. Operator: And this concludes our Q&A session as well as the Builders FirstSource Fourth Quarter 2025 and Full Year Earnings Conference Call. Thank you for your participation, and you may now disconnect.
Operator: Good day, and welcome to the Q4 2025 SunCoke Energy, Inc. Earnings Conference Call. All participants will be in a listen-only mode. By pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Shantanu Agrawal, Vice President, Finance and Treasurer. Please go ahead, sir. Thanks, Nick. Good morning, and thank you for joining us this morning to discuss SunCoke Energy, Inc.'s Shantanu Agrawal: fourth quarter and full year 2025 results as well as 2026 guidance. With me today are Katherine Gates, and Chief Executive Officer and Mark Marinko, Senior Vice President and Chief Financial Officer. This conference call is being webcast live on the Investor Relations section of our website and a replay will be available later today. Following management's prepared remarks, we will open the call for Q&A. If we do not get to your questions on the call today, please feel free to reach out to our Investor Relations team. Before I turn things over to Katherine, let me remind you that the various remarks we make on today's call regarding future expectations constitute forward-looking statements. The cautionary language regarding forward-looking statements in our SEC filings apply to the remarks we make today. These documents are available on our website as are reconciliations to non-GAAP financial measures discussed on today's call. With that, I will now turn things over to Katherine. Katherine T. Gates: Thanks, Shantanu. Good morning, and thank you for joining us today. Before we get started, I would like to congratulate Mark on his previously announced retirement. Mark has been instrumental in guiding SunCoke Energy, Inc. through critical phases of our evolution, including the recent acquisition of Phoenix, and the entire SunCoke Energy, Inc. team wishes him the best in his retirement. I would also like to congratulate Shantanu Agrawal on his well-deserved appointment as Chief Financial Officer. Shantanu has acquired deep knowledge of SunCoke Energy, Inc.'s business during his eleven years at the company. He is ideally situated to continue our focus on financial discipline, operational excellence, strategic growth, and creating long-term value for shareholders. I want to share a few highlights from 2025 before I turn it over to Mark to review the results in detail. First, I want to recognize another year with remarkable safety performance. SunCoke Energy, Inc., excluding Phoenix, ended the year with a total recordable incident rate of 0.55. Safety is our first priority, and I would like to thank all of our employees for their continued commitment to exceptional safety performance. Turning to our financial results, we delivered consolidated adjusted EBITDA of $219,200,000. These results reflect the addition of Phoenix for five months, as well as lower terminals handling volumes driven by market conditions. The domestic coke segment was impacted by the change in mix of contract and spot coke sales coupled with lower economics on the Granite City contract extension and the breach of contract by Algoma. We have extended our Granite City coke making contract with U.S. Steel through December 2026 at similar economics to the 2025 extension. We have also extended our Haverhill II contract with Cleveland-Cliffs through December 2028 with key provisions similar to the previous contract. In addition, we have the new take-or-pay coal handling agreement at KRT that began in 2025. We will benefit from a full year of that contract in 2026. We also made great progress on our capital allocation priorities in 2025 with the acquisition of Phoenix. potential in this business. The integration is progressing well, and we are excited for the growth In 2025, we also returned approximately $41,000,000 to our shareholders via our quarterly dividend. We expect to continue our quarterly dividend throughout 2026. With that, I will turn it over to Mark to review our fourth quarter and full year earnings in detail. Mark? Thanks, Katherine. Mark W. Marinko: Turning to Slide four. The fourth quarter net loss attributable to SunCoke Energy, Inc. was $1 per share, down $1.28 versus 2024, primarily driven by one-time items Mark W. Marinko: totaling $0.85 per share net of tax, including a non-cash asset impairment charge primarily due to the closure of Haverhill 1, site closure costs were primarily related to Phoenix operating sites, and restructuring and transaction costs primarily primarily related to the acquisition of Phoenix. Fourth quarter net loss was also impacted by lower coke sales volumes in the domestic coke segment due to the breach of contract by Algoma. Our full year net loss attributable to SunCoke Energy, Inc. was $0.52 per share, down $1.64 versus the full year 2024. The decrease was primarily driven by one-time items totaling $0.97 per share net of tax, including a non-cash asset impairment charge primarily due to the closure of Haverhill One, acquisition-related transaction and restructuring costs, and Phoenix operating site closure costs. Full year net loss was also impacted by the change in mix of contract and spot coke sales, coupled with lower economics on the Granite City contract extension in the domestic coke segment, partially offset by lower income tax expense driven by capital investment tax credits. Consolidated adjusted EBITDA for the fourth quarter 2025 was $56,700,000, down $9,400,000 versus the prior year period. The decrease was mainly driven by lower coke sales volumes due to the breach of contract by Algoma, lower economics on the Granite City contract extension, and lower terminals handling volumes due to market conditions, partially offset by the addition of Phoenix Global. On a full year basis, we delivered adjusted EBITDA of $219,200,000, down $53,600,000 versus the prior year. The year-over-year decrease was primarily driven by the change in mix of contract and spot coke sales, lower economics on the Granite City contract extension, lower coke sales volumes due to the breach of contract by Algoma, and lower terminals handling volume due to market conditions, partially offset by the addition of Phoenix Global. Turning to Slide five to discuss the year-over-year adjusted EBITDA variance in detail. Our domestic coke business delivered full year adjusted EBITDA of $170,000,000, down $64,700,000 from the prior year period. Results were impacted by the change in mix of contract and spot coke sales, the lower Granite City contract extension economics, and the Algoma breach of contract. Our Industrial Services segment, which includes the former logistics segment and new Phoenix Global business, delivered full year adjusted EBITDA of $62,300,000, representing a year-over-year increase of $11,900,000. The increase is primarily driven by the addition of Phoenix Global, partially offset by lower terminals handling volumes due to market conditions. Finally, corporate and other expenses, which include results from our legacy coal mining business and Brazil coke making business, were $13,100,000, an increase of $800,000 year over year. Turning to Slide six to discuss capital deployment in 2025. We generated operating cash flow of $109,100,000 in 2025, net cash provided by operating activities negatively impacted by two items. Number one, the accounting treatment of a portion of Phoenix Global's acquisition price. Phoenix's management incentive plan and transaction costs, cash payments totaling $29,300,000 included in the acquisition price but flowed through our operating cash flow as a use of cash. Number two, the $30,000,000 impact from the breach of contract by Algoma, Mark W. Marinko: and coal coke and coal inventory on the books Mark W. Marinko: at year-end. Without the impact of these two one-time items, our operating cash flow would have been approximately $59,000,000 higher. Net borrowing on our revolver was $193,000,000. Cash acquired from the Phoenix Global acquisition was $24,300,000. And after factoring in the $29,300,000 flowing through operating cash flow, the net purchase consideration for Phoenix was $295,800,000. Capital expenditures came in at $66,800,000, which is slightly below our revised guidance of $70,000,000 due to the timing of CapEx payments. We also returned capital to our shareholders in the form of a $0.48 per share annual dividend, which was a use of approximately $41,000,000 of cash. We ended 2025 with a cash balance of $88,700,000 and $132,000,000 of availability on our $325,000,000 revolver, resulting in strong liquidity of approximately $221,000,000. Now I would like to turn to our expectations for 2026. Slide eight lays out our SunCoke Energy, Inc.’s historical adjusted EBITDA, free cash flow generation, annual dividends paid per share, and gross leverage. SunCoke Energy, Inc. has a strong track record of generating steady free cash flow, and we expect the trend to continue with the addition of Phoenix Global. Our deliberate and careful capital allocation decisions over the last several years have strengthened our balance sheet and financial position while continuing to reward our long-term shareholders. We refinanced our debt and prioritized deleveraging in the midst of COVID-19, which allowed us to significantly lower our interest expense, resulting in higher free cash flow conversion. We expanded both our foundry market presence and participation in the spot blast coke market during 2023 and 2024, while our terminals expanded both their customer base and their services. With our leverage target in sight, we prioritized return of capital to shareholders by establishing a quarterly dividend and increasing that dividend each year for three years in a row. While our 2025 results reflect the challenging market conditions we operated in during the year, we still generated positive free cash flow for the year. We anticipate meaningful recovery in 2026 with an optimized coke fleet, extended coke making contracts at Granite City and Haverhill II, improved market conditions for our terminals, and a full year of Phoenix Global. With deleveraging as our priority, we plan to use excess free cash flow to pay down the outstanding borrowing on our revolver and anticipate 2026 year-end gross leverage around 2.45 times, comfortably below our long-term target of three times. As Katherine mentioned earlier, we also intend to continue utilizing our free cash flow to reward our shareholders with our regular dividend, which is reviewed and approved on a quarterly basis by our Board of Directors. Moving to 2026 guidance summary on Slide nine. We expect consolidated adjusted EBITDA to be between $230,000,000 and $250,000,000 in 2026. Domestic coke adjusted EBITDA is expected to be lower by $2,000,000 to $8,000,000, primarily driven by approximately two twenty thousand lower coke Mark W. Marinko: lower contract blast Mark W. Marinko: coke sales tons. With the closure of Haverhill One, our revised capacity is now 3,100,000 blast furnace equivalent tons. We will be running at full utilization and are sold out for the year. Industrial Services adjusted EBITDA is expected to be higher by $28,000,000 to $38,000,000 in 2026, primarily driven by a full year of Phoenix Global and our expectations for improvement in market conditions for our terminals. Corporate and other expenses are expected to be higher by $5,000,000 to $9,000,000, primarily driven by normalized employee bonus expense and Phoenix integration-related IT costs. We expect 2026 corporate expenses to be comparable to 2023 and 2024 spending. Moving on to Slide 10 to discuss domestic coke segment in detail. In 2026, we expect our domestic coke adjusted EBITDA to be between $162,000,000 and $168,000,000, sales of approximately 3,400,000 tons, which includes contract foundry and spot blast coke. We have optimized our coke fleet with the closure of Haverhill One operations due to the breach of contract by Algoma. The approximately 500,000 ton reduction in coke production and sales represent our lowest margin tons. As a result, we expect a modest increase in the domestic coke adjusted EBITDA per ton in 2026. Our revised total domestic coke blast furnace equivalent capacity is now approximately 3,700,000 tons. Have extended our Granite City coke making contract through 12/31/2026, similar economics to the 2025 extension. We have also extended our Haverhill II contract through December 2028 with similar economics to previous contracts and will provide Operator: Cleveland-Cliffs with 500,000 tons of coke annually. Mark W. Marinko: Our coke fleet will be operating at full utilization in 2026. We have approximately 3,000,000 tons contracted under long-term take-or-pay agreements and the remaining capacity is sold out for the year between the foundry and spot markets. Finally, we are experiencing a slower than normal start to 2026. Our Middletown coke plant experienced a turbine failure during a planned outage, which is impacting power production. This is an insured event and we expect the turbine to be back in operation mid-year. Additionally, the severe winter weather we all experienced over the last few weeks has impacted several several of our operations as well. Mark W. Marinko: The impact of these events is reflected Mark W. Marinko: in our 2026 guidance. Moving to Slide 11 to discuss Industrial Services in more detail. 2026 Industrial Services adjusted EBITDA is estimated to be between $90,000,000 and $100,000,000. Our outlook for 2026 reflects our expectations for improvement in market conditions. We will have a full year of Phoenix Global in our results for the year. As our terminals handling volumes are largely market driven, our current guidance assumes improved market conditions in 2026. We have included partial synergies in our 2026 guidance and expect to continue recognizing synergies in 2027. We expect approximately 24,000,000 tons of terminals handling volumes and approximately 22,000,000 tons of steel customer volume serviced. Moving to Slide 12. Once again, we expect consolidated adjusted EBITDA to be between $230,000,000 and $250,000,000. Our Domestic Coke segment is expected to deliver adjusted EBITDA between $162,000,000 and $168,000,000 while the Industrial Services segment is expected to deliver between $90,000,000 and $100,000,000 in adjusted EBITDA. We anticipate CapEx in 2026 between $90,000,000 and $100,000,000 driven by a full year of Phoenix CapEx requirements. We expect 2026 operating cash flow to be between $230,000,000 and $250,000,000 and our free cash flow is expected to be between $140,000,000 and $150,000,000. With that, I will turn it back over to Katherine. Katherine T. Gates: Thanks, Mark. Wrapping up on Slide 13. As always, safety is our first priority. We are coming off of another year of excellent safety performance and the team remains committed to maintaining strong safety and environmental performance in 2026. Robust safety and environmental standards set SunCoke Energy, Inc. apart and are central to our reliable delivery of high-quality coke and industrial services. In 2026, our focus will be on utilizing our free cash flow to support our capital allocation priorities. We will use excess cash to pay down our revolver balance with a goal of gross leverage below three times by 2026 and beyond. We also plan to continue returning capital to shareholders via the quarterly dividends. In addition, our efforts will continue on the seamless integration of Phoenix, maintaining the strength of our core businesses, as well as assessing new growth opportunities across all areas of our business. As always, we continuously evaluate the capital needs of the business, our capital structure, and the need to reward our shareholders, and we will make capital allocation decisions accordingly. We continue to see SunCoke Energy, Inc. being well-positioned for long-term success. We continue to invest in our coke and industrial services assets to ensure that they are safe, efficient, reliable, and environmentally compliant, putting SunCoke Energy, Inc. in the best position to grow and diversify our customer and product base. Finally, we are pleased to share that we plan to host a virtual Investor Day on Thursday, February 26. We are looking forward to discussing the recent developments at SunCoke Energy, Inc. and having some one-on-one conversations. With that, let us go ahead and open up the call for Q&A. Operator: Thank you. We will now begin the question and answer session. The first question will come from Nick Giles with B. Riley Securities. Please go ahead. Thank you, Operator, and good morning, everyone. This is Henry Hearle on for Nick Giles. Mark W. Marinko: First off, Mark, congratulations on your retirement. And Shantanu on the CFO appointment. Operator: Great. Thank you. Last call, you discussed Operator: oh, yeah. Operator: Of course. So on the last call, you discussed pursuing all legal means to enforce the Algoma contract. Mark W. Marinko: And recover any financial losses. Operator: But now with Haverhill One closed and subsequent impairment charges, could you give us some more color on the current status of litigation Mark W. Marinko: and what are some of the likely outcomes? Katherine T. Gates: Sure. And thanks for the question. We continue to pursue Algoma in its in an arbitration arbitration. We are pursuing all legal means to recover our losses. So we absolutely believe we have an enforceable contract. This is a clear breach of contract by Algoma, and we expect to prevail in our litigation with them. The breach by Algoma is actually ongoing. We had sales to them in 2025 as well as in 2026. So if you think about this in terms of, you know, the amounts that are owed by Algoma and what we are pursuing, in our third quarter call, we said that we had that the impact to the working capital for the breach by Algoma could be up to $70,000,000 and this is in 2025. So if you look at our guidance summary, there is a deferral cash receipt from Algoma for $30,000,000 in 2025. So you can see that we are actually able to do much better and mitigate that potential loss through sales to third parties and also through the turn down of our facility. So that amount that you see, that $30,000,000, it actually represents part but not the full amount of the Algoma losses for the breach of contract in 2025. But, again, as I said, that breach is 2025, but also ongoing, and we are pursuing not just our losses from our losses in 2026. Beyond that, I cannot really provide detail on the outcome of the litigation since it is active litigation, but I will emphasize again that this is a clear breach of contract and we expect to recover. The other thing that I can say that might provide some color and be helpful is that if you are looking at bridging our 2025 to our 2026 guidance, is really as a matter of coincidence the losses from in 2025 are very similar to what we would have expected to have lost in 2026. So in other words, what we would have made last year with Algoma and this year without Algoma is not meaningfully different. And so I hopefully that is helpful if you are thinking about bridging the years, but really beyond that, I cannot say more because we are in active litigation. Mark W. Marinko: Okay. Yeah. That is very helpful. Thanks for that. And then moving over to Phoenix Global, are you guys still Operator: anticipating an annual EBITDA contribution of roughly $60,000,000 and synergies of $5,000,000 to Mark W. Marinko: 10 in this 2026 guidance? Katherine T. Gates: Yes, we are. Operator: Okay. And then could you also remind us of any of the onetime integration costs that you incurred with Phoenix Global in 4Q? And then should we expect any more in 1Q of this year? So that related just to Phoenix, Mark W. Marinko: one-time it is, you had some site closure costs of about $3,900,000. That is really related to some international sites that during due diligence we identified that we would like to close down. There were some transaction costs of about $600,000 as well. Really related to the Phoenix. That is the Phoenix side. Yep. Mark W. Marinko: Okay. Great. Thanks for the time guys and continue best of luck. Thank you. Operator: The next question will come from Nathan Martin with The Benchmark Company. Please go ahead. Thanks, Operator. Good morning, everyone. First, I would also like to congratulate Shantanu on his upcoming promotion and, of course, wish Mark well in his retirement. Thank you. Thanks, mate. Haverhill One closure, first question there, is that permanent, or would you guys be able to reopen if market conditions improve Nathan Pierson Martin: And then what savings, if any, do you see on the coal side from the closure? Katherine T. Gates: Sure. So the Haverhill One could be restarted, but it would require a significant capital investment and it would take about twelve to eighteen months to restart. So that facility was taken down completely cold. So we would certainly be willing to restart that facility, but we would need to see a meaningful a meaningful return to do it. And, you know, sitting here today with the market conditions being what they are and Algoma's breach, we do not really see any economic value in the asset. I think it is important to note that, you know, we do not have any sort of environmental or other remediation related costs for Haverhill One. So no reclamation, no remediation. We have some non-material costs to remain in sort of compliance. But they are minimal. And then in terms of the savings that we will see from Haverhill One, we have a reduction in our workforce and obviously some other costs related to ongoing O&M for that facility. Nathan Pierson Martin: And Katherine, I am assuming all those costs are incorporated in guidance already? Katherine T. Gates: They are. Nathan Pierson Martin: Okay, perfect. Second, I wanted to touch on, you know, maybe EBITDA cadence. Like, how should we think about that as we go through the year? You guys called out the Middletown turbine failure. I think that is said, you know, come back maybe midyear. Obviously, the recent Arctic weather impacting operations as well. So maybe a couple things there. Like, what is the cost on the turbine? You know, again, how should that impact operations in sounds like the first half? And then, you know, additionally, like, when will most of the IT integration and bonus expense items hit that you guys talked about? Katherine T. Gates: Sure. Why do not I start with the weather and the turbine outage? So obviously, you have seen this across the space. Like, we had an absolutely brutal start to the year. So between the extreme storms, the extreme freeze, as Mark mentioned, really all of our facilities were impacted, Phoenix sites, terminals, and our coke plants. And the impact was really the most acute at Indiana Harbor, which sits on a peninsula on Lake Michigan. And so was significant lost production there, and you are going to see that come through in the first quarter results. But we do have the balance of the year to make that up at our other facilities. With respect to the Middletown turbine outage, so not only did that impact our fourth quarter because we had six weeks of lost power that was not built into our revised guidance, but we also had the entire really first half as you mentioned where we will have that turbine down, we will be addressing the unexpected failure, and it is an insured event. But we will not see any earnings associated with the power production at Middletown until the turbine is back up and we have recovered the amounts that were owed for that lost power from the insurer. So I, while not being able to give sort of plant-specific EBITDAs, you know, that we do not do, what I can tell you is that the impact from those events, the Middletown turbine and the weather that impacted the first quarter, that is going to aggregate to approximately a $10,000,000 impact in the first quarter. And then again, we do not expect to see the turbine up and the recoveries from the power in the second in the second quarter. So that may help you a little bit as you are trying to build out the cadence of the year. Nathan Pierson Martin: Yeah. No. That is definitely helpful, Katherine. Appreciate that. And then maybe just related while you are talking about the power production there, anything we need to think about for power at Haverhill One? With that being down? Any losses there? Katherine T. Gates: No. That facility did not produce power, so no impact. Nathan Pierson Martin: Okay. Appreciate that. Nathan Pierson Martin: Maybe one last question. expected improvement in tons handled. Could you kind of walk us through what is driving the in the Industrial segment? Is this mainly the KRT expansion and take-or-pay there you mentioned earlier? How should we think about CMT? I believe you guys still also have some small take-or-pay there for 2026 as well. Thanks. Katherine T. Gates: Sure. So, yes, we have built in our guidance a full year of the new contract that we began in 2025 at KRT. We are also expecting some modest recovery overall across both KRT and CMT. And you are seeing that come through in the guidance as well. Nathan Pierson Martin: Okay. Great. I will leave it there. I appreciate the time, and best of luck in 2026. Katherine T. Gates: Thank you very much. Operator: This concludes our question and answer session. Would like to turn the conference back over to Katherine Gates, President and CEO, for any closing remarks. Katherine T. Gates: Thanks. I want to thank everyone for joining us today. And again, the SunCoke Energy, Inc. team for their hard work and excellent safety performance in 2025. We are looking forward to speaking with everyone on the twenty-sixth. Let us continue to work safely today and every day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Kite Realty Group Trust Fourth Quarter 2025 Earnings Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Bryan McCarthy, Senior Vice President, Corporate Marketing and Communications. Please go ahead. Bryan McCarthy: Thank you, and good morning, everyone. Welcome to Kite Realty Group Trust's fourth quarter earnings call. Some of today's comments contain forward-looking statements that are based on assumptions of future events and are subject to inherent risks and uncertainties. Actual results may differ materially from these statements. For more information about the factors that can adversely affect the company's results, please see our SEC filings, including our most recent Form 10-Ks. Today's remarks also include certain non-GAAP financial measures. Please refer to today's earnings press release available on our website for reconciliation of these non-GAAP performance measures to our GAAP financial results. On the call with me today from Kite Realty Group Trust are Chairman and Chief Executive Officer, John Kite; President and Chief Operating Officer, Thomas K. McGowan; Executive Vice President and Chief Financial Officer, Heath R. Fear; and Senior Vice President, Capital Markets and Investor Relations, Tyler Henshaw. Given the number of participants on the call, we kindly ask that you limit yourself to one question and one follow-up. If you have additional questions, we ask that you please rejoin the queue. I will now turn the call over to John. John A. Kite: Okay. Thanks, Bryan, and thanks, everyone, for joining us today. The fourth quarter concluded a year of outstanding execution by the KRG team. The following highlights underscore the depth and impact of our operational and transactional accomplishments. Leased nearly 5,000,000 square feet of space, and our new leasing volume marked the highest annual volume in the company's history. We leveraged the strong demand for space in our high quality portfolio, to improve our lease structures, embed higher rent escalators, and optimize our merchandising mix. We entered into two joint ventures with GIC totaling approximately $1,000,000,000 of gross asset value. We sold approximately $6,222,000,000 of noncore assets which reduced our percentage of ABR coming from power centers by 400 basis points compared to last year. And increased our exposure to neighborhood grocery, life and mixed use assets. Allocated a portion of the proceeds of these sales to $300,000,000 of stock buybacks at a significant discount to our consensus NAV. Most importantly, our total activity in the year was accretive on an annualized basis. And our net debt to EBITDA remains below our long term target range of five to 5.5 times. John A. Kite: We have a relentless team that will capitalize on this momentum and accomplish even more in 2026 and beyond. Turning to our results. Our leased rate increased by 120 basis points sequentially, driven by continued demand for space across our portfolio particularly with anchor tenants. We signed leases with nine anchor tenants in the fourth quarter and a total of 28 during 2025, representing approximately 645,000 square feet. The anchor leasing in 2025 was done at a 24% blended comparable cash spreads, 26% gross returns on capital, included names like Whole Foods, Trader Joe's, Crate and Barrel, Nordstrom Rack, Sierra, HomeSense, Ulta, and Barnes and Noble. While our box inventory is being absorbed, the anchor demand remains unabated, which allows us to drive better lease terms such as reducing the number of fixed options, limiting use restrictions, and incorporating more favorable cotenancy clauses. Our small shop lease rate increased 50 basis points sequentially and 110 basis points year over year. We have been on a steady upward trajectory over the last five years, and over the course of 2026, we intend to drive our shop lease rate to new heights. Our focus continues to be on higher long term organic growth, an effort that will pay dividends long after our sizable signed-not-open pipeline normalizes. The embedded rent bumps for the portfolio are 180 basis points, a nearly 25 basis point increase from 2024. By shedding lower growth assets and negotiating better annual bumps, we are well on our way to hitting our goal of 200 basis points of embedded escalators in the portfolio. Turning to development. Our activities at One Loudoun—it is important to appreciate that this is not a run-of-the-mill expansion project. We are adding 86,000 square feet of retail space, 33,000 square feet of highly amenitized office space, 169 full-service hotel rooms, and 429 additional luxury multifamily units to a premier mixed-use asset located in the wealthiest county in the country. The retail portion of the expansion is currently 65% leased to names like Arhaus, Williams-Sonoma, Pottery Barn, Tatte, and Alo Yoga. In 2025, we took a series of critical steps to transform our portfolio and refine our investment thesis. Together with a world-class partner, we acquired a landmark property in Legacy West and contributed three larger-format, well-located assets to a second joint venture. Legacy West has been outperforming our original underwriting, and since our acquisition last April, we have signed or opened names like Watches of Switzerland, Ralph Lauren, The Henry, Buck Mason, Seventh Avenue, and Adidas. As one of the elite open-air assets in the country, Legacy West has opened the door to a new tier of luxury tenant relationships and we see a clear opportunity to replicate that success across select assets in our portfolio. We sold 13 properties and two land parcels in 2025 for approximately $622,000,000. The disposition pool was primarily composed of larger-format assets with embedded rent escalators significantly below our portfolio average. The sales also allowed us to shed a total of 21 watchlist anchor boxes representing approximately 578,000 square feet of space. At the beginning of 2025, we indicated there would be an acceleration in our capital recycling activities and that is exactly what happened. In totality, we were a significant net seller in 2025. Based on where our stock has traded, we leaned into the capital allocation cues by selling larger-format, lower-growth assets into the private market at yields well inside of our implied cap rate, redeployed the majority of the proceeds into $300,000,000 of share repurchases at a 9% core FFO yield. In summary, we took advantage of a clear yield arbitrage opportunity while at the same time derisking our cash flows and enhancing the growth rate of our portfolio. Looking into 2026, the midpoint of our guidance has limited transaction activity that Heath will address in a moment. As for any transactional activity beyond that, we have previously discussed a possible second round of larger-format noncore dispositions to further elevate the quality of our portfolio. Any such recycling would be pursued opportunistically so long as it is minimally disruptive to earnings and otherwise consistent with the objective of last year's dispositions. As always, I want to thank the KRG team for their continued dedication and considerable efforts to deliver strong results and execute on our strategy. I will now turn the call over to Heath to discuss the details of Q4 and 2026 guidance. Heath R. Fear: Thank you, and good morning. 2025 was an extremely productive year, and we are taking that same drive and conviction straight into 2026. As a team, we are focused on converting momentum into results by further optimizing and derisking the portfolio, upgrading our operating platform, embracing technological change, and staying ahead of emerging trends. Turning to our results, KRG earned $0.52 of NAREIT FFO per share and $0.51 of core FFO per share in the fourth quarter. For the full year, KRG earned $2.10 of NAREIT FFO per share and $2.60 of core FFO per share. Our core FFO per share grew 3.5% year over year, and as a reminder, core FFO focuses on the fundamental operating results and serves to eliminate the non-cash noise. For the full year, same property NOI growth was 2.9%. Take note that our full year 2025 same property NOI result is 100 basis points above our original guidance. Over the past four years, our same property NOI growth has averaged 4%. When accounting for our disposition activity in the fourth quarter, our signed-not-open pipeline grew $4,000,000 sequentially to $37,000,000 of NOI, and the gap between leased and occupied space widened to 340 basis points. During the quarter, we executed 61 new leases that added approximately $14,000,000 of NOI, which more than offset the 61 tenant openings representing approximately $10,000,000 of NOI. Importantly, about 70% of that signed-not-open NOI is expected to come online in 2026. For 2026, we are establishing our NAREIT and core FFO per share guidance ranges between $2.06 and $2.12. Included at the midpoint of our guidance are the following assumptions: same property NOI growth of 2.75%, a bad debt reserve of 100 basis points of total revenues, and interest expense net of interest income of $121,000,000. The midpoint of our guidance also assumes approximately $110,000,000 of 1031 acquisitions in the first half of the year, offset by approximately $115,000,000 of noncore asset sales later in 2026. I encourage all of you to review page five of our investor presentation which bridges 2025 NAREIT and core FFO results to the midpoint of our 2026 guidance. Our same property NOI cadence for 2026 will be the opposite of 2025. We anticipate lower growth in the first half followed by an acceleration in the back half of the year and into 2027. The cadence is primarily due to bankruptcy rents we collected in 2025 and the impact of our signed-not-open pipeline in 2026. Interest expense will be roughly a $0.03 tailwind into 2026 driven by lower line of credit balances following last year's transactional activity and higher capitalized interest as we accelerate development activities at One Loudoun. Our recurring but unpredictable items are serving as a $0.04 headwind in the 2026 guidance. Termination fees were a historical outlier in 2025. Our philosophy with establishing guidance is always to set expectations based on things we have clear visibility to while maintaining a pathway to outperformance. While our 2025 allocation activity is expected to be accretive on a full year basis, the timing of dispositions and associated deployment of proceeds are acting as a $0.02 headwind into 2026. You will note that our NAREIT and core FFO per share guidance is the same for 2026. This reflects the continued wind down of non-cash items stemming from our 2021 merger, including straight-line rent, lease intangibles, and debt marks, resulting in a more balanced noncash profile for the year. We have consistently emphasized that the strength of our balance sheet provides us tremendous flexibility in how we allocate capital. The recent dispositions and share repurchase activity are clear examples of that flexibility in action. Our balance sheet remains one of the strongest in the sector with over $1,000,000,000 in liquidity, a net debt to EBITDA of 4.9 times, giving us the capacity to pursue opportunities that enhance shareholder value while maintaining our financial discipline. We remain firmly committed to our long term leverage target of low to mid five times net debt to EBITDA which continues to position us well for both stability and growth. Thank you to our team for their relentless effort to deliver strong results and create long term value for all our stakeholders. We look forward to seeing many of you over the next several weeks in much warmer weather. Operator, this concludes our prepared remarks. Please open the line for questions. Operator: Thank you. Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from the line of Cooper R. Clark with Wells Fargo. Your line is now open. Cooper R. Clark: Great. Thanks for taking the questions. I just wanted to touch on some of the noncore dispositions assumed in guidance. Just curious if you could provide expectations on pricing there and whether it or not it is fair to assume that is mostly comprised of power centers? John A. Kite: Yeah. I mean, I think you can assume that it is similar to what we have done in 2025. And we, you know, it obviously has not happened yet, so we are not, you know, we are not going to give too much color on where we assume the cap rates to be. But I think overall, the market continues to be very healthy, you know, and there is a strong demand for that type of product. Cooper R. Clark: Great. Thanks. Then on the 1031 acquisitions, just curious what type of product you are looking at today and how we should be thinking about the buy box on different types of assets you are looking in the market? Heath R. Fear: Yeah. I think, again, in general, in terms of what we are looking to on, we continue to want to execute on this idea of moving away from the larger format centers and into more of the neighborhood grocery and lifestyle mixed use. Again, with a focus on, you know, embedded rent growth. But, also, some of this activity is based on, you know, activity that we had at the '25 relative to, you know, gains and losses. Right? So we have to be focused on this idea of trying to harvest some losses to offset some gains. So it is not simply just about product type. There is a little bit of that going on as well. But in general, you know, the theme is that we want to continue to move the portfolio in a direction that will grow our embedded rent growth, you know, and as, you know, getting up to growing it by 25 basis points in a year up to almost 1.8%. You know, we are closing in on this goal of 2% embedded rent growth. That is just a significant driver for us in the future. So it is kind of a combination of all those things. Keith, you got anything? Heath R. Fear: Yeah. I would just add, Cooper, that the acquisitions and the dispositions are really accomplishing the same thing. So the 1031 acquisitions are really just shielding gains from last year. The $115,000,000 of assets have embedded losses. Again, achieving the same thing, which is managing through our taxes and at the same time derisking the portfolio and improving the overall quality. So both different sides of the same coin, so to speak. Cooper R. Clark: Great. Thank you. Thanks. Operator: Our next question comes from the line of Andrew Reale with Bank of America. Your line is now open. Andrew Reale: Good morning. Thanks for taking my questions. First, I was just hoping maybe you could speak to some of the key swing factors that would drive you towards the higher or lower ends of the guidance range? And then specifically for the S&O pipeline, how much of that timing is ahead. Heath R. Fear: I am sorry. Can you ask your question? Andrew Reale: Sure. Just with the S&O pipeline, how much of that timing is within your control, and what levers could you pull to potentially accelerate some of that commencement? Heath R. Fear: So I will answer the first question which is what is going to put you to the high and the low end of your range. So listen, on the same store side, it is the typical suspects. It is lower bad debt, RCDs, rent commencement dates, retention, higher overage. Those are your typical same store things that put you in the higher or lower end of your range. And then below same store, as we talked about, there is recurring and unpredictable items. Term fees, land sales, fee income, etcetera. We mentioned that is a $0.04 drag into this year, but we would only put into guidance things that we have visibility on so that number could grow over the course of the year. Timing of the transactional activity that we just mentioned could also impact the higher or lower end of the range. That is, again, deployment of the sale proceeds, when we are going to get those 1031 done, when do we sell the other $115,000,000. And finally, as John mentioned on the call, are we doing the second pot of dispositions. Again, that is TBD. But those are all sort of the main broad factors that really sort of bring us high or low on the range. And then Tom, do you want to discuss what we can control on the RCDs? Thomas K. McGowan: Yeah. From an RCD standpoint, I think one of the most important factors is once we are at a comfortable state of moving forward, getting drawings started, doing everything we can from a permit standpoint, or if situations require multiple permits, we consolidate those to avoid delays. So we have four or five tools that we can take off on to improve those and we are in the midst of really tackling those right now. Heath R. Fear: Okay. Andrew Reale: That is helpful. Thanks. And then if I could just follow-up on the recurring but unpredictable items. I know you mentioned the $0.04 headwind this year. But could you just quantify what is currently baked into the assumption as it relates to term fees or any land sale gains or anything else? Heath R. Fear: Yeah. Just to put context, we had around $21,500,000 of recurring but unpredictables last year. We are just under $13,000,000 this year. And it is spread across typical suspects, term fees, land sale gains, and development fees. So again, that is what we have purview into right now. And we only put things in that we have really, really great visibility to. And to the extent we are able to get more of that over the course of the year, that will be a source of outperformance. I will observe, however, though, what we have in the model right now is pretty much a run rate. So if you look at between 2023, 2024, and 2025, it is running around $13,000,000 a year. So that is kind of a midpoint, I think. So we will see. Again, it is a lot of time in front of us. Thank you. Operator: Thank you. Our next question comes from the line of Todd Michael Thomas with KeyBanc Capital Markets. Your line is now open. Todd Michael Thomas, your line is open. Please check your mute button. Todd Michael Thomas: Yeah. Hi. Thanks. Sorry about that. I just wanted to follow-up on capital recycling, some of the transaction commentary. Heath, in terms of the $115,000,000 of dispositions assumed in guidance and the 1031 you plan to make. Is there any update on progress to dispose of City Center that you can discuss? And how should we think about deploying the balance of the cash and restricted cash on the balance sheet? Heath R. Fear: Yeah. So great question, Todd. So on the $115,000,000 we are selling, all of it is in process. As you know, we were forced to remarket City Center as we were cleaning up some tenant issues. That one is still actively in the process. You know, the weighted average transactional date for that group of assets is August, so it is something later in the year. Then in terms of how we are applying the proceeds, if you look at our balance sheet, Todd, you will see that we had $440,000,000 sort of in restricted cash. That was all sitting in 1031 escrows, but that is obviously not all earmarked for 1031s. Going through it, you know, we paid about $30,000,000 for that special dividend at the beginning of the year. We got another $50,000,000 of stock back in January. We paid down $85,000,000 on the line of credit. So now the line of credit is sitting at zero. It was $85,000,000 at the end of the year. And then there is 1031 acquisitions. And then the balance of it is going to be a combination of debt reduction and share repurchases. So that is how we intend on deploying the full proceeds. Todd Michael Thomas: Okay. That is helpful. And then maybe, John, can you just maybe speak to the broader acquisition environment today in terms of the product that you are seeing. We have seen a lot of activity pick up, and I am curious how that sort of fits into the company’s strategy for acquisitions just moving forward here and what your appetite is like for new investments as we think about 2026–2027. John A. Kite: Yes. Todd, as you know, I mean, I think the market is definitely active. There is a strong bid for kind of retail across the board. Each component of retail, you know, has a strong bid actually. So it makes the job a little harder in terms of finding the things that we think match. That being said, we are actively underwriting deals right now. As Heath said, we do intend on, you know, executing on at least $110,000,000 of acquisitions. We have two or three, four opportunities that we are, you know, well on the way of underwriting and analyzing. So I think we feel good about that execution. Think we continue to want to find things that we think we can add value to, and things that have a better embedded rent growth profile. And, also, again, derisking exposure to certain large anchor tenants that we just want to derisk our exposure to. So this is not a one-year thing. It is a multiyear process that we are moving towards, and I think we are off to a fabulous start. And I think we can continue to do that. But we have to be smart, we have to be agile. We have to be looking all over the place, and we are doing that. We, you know, we are in great markets, so we can add to the markets that we are already in, which is generally what we are looking at. So, I feel very good about it. But, again, I mean, the more and more people that want to be in the space, the more, you know, difficult it is to try to make numbers work. But that is our job, and that is what we will do. Todd Michael Thomas: Okay. Thank you. Operator: Our next question comes from the line of Craig Mailman with Citi. Your line is now open. Heath R. Fear: Hey. Good morning, guys. Just, Heath, on the 100 basis point of bad debt expectations, you know, I know John, I think you said with the dispose, you got rid of 21 watchlist spaces. I am just kind of curious. Did you guys kind of sell off the noncore. How much of that 100 basis points is kind of earmarked versus just a cushion, and kind of walk through maybe some of the watchlist tenants that may be on there. Heath R. Fear: Thanks for the question, Craig. So as you know, our typical run rate is somewhere between 75 and 100 basis points of revenue. And also this year, we do not have a separate anchor reserve. We decided that 100 basis points was an appropriate level mostly probably due to The Container Store. So we will see how that shakes out, but we are having that one. So we are starting at a little bit of a higher level. Last year our general reserve was 85 basis points. So rather than separating it out we just said 100 points general reserve for 2026. John A. Kite: Yeah, Craig. I mean, it is like every time at this time of year, I think we get this question every year at this call. It is just so early. There are so many variables. I feel like 100 at the midpoint is a nice place to start. Let us see how we go through the year. There are multiple, you know, retailers that have lots of things going on. So this is the right way to go about it. I do think, overall, we are trending in a good direction as it relates to our portfolio in particular, but also just the overall landscape where, you know, I have seen people write about, you know, retailers that were previously on watchlists that are not on watchlist and things like that. So I think we feel good about it, but this is a good place to start, and I think it is prudent. Heath R. Fear: That is helpful. And then just second, just on the asset recycling, you know, capital deployment side of things, you guys were very active. It seems like selling stuff is much easier than buying things these days given the transaction environment out there. I am just kind of curious, you know, it just feels like there are diminishing returns on buybacks, and you guys are in probably better shape than other REITs that have tried, given your leverage levels. But I am just kind of curious, you guys have traded at a persistent discount to peers, and it feels like maybe the route is figure out a way to drive earnings growth that exceeds peers versus setting up the portfolio for longer term NAV. So I am just kind of curious the appetite here, you know, five times, you guys are below the low end of your debt to EBITDA range. But just pushing that leverage, and I am not saying to go to seven times, but, you know, maybe something a little bit more efficient from putting capital out the door and driving earnings. Rather than continue to run at low leverage and kind of putting yourself at a disadvantage relative to private peers who run at higher leverage. I do not know. Could that make it easier to buy things and drive earnings growth and differentiate yourselves that way versus kind of the shrink to grow down the road strategy you guys are doing now? John A. Kite: Yeah. I mean, I think there is a lot to unpack there, Craig. But bottom line, you know, when we started the year in 2025, we were very clear about the strategy. Right? And the strategy has a lot to do with not thinking about, you know, the next four or five quarters, but thinking about the next four or five years. Sometimes people do not like to hear that. We are in a great business that is going to get stronger and we are positioning the portfolio to take advantage of that and actually, you know, in the future be in a better growth profile. So that is kind of the work that we did, and we were able to do that. I mean, if you look at what we did in the year, you know, a lot of people talk about things that they might do or want to do and they complain about where their stock price is and where assets trade, and but yet, they do not really act on it. And, you know, I think the reality is we acted on something that was a very clear arbitrage. You know, buying back 6% of our stock at, you know, at numbers that, you know, the source was provided at yields that were very attractive relative to the yields that, as we said, the core FFO yield of the stock was at 9% at that time. So bottom line, I think we feel very good about how we executed that. Obviously, as we continue to move down the road, our goal is to grow. Our goal is to grow the portfolio, grow cash flow. And remember, we are growing cash flow per share. We are not, we are very focused on that. So I think over time, all these things will come together. And there is still more work to be done. There is a lot of wood to be chopped. And, you know, we continue to do that. We are extremely happy that we were able to do a massive amount of transactional activity and yet have a situation where, you know, all of it ultimately was accretive, you know, without the timing, you know, associated with the redeployment. Heath R. Fear: So I think we, I understand what you are saying, and the idea of taking leverage up. You know, we have been around a long time. We have seen a lot of different cycles. And running a business with lower leverage is a smart thing to do. Obviously, we are now at, as you said, below where we intend on running. And it also has a lot to do with where things can trade, where interest rates are. So over time, I think that will also come to us. I think there will be a better situation for us to deploy capital more accretively just in straight up acquisitions. But right now, that is more challenging. So I think we will continue. That is a long way of saying we love running a company with low leverage that gives us opportunities to take advantage of that down the road like we have done in the past. And so I think you will see us take advantage of that great balance sheet. But right now, we are positioning ourselves to do that. You know what I would also like, Craig, if you think about it on a relative basis, why did we underperform in terms of growth? Well, a lot of it was because of the credit watchlist and credit losses. And so the exercise we are doing, we are addressing the fundamental building blocks of growth, which is derisking the cash flow, which means making sure that we do not have fallout in a disproportionate way, and also improving our embedded bumps by shedding assets that have lower. So while, yes, we could lever up and we could create growth that way, I think it is addressing the fundamental issue first and getting the portfolio in a position where we can outperform growth. And the challenge is not about this year or next year or, you know, it is about the next five years. We are trying to make changes that are going to be sticky. Because at the end of the day, you know, all the occupancy growth at some point, everyone is going to stabilize. And we would like to be in a position, as John said, that we have 200 basis points of embedded escalators. We are starting at a place ahead of many of our peers. That is the whole point of the exercise. It is growth. Craig Mailman: Great. Thank you. Operator: Thank you. Our next question comes from the line of Michael Goldsmith with UBS. Your line is now open. Heath R. Fear: Good morning. Thanks a lot for taking my question. A question just about the flow through from same property NOI to the FFO growth. You know, it seems like you are not getting that good flow through here, and you are also getting a benefit of interest expense of $0.03. So can you just walk through the factors that are limiting the flow through, and then does that get better in the out years? Thanks. Heath R. Fear: Yeah. I think the two big items that are limiting the flow through are really the recurring but unpredictable. Again, that is a $0.04 headwind into year. And as I mentioned before, we are starting with a number. That number could grow over the course of the year. And then the second thing, and the good news about this, one is really going to diminish, is the $0.35 of noncash. Still, that is that merger burn off of non-cash items. And illustrative is the fact that our core and our NAREIT FFO are on top of each other this year. It just shows you that that is now normalizing. So that has been a consistent theme over the last three years. In fact, a total of $1.35 cumulatively over the past three years has really impacted our earnings growth. So those are the two drivers of why it is not flowing through onto the FFO line. Michael Goldsmith: Thanks for that, Heath. And then just to follow-up, you have been buying back stock at $23 in the fourth quarter and towards the end of the quarter closer to $24. Stock is now moving a bit higher. Like how are you thinking about share repurchases? You know, what is the right level? At what point do you move away from that into some other areas where there are other capital allocation options where there may be more accretive? Thanks. John A. Kite: Yeah. I mean, there is obviously a lot that goes into the analysis of the stock buybacks. You know, we still believe even wherever we are right this second, we are clearly well below consensus NAV. You know, a lot has to do with the, you know, what is the source of that buyback in terms of the core yield on that if there is more asset sales that would be funding that. As Heath said, you know, we still have some deployment of the $400+ million that we had at the end of the year that needs to be deployed. So I mean, we analyze it, you know, in multiple ways. And, again, we are trying to do all this and maintain a really healthy balance sheet and not have any material, you know, issues relative to earnings. So yeah, it is not a simple exercise, but I think we can execute on it. And, again, we still trade at a significant discount, you know, even as we sit here today. So I think, as we said, we want to take advantage of any arbitrage opportunities that we can to position the company to grow further in the future. So that is really what this is all about. It is not a one dimensional exercise. There is a lot going on here and we have a really strong belief, a real conviction, our portfolio will perform in the future. Michael Goldsmith: Thank you very much. Good luck in 2026. John A. Kite: Thank you. Our next question comes from the line of Floris van Dijkum with Ladenburg. Your line is now open. Floris van Dijkum: Hey. Good morning, guys. I am glad the capital allocation topic is being discussed widely. I am just curious. I note that you sold a bunch of assets in the fourth quarter, yet your S&O pipeline has not really moved. Maybe if you can talk a little bit about where that S&O is located and, you know, and how does that impact potential sales? Because presumably, you would not want to, you know, sell assets until the rents are in place. Heath R. Fear: Floris, so good question. For the assets we sold, there was about $1,600,000 of signed-not-open NOI that we sold. And if you heard my remarks, I said that we actually increased it by $4,000,000 once you take those dispositions into account. So it was a really healthy growth. And as we mentioned, we expect the SNO pipelines to remain elevated. We expect the gap between our leased and occupied rate to remain elevated throughout the course of the year as we continue to lease up. John A. Kite: Yeah. I think, Floris, in terms of this idea that, you know, would you not sell things that still had upside. I mean, you have got to analyze each individual deal, the quality of the deal. Do we want to spend the capital on a particular box deal? And what are the returns on that deal versus the returns that we generate by selling? So, you know, those are the things you look at as it relates to that. Michael Goldsmith: Thanks, John. Maybe, you know, I note that you have not sold your two big land parcels yet, Carillon and Ontario. I know that Ontario is going through an entitlement process. Could you maybe update us on where that entitlement process stands today? Heath R. Fear: Sure. Tom, you want to hit that? Thomas K. McGowan: Yeah. Excuse me. So the entitlement process is well underway. It is lengthy for us. It is a process that will take us into 2027. But all things are moving in the right direction. We seem to have great backup from the county and the need for housing. So we are moving in the right direction, but it is a very timely process. Heath R. Fear: And then in terms of the—that is the California asset. John A. Kite: Same thing in Carillon. We are, you know, we are pursuing the sale of that land. Yes. It is what it is. I mean, these things take time. Obviously, there is no NOI associated with that. So, you know, we want to maximize the value as opposed to rush through it. But both of these things over time will happen, and, you know, they are large parcels of land that can generate some a good source for us. Michael Goldsmith: Thanks, John. Lots of work to do within the counties for sure. Thanks, guys. John A. Kite: Thank you. Operator: Our next question comes from the line of Alexander David Goldfarb with Piper Sandler. Your line is now open. Alexander David Goldfarb: Hey, morning. Morning out there. John, when you were talking about the dispositions this year and presumably stock buybacks, you mentioned you want to focus on minimizing earnings disruption. Were those comments specifically on the actual earnings this year, or you were talking more on an annualized effect? John A. Kite: I mean, I think I am referring to both. I mean, it is what we did in 2025, and it is what we are, you know, thinking about in 2026 as we look at what we might do in 2026, Alex. So we are always analyzing that. And, you know, our goal is to, as I said, we want to have minimal disruption and then we want to have maximum future growth. Heath R. Fear: Okay. And then the also—yeah. One last thing I will add is, as John mentioned, on an annualized basis, all this stuff is accretive. But if you look at our bridge, you will see that based on the timing of when we sold it and when we are, you know, deploying the proceeds, it was a $0.02 drag into 2026. That drag obviously will disappear in 2027 as the results are annualized. John A. Kite: Okay. No, that is helpful. The second question is, I understand your rationale for selling the larger format centers. You said you want to reduce some of the certain anchor exposure. On the other hand, a number of your peers have been commenting that they have seen better acquisition opportunities in the larger format. So would you just say it is sort of the randomness, like the particular centers that you own that are on the larger side, those particular ones have issues that you want to sell but you are still amenable to buying larger format, or are you saying that, hey, we have owned a variety of different size centers, and, ultimately, we believe that the neighborhood and the lifestyle are the best. And even though others may be going for larger format, for the Kite portfolio, you do not see the larger format. I am trying to understand if it is a format or just the particular exposure of your tenancy that is driving the larger dispositions? John A. Kite: I mean, I think it is more, you know, complicated than that. I think each individual company has their own goals and expectations. You know, I think what we have said is we clearly want to reduce the total exposure to that larger power center portfolio. We did not say we wanted to eliminate it. So we are just reducing that percentage and growing the percentage in, you know, grocery lifestyle mixed use. And it is paying dividends in terms of our cash flow growth for doing that. It does not mean that a large format center cannot be a great center. It all comes down to, you know, what your cost of capital is and what your yield is and what your credit risk is because we discount the cash flow when we look at these things. So, again, each company has their own independent goals and objectives. In our particular case, we are very focused on this idea that if we get to, you know, 2% plus embedded rent growth in the portfolio, that is going to pay dividends for us in the future. Versus the assets that we sold, which were closer to 1.4% embedded growth and are exposed to a portfolio of tenants that have a higher degree of credit risk. That is it, Alex. It is really—it is, and as you know, you have been around us long enough. We are real estate people. Great real estate will overcome. Right? Great real estate will overcome whatever potential mistake you have made on top of it. So it is really about us owning great real estate and pivoted a bit in that other direction of, you know, where we think we can get higher growth. Alexander David Goldfarb: Perfect. Thank you, John. John A. Kite: Thank you. Operator: Our next question comes from the line of R.J. Milligan with Raymond James. Hey. Good morning, guys. One specific question, I was wondering if you could just sort of walk through the components of the timing of the net capital allocation activity of negative $0.02. I guess my question is if you bought back stock early this year, you are going to be buying more assets earlier in the year, selling assets later in the year, I would think that that would have a positive impact. Heath R. Fear: Also, yeah, we, you know, we bought back $300,000,000—$250,000,000 in 2025, and then $50,000,000 in 2026. We also utilized the line in 2025, which added some interest expense. And, also, there is more proceeds to deploy. As we discussed, there is another $110,000,000 of 1031 acquisitions, which is not to happen until the middle of the year. When you put all that into the blender, RJ, timing wise, it is just dilutive going into 2026. And if you think about it, we had the disposition NOI for almost all of 2025. And that is immediately being taken out. So it is not there at all for 2026. So backfilling that is the accretion from the share buybacks. But we also have to get these 1031s done. R.J. Milligan: Okay. And then just bigger picture, wanted to follow-up on—and I think within guidance, just over $100,000,000 of disposition activity, and it looks like just from where we stand today that 2027 is shaping up to be a pretty good year for actual earnings growth. You are going to remove the noncash headwinds. You probably, you know, have a more reasonable year-over-year comp for lease termination fee income. I am just curious if, you know, is there a possibility—like, one, what is the appetite to sell additional assets? You know, is there a possibility we get to the second half of the year and we see a larger bucket of dispositions that then would negatively impact earnings growth in '27? Heath R. Fear: Sure, RJ. I mean, obviously, it is— John A. Kite: It is too early for us to indicate what we think '27 is. That being said, I get your question. And, you know, we are going to have to see how the year plays out to the acquisition disposition, you know, kind of plans. There is, as we—as I mentioned in my prepared remarks, we have been clear that there is a possibility that we would look at another larger, you know, kind of transaction in terms of selling larger format centers at what we think are very attractive yields and redeploying that capital in a, you know, accretive—accretive or very minimally dilutive way as we did this year. It would need to fall in those kind of, you know, in that bucket. And, again, if we were to do something like that, it would be because we think that it is going to significantly increase our kind of cruising speed, as people like to say, relative to our embedded rent growth. Our desire is obviously to grow earnings and grow earnings with a better portfolio. And not necessarily just better, but one that is positioned to take advantage of the retail environment is a better way of saying that. So I think it is too early to say what '27 looks like, but, you know, those are the components of what we are looking at. R.J. Milligan: Great. I appreciate it. Thanks, guys. Heath R. Fear: Thank you. Operator: Our next question comes from the line of Hongliang Zhang with JPMorgan. Your line is now open. Hongliang Zhang: Yes. Hey, guys. I guess I just want to clarify. In the $115,000,000 of noncore assets you expect to sell later this year, does that include City Center? And if so, what is the—could you remind us what the—what the rough dollar amount you expect to get from the disposition? Heath R. Fear: It does include City Center, and it is mid fifties. Hongliang Zhang: Mid fifties. Got it. And then I guess you talked about the potential of selling a second bucket of dispositions. Is there any color you could provide about just the magnitude compared to the dispositions you have already sold last year? Heath R. Fear: No. I do not think that what we are saying is—we are studying the potential of something similar that we did last year, not necessarily in terms of total size, more so in the type of product that we would be looking to sell. And again, as Heath said, we are still, you know, going through some of the, you know, tax kind of harvesting of losses that we want to get for against what we have already done. So I think it is going to depend on how this plays out. But, obviously, if, you know, if the opportunity arises for us to do something similar in a similar fashion that can ultimately be accretive to the value of the business, then, you know, we will look at that. Heath R. Fear: Also, Adam, if you think about it, our current FFO yield even at the price where it is now is still 8%, which is going to be wide of where we can sell assets. So if you are looking at the capital allocation cues, and John mentioned this in his comments, we are viewing this as an opportunity to upgrade the quality of the portfolio while doing minimal—either accretive or minimally dilutive to earnings. So it is almost incumbent upon us to consider this again this year. So again, we will see how it pans out. But, you know, we will—you will know more as the year progresses. Hongliang Zhang: Got it. Thank you. Operator: Thank you. Our next question comes from the line of Wesley Golladay with Baird. Your line is now open. Wesley Golladay: Want to go back to the comment you had, John, about, you know, getting better terms on the anchor leasing, but you are also, you know, that is rate, but also you are getting, you know, no cotenancy. And I am just wondering if that is going to kick off any redevelopment for you on the retail side? John A. Kite: Yeah. Hey, Wes. I think what we are saying is overall, you know, we are in a position of strength and we are doing everything we can to improve a myriad of different deal terms. You know, you do not eliminate all these things overnight. For example, we did not say we are eliminating cotenancy. We are saying we are improving it. We are improving our rent growth. We are improving the terms in terms of, you know, obviously looking to limit future fixed options which we have been doing. But if you just look at what we did in one year relative to the peer group, to grow our embedded rent growth, you know, to close to 1.8%. I think that tells the story for the future. And that is really what this is all about. The fact that we were able to do that and buy back 6% of our shares at a significant discount to value. We had a hell of a productive year and we laid out a business plan in the beginning of last year which we were very clear with the street, and we executed on that plan. And that is what we intend to keep doing. You know? So I think—and, again, the backdrop of the business is strong. So you have to take advantage of these things because things move around, things change. And when you have—that is why you have got a balance sheet like ours. So that you can ebb and flow with those changes. So we feel very good about that. Thomas K. McGowan: And then one other thing to add on better terms—you know, this is not occurring by sending a redraft of a lease to a company saying, hey, we would want this or this. What we are trying to do is take it directly to the companies and having open conversations about, hey, here is the direction that we have to move in, and that has been helping us. Because it needs to be a very blunt and candid conversation about here is what KRG needs and here is the best way for us to get it and make it also work for you. Wesley Golladay: Thanks for that. And then, you know, going back to the comment about improving the cruising speed, it looks like you added 24 basis points over the last two years. I imagine you touched about maybe half the leases. Would that be a good extrapolation for maybe increasing it another almost 25 bps the next two years? John A. Kite: I mean, I think we said we feel like we are very close to this, you know, in the near term getting to 2%. You know, if you look at our investor presentation, you will see that, you know, on the small— for example, on the small shop side, you know, 62% of our deals in 2025—62% were at 4% or better. I have not heard that stat from anybody else anywhere near that. So I think, you know, yes, we continue to push that. It reflects the growing quality of the portfolio as well and the mixture of the portfolio that we are working towards. So I think, Wes, that is absolutely in our sights. And we will continue to get there. And then if you look at the others that are at two or better, I would tell you they trade at a significant multiple premium than we do. So that is part of this as well is that eventually as we pivot this portfolio into this direction, people will recognize that. Wesley Golladay: Thanks for the time. John A. Kite: Thank you. Operator: Thank you. And I am currently showing no further questions at this time. I would now like to hand the call back over to John Kite for closing remarks. Heath R. Fear: Well, great. Really appreciate the time spent today and the great questions. John A. Kite: And we will probably be seeing a lot of you in the next couple of— Operator: Thank you. This concludes today's conference. Thank you for your participation. You may now disconnect.
Operator: Thank you for standing by, ladies and gentlemen, and welcome to the Seanergy Maritime Holdings Corp. Conference Call on the Fourth Quarter and Year Ended December 31, 2025 financial results. We have with us Mr. Stamatios Tsantanis, Chairman and CEO, and Mr. Stavros Gyftakis, Chief Financial Officer of Seanergy Maritime Holdings Corp. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session. At which time, if you would like to ask a question, please press 11 on your telephone keypad. You will then hear an automated message advising your hand is raised. Please be advised that this conference call is being recorded today, Tuesday, 02/17/2026. The archived webcast of the call will soon be made available on the Seanergy website, www.seanergymaritime.com. To access today's presentation and listen to the archived audio file, visit the Seanergy Maritime website following the webcast and presentation under the Investor Relations page. Please now turn to Slide two of the presentation. Many of the remarks today contain forward-looking statements based on current expectations. Actual results may differ materially from the results projected from those forward-looking statements. Additional information concerning factors that can cause the actual results to differ materially from those in the forward-looking statements is contained in the fourth quarter and year ended 12/31/2025 earnings release, which is available on the Seanergy website, www.seanergymaritime.com. I will now turn the call over to the Chairman and CEO of the company, Mr. Stamatios Tsantanis. Please go ahead, sir. Stamatios Tsantanis: Thank you, Operator, and welcome, everyone. Today, we are pleased to present our financial results and company updates for the fourth quarter and full year of 2025. 2025 marked our fifth consecutive year of profitability and another important milestone for Seanergy. We delivered strong earnings, generated meaningful cash flow, advanced our fleet renewal strategy, and continued returning capital to our shareholders, all while further strengthening our balance sheet. For 2025, we reported earnings per share of $0.68 and for the full year period of 2025, we reported earnings per share of $1.28. Both our net income as well as the appreciation in value of vessels acquired since 2021 underscore the operating leverage embedded in our platform. Our profitable track record validates our long-term consistent strategy of focusing exclusively on larger bulkers, Capesizes and Newcastlemaxes. Seanergy is optimally positioned in what we believe is a favorable Capesize environment supported by expanding long-haul demand while fleet supply growth remains constrained, aging tonnage, limited new ordering, and environmental regulations creating a structurally tighter supply environment. With respect to fleet renewal and optimization, we have made significant progress. To date, we have secured three high-specification eco newbuildings, two Capesize and one Newcastlemax at leading Chinese shipyards with deliveries between Q2 2027 and Q2 2028 totaling approximately $226,000,000. At the same time, we recently concluded the sale of a 2010-built Duke ship at a firm price, in addition to the sale of a 2010-built Genoa ship earlier in 2025. Both transactions released significant capital for the company. The current strength in secondhand values allows us to execute our fleet transition in a disciplined and measured manner while maintaining a strong balance sheet. At year end, our fleet loan-to-value stood at 43%, reflecting a conservative leverage profile supported by disciplined balance sheet management. As a pure-play Capesize operator, we maintain balanced leverage that preserves financial resilience while retaining meaningful exposure to market upside. I will now turn to Slide four for an overview of our capital distributions. In this profitable market environment, our capital allocation priorities remain clear: return capital to our investors, modernize our fleet, and preserve financial strength. In 2025, we declared total dividends of $0.43 per share, including $0.20 in the fourth quarter. Since Q4 2021, we have returned approximately $96,000,000 to our shareholders through dividends, share buybacks, and note repurchases. Based on our track record and current market strength, we remain constructive on future distributions subject to market conditions and capital commitments. Slide number five, commercial snapshot. Turning to slide number five, 2025 demonstrated the strength of our chartering strategy. During the fourth quarter, Seanergy achieved a daily time charter equivalent of approximately $26,600, while our full year time charter equivalent was approximately $21,000 per day. Fleet utilization exceeded 96% despite the intense dry-dock schedule, reflecting our strong operating efficiency. In what was an extremely volatile year for the Capesize market, we are very pleased with our balanced commercial strategy combining index-linked exposure with selective forward fixtures that has allowed us to participate in market upside while securing cash flow visibility and reducing volatility. Looking forward for 2026, we expect our time charter equivalent to be about $25,300 per day based on the FFA curve for the remaining days of February and March. We are closely tracking Capesize Index during the period of counter-seasonal strength. As the market remains on a clear positive trend, we aim to selectively fix a percentage of our available days at attractive rates, securing high cash flows and returns on invested capital. For the period from Q2 until 2026, we have fixed approximately 32% of our available fleet days at an average gross rate of $27,300, subject of course to further increase as a result of the profit-sharing scheme for two of our vessels. Looking further ahead, the upcoming delivery of our newbuildings will further improve the commercial profile of Seanergy. We are currently considering our options with regards to their employment. Slide six. Since our previous quarterly update, we have taken decisive steps towards fleet renewal and placed orders for two additional newbuildings at first-class shipyards based in China. For now, we have two sister Capesize newbuildings for mid-2027 and one Newcastlemax for Q2 2028. Combined contract cost stands at approximately $226,000,000, which we believe represents a very competitive value given the prompt deliveries and the quality of the yards. Our three newbuilding vessels have already attracted strong interest from both existing and prospective charterers. However, given the continued strengthening of the market, we remain flexible and have not yet committed to any long-term employment agreements. Their superior fuel and environmental performance enhance their attractiveness to major dry bulk charterers and position them very well as regulatory requirements will continue to tighten the market. On that note, I would like to turn the call over to Stavros for an overview of our financial performance as well as our financing developments with regards to our existing and newbuilding vessels. Stavros, please go ahead. Thank you, Stamatios, and good morning to everyone joining us. Let us begin with slide seven where we will review the key highlights of our financial performance. Before turning to the numbers, I would like to emphasize the continued strength and resilience of our platform as 2025 marks our fifth consecutive year of profitability. For 2025, the strong Capesize market supported robust financial results. Net revenue for the quarter totaled Stavros Gyftakis: $49,400,000 while adjusted EBITDA and net income reached $28,900,000 and $12,500,000, respectively, reflecting the strength of the second half of the year. For the full year, net revenue amounted to $168,100,000, adjusted EBITDA reached $81,700,000, and net income was $21,200,000, translating into earnings per share of $1.02. These results underscore the effectiveness of our chartering strategy and risk management framework. Turning to the balance sheet. We maintained a strong liquidity position with $62,700,000 in cash and cash equivalents or approximately $3,100,000 per vessel. This liquidity provides operational resilience and supports the execution of our fleet modernization strategy. Now regarding our newbuilding program, the investment plan has been carefully structured with a laddered schedule to ensure alignment with our shareholder reward strategy and financial flexibility. Approximately $— million is expected to be deployed this year, $100,000,000 in 2027, and $50,000,000 in 2028. Financing for two of these vessels has been secured on attractive terms while we are in active discussions for the third. Our debt capital ratio remained well below 50%. This conservative leverage profile, combined with strong cash generation, provides flexibility as we enter 2026 and supports the funding of our newbuilding program. Overall, 2025 was characterized by consistent profitability, disciplined balance sheet management, and solid cash generation, positioning us well to continue delivering value to our shareholders moving forward. Moving on to Slide eight. For the full year, our TCE averaged $20,937 per day, closely aligned with the annual BCI average. This reflects the effectiveness of our chartering strategy which balances index exposure with selective forward fixtures to manage volatility while preserving upside. Adjusted EBITDA is $81,700,000 for the year, significantly above our five-year average. The strong performance in the second half demonstrates the operating leverage inherent in our fleet. Our EBITDA margin of approximately 50% and operating cash flow margin of roughly 33% highlight the quality and resilience of our earnings. Even amid a volatile freight market, we generated meaningful and recurring cash flows supporting both shareholder returns and fleet modernization. Daily operating expense per vessel averaged approximately $7,100, only modestly higher year over year despite the inflationary pressures and the aging profile of our fleet. Moving on to slide nine, let us look at our leverage profile and overall debt position. We closed the year with approximately $294,000,000 of total debt, close to $50,000 in deferred finance fees. Fleet loan-to-value declined to about 43% with net LTV at 34% supported by financing activity and resilient vessel valuations. This places us in a comfortable position relative to both historical levels and industry benchmarks. Debt per vessel stands at about $14,700,000 versus an average market value of $34,100,000, reflecting substantial embedded equity. Additionally, approximately 7% of our total debt is covered by value, offering meaningful downside protection. Daily cash interest expense per vessel decreased to approximately $2,570 per day, representing a 6% year-over-year improvement and enhancing our cash flow profile entering 2026. Before moving on, let me briefly touch on our recent refinancing activity. Over the past month, we executed several refinancings that strengthened liquidity, lowered margins, and extended our maturity profile. At the same time, we secured competitive funding for two of our newbuilding vessels, locking in attractive pricing well ahead of delivery. These facilities were structured with prudent amortization, even covenant restrictions, and enhanced flexibility, including purchase and prepayment options. Overall, our actions reinforce balance sheet resilience and provide the financial flexibility needed to support fleet renewal while maintaining disciplined leverage. Specific details of these financings are outlined in our earnings release. With a strengthened balance sheet and enhanced financial flexibility in place, let us now turn to slide 10 to illustrate the operating leverage in our platform and the sensitivity of our earnings to movements in the Capesize market. At current FFA levels, we estimate full-year EBITDA of approximately $122,000,000. At 2025 average BCI level, EBITDA would approximate $95,000,000, providing a reference point based on current market assumptions. At rates above $30,000, EBITDA would increase materially, reflecting the operating leverage embedded in our platform. That concludes my review of our financial results and updates. I will now turn the call back to Stamatios, who will provide insights in the Capesize market and his concluding remarks. Stamatios, Stamatios Tsantanis: Thank you, Stavros. Slide 11. 2025 was another strong year for the Capesize market despite the initial volatility. The Baltic Capesize Index averaged approximately $21,300 per day. The year began on a softer note during the first half before iron ore and coal restocking activity in China supported the strong recovery in the second half of the year. Record iron ore exports from Brazil and record bauxite exports from Guinea provided a meaningful tailwind to Capesize ton-mile demand, reinforcing the constructive long-term demand outlook for the segment. In addition, market sentiment and broader trade fundamentals were further supported by strength in the Panamax market driven by increased grain exports from Brazil and the United States as well as additional coal restocking towards the year end. Moving to 2026, in regards to Capesize demand, we have started very strongly with the BCI averaging $22,000 over the first two weeks of the year, marking one of the strongest first quarters of the past decades. Guinea bauxite exports have grown by 14% year over year while dry weather in Brazil and Australia has resulted in high iron ore cargo activity during a traditionally weak seasonal period. For the rest of 2026, the demand outlook remains constructive with bauxite trade expected to continue its growth path and iron ore miners’ production and sales outlook pointing to resilient trade volumes. This trend looks set to continue into 2027 with the Simandou mining project in West Africa ramping up its output. China’s demand for high-grade iron ore remains healthy, supporting demand for imported iron ore versus lower-quality domestically produced one. Moving on to Capesize supply. The supply picture for the larger bulkers, especially Capesizes, points to further tightness and limited vessel availability for the next two years. The orderbook currently represents 12% of the fleet compared to about 9% of the fleet being 20 years or older. Moreover, what is significantly important is that right now, 40% of all the larger bulkers—Capesize, Newcastlemaxes, and VLOCs—exceeds 15 years of average age. So we are talking about an excessively aging fleet. At the current pace of vessel ordering and given the limited capacity of shipyards to deliver newbuildings, it becomes clear that the supply tightness is likely to continue over the next many years. As regards our near-term forecast, 2026 and 2027 are also likely to be affected by the extensive drydocking of the current ships that usually entails considerable downtime. With more than 20% of the world Capesize fleet built in 2011–2012, a significant portion of vessels will undergo their fifteen-year special survey in 2026–2027, temporarily reducing the effective supply, plus, of course, a significant cost. This is expected to result in a fleet capacity reduction of more than 1.5% both years, with some estimates calling for a 2% to 2.5% reduction. This should not be underestimated as it would counteract the 2.2% expected fleet growth due to newbuilding deliveries and could continue to contribute to periods of significant market tightness during the next two years. To summarize, as we have seen in the past, the Capesize market will always be subject to considerable volatility stemming from multiple unpredictable factors, but the limited vessel supply that is shaping up over the next few years along with increased ton-mile demand should result in a positive trend for charter rates. We are pleased to see this positive trend unfold over the past two to three years and we are confident in our view of a strong market in the following years. As I mentioned before, Seanergy is optimally positioned to deliver our stated priorities of capital returns and fleet growth while maintaining a sustainable balance sheet throughout the cycle. We are, in our view, very well placed to deliver strong financial performance over the next few years and we are therefore excited about our prospects. On this note, I would like to turn the call over to the Operator to answer any questions you may have. Operator, please take the call. Thank you. Operator: Thank you. Once again, it is 11 on your telephone and wait for your name to be announced. We will now open for questions. We are now going to proceed with our first question. The question comes from the line of Liam Burke from B. Riley Securities. Please go ahead. Your line is open. Liam Burke: Thank you. Good afternoon, Stamatios. Good afternoon, Stavros. Hello, Liam. Good morning. Liam, you have been very nimble in terms of managing your fleet and maximizing the rate environment. I mean, a year ago, you were outdistancing the BCI even when rates are low. But are you seeing anything in the market where it is more prudent to add longer-term time charters versus moving more of the fleet into the spot market? Stamatios Tsantanis: Well, we constantly are. If you see the release, we have about 35% of our days already pretty much in some sort of long-term contracts that carry all the way to the end of the year. As you know, we are progressing after the Chinese New Year that we expect to see more strengthening in the market. We will continue switching more and more ships from floating to fixed. So already, we have 35% at around $27,000. And, as the year will be progressing, we will do some more. Liam Burke: Okay. You have gotten—well, how are you balancing going forward the inflated asset values, some of your older vessels, versus what looks to be a fairly attractive rate environment for the next two to three years. Stamatios Tsantanis: Well, that is exactly what we are doing right now. We were able to secure very prompt delivery slots for newbuildings. First of all, let me step back a little bit. The five-year-old ships, as you know, have been very much inflated. So for five-year-old ships, it is kind of a no-go for acquisitions. It is pretty much identical to newbuildings or a bit lower than that. So we decided to seek newbuildings at high-quality shipyards, but then the question was whether we are going to have debt capital in these orders or not. And then due to our connections and excellent relationships, we were able to secure very prompt, for the Capesize market, delivery slots. We went ahead, and we placed ships—two ships within 2027 and one for 2028. So that is how we manage. So once we identify prompt slots for newbuildings, we will likely continue doing a few more, while at the same time, we might be disposing some of our older assets, the way that we did it right now with the Duke ship. From Seanergy to United or some other, let us say, interesting ideas. But that is how we are going to do it. So if we are able to add three ships and dispose of a couple, or even add a few more, that is how we are going to do it. Liam Burke: Great. Thank you, Stamatios. Appreciate it. Stamatios Tsantanis: Very welcome, Liam. Operator: We are now going to proceed with our next question. The question comes from the line of Mark Reichman from Noble Capital Markets. Mark Reichman: Thank you, and good morning. Stavros Gyftakis: Maybe Slide six would be the slide to look at. But just following up on the last question, how it is a favorable financing environment. You are able to get these sustainability-linked loans. But when you think about the high asset values of the existing fleet versus the newbuilds, what are your expectations in terms of your weighted average cost of capital and your return on invested capital on maybe some of these newbuilds, and would you expect the difference to widen, or how are you thinking about that and managing that into your decisions? Stamatios Tsantanis: Well, that is an excellent question, and thank you. The answer is yes. We are seeing inflation and inflated prices all across the shipping newbuilding assets. So it is not only a Capesize or a Newcastle situation. We are seeing that all over the place. You see that on tankers, containers, LNGs, and, of course, on other dry bulk, smaller dry bulk ships. At the end of the day, however, the amount of money you spend for the CapEx is basically what you expect to make in return, like you very well asked. Thanks to the excellent efforts from our finance department, we are able to secure financing terms that will keep the all-in cash breakeven of these new acquisitions at around $20,000 a day. So the forward rate now stands anywhere between, let us say, $26,000 and $30,000 for a standard Cape. If you count in the premium of these modern ships, that exceeds $30,000 a day. So if we are able to secure anywhere between $8,000 and $12,000–$13,000 a day on a net cash flow basis, you do the math, you can automatically see that the return on equity on these assets is quite significant. That is how we approach it. Mark Reichman: That is very helpful. And then I always ask this question on the conference calls. What are your expectations in terms of operational off-hire days for 2026? Stamatios Tsantanis: I believe it is going to be consistent with 2025, but maybe a little lower than that. We have a much softer dry-dock schedule in 2026 compared to 2025. I believe it is going to be a bit lower than 2025. Mark Reichman: Okay. And then just the last question. This is really a client-driven question. Could you speak to the limited shipyard availability? I guess the question was really the low orderbook versus the limited shipyard availabilities. Stamatios Tsantanis: Well, again, that is an excellent question. There is no such thing as a limited shipbuilding capacity. I believe that the global shipbuilding capacity coming from China, as well as Korea and Japan, is at all-time highs. But the good thing is that it is pretty much covered by other types of ships. We have tremendous orderbook on containers, also on the tankers, as well as smaller bulkers and other ships. So the orderbook for the standard Capesize and the Newcastlemax is quite limited because it is pretty much covered by all the other asset classes. Also, it is too far down the road. I mean, if you ask for a CPP today, you are likely going to come back with 2029 or 2030. So given the fact that a very big percentage of the current fleet is already quite old, I do not expect to be in a position to be replaced with modern tonnage until well before 2031–2032, just to have a normal churn rate, to put it this way. Mark Reichman: Oh, that is great. That is very helpful. Thank you very much. Stamatios Tsantanis: You are very welcome. Thank you. Operator: As a reminder, to ask a question, you need to press 11 on your telephone and wait for your name to be announced. Once again, it is 11 on your telephone and wait for your name to be announced. We are now going to proceed with our next question. The question comes from the line of Tate H. Sullivan from Maxim Group. Please ask your question. Tate H. Sullivan: Hi, thank you. Good day and great comments and congratulations on the newbuilds. And in light of the newbuild program, can you comment and remind us on the current dividend policy and how you are looking at evaluating the dividend with the newbuild expenditures going forward, please? Because I think there is a discretionary cash reserve element in the dividend, but wanted to double check. Stamatios Tsantanis: Good morning, Tate. Thank you very much for your question. We do not expect the dividend policy to be affected by the newbuildings. The sale of the Duke ship plus some other planned things that we intend to make, if we are to put additional newbuildings, will likely be more than sufficient in order to cover all the cash expenditure and, of course, the efforts of Stavros and the finance department to get the financing in place. We will it is going to be unlikely to affect our dividend policy. So we will, and we expect to be in a position to start renewing our fleet without affecting the operating cash flow and the dividend that we will continue to pay to our shareholders. Tate H. Sullivan: Good. Thank you. And the second question, you mentioned already having some very early contracting discussions regarding the newbuilds. It seems like in the last five years, maybe the tanker sector would lock in multiyear contracts at below-market fixed rates, maybe at the behest of the lenders. How are you strategizing those of contracting the newbuilds? Are you considering the multiyear, or is that a dynamic part of the conversation you have with the lenders? Stamatios Tsantanis: Well, not so much. Our lenders are very comfortable with the fact that our sheet is very solid. We have very low loan-to-value right now. We have a very significant cash balance. So as far as we keep our orderbook in a well-managed situation, I do not think that any of our existing lenders is going to have an issue. And we see a very strong appetite from new lenders in order to provide additional financing. So I do not see that as an issue altogether. Now fixing the ships for five years or seven years, we are of course considering them. We feel that these ships are in very high demand from our charterers. I think closer to the delivery, maybe in a few months from now or end of the year, we will be in a position to fix some of these ships in long-term periods. But I do not want them to be below market, just to sacrifice the operating cash flow of the ships. Tate H. Sullivan: Okay. Thank you very much. Stamatios Tsantanis: Thank you, Tate. Operator: Thank you. This concludes the question and answer session and today’s conference call. Thank you all for participating. You may now disconnect your line. Speakers, please stand by.
Operator: Good morning, and welcome to the Otter Tail Corporation Fourth Quarter 2025 Earnings Conference Call. Today’s call is being recorded. We will hold a question-and-answer session after the prepared remarks. I will now turn the call over to the company for their opening comments. Good morning, and welcome to our fourth quarter 2025 earnings conference call. Beth Eiken: My name is Beth Eiken, and I am Otter Tail Corporation’s Manager of Investor Relations. Last night, we announced our fourth quarter and annual financial results. Our complete earnings release and slides accompanying this call are available on our website at ottertail.com. A recording of this call will be available on our website later today. With me on the call are Charles S. MacFarlane, Otter Tail Corporation’s President and CEO, and Todd R. Wahlund, Otter Tail Corporation’s Vice President and CFO. Before we begin, I want to remind you that we will be making forward-looking statements during the course of this call. As noted on Slide 2, these statements represent our current views and expectations of future events. They are subject to risks and uncertainties, which may cause actual results to differ from those presented here. So be advised against placing undue reliance on any of these statements. Operator: Our forward-looking statements are described in more detail in our filings with the Beth Eiken: Securities and Exchange Commission, which we encourage you to review. Otter Tail Corporation disclaims any duty to update or revise our forward-looking statements due to new information, future events, developments, or otherwise. I will now turn the call over to Otter Tail Corporation’s President and CEO, Mr. Charles S. MacFarlane. Operator: Thank you, Beth. Good morning, and welcome to our fourth quarter earnings call. Charles S. MacFarlane: Please refer to Slide 4 as I begin my remarks with an overview of recent highlights. We are pleased with our 2025 financial results as they exceeded our original expectations for the year. Our team members continue to deliver for our customers and shareholders amidst dynamic market conditions, and I am grateful for their efforts throughout the year. Otter Tail Power continued to deliver on our significant rate base growth plan while executing on our regulatory priorities. Interim rates went into effect December 1 in South Dakota, and we obtained approval from the Minnesota Public Utilities Commission to implement interim rates beginning on January 1. Phase two of final tech expansion project continued to progress as well. We expect the new line to be fully operational in early 2026, and we look forward to bringing this incremental capacity online. Earlier this year, we increased our dividend by 10%, producing an annual indicated dividend of $2.31 per share. This was the second year in a row we announced a double-digit increase to our dividend, reflecting our financial health and commitment to delivering value and returning capital to our shareholders. 2026 will mark the 88th consecutive year we have paid dividends to our shareholders without interruption or reduction. Slide 5 provides a summary of our quarter-to-date and annual earnings. For the year, we produced diluted earnings per share of $6.55, a decrease of 9% from last year. The decrease in earnings was expected as our earnings from our segment receded from record levels achieved last year. We ended 2025 in a position of financial strength with a strong balance sheet and ample liquidity to fund our customer-focused growth plan. We are initiating our 2026 diluted earnings per share guidance range with a midpoint of $5.42. Following my operational update, Todd will provide a more discussion of our 2025 financial results and our outlook for 2026. Transitioning now to our operational update for Otter Tail Power. As noted on Slide 7, we received approval from the Minnesota Public Utilities Commission to implement interim rate revenues of $28,600,000 effective 01/01/2026. Interim rates are subject to refund at the conclusion of the proceeding. The procedural schedule has been set, and we continue to anticipate final rates being implemented in mid-2027. Turning to Slide 8. Our South Dakota rate case continues to progress. Interim rate revenues of $5,700,000 went into effect on December 1, subject to refund. There were no intervenors in our South Dakota rate case, and earlier this year, we reached settlement in principle with the South Dakota Public Utilities Commission staff. We continue to work towards finalizing the settlement and appreciate the collaboration with the commission staff to date. Turning to Slide 9. Our customer-focused rate base growth continues to be robust. We refreshed Otter Tail Power’s five-year capital spending plan with the total remaining unchanged. Key changes to the plan include the addition of a battery storage project, the acceleration of solar investment, and the shifting of a portion of our transmission investment outside the planning period due to updated project timing. Todd will provide more details as it relates to our five-year capital spending plan in a moment. We are reaffirming our five-year rate base compounded annual growth rate of 10% and continue to expect Otter Tail Power to convert rate base growth into earnings per share growth near a one-to-one ratio. Slides 10 and 11 provide an overview of ongoing and future capital projects. We recently completed our wind repowering project, upgrading the wind towers at four of our owned wind energy centers. These upgrades are expected to result in a 20% increase in output and, due to the benefit of an additional ten years of renewable energy tax credits, are very economical for our customers. Our two solar development projects are underway. Solway Solar is in the early stages of construction, and in January 2026, we completed the acquisition of development assets for Abercrombie Solar. We continue to expect Solway to be operational toward the 2026 or early 2027, and Abercrombie in 2028. Throughout 2025, our team members evaluate options for a battery storage project that would meet the requirements of our approved Minnesota integrated resource plan, which authorized us to add up to 75 megawatts of battery storage by 2029. Near the 2025, we identified an opportunity to add this battery near our Hoot Lake Solar facility. We advanced this project so it would be operational in the approved timeline and qualify for available tax credit, making it economical for our Minnesota customers. Our team’s preparedness, experience, and agility enabled us to capitalize on this opportunity, allowing us to accelerate the timing of the project for the benefit of our customers. The battery project is under development and is expected to have a storage capacity of 75 megawatts and a storage duration of four hours. Our total capital investment associated with the project is approximately $120,000,000, and in November 2025, we received Minnesota commission approval for rider recovery. We currently expect the battery storage facility to be operational in 2028. Turning to our transmission projects. Development work continues in our MISO Tranche 1, MISO Tranche 2.1, and JPIQ portfolio projects. We continue to work through landowner and local government resistance associated with siting and certain permits for one of our MISO Tranche 1 projects. We continue to monitor a FERC complaint filed in mid-2025 against MISO’s Tranche 2.1 portfolio of projects, citing a concern with benefit calculation. We currently expect the projects to move forward due to their reliability-related benefits, but believe there could be delays. Turning to Slide 12. We refreshed our large load pipeline, removing the 155 megawatt load that went into service in 2025. We continue to engage with companies looking to add large loads to our system. We believe we have attractive opportunities to add new customers, but we are being prudent in our approach to mitigate potential adverse implications to our existing customer base. We remain optimistic about the 430 megawatt data center opportunity currently sitting in phase two. We continue to engage with the customer in an effort to advance this load to a signed electric service agreement. As a reminder, we have not made any adjustments to our load growth forecast for the opportunities sitting in phase one and two of our pipeline. Further, our current five-year capital spending plan does not include any capital related to new large loads. We remain committed to providing low-cost electric service to our customers and have demonstrated our ability to do so for many years. Slide 13 illustrates Otter Tail Power’s electric rates have remained well below the national average and regional average for many years. Our 2025 residential electric rates were 34% below the national average and 19% below the regional peers. Looking ahead, we remain committed to managing customer bills. We currently project bills to increase between 3%–4% on a compounded annual growth rate over the current five-year planning period. This is made possible by MISO system-wide recovery of regional transmission and the availability of renewable energy credits, reduced energy costs, and other factors. There could be some variability in terms of annual bill increases with some years experiencing higher increases and others lower. This is due to the timing of rate case filings, capital spend, and related recovery. We also expect that the five-year CAGR may vary between jurisdictions. Transitioning to our manufacturing platform, Slide 15 provides an overview of the industry conditions impacting our Manufacturing segment. BTD continues to face end-market demand-related headwinds as sales volumes remain below historic levels. End-market demand continues to be negatively impacted by higher levels of new and used inventory at the dealer level, as well as a challenging economic environment. The end markets most heavily impacted by these dynamics include lawn and garden and agriculture. The construction and recreational vehicle end markets seem to be improving as inventory levels are normalizing at the retail level. The industrial end market remains strong, as our products are ultimately used to support the growing energy demand. We have seen some improvements in T.O. Plastics’ horticulture end market but continue to face competition from low-cost importers. Slide 16 provides an overview of our Plastics segment pricing and volume trends. Our sales prices of PVC pipe continue to steadily decline, decreasing 15% from the 2024 average. The rate of decline accelerated during 2025, with the average sales price being 20% lower than the same time last year. The rate of price decline can be impacted by a variety of factors, including product mix and seasonal demand patterns. Sales volumes increased 8% from 2024 levels. The increase was largely driven by the incremental capacity added at Vinyltech in late 2024. Material input costs, including PVC resin, decreased 14% from 2024 levels as domestic supply remains elevated. Turning to Slide 17. Our manufacturing platform remains well positioned to support future growth opportunities. Our new BTD Georgia facility is ready to support our customers in the Southeast part of the United States, and phase two of our Vinyltech expansion project is nearly complete. Further, Northern Pipe Products is also pursuing a project to increase their nameplate production capacity by approximately 20,000,000 pounds by enhancing the efficiency of an existing line. We expect this incremental capacity to be available beginning in 2028. I will now turn the call over to Todd for the financial results. Todd R. Wahlund: Thank you, Chuck, and good morning, everyone. Turning to Slide 19, we are pleased with our consolidated 2025 financial results. We generated $6.55 of diluted earnings per share, which was towards the upper end of our 2025 earnings guidance range. Please follow along on Slides 20 and 21 as I provide an overview of annual financial results by segment. Electric segment earnings increased over 7% year over year with an increase of $0.16 per share. The increase in earnings was driven by recovery of our increased rate base investments, higher residential and commercial sales volumes, the impact of favorable weather relative to 2024, and lower operating and maintenance expenses through prudent cost management-related efforts. While weather conditions were slightly negative in 2025 compared to normal levels, they were much closer to normal levels than the mild 2024. These drivers were partially offset by higher depreciation and interest expense related to our rate base investments and associated financing costs. Manufacturing segment earnings decreased $0.06 per share, or 16% year over year, primarily driven by lower sales volumes, the impact of product mix on average pricing, and higher SG&A expenses. Sales volumes were negatively impacted by soft end-market demand and inventory management efforts by manufacturers and dealers throughout 2025. These drivers were partially offset by lower production costs as our team members did a great job aligning our cost structure with the current demand environment. We finished the year strong with higher year-over-year sales volumes in Q4, and this momentum is carrying into 2026. Turning to Slide 21. Plastics segment earnings decreased $0.72 per share, or 15% year over year, as earnings receded from the historic high reached in 2024. The decrease in earnings was largely driven by lower average sales prices. Sales prices decreased 15% from the 2024 average. We continue to offset some of this decrease in average pricing with higher sales volumes and lower input material costs. Turning to Slide 22. We ended the year in a position of financial strength with $386,000,000 of cash on hand. We produced a utility sector-leading return on equity of 16% on an equity layer of 63%. Our balance sheet continues to be capable of funding our significant customer-focused growth plan without external equity through at least 2030. On Slide 23, we are initiating our 2026 diluted earnings per share guidance range of $5.22 to $5.62. The midpoint of our 2026 earnings guidance is expected to continue producing an above-average return on equity of 12%. Our 2026 earnings guidance is premised on the following assumptions by segment. Electric segment earnings are expected to increase 14% in 2026 due to higher returns generated from an increase in average rate base of 14%, as well as interim revenues from our Minnesota general rate case. The double-digit increase in average rate base is primarily driven by our wind repower and solar investments. We expect these drivers of increased earnings to be partially offset by higher operating and maintenance expenses as well as increased depreciation and interest expense. We expect Manufacturing segment earnings to increase 7%, primarily due to an improved sales outlook across the segment. The projected sales growth is being driven by a modest increase of sales volumes at BTD Manufacturing and higher sales volumes of horticulture products. We also expect improved productivity to be a positive contributor to earnings in 2026. For BTD, we anticipate a strong first half of sales relative to 2025, but are being more cautious on our projection for the second half of the year due to continued challenges with certain end markets. Plastics segment earnings are expected to decrease 36%, as average PVC pipe prices continue to recede from the peak reached in 2022. This is expected to be partially offset by the impact of higher sales volumes driven by the phase two capacity coming online at Vinyltech in early 2026. Input material costs, including the cost of resin, are expected to be largely flat year over year. Corporate costs are expected to increase in 2026, driven by lower investment income and higher labor costs. We updated Otter Tail Power’s five-year capital spending plan, which is included on Slide 24. Despite the updates made, Otter Tail Power’s five-year capital spending plan continues to total $1,900,000,000 and continues to be expected to produce a rate base compound annual growth rate of 10%. Our updates included increasing the investment amount for renewable generation and battery storage to include the Hoot Lake battery project. We shifted approximately $140,000,000 of transmission-related investments outside the current five-year planning period due to updated timing of capital spend. Additionally, we continue to have potential incremental investment opportunities for Otter Tail Power. We have approval in Minnesota to add up to 200 megawatts of additional wind generation and continue to seek the least-cost option for our customers, whether that be a power purchase agreement or a rate base investment. With our large transmission projects, there is still some uncertainty on the precise timing of some of the spend, so there could be some shifting of spend back into this five-year planning period. We also could have incremental investment opportunities if we successfully secure new large loads. We continue to project every additional $100,000,000 incremental capital investment opportunity increases Otter Tail Power’s rate base compounded annual growth rate by approximately 65 basis points. Slide 25 summarizes our updated five-year financing plan. Even with our significant utility capital spending plan, we do not have any external equity needs through at least 2030. We plan to issue debt at Otter Tail Power on an annual basis to help fund the investment plan and maintain its authorized capital structure. We have $80,000,000 in parent-level debt that matures later this year and expect to retire and not replace this debt. We will have no outstanding parent-level debt upon retirement. On Slide 26, we are reaffirming our expected long-term Plastics earnings profile. We believe Plastics segment earnings will continue to decline through 2027 such that 2028 is our first full year of earnings within our $45,000,000 to $50,000,000 range. This assumption is based on the average sales price of our PVC pipe continuing to decline at a rate similar to what we experienced towards 2025, higher sales volumes due to our expanded production capacity, and cost changes generally in line with the rate of inflation. For 2026, we expect our average sales price of PVC to be approximately 20% lower than the 2025 average. Due to seasonality and other factors, the rate of margin compression could vary from period to period. Additionally, it continues to be difficult to predict with certainty long-term Plastics segment earnings. The timing or level of earnings could vary materially from this projection. However, our Plastics segment is an important component to our overall strategy, with the enhanced returns, cash flow, and earnings it generates. Even as earnings continue to recede, we expect the segment to produce an accretive return and incremental cash to help fund our electric utility’s rate base growth plan. Slide 27 summarizes our investment targets. Underpinned by the significant growth in our electric segment, we continue to target a long-term earnings per share growth rate of 7% to 9%, resulting in a targeted total shareholder return of 10% to 12%. We anticipate delivering on those targets once Plastics segment earnings normalize in 2028. As we continue to execute on our customer-focused growth plan, we are well positioned to deliver on our investment targets over the long term. Otter Tail Power continues to be a high-performing electric utility, converting its rate base growth into earnings per share growth at near a one-to-one ratio. Our Manufacturing and Plastic Pipe businesses consistently produce accretive returns and incremental cash, enabling us to fund our rate base growth plan without any external equity needs through at least 2030. It is this intentional strategic diversification that has and will continue to provide benefits to our customers and investors over the long term. We look forward to what the future holds and are grateful for your interest and investment in Otter Tail Corporation. We will now open for questions. Operator: Thank you. As a reminder, to ask a question, please press. There are currently no questions in the queue, but we will wait a brief moment in case anyone is experiencing technical difficulties. As there are still no questions in the queue, I will turn the call back to Chuck for his closing remarks. Charles S. MacFarlane: Thank you for joining our call and your interest in Otter Tail Corporation. If you have any questions, please reach out to our investor relations team. We look forward to speaking with you next quarter. Operator: This concludes today’s conference call. Thank you for participating, and you may now disconnect.
Roger Schrum: Let me make sure we're there. Again, good morning, everyone, and thanks for joining us at today's Sunoco's 2026 Investor Day. I'm Roger Schrum, I'm Head of Investor Relations for the company. And it's been my honor to work for Sunoco for 20 years, although I did have a couple of years off for good behavior. This morning, Howard Coker, our President and CEO; and Paul Joachimczyk, our Chief Financial Officer, will start with a brief review of our fourth quarter and full year results. Sunoco issued a news release and posted a presentation on our website at sonoco.com yesterday evening, which provided detailed information on our financial results. We also will post today's presentation on our website after we conclude prepared remarks. Once we finish with our review of 2025 results, Howard will come back on the stage and do our strategic review and follow that with our presentations from our 3 business unit presidents on our industrial and consumer businesses. We're then going to take a short break, and Paul will come back up and provide further financial review and present our targets for 2026 through 2028. Howard will close our formal presentation, and then we'll take your questions. For those of you that are listening virtually, we do have an option for sending us questions as well. After we conclude Q&A, we'll be hosting a short modeling session across the hall over here and Harvard Room 1 to answer any your detailed question than you may have. With that in mind, we hope that you limit your financial modeling questions during the Q&A, we'll take care of them over there. But before we get started, let me remind you that during today's presentation, we will discuss a number of forward-looking statements based on current expectations, estimates and projections. These statements are not guarantees of future performance and are subject to certain risks and uncertainties. Therefore, actual results may differ materially. The company undertakes no obligation to revise any forward-looking statements. Additionally, today's presentation includes the use of non-GAAP financial measures, which management believes provides useful information to investors about the company's financial condition and results of operations. Further information about the company's use of non-GAAP financial measures, including definitions and reconciliations to GAAP measures is available in the Investor Relations section of our website. Now with that, let me turn it over to Howard. Robert Coker: Okay. Well, good morning, and thank you, Roger. It's really great to see so many of you who I've come to know over so many years, and I'll certainly look forward to getting to those that don't know through the course of this conversation and others. Before Paul and I review fourth quarter and full year 2025 financial results and present our '26 guidance. Let me open with a few comments about what you will hear today. First, our portfolio transformation is complete. In fact, what differentiates us from so many in our industry today is that the most difficult part of our transformation journey is behind us and we're poised to create greater value for our customers and shareholders going forward. Second, there was a purpose behind our portfolio changes and we have built global market-leading franchises in both metal and paper, consumer and industrial packaging. And while our portfolio is set -- we have plans to further improve profitability and cash flow generation. Finally, we believe we are in the best position to deliver consistent earnings growth going forward. Our Sonoco team executed well in the fourth quarter despite a difficult macroeconomic environment, delivering strong operating results we reduced net debt by approximately 40% year-over-year and lowering the company's net leverage ratio to approximately 3x. And we concluded our portfolio transformation following the successful divestiture of ThermoSafe and further simplified our Consumer Packaging segment by consolidating our global metal packaging and rigid paper containers business into a single integrated structure driven geographically. Which we believe enhances our go-to-market strategy and will drive additional synergies across global channels. I'll let Paul go through the numbers in detail, but we improved revenue, operating profit, adjusted EBITDA and adjusted EPS above consensus and our own expectations. We achieved this improvement despite the divestiture of ThermoSafe earlier in the quarter. Providing some context for the quarter. October was a strong month for all of our businesses, while November was a bit weaker than we had expected. December is always a difficult month to predict due to our customers' inventory management practices and consumer demand at year-end. But overall, the month was better than we had planned. Productivity, favorable price cost environment and structural cost savings throughout the quarter improvement, meaning we were effective in controlling the controllables. Demand was about what we expected with volume mix overall down just under 2%. Metal Packaging U.S. had a record quarter and a record year. U.S. food can units were up 10% in the quarter and 9% for the full year exceeding reported industry averages. Results from metal packaging EMEA exceeded our expectation, although food can units were down about 3%. Some of our customers manage inventories below what they had done historically. Rigid Paper Containers were down in North America on soft construction, stack chip and other food categories while unit volumes in Europe were flat. Industrial had another solid quarter on top of a record year and margins expanded for the ninth consecutive quarter. As mentioned, we completed the sale of ThermoSafe, our temperature-assured packaging business in early November and received $656 million in cash which equates to a valuation of approximately 13x. We used net proceeds and free cash flow in the fourth quarter to reduce debt by $966 million. Year-over-year, we reduced net debt by approximately $2.7 billion, if you include the proceeds from our TFP divestiture and free cash flow. This debt reduction effort lowered our net leverage ratio from 6.4x starting the year to approximately 3x at year-end. As you recall, we had targeted to reduce our leverage to 3.3x to 3x by the end of 2026. So we are tracking ahead of our expectations. Net-net, it was a good end to the year, an excellent setup for 2026. Now I'm going to turn the podium over to Paul to go over the numbers in more detail and review our 2026 guidance. Paul? Paul Joachimczyk: Thank you, Howard, and thanks, everybody, for being here today. I'll walk through our fourth quarter and full year 2025 financial performance. All of the results are presented on an adjusted basis, with growth on a year-over-year basis unless otherwise noted. The GAAP to non-GAAP EPS reconciliation is included in the appendix and in our press release. As Howard noted, 2025 was a pivotal year for Sonoco. With our portfolio transformation complete, we now have global market-leading positions across 2 focused segments, positioning the company for more consistent execution and sustainable long-term performance. Turning to the fourth quarter. Results reflected strong execution across the businesses despite a mixed demand environment. From a revenue perspective, fourth quarter net sales for continued operations increased 30% to $1.8 billion, driven by the metal packaging EMEA acquisition, strong pricing and favorable FX. This was partially offset by volume and mix which declined approximately 2%. Adjusted EBITDA increased 10% to $272 million with margin expansion of 51 basis points, reflecting strong operational discipline, despite softer volumes. Adjusted EPS was $1.05, up 5% year-over-year, driven primarily by favorable price cost largely in our consumer segment. Continued productivity gains were evenly split between consumer and industrial. FX tailwinds and lower SG&A also contributed to that. These benefits were partially offset by softer volume and mix, slightly higher interest expense and lost net earnings from our divestitures. Operating cash flow was $413 million for the quarter, while that includes a onetime tax payment from divestitures, it also demonstrates the strong seasonal cash generation of our Med can businesses. Turning to the full year results. Full year net sales for continued operations increased 42% to $7.5 billion, driven by the metal packaging EMEA acquisition, favorable FX pricing, which was partially offset by volume and mix. Adjusted EBITDA of $1.3 billion increased 28% with margin expanding 120 basis points to 16.9%. This improvement was driven by the metal packaging EMEA acquisition, strong price/cost execution, continued productivity, lower fixed costs and favorable FX partially offset by volume softness, primarily in our converting and Consumer business. We also had lost earnings from our divested businesses within the year. Adjusted EPS was $5.71, representing a 17% increase year-over-year. This improvement was driven by metal packaging EMEA acquisition, favorable price cost productivity gains and FX, partially offset by divested businesses, unfavorable volume, a higher tax rate and interest expense. Operating cash flow was $690 million, including $216 million of onetime items, primarily $196 million in taxes paid on capital gains from our divestiture. On a normalized basis, full year operating cash flow was $906 million, underscoring the strong cash generating capability of the portfolio. Looking ahead to 2026, we expect continued earnings growth, supported by improving volume and mix, disciplined pricing, strong productivity and lower interest expense. We are projecting sales of $7.25 billion to $7.75 billion, adjusted EBITDA of $1.25 billion to $1.35 billion and adjusted EPS of $5.80 to $6.20. Operating cash flows of $700 million to $800 million. This includes approximately $100 million of taxes related to our capital gains from the businesses divested in 2025. Before reviewing the 2025 to 2026 bridges, let me clarify our definition of pro forma. It reflects our 2025 reported results adjusted to exclude divested businesses and represents the comparable asset base for growth in 2026. Relative to the 2025 pro forma sales of $7.3 billion, we expect low to mid-single-digit sales growth driven by favorable volume mix, pricing and FX. We are also projecting EPS growth of approximately 20% versus our 2025 pro forma EPS of $4.97, driven by our operational improvements, favorable volume mix, lower year-over-year interest expense and FX. This growth will be partially offset by 150 to 200 basis points increase in our effective tax rate. In summary, 2025 was a year of disciplined execution and strategic processes. We entered 2026 with a stronger portfolio, improved margins and enhanced cash flow generation, positioning Sonoco well for durable earnings growth. This concludes our recap of 2025 and our outlook for 2026. At this time, we invite you to watch a short video transitioning into our Investor Day, where we will focus on 2026 and beyond. [Presentation] Robert Coker: Again, thank you for joining us today. I really, really am looking forward to the next portion of our presentation, which, as you just saw, is all about our focus towards the future. Sunoco has transformed over the last several years to create a more focused, simplified business. This focus allows us to move faster, allocate capital, with greater discipline and hold ourselves accountable for returns. After reviewing our strong finish to 2025 and our outlook for '26. We now want to take a step back to talk about our transform portfolio, our focused strategy and the experienced leadership team that we have in place, which you'll hear from today. Importantly, what is different today is not just where we are but how decisively we will run the business going forward. Focusing management attention, capital and resources on fewer but scale businesses, we have a strong competitive advantage. I've been at Sunoco for over 4 decades and have experienced a wide range of economic cycles, changing competitive dynamics and shifting consumer trends, but I've never been more excited about the opportunities we have for the next phase of our growth. What gives me confidence today is not simple optimism, but clarity, clarity around our portfolio, our strategy and our ability to execute through cycles. Our scaled well-capitalized asset base underpins our belief that Sunoco is the investment of choice in packaging. We are a global leader in high-value paper and metal cans as well as uncoated recycled paperboard and associated converted products. Significant prior investments in our operations, systems and people position us to drive improved profitability. Our streamlined portfolio supported by our proven operating model enables accelerated margin expansion and consistent earnings growth. We focus on essential center of the store food categories and partner with large growing brands and private label customers. Through strong relationships, product quality and service excellence core to Sunoco's culture, we continue to gain share. With more than 125 years of value creation, strong cash flow generation and disciplined capital allocation, we are investing for growth, strengthening our balance sheet and returning capital to shareholders, including 100 consecutive years of sector-leading dividends. Today, Sunoco has grown to become a $7.8 billion global packaging leader with 22,000 team members working in 265 facilities across 37 countries, serving some of the best known brands around the world. Guided by our purpose of better packaging, better life. We strive to foster a culture of innovation collaboration and excellence to provide solutions that better serve our customers. Over the past several years, we have balanced our geographic sales mix, growing in the EMEA region, which now accounts for approximately 40% of sales. while still maintaining more than half of our revenue right here in the United States. We believe there are significant economies of scale in our global platform, particularly in consumer packaging, that are a significant competitive advantage to serving large global customers with complex needs. In 2020, only 42% of of our sales came from Consumer Packaging, while 44% was industrial, and the remainder of sales came from a variety of diversified businesses. Since then, we purposefully shifted our mix to more consumer-focused packaging where today, more than 2/3 of sales are generated by our leadership positions in paper and metal. The remaining 1/3 of our sales come from our leading position in uncoated recycled paperboard and converted products. Furthermore, in our URB business, approximately 70% of our paper and converted product sales are, in fact, in consumer staple and durable end markets. Both our consumer and industrial businesses are strategically aligned around technology, innovation, of course, customers, service and sustainability. During our transformation, we followed a set of principles that helped us determine what markets we would participate in and how we expect to win. We focused on value-added packaging where we can drive a competitive advantage to advanced material science and technology expertise, where our products possess high functionality and where we can best leverage continuous process manufacturing to drive efficiency and scale. Our operating model leverages our quality and partnership approach to help our customers respond to a dynamic marketplace for customer preferences and buying habits, along with regulations are indeed constantly changing. Today, we have developed a focused portfolio serving a mix of large growing global customers who value the competitive advantages that we provide. I've been asked many times why we went through this transformation. The objective was straightforward: to improve the quality predictability and durability of our earnings and cash flow over the long term. Early in our transformation, we increased investment in technology and innovation in our core operations to drive growth and efficiency. We then reshaped our portfolio by exiting noncore businesses, and we recycled that capital to acquire and create scale in our market-leading segments. By the end of our journey, we reduced a number of our highly diversified businesses from 20 to 2 core segments. And we simplified our operating systems and concentrated our resources where we could best drive profitable growth. Today, our foundation is set, and the transformation of our portfolio is complete. Since we began this journey in 2020, we have grown revenue by 50%. We've increased adjusted EBITDA by 67% and expanded EBITDA margin by approximately 200 basis points. Adjusted earnings grew 50% during this period, and we generated over $3 billion of operating cash flow. And returned $1.2 billion to shareholders through dividends and share repurchases. We believe there is much more we can accomplish by focusing on our strategic priorities, sustainable growth, margin improvement and efficient capital allocation. During their upcoming presentations, each of the business unit presidents will detail specific actions that we'll be taking to drive these strategic priorities. But let me provide an overview of each of these initiatives. First is sustainable growth. We have a targeted strategy to take advantage of long-term trends and believe we can grow organic sales by focusing our customer partnerships to gain share, not by chasing volume, but by improving mix, strengthening customer service and relationships and achieving fair value-based pricing. We have a track record of improving profitability and margins by deploying our operating model. Our model is centered around structural transformation, operational improvement, including commercial, supply chain and operational excellence, strategic capital allocation and maintaining excellence and sustainability. This model allows Sunoco to add $533 million in adjusted EBITDA since 2020 at a greater than 20% margin. Also, we've been able to reduce net debt by approximately 40% in the past year while achieving our sustainability goals. We're excited about the early results we're experienced in deploying this model across a more streamlined and simplified organization. We have an opportunity to further improve our business through structural transformation. As an example, we recently announced we are simplifying our consumer segment, by consolidating our global metal and rigid paper container businesses into a single integrated structure divided geographically. This action, which you'll hear much more from our business unit presidents will enhance our consumer go-to-market strategy, focus our technology and service model to respond to changes in the marketplace and drive additional cost savings across our global footprint. We are targeting an additional $150 million to $200 million of cost savings, which translates into roughly 200 basis points of adjusted EBITDA margin improvement by the end of 2028. And importantly, this improvement is driven by actions within our control, not portfolio exit or large acquisitions. Paul will provide more color on the specific initiatives when he reviews our KPIs and financial targets later in the presentation. But this is the path the team, our team is working on to control the controllables and deliver on our long-term financial goals. Sonoco has consistently generated strong operating cash flow and we're expecting that trend will continue. Efficiently allocating capital remains a key element of our operating model. Our top 3 priorities going forward will be to invest in high-return growth and margin expansion projects, maintain a strong balance sheet by focusing on further debt reduction and continuing to return capital to shareholders. Our focus on sustainability excellence remains an important initiative for many of our customers and shareholders. Earlier this month, we announced that a virtual purchase power agreement developed between Sonoco and NG North America, consisting of 60 wind turbines and Crockett County, Texas has become operational. This project is another step in Sonoco's integrated sustainability efforts to reduce our global carbon emissions by 25% before 2030 by improving packaging design, installing energy-efficient equipment and renewable energy sources, such as solar power installations. Let me close by focusing on high-level strategic targets for '26 through '28 and Paul will build on these with a more detailed framework in his section. To achieve our strategic priorities of sustainable growth, margin expansion and efficient capital allocation, we have set specific targets, develop detailed plans and will measure our progress and will hold ourselves accountable. We expect our future organic growth for our consumer and industrial business to be around GDP in aggregate. As I mentioned earlier, we're targeting 200 basis points of margin improvement, which will result in between $150 million and $200 million in savings by the end of 2028. And finally, we expect to achieve accumulated 3-year operating cash flow of $2.5 billion while reducing our long-term net leverage ratio of below 2.5x. I'm proud to say that Sonoco has one of the packaging industry's best and most experienced leadership teams to drive our focus mission going forward. Simplifying our structure also means we now have a simplified business and functional leadership team. I'd like to take a minute and provide you some background on our 3 business unit presidents. All 3 of which have long tenures with Sunoco as well as deep experiences in the businesses they run. Let me start with James Harold. James is President of our Industrial Paper Packaging segment, which successfully completed a record year in 2025. James is 41 years for the company, leading the industrial segment since 2020 and is considered one of the leading experts in the global URB industry. Sean Karnes as President of Consumer Packaging, EMEA, APAC, and -- he's been with Sunoco for 17 years and previously was President of our global rigid paper container operations. Before coming to Sonoco, Shawn was a business unit leader for Crown's EMEA can business, which, of course, we now own. Sean is an engineer by training but he has strong commercial skills and led the team that significantly grew our paper can business internationally. Ernest Haynes as President of Consumer Packaging Americas, Ernest has 28 years of experience with Sonoco and was previously President of Metal Packaging U.S., which is coming off a record year of performance. Prior to that role, Ernest was General Manager of our rigid paper container operations in North America. Also an engineer by training, Ernest started as a shift supervisor in our rigid paper container business, later serving as Head of Operations for our North American Industrial Paper Packaging business before taking the leadership role in consumer. Ernest also has strong commercial skills and led his team to more than double EBITDA for our U.S. metal packaging business since it was acquired in early 2022. I'd also like to recognize our functional leadership team who has manufacturing and operational leadership and experience in addition to being an expert in their fields. Andrea Way is our Chief Human Resource Officer and has 20 years with Sonoco. Andrew is also an engineer by training and started out our career as a manufacturing excellence expert and has used her process improvement skills to simplify our global HR function. John Florence, our General Counsel, has more than a decade with the company, although he did outside legal work for Sonoco for nearly 10 years. John also recently was a General Manager of our U.S. and Canada industrial paper and packaging operations, working very closely with James. Finally, as you know, Paul Jounce is our Chief Financial Officer. Paul joined the company in July with a proven track record of successfully leading financial functions for large multinational publicly traded companies in the building materials and manufacturing industry. Paul is comfortable in both finance and manufacturing and is taking on the task of helping drive our profitability performance plan, along with developing and tracking the companies key performance indicators. Before I turn the podium over to James, I want to leave you with one final thought. Today, Sonoco is a simpler company. running fewer but market-leading businesses with clear priorities, consistent earnings growth, stronger cash flow generation and a management team focused on execution, not reinventing the strategy. So with that, let me turn it over to James. James? James Harrell: Thank you, Howard, and good morning, everyone. I'm incredibly proud to introduce you to our Industrial Packaging group. As you heard from Howard, I've spent more than 40 years at Sonoco in the last 30 with the industrial team, I absolutely love being the industrial guy. Very proud of this team and what they have accomplished. This is Sonoco's oldest business spanning our full 125-plus years. generation after generation of team leaders and team members have found ways to keep reinventing this business, and this team is no different. I know I'm biased that I wake up every day knowing I am competitively bringing the best talent to task to continue to create value for our customers and our shareholders. Our best is still ahead of us. There's a number of key themes I would like for you to consider as I take you through this business. We are the URB global leader focused on vertically integrated, low-cost system producing paper and converted paper products. We have a proven track record of EBITDA growth, cash generation and high returns on investment. With our focus on customers and solutions through R&D and technology, we expect to achieve better than industry growth rates. As you have heard from Howard, we have been focused on simplifying our portfolio and structure. And this business has gone through those same filters. Five years ago, this business operated at 7 separate P&Ls and leadership teams. Today, it operates as one. From 2021 through 2024, we consolidated all the converting platforms, tubes and cores, post, partitions and corns together into paper converting. Early last year, we brought together paper mills and paper converting groups as 1 team. This has removed the silos and focused our single leadership team on value creation along the full supply chain and significantly reduced our critical decision-making time lines. Complementing our paper business, we have a wood metal and poly fiber business, driven by the growing power demand in North America. Today, we're a $2.4 billion business operating across 25 countries with around 9,000 focused team members. 73% of our sales are from North America and 16% from EMEA. Now we do call this the industrial business. But as you can see from the graphic, over 65% of our products support customers and consumer-facing end markets. As mentioned, our paper business is vertically integrated from fiber collection through paper mills to paper converting producing over 2 million tons per year which are split 52% internal and 48% external. Our internal versus external sales balance is the result of positioning to deliver the highest value from the products that we make based on the end markets we choose to serve. We target trade URB markets that are less correlated with our converting markets and allow us to use product development and tech service capabilities to add value to both our customers and our business. In some end markets like tissue and tau, the majority of value-add in paper making is in the paper making and less in converting. In other markets like tubes and cores and paper cans, we deliver critical value-add across both papermaking and converting. As a result, we have reoriented our business toward more sustainable consumer end markets. The mix of internal versus external tons is managed to reflect where we believe we can deliver the most value. It is not directed or dictated by the need to cover tons through internal consumption. More than half of the URB that we produce is utilized by our converted paper products business that produces tubes and cores, protective post, partitions, comes and paper for the paper can side of our consumer business, which you will hear more about from Sean and Ernest. Our converted paper business is focused on partnering with customers that have leadership positions in markets they serve and where we have the right to win. With approximately 2/3 of our converted paper product sales in the consumer staple and durable end markets. The URB that we sell externally is focused on the following markets: tissue and towel, food packaging, floor paper and coal board. These markets provide long-term stable growth and are aligned with our differentiated capabilities. We are biased to markets that are less cyclical and consumer-facing. Based on estimates from RISI, URB markets are expected to grow annually at just over 1% through 2028. RISI is also projecting that mill operating rates which averaged around 90% in 2025 should continue to improve to the mid- to the mid-90s as URB production levels increase through the expected growth. The industry has adjusted capacity to better align with post-COVID demand levels. The industrial team has driven solid EBITDA results through strong customer value focus, acquisitions like [ skarn ] and RTS, footprint leverage and a robust internal productivity process. Capital is driven by a disciplined allocation process, focused on keeping our system operating at high yields and delivering automation solutions in our converting operations. our operation model is strong and it is resilient. The bottom line of this slide is, you can depend on us. to continue to deliver strong EBITDA and margin results. We expect the macroeconomic backdrop to continue to present both challenges and opportunities. As you will see later in the presentation, we believe the preference for sustainable recycled packaging, power grid reinvestment Power growth from data centers and AI will provide us continued opportunities to grow. Geopolitical uncertainties will continue to drive volatility in tariffs, will put upward pressure on equipment-related expenditures. We are also seeing efforts to lightweight packaging, and this could adversely affect some markets. investments that allow us to drive greater efficiency and better service customers will continue to be a priority in how we allocate capital. Forward margin improvement will be driven by getting our European and APAC regions to higher return levels, along with opportunities to further simplify and streamline our processes. We continuously pursue new opportunities for growth through innovation, entering new markets that reward us for delivering the highest quality levels and service to our customers. Our entry into the high-pressure laminates market is a great example of this. Recognizing an unmet need in the market, we develop URB replacement for saturated kraft that supports high-pressure laminate products in countertops, flooring, composite boards and decorative panels. We are in final testing and expect to have our product in the market early this year. We believe this market opportunity is in the range of 20,000 to 30,000 tons per year. This is another great example of how our chemists our process engineers, our paper engineers can develop new value-added products in our URB converted paper space to meet new and evolving customer and consumer preferences. Our entry into the high-pressure laminates market is a great example of this. Recognizing an unmet need in the market, we develop URB replacement for saturated kraft that supports high-pressure laminate products in countertops, flooring, composite boards and decorative panels. We are in final testing and expect to have our product in the market early this year. We believe this market opportunity is in the range of 20,000 to 30,000 tons per year. This is another great example of how our chemists, our process engineers, our paper engineers can develop new value-added products in our URB converted paper space to meet new and evolving customer and consumer preferences. An absolutely exciting area for us and the strongest organic growth engine we have in the Industrial Group is our Reels business, focused on the wire and cable markets in North America. We have seen a doubling of revenue over the last 5 years in this business, driven by North American power demand, greening of the grid, infrastructure rebuild and the AI data center boom. We continue to invest capital in this business and to expand capacity, to increase automation to ensure we stay ahead of demand. And yes, that reel is real. It is truly that big. We have now moved the Industrial and Specialty Packaging business into our Industrial group as there are product overlaps and internal supply chains that allow our paper converting, reels and I&S business to leverage from each other. We will continue to build on these internal supply chain elements and cross-selling opportunities. I&S also has a strong foodservice product portfolio that we will continue to drive for growth. In summary, I am truly excited about this team, the opportunity to continue to deliver on the business we have built. We are committed to continued top line and EBITDA growth through strong value-based relationships with our customers, 1% to 2% growth in our URB markets and between 5% to 8% in our reels business. We will remain focused on being the best operators in the URB space, driving internal productivity and managing our footprint versus market needs. We will also continue a strong focus on improving returns in both our European and APAC regions, along with continued investment in our reels business to drive growth. In closing, you can count on us to be disciplined in how we allocate capital. As we focus on creating customer value with great products, maintaining a strong mill system and using automation and data to support optimization and decision-making. I want to thank you for your time this morning, and I hope I've created for you that same excitement and confidence that I feel every day about this business. We have a great team, capable of adjusting to whatever challenges we face and will continue to deliver and win for both our customers and our shareholders. I am honored to represent this team and this business for you here today, and I do love being the industrial guy. I'll now turn the podium over to Sean Cairns. Sean Cairns: Good morning, everybody, and thank you, James. So I'm actually super excited to be here today to share with you my passion for this business. As over the past years, my team and I have helped reshape how Paper Packaging perceived globally by inventing, commercializing and scaling all paper packaging solutions that resonate with both brand owners and consumers. Late last year, Howard asked me to lead our newly combined consumer packaging business in EMEA and APAC. And after my early career as a Merchant Marine, I spent 13 years at Crown in the [indiscernible] Metals business that we acquired. Today, I'll walk you through how we're going to integrate these 2 businesses and continue to grow in this region. We're the only player in EMEA and APAC that produces both paper and metal packaging, the 2 most sustainable and circular packaging substrates. Our customers require packaging solutions to meet increasing regulations and unique sustainability demands and, of course, their performance requirements. The streamlined organization improves flexibility, lowest cost to serve and strengthens customer partnership. Our consumer [indiscernible] APAC business is around about $2.9 billion in revenue with about 8,000 employees across 65 facilities. That scale creates meaningful advantages from procurement leverage, operational agility, supply security and, of course, capital efficiency. I'm proud to say we serve many of your most iconic brands across food, household and health and beauty with an innovative and versatile portfolio. In fact, I challenge any of you to look into any European household and not see many of our products. Rigid Paper continues to grow strongly, now enhanced by our ability to deploy assets across both paper and metal networks. And our market leadership in innovation and service helps us position that growth in both metal and paper with new and existing customers. Importantly, we can excel combined resources to deliver the highest service and value to our customers. What is unique about this region is when I've got the opportunity to sit down with customers and brand owners, sustainability is at the forefront of that conversation. And the good news is we've got the right sustainable fit for purpose solutions to meet our consumers' needs. No one else delivers packaging solutions across the region in metal and paper and that makes us unique in this market. We actually have over 200 years of experience in can design, innovation and our customers come to us to meet their design objectives. -- which actually significantly vary by country. Trust is actually essential in this business and our technical and service support teams enhance quality, improved consistency for our customers to reduce their waste and contamination risks. And as I said before, our manufacturing footprint and scale allows us to respond to variations in design, all while constantly delivering on productivity. Our footprint allows us to optimize our -- across our network to drive better value to our customers. And finally, our dedicated R&D and regulatory teams are a clear differentiator in the business. Our footprint is a key strategic advantage. Our can network needs to be located close to our customers' fill-in operations. For example, if you think about vegetables from the time to pick into packaging is incredibly important to lock in that very freshness that consumers demand. However, of course, we centralize operations where it makes sense to exploit our share economies of scale. A great example of this is our new can bottom for Pringles. We will produce all the world's demand out of 2 locations, 1 in Europe and 1 in Asia. Importantly, we're not simply merging these 2 businesses. since November, we've been undertaking a real deep dive structural review from the very top of this combined organization directly down to the shop floor to reduce the organization's layers while establishing best practices. I'm proud to say we've already implemented changes, and we expect further actions as we complete this review. Finally, it would be [indiscernible] if I didn't mention APAC. APAC is a meaningful growth vector for us as new all paper packaging solutions are being launched within this region. In fact, as we sit here today, in the coming weeks, we will launch yet another new innovative product within the APAC region. Our new factory, which we just recently opened in Thailand is actually directly connected to the Mass Pringles plant. And this facility is being built to serve this region and has the capability of being the world's largest paper can plant, and it's a perfect example of disciplined customer-backed expansion. I'm proud that our portfolio spans metal and metal and closures rigid paper visas and premium specialty packaging. Metal provides over 80% recycling rates, unmatched shelf life and exceptional food protection, making it essential for the food security, flexibility and quality. Meanwhile, paper cans delivers high recycled content, full recyclability and strong consumer appeal, which is driving rapid brand adoption. While premium cans deliver high margin and emotional brand engagement for our customers, particularly in gifting and luxury. This balanced portfolio creates resilience, premium upside and powerful substrate conversion opportunities for Sonoco. So from Pate to pet foods, stack chips to infant formula household to health, this portfolio unlocks opportunity with some of the highest growth end markets. And we're incredibly proud to operate across more than 70 countries, with all those differences in languages constant changes in regulation and customer requirements, formats and supply chains. Put simply, our job is to manage thatcomplexity. So effectively, our customers don't have to. Regulation across EMEA and APAC is ever-changing and accelerating conversions away for more difficult to recycled substrates, such as plastics and that unlocks up rail opportunity for us. Sunoco has been at the forefront of this movement by developing mono-material packaging solutions even before mono-material was a requirement. [indiscernible] extended producer responsibility program or ERP, puts in place higher fees for manufacturers and brand owners to cover the cost of collecting recycling and disposing of product packaging. These fees are designed to incentify sustainable designs shifting the burden of waste management from local governments to producers. This means as our customers require solutions to reduce their exposure EPR exposure. So now because of the knowledge the solutions in both paper and now metal to enable them to have a smooth transition. And I'm incredibly proud of because right now, we've got brand owners and retailers coming directly to us. asking for us to create solutions to reduce their environmental exposure. There is a classic example with Icopal. It's a Sonoco innovation, and it shows how regulation and innovation translates into growth. It reduces CO2 emissions by 20%, improves the consumer experience and simplifies production. APIs adopted it for Pat. And today, we're the only company globally that can produce this product. And we see broad adoption potential for this. Across mean APAC private labels are growing, while pet food premiumization and plant-based protein diets and trends are accelerating. All of these trends are influenced by continuous emphasis on sustainability, a key differentiator related to the U.S. Private label brands and owned brands are constantly looking for differentiation, and we're partnering directly with retailers and brands to meet these shifts often before they become mainstream. The result is diverse, resilient growth across categories and geographies. Pringles is a flagship example. Together, we moved the can from over -- to over 90% recycled paper content without compromising shelf life, manufacturing speed or most importantly, consumer experience. This is the single largest change to 1 of the world's most iconic packs in the past 50 years. And in effect, we future-proof the brand. And now with Mars and in Pringles, we are their partner for the next phase of growth. As I mentioned earlier, technology underpins our competitive advantage. Beer automation, artificial intelligence and analytics, they improve our quality, help us improve our safety and, of course, our productivity while reducing our energy use and waste. As an engineer, I could tell you productivity is a never-ending process. It's simply a must do in order for us to remain competitive for our customers. And we will continue to protect and scale proprietary platforms like ECPL and our all paper can solutions such as green can or orbit closures, which you can see all at the bottom of this slide. In fact, Orbit is a great example of how we use innovation to meet or met consumer needs. Who in the audience has not struggled to open a glass dark jar, while all bits the solution to that problem. Orbit's the only vacuum closure for glass jars that makes opening jars easy for anybody, how it works the outer ink rotates separately from the center panel. And this is another great creative innovation from Sonoco. Kicker costs started with 1 SKU and due to its success in the marketplace, they're currently rolling this out across the entire product range. And we see this as yet another growth vehicle as other brands realize its value. We're going to drive growth across the region by focusing on 3 levers. As we've been discussing, driving immediate paper can adoption, we expect to grow faster than any other substrate by catching sustainability and substrate conversion trends. While combined commercial teams, we have the right people and the right resources to approach the market with solutions that are sustainable and agnostic across paper and metal. And lastly, by creating a disciplined approach to our commercial processes, which will include standardization and improve our value-based pricing. And I'm really pleased to say our teams will stay deeply embedded with our customers as they constantly evolve. Capital investment will prioritized by customer back programs, such as the Mars example that I mentioned earlier. We will invest with regulatory demand and commitments align across both metal and paper. Another example of our consumer -- our customer-backed investments includes our all-new 60-millimeter all paper can line in France. A brand-new product to serve a new market with an entirely new product. Similarly, our 2-piece aluminum Patti line in France was built to support the growing preferences for single-serve formats. And of course, every project is evalued through strict return on invested capital criteria to ensure long-term value creation. To summarize, we're driving growth through the region's obsession with having sustainable packaged solutions driven by changing consumer preferences and regulation. We're expanding margins through integration and operational excellence. Strategic sourcing and materials remains a key competitive advantage, with which we can leverage to deliver value for our customers. Continuing to drive footprint optimization, standard processes and procedures with automation will be accretive to our margin profile. And we're allocating capital with disciplined where it's aligned with our customers or drives productivity enhancements. As I close out the section in my 31 years in the packaging industry, I've never experienced so much demand for change. This is mainly driven by the region's unique sustainability demands. And I'm incredibly proud that Sunoco is ahead of the curve with our proprietary sustainable packaging solutions. As you can see, I'm extremely excited about the future a consumer package in EMEA and APAC and the value it will bring and deliver for Sonoco and its shareholders. Thank you for your time this morning, and I'll now hand over to my friend, Ernest. Unknown Executive: Thank you, Sean, and good morning, everyone. I'm Ernest Haynes and it's really good to be with you all in New York. As Howard mentioned, I've had the great fortune to spend over 28 years with Sonoco between both our consumer and industrial businesses. and I feel positioned well to now lead Consumer Packaging Americas. No matter the economic climate, 1 principle remains constant, consumers vote with their wallets every time they shop. That vote is shaped by where they are today and more specifically, how they think about grocery decisions, affordability and value and brands must meet them where they are. We have a really clear view of how consumers are shopping, how retailers are responding and how our customers are adjusting to win those choices. My team's role is to help our customers earn that shopper's choice by making our packaging a competitive advantage through quality, service, advanced technology and sustainability. [Audio Gap] each facility is equipped with advanced automation, affording us significant cost efficiencies. In addition, we implement lean technologies to promote operational excellence throughout our entire network. Today, we produce over 3 billion steel food and aerosol cans in both 2-piece and 3-piece formats, whether you're in the center aisle of a grocery store or working on your DIY projects on a Saturday afternoon at home, our cans are likely very well represented. Within our leading paper can portfolio, we provide solutions for addressable markets like baby formulas, snacks, chilled dough and nuts. For decades, we have partnered with global CPGs to innovate every single component of our cans to satisfy the sustainable packages consumers both want and need. In addition to our metal and paper cans, we've also invested in expanding our footprint and capacities to provide cartridges that serve the adhesives and sealant space within the construction markets. At Sonoco, sustainability is an integral component of our approach to both material selection and product development. Steel remains the most recyclable consumer packaging material globally. Approximately 85% of all steel ever produced is still in use, supporting a genuinely circular economy that ensures long-term material availability and contributes to decarbonization. Our rigid paper cans feature approximately 85% post-consumer recycled content directly supporting brand objectives related to recycled content and performance on many important retail sustainability metrics. From a market standpoint, these attributes are incredibly significant. Sonoco's metal and paper can solutions enable customers to lead with confidence by mitigating risk, safeguarding shelf visibility and ensuring consistent supply. The macroeconomic environment significantly influences our industry and our market dynamics. Whether we're mitigating the high impact cost of steel-related tariffs, for our entire domestic customer base or adapting to evolving extended producer responsibility regulations, our strategies are specifically designed to manage those challenges and enable our customers to capitalize on emerging opportunities. Our global tinplate procurement capabilities guarantee continuity of supply, a critical factor for all of our clients. while our ongoing investments to innovate mono material paper cans, demonstrates our commitment to reducing environmental impact. While additional challenges are likely to arise. We remain steadfast in our mission to lead the industry by delivering sustainable solutions. As we look towards 2026 and 2027, shoppers are not pulling back, but they are rebalancing, inflation, slower job growth in tighter markets are reshaping budgets, while about 5 million U.S. adults are now using GLP-1 specifically for weight loss, driving diverse shopping baskets and new eating behaviors. But this is actually where Sonoco thrives. The majority of our Consumer Americas volume sits in the center of the store, where consumers turn for value, substance and meals that stretch further. As budgets tighten and eating patterns change, we're uniquely positioned to help brands rethink pack sizes, formats and shelf execution. These moments of disruption actually create opportunity, and they play directly into Sonoco strengths and helping our customers win the shelf and protect volume. Commercial excellence forms a fundamental component of our strategic initiative to drive earnings growth. The newly implemented organizational structure enables deeper analysis of customer requirements, and facilitates the optimization of internal processes. Our sales teams are now equipped to represent our entire can portfolio, irrespective of substrate, ensuring that the customer remains central to all commercial initiatives. Additionally, we have recently launched a global CRM system within our business technology suite that enhances collaboration and operational efficiency across every work group. Our customers rely on our capacity for collaboration and innovation to sustain competitiveness in their respective markets. Crop production costs remain a primary consideration for all can makers. Our operating model is distinguished across the Americas by its commitment to superior quality and service. We foster long-term partnerships with our customers, enabling value creation and supporting their growth in market share. A few partnerships illustrate this better than ours with Bush. -- where we are co-located on their site. As the market has evolved, Bush is protecting volume through premium promotions, like its new Blue Beans collaboration designed to bring younger consumers into the category. Our co-located model has expanded our 2-piece food can capabilities and enables daily collaboration with their teams, helping move faster on shelf, drive demand and create value for both companies. Within our aerosol segment, we've recently introduced a digital case study featuring CRC a globally recognized and trusted brand with Sonoco serving as a key contributor to their ongoing reliability. Sonoco provides supply assurance and tailored aerosol solutions ensuring that CRC products remain available on shelves even amidst significant external challenges. This partnership demonstrates Sonoco's commitment to creating lasting value for our customers, through a combination of global scale, dependability and operational excellence. Within South America, Brazil represents a high-value growth vector for the business. The country's dietary supplement market is expanding at nearly 10% annually, evolving rapidly from a sports nutrition focus to a broader everyday health and wellness category. Sonoco was positioned to capitalize immediately supported by established end-market capacity, strong customer and market intelligence and a purpose-built team capable of scaling powder supplement formats without the need for incremental platform investment. Investing in ourselves is something you've often heard Howard refer to. As a part of our greater strategy to drive long-term earnings and profitability. Our commitment to this philosophy is most evident in our Consumer Americas platform. where we have invested millions to enhance capacity, increased output across multiple lines raising OEE and installed advanced automation that continues to reduce our production cost. Additionally, we've recently adopted AI technologies within our manufacturing networks, aiming to further expand capabilities across various back-office processes. Over the next 3 years, we're focused on driving growth by expanding our market share through strong customer partnerships. We aim to increase EBITDA through commercial excellence and the use of efficient capital allocation, focused on the highest returns. Combining metal and paper solutions makes it easier for our customers to work with us. speeds up execution and strengthens margins. Our portfolio matches current consumer trends, supporting both private label growth and targeted premium products and what is expected to be a challenging 2026 marketplace. As the leading supplier in the Americas, we provide dependable supply through disciplined operations and smart capital investment. We're ready for market pressure, backed by a long-range plan designed to navigate tariffs and drive innovation-based growth. I have confidence in our new organizational structure, and our capacity to implement this growth strategy. But most importantly, I trust in the dedication of Sonoco's employees who've been instrumental in shaping our company over the past 125 plus years. I feel certain their commitment will remain a driving force in our continued success. Thank you. Now we'll take a short break. So please join us back in just a few minutes for our financial review, led by Mr. Joachimczyk. Thanks, everybody. Paul Joachimczyk: All right. As we gather back here. Thanks again, everybody, for taking your time for being here today. We do not take your time lightly at all. The fact that you're here reflects the long-term relationships we're focused on building as we continue to strengthen Sonoco. Again, I'm Paul Joachimczyk, Chief Financial Officer. I joined Sunoco after 3 decades across global manufacturing, building products and consumer businesses. All environments were capital discipline, execution and cash flow matter. Today, I'll walk you through our financial strategy and our 3-year outlook. It's grounded in discipline, shaped by transformation and designed to deliver durable long-term value. I'll focus on 3 things. First, how our recent financial performance reflects the transformation you've heard about today. Second, how we think about growth, margins and capital allocation going forward. And third, how our financial discipline underpins everything we do as we execute our strategy, what we call focus. As you heard from James, the Industrial business is a clear example of what happens when strategy and execution truly align. Five years ago, this was a collection of assets in markets that didn't always move together. Today, it's a focused, integrated business with a clear operating model. Since 2020, Industrial has added $190 million of EBITDA with margins expanding by more than 600 basis points. These aren't incremental gains. There are structural step changes driven by discipline, customer focus, operational rigor and smart asset investments. This is what repeatable value creation looks like at Sonoco. On the consumer side, the story is leadership, focus an opportunity. Sean and Ernest bring deep experience and long-standing partnership to this business, which has brought clarity and speed to our decision-making. Financial progress is already visible. EBITDA is expanding. And while margin expansion remains the largest opportunity, the leadership structure and operating rigor are now firmly in place. Over the next 3 years, that progress increasingly shows up in the numbers. Across the enterprise, the last 5 years, fundamentally reshaped Sonoco. We simplified the portfolio, aligned our resources, built scale and eliminated complexity and the financial results reflect that work. Top line growth of 50%, EBITDA growth of 67%, margin expansion of 200 basis points. In total, we added more than $530 million of EBITDA at margins above 20%. Those aren't onetime gains, the result of a company that is clear about where it competes and what drives value. Underlying every part of this transformation is a simple truth. Sonoco generates cash consistently. Since 2020, we've generated $4.4 billion in cash flows through a period of macro uncertainty and significant portfolio change. That reflects strong market positions, disciplined execution and alignment across the businesses. This cash flow allows us to invest in the business, reduce leverage and return capital to shareholders all at the same time. Over the same period, we invested above our historical average to strengthen capabilities, drive our productivity and grow alongside our customers. The most visible example is Project Horizon completed in 2023, it wasn't simply a mill project. It reset the economics of our industrial business. Today, we operate the largest, most cost-competitive mill in our system with differentiated capabilities. With Horizon behind us, capital needs normalize. Going forward, investments will focus on what drives competitiveness, automation and AI, international growth and selective technology upgrades with capital spending steady at roughly 4% of sales. Balance sheet discipline has been a constant at Sonoco, including through the transformation. Following the Evosys acquisition, we reduced net debt by approximately 40%, and we remain on a clear path for continued deleveraging through 2026. Long term, we view the leverage below 2.5x as the right target to balance flexibility and returns. Strong liquidity underpins every capital allocation decision we make. We maintain an investment-grade portfolio with a total cost of debt of approximately 3.6%, supported by disciplined treasury management. And with $1.6 billion of liquidity at the end of 2025, we're positioned to invest even in uncertain environments. Being able to move when others can't is a real competitive advantage. One thing that hasn't changed at Sonoco is our commitment to the dividend. We've increased the dividend for 42 consecutive years, placing us among the top 1% of dividend payers on the New York Stock Exchange, which makes us a dividend aristocrat. That consistency reflects the simple philosophy, long-term value creation requires long-term trust. Our capital allocation approach is dynamic and return driven. In 2025, debt reduction was the priority. And more than 80% of our cash flow and divestiture proceeds went towards deleveraging. Debt reduction remains important as we strengthen the balance sheet, but we're not anchored to a timing model. We're anchored to risk-adjusted returns. If the best return comes from buybacks or dividends, will shift. If it comes from a growth investment, we'll invest. The objective is always the same: maximize long-term shareholder value. As we look ahead, margin expansion remains 1 of the most important value drivers in our financial outlook. And we are approaching it with the same discipline that has underpinned our performance over the past 5 years and the same discipline I intend to reinforce in how we plan, invest and measure the results going forward. We are targeting approximately 200 basis points of margin expansion by the end of 2028, which equates to $150 million to $200 million of incremental value. This is not dependent on a single initiative or step change in market conditions but rather the result of a coordinated enterprise-wide productivity system that is already embedded in how we operate. Roughly $20 million to $30 million of this improvement is expected to come from structural simplification and cost alignment. As we continue to reduce complexity and align our cost base with the portfolio we operate today. Beyond that, the majority of the opportunity sits within operations, where we are targeting $130 million to $170 million through commercial excellence and operational improvements. These targets are embedded in our operating plan, reviewed regularly through our finance governance processes and tied directly to management accountability. Importantly, these are not new concepts of Sonoco. Commercial excellence has been a long foundational element of our value proposition. And we see continued opportunity by partnering closely with customers, pricing for the value we deliver and maintaining service and quality standards that support margin integrity. On the operational side, continuous improvement remains core to our operating model with deeper focus across supply chain productivity, footprint optimization, and synergy capture as we bring our consumer businesses together. What is different this time is the integration and governance around these efforts. Rather than treating synergies, standard cost reductions and productivity initiatives as separate programs, we have consolidated them into a single coordinated framework with clear ownership, accountability and tracking. That structure gives us confidence not only achieving the targeted margin expansion, but also sustaining productivity momentum beyond the current planning horizon. This is how we make margin improvement repeatable. When you put it all together, growth, margin expansion and disciplined capital allocation, the financial profile is compelling. We see a path to $1.5 billion in EBITDA and $2.5 billion in cumulative operating cash flow through the end of 2028. That profile gives us the flexibility, resilience and the ability to invest while continuing to reward our shareholders. Everything you heard today ties back to focus, sustainable growth, margin expansion of 200 basis points, disciplined capital allocation, generating more than $2.5 billion in cumulative operating cash flows. But beyond the numbers, the story is simple. We are a more focused organization. We're deploying capital where it matters most, and we have more levers to create value than ever before. We are positioned not just to compete but to win. Thank you for your time and your partnership. Our focus is clearly in the future. Now let me turn the podium over to Howard for a few closing comments. Robert Coker: All right. Well, on behalf of the entire Sonoco team, I want to thank you. Thank you for your time today, your presence and interest in our company. We believe we have the right strategy at the right time. Let me close by summarize what we laid out today. Our portfolio transformation is complete. And the most difficult part of our journey is behind us. and we believe we're poised to create greater value for our customers and our shareholders. There was purpose behind our portfolio changes, and we have built global market-leading franchises in both metal and paper cans and industrial packaging, which we believe provides us with a competitive advantage in the key markets that we serve. While our portfolio is set, we have plans to further improve profitability and cash flow generation. Finally, 2025 was a good year. But we were setting the foundation for a stronger '26, and we believe we're in the best position to deliver consistent earnings growth going forward. Now let me call on the management team, if you would join me. And we would love to entertain any questions that you possibly may have. Roger Schrum: [Operator Instructions] But let me start with questions from the audience. And George, I see you have a microphone. So would you like to start? George Staphos: Appreciate all the details today. Two questions. One first on consumer for Ernest and Sean. Generally, when I was looking at the slides, I was coming up with kind of a rough sort of $2 million average revenue per customer, give or take. And I recognize customers are all over the range in terms of size. Obviously, Part of the logic of putting metal and paper together is that you're serving the same customers, and there's going to be synergies from that. Can you talk right now about how many of your customers are buying, I don't know, $1 million each from both sides of the house and what the expectation is going forward? Are you -- how are you going to track that marriage that's going to lead to the revenue synergies there? And then a question for Paul. Again, thank you for taking us to the bridge to 2028 and the $2.5 billion, recognizing you're confident in, otherwise, and the $1.5 billion, excuse me, on EBITDA, you're confident in that, otherwise, you've not have provided it. How much of your pressure tested this, Paul? What are the biggest concerns you have recognize you're confident in terms of being able to achieve that over the next number of years. Roger Schrum: Well, we start with Ernest and Sean. Unknown Executive: Sure. I think speaking for the Americas, there are a number of customers that -- from a legacy standpoint, George, that have bought paper cans and the associated metal components that go with a paper can. And so the addressable market is going to be a little bit different between the Americas and Europe. But we see quite a bit of turnover between the 2. If you think about baby formula. There are customers that buy both metal and paper in that baby formula space. If you think about some of the legacy, what I call coffee and/or snacking products, there are some of both. I think what's more important is we have a much simpler commercial organization. It's just easier to do business with. So almost regardless of the substrate, we have 1 commercial asset that is leading those work groups. I think the level of customer intimacy is much greater in the go forward. So we will continue to kind of shape out our go-to-market strategies. But I do think you see some. Obviously, there's differences in processable foods, which is the lion's share of what we would put inside of a metal can and what I call baby formula snacks, child that would be in a paper can. But a lot of those procurement assets with the customers we serve are the same individuals. So when we're selling a can, irrespective of substrate, we're generally talking to those same individuals and make sure we have all the options in front of them in a really simple way going forward. Roger Schrum: Sean, anything to add? Unknown Executive: Yes, to be honest, it's the same in Europe as well as the U.S. We do have customers who buy both products, been through about it, the metal cans bag for processed food, the paper can is very good for dry products. So there is some clear boundaries between them. As we progress the paper canning to be monomaterial, that's brought the growth. I think 1 of the things I would say is there's a lot behind the scenes that the same. So we're the largest buyer template in the world, which is great, and that's what we both enjoy that side of the portfolio. But it's down so we can give a solution that is right and fit for purpose. But whilst in the back office, computers are computers, indirect spends indirect spend. So we can leverage all of that type of rationalization. And at the same time, as I explained earlier on, we've got an extensive program looking at structural review. We're about 20% through right now in Europe. That's going to give us a huge amount of cost out initiatives. And we've got 1 face to the customer. We've been -- you do pass 1 another as you go into the customer base, that has to stop and that will stop. Roger Schrum: Paul? Paul Joachimczyk: Yes, George, I'll say I'll start with profitability first. We broke that out targeting $150 million to $200 million that's out there. So right off the gate, those are things that we can control. We're looking at our structural realignment going in and, I'll call it, simplifying our business to match what we are today, which is 2 segments. So we're in industrial and more consumer business as we go forward. So right out of the gates, we will go get $20 million to $30 million just out of structural savings alone. Now if we go into the next phase of that, we look at operations, which is really broken into the commercial side and then our operational footprint. The teams have done a great job being really disciplined around our pricing mechanics, how we provide value to our customers. So there is a little bit of element going on there, but it's deeper than that, and it's really focusing on our footprint, leveraging that agnostic material that's there, looking at opportunities to combine a metal on a paper can into 1 location is going to be something that will be a game changer for us as well, too, because before, we didn't have the opportunities to actually think about that. Now it is, let's treat it as 1 business. It's agnostic. And as we ship our cans out paper or metal, it doesn't matter. They're going to go to the same customer base that's out there. So that's really how we feel confident in the, I'll call it, the profitability side. Profitability is a key driver then to the cash flows second part of your question that was there. We do feel if you look at next year, our guide of $700 million to $800 million, that does include $100 million of onetime payments related to taxes on the gain on sale of assets in 2025. That puts us back into the range of roughly around $900 million plus of a normal operating cash flow basis. So we do feel confident that after 2026, we will get back to north of that $900 million on a consistent basis that's out there. Robert Coker: Let me add 1 final comment. You may have covered it. But you heard over and over, the portfolio is complete. Now we still have a tremendous opportunity as it relates to how we support that portfolio and what I mean by that is that we've got back office, be it HR, finance, IT, that are -- we're working on it today, but it's part of that road map over the next couple of years, how do we rightsize the back office to support this much simplify. We're no longer supporting 20 disparate business. with each one, the squeaky wheel, you know where I'm going with that pulling, now it's going to be focused, and that's going to drive a lot of things to include productivity, better service to our customers and cost outs. And that is part of what you're saying, do we have, I think, do we have a checklist of what are we going to do over the next 2 to 3 years to get the type of savings that we're... Roger Schrum: Okay. Any next question? Gabe? Gabe Hajde: I had a question about change in behavior across your customer base and thinking about -- I mean, there's been a reasonable change in tone from their perspective to address some of the things you guys all talked about today, affordability, GLP-1, et cetera, population trends. and really attacking the cost side of the equation, right, as they try to promote and/or lower absolute cost levels for consumers on the shelf. Maybe more of a near-term question, if you've been engaged in some of those conversations or have heard [indiscernible] teams and how that sort of informs your 2026 outlook. And then as you've seen, of course, this evolve over the past, let's say, 10 years, pre-pandemic comparing to where we are today. Does that typically make it more challenging for your business to drive cost out or to drive margin expansion when your customers are being a little bit more aggressive on the cost front. Unknown Executive: I'll start. So look, it's a different market from pre-Covid to now. So -- and all the customer base is seeing there's price pressure, of course. So and population growth, except in Ernest has pointed out, in terms of the job, et cetera, that's having is challenging in terms of the the base business. However, there's opportunity. I mean, so speaking for Europe, that sustainability drive is huge. Now are the customers going to pay more for sustainability? No. It's a very price-sensitive market. However, it's a place for innovation. I think that's the biggest opportunity we've got is continue to be ahead of the competition. R&D is essential to us. But for me, everybody in this business, everything we do, there's an opportunity to do anything. Whether or not that's the back office or the products or whatever, that's where we'll win. If we're going to just compete to be the same as everybody else, then it just becomes a price discussion. And that's not what we're here for. So for me, I'm super excited with the products we've got. They're very cost effective. We've got -- in Europe now, I mean, I can tell you, the retailers, we've we've been invited into the retailers to go around the shelves, look at all the private label products that they've got and come up with more cost effective, more innovative solutions. And that in itself is incredibly powerful. I've never seen that in 31 years in the business. So yes, is it a price-sensitive market? Yes, the right -- but that's a place for [indiscernible]. We're not victims. Our destiny is in our hands. Ernest Haynes: Yes. Gabe, for me, I'm really encouraged by some of the early signals we're seeing from CPGs. One, a real recognition that affordability is a challenge, right? And so some of the pricing pressure that consumers have had to bear over the past couple of years has put pressure on volumes. And I think we see CPGs really recognizing that and leaning more into promotions. And we've seen kind of end of 2025 early '26 much more promotional velocity. So that gives me confidence in some of the underpinnings of the volume. We've seen some resets or reset recommendations relative to the retailers of pricing of some of our products. So all of that encourages me the kind of late stage as we get into 2026. There's more optimism around a recognition that affordability is an issue, price on shelf has to be challenged. We recognize tariffs are a big part of that input cost. But I think our brands are beginning to realize the trade-off between margin and volume, and we're encouraged by some of that recognition. Roger Schrum: James? James Harrell: Yes. And I think when you look at our business, it's no different from what you've heard. It's always been competitive. This paper world has been competitive. I know for the 30 years that I've been in it. But we are making changes internally working on our footprint, working on our processes. You've heard about how we have restructured the business to bring a more focused group in and what Paul has talked about of how the cost to support us, and we'll continue to work on service and quality. So I think putting all that together, yes, we will have to be competitive we will have to understand customers, but we drive strong value. And when we need to adjust our costs, we're very good at doing that. So I think we're positioned well for whatever battles may be ahead of us. Roger Schrum: A question over here, and we'll do this 1 first. Matthew Roberts: Howard and team. Thank you all very much for the event and all the great content in the presentation. If I may ask about the sustainable growth profile, particularly the consumer packaging, EMEA, APAC, now Sean you've led a lot of the growth on the RPC side. Now you've round tripped your experience in metal and you're certainly tasked with 1 of the, I would think, higher growth areas. If I compare this to 2024, I think RPC was more of a high single-digit grower. Now is the low single-digit plus type growth in consumer EMEA, is that now mostly a function of just a larger metal shift? Or any other updates you could give us? Is there any other impact from capacity expansions, particularly any updates from Thailand or your conversations with Mars now that the merger has closed there. So any confidence or what you're expecting on that side in 2026 and beyond even. Unknown Executive: So it depends on the market. So if you look at Asia, you're talking of significant double-digit growth. For Europe, the sustainability drive is huge. The antiplastic movement has gathered so much momentum. For North America, the drive is not as much as we probably thought it was a few years ago. I just spent the weekend in New York buying food product and seeing how much plastic waste had compared to what, again, Europe is dramatic. So you've got to look at -- you can't look at it in isolation. So Ernest showed you Brazil. We've seen exceptional growth in terms of rigid paper. Asia unbelievable growth. Europe, it's not slowing down. You're talking mid-single digit at least. For the metals business, it's a different type of argument as well. For paper, we dominate the market. So for us, in the rigid paper market, the only way we can grow is to create new markets, and that's what we've been doing for the best part of 17 years. For the metal can business, in the market, we've got a number of competitors in there. The nice thing is you can compete to be different and take share like what Ernest has been doing in North America incredibly successfully. I think 1 of the things I would say for the metals business, the substrate is infinitely recyclable. I think with the antiplastic movement, you can see trays, single-serve units. There's a lot of opportunity out there. So there's a lot of products that we've got in Europe that we don't have in North America. And again, that's what we'll share going forward. So -- is it double digit? No, it's not going to be double digit, but it's going to be GDP. And in fairness, we've not put in the plan anything too aggressive. I think personally, I think we've got tremendous opportunity. I don't like being a victim. I think everything is in our hands. And I'm convinced with the getting the business rightsized. Look, I came from this metals business. I know it incredibly well. Being back in the hands as a strategic is really important to the customer base. Somebody is investing in not just in the next 3 months or the 12 months to sell it, but investing into the future. And I think that's what's going to give us the competitive advantage in the marketplace compared to everybody else. And I don't take the fact that we're in the market lightly. We're the custom in our brands we deserve to be there, but we've got to show in our actions. I'm pleased to say, I think in the next 12, 18 months, we will start seeing significant growth again. Roger Schrum: We had a question over here. You got a microphone. Okay. Go ahead. Unknown Analyst: Maybe one for James on the Industrial Packaging segment. Just from a high-level standpoint, just -- could you just walk us through just over time, how you've thought about your strategic evolution of the Industrial Packaging segment as it relates to growth. More specifically, how you think about capital deployment? I know about some innovation that you've -- that you guys are working through right now, some investments you're making. But just any high-level thoughts on how that's kind of developed over your time in the job, that would be great. Unknown Executive: Yes. Thanks. It's a great question. And if I think back over the last 15, 20 years the industrial side has we've been able to grow through bringing innovative products or when our customers innovate themselves and need bigger faster examples or paper meals when they get wider, when they get faster when packages get larger is when we have an opportunity to bring our tech and R&D to task to answer those questions. We talked about the reals business. We think the reels business has entered a a new growth phase with power generation and transmission, the rebuilding of that infrastructure, but also the growth that coming forward from there. And then when you think back about the evolution of the industrial side of the company, as I talked about, we operated in silos. We were stand-alone leadership team, stand-alone P&Ls, even though we were an integrated supply chain, we all self-optimized rather than optimizing from end to end. It took us 120 years to figure that out, but we only figured it out. And now it's unbelievable, the power that we're seeing as we put -- I mean, there's no reason why you have to have a post plant in a 2 plant and a partitions plant separate. They're paper converting and then bringing the P&Ls and the thought process of the paper makers and the adhesives makers in with the paper converting groups is just unlocking a lot of opportunity for us internal and allowing us to put structures in from a supply chain standpoint to really optimize from start to finish and it's a low-growth area, but I think that puts us in the best opportunity to either innovate for the growth when it's there or have a right to win on pricing because of how we're operating. So I'm as charged up at any point in my career of the opportunity that's still ahead of us, both to capture growth and are to capture internal opportunities for profitability. Roger Schrum: Michael, why don't we bring a microphone up to you. And then in the meantime, I've got a question Howard because he's feeling lonely up here [indiscernible] Robert Coker: I'm absolutely in great confidence. Roger Schrum: But I had a question from online, a virtual question about we're into the first quarter, how are things looking so far? Robert Coker: I would say better than we expected in January, but 1 month does not make a year, as you all know, little disappointed as it related to the amount of downtime we had to take. We are fairly dense in terms of operations in the Southeast. So through the Tennessee value Carolinas, we lost significant days in January. But even still, I was pleased with what the team was able to deliver and the expectation is we'll catch that up as we get through the quarter. Unknown Analyst: Great presentation today. Two questions. First, we heard a lot about commercial capability, commercial excellence and that you're looking to build out your commercial team. What capabilities have you added? Or do you intend to add, whether it be commercial go-to-market approach, plan structure -- and what products are you targeting for that growth? And can you also talk about how you intend to penetrate end markets where your peers already have entrenched and strong market shares. So that's question one. Question 2 is we've heard a lot also about you're trying to drive better returns in Europe a couple of times it was mentioned during the presentation. To that extent, can you comment about opportunities to consolidate self-manufacturing in EMEA similar to what was done in the Americas a couple of decades ago, whether that's part of your strategy in terms of driving better returns in Europe. Roger Schrum: We start with Ernest. Ernest Haynes: Sure, Mike, a great question. Relative to the commercial teams, in large part, that structure has been codified as we looked at what will be important in the go-forward, if you think about how we restructured before, we probably had legacy assets more focused on aerosol within the tinplate space or more focused on food within tinplate and then paper. Today, we have one unified structure. So there is 1 commercial team a group of leaders that sells everything in the portfolio. So no longer do we have any silos relative to food, aerosol metal paper, that's all agnostic under 1 umbrella within our commercial strategy. We think that simplifies our approach. We've got immediate feedback from our customer base, particularly in the Americas that have really warmed up to that structure. And so we're where we need to be from a structural standpoint. Relative to different go-to-market strategies, my good buddy here, Sean, over the past couple of years has really worked hard on innovating on the paper can and he's been at the tip of the spear. So there's certainly more opportunity for us on our paper can business relative to the Americas in terms of our green can, all paper can, paper bottom strategies. We're just beginning to unlock some of those opportunities where customers are looking for different options. So lots of opportunity there. And then certainly, what we've done on the Metalpack side over the past couple of years still have a lot of growth lanes on the metal can side. So I'm bullish about our outlook. And certainly, that commercial team is at the front of that. Unknown Executive: Yes. What I would say is, commercially, it's a very different marketplace than it was. So you look back in the day when I started in this industry 3 years ago, the sales guy would speak with the buyer and it was very bot-type or approach. As you're developing new markets and new products, it involves a lot more of the organization. So we use CRM systems, et cetera, to keep the data there. But more importantly, everybody is trained on project management schools. So when you're doing a new product or launching a new product, whether it's a design, et cetera, you're involved in a lot more people within the manufacturing scope speaking directly with their counterparts. I think that's a significant change. And I do think that's a competitive advantage that we have as well. So more or less, everybody is a salesman in some way. So that's what we're focused on, particularly with the acquisition in EMEA, changing that dynamics and getting it more aligned to what we've been doing in RPC for a number of years. So that's the challenge. In terms of market where we will grow, again, it's innovation in not just the product, but everything we do. So being different from everybody else gives us an opportunity and that's where -- I don't want to start go in and just compete on price. That's -- there's no benefit to that. For us, it's going in the best product fit for purpose, whether it's paper, metal, et cetera. And again, innovation. Is there a way of getting the consumer more brand awareness, more shelf space, et cetera, with new products. So that's where the driver is. But in summary, our freebody works and Sonoco's a salesperson in effect. Robert Coker: How about soft manufacturer profiling. Unknown Executive: Yes, self-manufacturing. I mean there is there's some very, very large players in self-manufacturing. Converting them. Is there anything in the plan. We've got a couple of things in the pipeline, nothing solid yet for people to realize the real cost to self-manufacturing is difficult. A lot of people don't see the real or true cost of it. But right now, we haven't got anything -- we haven't got a hockey stick in there of conversion, but we are working on them. We've got 2 in particular, we're working on quite aggressively, but I can't go into any more detail than that right now. Robert Coker: I think innovation plays into that as well. Unknown Executive: Yes. Of course, yes. Roger Schrum: Next question? Why don't we come up here with Anojja And Anojja you while you're doing that. I had a question come in from a virtual question that came in, this is for Paul. On the EBITDA bridge through 2028, how much volume growth is anticipated and what is the sensitivity to shortfalls or upsides and how much visibility do you have to -- on achieving possible business wins to supplement overall market growth? Unknown Executive: Yes. If we go back to the EBITDA bridge that we provided, that was out there, not a lot of growth was baked in, low single digits that's out there. You've heard from both Sean, Ernest and James about the growth opportunities that are there, but we want to provide a plan that basically was within our control, something that we could deliver upon irregardless of the market conditions around growth. So if there is a macroeconomic change to the upside for us, that will all be incremental gains for us from that projected that's out there. So strong performance expected. Anojja Shah: My question was actually pretty similar to that, but I'll ask a follow-on hole. You mentioned that you're approaching operational improvement a little differently now from how you've done in the past. Can you talk about what you're doing? And also if there's any sort of quantification of upside that you expect from that? Unknown Executive: Yes. So I'd say the different side of it is really the approach. So we're installing new KPIs across the board, working with the business senior presidents and the BU CFOs that are out there, creating that clear accountability pattern that's there. I'd say that's a little bit different than what we've done in the past is they were all there. The enhancements were there. We had tools like SPS and continuous improvement. But now it's exactly is and I hate to say it is we've created a detailed P&L for each business unit president, we went line by line and said this is your targets for each 1 of those areas. And then on a quarterly basis, we're going to be I'll call painstakingly antagonistic on there every single quarter. How did you do? How did you track against it? And then if we're short, is there another business unit that could actually cover that. So I'd say it's the discipline around it and the consistency of how we're going to go execute that is going to be a little bit of a difference. Roger Schrum: Okay. Gabe, you have a question? -- follow-up, I should say. Gabe Hajde: Two, hopefully, they're quick. Would you say -- maybe, Paul, you talked about taking a little bit more of, I guess, maybe a homogenous approach to the productivity? And can you give us kind of the -- I think it was $130 million to $170 million in and cost breakout of the margin improvement. I think you also mentioned 20 to 30 of what I'll call, G&A improvement sort of back office, maybe shared service type operations. And if memory serves, maybe on the synergy -- legacy synergy realization associated with Eviosis, I think there was about 60 remaining. And so if we combine those together, let's say, on there's $100 million of sort of what we knew bringing to the table, which may appear conservative and maybe you can disagree or agree with that. And then on the cost side, I think you have roughly between SG&A and COGS, let's call it, $6.7 billion of spend. I figured 2% annual inflation, $130 million inflation treadmill. Thinking about kind of gross versus net, I know you presented at $1.5 billion, but just if there's other productivity that we should expect to offset that? And sorry, last one, anything to think about with what I think was low double-digit metal price increases coming into 2026, if there was any movement between customers pulling forward into Q4 and/or impacts on H1 profitability. Roger Schrum: Paul, do you want to start on the [indiscernible] Paul Joachimczyk: Okay, that was more 1 question. He's giving you room for your money, George. Unknown Executive: Thank you beat you, George, right now. So Gabe, if you really think about the stranded costs. This is why we have shifted away from that to try to get away from all of those buckets that are out there. But you're absolutely spot on is about $60 million was going to carry over into the future plan. so that you could take that right off the top. And so now your plan goes from $90 million to $140 million of additional incremental upside for us. But what we want to try to do is, as we look at the businesses, as we try to drive 1 business, 1 consumer it's no longer like, let's give Sean a target, let's give Ernst target. It's like we have one target for consumers, and that's how we needed to approach the business as we did the realignment of those organizations that were there. So it may look like it's a I'll call it, maybe in your eyes a little bit of a less lofty goal. I think it's a very aggressive goal still to go tack out another $90 million to $140 million of savings. To the second part of that question around productivity, those are all net those are going to drop to the bottom line. So we're going to go and offset all the inflation and everything else that is out there with our normal productivity gains. So everything that we're showing there is above and beyond just the normal productivity -- so this will be truly incremental wins for us and our shareholders. Robert Coker: And Gabe, I think to the second part of your question, there was no material pull ahead into what I call Q4 2025 that would negatively impact '26, nothing appreciable there. Roger Schrum: Next question. I do have 1 on George, why don't we grab my phone. I'll give you -- we do have a fan of the industrial guy who has asked a question in Industrial on saturated kraft, does the exit of some producers in that area boost that market opportunity for you? And is it actually larger than you depicted? Rodger Fuller: Answer is yes, yes. So yes, that's what created the opportunity was closure of some mills that focused in that area and the industry needs alternatives, and we feel -- we're being conservative in our estimate on the opportunity, and it could be larger if we're very successful with our product. Roger Schrum: Great. George. George Staphos: A couple of questions. Again, I appreciate the details. First, I want to come back to the growth question in paper and metal. How much capacity do you think you have right now to be able to grow before you'd have to reinvest significantly? What I heard was you're pretty much set, but I just wanted to test that and ask relatedly, what the incremental profit might be across both metal and paper and consumer. So that's part 1 of the question. Part 2 again would be, it sounds like you see right now, even though it's the same purchasing manager on the customer side, you're really not doing a lot of cross-selling at the moment. And feel free to correct me if I misstated that. So the synergies are really on the back end. How are you -- Paul, what are you doing to make sure that that transmission, that commercial effort that tracking isn't messed up to the customer because you're now combining entities. So capacity and incremental margin back in -- last question, Howard, for you. When you announced [indiscernible] and Grumettol,a even though Sonoco has been involved in metal packing for years, a lot of people took a step back and said sort of Sonoco metal what's that all about? How is the growth here similar and your view to what Sonoco did, whatever, 30-plus years ago when you did composite cans and everybody said, composite cans, what's that, tubes course paper, what's Sonoco doing that business? What's similar? What's different? And what do you think the -- I mean I'm -- we know you're posing because you made the acquisition, what do you think the sort of untapped market opportunity is there in metal that's similar composites many years ago? Unknown Executive: I'll take part 1 and Paul, on that you can talk about profitability from pure capacity, and I'll just speak to the Americas, Sean can touch on Europe. We have available capacity on both our paper can and metal cans as match what we anticipate our growth trajectory through 2028. So some of that obviously depends on customer specification, geography of where that capacity would be filled -- but in large part, we have the available capacity to meet our needs through 2028 without incremental capital of installing new lines or new assets. So we feel really good about that. Certainly, we evaluate any outside opportunities and look at the return on investments that, that would take. But fundamentally, we have the available capacity, both in paper and in metal. Paul Joachimczyk: Yes. So if you -- what I could say for paper, we've invested quite substantially over the last few years, increasing capacity, particularly on stack chips. We have a major customer who let's just say, slowed as they were being acquired. And that acquisition took longer than probably anybody expected. As they come out of that now, we've got an awful lot of capacity to fill. So we can grow substantially overnight with no investment. If you look at the metals business, the metals business, the vast -- it's a very seasonal business in Europe. It's food. So there's a lot of capacity that's ramped up for the summer period. So you've got weekend shifts, you've got night shifts, et cetera. So again, we've got a lot of latent capacity there, which won't require a lot of investment to realize. So I think that's quick growth when the market changes, particularly as people go and do more promo. I think post COVID, that's one of the things I want to say. There's not been as much promotional opportunity. The CPGs are seeing a real opportunity to do that, to grow volumes. And the nice thing is we've got the asset base in there now that can grow with it. But of course, on top of that, we are investing in future products. Robert Coker: Yes. I'd say just to add on to that, the investments we've made similar investments have been made by customer as well that have slowed down in the past year. The other part of your question, I think, to these guys as margin profile. They're relatively on top of each other in terms of the profitability metal versus paper. George, what I'd say is the parallels between where we were in the late 70s, 80s on the paper can side, pretty crowded marketplace. We've been in it since 1962. And lots of players. What happened was we started seeing markets such as motor oil change to plastics, blow-molding was a new thing coming out. And A lot of the strategics that were involved said, this is the end, I need to get out. We leaned into it. So direct peril and I should say that during -- from that time to our acquisition 3, 4 years ago, we've constantly said, this is -- the metal side of the business is a natural fit for what we do. It meets those core elements that makes a successful business where Sonoco has made a successful business. But there wasn't a need for another provider. So fast forward to 3, 4 years ago, we looked and said, guess what? There's a lot of strategics or several strategics that are moving out of the space. We think there is a tremendous opportunity for us to come in and put our playbook in place, just as we did in the 1980s when we consolidated on the paper can side. And the truth of the matter is that thesis has played out even greater and better than what we anticipated, if you look at our North American business. It wasn't the -- ones will probably say, "Hey, we're the funnest first year or so, but we put a playbook in. And so here we are showing and Ernest working very closely from a global perspective. We're as excited as -- we're as excited as we were in 1986 when we acquired Boise Cascade out of the paper can business. So it's a recognition of a market that is a necessary important market. It's large and consolidated concentrated. And it checks all the right boxes which absolutely layers right on to what happened in the mid-1980s or so on the paper against side of the business. Unknown Executive: Yes. I think 1 of the things I'd just add to that. since the major acquisition of [ Biodenama ], we've grown the rigid paper space in New York by 60% in 10 years. So it's easy to look at a market and say it's mature, but there's another -- for me, there's markets out there we've never been in before. And we're going into markets that we've never experienced before. So again, it's about innovative, it's about going into places that you just don't know. And I think that's been where we've got real opportunity. Roger Schrum: Do you have an online question, then we'll take this 1 up here quick. But this is from Ghansham Panjabi with Baird, and he's asking industrial. He's asking what is -- what -- with productivity and strategic changes you have implemented over the years in industrial packaging. Will the segment be more resilient from an EBITDA margin standpoint relative to historical baseline, especially due to price cost variability. Unknown Executive: Yes. We believe we've made fundamental changes in both the way we price the market and underlying manage our capacity, and I think it won't take completely away the volatility, but we believe we've significantly changed that profile. Roger Schrum: I had a question up here. Unknown Analyst: This is [indiscernible] at Jefferies on for John Dunigan. I have 2 questions. One is based on your $150 million to $200 million of potential profitability initiatives. What would drive you to the top end or maybe above the target line -- the second one is more focused on consumer parts. You guided for low single-digit growth. So maybe -- just curious what's the breakout between the business win versus what's been already locking relative to the underlying market growth? Unknown Executive: Yes. I'll take the first part of that question and turn it over to the rest of the panel. I'd say to get to the top end of that range really is going to be dependent on a few things as one, as we look at our overall portfolio of assets that are out there, in our footprint optimization. Some of those changes do take a little bit longer to enact and you actually cut into full fruition for us on savings. Especially when you look at the European market, there is a little bit longer drawn out tail. We do have a road map and a plan already in place today. There may be an ability to accelerate that plan, which would allow us to get to the top end of that range. But right now, the plan is basically built off of a conservative approach. But if there is the optionality to go faster and drive more return for our shareholders, we will absolutely do that. Ernest Haynes: Yes. From a growth standpoint, I think Paul articulated this earlier, we expect to be around that GDP number. So we were not anticipating a bunch of macro health, particularly in 2026. The volume we've had today, we feel pretty confident in in the go forward. And we'll certainly be chasing volume, this is the right fit for our portfolio long term. But there are no outsized expectations in the volume growth for '26. Roger Schrum: Other questions? Unknown Analyst: When I looked at the slide deck, I see a lot of commentary around value-added pricing. And I'm curious, as we go from $1.3 billion of EBITDA to $1.5 billion, -- how much of that increase is driven by value-added value-based pricing, excuse me. Unknown Executive: Yes. So in that guidance, there is an element of that. It is not the largest element of those operational changes out there by any way, shape or form. And I believe George asked the question, we probably didn't answer from a back office perspective, we are giving the tools right to these business unit presidents. Their market is changing at a fast pace. We have to align the back office support to do that as well, too. So our teams, it doesn't matter on the finance side, customer service side, we have to align to 1 tool. So we're going through, I'll call it, the buzzwords of master data management cleaning up those records, those elements. We're giving the standard financial processes and commercial disciplines to arm all the business unit presidents that's out there. So the discipline is really going to come from our own internal house and cleaning up those kind of like idiosyncrasies that were there to make sure we're consistently driving value for our customers as well. Unknown Analyst: And with respect to the value-based pricing, each of you has said it's a very competitive market. So why I imagine the only reason you bother with value-based pricing is because you'd like a better price. So why should we expect to get that better price given the competitive nature of the markets? Robert Coker: So service quality and the way we approach the market and the value that we deliver to our customers and making sure we're getting the appropriate recognition and understanding where the call leakage can be, and that's exactly what Paul is talking about, but it is being the best provider in the eyes of your customer. I'm not sure all of the procurement folks would tell you that these guys already talked about it in terms of how we are approaching our relationship with our customers to ensure that from the shop floor all the way to the conference run that the Sonoco image value is fully recognized within the customer. Unknown Executive: Yes. I think what I'd say is we don't sell on price. We sell on value. And fundamentally, there's more towards than the [indiscernible] commodity market and that's essential. Having that pride, going into the customer being different in the face of the customer matters a lot. Roger Schrum: I have a couple of online questions. First one for Howard. You've talked -- you've spoken with regards to the importance of debt reductions. But when will share repurchases come into the picture. Robert Coker: I think what we kind of went through that in pretty great detail. #1 focus is making the appropriate capital investments associated with growth and profitability, getting our debt down. So we're not really going to consider anything until we get our debt at that 2.5-ish type of range, and then we'll see what opportunities come from that point on. Roger Schrum: And a question from Mark Weintraub with Seaport Research. Is there any metal overlap impact in 2026? And if so, is it embedded in your 2026 guide? Robert Coker: Nothing material. SP47135678 Yes. I was going to say there's really from an MTO perspective, you're not going to see -- like after the Bull acquisition, there was this massive uplift. So from our perspective, we really will be balanced out some minor impact, but it's nothing material that will change our results. . Roger Schrum: Further questions in the audience? Anojja? Anojja Shah: Thank you. I just wanted to get an update on pet food. I know that was an area of focus. You had pretty low exposure when you first bought the business, and it was an area you were trying to build -- where are you now? And also what drove that 10% volume increase number in Q4? Was pet food part of that? Unknown Executive: Yes, I'll take that. Pet food is obviously 1 of the highest compounded annual growth rate subsets in the food category. It's not something we had a large presence in dating back -- so we've been really intention in getting our feet wet in that space. So we'll have some pet-related products on shelves in 2026 that we're excited about and we'll continue to try to grow out that footprint relative to food can, we've just been very, very successful with organic growth with our existing customer base. We kind of call that core growth. So we've seen the customers we serve, continue to have good shelf presence, and we've grown with them. And we've had some opportunistic share gain wins along the way. So we feel good about the persistency of that growth into 2026. Paul Joachimczyk: Yes. What I'd also add is if you look at the sort of pet premiumization, some people just -- since COVID, I think [indiscernible] bought themselves a dog. So there's a lot more pets, a lot more smaller pets. Gone are the days of buying a 13-millimeter dog food and spooning out. So there's a lot more single serve out there, and we've come up with new products that go into the single-serve market. On the rigid paper side, we've seen really good success in going into new markets for dog treats. So a sustainable dog treat package that can go into the waste stream, a paper waste stream, that's where we're seeing growth. So it's not just looking at the Pet segment as sort of wet pet food. It's much broader because to be honest, some people are spending more money on their pets than their kids. So we need to be positioned. Roger Schrum: Any further questions? Wolf, we've got 1 more question? Unknown Analyst: Just curious, with respect to footprint optimization, how much will we have to spend to achieve that? Because I know how France can be. Robert Coker: Yes. So Paul talked about it in detail. We are taking I look at -- typically, we talk about capital dollars and not so much of our own restructuring. Now it's all 1 pool. So when we evaluate for the James comes in and says, I've got a 5-year great IRR on an investment that is not customer related, something can wait, and then we look at consolidation in France. And so for the same amount of capital, I can get a 2-year return or cash. So that's how we're looking at it. When we talk about our cash capital allocation included in that is restructuring. And Certainly, if you look at the $150 million to $200 million, there's -- Sean and his team, especially are laying out what potential opportunities we have and making sure that we're managing our cash flow accordingly and choosing the best returns for our shareholders. Paul Joachimczyk: Yes. And I won't pick out France, but we know what your works like. I mean, restructuring is is a burden. However, the 1 thing I'd say is in my -- I've spent the majority of my career on the mainland of Europe, it makes you think differently. So for me, 1 of the big opportunities we've got particularly for the rigid paper business. We've had opportunities to say, build a rigid paper plant in Italy for a customer, but we'd have to employ a plant manager, a quality manager, et cetera. So utilizing the assets that we've got and putting some paper assets in those facilities is a massive opportunity for us. And that will give us a much lower cost of entry. So we look -- we've got a couple of projects that we're looking at right now, which are encouraging. Roger Schrum: All right. Any further questions? If not, I would remind everybody we're going to have a brief modeling session for those that are interested in and getting to a little bit more detailed information. Jerry Cheetham will lead that session. But again, thank you very much for your time. Please give the management team of Sonoco around of the applause. Thank you very much for your time.
Operator: Good morning. Welcome to USA Compression Partners, LP Fourth Quarter 2025 Earnings Conference Call. During today's call, all parties will be in a listen-only mode. At the conclusion of management's prepared remarks, the call will be opened for Q&A. At this time, I would like to remind everyone in order to ask a question, please press star then the number one on your telephone keypad. This conference is being recorded today, 02/17/2026. I now would like to turn the call over to Clint Green, President and Chief Executive Officer. Clint Green: Good morning, everyone, and thank you for joining us. With me today is Christopher M. Paulsen, Senior Vice President and Chief Financial Officer, Christopher Wauson, Senior Vice President and Chief Operating Officer, and other members of our leadership team. This morning, we released our operational and financial results for the year and quarter ending 12/31/2025. Today's call will contain forward-looking statements based on our current beliefs and certain non-GAAP measures. Please refer to our earnings release and SEC filings for reconciliations, definitions of non-GAAP measures, and related risk factors. Please note that the historical information presented excludes the results of the JW Power acquisition, which closed on January 12. With that, I would like to congratulate the team for closing the JW transaction. With this transaction, we are leaning into the USA Compression Partners, LP name, with broader reach all across this great country. The transaction makes us a clear choice for operators who want a provider with a reputation of high-quality, reliable service in every major oil and gas basin in the U.S. and across all horsepower classes. I want to highlight the tremendous year we had across our operations, commercial, and finance organization. On the safety front, we recorded a TRIR of 0.39, which is approximately half of the industry average. We delivered full-year adjusted EBITDA of $613,800,000 and DCF of $385,700,000; both are records for the company. We maintained high average utilization in excess of 94% throughout the year and ended the year at 94.5%. Finally, we refinanced our ABL and one of our senior notes, significantly reducing our weighted average borrowing cost and improving strategic flexibility. These accomplishments occurred as the company embraced a new leadership team, a change in headquarters, a new shared services model, and a new ERP platform. The resilience and grit showcased across our organization in 2025 gave us confidence to pursue and now integrate the JW acquisition in 2026. Last year, the energy macro environment stabilized following early tariff discussions, but the development pace slowed in the Permian as rigs continued to reduce throughout the year in response to lower oil prices. Of note, while oil production flattened in the last half of the year, natural gas continued to move upward, ending approximately 9% higher year-over-year. We continue to be bullish on the Permian longer term. With the acquisition of JW, we maintain a large presence and have increased our active horsepower in the Permian to around 1,700,000. We have also increased our horsepower in oil and liquids-rich basins, as well as major gas basins like the Marcellus, Utica, and Haynesville, which returned to growth in 2025. This growth was tied to increased local demand, additional infrastructure debottlenecking, and a higher average natural gas price of $3.52 per MMBtu. This is a 56% increase from the prior year. We are encouraged by these fundamentals and believe the acquisition of JW strengthens our leadership within these natural gas basins. The broader compression industry continues to forge ahead with strong margins and a disciplined approach to new compression capital, and USA Compression Partners, LP is no different. Of note, lead times for new equipment have increased to over two years, which presents a new set of opportunities and challenges that our team continues to work through. In 2026, we have budgeted approximately 105,000 new horsepower, representing a 2% increase in active horsepower, with half of that new horsepower under contract. We also have new units contracted for 2027 and are in active discussions to procure additional horsepower in 2027. With that, I will turn the call over to Christopher Wauson, our Chief Operating Officer. Christopher Wauson: Thanks, Clint. Since the close of the transaction on January 12, we have begun planning to optimize route management, inventory, contracts, and operational structures to begin to realize synergies as early as this year. As we have previously noted, we move forward with the go-live of a new ERP system in 2026 for the legacy USA Compression Partners, LP assets and now plan to integrate the JW assets during 2026. We will have modest one-time costs associated with the transaction in 2026 but expect to lay the groundwork for substantial synergy capture by 2027. Our assessment is still ongoing, but at this time, we anticipate approximately $10,000,000 to $20,000,000 in annual run-rate synergies that will be achieved by 2027. We expect these synergies to create improvements in both operating margins and G&A, with the additional potential for commercial synergies as we better serve our combined customer base. As we discussed in our announcement, we are excited about increasing the extent and depth of our asset offering and customer base. Customer retention and review of existing contracts are top of mind, and we have already begun moving contracts under USA Compression Partners, LP MSAs and will work to extend average contract duration throughout this year. We hope our customers will realize the best of both organizations. I am personally excited to see the strength of our organization grow, especially across the Mid-Continent, the Rockies, and Northeast, with the addition of the JW assets. We will focus on continuing to be the operator of choice across these basins and others, providing customers commercial and operational consistency across the U.S. No other contract compression company in the market can support its customers’ diverse horsepower and geographic needs like USA Compression Partners, LP can today. Finally, with the acquisition of JW, we acquired approximately 200,000 idle horsepower that will undergo significant review over the course of the next year. As we indicated in December's JW acquisition call, we believe approximately 50,000 horsepower is readily deployable with limited capital spend. As it relates to the remainder, we will analyze best path, including potential monetization of a portion of the horsepower. We also acquired a manufacturing business that provides strong optionality, third-party sales, and internal reconfigurations. I will now turn it over to Christopher M. Paulsen to discuss our 2025 financial results in detail and our 2026 guidance. Christopher M. Paulsen: Thanks, Chris. In Q4, we increased pricing to an all-time high, averaging $21.69 per horsepower, a 1% increase in sequential quarters and a 4% increase compared to the year-ago period. Average active horsepower increased approximately one relative to Q3 to 3,579,000. Our fourth quarter adjusted gross margins came in at 66.8%, right on historical trend. Regarding the consolidated financial results, our fourth quarter 2025 net income was $27,800,000, operating income was $76,600,000, net cash provided by operating activities was $139,500,000, and cash interest expense, net, was $43,400,000. Our leverage ratio at the end of the fourth quarter was 4.0x. Turning to operational results. Our total fleet at the end of the quarter was approximately 3,900,000 horsepower, adding approximately 21,000 horsepower as compared to the prior quarter. Our average utilization for the fourth quarter was 94.5%, a slight increase compared to the prior quarter. Fourth quarter 2025 expansion capital expenditures were $40,000,000 and our maintenance capital expenditures were $7,800,000. Expansion capital spending in Q4 primarily consisted of new units. Turning to 2025 full-year results, we ended the year with adjusted EBITDA of $613,800,000. We also ended the year with distributable cash flow of $385,700,000, above the recently increased guidance, in part due to the final preferred unit conversion in December. Maintenance capital ended at $39,400,000, and expansion was $117,600,000, both towards the lower end of previously provided guidance. Looking ahead and with the contribution full year of JW, we are forecasting adjusted EBITDA of $770,000,000 to $800,000,000 and distributable cash flow of $480,000,000 to $510,000,000. Maintenance capital range is forecasted to be $60,000,000 to $70,000,000, allowing for consistent preventative maintenance intervals across our combined fleet. Expansion capital range is $230,000,000 to $250,000,000, which includes just over 100,000 new horsepower, or over 2% of our active fleet being added, and panel upgrades for improved telemetry practices. The expansion capital range also includes approximately $40,000,000 of other capital, including vehicles, tools, investments in technology, and other items. This expanded growth capital budget relative to prior years will enable us to better respond to the needs of our broader customer base and enable us to get new horsepower in both the Permian and the Northeast. The net result of our budget should enable us to improve upon our debt metrics, with our near-term targets at 3.75x debt to EBITDA, a quarter-turn improvement over the next twelve. We remain committed to managing debt levels and will remain open to transactions that further delever the balance sheet and are accretive to unitholders. We also continue to evaluate our capital structure and its fixed versus floating proportion as it relates to DCF and business certainty. Today, at current Fed rates, our borrowing costs are improved by approximately 50 basis points. By utilizing our ABL relative to our most recent notes refinance. We also have approximately a half a billion capacity, not including the $300,000,000 of additional accordion. Overall, I am very pleased with the operational momentum we carry into 2026 with the legacy USA Compression Partners, LP business and the JW Power assets. In the near term, the addition of JW assets will reduce our aggregate gross margins for the contract compression business. Our clear goal is to more closely align those margins with our own over the next two years, contributing to the synergies Christopher Wauson spoke of earlier. And with that, I will turn the call back to Clint for concluding remarks. Clint Green: Thank you, Chris. I want to thank all of our employees for the advanced planning and early integration efforts that have taken place across the two companies. We are honored to be part of the JW Power legacy and are confident it will be improved going forward given the broader reach and resources of USA Compression Partners, LP. It is our goal to provide the same level of excellence throughout every region in the U.S., something that continues to set us apart. I will now open the call up to questions. Operator: At this time, I would like to remind everyone in order to ask a question, please press star then the number one on your telephone keypad. We request that you limit yourself to one question and one follow-up. Your first question comes from the line of Douglas Baker Irwin with Citigroup. Your line is open. Douglas Baker Irwin: Hey, thanks for the question. I just wanted to start with the growth CapEx guidance here. Could you maybe just help dissect a bit how much of that $250,000,000 growth budget is tied to kind of organic base growth versus maybe the backlog from JW Power? And then just curious if this level is kind of the right way to think about run rate moving forward for CapEx, particularly as we kind of think about potential impact of two-year lead times here? Christopher M. Paulsen: Great question. Appreciate that. So just to break down the growth capital this year a little bit, you know, about $205,000,000 of growth capital is tied in with the typical compression business, both new units, make ready, and reconfigurations. Approximately $150,000,000 of that $205,000,000 is tied to new units. So as we mentioned in the call, approximately 105,000 new units overall. And we have another just less than $40,000,000 in other capital tied to vehicles, IT tools, etcetera. We are really trying to add consistency across our fleet as it relates to the other capital; we think there is a scenario by which that can come in lower, but, hopefully, overall, that kind of breaks down what we call growth in expansion capital. Douglas Baker Irwin: Got it. That is helpful. And then on the back relates to your other question, and apologies, it relates to your other question in terms of percentage growth going forward, as we mentioned, you know, this year is approximately around 2% growth overall relative to our active horsepower. As it relates to 2027, those long lead times do make for difficult planning. The beauty of our manufacturing entity is that it does allow us to start to dissect some of that a little bit differently than we have in the past. We have kind of been beholden to packagers. Today, we do have manufacturing capacity in 2027. We are trying to load up that relative capacity. We have about 10,000 horsepower already contracted for that capacity. We are looking to utilize probably the remainder of that capacity for our own compression this next year. And certainly, as it relates to smaller horsepower, and when I say smaller, it is still, you know, around 1,500 horsepower or so. The lead times are less. It is really some of those really large 2,500 horsepower plus packages that are the long lead times. So we do have some flexibility as it relates to that. And, frankly, this year, we have even packaged smaller horsepower than 1,000 horsepower. So we will continue to listen to our customers talk about their needs and be responsive as it relates to kind of horsepower for 2027 and decide whether or not that number is kind of 1.5% to 2% range that we have been in over the last several years. Douglas Baker Irwin: Got it. That is helpful detail. And I just wanted to follow up on some of the comments made in the prepared remarks about just some of the actions you have taken to improve the balance sheet. JW Power is obviously accretive from a leverage perspective as well. Just curious if these actions impact the way you think about the right level of distribution coverage moving forward and whether they might give you some runway to start thinking about potentially growing the distribution from here? Christopher M. Paulsen: Great question. So, you know, last year was really about, as you noted, kind of making sure that our balance sheet trajectory was set up along the right path. You know, we were able to do that transaction and able to put the cash forward because we did go through the process of a notes refinance beforehand. We went through an ABL restructuring and grew that relative ABL. And as I mentioned, you know, we also have capacity to even expand it further with our accordion feature around $300,000,000. So we are on the right track as it relates to our balance sheet and the relative improvement there. You know, 3.75x, I think, is a worthy goal in the near term. You know, the question is, do we move down further from there to 3.5x? I ultimately would like to be there, but we also need to balance, as you noted, the fact that our distribution coverage has continued to improve. You know, net of the dividends that were, or distribution, excuse me, that were paid in, you know, a week ago, our number on normalized basis is 1.55x. We did pay, you know, the Westerman family some units associated with Q4 that was factored into that 1.36x, and those units were ultimately repaid. So our normalized number is about 1.55x on Q4. We are looking for that number to be in the 1.6x plus range next year, or this coming year, that is. And as that number starts to expand beyond 1.6x and grow beyond there, you know, we need to continue to have conversations with all of our unitholders as to what the right answer is in terms of distribution growth. Operator: Your next question comes from the line of James Rollyson with Raymond James. Your line is open. James Rollyson: Just to circle back to the capacity adds of 105,000, it is in the budget for year. Maybe just kind of given this can really sway how things lay out across the quarters, if you could talk about the timing of delivery and when you expect that capacity to actually be in the field. And then maybe a follow-up on equipment cost trends given lengthening lead times. Clint Green: You know, I think most of what is coming on this year is in the back half of the year. I will start, and then Christopher Wauson will probably add into that. You know, July 4. Chris, do you have anything to add to that? Christopher Wauson: Yeah. So thanks, Clint. So majority of the horsepower, you know, there is a little bit that trickles in in Q3, but mainly, you know, the bulk of horsepower comes in late Q3 into Q4. So we will see good numbers of growth in the back half of the year. James Rollyson: Gotcha. And maybe just kind of following up, Clint, on your comments. Seems like every call I hear on compression lately, the lead times getting longer and longer. Wondering if that is showing up. You know, you go back two, three, four years, and obviously, you guys like Cat had really ramped up the cost of equipment, which was translating into higher pricing for everybody on new orders. And then it seems like because we were originally kind of late last year, prices were just more inflationary, like typical annual Cat increase. But I am curious, as lead times continue to stretch out, are you seeing that, or do you expect to see that translate at some point into higher equipment cost again, like a bigger step up? Clint Green: I do not think that any manufacturer ever misses opportunity to increase prices, but, yeah, you know, the main driver in the lead times is Caterpillar engines, and the data center demand for generation has driven that lead time out. You know, we still have some other options with some other manufacturers out there. They are not as sought after, what have you. I expect we will see some type of increase at some point this year. I have not heard of one yet, but I am sure one will come down later on this year. Operator: Your next question comes from the line of Gabe Moreen with Mizuho. Your line is open. Gabe Moreen: Obviously, one of your competitors recently announced a pretty big step out into the distributed power space. Just wondering kind of your latest thinking on potentially evaluating that space, whether it is something you are looking at or reconsider. And then if I can pivot, on the 50% of the new HP for 2026 placed, what are expectations for placing the rest of it and timing? Clint Green: Yeah. Hey, Gabe. It is Clint. Yeah. Absolutely. You know, we believe the distributed power business and the compression business are a lot alike. You know, we have mechanical equipment that has to run or has a guaranteed run time, several synergies with the type of folks you need to work on it. So we have definitely evaluated several of those over the last eighteen months or twelve months, what have you. We put them into our model. The ones we have looked at have not quite met the requirements that we wanted for whether, you know, it to make our model like we wanted it to be. And we have not jumped out there yet, but we are always evaluating that. It is a business we think that we could drive the same type of margins out of that we do in the compression business. Christopher Wauson: On the placement of the remaining 2026 new horsepower, we strive for kind of consistent margins, and our new unit growth has primarily been focused on our tier-one customers. So I am pretty confident that the remaining balance of what we have available will get contracted up here in the near future. So we look forward to working through that for our customers. Operator: Your next question comes from the line of Nate Pendleton with Texas Capital Bank. Your line is open. Nate Pendleton: Good morning. Congrats on the strong year. Wanted to go back for a moment to the new unit timelines. How do those timelines impact your longer-term horsepower growth strategy, be it organic or inorganic? And could we see the timelines impact contract compression pricing with customers in the near term? Clint Green: Yeah. Hey. Thanks. It is Clint. You know, with the lead times pushing out for a new package at 120-plus weeks, you know, it gets challenging. Right? It is not going to affect our 2026 growth, but in 2027, you know, we are working to secure that and figure that out. You know, picking up the manufacturing business with JW, that gives us a lot of optionality that Christopher M. Paulsen spoke to earlier. We do have around 10,000 horsepower already contracted in the '27. So we are looking at every angle to work through that and add growth. You know, I want to add that the size of the JW manufacturing business is, you know, it is almost the exact same size as our expected growth over the next couple of years. We are not looking to expand that manufacturing facility or go out and try to sell a huge amount of packages, but we want to be able to fund some of our own growth internally and give us that flexibility that we need to when packages move out to 100 weeks that we can still provide for our customers. Nate Pendleton: Got it. I appreciate that detail. As my follow-up, in the prepared remarks, Christopher M. Paulsen mentioned expansion CapEx, including the new telemetry being added to units. Can we get any more detail on what that can entail for customers? Christopher Wauson: Yeah. I will take that. You know, one thing we are looking at is always looking for efficiencies to drive efficiencies. And with that, we have to invest in our units. You know? So panel upgrades, unit upgrades, is huge. So it allows us to have some dashboards to really see what is going on without having employees out there on-site 24/7. So, you know, that gives you a little color as to what that looks like, but it is our eyes and ears, basically, without folks on the ground. Clint Green: I am going to add to that too. You know, it also gives us the ability to manage how our folks, you know, when they leave to go work on a piece of equipment that is down, maybe it got called out in the middle of the night, they can have the right parts. You know, that is where we are trying to get to with this with some form of AI going forward. And this is the first step in our business to move that direction. Nate Pendleton: Got it. Appreciate it. Operator: Again, if you would like to ask a question, please press star then the number one on your telephone keypad. I will turn the call back over to Clint Green, President and Chief Executive Officer, for closing remarks. Clint Green: Yeah. Just to add a little bit there, you know, I want to explain how happy we are with the JW acquisition, how excited we are to be able to get into all those basins, and then, you know, the excitement that we have for the overall gas industry. And the way that, you know, the demand from data centers and LNG, and, you know, it is real. It is coming online, and we are excited to be in this business at this time and look forward to creating unitholder value as we move forward. Thank you all for joining our call, and good day. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.