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Operator: Welcome to the Eutelsat Half Year 2025-2026 Results Presentation. [Operator Instructions] Now I will hand the conference over to the speaker, Jean-François Fallacher, Chief Executive Officer; and Sébastien Rouge, Chief Financial Officer. Please go ahead. Jean-François Fallacher: Hello. Good morning, everyone, and thank you for joining us today. I am Jean-François Fallacher, CEO of Eutelsat. And I am joined on this call by Sébastien Rouge, our new CFO. So before getting into the details, a quick recap of the highlights of the first semester, which has been truly pivotal for Eutelsat. In terms of performance, first half operating verticals were almost stable. Within this, LEO revenues were up nearly 60%, reflecting the ongoing strong commercial dynamic and driving rise in revenues in all 3 connectivity verticals. The adjusted EBITDA margin is just over 52%. It's reflecting the impact of sanction-related loss of video revenues as well as the effect of the product mix with LEO revenues that are still during their ramp-up stage. As a result of the first half year performance, we are able to confirm our full year financial objectives. We made great strides in our refinancing plan with the successful completion of our EUR 1.5 billion capital raise in December, leading to credit rating upgrades from Moody's and Fitch. Subsequently, we have recently announced that we obtained almost EUR 1 billion in expert credit agency financing. We have also secured operational continuity for the OneWeb constellation with the procurement of a total of 440 new LEO satellites with technology enhancements. Finally, the disposal of our passive ground segment asset has been halted. While disappointing, this has no impact on Eutelsat's ability to finance its strategic development plan. And I will come back to this later. Now let's have a quick look at the key financial data. Total revenues for the first half stood at EUR 592 million, stable on a like-for-like basis and down 2.4% reported. Revenues on the 4 operating verticals stood at EUR 574 million. They were down 0.6% on a like-for-like basis, excluding a EUR 20 million negative currency impact. As stated above, LEO revenues grew almost 60% to EUR 111 million and adjusted EBITDA was equating to a margin of 52.1% on a like-for-like basis. That means excluding currency and hedging effect, the EBITDA margin declined by 3.4 points. CapEx was at EUR 291.5 million, but clearly should not be extrapolated for the year as a whole. We will come back to this. Let's now have a look at our H1 performance in more depth. Noting please that all commentary from now on will be on a like-for-like basis, [indiscernible] at a constant currency rate. Let's have a look at our revenues by vertical. I remind they stood in total at EUR 592 million for the last semester. So revenues of the 4 operating verticals excluding other revenues amounted to EUR 574 million. Video is representing 46% of the revenues, EUR 266 million, down 12%. And I am pleased now to note that all the connectivity verticals delivered growth this semester. Fixed connectivity, representing 23% of our revenue was up 17%. Government Services representing 17% of the revenues was up 8% and mobility, representing 13% of the revenues, up 8.5%. Our other revenues amounted to EUR 18 million. This is reflecting the revenue recognition from IRIS2 project. As you know, we are involved in the consortium system development -- in the consortium system development prime. And these other revenues are also including EUR 8 million positive impact from hedging operations. Let's now zoom in the Video business unit -- in the Video segment. First half year revenues were down by 12.3% to EUR 260 million. They are reflecting the impact of further sanctions imposed on Russia. This is amounting to circa EUR 16 million for the full year '25-'26 as a whole, which came on top of the underlying trend in this mature business. Second quarter revenues stood at EUR 133 million, down by 14.1% year-on-year, but broadly stable quarter-on-quarter, as you can see there. And on the commercial front, we had good news. We announced several renewals with quite long-standing partners at very key orbital positions, notably beIN, the media company, for distribution of DTH services across the MENA regions. This is reaffirming the strategic value of our 7/8-degree West video neighborhood. And in Europe, we were very pleased to announce the renewal of the deal with Polsat. We renewed a multiyear multi-transponder contract at a very flagship HOTBIRD Video neighborhood. Let's now take a closer look at the connectivity. Our total connectivity revenues for the first half stood at EUR 307 million, up by 11.8%. Within this mix, GEO revenues stood at EUR 196.8 million, which is a decline of 4.5%. And as you can see, obviously, this decline was more than offset by the strong ongoing momentum in GEO revenues, which rose 60% up to EUR 110.5 million. And second quarter revenues stood by EUR 157.9 million, up by 15% year-on-year and by 5.8% quarter-on-quarter. LEO revenues up 50% at 56.4%, while GEO revenues were stable, as you can see there at EUR 101.5 million. Let's now zoom in each vertical in more detail. I will start with the fixed connectivity vertical. The first half fixed connectivity revenues, they stood at EUR 132 million, up by 17.2% year-on-year. This is clearly reflecting the continued growth on LEO-enabled connectivity solution. As well, we have a one-off impact, and this is resulting for the upfront recognition of revenues relating to a capacity contract with a GEO customer for an amount of circa EUR 7 million. The second quarter revenues stood at EUR 70 million, up EUR 18.3 million year-on-year. On the commercial front, Eutelsat reinforced its presence in Africa with a distribution agreement with MSTelcom in Angola for LEO services for businesses located in hard-to-reach regions as well as new multi-million, multi-year agreement with Paratus for services across Southern Africa. Let's now have a look at the Government Services segment. Revenue stood at EUR 99 million, up 7.7% year-on-year. They are reflecting again here the growth of LEO-enabled solutions, notably with a number of services delivered in Ukraine as well as increased demand from other governments. Second quarter revenue stood at EUR 46 million, down by 2.2% year-on-year. This is mainly reflecting the softer revenues coming from the U.S. as well as lower terminal sales in Q2 than Q1. Key highlights of the past semester, including the successful partnership with Airtel to support the Indian Army's relief operation with LEO connectivity. And we had also some activities in flood impacting Sri Lanka. Elsewhere, Eutelsat obtained approval for the first military-grade manpack terminal with our OneWeb network. This is a terminal for the armed forces developed in partnership with Intellian Technologies. It's now -- this terminal is now available to government and defense customers that will need a portable, resilient connectivity solutions. Now let's have a look at the mobility segment. Revenues stood there at EUR 77 million, up 8.5% year-on-year, reflecting the activation of contracts with aero mobility customers. We now have almost 600 certified antennas installation on planes, out of backlog of over 1,500 aircraft compared to what we had last year, 100 certified antennas and a backlog of 1,000 antenna. So you see the great evolution of our backlog and a number of antennas, which are actually active on planes. This impact is even more visible on the second quarter, where revenue stood at EUR 42 million, up to 34% year-on-year and 21% quarter-on-quarter. On the commercial front, we are happy also to pinpoint the multi-year deal we've inked with CMA CGM Group on maritime. This is a deal we closed with Marlink to integrate OneWeb into the connectivity solutions of CMA CGM global maritime fleet. Elsewhere, Eutelsat's OneWeb LEO network will provide passenger WiFi services on railways. We have signed a deal with Transgabon in partnership with Airtel Gabon. This is also reinforcing the Eutelsat Airtel partnership. And this is the start of business we are going to do in rail connectivity across Africa. Let's now if you wish to have a look at the backlog. The backlog stood at EUR 3.4 billion on end of December '25 versus EUR 3.7 billion earlier. This backlog of EUR 3.4 billion is equivalent to 2.7x the 2024-'25 revenues. And for you to know, connectivity represents 59% of the total backlog versus 56% a year ago. This evolution is reflecting the rapidly increasing weight of LEO business in the mix. And as a reminder, these LEO business contracts tend to be shorter. Moreover, only the success of the take-or-pay contracts, the LEO take-or-pay contracts are -- while what we call pay-as-you-go contracts are not reflected in the backlog at all. As a result, while it remains a useful indicator, the evolution of the backlog is a bit less correlated -- is now less correlated with future revenue trends than it used to be in the past. Let's now turn to the financial performance, and I will pass the floor to Sébastien. Sébastien Rouge: Thank you, Jean-François. Good morning, everybody. Revenues were covered in detail. So let's now jump to group profitability. Adjusted EBITDA stood at EUR 308 million for the half year ended on the 31st of December compared to EUR 335 million a year earlier, so down by 8%. On a like-for-like basis, it's down 6.1%. Operating costs stood at EUR 283 million, up EUR 12 million and well contained in spite of the large growth of the LEO business. They reflected mostly an increase in the -- related cost of goods sold. The adjusted EBITDA margin stood at 52.1% reported versus 55.2% a year earlier, so down 3.1 points. It is a consequence of the impact of sanction-related losses on Video revenue as well as the effect of product mix within LEO revenues during the ramp-up stage. If we look now at the rest of the P&L, the net result was a loss of EUR 236 million, largely reduced from the loss of EUR 873 million a year earlier. This reflected limited other operating losses at EUR 69.6 million as compared to EUR 691 million last year. As a reminder, in the first half of '24-'25, we included goodwill and satellite impairments totaling EUR 650 million. You can note we have also lower D&A at EUR 357 million versus EUR 434 million last year, reflecting notably the end of the amortization of certain intangible assets. As well, we have the positive effect from the securing of operational continuity of the LEO constellation, and that follows the procurement of the additional 340 satellites. Finally, we have a favorable currency impact in D&A. Net financial cost of EUR 95 million versus EUR 99 million last year, notably reflecting lower interest following the full repayment of the 2025 bond. And finally, corporate tax of EUR 21 million versus EUR 7.6 million last year. That's an effective tax rate of 10%. If we move now to our CapEx plan. Gross CapEx amounted to EUR 292 million as compared to EUR 175 million a year earlier. This reflects the timing of key milestones in LEO investment programs. I will remind, it should not be extrapolated for the full year since most of the investment will be deployed in the second half. Nevertheless, because of the phasing of LEO programs as well as an increased vigilance on our GEO spend, CapEx for the full year is now expected around EUR 900 million, while we announced EUR 1 billion to EUR 1.1 billion previously. Going forward, CapEx will remain focused on LEO activities in line with the group's strategic vision, primarily for the OneWeb follow-on program. GEO CapEx will be limited to ensuring service continuity. In this context, the group has canceled the procurement of the so-called Flexsat Americas following a review of its business case, resulting in future CapEx savings over EUR 100 million. Now in terms of financing structure of Eutelsat. The most important thing, on December 31, '25, net debt stood at EUR 1.3 billion, down EUR 1.3 billion as well versus the end of June '25. That is clearly reflecting the net proceeds from the capital increase. As a result, the net debt to adjusted EBITDA ratio stood at 2x as compared to 3.9x at the end of June '25. It will not stay at this level up to the end of the year because of the phasing of CapEx, which is skewed to the second half. The average cost of debt after hedging stood at 4.2%. It was 4.8% in the first half of last year. Weighted average maturity of the group's debt is 2.3 years as compared to 3 years at the end of December '24. We enjoy a great level of liquidity with undrawn credit lines and cash, which stood in total around EUR 2.1 billion. On this good note, now back to Jean-François to comment the outlook and next steps. Jean-François Fallacher: Thank you, Sébastien. On the first half of 2025-'26, clearly, it's been a crucial semester for Eutelsat, most notably with the successful execution of the foundation of the refinancing plan with the success of the EUR 1.5 billion capital raise, that was clearly fully supported by our core shareholders and followed by credit rating upgrades from Moody's, up two notches to Ba3; and Fitch up three notches to BB with stable outlook. Subsequently, as announced, earlier on this, we have secured almost EUR 1 billion Export Credit Agency financing. And our intention is clearly to build on these strongly improved financial fundamentals to undertake the refinancing of our bonds in order to complete the strategic refinancing plan. In parallel, now I'm going to the next slide. We are taking steps. We have taken steps -- important steps to secure the operational continuity of our LEO constellation. We've procured 341 web satellites on top of the previous order of 100 bringing the total number of new satellites to 440. The availability of these satellites will assure full operational continuity for customers of the constellation that will be progressively replacing early batches of satellites that were coming to an end of life. And moreover, we are having the possibility of taking on board hosted payloads on some of these satellites, opening the possibility for Eutelsat OneWeb to a new type of business development. Furthermore, we diversified our options for access to space. We have signed a multi-launch agreement for the future launch of LEO satellites starting in 2027 with France launcher MaiaSpace. Before wrapping up, a quick word on the recent announcement on the transaction to dispose of the passive ground segment. At the end of January, we announced that this transaction will not proceed as all the condition precedents have not been satisfied. In that case, the condition precedent was the approval of the French state. While disappointing the noncompletion of the transaction does not affect our ability to fund the capital expenditure related to our strategic growth trajectory following the refinancing measures that we have undertaken since this announcement. It has no effect on our financial objectives for the current year with the exception of the net debt to EBITDA, which is now expected to stand at around 2.7x at the end of the year versus the 2.5x previously announced this project would have gone through. On the other hand, the effect on the EBITDA margin is positive to the tune up to roughly 5 points as clearly, we will not be paying the leases of circa EUR 75 million, EUR 80 million per annum that was planned to be paid to the acquirer. Let's now turn to our financial objectives. The first half performance was in line with expectations, enabling us to confirm our full year '25-'26 objectives. I'm reminding them now. Combined revenues of the 4 operating verticals in line with the levels of '24-'25 with LEO revenues growing by 50% year-on-year, and adjusted EBITDA margin expected slightly below the level of full year of '24-'25. Gross capital expenditure in full year '25-'26 initially expected in a range of EUR 1 billion to EUR 1.1 billion, now expected to around EUR 900 million. Following the capital increases in December '25 and taking into account the nondisposal of the Ground segment, net debt to EBITDA is estimated at circa 2.7 multiple by end of the year '25-'26, reflecting clearly a robust and self-funded financing structure. Looking further out, Eutelsat demonstrates, I believe, some of the most attractive growth and profitable prospects in the sector with revenues expected in a range between EUR 1.5 billion and EUR 1.7 billion in the end of the full year '28-'29, supported by the strong momentum of LEO revenues, which are significantly outperforming the market. Our operating leverage is expecting to drive to a mid- to high single-digit percentage points of improvement in the EBITDA margin, resulting in a margin of around 65% by '28-'29. In the long term, post full year '28-'29, the B2B connectivity market is expected to pursue its growth, clearly with a double-digit rate driven by the LEO market expansion. So a few words to sum up. First half revenues once again confirmed the significant momentum in LEO revenues. Our financial situation is significantly reinforced following the capital raise of EUR 1.5 billion and the attention of the EUR 1 billion ECF funding and the operational continuity of OneWeb constellation well assured with the procurement of further 440 LEO satellites. So now with both financing secured and operational continuity assured, we can look forward with confidence as we focus on our growth strategy based on the development of our LEO business. I'm thanking you very much for your attention, and we are now ready to take your questions. Operator: [Operator Instructions] The next question comes from Aleksander Peterc from Bernstein. Aleksander Peterc: I just have a first a couple on connectivity. Do you expect government to bounce back? We had a bit of a weaker-than-expected revenue in the reported quarter. So I was wondering if this is just due to one-off installation effects and so on. And conversely, on aviation, do you see the strong traction there continuing given your strong backlog numbers and installed planes numbers that you disclosed in the report? So should we be a bit more bold in our estimates for this vertical going forward? And then secondly, on your debt, do you plan a bond issuance soon? The bond issuance conditions your access to the ECA financing? Is that a near-term event? And once you complete that and you have access to the ECA EUR 1 billion, do you think you have a credible path to investment grade in the medium term? Joanna Darlington: Alex, it's Joa on the line. So I'll take your first question, and then I'll pass the other questions on to the others. So you're right, there's a slight slowdown in Q2 on government services. I think that the first thing to remember is that in Q4 of last year and Q1 of this year, there was quite a high level of equipment sales in the mix, and this obviously reflects the very strong momentum that we saw in government services throughout financial or calendar year 2025. The fact is that, that mix has been slightly different in the second quarter. But I think I would say 2 things. The first thing is that the -- it's absolutely a good signal to have terminal sales in the mix because obviously, you need to install the terminals so that you can then get the service revenues going. And the other thing I would say is these are long-term businesses. So I wouldn't extrapolate a trend based on the performance of one quarter to another. I think on your second question, I mean, yes, obviously, we have been making very strong progress on aviation. You can see that the number of installations has gone up as has the backlog of planes. As a reminder, all of these customers are serviced by our distributors, not directly by us. So this means that the distributors who are Intelsat, Gogo, I mean, obviously, they're Panasonic, they're getting momentum in terms of selling the OneWeb service. So yes, it's a positive sign. We knew that once the kind of we got to a certain critical level of global coverage, then it would unblock the pipeline for Aero, and this is what you're beginning to see. I mean how you adjust your forecast is up to you. I would highlight that for the year as a whole, we are not changing our revenue forecast for the group. And I think your third question about the bond issuance, maybe Sébastien wants to take that. Sébastien Rouge: Look, I think you're right. The last step of the full refinancing of the group after the capital increase, renegotiation with the banks and the setup of the ECA loan is actually to issue some bonds to make sure that we refinance some of the maturities that come in the next years. The only thing we can say is that it's clearly on the radar, and we're in preparation mode. Whenever we are ready, we'll announce that to the market. As far as investment grade is concerned, I had the first interaction with our rating agencies. Before we anchor ourselves completely in investment grade, I think there are a few steps that have to be followed, in particular, phasing and the way IRIS2 will be financed. I think we first have to answer to this question before we entertain a complete clarity vis-a-vis the rating agencies. Aleksander Peterc: Can I just have a very quick follow-up? You have one expensive bond at 9.75%. Would that be a candidate for an early redemption? Sébastien Rouge: Yes, we are looking at this one in particular with -- in the foreseeable future, yes. Operator: The next question comes from Roshan Ranjit from Deutsche Bank. Roshan Ranjit: I have 3 questions, please and I guess, perhaps related to the first one around government. Interesting that you have canceled the Flexsat Americas satellite. I was just wondering what the kind of reasoning behind that is. If I remember correctly, that satellite was clearly directed over the Americas for activity and government business. So are you perhaps seeing less of a U.S. kind of demand? Clearly, you are seeing strong pickup in Europe. But is there a bit of a softening, as you say, the U.S. side, please? And just added to that, if you could give us -- remind us of the mix of U.S. DoD revenues within your government vertical, that would be helpful. The second question is on video. And clearly, the headwinds from the Russian sanctions still impact it. But if I adjust for that on my calculations, I think high single digit, perhaps very low kind of double-digit underlying decline in video. Your previous message was kind of a mid-single-digit decline. So should we think the new normal is kind of high single digit for the video business? And lastly, could you just give us a quick update on IRIS2? I understand that we're supposed to be getting a kind of this rendezvous point in the coming weeks to kind of finalize the numbers and get the ultimate go ahead. Is that still the case? Jean-François Fallacher: Maybe I will take -- thank you for your questions. On the Flexsat Americas, I mean, the decision is not linked to the U.S. or to the continent itself, the U.S. continent itself. Now the decision we have taken is linked to the fact that we didn't see a viable business case or at least the return was going much further down the years, 2030s with the Flexsat Americas, simply linked to the fact that we see more LEO constellations coming, and we thought, basically, we would not have a flying business case anymore if I may say so. And that was the main reason why we decided to cancel now on an amicable basis this -- the construction of this GEO satellite. So this is obviously going to avoid a lot of CapEx to us in the very short term for a business case that was more and more shaky. So that's the main reason of this decision. Maybe I will take the question on the IRIS2, and I will let Joanna tell you a few words about -- on the video and how we see the evolution of our video business. Keep in mind always that on the video business, of course, we can talk about trends, but we have long-term big contracts with a number of different parties. So every year is a bit different. So it's a bit difficult to talk about trends, but I will let Joanna say more on that. On IRIS2, where are we? So we are, as you know, one of the key, let's say, players in the consortium, SpaceRISE consortium together with SES and Hispasat that have won this concession from Europe. We've been working the full year 2025, calendar year 2025 with actually suppliers and the supply chain in order to solidify the constellation we want to build. We are now entering a so-called -- on level 1 with European Commission. And this semester will be key because this is the moment where we will actually finalize our commitments. I'm talking about the SpaceRISE consortium towards Europe to actually build this constellation, this European constellation further. So we are having a very important semester now in this project. So stay tuned. Maybe Joanna, a few words on the video. Joanna Darlington: Yes. So I think -- thanks, Jean-François. So on video, not really a lot more to say. You're right that this year, obviously, is affected by Russia. And I mean, technically, if you remove Russia and recalculate, yes, it gives you a decline, which is a bit higher than mid-single digits. But as you know, because you've been covering the sector for a long time, it can be quite lumpy based on renewals. So again, I wouldn't necessarily extrapolate that into a long-term trend. I think we can probably say that what we've been seeing in the last year or so is a bit higher than mid-single digit underlying. But -- so your other question, I think, was the mix of U.S. DoD within government. It's now less than 50%, and we expect it to continue to decline as we build up with other governments and obviously, notably the framework agreement with the French DoD, but not only. Operator: The next question comes from Ben Rickett from New Street Research. Ben Rickett: I had 2 questions, please. Firstly, in the context of your Flexsat Americas cancellation, I'm just wondering how you think about the long-term viability of your GEO constellation. Do you think you will ever launch a GEO satellite again? And related to that, what level of GEO CapEx should we be expecting going forward? And then second question, it seems increasingly likely that Germany is going to build its own LEO constellation for their military. I don't know how much interaction you've had with the German government, but I'd be interested in your perspective in why Germany is doing this rather than using the IRIS2 constellation. Are there technical limitations with IRIS2? Or are there other factors? Jean-François Fallacher: Thanks very much for your 2 questions. On the GEO satellites in your question, will we ever build new GEO satellites in the future? So first of all, we have one project, one GEO satellite project still live, new GEO satellite with -- together in partnership with Thaicom, so which is a satellite that will fly over Asia. It's a connectivity satellite. So this one, we are feeling very confident, and we are really happy to keep it. We see the business plan still extremely valid over that region. Let's remind that when we look at our fleet of 34 GEO satellites, we have a big number of video GEO satellites. So these satellites have a long life duration. I believe in the future, we will have to invest in new GEO satellites for video because we have a number of regions where actually video is still -- the video business is still going very well. I was just saying, we are proud to have re-signed an important contract with Polsat, which is 1 of our 2 large customers in Poland. So there are a number of geographies where actually video is holding very well. I'm not even quoting Africa, where we have Canal+, MultiChoice as big customers. MENA, where you have seen we have renewed the contract with beIN. Our 7, 8 West position is a very strong one over MENA. So some of these satellites will, at some point, come to an end of life, but that will be post 2035, more in the '35 -- 2035-2040 region. So probably in a few years, we will need to look at the evolution of our GEO satellites, take decisions. Not much I can say now because, I mean, these GEO satellites can be also moved from one place to another place. So all of this is basically going to be looked at carefully. In the very short term, I mean, in the foreseeable short term, there is no such project, but for sure, in the future, there will be additional investments in GEO satellite. That's the first question. The second question about the public announcements of Germany. So just to put back these things in their context, first of all, there are announcements. We are taking them, obviously, very seriously. There are announcements from the German Bundeswehr, so the German MoD wishing to build its own military-grade LEO constellation. Obviously, we are in touch with Germany at multiple level. The reading and the reason why this project came to see the light, I think, it should be more asked to the Germans. We have obviously our ideas. One of them could be that they were expecting a very late arrival of IRIS2. And believe me, we are working very hard to have IRIS2 coming and becoming live in 2030 as was initially explained. So that's the only thing that I want to say. I take the opportunity that you are all here to say that what I'm advocating, we had a press conference this morning, and it's not the first time I'm saying it. Basically, personally, I believe that this is one of the pitfalls or one of the traps that Europe could have, is to fragment and that each country. And we understand that Europe is 27 countries, with 20 sovereign countries -- 27 sovereign countries, and there is always the temptation to build your own national object. But looking at the size and the complexity of building a LEO constellation, I remind, OneWeb, $7 billion invested since the beginning of the project in 2015, 7 years before OneWeb became really operational, and we could start to sell services over this constellation. So I believe, for Europe, that would be a trap, that would be a pity that Europe would fragment and that some of the countries would build their own constellation. I mean nonetheless, obviously, we are respecting the sovereignty of Germany and whatever decision they will take, but we are clearly advocating and trying to convince the Germans not to go that way. Operator: [Operator Instructions] The next question comes from Stéphane Beyazian from ODDO BHF. Stéphane Beyazian: Just a follow-up on the discussion about Germany, and perhaps I could add Italy as well. I mean if these 2 countries were to decide to build their own constellation, I would suspect that this probably changes your guidance for revenues coming from IRIS2 and possibly the return on investment. So yes, I was just wondering to what extent these 2 countries are important in the calculations that have been made about future revenues coming from IRIS2. And second question, I was just wondering if -- obviously, without revealing anything that could be confidential. But is there any major or big contract tender that is ongoing and which is public? I was thinking about the SNCF, which I think is looking for a provider of connectivity. Any update there? I mean any other major contracts that could be coming up and that is publicly known? Jean-François Fallacher: So just on your first question, it's much too early to answer to this question, obviously, but just -- I mean, because, again, I'm insisting, I mean, these are announcements. There is nothing concrete at this stage. Takes very long time to build a constellation. Let's never forget that this constellation, whether it's ours, whether it's IRIS2, are worldwide constellations. Low orbit satellites are flying by construction all over the earth, meaning that the economic model of this constellation cannot be standing on just one region. The economic model of OneWeb, the economic model of this constellation are worldwide. Just a few numbers, they are facts. The French -- the turnover of Eutelsat in France, France represents 7% of our turnover. Full Europe represents 27%, out of my memory, of the total turnover of the group. So I mean, of course, I mean, Germany is an important country, no discussion. Italy is at the same -- I mean, evenly a very important country in Europe, no discussions. But again, I mean, the revenue expectations and the business case we are having post 2030 linked to IRIS2 are also based clearly on international revenues in many other countries than just European countries. I remind that, as we speak, OneWeb is opened and we can sell in 180 countries across the world, not to name maritime, not to name planes, aero. So again, too early to make any statements about that. And we are working extremely hard and very focused on the Eutelsat side on making IRIS2 a success. Your last question, SNCF. Yes, obviously, we are in discussions with SNCF. Much too early to say. I mean SNCF is still in the process of, let's say, preparing their RFP. They have announced it. I believe there will be an RFP somewhere this year on basically the equipment of the French trains. Allow me also to give you an update on our NEXUS contract. We had a bit of, let's say, late start of the revenues in this contract simply because, as you have probably seen, France was having difficulties to finalize the budget for the country. The good news is that this has been now finalized 2 weeks ago. So that will also allow the French MoD to really take actions now. We've been working very closely with them since the announce of this frame contract since summer last year. We have things in the pipe, and hopefully, we'll be able to make some announcements in the second semester that has already engaged because now that the French Army has a budget, I mean, they will be capable of taking some actions and taking -- sorry, and signing purchase orders basically, which is what we expect now. Stéphane Beyazian: And I have a third question. Do you think it's possible? Joanna Darlington: Yes. Stéphane Beyazian: My third question is do you see any area for possible diversification? I'm thinking about earth observation or data analytics. And I would stretch the question to something that is probably a little bit different and more CapEx intensive. There's been a lot of talks also about computing in space. Anything, any color you could provide on that? Jean-François Fallacher: Thank you for your question. It's an excellent question. The first -- so we are not going to go into space observation. This is too far from our current business, although, I mean, it's -- actually, I understand why you think about that. There are 2 things we could quote now: one -- the first one because this is very concrete and this is very material. This is hosted payloads. In the satellites we have purchased to Airbus, 340 satellites, we have actually built an option on these satellites to embark what we call hosted payloads. So this is some, let's say, physical space we have on these satellites. Well, for those of you in the call, which are not familiar, I mean, the size of this OneWeb satellites are the size of, let's say, a big refrigerator or a big washing machine, something like that. We have actually some space that allows us to take an additional payload. So -- and what we would provide to these payload is basically electricity coming from our solar panels and batteries and a little bit of connectivity so that we could have people indeed doing earth observation or some kind of monitoring or whatever payload, scientific payload, military payloads. We can plug them in the space, in our satellite and take them with us in space and fly them with us. So these are -- this is really a new business in which we believe because this is win-win. This is, for us, the possibility to open a new stream of business. And this is for parties, which are having projects to put in space some specific missions and could not do it because it's very expensive to build a platform, to build a satellite. It's very expensive to launch a satellite. It's very expensive to maintain a satellite, to operate a satellite fleet. So that's a win-win. It's a new business line that we have opened with these 340 satellites that we are now marketing, selling to a number of space and new space actors across the globe. And I hope, without revealing anything, that we can have some announcements in the first semester. That's the first thing. The second thing, although it's very early to say, I mean, obviously, the deal with EQT that has been halted has been actually showing -- I mean, putting an eye on the ground assets of Eutelsat. These assets used to be seen as technical assets and operational assets in the past. Through the deal, we have prepared with EQT -- I mean, it became very clear that this asset could be a bit sweated. So we could derive some business from these assets. So clearly, now that the deal has been halted, these assets are still ours, obviously. We have started some kind of carve-out. So we are going to look, obviously, at the possibility to monetize a bit more these assets. So this is, I would say, the second direction. I want to pinpoint on what additional businesses could we -- aside our core business, could we start to launch basically. So -- and we have other projects in the cupboards, but I want to stay there for now because these projects are much too -- at a much too early phase. But we are seeing actually innovation and business development as also a key potential direction for the future. Stéphane Beyazian: And what about the orbital data centers? Anything on that? Or that's part of what you don't want to comment too much today? Jean-François Fallacher: No, we -- I mean, we've obviously seen and read like everyone the starting projects on this area. I mean, at this stage, we have no such projects at Eutelsat. Operator: There are no more questions at this time, so I hand the conference back to the speakers to conclude the call. Jean-François Fallacher: So thank you very much for your questions. Again, first half results confirming the momentum in LEO revenue. Our financial situation significantly reinforced capital raise of EUR 1.5 billion, ECA of EUR 1 billion. More to come as you understood today on the bond side, operational continuity of the constellation on the way with the order of 440 satellites. So now financing secured, operation continuity assured. We are looking forward to the future with confidence and we are focusing on our growth strategy based on the development of the OneWeb LEO constellation. Thank you very much, ladies and gentlemen. Operator: This concludes the call. You may now disconnect.
Christopher Kusumowidagdo: Good afternoon, and welcome to XLSMART's Fourth Quarter 2025 Earnings Call. My name is Christopher, Head of Investor Relations, and I will be coordinating today's call. Our presentation and financial results were released this morning and are available on our Investor Relations website. Today's call will begin with prepared remarks from our management team, followed by a hybrid Q&A session. [Operator Instructions] As a reminder, the session is being recorded. I would like to introduce our speakers for today's call: Mr. Rajeev Sethi, Present Director and CEO; Mr. Antony Susilo, Director and Chief Financial Officer; Mr. David Oses, Director and Chief Commercial Officer for Consumer; Mr. Feiruz Ikhwan, Director and Chief Strategy and Home Business Officer. And with that, I will now hand over to Mr. Rajeev to begin with the management highlights. Rajeev Sethi: Thank you, Christopher, and good afternoon, everyone, and thank you for joining us. As you know, the company was formed in April of last year 2025. So this was the first year for XLSMART. And this quarter closes our first year post merger. And from our point of view, the message is very clear. Execution matters, and we are happy to state that we have delivered. If I speak about the merger, we have successfully completed the 2025 integration milestone. And most importantly, we've done this ahead of the plan. and it translates into operational efficiency, faster decision-making and a more disciplined cost base. Integration risk has materially reduced as we enter into the new year. Secondly, on synergies, we've achieved our 2025 synergy targets with OpEx synergies exceeding our initial expectations. This gives us confidence that margin expansion is structural improvement that will continue in 2026 also. The heavy lifting on cost has largely been done. The focus now shifts to sustaining discipline. Next, on growth quality. Revenue growth was supported by a fully consolidated subscriber base and more importantly, a strong ARPU uplift, which was around 26% post merger. This was driven by pricing simplification and better customer experience, choices which were deliberate and that prioritized value over volume. And as we said earlier, in this market, we'll want to play a responsible game and we'll encourage the market players to move into a situation, which helps restore health to this industry. And we are also seeing clearer evidence that customers are willing to pay for a more consistent high-quality service. Finally, on the network, network consolidation has strengthened our performance across key metrics. And this was complemented by our recent launch of 5G services in Jakarta, Surabaya, Bali and other cities. In summary, 2025 demonstrates disciplined execution across integration, cost, growth and network. We exit the year with a stronger foundation, reduced complexity and a clearer path to sustainable value creation going forward. If I move to the next slide, building on the highlights which I've just shared, I'll go a level deeper into how this merger is being executed and what has been delivered on ground. Starting with network. This is the most complex integration stream and also the one that matters most for long-term performance. We are on track to complete full network integration by first half of 2026. Progress so far has been encouraging with visible improvements in coverage, capacity and consistency. Importantly, we are managing this carefully, protecting service quality and minimizing operational risk and both of these remain nonnegotiable. On customer experience, we are seeing integration benefits are already being felt and enjoyed by the customers. We have improved download speeds by up to 83% across the combined base. This is a real meaningful improvement that supports better engagement and underpins the ARPU uplift that we are seeing post merger. On synergies, execution has been strong. In the first year, we have delivered approximately USD 250 million of gross synergies, driven by OpEx efficiencies, procurement scale and network rationalization. This confirms that the merger economics are playing out as expected and in some areas, better than what we had initially planned. Finally, on business continuity. Throughout the integration process, we have maintained service stability and sustained growth momentum. This disciplined approach has allowed us to transform the business without disrupting day-to-day operations. Overall, the message on this slide reinforces a simple point. Merger is being executed with control and discipline, delivering tangible gains today, while we are preparing a solid foundation for the next phase of integration and value creation. If I move to the next slide, which is talking about the integration progress. And as I mentioned earlier, on the overall execution, the integration milestones were completed ahead of plan. This pace reflects strong governance, clear accountability and tight coordination across multiple teams. More importantly, it reduces execution risk as we move into the next phase of integration. On network, consolidation has progressed materially. We've integrated approximately 34,500 sites by December last year, delivering visible improvements in network performance and customer experience. By the end of Q4 '25, around 70% of the sites have been consolidated. And as I said earlier, it puts us in a very strong position to finish most of the integration by H1 '26. From an organization perspective, the end state structure is now in place. We have harmonized processes and governance across the combined entity, creating clearer decision risk, decision rights, faster execution and better cost control. In total, around 120 processes have been streamlined and standardized. Finally, on the cost base, we have structurally streamlined our cost base, including vendor consolidation and site optimization. These actions underpin the OpEx synergies already delivered and support sustainable efficiency going forward rather than just short-term savings. To summarize, 2025 integration has been executed with speed and discipline. The foundation is now largely built. Risks are lower as we move forward, and the focus shifts towards optimization and value extraction in a way moving away from integration to driving more value. The last part, which I'm going to talk about is on the 5G rollout. As we said earlier, this merger gave us an opportunity to ready our network for 5G, and we are delivering on that promise. And we believe 5G is a key pillar of our growth and differentiation strategy. We want to be leaders in 5G, simply put. Our focus is not just on rolling out 5G faster, but on delivering a clear, consistent and commercially meaningful 5G experience. Today, we offer what we believe is the first true 5G experience in Indonesia. This is built on 3 core propositions. First, blanket city coverage. And this, I believe, is rare in many parts of the world. It's not only your home is covered or your workplace is covered, wherever you go in a city, you will find 5G. Secondly, an auto 5G experience where customers with 5G devices can seamlessly access speeds up to 250 Mbps without complexity. There is no special plan for availing 5G benefits. And thirdly, a dedicated 5G spectrum, which delivers more consistent speeds and better user quality, especially in high usage area. In terms of coverage, our 5G network is now live around 33 cities and continues to expand. Importantly, the experience is designed to be certified and consistent with capacity strengthened where demand is highest. This approach ensures that network investment is closely aligned with actual usage and monetization potential. Equally important is brand clarity, where we have positioned 5G clearly across our portfolio of 3 brands -- 4 brands, if I may say, XL Prepaid, the postpaid brand, Prioritas, AXIS and Smartfren. Each brand plays a distinct role, avoiding overlap while maximizing reach. In summary, our 5G strategy is deliberate and focused, combining disciplined rollout, consistent experience and clear brand positioning to support sustainable growth and long-term. I thought that was my last slide, but there's one more, which is on the network side, and I'm happy to give you an update on that. By end of last year, our total BTS count reached more than 225,000, which is a 36% increase year-on-year. This reflects the post-merger consolidation of our network and continued investment in capacity, particularly in 5G. As expected, legacy technologies continue to decline as we optimize the network towards more efficient and higher performance platforms. On 5G, we continue to expand our footprint in a disciplined and targeted manner. As I said earlier, we launched our services and we expanded further in January 2026. In addition to the expansion, we are also seeing external validation of our network quality. And I'm happy to announce that XLSMART was awarded the Ookla Speedtest Award our Fastest 5G Network in Indonesia, reinforcing our commitment to delivering a globally benchmarked high-performance connectivity. This reflects the progress we have made in network design, spectrum strategy and execution quality. Overall, our network strategy is delivering on 3 fronts: scale, performance and resilience, providing a strong foundation to support growth, accelerate 5G monetization and maintain customers trust going forward. I'll now hand over to our CFO, Pa Antony, to walk us through the financial results. Antony Susilo: Thank you, Pa Rajeev. Good afternoon, everyone. Let me now present you our key operating metrics, which reflect a clear shift toward quality growth. We know that this quality growth because of the price adjustment and also the broader industry recovery. So let's start with the subscribers. Our mobile subscriber base become 73 million in Q4 2025, representing an 8% quarter-on-quarter decline. This decline was an intentional outcome reflecting a tighter acquisition discipline as well as a sharper focus on monetization and high-quality users. Most importantly, on a year-on-year basis, the consolidated base remains up by 24%, reflecting the post-merger scale of the business. If we look at the ARPU, this is where the benefit of our strategy are most visible. Blended ARPU increased by 15% Q-on-Q to become INR 44,800 in quarter 4 2025. This mainly driven by the improvement across both in the prepaid as well as postpaid segments. And this reflects the pricing normalization, better customer mix and confirms that we are capturing more value for users. In erms of the usage data traffic, it continues to grow despite of the lower subscriber base. Traffic reached almost 4,000 petabytes in Q4 2025, an increase of 47% year-on-year and 2% quarter-on-quarter. This growth in consumption per customer reinforces the positive relationship between network quality, the engagement as well as the monetization. So overall, these trends demonstrate that our strategy is working well. Our subscriber numbers have normalized, becoming better customer quality, intensity and ARPU continue to improve. This positioning the business to be more sustainable and more profitable growth going forward basis. Now let me now present the financial performance for full year 2025, where it reflects the impact of the disciplined pricing, integration execution as well as a clear focus on value creation. We start with the revenue figures. The 2025 revenues increased by 23% year-on-year basis to become IDR 42.5 trillion driven primarily by the data as well as digital services. This growth reflects the benefit of price rationalization, ARPU uplift and also a larger consolidated base following to the merger. On a quarterly basis, the revenue grew by 4% quarter-on-quarter, demonstrating a continued momentum despite of the subscriber normalization. Moving on to the profit Normalized EBITDA for full year 2025 increased by 13% to become IDR 30.1 trillion, while reported EBITDA margins moderated at around 42%. This reflects deliberate acceleration of integration activities, which created a near-term cost pressure. On a normalized basis, EBITDA margin remained healthy at 47%, underscoring the underlying strength of the core business. At the bottom line, normalized PAT grew by 63% year-on-year to become IDR 3 trillion in full year 2025, supported by the stronger operating performance and improving operating leverage. Reported PAT continues to be impacted by integration-related costs as well as one-off items, which is temporary in nature and aligned with our transformation. Overall, our full year 2025, we demonstrated a strong financial outcome, the revenue growth supported by the pricing discipline, resilient in the profitability despite of the integration acceleration as well as integration as well as a significant stronger normalized bottom line. This position is good for us as we move into full year 2026 with a clearer earnings profile and increasing contribution from synergies. Next slide. The slides provide a quick reconciliation between our reported numbers and normalized EBITDA as well as PAT will help us to clarify the underlying performance of the business during the integration phase. On EBITDA basis, reported EBITDA full year '25 was IDR 17.8 trillion. This includes IDR 2.4 trillion of integration-related OpEx, mostly on the network costs and people costs. These are primarily associated with accelerated execution of merger initiatives. If we exclude this one-off integration costs, the normalized EBITDA stands at around IDR 20.1 trillion, reflecting the underlying strength of our core operations. At the bottom line, the reported PAT was impacted by integration OpEx and then accelerated depreciation and asset impairment. Adjusting for these 3 items, the normalized PAT for full year 2025 will be IDR 3.3 trillion. These adjustments are temporary and integration related, and they do not change the fundamental earnings capacity of the business as we move beyond the integration period to the next slide. Following the normalized EBITDA and PAT, this slide basically walks you about the operating cost base post the merger. Reported OpEx increased by 18% quarter-on-quarter in Q4 '25, largely reflecting the integration-related expenses and the expanded scale of operation after the merger. On a normalized basis, excluding the integration costs, OpEx increased by around 6% Q-on-Q, which is broadly in line with our business expansion. This indicates that the cost discipline remains intact and the majority of the increase is temporary and nonrecurring in nature. From a cost mix perspective, the main drivers for Q-on-Q increase coming from 3 factors, mainly: number one, higher labor costs related to the integration activities; second one, increased sales and marketing to support 5G launch and network expansion. And then the third one, higher infrastructure expenses due to more sites and network integration. These increases are structurally aligned with scale and integration rather than in efficiencies. Okay. So that's it from me. I shall now hand over back to Pa Rajeev, to provide the full year 2026 guidance and the proceeding parts. Thank you. Rajeev Sethi: Sure. Thank you, Pa Antony. And as we mentioned, I will talk a bit more about the 2026 outlook. Starting with revenue, we expect revenue growth to be broadly in line with the overall market, which we believe should be recovering from a bad first half of 2025. And as all of us know, there's been a strong recovery in the second half of the year, and we expect that recovery will continue, and we'll want to participate in that market growth. And this will reflect a very disciplined approach that will prioritize value and sustainable return over just volume-driven expansion. EBITDA growth is targeted at approximately 2x the revenue growth, supported by continued cost discipline, operating leverage and the ongoing realization of merger synergies. Capitalized CapEx for 2026 is projected to be around IDR 15 trillion. This may inch up higher depending on our ability to execute all the CapEx projects which we have. If we are able to do that, it may inch towards IDR 20 trillion. And this level of investment is focused on strengthening network quality, completing integration and supporting targeted 5G expansion, while maintaining financial discipline. On synergies, we are targeting a merger synergy of between USD 250 million to USD 300 million in 2026, driven by efficiencies in network operations and vendor procurement. Beyond 2026, we remain firmly on track to achieve our full synergy potential, which as stated earlier of between USD 300 million to USD 400 million annually once the integration is fully completed, which should happen by end of this year. So this was for me, and I conclude my summary hand it back to Chris. Christopher Kusumowidagdo: Thank you Pa Rajeev and Pa Antony for the presentation. Ladies and gentlemen, we will now proceed to the Q&A session. [Operator Instructions] The first question comes from Piyush Choudhary from HSBC. There are 4 questions. Actually just the first one. But the normalized EBITDA growth, which is only 1% Q-on-Q when the revenue is up 4% Q-on-Q. Second question is about the outlook for mobile ARPU and how are the trends in first Q 2026, so far? Question number three, what is the fixed broadband ARPU and in fixed broadband, what is the outlook for both subs and ARPU? And the fourth question, any update on the potential spectrum auction timing and pricing? For the first question, I would like to invite Pa Antony to provide some clarity on that. Antony Susilo: Okay. Thank you Piyush. On the first item regarding the normalized EBITDA, why the growth is only 1%, while the revenue is up by 4%. I think as explained by Pa Rajeev earlier that in Q4, we did a lot of campaign on the 5G, anticipating the 5G launch. So we are already entered 33 cities in Q4 2025. So because of that, then there is an additional cost increase from the sales marketing activities. So I think that will answer the number one. On the second question maybe Pa Oses. David Oses: So the outlook for mobile ARPU in 2026, if you take a look to the last couple of quarters, you can see that our ARPU has increased significantly. Where did the ARPU growth come from? Two areas. One is because our subscribers use more, so more gigabytes per subscriber. And number two, because our yield or price increased. So ARPU increases because people use more and because what they use, it's more expensive. If you have seen our yield in the last 2 quarters have grown double digit. So at almost 10%, right? So we have had a significant increase in the price per gigabyte or the revenue per gigabyte, very, very healthy. I would say that in quarter 1, you can expect more of the same. So our bet for good quality subscribers is there. So I guess that we will see ARPUs moving in the correct direction, up, with prices also moving in the correct direction and traffic coming as well. So I would say that we could expect ARPUs to keep moving in the same direction. Christopher Kusumowidagdo: Yes, David. For the FPD, I would like to invite Pa Feiruz to provide some color on the [ FPD ] Feiruz Ikhwan: Sure, Piyush. Thanks for the question. For ARPU, typically, we've not disclosed in terms of the fixed broadband ARPU. But I guess, let me allow to give you a bit of color in terms of the outlook, right, for the subs and ARPU. I think you have seen the market and industry have seen some moderation in the ARPU. But I think suffice to say that any decline in ARPU that we see are much more moderated compared to the res of the market. I think that clearly reflects also our discipline, right, in pricing and focusing on higher quality acquisitions. I think from the subscribers, there's a lot more demand, right? I think the broadband demand remains structurally strong, right? In Indonesia, we see a huge opportunity for growth, as data consumption increases, in particular, in the home. Having said that, I think we need to be responsible, right, in terms of capturing the growth and targeting the right segments by offering the right products and without, shall I say, destroying right, further value. Antony Susilo: Thank you, Pa Feiruz. Rajeev Sethi: Yes. On the last one, on the spectrum, Piyush, on the timing, we believe this should be completed and awarded by H1 of this year, the first half. Pricing, I would not want to speculate. We just hope that the pricing is rationale, which enables us to offer better services to the customers. Christopher Kusumowidagdo: I'll open the line for Piyush. Piyush Choudhary: Just 2 follow-ups. Firstly, which spectrum band are you using for 5G? And are you deploying or SA or NSA? And secondly, on your kind of subscriber base of 73 million, how much is the 5G device penetration at the moment? Rajeev Sethi: Yes. So currently, we are using NSA and the spectrum which we are using is [ 2,300 ]. And the device penetration, David, would you want to? David Oses: Yes, device penetration in the cities that we are launching in the cities, the 33 cities that we are already up and running. We can say that the device penetration is around 20% in the cities in our own customer base, could be close to that number as well. I would like to underline in any case that even though the device penetration today in those cities, of course, in more rural areas will be lower in the cities that we are launching, it's around 20%. But the most important is that the replacement of the devices, the new devices that are coming are in a bigger percentage, 5G devices. Christopher Kusumowidagdo: Next question from [ Sabrina ] from [ Prime Securitas ]. Three questions. First one, should we expect accelerated depreciation to continue only through first half 2026, in line with the completion of our integration? And it would be helpful if you could provide an indication of the magnitude. Question number two, noted a significant increase in salaries and allowance expenses, could you elaborate on the drivers? Is this related to costs associated with employee optimization? And should we expect this level to persist on normalized post first half of 2026 once integration is completed? Third question is, does your EBITDA guidance incorporates the potential costs related to this year's spectrum offsets? For all the 3 questions, I would like to invite Pa Antony to provide some color on that. Antony Susilo: Okay. So on the first question on the accelerated depreciation. I think we mentioned that our full integration will be completed by 2 years. So I understand that from Pa Rajeev presentation, as we mentioned, the MOCN network already happens like some 70% already. But then in terms of the accelerated depreciation, I think will not be witnessed by first half of 2026, it will still continue until end of 2026. But I believe the Q4 2026 hopefully, will be already showing a lower rate starting Q3, Q4 because the heavy one in the first half in mid, yes, correct, maybe Q3 also correct. But then Q4 will be tapering off to the last one. Yes. That's on the first one. The second one, in terms of the significant increase in salary and low expenses in Q4. Yes, it is mostly in the Q4, there is risk cost interest associated to the employee optimizations. Yes, there is some program that the management leads to the company that -- because we hear from the employees that some of the employees know that they want to make some -- they want the management to make some programs to offer them resignation program. So it is based on mutual scheme program. And then some of the employees took that program. Because of that, then we incur quite a number of operating expenses in terms of personal expenses. So these things only happened in December, this mature scheme program. Next year, I think it will be already -- will be very, very minimal, I would say. That we still see that there is some very things that we can optimize, but it will be minimal. The biggest chunk already happens in 2025 -- December 2025. So I think that's to answer number two. And number three, does your EBITDA guidance incorporate the potential cost spectrum? Today, this EBITDA guidance is before the spectrum auction. Because at this moment, we don't know how much is the spectrum piece that we will be opened by the -- or will be finalized by the government at this moment. So we -- this EBITDA guidance is still outside or exclude the spectrum auction. Christopher Kusumowidagdo: Now please open the line for [ Sabisa ] if you have any follow-up questions. Unknown Analyst: Maybe just one follow-up questions, but just not related to my questions earlier. I just want to know about the ARPU momentum because we track like in January, I think there has been no bonus quotas being offered in January. So are we seeing this trend to continue in February as well as March? Is this part of the pricing strategy to lift up the data yield going forward? Or as we know that the festive season is approaching soon, right? So are you guys planning to increase some bonus quota. And therefore, we should anticipate like there could be some pressure in the value for first Q? David Oses: Actually, no. So as you say, the closer the festive period, the better the moment to monetize. Let me put it this way. So independent of that specific seasonality, I think our strategy is clear, we want high value customers and our strategy is going to be to try to avoid as much as possible this previous or be at least very conscious of the price per kilowatt that we are charging. In that sense, again, you can see that in the last 2 quarters, we can -- we have been able to increase the revenue per gigabyte double-digit, 10%. So I think that shows very clearly that we are very serious on our strategy of repairing the market, number one, and going after the high-quality subscribers. So this is our strategy, and this is how we'll follow. Christopher Kusumowidagdo: Do you have a follow-up question? Unknown Analyst: No further question from me. Christopher Kusumowidagdo: Let's move on to the next question from in Safari from [indiscernible]. Now that XLSMART has exited its position in Mora, how will the company navigate its future focus? And second question, despite the year of a year, a dip in subscriber, will XLSMART continue to pursue its fixed mobile strategy? Or will you be focused primarily on your core mobile telco business. I would like to invite, Mr. Rajeev to provide some color. Rajeev Sethi: I think exiting Morato was decided premerger that the principal shareholders investments in the subsidiary companies will be monetized. It's part of that. But it doesn't fundamentally change our future, especially on the home broadband or SPP, as you call it. The focus on this continues. And as we said earlier, we would want to work with any partner who is in a position to provide us access to home passes. We are working with the biggest FLP providers in the market, fiber lease providers, and we'll continue to expand that part. The other part is whether FPB is an option for us or we'll go back to only mobile telco. I think all of us realize that more and more consumption eventually will happen inside the home. So it is super important for us as a mobile operator also to win the home market also. And that focus will continue. Towards that, we'll have both the strategies, which will be fiber at home and also FWA on 5G. And our 5G investment, as we spoke about, we are very proud about blanket 5G coverage in many cities, and we'll continue to roll that out. And all those cities will be using 5G, FWA to provide a very attractive alternative option for the customers to enjoy a fiber-like WiFi experience at home. So short answer is the focus will continue. In fact, it will be even more stronger as we move forward. Christopher Kusumowidagdo: Thanks, Pa Rajeev. Now I'd like to open the line for Mr. [indiscernible] ask follow-up questions, please, you have. Since no follow-up questions, I think we can move on to the next question. The next question is coming from [ Brian ] from [ UOBKN ]. How much more integration costs should we expect in 2026? Could you provide some color on when this cost will be booked? Also there is regarding accurate depreciation, impartment costs and sell costs, could you provide what page you'll see this group? I would like now to invite Mr. Antony to provide the color. Antony Susilo: Okay. The integration costs for 2026, we expect the amount will be less than what much less than 2025. If you look at the 2025 figure, it's IDR 2.4 trillion. But then I think I believe in the 2026, it would be less than IDR 1 trillion. That's on the integration costs. And then the question regarding the accelerated depreciation, I think on the external depreciation, I already mentioned a little bit, but if you want -- just to give another color on the amount. The amount will be more or less around IDR 5 trillion. So in the 2025, it's around IDR 4 trillion, IDR 4.7 million, I believe, and then going up to around IDr 5 trillion, slightly higher, okay? So I think that's the answer to the question. Christopher Kusumowidagdo: Thank you, Pa Antony. Brian, any follow-up questions? Unknown Analyst: No, thank you. Christopher Kusumowidagdo: We have the question coming from Arthur Pineda from Citi. There are 2 questions. First one is where do you see the market growth levels in 2026? And number two, can you help us identify the depreciation and amortization trend for 2026? What was the annual D&A being moved from the assets that will remove based on accelerated depreciation? There are 3 questions. The third one, where do you see mobile and broadband user base into first Q 2026, do you see this reporting to growth? Or do you still see some churn? I think we can start question 1, on the market growth level. I would like to invite David. David Oses: Well, actually, we don't usually give the guidance on how much the market can increase or not. That's why when we gave the guidance, we see in line with the market, right? And we don't give a specific number. Now if you ask me, I think we have -- I think we have the correct momentum to believe that the market can grow healthily this year unless, again, something strange happens, right? So I think we are in a correct momentum to have a good year. Again, I don't want to say this too much because if you asked me 2 years ago, in February, I will have said the same, and then if you don't have that, right? But again, I am not able to give you a number. That's why when we give the guidance, we say in line with the market. Christopher Kusumowidagdo: Thank you, David. Second question, maybe Pa Antony, can you give more color on the D&A? Antony Susilo: On the D&A for 2026, I think as I mentioned earlier, the D&A consist of accelerated depreciation as well as the additional of the -- because we are keep expanding, and we are expanding around 7,000 around 8,000 sites in 2026. So with that, what we call the actions, the movement. So we are expecting that the D&A for 2026 will increase maybe around 10%, 15% from 2025 figures. Yes, because accelerated depreciation still continue at IDR 5 trillion. And then the normal depreciation, of course, will -- because of the additional of new sites, then we have to start recognizing the depreciation. Christopher Kusumowidagdo: Okay. That's it. -- thank you, Antony. And the third question, where do you see on mobile and broadband users in 2026? I think David already give some color on that. But Pa Feiruz, do you want to take some colors on your broadband? Feiruz Ikhwan: Sure. I think typically, we don't provide guidance for the quarter. What we see is I think the market remains competitive. Having said that, we are very conscious and deliberate in trying to acquire quality subscribers, and that's the focus for value rather than just a short-term volume growth, right? Volume growth. Having said that, we've seen signs of stabilization, but it's still very early days. We still continue to improve and focus on getting the right customers as well as improving the value of our existing base. Christopher Kusumowidagdo: Thank you, Pa Feiruz. Arthur, do you have any follow-up questions for us? Arthur Pineda: Yes, please. Just a clarification with regard to the merger expenses being booked for 2026. You mentioned IDR 1 trillion earlier. Is that just for the OpEx side? And should we expect another IDR 5 trillion for the asset impairments? Is that how we should look at this? Antony Susilo: You're referring to the IDR 1 trillion integration cost here, Arthur. Is that correct? Arthur Pineda: Yes. Because in the earlier question, I think you responded with around IDR 1 trillion integration cost. Is that just for OpEx and should we assume an additional IDR 5 trillion for asset accelerated depreciation. Is that how we should look at it? Antony Susilo: Yes. So in 2026, yes, there will be a onetime cost again, which is integration costs, which is hopefully less than IDR 1 trillion. That one is related to network as well as to people. And then for the second one is the accelerated depreciation, is around IDR 5 trillion, which is noncash items. It's another onetime cost again that we have to incur this year. Christopher Kusumowidagdo: Now let's move on to the next question. Henry Tedja, from PT Mandiri Sekuritas. The first one, can we check about the integration cost outlook for this year, which I believe Pa Antony has already answered earlier. And second person regarding the effort to get the quality subscriber base, can we check better the subspace decline trend will start to stop or slowdown post 4Q 2025? Pa David to provide some color on the [indiscernible]. David Oses: Yes. So the subscriber base -- we usually, internally, we divide the subscribers in subscribers of less than 3 months, that have been with us less than 3 months and subscribers that have been with us more than 3 months. Those that have been with us long tenure, we call them high quality, right, usually a high ARPU, high quality. Most of the subscribers that you see that are disappearing are those that are less than 3 months. Who are those subscribers? Those subscribers are buying again and again, a SIM card, use and throw, use and throw. So probably, we were counting them more than once. So it's not one subscriber, maybe it was counting like 5. That's number one. Number 2 type, it's a very price-sensitive person who is willing to keep changing the SIM card because of a few gigabytes or a few rupia up and down. So again, our strategy was, okay, we are not going to entertain those subscribers. There are other operators where they can go and keep being entertained, but not us. So we will protect our network in order to provide the best customer experience for the good quality subscribers. We did -- we started cleaning back in quarter 3, quarter 4 and in quarter 1, I believe that we will still have some correction of these subscribers of this low-end, low-ARPU subscribers. So yes, in any case, again, our objective is to increase the amount of subscribers of good quality subscribers. That's our main topic rather than the overall or the total amounts that we have. So that's a little bit of strategy. So probably in quarter 1, you will see the total amount declining. But hopefully, internally, we will see the good quality subscribers keep increasing as we have seen in the last few months. Christopher Kusumowidagdo: Thanks, Pa David. Henry, do you have a follow-up question to us? Henry Tedja: Perhaps 2 questions -- 2 additional questions. First one, regarding the employee optimization costs. Would you mind to share the exact amount of the cost for this employee optimization. The second question, perhaps regarding the 5G. I mean like we are discussing about the 5G earlier in the presentation. And then in terms of how big we spend in terms of the marketing expenses and also investment as well for the 5G. So I'm just curious, what will be the factor impact for the SRS in terms of the productivity and ARPU for the subscribers in here? Rajeev Sethi: Yes. I think on the first one, you spoke about the for people cost because of the integration, separation of people. Given the sensitivity, it's people involved, we would not want to get into too much details there. But what we can confirm is most of the cost on account of card has been incurred in 2025. There will be a small marginal cost as we move towards 2026, possibly in the first half, and it will be much smaller than what we've incurred in last year. And I think there are a couple of other questions, which is about the 5G cost, especially on the marketing, communication, sales part. Yes, quarter 4 was higher because we were just launching 5G. And we had saved for that cost during the course of the year because we knew about the impending 5-year launch. On the overall sales and marketing costs, there would be some quarters in quarter in 2026, where we are spending more in some quarters less, depending on the rollout of 5G and the seasonality, as you would appreciate. What I would encourage all of you is to take a look at an average cost for 2026 on sales and marketing, which will be very similar to 2025. Obviously, the focus will shift more and more on 5G, especially in the cities where we are launching 5G. But the overall percentage will remain percentage to revenue will remain the same. In terms of the ARPU increase, I think David can add a bit more color on this. But as we said, we believe 5G should be for everyone, and that's what we are doing. So most of the ARPU increase, we believe, would be consumption-led because people will tend to consume more because of better 5G experience. And there are certain specific plans which we are launching on 5G, which will also help us generate more revenue. But David, in case you want to get into more details. David Oses: No. As Pa Rajeev mentioned, right, so our strategy of monetization is passive monetization in the sense that anyone with a 5G device access the 5G network in that way, their customer experience will be much better and hopefully, the usage. And as a consequence, the ARPU will be higher. That's one, plus we have specific products, very attractive products at higher prices, that will help us increase the ARPU. What we have seen in the very first month, 2 months that we have been already with the 5G specifically that. So we see that the 5G devices in 5G areas, their ARPU is significantly higher than other devices in other areas, be 5G devices in other areas or course for devices in other areas. So again, it's exciting for us to see that. And now it's more about implementing this properly and continue the expansion of the 5G in more areas. Christopher Kusumowidagdo: Let's move on to the next question from Aurellia from BNI. There are 2 questions. The first one on the sales and marketing expense. Given the ongoing 5G expansion, do you expect 2026 outlook to follow the 4Q trend? This one likely -- Unknown Executive: I already answered that. Christopher Kusumowidagdo: And then the second question is on ARPU, I think this one is already answered by Pa Feiruz. I think there is a question from Sachin. Unfortunately, he is not able to type, I would like now to unmute this line, Sachin from UBS. Can you please ask your question? Since Sachin is not responding, we will take your questions off-line after this call. Seems like that it, that's all the questions that we have for today's conference call. Thank you for participating. That concludes today's conference call, and thank you once again for everybody to participate. If you have any further questions, please reach out to investor relations. Stay safe and happy, and we look forward to speaking to you next quarter. Thank you.
Coimbatore Venkatakrishnan: Good morning. Thank you for joining us today. So thank you. We have today the Barclays Full year 2025 results, our progress and our target update. Today, we will outline targets for the next 3 years to deliver an even better run more strongly performing and a higher returning Barclays. This builds on the improvements which we have delivered in the last 2 years of our plan and which we shared with you in February of 2024. But first, let us take stock of the progress so far, starting with our 2025 results. There will be an opportunity for those in the room to ask questions at the very end of our presentation. So turning now to Slide 4. Barclays achieved all financial targets and guidance in 2025. We generated a return on tangible equity of 11.3%. Our top line grew by 9% year-on-year to GBP 29.1 billion, and we achieved our NII guidance for the group and for Barclays U.K. Our cost/income ratio once again improved year-on-year to 61%. And the group loan loss rate of 52 basis points was comfortably within the 50 basis points to 60 basis points through the cycle guidance. We have also announced today GBP 3.7 billion of shareholder distributions for 2025. This is up from GBP 3 billion in 2024. This includes dividends of GBP 1.2 billion and share buybacks of GBP 2.5 billion, and that includes a GBP 1 billion tranche, which we announced today. And importantly, we remain well capitalized, ending the year at the top end of our 13% to 14% CET1 range after accounting for today's buyback. We are delivering these improvements as we said we would. In 2025, we simplified the bank further, achieving GBP 700 million of gross efficiency savings versus the GBP 500 million target, which we had for the year. We divested the remaining nonstrategic businesses, and we announced a long-term partnership for payment acceptance. Operational improvements across the group are creating a better Barclays, driving stronger financial performance. All our divisions generated double-digit RoTE in 2025, and this was an improvement on the prior year. In the Investment Bank, greater capital productivity and cost efficiency contributed to a 2.1 percentage point increase in RoTE to 10.6%. And the U.S. Consumer Bank RoTE increased 1.9 percentage points to 11%. This reflects additional scale and operational progress to improve the business mix to improve pricing and improve efficiency. Finally, we are continuing to rebalance the group towards the 3 highest returning U.K. businesses. We have now delivered GBP 20 billion of the GBP 30 billion RWA growth, which we targeted for the end of 2026, and this includes GBP 7 billion in 2025. So we see good momentum with 6 consecutive quarters of organic loan growth in Barclays U.K. and 5 such quarters in the U.K. Corporate Bank. Progress in each of these 3 areas is delivering structurally higher and more consistent group returns. It has also increased my confidence in and my expectations for the group. Stronger and more consistent returns mean that we are better equipped to serve our clients and that we have more capacity to invest in the business. All of this is providing a solid foundation to create more value for our shareholders in the next phase of our plan through to 2028 and beyond. We will return to this later. Our progress in the last 2 years reflects the consistently excellent work of our colleagues, over 90,000 of them. They implement our strategy every day and are core to our success. So I'm therefore pleased to announce today a grant of approximately GBP 500 of shares to the vast majority of our colleagues, essentially all full-time employees outside of managing directors. This is the second year of such a reward, and it is more than just a reward for past effort. We are aligning the actions of our colleagues with the ultimate outcome of their efforts, which is the change in our share price. And I believe this equity ownership is really important for all our colleagues. With that, over to you, Anna. Angela Cross: Thank you, Venkat, and good morning, everyone. Slide 6 summarizes the financial highlights for the fourth quarter and full year. Before going into the detail, I would remind you that a weaker U.S. dollar reduced our reported income, costs and impairments. Return on tangible equity increased from 10.5% to 11.3% year-on-year, in line with guidance. Pre-provision profit increased by 13% as income growth, coupled with efficiency actions supported 3% positive draws. Profit before tax increased 13% to GBP 9.1 billion and earnings per share by 22% to 43.8p. My focus, as ever, is on operational progress, which strengthened throughout the year. Income increased by 9% year-on-year to GBP 29.1 billion. We grew stable income streams by 9%, supported by 8% growth in retail and corporate businesses and 17% growth in financing within markets. The strength and predictability of this growth means we are upgrading our expected group income to circa GBP 31 billion in '26 versus circa GBP 30 billion previously. Elsewhere in the Investment Bank, intermediation revenues increased by 13% as we helped clients navigate a volatile environment whilst our IB fees were stable. Group net interest income increased for the fourth consecutive year and by 13% year-on-year to GBP 12.8 billion, reflecting 3 factors: First, stable deposits across the group supported further significant growth of structural hedge income, which I will discuss shortly. Second, lending grew across all divisions, and we exited the year with strong momentum. And third, operational progress in the U.S. Consumer Bank drove stronger NII and NIM. Turning to the structural hedge. As a reminder, the hedge is designed to reduce income volatility and manage interest rate risk. We had assumed that we reinvest 90% of maturing hedges, but we fully reinvested assets throughout '25. We also reinvested hedges at higher rates than planned. As a result, hedge income increased GBP 1.2 billion to GBP 5.9 billion, contributing 46% of group NII, excluding IB and head office. The increase that I -- in the average hedge duration that I called out last quarter from 3 to 3.5 years further supports the predictability of hedge income, which I will return to later. Now moving on to costs. We delivered GBP 700 million of gross efficiency savings in '25 and GBP 1.7 billion cumulatively towards the GBP 2 billion target by '26. These savings have contributed to 10% positive jaws since '23. The group cost-to-income ratio decreased again to 61%, in line with guidance despite several cost headwinds in the year. Total costs increased by GBP 1 billion to GBP 17.7 billion, with nearly half of this coming from the addition of Tesco Bank. And we chose to accelerate some discretionary investments, ending the year with structural cost actions around the top of the GBP 200 million to GBP 300 million guided range. The '25 group cost base also included some items that we do not expect to repeat. First, the GBP 235 million of finance provision in Q3 without which we would have ended the year at 60%. and second, circa GBP 50 million of one-off costs in Q4, including a VAT expense in Barclays U.K. Turning now to impairment. The full year impairment charge of GBP 2.3 billion equated to a loan loss rate of 52 basis points, in line with the through-the-cycle guidance of 50 to 60 basis points. The credit picture remains benign with low and stable consumer delinquencies and wholesale loan loss rates below the through-the-cycle range. The Q4 loan loss rate of 48 basis points fell versus Q3, reflecting lower single name charges in the Investment Bank. Calibration of our impairment models to better capture consumer behavior resulted in lower loan losses in Barclays U.K. throughout '25, including in Q4. With these now largely complete, you should expect the Barclays U.K. loan loss rate to be closer to 30 basis points from Q1. The U.S. Consumer Bank loan loss rate was higher in the quarter as expected, shown on the next slide. 30- and 90-day delinquencies were seasonally higher versus Q3 and broadly stable year-on-year, and U.S. consumer behavior remains resilient as we show on Slide 95 in the appendix. The Q4 impairment charge increased GBP 52 million quarter-on-quarter, reflecting higher balances. As a reminder, the Q1 loan loss rate tends to remain elevated following holiday-related spend in Q4. Turning now to U.K. lending. We have now deployed GBP 20 billion of business growth RWAs in the U.K., including GBP 13 billion of organic growth, and we exited '25 with strong momentum. Mortgage balances have grown for 6 quarters, and we delivered GBP 3.1 billion of net lending in Q4. Mortgage applications in '25 were higher than in any prior year, supported by Kensington and increased broker engagement following improvements to the platform in Q3. We also acquired 1.4 million new credit card customers in the year, up from 1.1 million in '24. As we show in our operational data pack on Slide 79, this included 300,000 new Tesco Bank customers. Supported by this, credit card balances grew to the highest level since 2017. Core business banking lending has grown for 4 consecutive quarters, and we expect overall balances to grow in half 2 as headwinds from the runoff portfolio diminish. U.K. Corporate Bank lending grew 18% year-on-year and market share increased 100 basis points in this period to 9.6%. In each case, we have further to go, supporting our plan to deploy GBP 30 billion of RWAs by '26 and onwards from there. Turning to Barclays U.K. in more detail. You can see financial highlights on Slide 15, but I will talk to Slide 16. RoTE was 23.8% in the quarter and 20.7% for the year. NII of GBP 2 billion increased 11% year-on-year and 3% quarter-on-quarter. On a full year basis, NII of GBP 7.7 billion was in line with guidance, and we expect an increase to between GBP 8.1 billion and GBP 8.3 billion in '26. The hedge is expected to drive around GBP 550 million of additional NII. As I'll cover in more detail later, this is a smaller allocation of the total hedge income growth versus '25 with more growth now allocated elsewhere in the group. We expect a circa GBP 100 million product margin impact in our mortgage book, driven by maturities of higher-margin loans written during the stamp duty holiday in early '21. This will be weighted to half 1. We also expect lending growth to continue throughout the year. As a planning matter, we expect this benefit to be offset by continued, but easing deposit margin compression. These effects will lower NII quarter-on-quarter in Q1 with stability and growth from Q2 and Q3. And on a year-on-year basis, we expect growth in each quarter of '26. Non-NII of GBP 247 million was broadly stable year-on-year with a full year just above GBP 1 billion. We expect a similar level in '26 with some seasonal variation. The one-off items I described earlier accounted for around half of the year-on-year increase in operating costs in Q4. These should not repeat in Q1 '26. Moving on to the Barclays U.K. balance sheet. Deposit balances increased GBP 3.1 billion versus Q3 and were broadly stable versus last year. Customers continue to seek higher-yielding products and time deposits, which both grew quarter-on-quarter. Lending grew for the sixth consecutive quarter and by 4% year-on-year, driven by mortgages and cards. Moving on to the U.K. Corporate Bank. RoTE was 19.1% in the quarter and 18.9% for the year. Q4 income grew by 18%, while costs grew by 8% as we accelerated discretionary investments. These investments support delivery of a high 40s cost/income ratio in '26 following a 4% improvement in '25 to 51%. Q4 NII growth of 22% reflected stronger volumes across both sides of the balance sheet. Lending grew 18% year-on-year, reflecting improvements in the lending process. Deposits grew by 7%, resulting in a 34% loan-to-deposit ratio, up 3 percentage points. Turning now to Private Bank and Wealth Management. RoTE was 26.3% for the year, on track for the greater than 25% target for '26. Q4 RoTE was impacted by higher costs from an acceleration of investments and a historic litigation charge. This was small in the context of the group, but reduced this division's Q4 RoTE meaningfully to 12.6%. Client assets and liabilities grew 9% year-on-year and assets under management grew 11%. More than half of this AUM growth came from net new assets under management of GBP 3.3 billion, including GBP 0.6 billion in Q4. This contributed to 4% quarter-on-quarter income growth, and we expect continued volume and income growth in '26. Turning now to the Investment Bank. As a reminder, our objective here is to generate higher structural returns by improving the productivity, mix and efficiency of the business. Risk-weighted assets have been stable for 4 years. Income to average RWAs has increased by 110 basis points since '23 to 6.6%. In the top right, more stable income from financing and the International Corporate Bank grew 14% and accounted for 42% of IB income, up from 32% in '22. Moving to the bottom left, Markets income has grown year-on-year for 7 consecutive quarters as we deepen client relationships and investment banking income has grown for 5 of the past 7 quarters. Together with 7 consecutive quarters of positive operating jaws, this has improved the financial performance of the division. The Investment Bank delivered a full year RoTE of 10.6% in '25, up 210 basis points. Q4 RoTE was seasonally low at 4%, up modestly year-on-year. Income grew 7%, which we show in more detail on Slide 25, and costs were flat. In U.S. dollars, markets income was up 17% year-on-year, delivering around 2/3 of the Investment Bank's income in the quarter. FICC and equities grew 14% and 21%, respectively. We saw particular strength in securitized products within FICC and prime and equity derivatives in equities. Financing income grew 20% year-on-year and for the sixth consecutive quarter, with prime balances up 30% year-on-year, including strong growth in Asia. In Investment Banking, income was broadly stable. The U.S. government shutdown weighed on ECM activity with the majority of Q4 IPOs pushed into half 1 '26. This was offset by a 7% increase in DCM fees and an 18% increase in advisory fees. The M&A pipeline is strong, and our share of announced fees and volumes due to complete in '26, has increased year-on-year. International Corporate Bank income was broadly stable, including 5% growth in transaction banking income. Turning now to the U.S. Consumer Bank. Operational progress has continued. Net receivables grew 5% quarter-on-quarter and 10% year-on-year, around half of which related to the addition of the General Motors balances at the end of Q3. Our partnership cards business has grown faster than the overall market in 16 of the last 20 quarters. NIM improved slightly versus Q3 to 11.6%, supported by the repricing that we undertook in '24 and portfolio mix. Retail deposits grew 5% quarter-on-quarter and 20% year-on-year, which improved the funding mix. And we continue to drive greater digital interactions, supporting a 41% cost/income ratio in the quarter. We expect this progress to continue, reflecting sustainable improvements in returns. Q4 RoTE of 15.8% was supported by a one-off benefit, which I'll come to shortly, adjusting for which RoTE was 12.5%. And the full year RoTE increased 190 basis points to 11%. In U.S. dollars, Q4 income grew by 28% year-on-year, whilst costs were up 4%. NII increased 19%, reflecting stronger volumes and margins. Following a review of customer behavior, we have updated our assumptions to reflect more transacting versus revolving balances and longer duration customer relationships. This has allowed us to more precisely allocate partner rewards, which has 2 accounting effects. First, a one-off benefit largely in non-NII of circa GBP 45 million in Q4. Second, an ongoing change in income mix, reducing non-NII by circa GBP 50 million from Q1, offset by a broadly equivalent increase in NII. Q1 NIM will be around 12.5% with total income of circa GBP 950 million. There are considerable inorganic changes in the business in '26. So to help with modeling, we have included some details in Slide 96 in the appendix. Following the sale of the AA portfolio in Q2, we expect NIM to rise to nearly 14% in half 2, supporting a circa 12% RoTE in '26 before the AA gain on sale. We ended the quarter with a CET1 ratio of 14.3%. This included 33 basis points of capital generation from profits. Given this strong capital position, we have announced a GBP 1 billion share buyback and a GBP 0.8 billion final dividend equivalent to 5.6p per share. Looking ahead, we continue to expect between GBP 19 billion and GBP 26 billion of regulatory RWA inflation. Within this, the circa GBP 16 billion effect of IRB migration in the U.S. Consumer Bank remains our best estimate. Around GBP 5 billion of that will now happen with the implementation of Basel 3.1 on 1 January '27 with the remainder anticipated that year. We expect a reduction in the group Pillar 2A requirement following each of these changes. We have been operating around the top of our 13% to 14% CET1 range, with the returns and distributions in the plan announced today based on that level. Post implementation, we will consider where we operate across the range. More broadly, in the U.K., we welcome the constructive tone in the recent FPC review of capital requirements and we'll continue to engage closely with the Bank of England. Turning now to the RWA walk. Investment Bank RWAs decreased due to seasonality and accounted for 55% of group RWAs at the end of the year. The reduction in Barclays U.K. reflected a securitization in Q4 to manage risk on the balance sheet. As usual, a word on our overall liquidity and funding. We have a strong and diverse funding base, including a 73% LDR and an NSFR of 135%. And we are highly liquid across currencies with an LCR of 170%. These measures reflect purposeful and prudent management of our balance sheet, delivering resilience and thus ensuring we have the capacity to support customers in a range of economic environments. TNAV per share increased 17p in the quarter and 52p year-on-year to 409p. Attributable profit added 9p and 43p per share, respectively. Movements in the cash flow hedge reserve added 5p per share in the quarter, and we expect this to largely unwind by the end of '26, adding around 9p to TNAV. To summarize, we are pleased with the group's performance in the second year of our 3-year plan, having achieved all our targets and guidance. We now expect group income of GBP 31 billion in '26, GBP 1 billion more than originally expected. And continued operational progress means we are more confident in delivering target RoTE greater than 12% in '26. Venkat will now outline the next 3 years of the plan before I take you through the '28 financial targets in more detail. Venkat, over to you. Coimbatore Venkatakrishnan: Thank you again, Anna, and welcome back. Barclays is now on a journey to sustainably higher financial returns. I think of this journey as taking place in 4 stages. First, from 2021 to '23, we stabilized the bank's financial profile, exercising capital discipline in the Investment Bank while starting to build out our areas of strength. Second, since the launch of our simpler, better, more balanced strategy in February '24, we've positioned the bank for income growth and for higher returns. We have simplified our processes to drive efficiency, and we exited nonstrategic businesses. We've invested in digital capabilities to create a better customer experience. And we've grown our highest returning U.K. businesses to create a more balanced Barclays with more stable returns. Today, we set out the third stage of this plan all the way to the fourth. In this third stage, we will build on the foundations we have created so far to increase returns for the bank and to make them resilient across a range of environments. Year-by-year, we are improving the profit signature of the bank. Stronger financial results create the capacity to invest to secure sustainably higher returns. This is the fourth stage, and it extends beyond 2028. Two years ago, we presented a vision anchored in measured ambition and disciplined delivery. I said then that we were building a potent set of businesses, which were strong in themselves and mutually reinforcing. Our vision was harnessed to our home U.K. market, where we aim to deepen our presence even as we engaged with the world from London. Our vision today is one of accelerating ambition, still anchored in disciplined delivery. We will forge segment-leading operationally efficient businesses that are primed to support growth, and we will drive structurally deeper client relationships by connecting these businesses. We have more capacity to invest. We build upon a strong track record of delivery. Our drive is greater and our commitment is unwavering. We will increase investments twofold to drive deep technological transformation and modernization of the bank. This includes embedding AI at scale across the group to deliver better products and services. And importantly, we will pursue our ambition while generating higher returns in each of the next 3 years. In 2028, we are targeting a return on tangible equity of greater than 14%, up from greater than 12% for '26. Stronger capital generation will enable greater than GBP 15 billion of distributions across the period of '26 to '28. And this provides capacity for additional investment and growth beyond the levels set out in the plan today. And as we have done, we will exert considerable discipline over any investment given the importance, which we place on shareholder distributions. In 2026, we expect the Investment Bank to represent a mid-50s percent of group RWAs. This is above the initial target, and it reflects the postponement of previously anticipated regulatory changes. We expect this proportion to fall to about 50% by 2028 as we continue to maintain broadly stable RWAs in the Investment Bank and deploy more capital in our consumer and corporate businesses. We will continue to be guided by 3 goals, and these are to make Barclays simpler, to run it in a better way and to make it more balanced. Our journey began by creating a simpler business structure organized and operating in a simpler way. It continued with the simplification of our processes and customer journeys to improve the quality of our service and to drive efficiency. In the next 3 years, we will be deploying digital capabilities and AI to further this progress. To harness these technologies successfully, we must standardize our data, we must modernize our approaches, and we must harmonize systems and processes. Delivering in this manner will not only enable greater productivity, it will improve our operational resilience, our reliability and security. And importantly, and I'll come back to this, it will create a fulfilling working environment for our colleagues. For some time now, technology has revolved around our businesses. Now our businesses are revolving around technology. Customer interactions in the U.S. Consumer Bank are almost entirely digital today. Elsewhere in the group, we've made significant progress to build easy-to-use customer-facing platforms, and we'll continue on that journey. By 2028, we will deliver a simpler but more sophisticated suite of products and AI-enabled services. So how are we doing this? Our transformation is built on 3 pillars: cloud computing, data platforms and AI adoption. To date, we have made the most progress in employing cloud computing built on scalable and robust infrastructure. We are one of the leading adopters in this sector with 89% of applications on the cloud versus 75% 2 years ago. And this platform provides greater stability and faster product deployment. We are also migrating core data onto a standardized platform. This helps us to provide personalized services for our customers and to implement models more rapidly. And by building on these modular foundations, we can accelerate the development, testing and deployment of code and models. So with cloud infrastructure and data platforms in place, we are now able to deploy AI at scale. Across the group, we have more than 250 AI tools and models in use. And by 2028, we expect more than half of our customer journeys in the U.S. Consumer Bank to be digitally personalized. Technology is creating a more stimulating working environment for our colleagues who are at the heart of these developments. And let me share some examples. In the past 2 years, we've held a number of AI hackathons, where employees prototype quick solutions to existing business problems. Every time I visit a hackathon, including one just 2 weeks ago, I'm overwhelmed by the seemingly limitless ambition and inventiveness of our colleagues. And their winning ideas translate into actual projects and actual products. This includes an AI chatbot that we recently launched for FX trading. We call it Box bot. And this tool delivers FX quotes 75% faster than the previous approach. It is driving better execution for our traders and swifter service for our clients. In the U.S. Consumer Bank, we are launching a conversational AI tool in our app. This accelerates customer query responses by 95% and enables more personalized service. We've also built the infrastructure and provided colleagues with tools to drive greater efficiency and productivity. In doing so, we enable them to perform in the economy of the future. The rollout of GitLab to 19,000 developers means we are now able to implement code 15% faster. And we are one of the largest users of Microsoft Copilot in the financial services industry with around 90% of our colleagues on the system. In 2025 alone, this saved our teams more than 1 million hours of work. Insofar, I've spoken about improvements in the way we engage with clients and how they engage with us. I want Barclays to be renowned for operational performance, excellent operational performance. And to me, operational performance and financial success are 2 sides of the same coin. With 3/4 of our colleagues engaged in operating the bank, simpler operations can improve efficiency materially. So let me just highlight 2 examples to bring this to life. In finance, Anna's area, we are simplifying our accounting platforms, moving from 11 to 3 subledgers within the trading book. And this will lead to fewer manual reconciliations, faster reporting and more efficient data analysis. On the risk side, close to my own heart, our wholesale credit risk systems remain overly manual. And so we are rebuilding the architecture and using AI to aggregate and analyze data and generate reports. This supports fast and accurate credit decisions. To summarize, the simpler Barclays is both well organized and well run for colleagues and customers alike. And at the beating heart of this is a standardized infrastructure supporting harmonized processes and enabling modern approaches to product development and delivery. And it's powered and curated by our talented and inventive colleagues. Moving to better. Having a simpler business means we can focus on delivering better service for our customers, and this results in improved returns for our shareholders. In this next stage, we are building a better bank by forging segment-leading businesses and deepening client relationships. To me, segment leadership is built on 2 pillars: best-in-class offerings and deep client relationships. And we begin from a strong position. We are the largest non-U.S. investment bank with deep expertise in fixed income and financing markets. We are a leading U.K. retail bank with an established and growing private bank and wealth management business. And our U.S. Consumer Bank is a highly sought-after partner for customers and corporate clients alike. The second pillar of segment leadership is combining the strengths of our products in each business and our capabilities across businesses. In doing so, we create deeper client relationships. And there is significant potential to increase connections between Barclays U.K. and the Private Bank and Wealth Management through our premier proposition. The acquisition of Best Egg in the U.S. allows us to bring market-leading digital lending capabilities to our credit card partners. And as the only U.K. bank -- U.K. investment bank, we bring a unique global reach and sophisticated capabilities to our U.K. corporate clients. By investing to strengthen these connections, we make each business individually stronger. And by forging connections across the group, we will unlock sources, new sources of fee growth beyond 2028. So let me share how I think about this, and I'll start with the Investment Bank. As I said, Barclays is the leading non-U.S. investment bank. We are U.K. domiciled, but we actually look more American than European with 50% to 60% of our revenues coming in the U.S. The Investment Bank has built a diverse and stable income mix. Two years ago, when I stood in front of you, I said that improving the investment bank was the hardest part of our plan. So what have we done and how have we done it? At that time, we had asked our business to do 4 things: First, to leverage further the traditional areas of strength. And for a long time, fixed income has been the calling card of Barclays. This is true in trading, financing, debt capital markets. And in markets, we identified 3 focused businesses where we plan to grow income by gaining share, European rates, equity derivatives and securitized products. We've made good progress, gaining share by about 150 basis points between 2023 and the first half of 2025. We have also leveraged our historical strength in fixed income financing to grow in prime. My second task was to drive greater capital productivity. The business has consistently increased return on RWAs. Now we will build on those successes. The third request was to increase fee share. The bankers who we hired in 2023 and 2024 have become more productive. Early results are good, but there is more to do. And so we will continue to invest and realize the full benefits of this investment over time. The final ask was to deepen relationships in the International Corporate Bank. And here, we've made strong progress rolling out what we call our treasury coverage model beyond the 1,500 top clients of the bank. And in the next 3 years, we will leverage strong transaction banking capabilities from the U.K. Corporate Bank and build on existing debt capital market strengths. We will be providing a more complete service to global corporates. And in doing so, we expect the International Corporate Bank to become a larger part of the Investment Bank by 2028. And this will remain an important source of fee growth beyond 2028, and I will discuss this later. Turning to Barclays U.K. Barclays aims to be the premier bank for all U.K. customers. We have a strong customer base, including around 1.1 million, what we call mass affluent customers in Barclays U.K. Our premier proposition provides exclusive rewards and priority service for this cohort, but only 50% of eligible customers have a premier account. This provides a material opportunity to increase engagement. Investment to improve our service has raised NPS scores among premier customers, and we plan to enhance our offering further by expanding the product range and rewards. We can also support this segment's investment needs more fully, and we will achieve this by strengthening connections between Barclays U.K. and Private Bank and Wealth Management. Within Barclays U.K., we have identified 400,000 customers who could benefit from financial advice. In 2025 alone, we onboarded 65,000 customers to Barclays Direct Investing, which is the new name for our digital self-investment platform. And in 2026, we will launch premier Wealth Management to provide planning and advice to premier customers. This will be human-led, but digitally enabled, fairly priced, transparently constructed and clearly disclosed. Turning now to the U.S. Consumer Bank. Our leading digital U.S. consumer bank is delivering strong growth and customer engagement. Our focus partnership business was among the top 4 fastest-growing credit card businesses in 16 of the last 20 quarters. And since 2023, we have achieved a 12% organic growth in receivables. By driving growth and customer engagement in this way, we are retaining existing card partners and attracting new ones. Last year, we renewed partnerships with Upromise, Carnival and Wyndham Hotels, and we successfully integrated General Motors. Operational progress in the U.S. Consumer Bank is also driving higher returns for Barclays. We will continue to use our digital deposit capabilities. In fact, the launch of a tiered savings product in 2024, has enabled 34% retail deposit growth, with the cost of this funding being about 50 basis points below the funding it replaced. And in doing so, we support the broader banking needs of our card customers. The acquisition of Best Egg in the second quarter of '26 will further expand the breadth of our digital capabilities. Around 90% of Best Egg's consumer loan originations come through digital channels, including online aggregators. And Best Egg's strong capabilities and enable flexible product design to suit a range of customer needs. We will leverage these capabilities to accelerate growth, including through closer integration with our card partners. So as you can see, the U.S. Consumer Bank is more than just a cards business. I strongly believe that happy and satisfied customers are the sine qua non of any enterprise. We aim to improve customer service by investing in it deeply, making it a point of ambition and pride. And as I said earlier, operational excellence and financial success are 2 sides of the same coin. I see them as the same. In Barclays U.K., last year, we launched a new platform to improve materially the speed of more applications for more than 26,000 mortgage brokers. Digital adoption in the U.S. Consumer Bank is already higher than in any of our divisions. And as I said, we are deploying AI tools to improve personalization further and ease of use. We're also making it easier for customers to come to Barclays, including in the Private Bank and Wealth Management division. Our digital platforms are a critical part of providing a superb experience to deepen customer engagement. This year, we will relaunch the Barclays app to deliver more personalized support through digital channels. Even as we emphasize digital engagement, we recognize that customers sometimes value the quality and depth of engaging with us in person, especially with complex issues and in important life moments. So we will look to enhance and expand our branch footprint. This will enable us to tailor our services to meet the changing preferences of our customers. And in the U.S. Consumer Bank, we are leveraging our capabilities across cards, deposits and loans to drive even greater customer engagement. The secret sauce in our investment bank is in our synergies, which we use to deepen client relationships. We are big enough to offer multiple sophisticated products to our clients, and we have the nimbleness and the cultural drive to customize delivery and create tailored solutions. We now rank top 5 with 62 of our top 100 markets clients. This is up from 30 in '21, 49 in '23, and we are on track of our target of 70 in 2026. Our leading fixed income and prime equity financing products are integrated on a single platform. Operating in this way provides a single view of risk, both for the client and for Barclays. And of our top 100 markets clients, 97 are also financing clients. So by continuing to leverage our integrated financing platform, we do 2 things. First, we build a stronger foundation of stable income, which supports returns in a range of environments. And second, we deepen relationships and drive greater engagement across the investment bank, including in intermediation. So over the next 3 years, we will bring together our investment banking and transaction banking strengths to accelerate growth in the International Corporate Bank. We are the top sterling clearing bank. We have a comprehensive suite of products and differentiated payment strength. By replicating some of these capabilities in the U.S., we have already driven a circa 140% growth in dollar deposits since 2023. And we plan to leverage this strength in other products through simple, but complete digital channels. In Europe, we will also extend the reach of our existing product suite from 9 to 15 countries to provide a more complete client coverage. We are also creating a better client experience to support this growth. So by the end of the first quarter of this year, all U.K. corporate clients will be enabled on an enhanced platform that we call iPortal. This combines 5 previously separate platforms for corporate banking into one. And in doing so, we make it easier for clients to access a broader range of products. Across the banking system, technology is not just affecting how we do business. It's also affecting what business we do. And nowhere is this likely to be greater than in new asset types and new payment methods. We are deeply engaged in understanding the role that Digital Assets will play in meeting the future needs of our clients. We are developing our own tokenized deposits to increase the speed and simplicity of transactions. And we are testing retail and wholesale use cases, including for corporate bond issuance and investment. We have been structurally improving the profit signature of Barclays, and we're doing it in two ways. First, by changing the mix of the group by growing our highest returning U.K. businesses. And I'm pleased with our progress, having grown these businesses from 30% of group RWAs to 34% in the last 2 years. We also now expect higher returns in Barclays UK. We will continue this progress, increasing lending by more than 5% annually while generating an RoTE greater than 20% across the three U.K. businesses. Second, we said we would strengthen returns in the lower returning divisions. The US Consumer Bank RoTE has increased from 4% in 2023 to 11% in 2025 in all the ways I described to you. And we expect this to build to mid-teens while absorbing regulatory RWA headwinds. And when I stood in front of you 2 years ago, I said we would increase returns in the Investment Bank by improving productivity on a stable RWA base. And I'm very pleased with the progress to date. IB RoTE is up from 7% to 11% in 2 years, but we have more work to do. With greater visibility 1 year out to the end of '26, we expect the Investment Bank to generate circa 12% RoTE this year. And by 2028, we expect this to rise to more than 13%. Let me be very clear. We remain ambitious for this business and for the returns it should be generating. And importantly, this should be done on a sustainable basis. More broadly, the ongoing change in the mix of RWAs across the group means that we are relying less on the IB to drive improvements in group RoTE. This is exactly as it should be. In summary, the better Barclays will continue to show higher returns, and it will also be built on segment-leading businesses, which offer the best-in-client service and experience. Our third goal is to create a more balanced Barclays. We will continue to maintain capital discipline in the Investment Bank while growing parts of the retail and corporate businesses. But being balanced, being more balanced also means growing new sources of fee income beyond 2028. Two years ago, I said that every global bank had to be strong at home. We've been a U.K.-centered bank for more than 3 centuries, and it remains a great place in which to do business and from which to do business. The economy is resilient. The legal and regulatory environment is both strong and trusted. And we remain committed to investing and growing in this our home market. Our investment will focus on diversifying sources of NII beyond deposit income, and we will increase U.K. lending in two main ways. First, we will leverage strong multi-brand offerings to reach new customers. For instance, the acquisition of Kensington in 2023 enabled us to provide mortgages to more complex borrowers. And the acquisition of Tesco Bank added significant scale in unsecured and open market capabilities in personal loans. Second, investment into the business is supporting growth by simplifying and improving customer journeys, as I discussed earlier. We are encouraged by progress in the UK Corporate Bank and expect momentum in core Business Banking lending to build in 2026. Importantly, we expect to grow U.K. lending by more than 5% annually in the next 3 years, above the growth in nominal GDP. And we will do this by continuing to grow in segments where we were underrepresented and by leveraging our expanded product range and capabilities. We will invest to support growth. In the next 3 years, we plan to more than double investment to support growth and efficiency compared to the previous 3 years. We will accelerate the adoption of digital technologies and AI across the group. And investments in the next 3 years will be substantially more weighted towards new sources of fee income growth beyond 2028. Through these investments, we will continue to develop best-in-class offerings, which is the first pillar of segment leadership. As I have said, we will also build connections across our business, and this is the second pillar of segment leadership. In the U.K., new capabilities will support customers across the wealth continuum. We will leverage U.K. transaction banking strength in the International Corporate Bank. And Best Egg will enable us to originate assets directly for investors in our leading U.S. asset-backed securities business in the Investment Bank. So as we move beyond 2028, we expect more of our growth to come from fee income versus net interest income. And by building more diverse sources of revenue this way, we support more resilient returns and we position ourselves better to navigate a range of environments. So changes in the operating environment globally present both risk and opportunities for large global banks like Barclays. And we look to manage this in three ways. First, by building strong customer businesses diversified by geography, customer, product and income type. Second, by deepening client relationships across products and where appropriate, across business segments. And third, through diligent management of economic, financial, operational and technological risks. AI, for example, is a transformative opportunity, which contains risks that need to be managed. And so to harness the technology successfully, we are standardizing our data, modernizing our infrastructure and harmonizing our business processes. By approaching risk and opportunities in this way, we aim to deliver consistently for our customers with strong operational performance. And this, in turn, will generate resilient financial performance in a range of environments for our shareholders. So to bring this all together, progress in the past 2 years provides a solid foundation for the next phase of our journey, and we are confident in the path to 2028. We're moving from a period of measured ambition to one of accelerating ambition. And now I'm going to pass it over to Anna to take you through the financial details of the plan. Anna? Angela Cross: Our confidence in the plan that Venkat has outlined reflects three factors. First, we plan on realistic assumptions that put delivery in our control. Second, the plan includes a significant increase in discretionary investment to support our future growth. And in doing so, we are intentionally prioritizing sustainably higher, longer-term returns over stronger shorter-term RoTE. And third, that delivery is grounded in existing momentum. For example, target income CAGR of more than 5% compares to 7% delivered since '23, as you can see on the top row. Planned U.K. lending of more than 5% is in line with the momentum we've seen in '25. And we expect Investment Banking income to RWAs to increase by more than 40 basis points to greater than 7%, having increased 110 basis points in the last 2 years. Our planning assumption is for a low single-digit IB income CAGR, '25 to '28 versus 9% achieved so far, and I'll come back to this in more detail. The low 50s target cost-income ratio in '28 represents more of a step change. But we are confident in delivering this, underpinned by circa GBP 2 billion of gross cost efficiency savings over the next 3 years. This compares to GBP 1.7 billion achieved in the last 2. And I will also come back to this topic in more detail later. Stable income streams in the retail and corporate businesses will materially drive income growth in RoTE in the next 3 years. We expect modest cost growth, supported by planned efficiency savings and normalization of the elevated cost base in '25. This combination will deliver positive cost jaws in every year of the plan, yielding a low 50s group cost/income ratio by '28. So what drives income from here? As I said, in the past two years the group has delivered a 7% income CAGR. This mainly reflected management actions, but the environment has also been favorable, reflected in upgraded 2026 income guidance of circa GBP 31 billion. As a planning matter to '28, we do not assume similar tailwinds in rates or in Investment Banking wallet growth. So we expect income CAGR to moderate to more than 5% in the next 3 years. Most growth comes from group NII, excluding the IB and Head Office, which has grown 8% annually since '23. This reflects the U.K. lending CAGR target of greater than 5% and the stability of our deposit franchises, which underpins the structural hedge, but it also reflects progress outside of the U.K. in USCB, where balanced growth and NIM expansion supported 11% year-on-year NII growth in '25. In '26, we expect group NII to increase at least to at least GBP 13.5 billion, up from GBP 12.8 billion in '25 and for Barclays UK NII to increase to between GBP 8.1 billion and GBP 8.3 billion. Relative to our previous plan, the Investment Bank contributes relatively less against the flat wallet assumption. Over time, we do expect the mix of our income growth to pivot more towards asset-based NII and fees versus deposit income. That's why we remain very focused on diversifying sources of NII beyond deposit income by continuing to grow lending. But for the next 3 years, the structural hedge alone will deliver 50% of planned income growth. We have already locked in GBP 6.4 billion of gross structural hedge income in '26, and GBP 17 billion over the next 3 years. We plan to fully reinvest maturing hedges as we did throughout '25, and to assume a reinvestment rate of around 3.5%. This is below the current 7-year swap rate of 3.9%, which has become the most relevant proxy given the hedge duration. The average yield of maturing hedges remains below this level in '26, '27 and '28 at circa 1.5%, 2.1% and 2.7%, respectively. This will result in continued structural hedge income growth, including circa GBP 1 billion in '26. The increase in the average hedge duration to 3.5 years during '25 will reduce the quantum of maturing hedges to circa GBP 35 billion per year, from around GBP 50 billion in recent years. This slows the pace of structural hedge income growth, but therefore, prolongs the expected positive effect until at least '29. Also note, the higher proportion of equity hedge and longer duration of product hedges outside of BUK means it will attract circa 55% of growth in '26 versus 75% in '25. This change in mix is equivalent to circa GBP 200 million less income in Barclays UK in '26, which instead will occur in other businesses, including the Investment Bank. Two years ago, we set out a plan to increase the Investment Bank returns by improving RWA productivity and modestly growing costs. Since then, income to average RWAs has increased by 110 basis points to 6.6%, driven by a 9% income CAGR against flat RWAs. In Global Markets, we increased RWA productivity by 60 basis points and grew RWAs to take advantage of the environment. And in Investment Banking, we increased productivity by 150 basis points and released RWAs. Further capital productivity remains central to the Investment Bank's journey to higher returns with a target of greater than 7% RWA productivity by 2028, having absorbed the impact of Basel 3.1. In part, this will come from a continued review of the loan book, which is around 60% complete. Of the GBP 2.1 billion increase in income since '23, 2/3s came from Global Markets where we have built capacity. Financing income grew by GBP 0.6 billion in a strong industry wallet, and we achieved the '26 target 1 year early. This is particularly important, given our focus on stable sources of revenue within the Investment Bank. In our three focus businesses in Markets, we grew share by 150 basis points between '23 and half 1 '25, and income grew by GBP 0.4 billion. In Investment Banking, we have meaningfully improved RWA productivity, which was our main objective. Progress towards our secondary objective to add scale through fee share has been slower, although Banking fees grew in a market 30% larger than we had planned. Our objective now is to consolidate these gains. We will further deepen our relationships with our top 100 clients and markets and our three focused businesses and financing. And we will continue to build banker productivity, including in ECM and M&A, which are capital-light. In financial terms, given a flat wallet assumption, our plan does not, therefore, include material benefits from wallet growth to 2028. We expect proportionately more growth from the ICB, as we leverage the Treasury coverage model and the transaction banking investments outlined by Venkat. This builds on the circa 140% growth in deposits achieved in 2 years. And as a result, we expect the International Corporate Bank to be a larger part of the IB, leading to more stable income overall. Moving on to costs on Slide 66. We delivered positive cost jaws in each of the past 3 years and expect positive jaws in each of the next 3 years. This is a result of the income growth we've just discussed and modest cost growth to 2028. So what underpins this cost pathway? First, we don't expect around GBP 0.3 billion of one-off costs in '25 to repeat, being Motor Finance and around GBP 50 million of unrelated one-offs in Q4. Second, we expect circa GBP 2 billion of gross efficiency savings by '28 split roughly evenly across the years. This includes around GBP 0.2 billion of reduced Tesco Bank costs. We will deliver this by modernizing processes and platforms to increase efficiency as Venkat outlined. These savings will more than offset the effects of inflation and business growth over the next 3 years. We expect annual investment costs to increase by around GBP 0.8 billion by '28, including circa GBP 0.6 billion from the acquisition of Best Egg in Q2 '26. This will result in modest overall cost growth and a high 50s cost/income ratio in '26 with broadly stable costs thereafter to '28, supporting a low 50s cost/income ratio. The Barclays UK cost profile is an important part of this overall shape, so let me briefly cover the dynamics here. Barclays UK has been on a transformational journey for several years, reducing the cost-income ratio from high 60s in 2021. Dual running of Tesco Bank added circa GBP 400 million to costs in '25, including GBP 100 million integration costs. Other costs increased by circa GBP 200 million, net of efficiency savings. This was due to increased investment as well as the GBP 50 million one-off items I mentioned earlier. In '26, we expect a modest reduction in costs versus '25 and a low 50s cost-income ratio as we continue to integrate Tesco Bank and invest in the business. By '28, we expect larger gross and net efficiency savings, in line with the group. And for Tesco Bank costs to fall by circa GBP 200 million. As a result, we expect Barclays UK cost to fall in each of the next 3 years, contributing to a mid-40s cost/income ratio in '28. Our investments to date, organic and inorganic are delivering revenue growth across the group. Investment in the financing platform from '23 to '25 has, for example, supported 60% growth in Prime balances. And our investment in the mortgage broker platform has supported more than GBP 14 billion of mortgage applications since its launch. We have also realized GBP 100 million of funding synergies on Tesco and significant margin benefits through Kensington as both acquisitions support U.K. lending growth. We plan to double annual organic investment by '27, focused on technology change and fee growth. In addition, we expect operational costs of Best Egg of circa GBP 0.3 billion in '26 and GBP 0.4 billion in '28. This highlights the increased intensity of investment at this stage to support stronger fee growth and returns beyond '28. Cost discipline remains a key focus of our plan and is the lever that we have most control of. During '26, we expect a high 50s group cost income ratio improving again from 61% in '25. This reflects strong progress in the U.K. businesses in particular. And looking ahead, we expect further improvements to deliver a low 50s percent group cost/income ratio by '28. Turning now to impairment. The group has operated around the through-the-cycle target loan loss range of 50 to 60 basis points for the past decade, and this guidance remains appropriate. It reflects two offsetting factors. First, in Barclays UK, lower arrears and high credit card repayment rates have contributed to our loan loss rate consistently below the through-the-cycle expectations. Strong mortgage affordability criteria and credit card quality supports structurally lower impairment in the U.K. market. As a result, we now expect a lower through-the-cycle loan loss rate in Barclays UK of circa 30 basis points versus 35 basis points previously. Second, we expect a circa 500 basis points through-the-cycle loan loss rate in USCB. This is up from circa 400 basis points previously due to the changing portfolio mix. It will be higher in '26, at circa 550 basis points, reflecting post-acquisition stage migration of the General Motors portfolio and retention of some non-performing American Airlines balances. Both effects will diminish in '27 and will be more than offset by higher NIM. During the past 2 years, we have structurally improved Barclays profit signature. The Investment Bank and USCB now deliver double-digit returns, and we plan to drive these higher whilst continuing to allocate additional capital to our highest returning U.K. businesses. By '28, we expect capital generation to exceed 230 basis points, an improvement of more than 30% over the next 3 years. We continue to exercise disciplined capital allocation. First, by holding a prudent level of regulatory capital. As you have seen, we've been operating around the top of the 13% to 14% target range ahead of the expected regulatory developments that I discussed earlier. Second, we will distribute greater than GBP 15 billion to shareholders by '28, subject to regulatory and Board approval. And third, we will maintain capacity for selective investments to support structurally higher returns beyond '28. Given the strength of capital generation, this capacity does exceed the level of investment set out in the plan today. As we have done, we will exert considerable discipline over any investment, given the importance we place on shareholder distributions. We expect a progressive increase in our total payout in 2026. We are also evolving the mix of distribution to reflect the growing consistency of capital generation and to recognize feedback from shareholders. In addition to the move to quarterly buybacks announced in Q3, we plan to increase the dividend to GBP 2 billion in '26, from GBP 1.2 billion in recent years. While we continue to prefer share buybacks, we will review the mix of distributions periodically to reflect the level of our returns and the preferences of our shareholders. Bringing this together on the next slide. Operational progress during the past 2 years means we are confident in achieving our '26 targets and guidance. But momentum across the group also underpins our confidence in delivering the '28 targets outlined today. We are focused as ever on driving greater efficiency and operating leverage, protecting returns in a range of environments. And we will drive structurally higher and more sustainable returns beyond '28 by investing to support more diverse sources of income and fee growth. Over to Venkat for final remarks. Coimbatore Venkatakrishnan: All right. Thank you, Anna. So 2 years on since our Investor Update in February 2024. As we've discussed, we remain on track to deliver our goals. We are moving from a period of measured ambition to one of accelerating ambition. We aim for sustainably stronger returns, greater shareholder distributions and operational excellence. The targets which we have shared today are underpinned by structural improvements to the profit signature of the bank, which we have made in the last 2 years. And our drive to become a simpler, better and more balanced bank. We plan to continue this progress in the coming 3 years. And of course, our journey does not end in 2028. Our ultimate aim is to secure structurally higher and more resilient returns beyond 2028. So now I'll pause for 15 minutes for a break before Anna and I open for Q&A. What shall I say, 10:40 U.K. 10:40 London, please be back in the room. There's refreshments outside, restrooms outside, and we'll be back. [Break] Coimbatore Venkatakrishnan: All right. Thank you. Welcome back. So we will go to questions in the room. Coimbatore Venkatakrishnan: [Operator Instructions]. So I'll begin with the person who raised his hand first and who taught me a lot of what I know about analyzing banks. Kian? Just for that, he gets preference. Kian Abouhossein: Two questions. The first question is on the capital return of over GBP 15 billion. If you could just put this in context of capacity to support investment and growth. How should we think about this capacity that you're outlining? It looks like there's quite a bit of buffer. So we would like to understand that. And then secondly, you're one of the few CEOs who actually discusses ledgers and middle office integration, which is not a -- it's a hot topic, but a lot of CEOs... Coimbatore Venkatakrishnan: I began as a programmer, so that probably helps. Kian Abouhossein: That's probably, you are, yes. And probably because he came from the same organization that I'm from, which is a big focus. But trying to understand a little bit the investment phase, which has stepped up in '26 significantly. And you're going from GBP 1.1 billion to GBP 2.3 billion of investments. And just what the focus is and how should we think about post '28 basically in that respect? Coimbatore Venkatakrishnan: Anna, do you want to start on the capital and then we can come back to the other one. Angela Cross: Yes, sure. Thanks, Kian. So one of the hallmarks of this plan is the level of capital generation. We've talked about that. And really, when we talk about an improving profit signature, that's really what we mean. It's this chart here that they've just brought up showing that sort of change to 230 basis points. And in the plan, what we've done is we've meaningfully increased the distribution to greater than GBP 15 billion, but we've also meaningfully, in fact, doubled the level of investment. But such as the level of capital generation within the plan, the level of generation actually surpasses both of those two increases. So what we've done here is we've deliberately created some capacity for us to be able to invest further if and only if we determine that is the right thing for us to do. And I'll just remind you of our very clear capital hierarchy here, specifically the importance of shareholder returns. So we're going to set a very, very high bar for any additional level of investment. And quite frankly, if we are unable to find such an investment, then the capital hierarchy will kick in, and we will distribute more than we have here in the plan, or alternatively, we will be investing more than we have here in the plan, and we would expect the momentum of the business in the outer years to be higher than we're presenting here. We have no inclination, no objective here to hold on to higher than required levels of capital. But what we're trying to do is create some capacity to underpin some of the meaningful opportunities for growth that we have, whilst meaningfully stepping up that level of distribution. Venkat? Coimbatore Venkatakrishnan: Yes. And I would say, I think if you look at our track record of investment, Anna spoke about the investment which we had made in our prime and financing business and both the quantum of investment and the payback. You saw the quantum of investment in even the mortgage broker application and the payback. We look to make investments where you would get the revenue realization fairly quickly. And you see that even of Kensington Mortgages and Tesco and God willing, Best Egg. So we are looking to do that. And we need to keep that capacity for that reason because opportunities will be there and needs will be there. I would say, Kian, on the second question about subledgers and the sort of the guts of the organization, it comes from both a philosophical place and from the actual reality of the business. The philosophical place is, as I said, for a long time in this industry, the businesses -- technology has revolved around the businesses. Now as you see not just in us, but across the industry, the depth and extent of technology-based services, products, and delivery, the businesses are revolving around technology. And what that means, especially if you're going to take advantage of the promise of new technologies like AI and cloud computing is that you've really got to, as I use the word, harmonize your processes and standardize your approaches. And especially when it comes to data platforms and to the way in which you construct and store your data, the way in which you do computing, the way in which you build models and the way in which you deliver. And if these things are not standard, you add huge complexity. And so we've got to unravel that complexity. And in large complex GSIFIs, that's a big task, and that's what we are trying to do. All right. Alvaro? Alvaro de Tejada: One of them is actually -- sorry, Alvaro Serrano from Morgan Stanley. One of them is kind of a follow-up to the second question maybe for you, Venkat. In one of the slides, you pointed out that 75% of the employees are in support functions, I think, yes, support functions. And obviously, one of the -- at least for me, the surprise of the plan is the cost element as you were referring to. During the plan, how is that number going to come down during the plan in 2028? And beyond that, how low do you think it can go because it's obviously one of the core pillars? And second, more -- maybe a more financial one on, again, maintaining the RWAs flat in the Investment Bank and one of the things coming out is ongoing RWA efficiencies. Is there anything -- maybe this one is for Anna, but is there anything you can point us to that is pretty mechanical around the way the business is done in Investment Banking, maybe less legacy LBO business, more sort of private credit capital-light businesses that we can gain conviction that mechanically the RWAs are going to be flat right now, pointing out to a proportion of contribution today versus 3 years out, something that will gain -- give us confidence that we can keep it flat. Coimbatore Venkatakrishnan: We're going to tag team on both these questions, Alvaro. So first of all, on the cost, just a definitional point. When we call support functions, there's a bit of a legal entity aspect of Barclays. This is what we call Barclays Execution Services. And this includes technology and operations, but it also includes compliance, risk, finance, HR and legal. And so it includes basically the non-revenue generating parts or direct revenue-generating parts of the business. So that's the first thing. The second thing, as I've said, and I'll have Anna chime in, we don't have an explicit target in terms of number of employees. What I've said is there will be productivity benefits from all these investments. We hope to harness this productivity benefit in improving the quality and delivery of services, whether that is to clients or whether that's internally, right? And there will be obviously a gross efficiency cost savings that we've outlined and investment in the group. But we are not outlining a particular people target. I think we are approaching this from something that creates efficiency in order to provide enablement. And then we'll see where we go. Anna? Angela Cross: Yes, sure. If I can just add to that. Our real focus from here on in is really on that technology efficiency. So the majority of cost out, if you like, the efficiency is going to be driven by change delivery, by platform modernization and the kinds of things that Venkat was talking about, about enabling products to market, if you like, much, much faster than we have done before. So that's where we see the sort of meaningful change, if you like, in the cost base. Shall I start on RWAs, or do you want to add? Coimbatore Venkatakrishnan: Yes, you do. But just one thing. It's no accident that the most digitally enabled part of the bank, which is the U.S. Consumer Bank, also has our lowest cost/income ratio, right? It's no accident. Go ahead. Angela Cross: Yes, sure. So on RWAs, I mean, this is not a new thing for the IB. They've been flat for 4 years. They were flat for 2 years before we started the last plan. And whilst we've made considerable progress, 110 basis points, we do think that there's more to go here. And I'd just call out -- so let me talk about a couple of whats. The first would be, if you remember when we did our Investment Banking deep dive, we talked about that review of the loan book being really good stewards of capital. We are 2/3 of the way through that review with 1/3 to go. And it might be helpful actually if we can bring up the slide that's got the relative revenues over RWAs, and you'll really see what's happening in Investment Banking. At the same time, so it's that bottom right-hand chart that I'm calling out there. So absolute levels of RWAs have been coming down in banking as we have reviewed that loan book. That's allowed us to be much more nimble in how we deploy RWAs across the Investment Bank and really deploying them at the moment, as you've seen, in markets just because the market opportunity has been there. The other thing I would call out is much of our growth that we're really leaning on from here on in, some of the things we talked about before, so M&A and ECM, but the International Corporate Bank is a really big part of this part of the plan. It's made tremendous progress in the last 2 years. And that again comes from the treasury coverage model that we talked about in our deep dive. We've increased our deposits by 140% here. And now we have the opportunity to really leverage that by deploying the technology that Venkat is talking about and really driving fee products from here. So we are confident in that trajectory. Venkat? Coimbatore Venkatakrishnan: Yes. I mean I'll just add to what Anna said. I mean structurally, it is the International Corporate Bank and Transaction Banking. It is the continued growth in our prime businesses, which revenue per unit RWA because of just the way the lending is structured is generally better. It is over a very long period of time, the way lending and banking has been changing from direct lending on individual credits to portfolio lending. But that's over a very long period of time. But it's the thing Anna said, it's corporate banking. It is an emphasis on fee businesses and also you know, at the right points of the cycle, intermediation. Yes, go ahead, please. Guy Stebbings: It's Guy Stebbings from BNP Paribas. The first question was on capital in terms of targets. You got the 13% to 14% target. I think you've talked sort of running at the top end of that range throughout this plan. And given this is the plan now to 2028, post Pillar 2A changes given the constructive tone from the regulator. I'm just wondering what do we need to see to sort of potentially move lower down in that range as sort of a formal way you're running from the business? Is it just getting that Pillar 2A change from the regulator? And presumably you've got pretty good visibility as to what you're expecting there. So if things do land as you expect, maybe you could help sort of frame that so we can think about what that means for capital return and RoTE targets. And then the second question was on the mortgage book in the U.K. You referred to the headwind in the first half of this year. Can I just check in terms of the definition of that headwind? Is that sort of a gross headwind? Because I'm mindful that with Kensington and the sort of flow of the book, you might be able to offset some of that as you have some higher LTV, higher-margin business coming through. So can you kind of frame the definition of that headwind? Angela Cross: Yes, sure, Guy. I'll take both of those. So on the first one, if you go back to the beginning of '25, what we said was that because we were carrying more Pillar 2 in advance of IRB implementation, you should expect us to operate at the top of the range or towards the top of the range. That's still what we're saying. It's no different to that. And I do expect there to be some Pillar 2 offset when we get through Basel 3.1 and IRB. I just don't know what they are right now. And what we are trying to do in every single part of this plan is put it in our control. We want our distribution plan to be underpinned by the things that we are doing and that it can't be put off course by the timing of regulatory change or the certainty of that change. So that's all we're saying here. So for us, in the short term, our planning assumption or actually throughout this plan, our planning assumption is that we will be at the top end of the range. And that's obviously -- you should reflect that in the way you think about our distributions, you should reflect that in the way that you calculate our RoTE. But once we get beyond that implementation and we have that clarity, we will, of course, review where we think we should be within that range. I mean we still think that the 13% to 14% range is the right range for Barclays. But at this point in time, we just don't have the regulatory clarity, and we want this plan in our control. So that's the reason for it. And on mortgages, I'm specifically talking about a gross impact, and it relates to the mortgages that were written at the very end of 2020 and beginning of 2021. So as you remember, as we were all coming out of COVID, there was that stamp duty holiday and the mortgage market was very substantial. Those mortgages were written at very wide spreads, like 160 basis points. That's quite meaningfully different from where we are now. So just as they refinance, you're going to see some relatively short-term pressure across the market as a whole. We think it will be gone by the end of half 1. And then beyond that, you're going to see the kind of progress that you've seen in our NII to date. But it is a gross impact. We're obviously enjoying very good levels of net lending, driven very much by Kensington and that broker platform. So it's a short-term hiatus, I would describe it as. Coimbatore Venkatakrishnan: If I may just underline one thing, whether it's capital or looking at our RoTE, there are potential tailwinds, right? We are planning prudently, but what Anna is referring to, whether it's the new capital rules and what relief we get, there are potential tailwinds. We are not banking. Sorry, go ahead. And I'll come back to the back in a minute. Benjamin Toms: Ben Toms from RBC. First one is on Private Bank and Wealth Management. What products are you currently missing from your premier banking proposition? And how easy is it for you to build those yourself? And then secondly, to continue on the U.K. loan book. U.K. retail banks continue to surprise to the upside on loan book growth relative to GDP. I think your guidance is for a 5% loan growth CAGR out to 2028. What's driving the growth in excess of GDP? And what's your outlook for volumes in the mortgage market for the next couple of years? Coimbatore Venkatakrishnan: Let me start on both. We've got a pretty big and complete product suite. There are a couple of gaps in the product suite that are missing, SIPPs, junior ISAs that are coming online. But if you put yourself at a higher level looking at it, starting at the self-directed end of the spectrum, what we've got is direct investment, what we used to call Smart Investor, which is your basically do-it-yourself investment buying stocks, bonds. Then you come to the next piece, which is planning and advice. And that is where we are doing some work, as I said, to create products, which we will talk to you about soon, which are clearly constructed, fairly priced, transparently built and cheaply distributed and -- sorry, efficiently distributed. And there, we are looking to grow in scale and we've got the basic product set. And then we've got our Private Bank, both domestically and internationally, was complete. So I would view it more as a scaling journey than as a completion of product capability. And that is our goal. And look, I think more broadly, the U.K. is a nation of savers. I think it needs to be more of a nation of investors. I think we're going to have a broader tailwind and support for this. I think it's an important role for banks to play, and you'll see us emphasize it. And then if I come to loan growth above GDP, let me begin and then Anna should fill in. We've said 5%, as you say, loan growth versus nominal GDP of 2%. Basically, there are parts of the business in corporate banking and business banking and even in parts of personal loans, where we were underrepresented in the last number of years. Tesco has given us the capability in personal loans, and you can see the increase. You're seeing the increase 18% growth in lending in the U.K. Corporate Bank. If you look at the U.K. Corporate Bank broadly, still loan to deposits is like 35%, 34%. So we have a lot to grow, right, versus what you might normally expect from somebody. Anna? Angela Cross: Yes. I mean, simply put, Ben, I think it's a combination of capability, increased capability. So we talked a lot about the mortgage platform. Actually, we're doing very similar things within the corporate banking environment, making it easier for that customer or client to engage with us and making that journey efficient, quick, giving them certainty, et cetera, that's making a really big difference. I think also the sort of broader product architecture that Venkat talked about, we see it in cards across multiple products. We obviously see it in our mortgage business. So we're just going to market with a much, much broader range and certainly, more of a step change than we've had sort of 2 or 3 years ago. What it isn't is price and what it isn't is risk. So you can imagine as CFO, I've got a very keen eye on those things. So if you think about our corporate lending, it's up by 18% year-on-year. We've got more than 1,000 new clients in 2 years. About half of those are driving some of that lending. But as I look at the risk profile, it's not changed since the beginning of the plan. And as I look at the portfolio margin, it's not changed since the beginning of the plan. So it's really technology, intention to lend and I would say, breadth of product. Coimbatore Venkatakrishnan: Go ahead, please. Tim Piechowski: Tim Piechowski with ACR. I think today in guidance, it's the first time you've pointed us to the 7-year swap rate from the 5-year swap rate on the hedge book. Could you talk about, is there a change in kind of the duration targeting there? And what gives you the confidence to make that change? You're looking at the deposit betas, et cetera? Angela Cross: Yes, sure. Thank you, Tim, for the question. So we actually extended the length of the hedge last year, taking it from roughly 3 years to 3.5 years, and that's why the 7-year swap rates becomes the most relevant rate. That really follows the observation of customer and client behavior because what we do is every single month, we are looking at how the deposit books perform across retail and corporate at a very, very granular level. And what we were observing was really that the customer and client lives were lengthening out, and we were getting more confidence around that. So it's purely a reflection of that change. Andrew Coombs: Andrew Coombs from Citi. So on the Investment Bank, If I look at your 2026 targets, previously, you had a greater than 12% return target. It's now circa 12%. A high 50s cost income is now circa 60%. I'm assuming the change is primarily due to FX, but perhaps you could firstly confirm that. And secondly, when I go back 2 years and think of the original plan, a lot of the revenue growth was assumed to come from market share gains, and you actually assumed a fairly flat wallet. Actually, what's materialized is a much better wallet than you expected, but flat market share. So perhaps you could also just talk to competitive dynamics and how that's played out versus what you thought 2 years ago and how that then fed through to your '28 assumptions as well? And then on the U.S. Consumer Bank, I just wanted to understand some of the moving parts because you talk about greater than 13% NIM for 2026 full year. But I think in your earlier commentary, you said 12.5% for Q1, 14% for the second half post the AA sale. So presumably it's the 14% you would argue we should be thinking about into the outer years. But then similarly, on the loan loss ratio charge, you're actually assuming that's coming down even as the exit NIM is higher. So perhaps you could just square the circle there. Angela Cross: Sure. Shall I start and then I'll hand to you on market shares, and then I'll take it back on. Okay. Thank you. So Andy, you are correct. The material moving part between the last plan and this plan is we previously planned on 1.27, we're now planning on 1.35, dollar rate. Now that has no impact on group capital, no impact on our ability to distribute. But in particular pockets of the bank, you see some concentrated effects. And the IB is one of those. You're going to see it in USCB as well. So that movement in FX is worth about 50 basis points. So all we're doing is we're just truing up our expectations. We're pleased with the progress that it's made so far. I'm not going to mark that plan to market every single passing quarter. It's just that as we're resetting targets, we felt like it was the appropriate thing to do. Venkat? Coimbatore Venkatakrishnan: Yes. And I think -- on the other side, what I would point to is, look, on the Investment Banking side, banking per se, as I said to you, we would like to see greater fee share. What you've seen so far is progress from the hires and the investments we've made, but -- and you've seen greater revenues, obviously, and excellent capital discipline. And as we make these investments, we hope to see the fee share. On markets, I would point you to the fact that in the 3 focus businesses, we've done what we said we would do, and we've done it a year early. And as well as the number of our top 5 clients among the top 100 clients for whom we are top 5, that has gone from 30 to 50 to 60. So there is structural progress being made in these elements. Angela Cross: Okay. Can we bring up the slide at the back of the deck, I think it's 95 or 96, please, on U.S. Consumer Bank, perhaps just to help this. There, 96, perfect. Thank you. So Andy, you're right. There's a lot going on in U.S. Consumer Bank in 2026, specifically being driven by the fact in Q2, we expect to exit the American Airlines partnership, and we'll also purchase Best Egg or complete the purchase of Best Egg in the same quarter. So firstly, that has a NIM impact. So I expect the NIM to go to around 12.5% in the first quarter. What's driving that? Well, it's just the accounting that I called out earlier. It's a movement between non-NII and NII. Then we've always said that because American Airlines was such a high-quality portfolio, the NIM on it is relatively low, but also the loan loss rate on it is relatively low. So taken together, it was a relatively low returning portfolio because it's super prime. So what happens when that leaves the portfolio is the NIM will go up further. And so you're right, in the second half of next year, I'm expecting, if you like, a clean run rate of NIM, which looks more like 14%. Now when I come to loan loss rates, that same impact is going to take us from 400 basis points to 500 basis points, but that will be more than offset by NIM. During '26, in isolation, what you're going to have is a couple of impairment effects. The first is, if you recall, when we buy something, we bring it all on at Stage 1. So it has to mature through Stage 2. So you get what we call stage migration. You're going to get that in the General Motors portfolio. So that's going to elevate impairments slightly. And then for a period of time, we're going to be holding on to some nonperforming loans from the AA portfolio that won't go with them on the sale. So those 2 things together are going to show a little bit of elevation during 2026. So that's why I'm guiding you to around 550 bps, but ongoing, 14% NIM and 500 bps loan loss rate. Coimbatore Venkatakrishnan: Nothing to add. Pui Mong: Sorry, I forgot that this was working. It's Perlie Mong from Bank of America. So thinking about the income guidance at the group level, so it's greater than 5% CAGR. And within that, obviously, Investment Bank is probably below and the Consumer Bank is above. And with the U.K. part also growing volumes greater than 5%. I'm just trying to think about what does it imply about margins. So in terms of product margin, that is, would you expect more of that growth -- income growth coming from the volume side? Or are we basically past the point where deposit margin is growing very substantially because of the hedge? And obviously, '26 will probably be a bit higher because of the more of the hedges coming through in '26. So in '27 and '28, how should we think about the margin piece? That's number one. And number two is that -- so it sounds like Investment Bank RWAs is going to stay relatively flat because you still expect that to come down to about 50% of the group by '28. So roughly speaking, it's not much more to the Investment Bank. And the cost guidance at a group level only modestly growing from now to '28. That suggests Investment Bank is not getting very much cost either. So I'm just trying to think about why you've decided to do that in the context that, obviously, the IB probably is one of the businesses that has performed above expectations in the last cycle. And increasingly, there are questions about with the U.S. peers investing more and putting more capital behind the IB, why would you choose not to do something? Coimbatore Venkatakrishnan: I'll let Anna take the first question, and she can start the second, and I might come in. Angela Cross: There we go, the plan. Thank you, Perlie. There's a lot in your question. Let me try and unpack it a bit. So how do we think about product margin in the U.K. is, I think, your question. So look, there's a bit more to go here. And you can see that from the -- can we go to the structural hedge slide, please? Thank you. Okay. So we are assuming that we are going to be reinvesting the structural hedge at 3.5%. The maturing yield over the next 3 years is materially below that. So 1.5%, 2.1%, 2.7%. So you're going to have a considerable hedge tailwind across at least this plan, probably beyond. And everything that we've done around the tenure of the hedge and extending it from 3% to 3.5% is only going to increase that momentum for longer. So that remains there as, if you like, an underpin for product margins. Then if you think about lending more and particularly within our credit card business, all of the volume that we've written over the last 2 years coming to maturity from its promotional balances, that will start to increase the interest-earning lending in the credit card book. So we expect those things to continue. Now what we're not doing here is planning for any expansion of product margin really, though, because what we've said implicitly is that the growth that we're seeing in lending and some of the margin pressure that we're seeing in the U.K. market pretty much broadly offset. That's our planning assumption. Now it may turn out differently to that, but we are not assuming that product margins either as a totality, if you like, Perlie, get either better or worse, if that makes sense. You just continue with that hedge grinding in the background, products is broadly awash. That's how we think about it or that's how we planned for it. In terms of the Investment Bank, look, what we're trying to do here is construct a plan that is carefully constructed, okay? We're trying to put as much of it within our control as possible. So we're planning on a flat wallet. We're not materially expecting any market share change in markets. We expect some in Investment Banking. The pressure here in the plan is coming more from Transaction Banking, but that's where we're directing our investment. But don't conflate careful planning and lack of ambition. Because what we will do, of course, if the opportunity presents itself, then we will monetize it as we have done to date. Venkat? Coimbatore Venkatakrishnan: I will emphasize that last point. I must say it's nice to be getting a question about why we shouldn't be bigger in the Investment Bank. But I think we've targeted -- we've been very clear to you over the last couple of years about where we are roughly targeting the IB as a percentage of the group. I think what you should expect us to do is exactly what Anna said, which is we're making a plan based on an assumption of a wallet. If there is opportunity, we've done it in the last number of years, which is we take advantage of it. Yes. Sorry, let's start, Chris. Chris Hallam: Chris Hallam from Goldman Sachs. Just a question on the Investment Bank to begin with. Are you able to give any color on perhaps how much leverage exposure is tied up in the Investment Bank? I know we talk about RWAs, but as we shift towards the growth you're seeing in the financing businesses, how relevant that metric is. And when you talk about flat market share in Global Markets, is that a conservative assumption or not given, I guess, the dereg story we're seeing building in the U.S. and also the ambitions one of your European peers has in FICC, specifically in the United States? And then the second question is more broadly on AI. I think or I assume behind the scenes going through all the planning, you've looked at a lot of the opportunity set in that area. It feels as though more generally, there's a narrative that the technologies are becoming more impactful, but perhaps the speed at which you can get them into the enterprise is taking longer than people had expected and maybe slightly at a higher -- slightly higher cost. Is that a fair narrative or one that you would agree with when you think about the work you've done behind the scenes on this topic? Coimbatore Venkatakrishnan: You want to go with the first one? Angela Cross: Yes, sure. So thanks, Chris, for the question. I mean we don't talk about return on leverage balance sheet a lot with this community, but you can imagine we're very focused on it in the background. And there are -- you're right, there are 2 big parts of the bank where leverage is deployed probably most extensively. One of them is obviously retail mortgages. The other one is financing within the Investment Bank. It's very high RoTE business because it's essentially secured lending, but it does consume leverage balance sheet. That's why we have the AT1 strategy that we have. And we're always thinking about what are those returns on the leverage balance sheet versus the cost of those AT1s. That's how we think about it in the background. We have deployed more leverage in the business over the last few years, but so have our U.S. peers. And our perception to date certainly is that they have not been leverage constrained in the way that they have addressed that. And despite that, we've grown the balances by 60%. So it's a business, of course, we're focused on the returns across many lenses, but we're happy with where it's going. Coimbatore Venkatakrishnan: Yes. I'd also say one of the things about the bank and the way we're building the bank is that we have lots of options and lots of opportunities. So just as you have 2 areas which consume leverage, you've also got the U.S. cards business, which helps you offset that because it's capital dense, relatively speaking. And what we are doing on the personal and unsecured side in the U.K., which is also relatively more capital dense. So I spoke on one of the slides about balancing product, income type mix, all these factors are coming in to create the portfolio which we have. Angela Cross: Yes, sure. I think back to you on AI. Coimbatore Venkatakrishnan: Back to me on AI. Yes. So you're right that I think what people are finding is that it's not just sort of enabling a particular type of model or a particular capability on everybody's computers and then get to work. So you have human adoption and then you have, more importantly, the ability to get it to work in the system. To get it to work in the system requires 2 things or 3 things. One is the basic infrastructure, then adding the capability and then the third, the willingness to reengineer your processes. That is what we are trying to convey in the slides we spoke about on technology. So the basic infrastructure is about both data and computing. Then on top of that, you build the model capability, which exists in some of the computing platforms, but which you might put on your own. And then the third is the commitment to reengineer processes, and you've got to really do it end-to-end. So whether it is that BARXBot, whether it is what we are trying to do in credit risk, whether it is what we are trying to do in U.S. cards in the U.S. Consumer Bank and customer service, you can't leave pieces of this undone, okay? And that's the deep organizational commitment. So we recognize it. That's what we are finding behind the scenes, as you said, but we're trying to pick the right projects that will have the biggest impact on the bank and see it through from beginning to end. Yes. Mike Holton: So another question on the income planning assumptions. Coimbatore Venkatakrishnan: Sorry, can you introduce yourself? Mike Holton: Sorry. Yes, Mike Holton from BNY Newton. There are some that you talked about that do seem relatively conservative. Now whether they will be or not, we'll see over the planning period. But to the extent that they are and revenues are better, income is better than you're planning, should we expect as investors for that to flow to the bottom line? So profits are better, RoTE is better? Or over the course of the plan, would you invest that away, maybe make additional accelerated investments in the business such that you still hit or maybe beat your plan by a little bit, but you improve the sustainability perhaps of the profitability, pull some investments forward. So beyond '28, you're set up even better. Angela Cross: Do you want me to start? Okay. So Mike, the first thing I would say is that our targets that we've given you have very deliberately got a greater than sign in front of them. So we're balancing a few things here. The first is that, as I've said a few times, we want to put this within our control, the delivery of the plan. That's really, really important to us and particularly the delivery of the distributions of the plan. So that's number one. Number two, we are balancing here the longer-term growth of the firm. So Venkat has talked a lot about the additional investments that we have and will continue to make. I mean between Venkat and I, it would be relatively easy for us to optimize the returns of the firm across a short-term horizon. That is not what this is about. We are really balancing here, investing more in the business, and that means that the RoTE in the shorter term are probably a bit lower than they would otherwise be. But we think it's really, really important to create a Barclays for 2 years' time when we're standing up maybe during the next phase of the plan, the third phase of the Trilogy, where we're talking about '28 and beyond. We want that momentum to continue. So that's why we've -- not so much on the income forecast, but when I was talking before about the capital capacity of the plan, that's exactly what I was driving at, our ability to flex our investment pathway if we feel that's the right thing to do. But every time we are doing that, we are considering what is the returns on that investment relative to either the business as it stands now. So is it going to enhance those returns further? Or how does it look like versus the returns of a buyback? So we're thinking about all of those things as we deploy that. Coimbatore Venkatakrishnan: Yes. I mean it's going to be -- we've presented a plan to you that is based on prudent financial planning in the way Anna has said, but we want to create a deep infrastructure for this bank, make it, as we said, returns in different environments, produce strong returns in every -- through different environments and sustainably higher returns in the long run, which is a combination of investment and shareholder return, right? Sorry, going to the back and then I'll come here. James Frederick Invine: It's James Invine from Rothschild & Co. Redburn. I've got 2, please. Anna, can you talk about your thoughts on kind of deposit volumes and spreads in Barclays U.K., please? So we saw a pickup in volumes after a few quarters of kind of flat to slightly down. And I think as well, your U.K. net interest income guidance kind of implicitly assumes quite a bit of deposit pressure. So is that migration? Is it product spread pressure? And then, Venkat, just back on the Investment Bank, I mean it sounds like you're very theoretically open to putting more investment in there. But what actually has to happen? So the revenue on risk-weighted assets has gone up. You're talking about a 13% plus RoTE. How much higher do those numbers have to go before you think you'll give this business another GBP 20 billion of risk-weighted assets or something? Angela Cross: Okay. So on U.K. deposits, you can see that the deposits are up quarter-on-quarter by around, I think, GBP 3 billion if we go to the slide. What we continue to see, though, James, is we do continue to see some competitive pressure in the U.K. and specifically that move towards fixed or time deposits. Now seasonally, I would expect some concentration of that in Q1, Q2 just because of the ISA season in the U.K. We always see that. And it feels like as a market, we're well primed to see that. But we are pleased with that deposit progress. What does that underpin? Well, I think just continued improvements in the business. I would say that we've deployed our multi-brands in deposits this year. We don't really talk about that. We talk about it a lot in assets, but we are going to market with a much more sophisticated product architecture in deposits because we are now deploying the Tesco brand here. So that's really helping us. But we are not assuming from here that there is any real easing in that deposit environment. It may happen, it may not. But as I say, we're trying not to make significant market assumptions. Venkat? Coimbatore Venkatakrishnan: Yes. So on the Investment Bank, first of all, investment comes in different ways. Investment comes in people, investment comes in technology, particularly in the markets business, and then investment can come in RWAs. What we've spoken about on the balancing side is basically Investment Bank RWAs as a percentage of the group, where we've set a target of around 50% seems right. We've also indicated flexibility around that number if there's a little opportunity, but 50% seems right. We have been investing heavily on technology and people. And we've spoken about it, whether it's bankers, whether it's trading capability and of course, electronic trading capability. We spoke a little earlier about the investments we've made in prime. So there's been and continues to be tremendous investment in technology and capability. Some of this or a lot of it is going towards things that are relatively capital-light and relatively high in fees. So we are prioritizing stable income. We are prioritizing corporate banking. And of course, electronic trading, which helps with our intermediation. And on the capital side, as I've said, there's a balancing act, and it's about 50% is where we would aim to target. And to get there right now, IB RWAs have to be relatively flat. Angela Cross: Venkat, on the left-hand side, you've got Chris, Jonathan and Amit who are being incredibly patient. So... Coimbatore Venkatakrishnan: All right. In that order, Chris. Christopher Cant: It's Chris Cant from Autonomous. If I could just ask one point of detail and then on the IB again. So your effective tax rate has been quite difficult to predict over the last couple of planning periods. If you could just fill that gap in our models, I think that would be appreciated by all. And then on the Investment Banking side of the equation in terms of stable market shares, I guess one obvious development that's probably coming down the tracks at you in the next 12 months is this regulatory change in the U.S. So are you seeing at the moment any change in the competitive environment? And do you make any allowance in the plan for a potential contraction in product margins as some of your U.S. competitors get more capital capacity, some of which is likely to be deployed into the IB? Angela Cross: Okay. I'll start with the tax rate. So Chris, I'm not going to give you a tax forecast. But I recognize that quarter-by-quarter tax can be a bit lumpy because it relates not only to the changing shape of the business, but also things that may have happened in the past. So I would encourage you to look at it over a sort of full year basis, maybe for the last couple of years and start from there. Always, if we've got significant tax impacts, we typically call them out for you. So start with that. Coimbatore Venkatakrishnan: And Chris, just to clarify, by regulatory change, do you mean capital regulations in the U.S.? Or do you mean individual banks that might be under regulatory structures now that might lift? Christopher Cant: More the former. Coimbatore Venkatakrishnan: The former. Right. Look, U.S. capital regulation is very likely diverging from what's there in the U.K. and what's there in Europe. We have operated this investment bank through multiple capital regimes in different locations, and we adapt. The question is then how do we adapt? I said earlier in our presentation that the secret sauce of our Investment Bank is the synergies, our strength in fixed income and structured financing and the nimbleness of our approach with our clients and deepening the way in which we engage with clients. So we'll see what comes out. We will see whether we are at a relative advantage or disadvantage in certain things. But the most important thing is to keep investing in the infrastructure, the people, the products so that -- and the client relationships so that we can manage it through different points in the market cycle, through different differences in capital regimes. This has always been a very competitive business, and we expect it to continue to be so. Jonathan and then Amit, yes. Jonathan Richard Pierce: It's Jonathan Pierce from Jefferies. If I can take it up a level, if that's okay, a couple of questions. I'm really trying to triangulate the capital generation targets on Slide 71 with the RoTE and the distribution expectations. I mean greater than 230 basis points on circa GBP 400 billion of RWA is obviously getting you to an attributable profit number of over GBP 9 billion. So putting to one side, that's quite a bit ahead of consensus, even if we assume 3% RWA growth, which if the Investment Bank is pretty flat, is quite a lot. That's only going to take us down to about GBP 8 billion of free capital generation, which is obviously huge in the context of the GBP 15 billion plus over the 3 years. So can I just firstly ask do you recognize those numbers? Are these distributions going to be really quite back-end loaded such that when you are stood here in 2 years' time, the next 3 years of distributions are going to be markedly above the greater than GBP 15 billion that you've talked about today. Secondly, connected, the RoTE on that 230 basis points plus, if we use consensus TNAV would be closer to 15%, maybe a little above 15%. I just wonder if you can talk to TNAV growth over the next few years. It would be great if you can reference consensus, but maybe some of the things that are harder for us to model like the own credit unwind, the pension surplus, maybe even the cash flow hedge reserve moves to a positive. How should we be thinking about TNAV 2 or 3 years forward, please, particularly versus consensus? Angela Cross: Thanks, Jonathan. I guess both of those are for me. So let me just start with capital. So I'm not going to comment on your math, Jonathan. Where I agree with you is that the organization is generating a lot of capital, and we expect that to continue. And so when we give you a distribution target of greater than GBP 15 billion, I would concentrate on 2 things within that slide. One is the greater than sign. And the second is this point that we are making that beyond the investment that we've got in the plan, so beyond the doubling of investment and beyond the level of distributions, there is an element of capital creation here that we are holding for additional investment if we think that is the right thing to do. Now if we don't, then we will, of course, return that to shareholders. That's what our capital hierarchy says. It says first, be well capitalized, then deliver it to shareholders, then invest it to meaningfully improve the returns of the group. So that capital hierarchy remains. We have no desire to hold on to excess levels of capital. So your thought process is as ours is. But as I say, I will leave the math to you. In terms of the sort of -- in terms of the RoTE point, we've given you a RoTE target, which is greater than. So again, I'm not going to comment on the math that you've given me. Last time I looked at it, TNAV was broadly -- our expectations of TNAV and consensus TNAV were broadly similar. I think the difference here is probably in the greater than sign simplistically put. Coimbatore Venkatakrishnan: Amit? Amit Goel: Maybe one [Technical Difficulty] again, just say, for example, looking at BUK profitability targets, so '28, greater than 20%, similar to '26, greater than 20% despite a mid-40s cost income versus the low 50s, further progression in terms of the income from the hedge. I mean I guess just wondering why isn't that number, say, greater than 25% or higher, you don't want to show a number like that. So just curious on that. That's the first question. The second, again, just on the IB, just on IB fees, again, this comes back to the market share point. So I understand the flat wallet assumption going into '28. But again, when I look at the trajectory, I think last time we were thinking that there had been investment in '23 and so forth, which should drive market share gains. We saw gains into '24. I think we went from about 3% to 3.3% -- sorry, into '25 or '24, but that's come back down now to around 3% again. So just wondering what's going to create the reacceleration back to the 3.5%, and what gives the conviction on that piece? Coimbatore Venkatakrishnan: Do you want to take BUK and then I'll come back to the IB. And that's Amit Goel, by the way, from Mediobanca. No, it's okay. Angela Cross: You did a good job with that. Coimbatore Venkatakrishnan: I know. I won't say anything. Angela Cross: So a couple of things just to call out, Amit, just to help you. Firstly, again, I'm going to lean on the greater than. The second thing is that although this is not true for the group, for BUK, it is true. We are expecting some impairment normalization within that business. So as we said, it's been running relatively low because we've been recalibrating these impairment models that are consistently overpredicting impairment in the U.K. So we've been running pretty low in BUK. We do expect that to normalize up to around 30 basis points. That's not true of the group. The group is running in totality where I expect it to be. So that's not flattering the group, but I think it is flattering BUK right now. So if you take that plus just lean on the greater than number, then that should hopefully explain. Venkat? Coimbatore Venkatakrishnan: Yes. So I'll begin with an answer on fees, similar to one I often give on markets. So when we have quarter-by-quarter or annual returns and results in markets, people will always ask, why are you better in this or why are you worse than that? Some of it has to do with where we are relatively -- where are our relative strengths and then how do the markets evolve to either give -- play to your relative strengths or not. And you've got to look at it over a long period of time. On Investment Banking fees, as I said, we made the investment in bankers. And debt capital markets is relatively strong. It's equity capital markets and M&A, where we need to do more catching up. And leveraged finance is obviously reasonably strong. So when you then look at that, some of it has to do with the pattern of deals in the last year versus the year before. They were larger, more lumpy deals. Sometimes if you're lucky to be in them, you're good. Otherwise, you're not. So '24 was a helpful year, '25, less helpful. But over the long run, we expect to get that market share simply by having the right bankers and the right product, and we look at this over a longer period. So I will give that kind of answer to you. Right. Anybody else? Going once. All right. Well, listen, thank you very much. Let me say that over the last couple of years, Anna and I have really appreciated the engagement from all of you and your organizations as we've been on this journey. We appreciate your candid feedback, supportive and encouraging. We welcome the opportunity to continue these conversations with you. Some of it will be on the road and one-on-ones. And I want to really thank all my colleagues who have helped put this together, Marina, starting with you and your team and the Investor Relations team. So please go easy on them. And then thank you. If you have a minute or 2, there are refreshments outside, and you can linger or you can run back to your computers. I'll leave that to you. Thank you. Angela Cross: Thank you.
Operator: Good morning, ladies and gentlemen. Welcome to Vale's Fourth Quarter 2025 Earnings Call. This conference is being recorded, and the replay will be available on our website at vale.com. The presentation is also available for download in English and Portuguese from our website. [Operator Instructions] We would like to advise that forward-looking statements may be provided in this presentation, including Vale's expectations about future events or results encompassing those matters listed in the respective presentation. We caution you that forward-looking statements are not guarantee of future performance and involve risks and uncertainties. To obtain information on factors that may lead results different from those forecast by Vale, please consult the reports Vale files with the U.S. Securities and Exchange Commission, SEC, the Brazilian Comissão de Valores Mobiliários, CVM, and in particular, the factors discussed under forward-looking statements and Risk Factors in Vale's annual report on Form 20-F. With us today are Mr. Gustavo Pimenta, CEO; Mr. Marcelo Bacci, Executive Vice President of Finance and Investor Relations; Mr.Rogério Nogueira, Executive Vice President, Commercial and Development; Mr. Carlos Medeiros, Executive Vice President of Operations; and Mr. Shaun Usmar, CEO of Vale Base Metals. Now I'll turn the conference over to Mr. Gustavo Pimenta. Sir, you may now begin. Gustavo Duarte Pimenta: Hello, everyone, and welcome to Vale Fourth Quarter 2025 Conference Call. Last year, we delivered outstanding results by exceeding all production guidances while maintaining a strong focus on cost performance and capital discipline, both in iron ore and Base Metals. Our flexible commercial strategy in iron ore and the successful ramp-up of key growth projects such as Capanema, Vargem Grande, Onça Puma furnace 2 and Voisey's Bay expansion were fundamental in driving value for 2025 and will continue to do so in the years to come. At Vale Day, we outlined our strategy and presented our ambition to create superior value for our shareholders, driven by a relentless focus on operational excellence and adding high-quality growth projects to our portfolio, particularly in copper and iron ore, leveraging our unique endowment. I am extremely confident that by executing on this long-term strategy, we will generate significant value for all of our stakeholders. With that, I would like to now turn to the highlights of our 2025 performance. As I mentioned earlier, we were able to make significant progress in 2025. On our core value safety, we achieved a 21% reduction in high potential incidents, reflecting the continued evolution on our safety culture and on our focus on building an accident-free work environment. On tailings dams, in August, we fulfilled the commitment made to society in 2020 by eliminating all dams classified at emergency level 3 by 2025. We also ended the year with a 77% reduction in structures at any emergency level compared to 2020, and we expect it to reach an 86% reduction by the end of 2026. These are meaningful milestones in our commitment to nonrepetition. We also continue to make solid progress on reparations efforts, reaching 81% execution of the Brumadinho agreement and disbursing BRL 73 billion under the Mariana agreement, ensuring fair and comprehensive reparation. Operationally, 2025 was simply an outstanding year. We exceeded production guidances across all businesses while continuing to sharpen our competitiveness, once again delivering meaningful and sustainable cost reductions. I will cover that in more detail in the next slides. In February, we launched the Novo Carajás program, a transformation initiative that will help us double the copper output while enabling accretive growth in the world's highest quality iron ore endowment. Finally, the combination of strong execution in a more favorable cycle allowed us to exceed initial market expectations in terms of shareholder remuneration with a double-digit dividend yield. We entered 2026 with great optimism and the same focus to deliver strong results. Now let's look in more detail at our businesses, starting in the next slide. Iron ore production reached 336 million tons in 2025, 3% higher year-on-year and the highest level since 2018. The growth was primarily driven by the start-up of low capital-intensive projects such as Capanema and Vargem Grande, combined with a very solid performance in Brucutu and S11D. Together, these assets enhance the flexibility of our operations and strengthen our product mix. In the second half of 2026, we will begin commissioning the Serra Sul plus 20 million tons project, which will further increase volumes from our most competitive asset in terms of quality and cost. Enhanced operational flexibility, combined with our active product portfolio management enabled us to maximize value creation in the iron ore business while continuing to meet the evolving needs of our customers. Vale Base Metals also delivered outstanding results in 2025, achieving double-digit production growth in both copper and nickel. In copper, production reached 382,000 tons in 2025, 10% higher year-on-year, supported by record output in Brazil and solid performance across our polymetallic assets in Canada. Nickel production also showed a strong growth of 11% year-on-year, driven by the ramp-up of the Voisey's Bay mine extension project and the commissioning of the second furnace at Onça Puma, reaching 177,000 tons. This strong performance at Vale Base Metals underscores the exceptional work of our team in unlocking value from our existing assets and positioning the company to deliver on its long-term growth ambitions, particularly in copper. In 2025, we delivered cost reductions across all 3 commodities. This year-on-year improvement reflects the success of our efficiency programs and greater operational stability, which continued to translate into lower unit costs. In iron ore, all-in costs reached $54 per ton, representing a $2 per ton year-on-year reduction despite a much lower contribution from pellet premiums. In copper and nickel, all-in costs declined by 77% and 27%, respectively, driven by higher byproduct prices and volumes. Looking ahead, we remain firmly committed to further strengthen our cost competitiveness across the portfolio. We are very confident in our ability to deliver our guidance once again in 2026, reinforcing Vale's position at the very low end of the global industry cost curve. Before passing on to Marcelo, let me briefly touch on capital allocation. Our capital allocation remains robust and disciplined, combining consistent organic growth with above-average shareholder remuneration. The new Carajás program continues to advance as planned. In January, we received the construction license for the Bacaba project and construction works started on schedule. The start-up is expected in the first half of 2028, with an annual copper production capacity of 50,000 tons. We also conduct a thorough review of our CapEx program in 2025. This resulted in an annual optimization of more than $500 million and allowed us to establish a new long-term CapEx guidance below $6 billion. Finally, in November, we announced a $2.8 billion in dividends and interest on capital. In 2025, Vale delivered a dividend yield of 16%, reflecting our confidence in the long-term prospects of our businesses. As I mentioned at the beginning of this presentation, our ambition is clear. We are committed to creating superior value within the sector, and I'm highly confident we will achieve that by consistently executing on our strategy. I will now pass the floor to Marcelo Bacci, who will walk you through our financial performance. I will return afterwards for closing remarks. Marcelo, please. Marcelo Bacci: Thanks, Gustavo, and good morning, everyone. As Gustavo highlighted in his opening remarks, 2025 was an outstanding year for Vale with strong performance and consistent execution across all 3 businesses. We delivered robust results and entered 2026 with great confidence and clear momentum. In the fourth quarter of 2025, our pro forma EBITDA reached $4.8 billion, representing an increase of 17% year-on-year and 10% quarter-on-quarter. As shown on the slide, this strong performance was primarily driven by an excellent quarter at Vale Base Metals, supported by favorable pricing conditions for copper and byproducts, while continuing to capture meaningful operational gains across our polymetallic operations in Canada. As a result, Vale Base Metals EBITDA more than doubled both year-on-year and sequentially, reaching $1.4 billion in the quarter, clearly demonstrating improved operating performance as well as the earnings power of this business. In iron ore, we also delivered strong results with EBITDA remaining at a solid $4 billion with higher sales volumes and improved realized prices compensating for the BRL appreciation in -- the quarter. Now let's turn to our cost performance. During the quarter, our C1 cash cost, excluding third-party purchases, increased by 13% year-on-year. This was primarily driven by the unfavorable BRL exchange rate and higher planned maintenance activities in the northern system with a clear focus on optimizing performance and ensuring long-term asset reliability. In addition, higher production volumes in the Southern and Southeastern systems contributed to higher overall average unit costs. However, this impact was more than offset by the positive contribution to EBITDA, reflecting the strong operating leverage of our portfolio. Importantly, this cost increase in Q4 was expected and fully in line with our 2025 guidance, which closed the year at $21.3 per ton, right at the midpoint of the guidance range. Looking ahead to 2026, we expect C1 cash costs to range between $20 and $21.5 per ton, representing a further year-on-year reduction supported by continued operational discipline and efficiency initiatives. The all-in cost also performed in line with full year guidance, reaching $54.3 per tonne in the fourth quarter and averaging $54.2 per ton in 2025. This annual performance reflects the downward trajectory in our C1 as well as gains from our long-term affreightment strategy. Turning now to Vale Base Metals. Once again, both copper and nickel delivered consistent reductions in all-in costs. In copper, all-in costs decreased by $2,000 per ton, moving into negative territory at minus $0.900 per ton, the lowest level in the history of the business. This outstanding performance was driven by strong byproduct revenues, supported by higher gold prices and increased gold production at Salobo, combined with solid operating performance in our Brazilian assets. In nickel, all-in costs declined 35% year-on-year, reaching $9,000 per ton. This significant improvement was mainly driven by higher byproduct revenues, particularly copper, as well as stronger performance at Voisey's Bay and Onça Puma, which helped dilute fixed costs. Looking ahead, we expect Vale Base Metals to continue delivering operational improvements throughout 2026, further reducing operating costs beyond the positive contribution from byproducts. In nickel, our focus remains firmly on achieving at least a cash breakeven position by the end of the year and we are clearly on track to deliver on this objective. Now let's move on to cash generation. Our recurring free cash flow generation reached approximately $1.7 billion in Q4, more than double versus a year ago. This improvement was driven by our strong EBITDA performance as well as cash inflows from exchange rate swap settlements, reflecting the appreciation of the Brazilian real. Our annual CapEx closed fully in line with the guidance we had announced, totaling $5.5 billion. Looking ahead to 2026, we remain firmly committed to disciplined and efficient capital allocation with expected CapEx in the range of $5.4 billion to $5.7 billion. We are confident that we can deliver all the growth initiatives discussed at Vale Day while keeping our operations at a very high standard with an annual CapEx below $6 billion in the long term, positioning Vale as one of the most accretive growth opportunities in the industry. Also in 2026, we already expect to see a significant reduction in cash outflows related to reparations and then decharacterization commitments as these programs advanced meaningfully over the last year. As a result, we anticipate a reduction of approximately $1.5 billion in cash disbursements compared to 2025. Finally, as Gustavo highlighted, we announced $2.8 billion in dividends and interest on capital. Of this amount, $1 billion were extraordinary dividends paid in January, while the remaining amount is scheduled for payment in March. As you can see on the next slide, our strong cash generation in the quarter led to a significant reduction in expanded net debt, which closed the period at $15.6 billion. Our target range remains unchanged at $10 billion to $20 billion with a clear objective of operating at the midpoint of this range. This level will continue to serve as our reference for additional shareholder remuneration. Before handing back to Gustavo, I would like to emphasize that the strong results we delivered in 2025 were made possible by clearly defined priorities and a company-wide focus on disciplined execution. Our value creation is anchored on a consistent, disciplined approach to capital allocation, which will continue to guide our decision going forward. With this foundation in place, we expect to continue advancing our growth strategy while consistently returning value to our shareholders. With that, I turn the call back to Gustavo for the key takeaways. Gustavo Duarte Pimenta: Thanks, Marcelo. I would like to highlight the key takeaways from today's call. First, safety remains at the center of everything we do, and our performance over the last years reinforces that we are on the right direction. Second, our culture and strategy are strong enablers of our ambition to consistently deliver superior value to our shareholders. Third, operational excellence continues to be a core pillar of our performance. We have delivered on all of our guidances in 2025 and we remain laser-focused on maintaining a solid operational performance in our businesses. At the same time, we are accelerating value-accretive growth opportunities such as the Novo Carajás program, offering a highly competitive and compelling value proposition. And finally, our disciplined approach to capital allocation remains unchanged, supporting our ability to deliver attractive shareholder returns. Before we open up the call for questions, I would like to reaffirm our confidence in the company and in its ability to unlock even greater value in 2026 and beyond. We experienced the strongest operational performance in Vale's history, allowing us to maximize value from our existing assets while positioning the company for accretive growth opportunities. All of that at a special moment for the industry, where mining becomes essential to everything we do from energy transition to AI, and we believe Vale can play a key role in that future. Now let's move on to the Q&A session. Thank you. Operator: [Operator Instructions] Our first question comes from Leonardo Correa from BTG Pactual. Leonardo Correa: So a couple of ones for me. First one, maybe for Shaun on the very solid results coming from DBM, right, Shaun. So we saw a very strong cost performance, and my question relates to that. If we look at the copper all-in numbers, they were negative, right, around $800 per ton. Nickel was $9,000 per ton in the quarter, which I can imagine is highly influenced by the very strong byproduct credits that you guys are realizing in several precious metals and also gold, right? So curious to see, apart from that byproduct credit scenario, which isn't helping, I mean, just curious to hear about some other, let's say, bottom-up initiatives. In terms of the guidance, right, I mean, on this topic, the guidance at Vale Day is about $1,000 to $1,500 in copper all-in costs. In nickel, it's around, let's say, $13,000 all-in cost. So you guys are materially below the guidance that you delivered a couple of weeks ago, right? So I just wanted to understand whether you see, let's say, some upside potential or better, some downside potential on the cost guidance you gave some weeks ago. That's my first question. The second one, and this is for Gustavo. Gustavo, I think the introduction was very clear on how strategic this is all becoming, especially your copper assets, which the market for many years has not really looked into, right? And has not really valued. At this point, the market is still ascribing basically the same multiple for iron ore and copper, we think, right, something around 5x EBITDA inside Vale. You see a series of copper plays in the world trading at around 10x EBITDA or even higher. Vale has a lot of potential. There's a lot of growth in-house, which you guys are working on. I just wanted to hear a bit more of this opportunity and how to unlock this value, right? Is it going to be -- at some point, we're going to discuss again the IPO of VBM? Or you think it's more about delivering being consistent and just giving more, let's say, visibility on these projects? Shaun Usmar: It's good to chat to you again, and thank you for the 2 questions there. I think the questions around cost and ongoing improvements and sustainability. I mean, your thesis is correct. And I think we've talked a lot about this in the last year or so. You remember when I started in this role, we initiated a lot of restructuring, taking out significant -- about 1/3 of our global overhead. As a sort of catalyst as we changed the operating model for the organization to one that was more sort of lean and decentralized. Our targets at the time you'll recall, were about $200 million on a cash basis, almost half split between costs and capital as we improved capital allocation. And as we went through the year, we found more and more opportunity as we then also focused on operating execution. So as you think about this, we ended up over $400 million, so double what we expected. There is an intense focus on -- you've seen we successfully ramped up multiple projects. So we've reduced fixed costs. We've diluted fixed costs by increasing volumes, and we continue to focus on keeping discipline in copper as well as nickel. So you'll see that in our Vale Day guidance. You will see this year as we go forward that there's an increasing focus on getting our tons and also continuing to drive the cost performance of the business. So that's our commitment and we'll continue to update it. And as for guidance numbers, obviously, it's early in the year. I'd say we're well on track. You can appreciate the volatility on everything from gold price to the various byproducts that we have. But yes, it's definitely a feature. And I think if it continues in the sort of price regime, there's obvious upside. Gustavo Duarte Pimenta: So I'll take the second question. Yes, look, I think the market starts to appreciate and see the value that our Base Metals business can bring to the table. If you remember a few years ago, we had a series of discussions around turnaround, and it's great to see the business performing operationally well. That was our first objective when we did the carve-out, and I'm very happy to see the strong performance from the business. Now I think we still have a lot of work to do in terms of showing we can deliver growth. There is enormous growth potential within the endowment that Vale has. So we are doing, as you saw, around 380 kilotons a year. We can certainly work to double it and that's the mandate for the team. And the more Shaun and the team looks into our portfolio of assets and the development projects, the more excited they get in terms of the opportunity. So I think now it's on us to show that we'll be able to advance those projects. We got the installation license for Bacaba. We filed a preliminary license for Alemão last year. So things are moving forward. And I think once we can demonstrate to the market that we can operate the assets well, but also that we can grow faster than our peers, our copper endowment and portfolio, I think we will continue to, from our perspective, get share price recognition for it. So that's what the team is working on. And then if we, at some point in time, decide to do some particular capital market transactions, we will assess, right, what is the ideal way to fund the business. But at this point, I think the focus is making sure we continue to operate well and we accelerate the growth program. Operator: Our next question comes from Daniel Sasson from Itau BBA. Daniel Sasson: My first question is for Rogério. Rogério, you changed the way Vale thinks about its product portfolio, right, shifting from a goal of maximizing value for the company instead of maximizing iron content in the portfolio. But looking at your realized prices in 4Q, there was actually a decline versus 3Q with weaker quality premiums. Can you try to help us think about the dynamics of that in the last quarter and discuss how comfortable you are with the implementation of your current strategy, which also involves the mid-grade products and so on and so forth? And my second question to Shaun, maybe a follow-up to Leo's previous question. It didn't become clear to me if you have -- what are your alternatives to try and reduce, for instance, your cash costs, especially in the nickel business, right, which is where you likely have more opportunities to -- so as not to depend on high byproduct revenues, right, which prices you can't really control. So what would you say are your more urgent operational goals that are not related only to ramping up volumes that would obviously allow you to dilute fixed costs if you could get in more detail on what are your goals to reduce costs? And that obviously, coupled with a more rational capital allocation also in the nickel business would drive you to become free cash flow neutral even if byproduct revenues decline, right? Those would be my questions. Rogério Nogueira: Daniel, Rogério, I'll take the first question, and thank you for asking it. Indeed, our price realization for iron ore fines is slightly decreased, but primarily due to lower market premiums and mix optimization. But it's important to notice that it was not due to structural premium deterioration. This is a very important point here. There were 2 main drivers for this quarter-on-quarter change in price realization. First, the decline in premiums for IOCJ. We had about a decline of about $3.5 per ton. And also, we had a decline in premiums for BRBF of roughly $0.50. The second one was our sort of plan design, I would say, of another mid-grade product from Carajás, and we're trying to do it to optimize production, but also to maximize the use of our resources and test some additional specs in the market and see customer response. But having said that, I think we are always saying and I would like to reinforce that our revised commercial strategy aims primarily at optimizing contribution margin across the supply chain. We've been saying that it's not about optimizing price realization independently. It's looking at the whole supply chain and optimizing contribution margin. I think also I'd like to call the attention to the fact that the premiums of our flagship products, especially the main ones, remained very resilient despite low steelmakers margin globally. So in particular, if you look at IOCJ, it sustained premiums of around $13 per ton and BRBF about $2 per ton if you average all the indexes $62. So very resilient premiums for those products. And I guess more important to your question is that going forward, I think what we see is that this flexibility will be a real strength for Vale will be a real strength for us. So it may introduce some swings in price realization. I think this is something that you probably will observe. But we believe that it also will create optionality through the cycles. And with that, we believe we will be able to boost value through these cycles. So this is the view. It's always looking to total contribution across the supply chain, and that's why we're trying to drive a very flexible supply chain. Shaun Usmar: Yes. And Daniel, to your second question, just to give you a bit more color. I think the first thing is, as you say, we have to develop a track record of execution, not just on costs, but obviously, on volumes and asset integrity, maintenance, reliability and obviously, to do so safely. It's been 5 quarters you've seen the results relative to both market expectation. But I'll give you an example. Your question was specific to nickel. It's the first time, I think, since Vale acquired the business nearly 20 years ago that we actually -- we met budget. We obviously set stretched budgets. We are running this business not on backward-looking metrics, but we're continuing to build in low probability opportunities we see as we mature them into our rolling forecast and continuing to improve above and beyond what we can see. So specifically, Onça Puma last year brought on, on time, under budget, 13%. We achieved record production even last year for that asset with that second furnace. This year, we will be running at full entitlement and will, even in a lower cost environment, be generating cash. And [indiscernible] and her team have done a great job of both cost control, asset reliability and bringing that on. And we -- I have to say every single one of our assets contributed savings in that restructuring I mentioned, both in cost and CapEx. And to Gustavo's point earlier in his opening remarks, continue to find these opportunities, and that's what we're pushing. Voisey's Bay Long Harbour, we ramped up about 20% ahead of plan. That meant we had nearly a $200 million improvement in our EBITDA relative to our internal plans, not because of price. As you know, nickel price was weak, but because of the successful execution debottlenecking. And what happened in turn is the feed that we put through Long Harbour allowed us for the first time in its 11-year history to hit record production. Now with that asset now fully ramped up at Voisey's the challenges for us to continue to run that at capacity in the year ahead, which will -- while we continue to lower cost and dilute fixed costs. Sudbury, you remember, we were looking to maximize the throughput of our 6 mines through the Clarabelle Mill. It's the biggest throughput at 5 million tons we've had since 2016. We have to go, and we will go beyond towards 7 million in the coming years. And there's an intense focus. We've got broke out of where the dominant constraints are, what are the key value drivers in each of these different areas. There's initiatives that are going above and beyond, we'll perhaps talk about in an Investor Day later this year alongside our copper projects and others and just give you a bit more of a flavor. So the idea is beyond our current plans, we recognize that we have to be in the lower half of the cost curve, not relying on byproduct credits, and we're not there yet. And you'll recall Gustavo at Vale Day last year saying that we have made a commitment to get to cash flow breakeven in lower price environments by the end of this year, and there's a lot of initiatives to focus on us doing that. So hopefully, that gives you a bit of a focus, but I'd say things like that asset integrity, asset reliability and development rates in underground mines and improving productivities are a core focus. Operator: Our next question comes from Alex Hacking from Citi. Alexander Hacking: I had a couple of questions on nickel. Given your experience operating in Indonesia, how do you interpret the changes to the licenses there, firstly? And then secondly, do you see this as something that could be a structural change for the nickel market in terms of supply and price? Shaun Usmar: Alex, I think it's a question that everyone is asking. You've seen the price response in the last periods. We've seen very clear guidance and I think a realization with the Indonesian government that they have an ability here to address some of the significant oversupply. And there's also environmental and other aspects, I think they're focusing on. So I'd say going to the thematic that was, I think, raised in the last couple of questions, we're cautiously optimistic, but we recognize we're on the wrong end of the cost curve still on our journey. And candidly, from a competitive point of view, I don't want to rely on the kindness of strangers to make sure that this business is resilient. So I'm cautiously optimistic. You will see that you saw the write-downs that we took on nickel really is a focus on our disciplined capital allocation. This is focused on legacy I want to make sure that this business is run as lean and as efficient and as cost competitive as we can. And then indeed, if we continue to find, let's say, more rational participation and supply occurring in Indonesia and elsewhere, we'll be -- our shareholders will be the net beneficiaries of that. The focus is on what we can control. Operator: Our next question comes from Caio Ribeiro from Bank of America. Caio Ribeiro: So my first question is on Fabrica and Viga. I just wanted to see if you could provide some color on the latest developments with these operations, if you have yet a conclusion on what caused the sentiment overflow and whether you see this generating any broader impacts to your other operations? In other words, if you see the need to upgrade safety parameters to prevent this type of event at other operations? And also, what is the current status quo in terms of freezing of assets or fines deriving from this incident? And then secondly, clearly, the company has been making notable progress with derisking with the decharacterization of dams, reduction of emergency levels of dams as well. And this has been key to unlock restricted AUM, right? So I just wanted to see if you could share some color on how much AUM you perceive is still restricted from investing in Vale at this point? And what you see as the key triggers catalysts that you as a company can deliver over the next years to unlock this restricted AUM? Gustavo Duarte Pimenta: Caio, thanks for the question, Gustavo here. I'll cover the first one and then Marcelo will cover the second one. So on Fabrica, Viga, what we had there was overflow of water with sediments, mostly related with very heavy rainfalls that we faced during that particular period. We've been since then working to restore the operational conditions of the site. The impact has been limited. So we expect that in the next 2 to 3 weeks, most of the work will be done and we'll be ready to reestablish operations, certainly depending on the authorities for us to resume operations. We are taking a deeper look at our facilities to see what else can we do to make sure we become even more resilient given the changes that we are all facing in terms of climate change and so on. And we will incorporate those learnings for our existing facilities and others. I think it is important to highlight that none of our dams and geotechnical structures have faced any impact. And they -- in fact, they performed very well during this rainy season. We do monitor them 24/7 and the work that we've been doing over the years have demonstrated that they continue to be resilient and performing very well. Nonetheless, we will look back at what else can we do to make sure a similar event doesn't happen, and that's what the team is working on. But from a practical standpoint, the impact has been limited, and we are working as we speak to make sure we can put those facilities in conditions to resume operations. Marcelo Bacci: Caio, this is Marcelo speaking. About your second question, our estimate is that right after the accidents, we had about $5 trillion of assets under management between equity and fixed income that became restricted from investing in Vale. And since then and more recently, I would say, most of the recovery that we had was last year, apparently something like 30% of that or $1.5 trillion have been unlocked or unblocked from this restriction. I think the main events related to that is the improvement -- first, the improvement in the ESG ratings that some of these investors follow, and we've been consistently improving. But some of them also have their own criteria. So in parallel to working on delivering the KPIs that are important for the ESG ratings, we're also working directly with some of these investors in order to understand what we still have to do to come back to their portfolios. For instance, next month of May, we're going to have another roadshow in Scandinavia, which is an important part of those -- where those restrictions are to show our improvements and to have a direct interaction with those investors. So this is gradually coming. It's up to us to continue to deliver the results so that we can accelerate the process. Operator: Our next question comes from Christopher LaFemina from Jefferies. Christopher LaFemina: I apologize if you addressed this earlier, I had to dial in late. So my question is around the commercial strategy in iron ore. And I'm wondering a couple of different factors there. So first, obviously, with the emergence of CMRG, which is doing a lot of blending, does that impact the potential premiums that you might get on some of your blended ores because your blending strategy has been far ahead of your peers, and I'm wondering how what, CMRG is doing might impact that? And secondly, just in terms of your pricing, I mean, pricing against the benchmark historically, effectively against the Pilbara blend, which was 62% Fe content ore and now that's 61%. And I'm wondering if your discussions with your customers are in pricing relative to the benchmark, like where it is today versus where it's been historically? Or are you looking at bigger premiums just because the benchmark is lower quality? In other words, the Chinese that I would say historically you've gotten a 5% premium to the benchmark or whatever is 5% premium today, but the benchmark is lower quality ore, your premium should be bigger. Are you getting bigger premiums as a result of that? I'm not sure if that question was clear, but if it was, any help would be appreciated. Rogério Nogueira: Chris, Rogério, it was very clear. To your first point about CMRG and the blending strategy, more broadly, I think we've been discussing with CMRG always with the view of creating win-win opportunities. So it has to be something for us to operate on a differential basis that we create value for both of us. In regards to the blending strategy, CMRG has its own goals of having its own blending yards, but it hasn't, and we don't believe it will affect our blending strategy in China. And in particular, even if they have their own blending yards, I think you may think about the world as a single big blast furnace. So whatever comes in makes is what makes a difference, and it's not how it is blended. So the strategic thinking is about what kind of product, what kind of chemistry, what kind of size distribution we offer to this sort of big world blast furnace, okay, if you will. Your second question about the benchmark. It's -- what we do generally in our contracts is that we have a basket of indexes. So some of them will use Platt 62, some of them will use metal bulletin 62, metal bulletin 62 low alumina. So to a certain extent, some clients are actually looking to move from the 62 to 61, which will become a more liquid index in the market, and it's a reality. But it doesn't affect our price realization, if you will. I think if anything, it will change the price differential. Operator: Our next question comes from Marcio Farid from Goldman Sachs. Marcio Farid Filho: Maybe a follow-up to Rogério. Rogério, probably an important point there, what's happening in the market in terms of overall grade decline. And you mentioned that the 61% benchmark does not change our price realization. But I'm just wondering how does it change Vale's overall resources and ability -- I mean, if you think about cutoff grade being cut, you probably talk about potentially increasing life of mine, reducing replacement CapEx, to some extent, reducing OpEx as well. And that seems to be where the liquidity and where the demand for China is going to come from, right? So just trying to understand how does this kind of degrading trend we are seeing globally affects Vale's resources on the ground. That would be great. And if you can follow up in terms of CMRG discussions. So obviously hearing a lot about what's happening between CMRG and BHP at least on the news. But just wondering if that kind of hard conversation is -- it can eventually contaminate Vale as well. It's been very specific to this one case. And maybe an update on the Base Metals side. I think there was an expectation that some technical reports can pop up in early 2026. Just trying to understand how VBM is performing in terms of exploration program so we can better track the projects? Rogério Nogueira: Marcio, thanks for the question. On the -- good that you follow up on the price realization on 61. Indeed, I think to your point, when everybody is moving down to a lower grade to a 61 index, alumina, in most cases, the ratio of alumina silica might increase. And if anything, that actually offers us an opportunity to improve our product mix to better suit to this new reality. So it tends to be favorable to us. To your second question about how do we use this mix optimization and you're spot on because the idea here is one to increase our resource base or to better use our resource base. If we keep the cutoff grades too high, sometimes what we end up being waste is really good iron ore. So the idea here was really think about an integrated portfolio, one that actually looks into the market and also look into our resources and capabilities. And obviously, as we reduce the cutoff grades, as you just pointed out, it actually increases the ability for us not only to improve the resource base but to reduce CapEx, reduce OpEx, increase production. So this is an integrated view together with [indiscernible] and we're working very close together to optimize the supply chain in this regard. CMRG, I think to your third question, this is hard for us to comment on third-party negotiations. But I mean, from what we know, BHP's conversations with CMRG are still ongoing. They will have second rounds or another rounds of negotiations with other -- more intense negotiations actually with other suppliers, iron ore suppliers, including ourselves. But we'll see it in due time. Shaun Usmar: Yes. And Marcio, on your questions on the technical exploration side and those reports, you recall Vale Day, there's a huge amount of work that's been done to take a different approach with our restructuring on projects in a fundamental way. We talk about what that looks like at a high level. The technical studies, SK 1300 level standard studies, a couple of hundred page reports are in final draft form right now, which we're reviewing. And the idea would be for us, certainly before the end of the quarter to be publishing those on the VBM website to make those available. So we just went through and discussed some of this with our Board today, and we'll be finalizing that work and looking to make that available to investors and analysts. And also the MRMR and the exploration results, the extensions and the results that we're seeing, which we're very excited about will be unveiled, and we will be able to talk more about that at an upcoming Investor Day. So stay tuned. And the last thing to reemphasize, you remember, we -- last year, particularly in copper and the Carajás, the exploration potential is huge. We do about $170 million a year of exploration globally, and we reprioritized. We went from about 8 to 23 drills in Pará. And indeed, from 20,000, 30,000 meters to 600 last year, we're on track for the 100,000 this year. And we'll be looking to update the market more regularly on some of those results because I think they're very exciting. I think it's a lot of what Gustavo had referred to in terms of the upside and the growth potential that we're focusing on simultaneously. Operator: [Operator Instructions] Our next question comes from Rodolfo Angele from JPMorgan. Rodolfo De Angele: Interesting to see conference call Vale more biased towards Base Metals this time around. But I have a question on each of the 2 sides of the business, and I want to start with iron ore. And this is probably for you, Rogério. I think one question we got a lot from investors into this year is about the strength of iron ore pricing. I guess investors were more on the bear side. There is capacity coming in. Simandou is a reality already. But -- and we look at a few statistics, China importing record levels of iron ore despite the fact that data suggests that peak steel consumption or production is already behind us. So I don't know, I would like to hear from you what is your assessment? What is the state of affairs? What do you expect for 2026 in terms of iron ore business environment and whatever you can talk about prices. So this is my first question. My second is I'm going to get back to Base Metals. I'm not sure if I understood correctly, but there is some additional information to come up on the development plans soon. But I think investors are not yet pricing in the growth that Vale can deliver on iron ore. And ultimately, once we have a more detailed plan. Today, I think it's a very real ambition. But if we get like this is the -- how we're going to get there. It's 50 from this project with this CapEx intensity. So I think that will be a trigger to see everyone kind of starting to put more numbers and pricing that growth in Vale's copper growth story. So is it reasonable to expect that in the short term? And if not, if you could comment a little bit, at least on what should we expect in terms of CapEx intensity, at least on a relative basis compared to industry, if you cannot share numbers, just to give us an idea as well of potential returns. Rogério Nogueira: Rodolfo, Rogério here. I know that China is not easy to understand these days, but we see indication of good fundamentals, I mean, for both steel and also iron ore. And we do see that globally. China, as you know, infrastructure and manufacturing continue to provide positive support to steel demand despite the challenges that we see and we know in the property sector. I think also, as we have seen, direct and indirect steel exports that we believe are likely to remain at very high levels. This is at least our view. So based on this, I mean, what we anticipate is that crude steel production for 2026 will be at the same level as last year in China. And outside China, we see market fundamentals are very positive or positive, I should say, across most regions. Some recovery we see more broadly in most of the world regions. In terms of iron ore supply and demand, we expect it to remain balanced at about 1.650 billion tons. That's our view. And we -- as you pointed out, we expect China's iron ore imports to remain broadly stable. This is our view. One point that everybody is noticing is the inventories, the high level of inventories at Chinese ports, which are roughly at 170 million tons currently, closed the year at 160 million. We believe that when you look at this on an aggregated basis, consolidated basis with steel mill inventories, you'll see that there is an offset. Steel mill inventories have increased about 20 million tons. So overall, when we look at it on a consolidated basis, iron ore inventory remains about 35 days of consumption, which is if you look back, it's within the typical range for this time of the year. So when we put this all together, we see that steel and iron ore fundamentals, and they point to a healthy price level for 2026 despite the usual volatility that we see. So when we say similar to last year, we're acknowledging that there may be volatility throughout the year, okay? Specifically on Simandou, we -- as you asked, we believe Simandou will come to the market gradually. And as we have been talking and we emphasized during the Vale Day, the Simandou additional volumes will be offset by depletion in the industry. Shaun Usmar: Yes. Thanks. And then specifically to your question, look, firstly, I came to this job excited actually about exactly what you just said that I think I can't think of, I'd say, a better underrecognized copper growth profile and what we are seeing in this business. And I think there was the very idea that brought Gustavo and the team to sort of carve out VBM. I'd direct you to a few quick things. The first is, and I think you see it in these results, we have to deliver in the immediate term. So there's quarterly delivery that we've been focusing on and you see that in a number of occasions exceeding guidance. That's the earning at least some recognition of what is possible operationally. And then if you go back to the Valid Day material on the website, there was a huge focus on this. We actually overlaid on the slide as we restructured our approach to projects, particularly the copper growth side, we took projects where we've dramatically lower capital intensity. So for example, Bacaba, we just got the LI. We're well on track now in execution, which will bring online in the first half of 2028. That is nearly half the capital it was a year ago. The return has gone from mid-teens to over 50%. And it's more of a brownfields project in terms of risk. As you can appreciate, it's extremely attractive from a capital intensity point of view. Of course, particle flotation at Salobo, next one, nearly 30,000 tons of additional copper. That's the 2029 time frame. We're well advanced on that. We're looking at actually doing some early works now and that's nearly half the capital intensity, and you're talking over 50% rate of return, brownfield site project. Alemão is the next one. It's a brownfield site. We've changed the mining method from sublevel cave to sublevel stoping. The returns have gone from mid-teens to mid-20s plus. And that will be the -- we just November last year, submitted the first license for that. So we've got this mapped out. We've accelerated. We've changed the sequence. It compares extremely favorably. You'll see it on our website, the capital intensities. And to your point, the technical studies, the execution, and I don't think at this point, the IR team has released a date. But in the near term, we'd be looking to have an Investor Day to go through more of the detail with the team on the projects, the details, the operational improvements and the things that have been discussed on this call in terms of cost improvements in both nickel and copper. And the other one is exploration because I think it's extremely exciting and it's underappreciated. Operator: Our next question comes from Carlos De Alba from Morgan Stanley. Carlos de Alba: I want to go back now to capital allocation. Given the share price strong rally and where you are in the expanded net debt range, what is the view on returning excess cash to shareholders potentially more buybacks, more special dividends? How is the company thinking about it? Marcelo Bacci: Carlos, Marcelo speaking here. I think the current market conditions are favorable for cash flow generation. So in case we start to go in the direction of lower than the midpoint of our range in terms of expanded net debt, there is a chance that we have additional returns to shareholders. Last year, we favored the dividends because of the change that came on the taxation that was effective in the beginning of this year. For future allocations, we will see what is the situation at the moment. We tend to be more balanced, but it will depend on the relative valuation. But definitely, we will consider both dividends and buybacks. Operator: Our next question comes from Rafael Barcellos from Bradesco BBI. Rafael Barcellos: Congratulations for the results. Rogério, how do you -- how should we think about your mid-grade volume strategy this year? I mean, especially considering the increase in this type of product coming from Carajás. And what are you seeing in the freight market, I mean, which appears seasonally stronger this year. I mean forward curves are pointing higher. So I'm interested to understand. I understand that Vale is protected against the short-term volatility, but what could be the potential impact of the freight dynamics on the company and in the overall cost curve? And my second question regarding M&A initiatives. Gustavo, we've continued to see a very active M&A news flow across the sector. So how should we think about Vale's positioning in this environment? And most recently, I mean, we saw discussions involving Rio Tinto and Glencore. So if something were to materialize there, how could that affect Vale's partnership with Glencore in the Victor operation in Canada? And more broadly, how should we think about future partnerships in Canada? Rogério Nogueira: Rafael, thanks for the question. In terms of your question on mid-grade products from Carajás and the volume. I think as we mentioned, we are increasing recently, and we're expecting from 40 million to 50 million tons this year. But it is based on the market assumption of what the market wants is looking at what the market dynamics is currently. But again, the volume, the final volume will depend on the market. What we're trying to do, as we said in the beginning, is adjust our product offering according to the market. So if the market values more higher quality products, which actually yield higher productivity to the steel mills, we may shift our product portfolio. But again, it's all about maximizing total contribution, not necessarily volume, not necessarily price realization. On the freight market, the freight market, as you pointed out, is really going up for the future. But we have actually -- and I won't be able to give too much detail. We have revised our freight strategy this year with very positive results. And what I can tell you is that our exposure to the freight spot market today is very low. So the impact on us would be very limited. And I think on the positive side, it would increase our competitive position against other players. Gustavo Duarte Pimenta: Rafael, Gustavo here on your M&A question. Look, we continue to believe that we'll be able to capture more value by developing our unique endowment. This is a sort of competitive advantage for Vale vis-a-vis our peers. We have a tremendous endowment with the ability to bring projects online at below average cost of capital and capital intensity, as Shaun pointed out with some examples there. That applies also for iron ore. So we think from a value creation standpoint long term, developing our own endowment makes more sense, and that's where we're going to get more value. We are looking at alternatives and potential transactions all the time. But we have to appreciate we still trade at a discount to peers of about 20%. So for us, from a value accretion standpoint, it is certainly better to develop the endowment that we have. Now if we look at our story and the reason why I'm so optimistic about it is if we are able to deliver growth at very competitive capital intensity below market, but at the same time, return strong cash remuneration to shareholders. So I think this is highly unique within the sector these days. So we'll continue to be focused on that. If tomorrow, as we pointed out long term, if we are doing 360 million tons in iron ore, C1 below $20, all-in below $50 per ton, and we are doing 700 kilotons in copper. This is certainly a very valuable portfolio of assets, and that's what this team is going to pursue. Operator: This concludes today's presentation. You may now disconnect, and have a nice day.
Christopher Kusumowidagdo: Good afternoon, and welcome to XLSMART's Fourth Quarter 2025 Earnings Call. My name is Christopher, Head of Investor Relations, and I will be coordinating today's call. Our presentation and financial results were released this morning and are available on our Investor Relations website. Today's call will begin with prepared remarks from our management team, followed by a hybrid Q&A session. [Operator Instructions] As a reminder, the session is being recorded. I would like to introduce our speakers for today's call: Mr. Rajeev Sethi, Present Director and CEO; Mr. Antony Susilo, Director and Chief Financial Officer; Mr. David Oses, Director and Chief Commercial Officer for Consumer; Mr. Feiruz Ikhwan, Director and Chief Strategy and Home Business Officer. And with that, I will now hand over to Mr. Rajeev to begin with the management highlights. Rajeev Sethi: Thank you, Christopher, and good afternoon, everyone, and thank you for joining us. As you know, the company was formed in April of last year 2025. So this was the first year for XLSMART. And this quarter closes our first year post merger. And from our point of view, the message is very clear. Execution matters, and we are happy to state that we have delivered. If I speak about the merger, we have successfully completed the 2025 integration milestone. And most importantly, we've done this ahead of the plan. and it translates into operational efficiency, faster decision-making and a more disciplined cost base. Integration risk has materially reduced as we enter into the new year. Secondly, on synergies, we've achieved our 2025 synergy targets with OpEx synergies exceeding our initial expectations. This gives us confidence that margin expansion is structural improvement that will continue in 2026 also. The heavy lifting on cost has largely been done. The focus now shifts to sustaining discipline. Next, on growth quality. Revenue growth was supported by a fully consolidated subscriber base and more importantly, a strong ARPU uplift, which was around 26% post merger. This was driven by pricing simplification and better customer experience, choices which were deliberate and that prioritized value over volume. And as we said earlier, in this market, we'll want to play a responsible game and we'll encourage the market players to move into a situation, which helps restore health to this industry. And we are also seeing clearer evidence that customers are willing to pay for a more consistent high-quality service. Finally, on the network, network consolidation has strengthened our performance across key metrics. And this was complemented by our recent launch of 5G services in Jakarta, Surabaya, Bali and other cities. In summary, 2025 demonstrates disciplined execution across integration, cost, growth and network. We exit the year with a stronger foundation, reduced complexity and a clearer path to sustainable value creation going forward. If I move to the next slide, building on the highlights which I've just shared, I'll go a level deeper into how this merger is being executed and what has been delivered on ground. Starting with network. This is the most complex integration stream and also the one that matters most for long-term performance. We are on track to complete full network integration by first half of 2026. Progress so far has been encouraging with visible improvements in coverage, capacity and consistency. Importantly, we are managing this carefully, protecting service quality and minimizing operational risk and both of these remain nonnegotiable. On customer experience, we are seeing integration benefits are already being felt and enjoyed by the customers. We have improved download speeds by up to 83% across the combined base. This is a real meaningful improvement that supports better engagement and underpins the ARPU uplift that we are seeing post merger. On synergies, execution has been strong. In the first year, we have delivered approximately USD 250 million of gross synergies, driven by OpEx efficiencies, procurement scale and network rationalization. This confirms that the merger economics are playing out as expected and in some areas, better than what we had initially planned. Finally, on business continuity. Throughout the integration process, we have maintained service stability and sustained growth momentum. This disciplined approach has allowed us to transform the business without disrupting day-to-day operations. Overall, the message on this slide reinforces a simple point. Merger is being executed with control and discipline, delivering tangible gains today, while we are preparing a solid foundation for the next phase of integration and value creation. If I move to the next slide, which is talking about the integration progress. And as I mentioned earlier, on the overall execution, the integration milestones were completed ahead of plan. This pace reflects strong governance, clear accountability and tight coordination across multiple teams. More importantly, it reduces execution risk as we move into the next phase of integration. On network, consolidation has progressed materially. We've integrated approximately 34,500 sites by December last year, delivering visible improvements in network performance and customer experience. By the end of Q4 '25, around 70% of the sites have been consolidated. And as I said earlier, it puts us in a very strong position to finish most of the integration by H1 '26. From an organization perspective, the end state structure is now in place. We have harmonized processes and governance across the combined entity, creating clearer decision risk, decision rights, faster execution and better cost control. In total, around 120 processes have been streamlined and standardized. Finally, on the cost base, we have structurally streamlined our cost base, including vendor consolidation and site optimization. These actions underpin the OpEx synergies already delivered and support sustainable efficiency going forward rather than just short-term savings. To summarize, 2025 integration has been executed with speed and discipline. The foundation is now largely built. Risks are lower as we move forward, and the focus shifts towards optimization and value extraction in a way moving away from integration to driving more value. The last part, which I'm going to talk about is on the 5G rollout. As we said earlier, this merger gave us an opportunity to ready our network for 5G, and we are delivering on that promise. And we believe 5G is a key pillar of our growth and differentiation strategy. We want to be leaders in 5G, simply put. Our focus is not just on rolling out 5G faster, but on delivering a clear, consistent and commercially meaningful 5G experience. Today, we offer what we believe is the first true 5G experience in Indonesia. This is built on 3 core propositions. First, blanket city coverage. And this, I believe, is rare in many parts of the world. It's not only your home is covered or your workplace is covered, wherever you go in a city, you will find 5G. Secondly, an auto 5G experience where customers with 5G devices can seamlessly access speeds up to 250 Mbps without complexity. There is no special plan for availing 5G benefits. And thirdly, a dedicated 5G spectrum, which delivers more consistent speeds and better user quality, especially in high usage area. In terms of coverage, our 5G network is now live around 33 cities and continues to expand. Importantly, the experience is designed to be certified and consistent with capacity strengthened where demand is highest. This approach ensures that network investment is closely aligned with actual usage and monetization potential. Equally important is brand clarity, where we have positioned 5G clearly across our portfolio of 3 brands -- 4 brands, if I may say, XL Prepaid, the postpaid brand, Prioritas, AXIS and Smartfren. Each brand plays a distinct role, avoiding overlap while maximizing reach. In summary, our 5G strategy is deliberate and focused, combining disciplined rollout, consistent experience and clear brand positioning to support sustainable growth and long-term. I thought that was my last slide, but there's one more, which is on the network side, and I'm happy to give you an update on that. By end of last year, our total BTS count reached more than 225,000, which is a 36% increase year-on-year. This reflects the post-merger consolidation of our network and continued investment in capacity, particularly in 5G. As expected, legacy technologies continue to decline as we optimize the network towards more efficient and higher performance platforms. On 5G, we continue to expand our footprint in a disciplined and targeted manner. As I said earlier, we launched our services and we expanded further in January 2026. In addition to the expansion, we are also seeing external validation of our network quality. And I'm happy to announce that XLSMART was awarded the Ookla Speedtest Award our Fastest 5G Network in Indonesia, reinforcing our commitment to delivering a globally benchmarked high-performance connectivity. This reflects the progress we have made in network design, spectrum strategy and execution quality. Overall, our network strategy is delivering on 3 fronts: scale, performance and resilience, providing a strong foundation to support growth, accelerate 5G monetization and maintain customers trust going forward. I'll now hand over to our CFO, Pa Antony, to walk us through the financial results. Antony Susilo: Thank you, Pa Rajeev. Good afternoon, everyone. Let me now present you our key operating metrics, which reflect a clear shift toward quality growth. We know that this quality growth because of the price adjustment and also the broader industry recovery. So let's start with the subscribers. Our mobile subscriber base become 73 million in Q4 2025, representing an 8% quarter-on-quarter decline. This decline was an intentional outcome reflecting a tighter acquisition discipline as well as a sharper focus on monetization and high-quality users. Most importantly, on a year-on-year basis, the consolidated base remains up by 24%, reflecting the post-merger scale of the business. If we look at the ARPU, this is where the benefit of our strategy are most visible. Blended ARPU increased by 15% Q-on-Q to become INR 44,800 in quarter 4 2025. This mainly driven by the improvement across both in the prepaid as well as postpaid segments. And this reflects the pricing normalization, better customer mix and confirms that we are capturing more value for users. In erms of the usage data traffic, it continues to grow despite of the lower subscriber base. Traffic reached almost 4,000 petabytes in Q4 2025, an increase of 47% year-on-year and 2% quarter-on-quarter. This growth in consumption per customer reinforces the positive relationship between network quality, the engagement as well as the monetization. So overall, these trends demonstrate that our strategy is working well. Our subscriber numbers have normalized, becoming better customer quality, intensity and ARPU continue to improve. This positioning the business to be more sustainable and more profitable growth going forward basis. Now let me now present the financial performance for full year 2025, where it reflects the impact of the disciplined pricing, integration execution as well as a clear focus on value creation. We start with the revenue figures. The 2025 revenues increased by 23% year-on-year basis to become IDR 42.5 trillion driven primarily by the data as well as digital services. This growth reflects the benefit of price rationalization, ARPU uplift and also a larger consolidated base following to the merger. On a quarterly basis, the revenue grew by 4% quarter-on-quarter, demonstrating a continued momentum despite of the subscriber normalization. Moving on to the profit Normalized EBITDA for full year 2025 increased by 13% to become IDR 30.1 trillion, while reported EBITDA margins moderated at around 42%. This reflects deliberate acceleration of integration activities, which created a near-term cost pressure. On a normalized basis, EBITDA margin remained healthy at 47%, underscoring the underlying strength of the core business. At the bottom line, normalized PAT grew by 63% year-on-year to become IDR 3 trillion in full year 2025, supported by the stronger operating performance and improving operating leverage. Reported PAT continues to be impacted by integration-related costs as well as one-off items, which is temporary in nature and aligned with our transformation. Overall, our full year 2025, we demonstrated a strong financial outcome, the revenue growth supported by the pricing discipline, resilient in the profitability despite of the integration acceleration as well as integration as well as a significant stronger normalized bottom line. This position is good for us as we move into full year 2026 with a clearer earnings profile and increasing contribution from synergies. Next slide. The slides provide a quick reconciliation between our reported numbers and normalized EBITDA as well as PAT will help us to clarify the underlying performance of the business during the integration phase. On EBITDA basis, reported EBITDA full year '25 was IDR 17.8 trillion. This includes IDR 2.4 trillion of integration-related OpEx, mostly on the network costs and people costs. These are primarily associated with accelerated execution of merger initiatives. If we exclude this one-off integration costs, the normalized EBITDA stands at around IDR 20.1 trillion, reflecting the underlying strength of our core operations. At the bottom line, the reported PAT was impacted by integration OpEx and then accelerated depreciation and asset impairment. Adjusting for these 3 items, the normalized PAT for full year 2025 will be IDR 3.3 trillion. These adjustments are temporary and integration related, and they do not change the fundamental earnings capacity of the business as we move beyond the integration period to the next slide. Following the normalized EBITDA and PAT, this slide basically walks you about the operating cost base post the merger. Reported OpEx increased by 18% quarter-on-quarter in Q4 '25, largely reflecting the integration-related expenses and the expanded scale of operation after the merger. On a normalized basis, excluding the integration costs, OpEx increased by around 6% Q-on-Q, which is broadly in line with our business expansion. This indicates that the cost discipline remains intact and the majority of the increase is temporary and nonrecurring in nature. From a cost mix perspective, the main drivers for Q-on-Q increase coming from 3 factors, mainly: number one, higher labor costs related to the integration activities; second one, increased sales and marketing to support 5G launch and network expansion. And then the third one, higher infrastructure expenses due to more sites and network integration. These increases are structurally aligned with scale and integration rather than in efficiencies. Okay. So that's it from me. I shall now hand over back to Pa Rajeev, to provide the full year 2026 guidance and the proceeding parts. Thank you. Rajeev Sethi: Sure. Thank you, Pa Antony. And as we mentioned, I will talk a bit more about the 2026 outlook. Starting with revenue, we expect revenue growth to be broadly in line with the overall market, which we believe should be recovering from a bad first half of 2025. And as all of us know, there's been a strong recovery in the second half of the year, and we expect that recovery will continue, and we'll want to participate in that market growth. And this will reflect a very disciplined approach that will prioritize value and sustainable return over just volume-driven expansion. EBITDA growth is targeted at approximately 2x the revenue growth, supported by continued cost discipline, operating leverage and the ongoing realization of merger synergies. Capitalized CapEx for 2026 is projected to be around IDR 15 trillion. This may inch up higher depending on our ability to execute all the CapEx projects which we have. If we are able to do that, it may inch towards IDR 20 trillion. And this level of investment is focused on strengthening network quality, completing integration and supporting targeted 5G expansion, while maintaining financial discipline. On synergies, we are targeting a merger synergy of between USD 250 million to USD 300 million in 2026, driven by efficiencies in network operations and vendor procurement. Beyond 2026, we remain firmly on track to achieve our full synergy potential, which as stated earlier of between USD 300 million to USD 400 million annually once the integration is fully completed, which should happen by end of this year. So this was for me, and I conclude my summary hand it back to Chris. Christopher Kusumowidagdo: Thank you Pa Rajeev and Pa Antony for the presentation. Ladies and gentlemen, we will now proceed to the Q&A session. [Operator Instructions] The first question comes from Piyush Choudhary from HSBC. There are 4 questions. Actually just the first one. But the normalized EBITDA growth, which is only 1% Q-on-Q when the revenue is up 4% Q-on-Q. Second question is about the outlook for mobile ARPU and how are the trends in first Q 2026, so far? Question number three, what is the fixed broadband ARPU and in fixed broadband, what is the outlook for both subs and ARPU? And the fourth question, any update on the potential spectrum auction timing and pricing? For the first question, I would like to invite Pa Antony to provide some clarity on that. Antony Susilo: Okay. Thank you Piyush. On the first item regarding the normalized EBITDA, why the growth is only 1%, while the revenue is up by 4%. I think as explained by Pa Rajeev earlier that in Q4, we did a lot of campaign on the 5G, anticipating the 5G launch. So we are already entered 33 cities in Q4 2025. So because of that, then there is an additional cost increase from the sales marketing activities. So I think that will answer the number one. On the second question maybe Pa Oses. David Oses: So the outlook for mobile ARPU in 2026, if you take a look to the last couple of quarters, you can see that our ARPU has increased significantly. Where did the ARPU growth come from? Two areas. One is because our subscribers use more, so more gigabytes per subscriber. And number two, because our yield or price increased. So ARPU increases because people use more and because what they use, it's more expensive. If you have seen our yield in the last 2 quarters have grown double digit. So at almost 10%, right? So we have had a significant increase in the price per gigabyte or the revenue per gigabyte, very, very healthy. I would say that in quarter 1, you can expect more of the same. So our bet for good quality subscribers is there. So I guess that we will see ARPUs moving in the correct direction, up, with prices also moving in the correct direction and traffic coming as well. So I would say that we could expect ARPUs to keep moving in the same direction. Christopher Kusumowidagdo: Yes, David. For the FPD, I would like to invite Pa Feiruz to provide some color on the [ FPD ] Feiruz Ikhwan: Sure, Piyush. Thanks for the question. For ARPU, typically, we've not disclosed in terms of the fixed broadband ARPU. But I guess, let me allow to give you a bit of color in terms of the outlook, right, for the subs and ARPU. I think you have seen the market and industry have seen some moderation in the ARPU. But I think suffice to say that any decline in ARPU that we see are much more moderated compared to the res of the market. I think that clearly reflects also our discipline, right, in pricing and focusing on higher quality acquisitions. I think from the subscribers, there's a lot more demand, right? I think the broadband demand remains structurally strong, right? In Indonesia, we see a huge opportunity for growth, as data consumption increases, in particular, in the home. Having said that, I think we need to be responsible, right, in terms of capturing the growth and targeting the right segments by offering the right products and without, shall I say, destroying right, further value. Antony Susilo: Thank you, Pa Feiruz. Rajeev Sethi: Yes. On the last one, on the spectrum, Piyush, on the timing, we believe this should be completed and awarded by H1 of this year, the first half. Pricing, I would not want to speculate. We just hope that the pricing is rationale, which enables us to offer better services to the customers. Christopher Kusumowidagdo: I'll open the line for Piyush. Piyush Choudhary: Just 2 follow-ups. Firstly, which spectrum band are you using for 5G? And are you deploying or SA or NSA? And secondly, on your kind of subscriber base of 73 million, how much is the 5G device penetration at the moment? Rajeev Sethi: Yes. So currently, we are using NSA and the spectrum which we are using is [ 2,300 ]. And the device penetration, David, would you want to? David Oses: Yes, device penetration in the cities that we are launching in the cities, the 33 cities that we are already up and running. We can say that the device penetration is around 20% in the cities in our own customer base, could be close to that number as well. I would like to underline in any case that even though the device penetration today in those cities, of course, in more rural areas will be lower in the cities that we are launching, it's around 20%. But the most important is that the replacement of the devices, the new devices that are coming are in a bigger percentage, 5G devices. Christopher Kusumowidagdo: Next question from [ Sabrina ] from [ Prime Securitas ]. Three questions. First one, should we expect accelerated depreciation to continue only through first half 2026, in line with the completion of our integration? And it would be helpful if you could provide an indication of the magnitude. Question number two, noted a significant increase in salaries and allowance expenses, could you elaborate on the drivers? Is this related to costs associated with employee optimization? And should we expect this level to persist on normalized post first half of 2026 once integration is completed? Third question is, does your EBITDA guidance incorporates the potential costs related to this year's spectrum offsets? For all the 3 questions, I would like to invite Pa Antony to provide some color on that. Antony Susilo: Okay. So on the first question on the accelerated depreciation. I think we mentioned that our full integration will be completed by 2 years. So I understand that from Pa Rajeev presentation, as we mentioned, the MOCN network already happens like some 70% already. But then in terms of the accelerated depreciation, I think will not be witnessed by first half of 2026, it will still continue until end of 2026. But I believe the Q4 2026 hopefully, will be already showing a lower rate starting Q3, Q4 because the heavy one in the first half in mid, yes, correct, maybe Q3 also correct. But then Q4 will be tapering off to the last one. Yes. That's on the first one. The second one, in terms of the significant increase in salary and low expenses in Q4. Yes, it is mostly in the Q4, there is risk cost interest associated to the employee optimizations. Yes, there is some program that the management leads to the company that -- because we hear from the employees that some of the employees know that they want to make some -- they want the management to make some programs to offer them resignation program. So it is based on mutual scheme program. And then some of the employees took that program. Because of that, then we incur quite a number of operating expenses in terms of personal expenses. So these things only happened in December, this mature scheme program. Next year, I think it will be already -- will be very, very minimal, I would say. That we still see that there is some very things that we can optimize, but it will be minimal. The biggest chunk already happens in 2025 -- December 2025. So I think that's to answer number two. And number three, does your EBITDA guidance incorporate the potential cost spectrum? Today, this EBITDA guidance is before the spectrum auction. Because at this moment, we don't know how much is the spectrum piece that we will be opened by the -- or will be finalized by the government at this moment. So we -- this EBITDA guidance is still outside or exclude the spectrum auction. Christopher Kusumowidagdo: Now please open the line for [ Sabisa ] if you have any follow-up questions. Unknown Analyst: Maybe just one follow-up questions, but just not related to my questions earlier. I just want to know about the ARPU momentum because we track like in January, I think there has been no bonus quotas being offered in January. So are we seeing this trend to continue in February as well as March? Is this part of the pricing strategy to lift up the data yield going forward? Or as we know that the festive season is approaching soon, right? So are you guys planning to increase some bonus quota. And therefore, we should anticipate like there could be some pressure in the value for first Q? David Oses: Actually, no. So as you say, the closer the festive period, the better the moment to monetize. Let me put it this way. So independent of that specific seasonality, I think our strategy is clear, we want high value customers and our strategy is going to be to try to avoid as much as possible this previous or be at least very conscious of the price per kilowatt that we are charging. In that sense, again, you can see that in the last 2 quarters, we can -- we have been able to increase the revenue per gigabyte double-digit, 10%. So I think that shows very clearly that we are very serious on our strategy of repairing the market, number one, and going after the high-quality subscribers. So this is our strategy, and this is how we'll follow. Christopher Kusumowidagdo: Do you have a follow-up question? Unknown Analyst: No further question from me. Christopher Kusumowidagdo: Let's move on to the next question from in Safari from [indiscernible]. Now that XLSMART has exited its position in Mora, how will the company navigate its future focus? And second question, despite the year of a year, a dip in subscriber, will XLSMART continue to pursue its fixed mobile strategy? Or will you be focused primarily on your core mobile telco business. I would like to invite, Mr. Rajeev to provide some color. Rajeev Sethi: I think exiting Morato was decided premerger that the principal shareholders investments in the subsidiary companies will be monetized. It's part of that. But it doesn't fundamentally change our future, especially on the home broadband or SPP, as you call it. The focus on this continues. And as we said earlier, we would want to work with any partner who is in a position to provide us access to home passes. We are working with the biggest FLP providers in the market, fiber lease providers, and we'll continue to expand that part. The other part is whether FPB is an option for us or we'll go back to only mobile telco. I think all of us realize that more and more consumption eventually will happen inside the home. So it is super important for us as a mobile operator also to win the home market also. And that focus will continue. Towards that, we'll have both the strategies, which will be fiber at home and also FWA on 5G. And our 5G investment, as we spoke about, we are very proud about blanket 5G coverage in many cities, and we'll continue to roll that out. And all those cities will be using 5G, FWA to provide a very attractive alternative option for the customers to enjoy a fiber-like WiFi experience at home. So short answer is the focus will continue. In fact, it will be even more stronger as we move forward. Christopher Kusumowidagdo: Thanks, Pa Rajeev. Now I'd like to open the line for Mr. [indiscernible] ask follow-up questions, please, you have. Since no follow-up questions, I think we can move on to the next question. The next question is coming from [ Brian ] from [ UOBKN ]. How much more integration costs should we expect in 2026? Could you provide some color on when this cost will be booked? Also there is regarding accurate depreciation, impartment costs and sell costs, could you provide what page you'll see this group? I would like now to invite Mr. Antony to provide the color. Antony Susilo: Okay. The integration costs for 2026, we expect the amount will be less than what much less than 2025. If you look at the 2025 figure, it's IDR 2.4 trillion. But then I think I believe in the 2026, it would be less than IDR 1 trillion. That's on the integration costs. And then the question regarding the accelerated depreciation, I think on the external depreciation, I already mentioned a little bit, but if you want -- just to give another color on the amount. The amount will be more or less around IDR 5 trillion. So in the 2025, it's around IDR 4 trillion, IDR 4.7 million, I believe, and then going up to around IDr 5 trillion, slightly higher, okay? So I think that's the answer to the question. Christopher Kusumowidagdo: Thank you, Pa Antony. Brian, any follow-up questions? Unknown Analyst: No, thank you. Christopher Kusumowidagdo: We have the question coming from Arthur Pineda from Citi. There are 2 questions. First one is where do you see the market growth levels in 2026? And number two, can you help us identify the depreciation and amortization trend for 2026? What was the annual D&A being moved from the assets that will remove based on accelerated depreciation? There are 3 questions. The third one, where do you see mobile and broadband user base into first Q 2026, do you see this reporting to growth? Or do you still see some churn? I think we can start question 1, on the market growth level. I would like to invite David. David Oses: Well, actually, we don't usually give the guidance on how much the market can increase or not. That's why when we gave the guidance, we see in line with the market, right? And we don't give a specific number. Now if you ask me, I think we have -- I think we have the correct momentum to believe that the market can grow healthily this year unless, again, something strange happens, right? So I think we are in a correct momentum to have a good year. Again, I don't want to say this too much because if you asked me 2 years ago, in February, I will have said the same, and then if you don't have that, right? But again, I am not able to give you a number. That's why when we give the guidance, we say in line with the market. Christopher Kusumowidagdo: Thank you, David. Second question, maybe Pa Antony, can you give more color on the D&A? Antony Susilo: On the D&A for 2026, I think as I mentioned earlier, the D&A consist of accelerated depreciation as well as the additional of the -- because we are keep expanding, and we are expanding around 7,000 around 8,000 sites in 2026. So with that, what we call the actions, the movement. So we are expecting that the D&A for 2026 will increase maybe around 10%, 15% from 2025 figures. Yes, because accelerated depreciation still continue at IDR 5 trillion. And then the normal depreciation, of course, will -- because of the additional of new sites, then we have to start recognizing the depreciation. Christopher Kusumowidagdo: Okay. That's it. -- thank you, Antony. And the third question, where do you see on mobile and broadband users in 2026? I think David already give some color on that. But Pa Feiruz, do you want to take some colors on your broadband? Feiruz Ikhwan: Sure. I think typically, we don't provide guidance for the quarter. What we see is I think the market remains competitive. Having said that, we are very conscious and deliberate in trying to acquire quality subscribers, and that's the focus for value rather than just a short-term volume growth, right? Volume growth. Having said that, we've seen signs of stabilization, but it's still very early days. We still continue to improve and focus on getting the right customers as well as improving the value of our existing base. Christopher Kusumowidagdo: Thank you, Pa Feiruz. Arthur, do you have any follow-up questions for us? Arthur Pineda: Yes, please. Just a clarification with regard to the merger expenses being booked for 2026. You mentioned IDR 1 trillion earlier. Is that just for the OpEx side? And should we expect another IDR 5 trillion for the asset impairments? Is that how we should look at this? Antony Susilo: You're referring to the IDR 1 trillion integration cost here, Arthur. Is that correct? Arthur Pineda: Yes. Because in the earlier question, I think you responded with around IDR 1 trillion integration cost. Is that just for OpEx and should we assume an additional IDR 5 trillion for asset accelerated depreciation. Is that how we should look at it? Antony Susilo: Yes. So in 2026, yes, there will be a onetime cost again, which is integration costs, which is hopefully less than IDR 1 trillion. That one is related to network as well as to people. And then for the second one is the accelerated depreciation, is around IDR 5 trillion, which is noncash items. It's another onetime cost again that we have to incur this year. Christopher Kusumowidagdo: Now let's move on to the next question. Henry Tedja, from PT Mandiri Sekuritas. The first one, can we check about the integration cost outlook for this year, which I believe Pa Antony has already answered earlier. And second person regarding the effort to get the quality subscriber base, can we check better the subspace decline trend will start to stop or slowdown post 4Q 2025? Pa David to provide some color on the [indiscernible]. David Oses: Yes. So the subscriber base -- we usually, internally, we divide the subscribers in subscribers of less than 3 months, that have been with us less than 3 months and subscribers that have been with us more than 3 months. Those that have been with us long tenure, we call them high quality, right, usually a high ARPU, high quality. Most of the subscribers that you see that are disappearing are those that are less than 3 months. Who are those subscribers? Those subscribers are buying again and again, a SIM card, use and throw, use and throw. So probably, we were counting them more than once. So it's not one subscriber, maybe it was counting like 5. That's number one. Number 2 type, it's a very price-sensitive person who is willing to keep changing the SIM card because of a few gigabytes or a few rupia up and down. So again, our strategy was, okay, we are not going to entertain those subscribers. There are other operators where they can go and keep being entertained, but not us. So we will protect our network in order to provide the best customer experience for the good quality subscribers. We did -- we started cleaning back in quarter 3, quarter 4 and in quarter 1, I believe that we will still have some correction of these subscribers of this low-end, low-ARPU subscribers. So yes, in any case, again, our objective is to increase the amount of subscribers of good quality subscribers. That's our main topic rather than the overall or the total amounts that we have. So that's a little bit of strategy. So probably in quarter 1, you will see the total amount declining. But hopefully, internally, we will see the good quality subscribers keep increasing as we have seen in the last few months. Christopher Kusumowidagdo: Thanks, Pa David. Henry, do you have a follow-up question to us? Henry Tedja: Perhaps 2 questions -- 2 additional questions. First one, regarding the employee optimization costs. Would you mind to share the exact amount of the cost for this employee optimization. The second question, perhaps regarding the 5G. I mean like we are discussing about the 5G earlier in the presentation. And then in terms of how big we spend in terms of the marketing expenses and also investment as well for the 5G. So I'm just curious, what will be the factor impact for the SRS in terms of the productivity and ARPU for the subscribers in here? Rajeev Sethi: Yes. I think on the first one, you spoke about the for people cost because of the integration, separation of people. Given the sensitivity, it's people involved, we would not want to get into too much details there. But what we can confirm is most of the cost on account of card has been incurred in 2025. There will be a small marginal cost as we move towards 2026, possibly in the first half, and it will be much smaller than what we've incurred in last year. And I think there are a couple of other questions, which is about the 5G cost, especially on the marketing, communication, sales part. Yes, quarter 4 was higher because we were just launching 5G. And we had saved for that cost during the course of the year because we knew about the impending 5-year launch. On the overall sales and marketing costs, there would be some quarters in quarter in 2026, where we are spending more in some quarters less, depending on the rollout of 5G and the seasonality, as you would appreciate. What I would encourage all of you is to take a look at an average cost for 2026 on sales and marketing, which will be very similar to 2025. Obviously, the focus will shift more and more on 5G, especially in the cities where we are launching 5G. But the overall percentage will remain percentage to revenue will remain the same. In terms of the ARPU increase, I think David can add a bit more color on this. But as we said, we believe 5G should be for everyone, and that's what we are doing. So most of the ARPU increase, we believe, would be consumption-led because people will tend to consume more because of better 5G experience. And there are certain specific plans which we are launching on 5G, which will also help us generate more revenue. But David, in case you want to get into more details. David Oses: No. As Pa Rajeev mentioned, right, so our strategy of monetization is passive monetization in the sense that anyone with a 5G device access the 5G network in that way, their customer experience will be much better and hopefully, the usage. And as a consequence, the ARPU will be higher. That's one, plus we have specific products, very attractive products at higher prices, that will help us increase the ARPU. What we have seen in the very first month, 2 months that we have been already with the 5G specifically that. So we see that the 5G devices in 5G areas, their ARPU is significantly higher than other devices in other areas, be 5G devices in other areas or course for devices in other areas. So again, it's exciting for us to see that. And now it's more about implementing this properly and continue the expansion of the 5G in more areas. Christopher Kusumowidagdo: Let's move on to the next question from Aurellia from BNI. There are 2 questions. The first one on the sales and marketing expense. Given the ongoing 5G expansion, do you expect 2026 outlook to follow the 4Q trend? This one likely -- Unknown Executive: I already answered that. Christopher Kusumowidagdo: And then the second question is on ARPU, I think this one is already answered by Pa Feiruz. I think there is a question from Sachin. Unfortunately, he is not able to type, I would like now to unmute this line, Sachin from UBS. Can you please ask your question? Since Sachin is not responding, we will take your questions off-line after this call. Seems like that it, that's all the questions that we have for today's conference call. Thank you for participating. That concludes today's conference call, and thank you once again for everybody to participate. If you have any further questions, please reach out to investor relations. Stay safe and happy, and we look forward to speaking to you next quarter. Thank you.
Operator: Good morning, ladies and gentlemen, and welcome to the Definity Financial Corporation Fourth Quarter of 2025 Financial Results Conference Call and Webcast. [Operator Instructions] This call is being recorded on Friday, February 13, 2026. And I would now like to turn the conference over to Dennis Westfall, VP of Investor Relations. Please go ahead. Dennis Westfall: Thank you. Good morning, everyone. Thank you for joining us on the call today. A link to our live webcast and background information for the call is posted on our website at definity.com under the Investors tab. As a reminder, the slide presentation contains a disclaimer on forward-looking statements, which also applies to our discussion on the conference call. Joining me on the call today are Rowan Saunders, President and CEO; Philip Mather, our Chief Financial Officer; Fabian Richenberger, Chief Operating Officer; Paul MacDonald, EVP of Personal Insurance and Digital Channels; and Obaid Rahman, EVP of Commercial Insurance. We'll start with formal remarks from Rowan and Phil, followed by a Q&A session, during which Fabi, Paul and Obaid will be available to answer your questions. With that, I will ask Rowan to begin his remarks. Rowan Saunders: Thanks, and good morning, everyone. As Dennis mentioned, we are welcoming Obaid Rahman to our earnings call following his recent appointment as EVP of Commercial Insurance after several years as that division's Chief Underwriting Officer. Obaid's appointment comes as Fabi moves to the Chief Operating Officer role. His move to COO enables him to put a greater focus on the integration of the acquired business from Travelers. Before we discuss our financial results for the fourth quarter and full year 2025, let me start with the progress we have made in recent years and how it has positioned us for the next phase of growth. Including the premiums from the Travelers transaction, we've doubled the size of the business since our IPO to become a top 5 P&C insurer, modernized our platforms and built a scalable foundation that gives us confidence in our long-term trajectory. Definity is a growth company with strong momentum and a clear strategy. Our strong performance reflects disciplined underwriting and claims management, solid organic growth and the returns on our digital technology investments. As we pursue our updated goal of becoming a top 3 P&C insurer, we remain focused on disciplined execution, technology and analytics, broker partnerships and broad-based growth. We've built Definity with a goal to outperform the market through all stages of the pricing cycle. In areas like small commercial and personal lines, conditions remain strong, and we're achieving rates that stay ahead of loss trends. Where the market is most competitive, such as certain large commercial segments, we're staying disciplined, protecting our profitability and competing where margins are most attractive. What differentiates us is the structure we put in place, thoughtful portfolio construction, advanced analytics aided by AI that allow us to price risk with increased precision. a modern claims platform that drives better operational outcomes and higher customer satisfaction and a national broker network that gives us a stable growing source of distribution income. Overall, these capabilities give us confidence in our ability to outperform across market environments. Turning to our transformational acquisition on Slide 6. The acquired business brings approximately $1.5 billion in premiums, meaningfully increasing our scale and positioning as firmly within the top 5 Canadian P&C insurers. Scale matters more than ever. It enhances pricing sophistication, strengthens our relevance with brokers and supports sustained technology investment and AI expansion. The portfolio is an excellent strategic fit. The commercial book expands our capabilities in mid-market and specialty while the close to $1 billion in personal lines premiums will benefit from being moved on to our modern digital buying platform. This is also a high synergy opportunity. We are confident that we will deliver at least $100 million in annual cost synergies to be realized over the 3-year integration period. Finally, the acquisition accelerates our operating ROE expansion strategy. With Sonnet achieving breakeven, expenses moving towards our target level and our claims transformation well underway, the acquired Travelers portfolio is expected to add roughly 200 basis points of run rate operating ROE by the end of the integration period, supporting our path to a sustainable mid-teens target level. In 2025, the acquired portfolio operated near breakeven as a result of elevated expenses, which will temporarily affect our combined ratio as we integrate. We see a clear path to sustainably operating in the low 90s as integration benefits take hold and synergies earn through. Turning to Slide 7. We reported full year operating earnings per share of $3.53 an increase of nearly 33% over 2024. We again met or exceeded all financial targets in 2025 with top line growth of 8.8% adjusted for our exited line, an excellent full year combined ratio of 91.6% and an operating ROE of 12.2%. This operating performance, coupled with our private placements of common shares in the second quarter of 2025, supported a 16% increase in book value per share in the year. These results demonstrate the strength of our company and validate the investments we've made to build a more agile and scalable business. As illustrated on Slide 8, since completing our landmark IPO 4 years ago, we've delivered consistent underwriting profits, built a top 10 property and casualty insurance brokerage in Canada, grown book value per share by more than 63% and increased our quarterly dividends per share by 72%. Turning to the results from the fourth quarter on Slide 9. Strong underwriting income, together with meaningful contributions from our insurance broker platform and net investment income generated operating earnings per share of $0.99. Our fourth quarter combined ratio of 89.9% reflected the broad-based strength of the business with particularly strong results in personal property and commercial insurance. We enter 2026 with top and bottom-line momentum in all 3 lines of business, which provides an ideal starting position as we integrate our recently closed $3.3 billion acquisition and scale the organization. Turning to the industry outlook on Slide 10. We expect conditions in personal auto to remain firm as insurers aim to keep pace with the combined impact of loss cost trends, ongoing regulatory constraints in Alberta and uncertainty related to the extent and impact of potential U.S. tariffs. We also expect market conditions to remain firm in personal property over the next 12 months as the industry continues to remain diligent, taking underwriting and pricing actions required to fund weather loss events amid heightened climate risk. While we expect overall commercial lines market conditions to remain attractive, we are continuing to see more competition in the large account space. Overall, we expect industry growth in commercial lines to be in the low to mid-single digits over the next 12 months. Slide 11 highlights our key financial targets for 2026. We expect to exceed $6.5 billion in gross written premiums representing growth of at least 35% from 2025. This substantial increase is expected to be driven by the benefit of the acquired business from Travelers and continued organic growth in our underlying book. The strength of our underwriting capabilities is expected to support a sub-95% combined ratio target for 2026 despite integrating a business operating near breakeven. We maintain our operating ROE target for 2026 as we expect earned synergy realization to begin contributing more meaningfully in 2027 with full realization by the end of the 3-year integration period. Slide 12 illustrates the composition of our national broker platform. We've made great progress in the past few years to develop it into a vehicle to diversify and strengthen the earnings profile of the business with repeatable distribution income that complements our underwriting operations. We expect continued M&A activity and the organic growth momentum of the business to result in $2 billion of managed premiums by the end of 2027. We continued our growth trajectory with several additional acquisitions last year, which enabled us to exceed our 2025 operating income objective for this part of the business. In 2025, our national broker platform generated $94 million of operating income before finance costs and minority interest. We expect to increase this by approximately 20% in 2026 with a 60-40 split between distribution income and intercompany commission income. This platform continues to provide stable, high-quality earnings that strengthen the overall resilience and diversification profile of the company. And with that, I'll now turn the call over to our CFO, Phil Mather. Philip Mather: Thanks, Rowan. I'll begin on Slide 14 with Personal Auto. Gross written premiums increased 9.7% in the fourth quarter and 8.9% for the year adjusted for the Sonnet Alberta exit. This represents a step-up from 6% growth in the third quarter, consistent with our expectations and supported by our improved competitive positioning that strengthened unit growth. Personal Auto delivered a solid combined ratio of 95% in the fourth quarter, an improvement from 2024, driven by earned rate increases, improved Sonnet profitability and a lower expense ratio. For the full year, these same factors supported stronger results versus 2024, further aided by lower catastrophe losses. We expect a mid- to upper 90s combined ratio for personal auto in 2026 as we integrate the acquired book of business. Turning to Slide 15 and Personal Property. Gross written premiums grew 11.6% in the fourth quarter and 9% for the year, supported by higher average written premiums and an increase in unit growth as we completed our actions in high appeal regions midway through 2025 and introduced product enhancements in the second half of the year. The personal property combined ratio remained robust at 82.7% in the fourth quarter of 2025. For the full year, we reported an 88.5% combined ratio, an improvement of 7.8 points from 2024. While catastrophe losses were unusually elevated in 2024, the level this year was broadly in line with expectations. Looking ahead, we expect a low to mid-90s combined ratio in 2026 in year 1 of integration. Slide 16 provides details of our commercial business with premium growth of 6.9% in the fourth quarter and 8.6% for full year 2025, driven by strong retention and rate achievement and continued expansion in small businesses and specialty. Industry growth has moderated to the low to mid-single digits as loss trends normalize. We continue to expect the organic growth in our commercial book to grow at least twice the pace of the industry, supported by our strong broker partnerships, digital capabilities and ongoing specialty expansion. Commercial lines continue to benefit from our focus on underwriting discipline, delivering a strong combined ratio of 89.1% in the fourth quarter of 2025. For the full year, the combined ratio was also strong at 89.3%, essentially unchanged from 2024. Results reflected lower catastrophe losses and a reduced expense ratio, partly offset by an increase in the core accident year claims ratio. The changes in catastrophe losses and the core accident year ratio were impacted in part by our revised definition of a single claim catastrophe loss. Looking ahead, we expect a low to mid-90s combined ratio overall in 2026 as we continue to target operating the existing Definity Commercial book in the low 90s and begin integration of the acquired book of business. Putting this all together on Slide 17, we generated substantial operating net income of $120.7 million in the fourth quarter, reflecting strong underwriting income alongside meaningful contributions from our insurance broker platform and net investment income. Consolidated underwriting income increased by $14.5 million in the quarter and by more than $142 million for the full year, driven by robust performances in personal property and commercial insurance. Net investment income totaled $215.7 million for 2025, up nearly 9% from 2024. The increase was primarily due to higher interest income from the proceeds of our senior unsecured notes invested in short-term instruments as well as increased bond holdings. 2026, we expect net investment income to exceed $300 million, supported by the growth in assets added through the Travelers transaction. Overall, broker operating income increased by more than 24% in 2025, reflecting strong contributions from both acquisitions and solid underlying organic growth. As Rowan mentioned, we expect broker operating income to grow by approximately 20% in 2026 from the $94 million delivered in 2025 with a 60-40 mix between distribution income and intercompany commissions, reflective of an increased share of wallet as we integrate the acquired business. Lastly, you'll note the increase in our operating ROE, which ended near the top of our guidance range at 12.2%. This resulted from progress on all of our organic levers, including improved Sonnet profitability, the continued march down of our operating expense ratio and early progress on our claims transformation. We also benefited from about 1 point of better-than-expected cat losses. Conversely, the issuance of shares in Q2 to partly fund our Travelers transaction had a negative impact on operating ROE, which will not be fully reflected in this metric until mid-2026. Progress made in 2025 provides confidence in our ability to sustain a mid-teen result post integration once we realize the expected benefits from the Travelers transaction. Turning to Slide 18. We delivered a successful renewal of our reinsurance program for 2026, which meets the requirements of our much larger post-acquisition profile. This was supported by our strong performance track record with reinsurers, and we maintain robust access to reinsurance markets. As part of the pro forma structure, Definity's overall reinsurance coverage increased significantly due to the expanded scale of the combined company. Importantly, while catastrophe treaty retentions increased by $15 million or 20%, the rise was smaller relative to the expected growth in the overall business of more than 35%, resulting in a more efficient risk transfer profile. Slide 19 illustrates the continued strengthening of our financial position in 2025. The increase in our book value to north of $4 billion was primarily due to strong operating performance and the private placements of common shares in the second quarter, partially offset by our growing dividend distributions for the year. Clearly, our financial capacity ended the year in a robust position as we approach the closing of the Travelers transaction. Our current leverage ratio remains below 30% following the close of the transaction, and we are confident that this will reduce to our target level of 25% in the near term. Slide 20 outlines how we funded the $3.3 billion acquisition last month. As expected, a significant portion of the funding came from excess capital, our own in addition to the approximately $1.1 billion from the acquired business as well as $385 million of equity financing completed post announcement. Our $1 billion inaugural bond offering and a $375 million 2-year bank loan make up the debt financing required to fund the acquisition. I'm pleased to say that we have already repaid the excess capital term loan that bridged from the date of closing until we could access the $1.1 billion in excess capital. Turning to Slide 21. Our integration work is progressing well, ensuring we delivered a seamless day 1 experience for brokers, policyholders and employees. All transition services were fully operational from day 1 to ensure business continuity and employees came together under unified leadership supported by in-person town halls that reinforced our culture. We have already begun to move new business intake to Definity, an important step toward harmonizing our broker distributed products under a single brand. Looking ahead, we're on track to start the policy conversion process in Q2 2026. At the same time, we're executing well against our planned integration activities and maintain strong change management to support brokers, employees and business growth. Turning to Slide 22. Our integration planning provides a clear actionable pathway with at least $100 million of annual run rate synergies identified. These synergies are driven by 3 primary sources: technology platform consolidation as Travelers personal and commercial volumes migrate onto Definity's scalable buying platform; elimination of U.S. parent company service charges that fall away as the business transitions to Definity oversight and operations and operational efficiencies driven by elimination of duplicative and administrative activities and the benefits of scale. This began immediately post close, there will be a lag between when we complete the work and when the financial benefits are earned. As previously outlined, we expect approximately 2/3 of the integration efforts will be completed in the first 18 months, which should translate into about 1/3 of total synergies earned during that period. This timing reflects the dependency on fully transitioning the acquired business onto our operating platforms. Together, these synergy drivers represent 6 to 7 points of combined ratio reduction for the acquired business before factoring in future loss cost benefits. With that, I'll hand it back to Rowan for some final thoughts. Rowan Saunders: Thanks, Phil. With the acquisition phase now complete, we've strengthened our position in the Canadian P&C market and reinforced our role as a leading carrier in the broker channel. Our focus now shifts squarely to execution, integrating the acquired business effectively, advancing digital innovation and sustaining the strong performance that has defined our trajectory. Bringing these organizations together enhances our scale, broadens our personal, commercial and specialty capabilities and deepens our relationships across Canada. Travelers culture has been a natural fit, and we're excited to welcome our new teammates as we build a stronger, more formidable Definity. This moment represents a launch point. With a modern platform, a diversified business and a clear growth strategy, we are well positioned to accelerate our momentum and continue building a Canadian champion, one that delivers sustained value for our customers, our brokers and our shareholders. With that, I'll turn the call back over to Dennis to begin the Q&A session. Dennis Westfall: Thanks, Rowan. We are now ready to take questions. Operator: [Operator Instructions] And your first question comes from the line of Paul Holden from CIBC. Paul Holden: First question is regarding commercial insurance lines. And without a question, I think Definity has done an excellent job growing in commercial since IPO, 2x industry growth rate, plus with very good margins. I think the question people are starting to ask though is, okay, well, now the market is clearly -- market conditions are not as generous. So can you continue to grow at 2x the market with very strong margins, or you can continue to grow at 2x, but maybe sacrificing a little bit of margin? Rowan Saunders: Paul, I think that a couple of points I would kind of make before handing over to Obaid to kind of give you some more color. You make the point about the commercial market evolving, and I think we definitely see that as well. The big picture for us is don't forget 70% of our premium is in personal insurance, which is still a very firm marketplace. And then the 30% that is in commercial we feel about 15% of that is what is really exposed to this increasingly competitive large commercial segment. So overall, it's about 5-ish percent of the total portfolio. So I think that's an important point of context. The other point I would make is that this isn't new. Like we've been seeing a more competitive market for multiple quarters now, as you've seen us call that out in the past. And Definity continues to outperform each of those quarters, even this last quarter, posting a 7% organic growth. We have said broadly, we can grow at twice the rate of the industry. But when you think about low industry growth rates, our current growth rate is actually multiples more than that today. And I think the main issue for us is that there is some structural advantages, and we're structurally well positioned to continually growing ahead of the market with -- withholding our margins. So a lot of kind of confidence there. But why don't I pass it over to Obaid to kind of add some more color on how you're doing this. Obaid Rahman: Thank you, Rowan. And let me maybe just start with -- I'll just take a minute on our performance and then give a bit of context on the structural advantages, which Rowan just mentioned. 7% growth in Q4, 8.5% for the year at a sub-90 COR. We're delighted by this because it's clear outperformance to the marketplace. Our growth was very balanced. About half of it came from pricing, half of it was organic. We gained market share overall. When we look at our structural advantage, it comes from 2 areas. One is the complexion of our portfolio, which is heavily skewed towards the small and mid-market business. The second component is over the past number of years, we've made quite a few investments in technology and in our specialty capabilities. If we start with the first piece on the small and midsized business, here, what matters is speed, ease of doing business, service and technology is really the differentiator. We have Vyne Commercial. It's our digital platform. We believe it is the leading digital platform in this space in the market, and it continues to give us outsized growth. We're getting high single-digit growth in the small business space, both coming from pricing, and we're gaining meaningful market share. As we've mentioned in a few quarters, and we did in the opening remarks, the large account segment is competitive. We're staying disciplined there, protecting margin. This is about less than 15% of our portfolio. And finally, we get to the specialty part of the business where over the years, we've made quite a few investments in capabilities, in underwriting, in claims, in risk prevention. We've cultivated deep broker relationships in that space, and that continues to bear fruit. We're gaining market share. We've got a number of verticals which are running, growing. We had double-digit growth in the specialty business. When I put this all together, this is a structural advantage, which helps us manage through the cycle. And if I take a step back, when we look at the past 5 or 6 quarters, this is when the market did become a bit more competitive in certain segments. We've had high single-digit growth, and we've outperformed our peers by about 7 points. It's a meaningful and material outperformance and really does speak to the resilience that we built in our business to manage through the cycle. As we look forward, we think this growth momentum of ours is going to continue how we ended the year. We're going to be in the upper single-digit range. And the Travelers acquisition is bringing a host of new verticals and capabilities in the specialty space, things like ocean marine, technology, cyber, financial lines, a leading cross-border facility, just to name a few. And once we get these onboarded, they're going to open up a new frontier of growth. They're going to expand our addressable market and really excited about having that as we go through the transition. Paul Holden: Okay. That's a very good answer. I appreciate that. Second question is related to personal auto. So certainly versus my own expectations, the combined ratio was better than I would have expected in Q4, which did see some more, call it, normal type weather and certainly worse than Q4 of the year before, but yet your core accident claims ratio improved by a little over 100 basis points year-over-year. So maybe talk to me a little bit about that and maybe it's just as simple as pricing has been coming ahead of claims inflation. But if there's more to it to that, I would love to hear it. Rowan Saunders: I think that, Paul, that's a part of the business we've been very pleased with. And I think it's had -- it's obviously industry challenges over the last couple of years, and we continue to get better in that line of business. So what we think about the way we've exited the year, there's a number of drivers there. But don't forget, Sonnet is one piece that is now much better than it was over the last couple of years. And that drag has now disappeared as we said that it would be. And then the other part of this is that there has been significant rate taken and segmentation changes. And when you put that on the Vyne Personal Lines platform, that agility and frequency by which you can keep optimizing your portfolio, we think, is actually giving us a competitive advantage. And if you think about not just the core accident year, which certainly has improved, as you said, up 2 points year-on-year, but we're now also in a position where we're moving back into strong growth. So the growth in Q4 was really a step up from where it was in Q3 as we had kind of called it out. And that component of growth is now both unit count as well as ongoing kind of rates. So I think that's a pleasing line for us. Paul Holden: Okay. I want to ask one more, and that's going to be on the AI disruption topic and my own opinions on it. But I want to hear your opinions and how it may or may not be or how you're viewing the risk, particularly in the insurance brokerage space, which was impacted earlier this week by that theme. You've guided to 20% growth next year in brokerage. I assume that indicates you're going to be buying more. Your intent is to be buying more. So how do you get comfort or how are you thinking about continuing to deploy capital into insurance brokerage, even though there's this AI narrative that it's going to be disruptive to the business? Rowan Saunders: Yes. Thank you for that, Paul. I think as you pointed out, our distribution, the top 10 broker that position we have is working out very well for us, and you saw us growing operating earnings by 24% this year. That's both acquisitions that we brought in, but strong organic growth at high margins. So this is an attractive business. And I'll tell you that one of the things that I think is an advantage for our platform is the fact that it is linked to Definity. And if you step back and you think about the investments that we, as an organization, have made in AI, we've been deploying these tools for well over a decade. They're right across the business from influencing growth, loss ratio, user experience. We have great data, 25 years plus in the cloud, a specific partnership with Google. So the point I'm making is that over 70% of our people are now engaged using these tools, and these tools are across our business. That's the underwriting side. As you link to the distribution side, I think that's an advantage where we can take some of this track record, this knowledge and these capabilities into helping brokers adjust as well. And I think on the broker kind of narrative, brokers have been challenged many, many times over the decades, and they continue to stay relevant. They continue to get bigger. They continue to do -- to actually increase their valuations. And so we think overall, in commercial insurance, this is complex. These are big assets, and you need a lot of trust and advisory services to set those. In personal lines, this is really happening. There are AI tools already involved in helping customers in the discovery phase, in shopping, but many of those still need, feel and trust the need to link to a broker, well over 40% of those. So to me, it's more about an adoption. Can the brokers adapt? Can they invest? And like anything, just like when digital tools came into the channel, if you're making those investments, I think you'll stay relevant. If you're not, I think you would fall behind. So the takeaway to us is we're still very confident in that channel. We don't think this is the end of broker distribution by any means. But they are evolving. They'll need to make these amendments. And many of them, with certainly our support, we think we'll do that. I actually think this helps increase the pipeline, which is a good pipeline. And I think that's a nice opportunity for that channel. Operator: And your next question comes from the line of Bart Dziarski from RBC Capital Markets. Bart Dziarski: I wanted to ask around on Travelers. So I guess, related to that 2026, you gave guidance for $6.5 billion of premiums. What does that assume for the $1.5 billion book you inherited for Travelers in 2025? And then maybe more importantly, how should we think about the growth of that book in 2027? Rowan Saunders: Well, thanks very much for that, Bart. A couple of quick points here. Firstly, I think when you think about the context around that, I would say we are delighted that we actually closed the transaction on January 2. It was a very smooth procedure. And as we've said before, this is a game changer for Definity. A quick reminder here is very strategic. This places us in the top 5, which was our goal before, we now set our missions on top 3. It's added a lot of capability and product to our specialty and commercial lines and more scale. The personal lines firmly put us in #3. So we like that. The financial conditions certainly compelling. We've talked about the $100 million cost synergy and how we will ultimately get that portfolio to perform like Definity. Clearly, when you buy a business like this, you're buying it for the long term. 2026 is a transition year. So what we're really focused on here is the retention of the business, the conversion and getting it on to our platform, that platform changed. I think the high-level question you asked about what are those assumptions. So I look back and I say, okay, you've got -- we're adding about $1.5 billion of business from Travelers to Definity's business. That moves us up a minimum of 35% this year. So Definity will become significantly larger as we pull that on. As you would expect on that Travelers portfolio, there is going to be some dislocation on that. Now we look at that, and we feel very good that there isn't major dislocation. Most of it, we like. But naturally, there will be some dislocation. There will be some accounts, some segments that don't fit. So that will kind of contract a little bit, not materially. But the underlying business, the Definity business, we're really confident is going to continue to operate like it is today, upper single digits. You heard Obaid talk about that in commercial. Paul says the same thing for his personal lines business. And once we convert the business on, our expectation is that both portfolios, the Travelers portfolio and the Definity portfolio continues to operate like it is. If you think about where is Definity today, it's in the low 90s, and it's growing upper single digits. That's not going to happen year 1 with Travelers, as you would expect. But as we finish the conversion, our expectation is that both businesses will be performing in that range. Bart Dziarski: Awesome. That's very helpful. And then I guess sticking with Travelers on the specialty opportunity that this business brings. You mentioned a new total addressable market. Could you maybe help us size what that opportunity could be and then how fast you're looking to kind of address that opportunity? Rowan Saunders: Go ahead, Obaid. Obaid Rahman: Yes. No, thank you for the question. I mentioned some of the verticals upfront. And the way we look at this is that you get those new capabilities, it allows us to cross-sell to our existing customer base, so we can give them more product. It will allow us to increase product density with our broker partners. And the combination of that, so you get the new capabilities plus the fact that those enable you to get more growth on your existing capabilities because you can link them up together, we think it's going to give us momentum to continue with that minimum sort of 2x industry growth rate, upper single digit for a number of years going forward. Now when do they come -- when do we bring them online? As Rowan mentioned, this is a transition year. We're right now working to onboard these capabilities into our operating model, into our business platforms. And we think towards the end of the year, we'll start to get them fully rolled on to our platform. So towards the end of the year, going into '27, that's when we expect that they'll be functioning within our model. Rowan Saunders: Just a data point. As far as the addressable market is concerned, typically, we've been operating in a market we think is about $27 billion. This moves that market up to just over $34 billion now. So it is a meaningful upside opportunity that Obaid has mentioned. Operator: And your next question comes from the line of Jaeme Gloyn from National Bank Capital Markets. Jaeme Gloyn: First question, I just wanted to get a clarification on a comment that was made around the AI and how AI is already helping customers in personal lines. You talked about -- you gave a percentage. It was 40%, I believe, of customers using, I guess, like AI or digital quoting tools need to get on the phone and confirm what they've done. Is that what I interpreted you said or just clarify that. Rowan Saunders: No, I think what we're saying is that when people do use those tools, 40% of them still end up reverting back to asking for broker advice to complete the transaction. Jaeme Gloyn: Okay. Yes, that's kind of what I thought. Okay. Got you. And then following on that as well, Rowan, I believe you talked about AI helping broker distribution and Definity helping with that expansion, increasing the pipeline for Definity. Can you sort of talk through how you would see that pipeline to Definity increase as opposed to potentially elsewhere? Rowan Saunders: Yes, sure. I mean, Fabi, do you want to take that, which is what are you seeing in the pipeline? And why are people coming into the pipeline? Fabian Richenberger: Yes. Glad to do that, Rowan. Thank you, Jaeme, for your question. So maybe picking up on the question what AI will do to distribution. As Rowan mentioned, we've been a leading company, both on the digital side, now with AI as well. And what we've been doing over the last couple of years, we've been leveraging those capabilities into our own broker platform as well. So over the past 2 years, we've been leveraging AI and the benefits of that to our broker platform is that we are able to enhance lead generation and customer traction. We are able to strengthen service and customer engagement. We are able to provide customized advice to specific commercial segments. And then we also have a number of key operational benefits that come out of leveraging AI into our broker platform, to name a few. We are automating routine processes. We are enhancing data analysis and business intelligence. We are automating coverage analysis and coverage gap analysis. We are using that capability to help our brokers kind of mitigate risk at the customer base. So a whole host of value drivers that will allow us to drive more organic growth, will allow us to increase our EBITDA margin. And I think what's happening, as it does on the P&C side, scale is a very important differentiator going forward. We fully expect that the consolidation will be continuing to happening on the broker side as well because the top 10 brokers are controlling now over 50% of the marketplace in Canada and being able to make those investments into platforms, talent, data communities will be a differentiator. And I think that the smaller brokers will kind of want to join our broker platform because they'll benefit from additional insights, additional capability, additional growth opportunity. And unlike other platforms that are out there, we are encouraging the incoming brokers to retain a meaningful ownership opportunity. And we quite like that because of broker principles, key producers that have an ownership in the broker platform as well. They are very motivated. They keep being very entrepreneurial and it aligns the growth aspirations between ourselves and those key operators overall. So I think these are many kind of dimensions as to why we think that the consolidation will continue to happen. And what we have proven over the last 2 years is that the platform that we've created is attracting the target focus that we want to have in that broker platform. And with that in mind, I think we are as confident as we can be that we will be continuing to increase our operating income in that 20% range that we committed to you. Jaeme Gloyn: Okay. Great. Appreciate that color. And then still on the broker side but just thinking through the acquisition pipeline to drive the 20% growth. Have you seen any shifts in the M&A backdrop in the last couple of months, maybe a little bit longer than that, that could potentially accelerate that growth trajectory and the M&A pipeline? Fabian Richenberger: What typically happens is that those midsized brokers that they look at it from a 3-, 5-, 10-year horizon at this point of time that the multiples that are being offered for those brokers are still attractive. And if you are a midsized broker kind of managing $100 million, $200 million of business, you have a concern now about how you go through succession planning. 20 years ago, you needed $10 million or $20 million to fund succession planning. Today, you need $100 million, $120 million. So it's nearly impossible for those family-owned brokerages to do internal succession planning. So then it comes back to the platform that we've built in terms of us supporting the McDougall leadership team to be empowered, entrepreneurial, always with sound governance framework around it. But again, the attractiveness of our platform, that allows them to leverage different product capabilities, allows them to typically increase the organic growth after they've joined the broker platform benefiting from scale and market access benefits. And then as I mentioned, the invitation for those broker principals to leave equity in the platform, I think will continue to be very attractive to brokers that decides to partner with somebody else. Jaeme Gloyn: Okay. Got it. And then last one, just on the Travelers and just I want to make sure I'm interpreting some of the commentary correctly. 2025 Travelers premiums written looks pretty flat to their 2024, just kind of rough numbers could be some rounding. And then my interpretation from your comments is we should expect to see like Travelers premiums growth through this integration process in the first year pretty flat again for what will be included with Definity and then start to accelerate towards the end of the year. Is that the right way to be thinking about Travelers premium contribution to Definity? Philip Mather: Yes, Jaeme, that's a good interpretation. I think if you look at what happened with the premium base, it actually contracted slightly from 2024 levels came in just a little below $1.5 billion. Now that was driven by actions taken under prior ownership where they were looking at targeted rate and underwriting actions. There's a couple of portfolio exits in there. So that's actually a good factor in terms of that underlying profitability kind of focus. And as they were taking those actions, clearly, it was during a period of time where people were waiting to look to see the certainty of the close period. So I think what we expect going forward, there'll be a little bit of spill of some of those actions and efforts into the first half of 2026. So we'll probably see the Travelers contribution of that acquired book be on the flat or a little lower side. And then as we emerge through our conversion activities begin to get a hold of the business and have more influence in the activity, we'd see that start to move back. So when I segment it for '26, we still continue to see good upper single-digit growth on the existing book. We see the $6.5 billion more akin to a floor than a ceiling. And certainly, we've got good conviction that as we get that stewardship and alignment of the books, you'll see that emergence into a more aligned growth pattern towards the end of the year. Operator: And your next question comes from the line of Alex Scott from Barclays. Taylor Scott: I just wanted to go back to a few more housekeeping items. On net investment income, can you help us think about the portfolio now that you have it? And just how to think about the yield and how that may change versus your portfolio, how much assets now that you've got them on board? Can you help us think through all that? Philip Mather: Yes. No problem. I mean there are quite a lot of moving parts because, obviously, we were positioning the portfolio for the transaction, which closed on Jan 2. And you may have heard in the commentary that we were very proactive in terms of settling down the excess capital loans. We paid down that $1.1 billion of temporary debt financing, leveraging the acquired portfolio from Travelers at the start of February, which was several months faster than we anticipated. That obviously helps us on a net basis because we've taken away the cost of the debt, but you don't carry those excess assets. So if I step back today and say where are we today, we've got just north of $9 billion of invested assets. The blended book yield on that, it's heavily weighted towards fixed income. So the blended book yield is about 3.4% when you recognize bringing on that investment portfolio from Travelers balance sheet. Your fair value that to market yields on the date of acquisition. And then we've done some trading to the line the portfolios. So I think if you step back, big picture, about $9 billion now of assets under our investment strategy and management, about a 3.4% book yield on that today. Now where we end the year, it obviously depends on the yield environment, depends on cash flows in and out of the portfolio. But that's why we've got good conviction that we'll generate at least $300 million on it during the year. I think what you'll see at the start, Alex, is our weights will be more orientated to fixed income. We brought that portfolio over on that basis. We'll probably stay like that for the first couple of quarters just as we settle into the acquisition, focus on a little bit of the deleveraging aspect as you've already seen with those actions in February. Taylor Scott: That's really helpful. And then just on pruning the business as you're kind of going through that, what will the timing look like? Are you starting that more aggressive immediately? Or is that something you'll sort of get the book on and take your time with? I'm just trying to anticipate a little bit how you're planning on approaching it? And also maybe just a view on the market we're in right now and just how retention will react relative to if there is some price softening out there that kind of leaks in from the global pricing environment. Rowan Saunders: I think that the retention of the portfolio and the conversion is really not that impacted by your point about the market conditions because, again, Travelers is pretty close to 70% personal lines, I think it's 68%. And of the commercial business, it looks fairly similar to ours. They have a large small business area. They also have a large specialty area, which is, of course, what we like. So the segment that's really exposed to these more competitive large commercial accounts is similar to ours. It's not a big piece. So I think that the market conditions are less impactful. I think that the point that we're making, and Phil articulated is the business that's rolling on that has come from previous management of Travelers, as they've really taken some underwriting actions, that portfolio is slightly contracting. As we said, that's good because those are actions we likely would have taken ourselves once we acquired the business. So in fact, it's accelerating some loss ratio improvement. Mostly, there aren't any big portfolios that we really dislike or outside of our underwriting appetite. So we would like to keep most of it. That being said, just naturally, there will be some accounts, there will be some dislocation on pricing as we transfer the business from the Travelers platform to the Definity platform. And that will be some, let's call it, relatively modest retention rate declines in the first year. As that rolls on, we then very much expect this business to start performing just like Definity. We expect that the retention rates will be just as good as Definity's. We expect that the new business production of the total portfolio continues to be upper single digit. And we've got Definity now running in the low 90s combined ratios as we complete this 3-year conversion, we expect Travelers portfolio to mirror that. So that's the kind of way forward. So I wouldn't read too much into it. But I think the important point here is that we're inheriting a little less than $1.5 billion. That will shrink a little this year as expected, as you would expect in the first-year conversion. It gets offset by upper single-digit Definity portfolio growth this year, and then they start to look pretty similar in performance over the next couple of years. Operator: And your last question comes from the line of Tom MacKinnon from BMO Capital Markets. Tom MacKinnon: A question with respect to the exited lines. I guess that's the Sonnet Alberta stuff. Losses of $10 million in the quarter. This has been ongoing for some time. I think this is the highest we've seen in the last 4 quarters. What's happening there? Are we going to continue to see losses from that going forward? When does that business run off? And I have a follow-up. Philip Mather: Yes. Thanks, Tom. Yes, you're right. Exited lines in the quarter, you saw a loss there of $10 million. That was driven by specific actions we took to strengthen the reserve position. I'd say, specifically in relation to bodily injury amounts. And really, what we did there was we took the decision to reinforce that level of prudence as we exit the year, and we now have a book that's fully transitioned into runoff. So there is no future earned premium coming through that book. There's no ongoing new exposure. So really, our intent there was to leave 2025 with a very robust balance sheet position against that exited business, really to try and mitigate the risk of any future adverse development coming there from. And I would say we're very confident in the closing position that we now exit really to put that behind us, I think, is the attitude that we took in closing the book and looking forward to the reforms that should come into the problems in '27. Tom MacKinnon: What about on the Travelers book that you're bringing in? Is there a decision to move any of that into exited lines? Philip Mather: No. So they have an active broker distributed business similar to the one that we have. It's not oversized either. I think the level of concentration in Alberta is pretty close to what we have today, and they're continuing to operate in that environment. So no. Now we're looking at -- obviously, we're picking up the whole legacy of the business. There might be historical business that they wrote, which we would consider to be more exited lines in nature. But we'll be looking at the opening balance sheet. We're going through that work right now. And I'd say similar to the Sonnet position, we'll be looking to make sure we're comforted on any back book there. But no, in connection with Alberta auto, they continue to move forward. Tom MacKinnon: And if you make a decision to bump up reserves on the Travelers book, does that -- will that be reflected in PYD in the first quarter? Or is that sort of reflected into the purchase acquisition mix? Philip Mather: Yes. So I think what we'll do is, obviously, we go through a fulsome review. We're at that now. We'll finish that process off for the Q1 reporting. I think just in that regard, from what we've seen so far, we're very happy with the balance sheet that's coming across. So we feel pretty good about the decisions they've taken. They certainly seem from early days to have been very prudent in their approach. And so we feel good about that opening position. As we report the reporting going forward in our MD&As, we will be reflecting that consistent pattern that we do today on our existing book of business. So as prior year development rolls through, that will get reported into current results. So we'll reset the balance sheet to our degree of prudence and satisfaction as part of that. And then from there on in, you'll see the prior year development roll through in our kind of operating reporting going forward. Tom MacKinnon: All right. So no change in your kind of guide for prior year development going forward then? Philip Mather: No, I don't think so. I think our view would be we'll be bringing them similar with the underwriting and pricing, we'll be bringing them to our reserve kind of practices and management and monitoring. So at this stage, we've had this historic 1- to 2-point range. I think our goal is to bring them consistent with that -- the practices that underpin that reserving approach. Operator: That ends our question-and-answer session. I will now hand the call back to Dennis Westfall for any closing remarks. Dennis Westfall: Thank you, and thanks to everyone for participating today. The webcast will be archived on our website for 1 year. The telephone replay will be available at 2:00 p.m. today until February 20, and a transcript will be made available on our website. Please note that our first quarter results for 2026 will be released on May 7. That concludes our conference call for today. Thank you and have a great one. Operator: This concludes today's call. Thank you for participating. You may all disconnect.
Coimbatore Venkatakrishnan: Good morning. Thank you for joining us today. So thank you. We have today the Barclays Full year 2025 results, our progress and our target update. Today, we will outline targets for the next 3 years to deliver an even better run more strongly performing and a higher returning Barclays. This builds on the improvements which we have delivered in the last 2 years of our plan and which we shared with you in February of 2024. But first, let us take stock of the progress so far, starting with our 2025 results. There will be an opportunity for those in the room to ask questions at the very end of our presentation. So turning now to Slide 4. Barclays achieved all financial targets and guidance in 2025. We generated a return on tangible equity of 11.3%. Our top line grew by 9% year-on-year to GBP 29.1 billion, and we achieved our NII guidance for the group and for Barclays U.K. Our cost/income ratio once again improved year-on-year to 61%. And the group loan loss rate of 52 basis points was comfortably within the 50 basis points to 60 basis points through the cycle guidance. We have also announced today GBP 3.7 billion of shareholder distributions for 2025. This is up from GBP 3 billion in 2024. This includes dividends of GBP 1.2 billion and share buybacks of GBP 2.5 billion, and that includes a GBP 1 billion tranche, which we announced today. And importantly, we remain well capitalized, ending the year at the top end of our 13% to 14% CET1 range after accounting for today's buyback. We are delivering these improvements as we said we would. In 2025, we simplified the bank further, achieving GBP 700 million of gross efficiency savings versus the GBP 500 million target, which we had for the year. We divested the remaining nonstrategic businesses, and we announced a long-term partnership for payment acceptance. Operational improvements across the group are creating a better Barclays, driving stronger financial performance. All our divisions generated double-digit RoTE in 2025, and this was an improvement on the prior year. In the Investment Bank, greater capital productivity and cost efficiency contributed to a 2.1 percentage point increase in RoTE to 10.6%. And the U.S. Consumer Bank RoTE increased 1.9 percentage points to 11%. This reflects additional scale and operational progress to improve the business mix to improve pricing and improve efficiency. Finally, we are continuing to rebalance the group towards the 3 highest returning U.K. businesses. We have now delivered GBP 20 billion of the GBP 30 billion RWA growth, which we targeted for the end of 2026, and this includes GBP 7 billion in 2025. So we see good momentum with 6 consecutive quarters of organic loan growth in Barclays U.K. and 5 such quarters in the U.K. Corporate Bank. Progress in each of these 3 areas is delivering structurally higher and more consistent group returns. It has also increased my confidence in and my expectations for the group. Stronger and more consistent returns mean that we are better equipped to serve our clients and that we have more capacity to invest in the business. All of this is providing a solid foundation to create more value for our shareholders in the next phase of our plan through to 2028 and beyond. We will return to this later. Our progress in the last 2 years reflects the consistently excellent work of our colleagues, over 90,000 of them. They implement our strategy every day and are core to our success. So I'm therefore pleased to announce today a grant of approximately GBP 500 of shares to the vast majority of our colleagues, essentially all full-time employees outside of managing directors. This is the second year of such a reward, and it is more than just a reward for past effort. We are aligning the actions of our colleagues with the ultimate outcome of their efforts, which is the change in our share price. And I believe this equity ownership is really important for all our colleagues. With that, over to you, Anna. Angela Cross: Thank you, Venkat, and good morning, everyone. Slide 6 summarizes the financial highlights for the fourth quarter and full year. Before going into the detail, I would remind you that a weaker U.S. dollar reduced our reported income, costs and impairments. Return on tangible equity increased from 10.5% to 11.3% year-on-year, in line with guidance. Pre-provision profit increased by 13% as income growth, coupled with efficiency actions supported 3% positive draws. Profit before tax increased 13% to GBP 9.1 billion and earnings per share by 22% to 43.8p. My focus, as ever, is on operational progress, which strengthened throughout the year. Income increased by 9% year-on-year to GBP 29.1 billion. We grew stable income streams by 9%, supported by 8% growth in retail and corporate businesses and 17% growth in financing within markets. The strength and predictability of this growth means we are upgrading our expected group income to circa GBP 31 billion in '26 versus circa GBP 30 billion previously. Elsewhere in the Investment Bank, intermediation revenues increased by 13% as we helped clients navigate a volatile environment whilst our IB fees were stable. Group net interest income increased for the fourth consecutive year and by 13% year-on-year to GBP 12.8 billion, reflecting 3 factors: First, stable deposits across the group supported further significant growth of structural hedge income, which I will discuss shortly. Second, lending grew across all divisions, and we exited the year with strong momentum. And third, operational progress in the U.S. Consumer Bank drove stronger NII and NIM. Turning to the structural hedge. As a reminder, the hedge is designed to reduce income volatility and manage interest rate risk. We had assumed that we reinvest 90% of maturing hedges, but we fully reinvested assets throughout '25. We also reinvested hedges at higher rates than planned. As a result, hedge income increased GBP 1.2 billion to GBP 5.9 billion, contributing 46% of group NII, excluding IB and head office. The increase that I -- in the average hedge duration that I called out last quarter from 3 to 3.5 years further supports the predictability of hedge income, which I will return to later. Now moving on to costs. We delivered GBP 700 million of gross efficiency savings in '25 and GBP 1.7 billion cumulatively towards the GBP 2 billion target by '26. These savings have contributed to 10% positive jaws since '23. The group cost-to-income ratio decreased again to 61%, in line with guidance despite several cost headwinds in the year. Total costs increased by GBP 1 billion to GBP 17.7 billion, with nearly half of this coming from the addition of Tesco Bank. And we chose to accelerate some discretionary investments, ending the year with structural cost actions around the top of the GBP 200 million to GBP 300 million guided range. The '25 group cost base also included some items that we do not expect to repeat. First, the GBP 235 million of finance provision in Q3 without which we would have ended the year at 60%. and second, circa GBP 50 million of one-off costs in Q4, including a VAT expense in Barclays U.K. Turning now to impairment. The full year impairment charge of GBP 2.3 billion equated to a loan loss rate of 52 basis points, in line with the through-the-cycle guidance of 50 to 60 basis points. The credit picture remains benign with low and stable consumer delinquencies and wholesale loan loss rates below the through-the-cycle range. The Q4 loan loss rate of 48 basis points fell versus Q3, reflecting lower single name charges in the Investment Bank. Calibration of our impairment models to better capture consumer behavior resulted in lower loan losses in Barclays U.K. throughout '25, including in Q4. With these now largely complete, you should expect the Barclays U.K. loan loss rate to be closer to 30 basis points from Q1. The U.S. Consumer Bank loan loss rate was higher in the quarter as expected, shown on the next slide. 30- and 90-day delinquencies were seasonally higher versus Q3 and broadly stable year-on-year, and U.S. consumer behavior remains resilient as we show on Slide 95 in the appendix. The Q4 impairment charge increased GBP 52 million quarter-on-quarter, reflecting higher balances. As a reminder, the Q1 loan loss rate tends to remain elevated following holiday-related spend in Q4. Turning now to U.K. lending. We have now deployed GBP 20 billion of business growth RWAs in the U.K., including GBP 13 billion of organic growth, and we exited '25 with strong momentum. Mortgage balances have grown for 6 quarters, and we delivered GBP 3.1 billion of net lending in Q4. Mortgage applications in '25 were higher than in any prior year, supported by Kensington and increased broker engagement following improvements to the platform in Q3. We also acquired 1.4 million new credit card customers in the year, up from 1.1 million in '24. As we show in our operational data pack on Slide 79, this included 300,000 new Tesco Bank customers. Supported by this, credit card balances grew to the highest level since 2017. Core business banking lending has grown for 4 consecutive quarters, and we expect overall balances to grow in half 2 as headwinds from the runoff portfolio diminish. U.K. Corporate Bank lending grew 18% year-on-year and market share increased 100 basis points in this period to 9.6%. In each case, we have further to go, supporting our plan to deploy GBP 30 billion of RWAs by '26 and onwards from there. Turning to Barclays U.K. in more detail. You can see financial highlights on Slide 15, but I will talk to Slide 16. RoTE was 23.8% in the quarter and 20.7% for the year. NII of GBP 2 billion increased 11% year-on-year and 3% quarter-on-quarter. On a full year basis, NII of GBP 7.7 billion was in line with guidance, and we expect an increase to between GBP 8.1 billion and GBP 8.3 billion in '26. The hedge is expected to drive around GBP 550 million of additional NII. As I'll cover in more detail later, this is a smaller allocation of the total hedge income growth versus '25 with more growth now allocated elsewhere in the group. We expect a circa GBP 100 million product margin impact in our mortgage book, driven by maturities of higher-margin loans written during the stamp duty holiday in early '21. This will be weighted to half 1. We also expect lending growth to continue throughout the year. As a planning matter, we expect this benefit to be offset by continued, but easing deposit margin compression. These effects will lower NII quarter-on-quarter in Q1 with stability and growth from Q2 and Q3. And on a year-on-year basis, we expect growth in each quarter of '26. Non-NII of GBP 247 million was broadly stable year-on-year with a full year just above GBP 1 billion. We expect a similar level in '26 with some seasonal variation. The one-off items I described earlier accounted for around half of the year-on-year increase in operating costs in Q4. These should not repeat in Q1 '26. Moving on to the Barclays U.K. balance sheet. Deposit balances increased GBP 3.1 billion versus Q3 and were broadly stable versus last year. Customers continue to seek higher-yielding products and time deposits, which both grew quarter-on-quarter. Lending grew for the sixth consecutive quarter and by 4% year-on-year, driven by mortgages and cards. Moving on to the U.K. Corporate Bank. RoTE was 19.1% in the quarter and 18.9% for the year. Q4 income grew by 18%, while costs grew by 8% as we accelerated discretionary investments. These investments support delivery of a high 40s cost/income ratio in '26 following a 4% improvement in '25 to 51%. Q4 NII growth of 22% reflected stronger volumes across both sides of the balance sheet. Lending grew 18% year-on-year, reflecting improvements in the lending process. Deposits grew by 7%, resulting in a 34% loan-to-deposit ratio, up 3 percentage points. Turning now to Private Bank and Wealth Management. RoTE was 26.3% for the year, on track for the greater than 25% target for '26. Q4 RoTE was impacted by higher costs from an acceleration of investments and a historic litigation charge. This was small in the context of the group, but reduced this division's Q4 RoTE meaningfully to 12.6%. Client assets and liabilities grew 9% year-on-year and assets under management grew 11%. More than half of this AUM growth came from net new assets under management of GBP 3.3 billion, including GBP 0.6 billion in Q4. This contributed to 4% quarter-on-quarter income growth, and we expect continued volume and income growth in '26. Turning now to the Investment Bank. As a reminder, our objective here is to generate higher structural returns by improving the productivity, mix and efficiency of the business. Risk-weighted assets have been stable for 4 years. Income to average RWAs has increased by 110 basis points since '23 to 6.6%. In the top right, more stable income from financing and the International Corporate Bank grew 14% and accounted for 42% of IB income, up from 32% in '22. Moving to the bottom left, Markets income has grown year-on-year for 7 consecutive quarters as we deepen client relationships and investment banking income has grown for 5 of the past 7 quarters. Together with 7 consecutive quarters of positive operating jaws, this has improved the financial performance of the division. The Investment Bank delivered a full year RoTE of 10.6% in '25, up 210 basis points. Q4 RoTE was seasonally low at 4%, up modestly year-on-year. Income grew 7%, which we show in more detail on Slide 25, and costs were flat. In U.S. dollars, markets income was up 17% year-on-year, delivering around 2/3 of the Investment Bank's income in the quarter. FICC and equities grew 14% and 21%, respectively. We saw particular strength in securitized products within FICC and prime and equity derivatives in equities. Financing income grew 20% year-on-year and for the sixth consecutive quarter, with prime balances up 30% year-on-year, including strong growth in Asia. In Investment Banking, income was broadly stable. The U.S. government shutdown weighed on ECM activity with the majority of Q4 IPOs pushed into half 1 '26. This was offset by a 7% increase in DCM fees and an 18% increase in advisory fees. The M&A pipeline is strong, and our share of announced fees and volumes due to complete in '26, has increased year-on-year. International Corporate Bank income was broadly stable, including 5% growth in transaction banking income. Turning now to the U.S. Consumer Bank. Operational progress has continued. Net receivables grew 5% quarter-on-quarter and 10% year-on-year, around half of which related to the addition of the General Motors balances at the end of Q3. Our partnership cards business has grown faster than the overall market in 16 of the last 20 quarters. NIM improved slightly versus Q3 to 11.6%, supported by the repricing that we undertook in '24 and portfolio mix. Retail deposits grew 5% quarter-on-quarter and 20% year-on-year, which improved the funding mix. And we continue to drive greater digital interactions, supporting a 41% cost/income ratio in the quarter. We expect this progress to continue, reflecting sustainable improvements in returns. Q4 RoTE of 15.8% was supported by a one-off benefit, which I'll come to shortly, adjusting for which RoTE was 12.5%. And the full year RoTE increased 190 basis points to 11%. In U.S. dollars, Q4 income grew by 28% year-on-year, whilst costs were up 4%. NII increased 19%, reflecting stronger volumes and margins. Following a review of customer behavior, we have updated our assumptions to reflect more transacting versus revolving balances and longer duration customer relationships. This has allowed us to more precisely allocate partner rewards, which has 2 accounting effects. First, a one-off benefit largely in non-NII of circa GBP 45 million in Q4. Second, an ongoing change in income mix, reducing non-NII by circa GBP 50 million from Q1, offset by a broadly equivalent increase in NII. Q1 NIM will be around 12.5% with total income of circa GBP 950 million. There are considerable inorganic changes in the business in '26. So to help with modeling, we have included some details in Slide 96 in the appendix. Following the sale of the AA portfolio in Q2, we expect NIM to rise to nearly 14% in half 2, supporting a circa 12% RoTE in '26 before the AA gain on sale. We ended the quarter with a CET1 ratio of 14.3%. This included 33 basis points of capital generation from profits. Given this strong capital position, we have announced a GBP 1 billion share buyback and a GBP 0.8 billion final dividend equivalent to 5.6p per share. Looking ahead, we continue to expect between GBP 19 billion and GBP 26 billion of regulatory RWA inflation. Within this, the circa GBP 16 billion effect of IRB migration in the U.S. Consumer Bank remains our best estimate. Around GBP 5 billion of that will now happen with the implementation of Basel 3.1 on 1 January '27 with the remainder anticipated that year. We expect a reduction in the group Pillar 2A requirement following each of these changes. We have been operating around the top of our 13% to 14% CET1 range, with the returns and distributions in the plan announced today based on that level. Post implementation, we will consider where we operate across the range. More broadly, in the U.K., we welcome the constructive tone in the recent FPC review of capital requirements and we'll continue to engage closely with the Bank of England. Turning now to the RWA walk. Investment Bank RWAs decreased due to seasonality and accounted for 55% of group RWAs at the end of the year. The reduction in Barclays U.K. reflected a securitization in Q4 to manage risk on the balance sheet. As usual, a word on our overall liquidity and funding. We have a strong and diverse funding base, including a 73% LDR and an NSFR of 135%. And we are highly liquid across currencies with an LCR of 170%. These measures reflect purposeful and prudent management of our balance sheet, delivering resilience and thus ensuring we have the capacity to support customers in a range of economic environments. TNAV per share increased 17p in the quarter and 52p year-on-year to 409p. Attributable profit added 9p and 43p per share, respectively. Movements in the cash flow hedge reserve added 5p per share in the quarter, and we expect this to largely unwind by the end of '26, adding around 9p to TNAV. To summarize, we are pleased with the group's performance in the second year of our 3-year plan, having achieved all our targets and guidance. We now expect group income of GBP 31 billion in '26, GBP 1 billion more than originally expected. And continued operational progress means we are more confident in delivering target RoTE greater than 12% in '26. Venkat will now outline the next 3 years of the plan before I take you through the '28 financial targets in more detail. Venkat, over to you. Coimbatore Venkatakrishnan: Thank you again, Anna, and welcome back. Barclays is now on a journey to sustainably higher financial returns. I think of this journey as taking place in 4 stages. First, from 2021 to '23, we stabilized the bank's financial profile, exercising capital discipline in the Investment Bank while starting to build out our areas of strength. Second, since the launch of our simpler, better, more balanced strategy in February '24, we've positioned the bank for income growth and for higher returns. We have simplified our processes to drive efficiency, and we exited nonstrategic businesses. We've invested in digital capabilities to create a better customer experience. And we've grown our highest returning U.K. businesses to create a more balanced Barclays with more stable returns. Today, we set out the third stage of this plan all the way to the fourth. In this third stage, we will build on the foundations we have created so far to increase returns for the bank and to make them resilient across a range of environments. Year-by-year, we are improving the profit signature of the bank. Stronger financial results create the capacity to invest to secure sustainably higher returns. This is the fourth stage, and it extends beyond 2028. Two years ago, we presented a vision anchored in measured ambition and disciplined delivery. I said then that we were building a potent set of businesses, which were strong in themselves and mutually reinforcing. Our vision was harnessed to our home U.K. market, where we aim to deepen our presence even as we engaged with the world from London. Our vision today is one of accelerating ambition, still anchored in disciplined delivery. We will forge segment-leading operationally efficient businesses that are primed to support growth, and we will drive structurally deeper client relationships by connecting these businesses. We have more capacity to invest. We build upon a strong track record of delivery. Our drive is greater and our commitment is unwavering. We will increase investments twofold to drive deep technological transformation and modernization of the bank. This includes embedding AI at scale across the group to deliver better products and services. And importantly, we will pursue our ambition while generating higher returns in each of the next 3 years. In 2028, we are targeting a return on tangible equity of greater than 14%, up from greater than 12% for '26. Stronger capital generation will enable greater than GBP 15 billion of distributions across the period of '26 to '28. And this provides capacity for additional investment and growth beyond the levels set out in the plan today. And as we have done, we will exert considerable discipline over any investment given the importance, which we place on shareholder distributions. In 2026, we expect the Investment Bank to represent a mid-50s percent of group RWAs. This is above the initial target, and it reflects the postponement of previously anticipated regulatory changes. We expect this proportion to fall to about 50% by 2028 as we continue to maintain broadly stable RWAs in the Investment Bank and deploy more capital in our consumer and corporate businesses. We will continue to be guided by 3 goals, and these are to make Barclays simpler, to run it in a better way and to make it more balanced. Our journey began by creating a simpler business structure organized and operating in a simpler way. It continued with the simplification of our processes and customer journeys to improve the quality of our service and to drive efficiency. In the next 3 years, we will be deploying digital capabilities and AI to further this progress. To harness these technologies successfully, we must standardize our data, we must modernize our approaches, and we must harmonize systems and processes. Delivering in this manner will not only enable greater productivity, it will improve our operational resilience, our reliability and security. And importantly, and I'll come back to this, it will create a fulfilling working environment for our colleagues. For some time now, technology has revolved around our businesses. Now our businesses are revolving around technology. Customer interactions in the U.S. Consumer Bank are almost entirely digital today. Elsewhere in the group, we've made significant progress to build easy-to-use customer-facing platforms, and we'll continue on that journey. By 2028, we will deliver a simpler but more sophisticated suite of products and AI-enabled services. So how are we doing this? Our transformation is built on 3 pillars: cloud computing, data platforms and AI adoption. To date, we have made the most progress in employing cloud computing built on scalable and robust infrastructure. We are one of the leading adopters in this sector with 89% of applications on the cloud versus 75% 2 years ago. And this platform provides greater stability and faster product deployment. We are also migrating core data onto a standardized platform. This helps us to provide personalized services for our customers and to implement models more rapidly. And by building on these modular foundations, we can accelerate the development, testing and deployment of code and models. So with cloud infrastructure and data platforms in place, we are now able to deploy AI at scale. Across the group, we have more than 250 AI tools and models in use. And by 2028, we expect more than half of our customer journeys in the U.S. Consumer Bank to be digitally personalized. Technology is creating a more stimulating working environment for our colleagues who are at the heart of these developments. And let me share some examples. In the past 2 years, we've held a number of AI hackathons, where employees prototype quick solutions to existing business problems. Every time I visit a hackathon, including one just 2 weeks ago, I'm overwhelmed by the seemingly limitless ambition and inventiveness of our colleagues. And their winning ideas translate into actual projects and actual products. This includes an AI chatbot that we recently launched for FX trading. We call it Box bot. And this tool delivers FX quotes 75% faster than the previous approach. It is driving better execution for our traders and swifter service for our clients. In the U.S. Consumer Bank, we are launching a conversational AI tool in our app. This accelerates customer query responses by 95% and enables more personalized service. We've also built the infrastructure and provided colleagues with tools to drive greater efficiency and productivity. In doing so, we enable them to perform in the economy of the future. The rollout of GitLab to 19,000 developers means we are now able to implement code 15% faster. And we are one of the largest users of Microsoft Copilot in the financial services industry with around 90% of our colleagues on the system. In 2025 alone, this saved our teams more than 1 million hours of work. Insofar, I've spoken about improvements in the way we engage with clients and how they engage with us. I want Barclays to be renowned for operational performance, excellent operational performance. And to me, operational performance and financial success are 2 sides of the same coin. With 3/4 of our colleagues engaged in operating the bank, simpler operations can improve efficiency materially. So let me just highlight 2 examples to bring this to life. In finance, Anna's area, we are simplifying our accounting platforms, moving from 11 to 3 subledgers within the trading book. And this will lead to fewer manual reconciliations, faster reporting and more efficient data analysis. On the risk side, close to my own heart, our wholesale credit risk systems remain overly manual. And so we are rebuilding the architecture and using AI to aggregate and analyze data and generate reports. This supports fast and accurate credit decisions. To summarize, the simpler Barclays is both well organized and well run for colleagues and customers alike. And at the beating heart of this is a standardized infrastructure supporting harmonized processes and enabling modern approaches to product development and delivery. And it's powered and curated by our talented and inventive colleagues. Moving to better. Having a simpler business means we can focus on delivering better service for our customers, and this results in improved returns for our shareholders. In this next stage, we are building a better bank by forging segment-leading businesses and deepening client relationships. To me, segment leadership is built on 2 pillars: best-in-class offerings and deep client relationships. And we begin from a strong position. We are the largest non-U.S. investment bank with deep expertise in fixed income and financing markets. We are a leading U.K. retail bank with an established and growing private bank and wealth management business. And our U.S. Consumer Bank is a highly sought-after partner for customers and corporate clients alike. The second pillar of segment leadership is combining the strengths of our products in each business and our capabilities across businesses. In doing so, we create deeper client relationships. And there is significant potential to increase connections between Barclays U.K. and the Private Bank and Wealth Management through our premier proposition. The acquisition of Best Egg in the U.S. allows us to bring market-leading digital lending capabilities to our credit card partners. And as the only U.K. bank -- U.K. investment bank, we bring a unique global reach and sophisticated capabilities to our U.K. corporate clients. By investing to strengthen these connections, we make each business individually stronger. And by forging connections across the group, we will unlock sources, new sources of fee growth beyond 2028. So let me share how I think about this, and I'll start with the Investment Bank. As I said, Barclays is the leading non-U.S. investment bank. We are U.K. domiciled, but we actually look more American than European with 50% to 60% of our revenues coming in the U.S. The Investment Bank has built a diverse and stable income mix. Two years ago, when I stood in front of you, I said that improving the investment bank was the hardest part of our plan. So what have we done and how have we done it? At that time, we had asked our business to do 4 things: First, to leverage further the traditional areas of strength. And for a long time, fixed income has been the calling card of Barclays. This is true in trading, financing, debt capital markets. And in markets, we identified 3 focused businesses where we plan to grow income by gaining share, European rates, equity derivatives and securitized products. We've made good progress, gaining share by about 150 basis points between 2023 and the first half of 2025. We have also leveraged our historical strength in fixed income financing to grow in prime. My second task was to drive greater capital productivity. The business has consistently increased return on RWAs. Now we will build on those successes. The third request was to increase fee share. The bankers who we hired in 2023 and 2024 have become more productive. Early results are good, but there is more to do. And so we will continue to invest and realize the full benefits of this investment over time. The final ask was to deepen relationships in the International Corporate Bank. And here, we've made strong progress rolling out what we call our treasury coverage model beyond the 1,500 top clients of the bank. And in the next 3 years, we will leverage strong transaction banking capabilities from the U.K. Corporate Bank and build on existing debt capital market strengths. We will be providing a more complete service to global corporates. And in doing so, we expect the International Corporate Bank to become a larger part of the Investment Bank by 2028. And this will remain an important source of fee growth beyond 2028, and I will discuss this later. Turning to Barclays U.K. Barclays aims to be the premier bank for all U.K. customers. We have a strong customer base, including around 1.1 million, what we call mass affluent customers in Barclays U.K. Our premier proposition provides exclusive rewards and priority service for this cohort, but only 50% of eligible customers have a premier account. This provides a material opportunity to increase engagement. Investment to improve our service has raised NPS scores among premier customers, and we plan to enhance our offering further by expanding the product range and rewards. We can also support this segment's investment needs more fully, and we will achieve this by strengthening connections between Barclays U.K. and Private Bank and Wealth Management. Within Barclays U.K., we have identified 400,000 customers who could benefit from financial advice. In 2025 alone, we onboarded 65,000 customers to Barclays Direct Investing, which is the new name for our digital self-investment platform. And in 2026, we will launch premier Wealth Management to provide planning and advice to premier customers. This will be human-led, but digitally enabled, fairly priced, transparently constructed and clearly disclosed. Turning now to the U.S. Consumer Bank. Our leading digital U.S. consumer bank is delivering strong growth and customer engagement. Our focus partnership business was among the top 4 fastest-growing credit card businesses in 16 of the last 20 quarters. And since 2023, we have achieved a 12% organic growth in receivables. By driving growth and customer engagement in this way, we are retaining existing card partners and attracting new ones. Last year, we renewed partnerships with Upromise, Carnival and Wyndham Hotels, and we successfully integrated General Motors. Operational progress in the U.S. Consumer Bank is also driving higher returns for Barclays. We will continue to use our digital deposit capabilities. In fact, the launch of a tiered savings product in 2024, has enabled 34% retail deposit growth, with the cost of this funding being about 50 basis points below the funding it replaced. And in doing so, we support the broader banking needs of our card customers. The acquisition of Best Egg in the second quarter of '26 will further expand the breadth of our digital capabilities. Around 90% of Best Egg's consumer loan originations come through digital channels, including online aggregators. And Best Egg's strong capabilities and enable flexible product design to suit a range of customer needs. We will leverage these capabilities to accelerate growth, including through closer integration with our card partners. So as you can see, the U.S. Consumer Bank is more than just a cards business. I strongly believe that happy and satisfied customers are the sine qua non of any enterprise. We aim to improve customer service by investing in it deeply, making it a point of ambition and pride. And as I said earlier, operational excellence and financial success are 2 sides of the same coin. I see them as the same. In Barclays U.K., last year, we launched a new platform to improve materially the speed of more applications for more than 26,000 mortgage brokers. Digital adoption in the U.S. Consumer Bank is already higher than in any of our divisions. And as I said, we are deploying AI tools to improve personalization further and ease of use. We're also making it easier for customers to come to Barclays, including in the Private Bank and Wealth Management division. Our digital platforms are a critical part of providing a superb experience to deepen customer engagement. This year, we will relaunch the Barclays app to deliver more personalized support through digital channels. Even as we emphasize digital engagement, we recognize that customers sometimes value the quality and depth of engaging with us in person, especially with complex issues and in important life moments. So we will look to enhance and expand our branch footprint. This will enable us to tailor our services to meet the changing preferences of our customers. And in the U.S. Consumer Bank, we are leveraging our capabilities across cards, deposits and loans to drive even greater customer engagement. The secret sauce in our investment bank is in our synergies, which we use to deepen client relationships. We are big enough to offer multiple sophisticated products to our clients, and we have the nimbleness and the cultural drive to customize delivery and create tailored solutions. We now rank top 5 with 62 of our top 100 markets clients. This is up from 30 in '21, 49 in '23, and we are on track of our target of 70 in 2026. Our leading fixed income and prime equity financing products are integrated on a single platform. Operating in this way provides a single view of risk, both for the client and for Barclays. And of our top 100 markets clients, 97 are also financing clients. So by continuing to leverage our integrated financing platform, we do 2 things. First, we build a stronger foundation of stable income, which supports returns in a range of environments. And second, we deepen relationships and drive greater engagement across the investment bank, including in intermediation. So over the next 3 years, we will bring together our investment banking and transaction banking strengths to accelerate growth in the International Corporate Bank. We are the top sterling clearing bank. We have a comprehensive suite of products and differentiated payment strength. By replicating some of these capabilities in the U.S., we have already driven a circa 140% growth in dollar deposits since 2023. And we plan to leverage this strength in other products through simple, but complete digital channels. In Europe, we will also extend the reach of our existing product suite from 9 to 15 countries to provide a more complete client coverage. We are also creating a better client experience to support this growth. So by the end of the first quarter of this year, all U.K. corporate clients will be enabled on an enhanced platform that we call iPortal. This combines 5 previously separate platforms for corporate banking into one. And in doing so, we make it easier for clients to access a broader range of products. Across the banking system, technology is not just affecting how we do business. It's also affecting what business we do. And nowhere is this likely to be greater than in new asset types and new payment methods. We are deeply engaged in understanding the role that Digital Assets will play in meeting the future needs of our clients. We are developing our own tokenized deposits to increase the speed and simplicity of transactions. And we are testing retail and wholesale use cases, including for corporate bond issuance and investment. We have been structurally improving the profit signature of Barclays, and we're doing it in two ways. First, by changing the mix of the group by growing our highest returning U.K. businesses. And I'm pleased with our progress, having grown these businesses from 30% of group RWAs to 34% in the last 2 years. We also now expect higher returns in Barclays UK. We will continue this progress, increasing lending by more than 5% annually while generating an RoTE greater than 20% across the three U.K. businesses. Second, we said we would strengthen returns in the lower returning divisions. The US Consumer Bank RoTE has increased from 4% in 2023 to 11% in 2025 in all the ways I described to you. And we expect this to build to mid-teens while absorbing regulatory RWA headwinds. And when I stood in front of you 2 years ago, I said we would increase returns in the Investment Bank by improving productivity on a stable RWA base. And I'm very pleased with the progress to date. IB RoTE is up from 7% to 11% in 2 years, but we have more work to do. With greater visibility 1 year out to the end of '26, we expect the Investment Bank to generate circa 12% RoTE this year. And by 2028, we expect this to rise to more than 13%. Let me be very clear. We remain ambitious for this business and for the returns it should be generating. And importantly, this should be done on a sustainable basis. More broadly, the ongoing change in the mix of RWAs across the group means that we are relying less on the IB to drive improvements in group RoTE. This is exactly as it should be. In summary, the better Barclays will continue to show higher returns, and it will also be built on segment-leading businesses, which offer the best-in-client service and experience. Our third goal is to create a more balanced Barclays. We will continue to maintain capital discipline in the Investment Bank while growing parts of the retail and corporate businesses. But being balanced, being more balanced also means growing new sources of fee income beyond 2028. Two years ago, I said that every global bank had to be strong at home. We've been a U.K.-centered bank for more than 3 centuries, and it remains a great place in which to do business and from which to do business. The economy is resilient. The legal and regulatory environment is both strong and trusted. And we remain committed to investing and growing in this our home market. Our investment will focus on diversifying sources of NII beyond deposit income, and we will increase U.K. lending in two main ways. First, we will leverage strong multi-brand offerings to reach new customers. For instance, the acquisition of Kensington in 2023 enabled us to provide mortgages to more complex borrowers. And the acquisition of Tesco Bank added significant scale in unsecured and open market capabilities in personal loans. Second, investment into the business is supporting growth by simplifying and improving customer journeys, as I discussed earlier. We are encouraged by progress in the UK Corporate Bank and expect momentum in core Business Banking lending to build in 2026. Importantly, we expect to grow U.K. lending by more than 5% annually in the next 3 years, above the growth in nominal GDP. And we will do this by continuing to grow in segments where we were underrepresented and by leveraging our expanded product range and capabilities. We will invest to support growth. In the next 3 years, we plan to more than double investment to support growth and efficiency compared to the previous 3 years. We will accelerate the adoption of digital technologies and AI across the group. And investments in the next 3 years will be substantially more weighted towards new sources of fee income growth beyond 2028. Through these investments, we will continue to develop best-in-class offerings, which is the first pillar of segment leadership. As I have said, we will also build connections across our business, and this is the second pillar of segment leadership. In the U.K., new capabilities will support customers across the wealth continuum. We will leverage U.K. transaction banking strength in the International Corporate Bank. And Best Egg will enable us to originate assets directly for investors in our leading U.S. asset-backed securities business in the Investment Bank. So as we move beyond 2028, we expect more of our growth to come from fee income versus net interest income. And by building more diverse sources of revenue this way, we support more resilient returns and we position ourselves better to navigate a range of environments. So changes in the operating environment globally present both risk and opportunities for large global banks like Barclays. And we look to manage this in three ways. First, by building strong customer businesses diversified by geography, customer, product and income type. Second, by deepening client relationships across products and where appropriate, across business segments. And third, through diligent management of economic, financial, operational and technological risks. AI, for example, is a transformative opportunity, which contains risks that need to be managed. And so to harness the technology successfully, we are standardizing our data, modernizing our infrastructure and harmonizing our business processes. By approaching risk and opportunities in this way, we aim to deliver consistently for our customers with strong operational performance. And this, in turn, will generate resilient financial performance in a range of environments for our shareholders. So to bring this all together, progress in the past 2 years provides a solid foundation for the next phase of our journey, and we are confident in the path to 2028. We're moving from a period of measured ambition to one of accelerating ambition. And now I'm going to pass it over to Anna to take you through the financial details of the plan. Anna? Angela Cross: Our confidence in the plan that Venkat has outlined reflects three factors. First, we plan on realistic assumptions that put delivery in our control. Second, the plan includes a significant increase in discretionary investment to support our future growth. And in doing so, we are intentionally prioritizing sustainably higher, longer-term returns over stronger shorter-term RoTE. And third, that delivery is grounded in existing momentum. For example, target income CAGR of more than 5% compares to 7% delivered since '23, as you can see on the top row. Planned U.K. lending of more than 5% is in line with the momentum we've seen in '25. And we expect Investment Banking income to RWAs to increase by more than 40 basis points to greater than 7%, having increased 110 basis points in the last 2 years. Our planning assumption is for a low single-digit IB income CAGR, '25 to '28 versus 9% achieved so far, and I'll come back to this in more detail. The low 50s target cost-income ratio in '28 represents more of a step change. But we are confident in delivering this, underpinned by circa GBP 2 billion of gross cost efficiency savings over the next 3 years. This compares to GBP 1.7 billion achieved in the last 2. And I will also come back to this topic in more detail later. Stable income streams in the retail and corporate businesses will materially drive income growth in RoTE in the next 3 years. We expect modest cost growth, supported by planned efficiency savings and normalization of the elevated cost base in '25. This combination will deliver positive cost jaws in every year of the plan, yielding a low 50s group cost/income ratio by '28. So what drives income from here? As I said, in the past two years the group has delivered a 7% income CAGR. This mainly reflected management actions, but the environment has also been favorable, reflected in upgraded 2026 income guidance of circa GBP 31 billion. As a planning matter to '28, we do not assume similar tailwinds in rates or in Investment Banking wallet growth. So we expect income CAGR to moderate to more than 5% in the next 3 years. Most growth comes from group NII, excluding the IB and Head Office, which has grown 8% annually since '23. This reflects the U.K. lending CAGR target of greater than 5% and the stability of our deposit franchises, which underpins the structural hedge, but it also reflects progress outside of the U.K. in USCB, where balanced growth and NIM expansion supported 11% year-on-year NII growth in '25. In '26, we expect group NII to increase at least to at least GBP 13.5 billion, up from GBP 12.8 billion in '25 and for Barclays UK NII to increase to between GBP 8.1 billion and GBP 8.3 billion. Relative to our previous plan, the Investment Bank contributes relatively less against the flat wallet assumption. Over time, we do expect the mix of our income growth to pivot more towards asset-based NII and fees versus deposit income. That's why we remain very focused on diversifying sources of NII beyond deposit income by continuing to grow lending. But for the next 3 years, the structural hedge alone will deliver 50% of planned income growth. We have already locked in GBP 6.4 billion of gross structural hedge income in '26, and GBP 17 billion over the next 3 years. We plan to fully reinvest maturing hedges as we did throughout '25, and to assume a reinvestment rate of around 3.5%. This is below the current 7-year swap rate of 3.9%, which has become the most relevant proxy given the hedge duration. The average yield of maturing hedges remains below this level in '26, '27 and '28 at circa 1.5%, 2.1% and 2.7%, respectively. This will result in continued structural hedge income growth, including circa GBP 1 billion in '26. The increase in the average hedge duration to 3.5 years during '25 will reduce the quantum of maturing hedges to circa GBP 35 billion per year, from around GBP 50 billion in recent years. This slows the pace of structural hedge income growth, but therefore, prolongs the expected positive effect until at least '29. Also note, the higher proportion of equity hedge and longer duration of product hedges outside of BUK means it will attract circa 55% of growth in '26 versus 75% in '25. This change in mix is equivalent to circa GBP 200 million less income in Barclays UK in '26, which instead will occur in other businesses, including the Investment Bank. Two years ago, we set out a plan to increase the Investment Bank returns by improving RWA productivity and modestly growing costs. Since then, income to average RWAs has increased by 110 basis points to 6.6%, driven by a 9% income CAGR against flat RWAs. In Global Markets, we increased RWA productivity by 60 basis points and grew RWAs to take advantage of the environment. And in Investment Banking, we increased productivity by 150 basis points and released RWAs. Further capital productivity remains central to the Investment Bank's journey to higher returns with a target of greater than 7% RWA productivity by 2028, having absorbed the impact of Basel 3.1. In part, this will come from a continued review of the loan book, which is around 60% complete. Of the GBP 2.1 billion increase in income since '23, 2/3s came from Global Markets where we have built capacity. Financing income grew by GBP 0.6 billion in a strong industry wallet, and we achieved the '26 target 1 year early. This is particularly important, given our focus on stable sources of revenue within the Investment Bank. In our three focus businesses in Markets, we grew share by 150 basis points between '23 and half 1 '25, and income grew by GBP 0.4 billion. In Investment Banking, we have meaningfully improved RWA productivity, which was our main objective. Progress towards our secondary objective to add scale through fee share has been slower, although Banking fees grew in a market 30% larger than we had planned. Our objective now is to consolidate these gains. We will further deepen our relationships with our top 100 clients and markets and our three focused businesses and financing. And we will continue to build banker productivity, including in ECM and M&A, which are capital-light. In financial terms, given a flat wallet assumption, our plan does not, therefore, include material benefits from wallet growth to 2028. We expect proportionately more growth from the ICB, as we leverage the Treasury coverage model and the transaction banking investments outlined by Venkat. This builds on the circa 140% growth in deposits achieved in 2 years. And as a result, we expect the International Corporate Bank to be a larger part of the IB, leading to more stable income overall. Moving on to costs on Slide 66. We delivered positive cost jaws in each of the past 3 years and expect positive jaws in each of the next 3 years. This is a result of the income growth we've just discussed and modest cost growth to 2028. So what underpins this cost pathway? First, we don't expect around GBP 0.3 billion of one-off costs in '25 to repeat, being Motor Finance and around GBP 50 million of unrelated one-offs in Q4. Second, we expect circa GBP 2 billion of gross efficiency savings by '28 split roughly evenly across the years. This includes around GBP 0.2 billion of reduced Tesco Bank costs. We will deliver this by modernizing processes and platforms to increase efficiency as Venkat outlined. These savings will more than offset the effects of inflation and business growth over the next 3 years. We expect annual investment costs to increase by around GBP 0.8 billion by '28, including circa GBP 0.6 billion from the acquisition of Best Egg in Q2 '26. This will result in modest overall cost growth and a high 50s cost/income ratio in '26 with broadly stable costs thereafter to '28, supporting a low 50s cost/income ratio. The Barclays UK cost profile is an important part of this overall shape, so let me briefly cover the dynamics here. Barclays UK has been on a transformational journey for several years, reducing the cost-income ratio from high 60s in 2021. Dual running of Tesco Bank added circa GBP 400 million to costs in '25, including GBP 100 million integration costs. Other costs increased by circa GBP 200 million, net of efficiency savings. This was due to increased investment as well as the GBP 50 million one-off items I mentioned earlier. In '26, we expect a modest reduction in costs versus '25 and a low 50s cost-income ratio as we continue to integrate Tesco Bank and invest in the business. By '28, we expect larger gross and net efficiency savings, in line with the group. And for Tesco Bank costs to fall by circa GBP 200 million. As a result, we expect Barclays UK cost to fall in each of the next 3 years, contributing to a mid-40s cost/income ratio in '28. Our investments to date, organic and inorganic are delivering revenue growth across the group. Investment in the financing platform from '23 to '25 has, for example, supported 60% growth in Prime balances. And our investment in the mortgage broker platform has supported more than GBP 14 billion of mortgage applications since its launch. We have also realized GBP 100 million of funding synergies on Tesco and significant margin benefits through Kensington as both acquisitions support U.K. lending growth. We plan to double annual organic investment by '27, focused on technology change and fee growth. In addition, we expect operational costs of Best Egg of circa GBP 0.3 billion in '26 and GBP 0.4 billion in '28. This highlights the increased intensity of investment at this stage to support stronger fee growth and returns beyond '28. Cost discipline remains a key focus of our plan and is the lever that we have most control of. During '26, we expect a high 50s group cost income ratio improving again from 61% in '25. This reflects strong progress in the U.K. businesses in particular. And looking ahead, we expect further improvements to deliver a low 50s percent group cost/income ratio by '28. Turning now to impairment. The group has operated around the through-the-cycle target loan loss range of 50 to 60 basis points for the past decade, and this guidance remains appropriate. It reflects two offsetting factors. First, in Barclays UK, lower arrears and high credit card repayment rates have contributed to our loan loss rate consistently below the through-the-cycle expectations. Strong mortgage affordability criteria and credit card quality supports structurally lower impairment in the U.K. market. As a result, we now expect a lower through-the-cycle loan loss rate in Barclays UK of circa 30 basis points versus 35 basis points previously. Second, we expect a circa 500 basis points through-the-cycle loan loss rate in USCB. This is up from circa 400 basis points previously due to the changing portfolio mix. It will be higher in '26, at circa 550 basis points, reflecting post-acquisition stage migration of the General Motors portfolio and retention of some non-performing American Airlines balances. Both effects will diminish in '27 and will be more than offset by higher NIM. During the past 2 years, we have structurally improved Barclays profit signature. The Investment Bank and USCB now deliver double-digit returns, and we plan to drive these higher whilst continuing to allocate additional capital to our highest returning U.K. businesses. By '28, we expect capital generation to exceed 230 basis points, an improvement of more than 30% over the next 3 years. We continue to exercise disciplined capital allocation. First, by holding a prudent level of regulatory capital. As you have seen, we've been operating around the top of the 13% to 14% target range ahead of the expected regulatory developments that I discussed earlier. Second, we will distribute greater than GBP 15 billion to shareholders by '28, subject to regulatory and Board approval. And third, we will maintain capacity for selective investments to support structurally higher returns beyond '28. Given the strength of capital generation, this capacity does exceed the level of investment set out in the plan today. As we have done, we will exert considerable discipline over any investment, given the importance we place on shareholder distributions. We expect a progressive increase in our total payout in 2026. We are also evolving the mix of distribution to reflect the growing consistency of capital generation and to recognize feedback from shareholders. In addition to the move to quarterly buybacks announced in Q3, we plan to increase the dividend to GBP 2 billion in '26, from GBP 1.2 billion in recent years. While we continue to prefer share buybacks, we will review the mix of distributions periodically to reflect the level of our returns and the preferences of our shareholders. Bringing this together on the next slide. Operational progress during the past 2 years means we are confident in achieving our '26 targets and guidance. But momentum across the group also underpins our confidence in delivering the '28 targets outlined today. We are focused as ever on driving greater efficiency and operating leverage, protecting returns in a range of environments. And we will drive structurally higher and more sustainable returns beyond '28 by investing to support more diverse sources of income and fee growth. Over to Venkat for final remarks. Coimbatore Venkatakrishnan: All right. Thank you, Anna. So 2 years on since our Investor Update in February 2024. As we've discussed, we remain on track to deliver our goals. We are moving from a period of measured ambition to one of accelerating ambition. We aim for sustainably stronger returns, greater shareholder distributions and operational excellence. The targets which we have shared today are underpinned by structural improvements to the profit signature of the bank, which we have made in the last 2 years. And our drive to become a simpler, better and more balanced bank. We plan to continue this progress in the coming 3 years. And of course, our journey does not end in 2028. Our ultimate aim is to secure structurally higher and more resilient returns beyond 2028. So now I'll pause for 15 minutes for a break before Anna and I open for Q&A. What shall I say, 10:40 U.K. 10:40 London, please be back in the room. There's refreshments outside, restrooms outside, and we'll be back. [Break] Coimbatore Venkatakrishnan: All right. Thank you. Welcome back. So we will go to questions in the room. Coimbatore Venkatakrishnan: [Operator Instructions]. So I'll begin with the person who raised his hand first and who taught me a lot of what I know about analyzing banks. Kian? Just for that, he gets preference. Kian Abouhossein: Two questions. The first question is on the capital return of over GBP 15 billion. If you could just put this in context of capacity to support investment and growth. How should we think about this capacity that you're outlining? It looks like there's quite a bit of buffer. So we would like to understand that. And then secondly, you're one of the few CEOs who actually discusses ledgers and middle office integration, which is not a -- it's a hot topic, but a lot of CEOs... Coimbatore Venkatakrishnan: I began as a programmer, so that probably helps. Kian Abouhossein: That's probably, you are, yes. And probably because he came from the same organization that I'm from, which is a big focus. But trying to understand a little bit the investment phase, which has stepped up in '26 significantly. And you're going from GBP 1.1 billion to GBP 2.3 billion of investments. And just what the focus is and how should we think about post '28 basically in that respect? Coimbatore Venkatakrishnan: Anna, do you want to start on the capital and then we can come back to the other one. Angela Cross: Yes, sure. Thanks, Kian. So one of the hallmarks of this plan is the level of capital generation. We've talked about that. And really, when we talk about an improving profit signature, that's really what we mean. It's this chart here that they've just brought up showing that sort of change to 230 basis points. And in the plan, what we've done is we've meaningfully increased the distribution to greater than GBP 15 billion, but we've also meaningfully, in fact, doubled the level of investment. But such as the level of capital generation within the plan, the level of generation actually surpasses both of those two increases. So what we've done here is we've deliberately created some capacity for us to be able to invest further if and only if we determine that is the right thing for us to do. And I'll just remind you of our very clear capital hierarchy here, specifically the importance of shareholder returns. So we're going to set a very, very high bar for any additional level of investment. And quite frankly, if we are unable to find such an investment, then the capital hierarchy will kick in, and we will distribute more than we have here in the plan, or alternatively, we will be investing more than we have here in the plan, and we would expect the momentum of the business in the outer years to be higher than we're presenting here. We have no inclination, no objective here to hold on to higher than required levels of capital. But what we're trying to do is create some capacity to underpin some of the meaningful opportunities for growth that we have, whilst meaningfully stepping up that level of distribution. Venkat? Coimbatore Venkatakrishnan: Yes. And I would say, I think if you look at our track record of investment, Anna spoke about the investment which we had made in our prime and financing business and both the quantum of investment and the payback. You saw the quantum of investment in even the mortgage broker application and the payback. We look to make investments where you would get the revenue realization fairly quickly. And you see that even of Kensington Mortgages and Tesco and God willing, Best Egg. So we are looking to do that. And we need to keep that capacity for that reason because opportunities will be there and needs will be there. I would say, Kian, on the second question about subledgers and the sort of the guts of the organization, it comes from both a philosophical place and from the actual reality of the business. The philosophical place is, as I said, for a long time in this industry, the businesses -- technology has revolved around the businesses. Now as you see not just in us, but across the industry, the depth and extent of technology-based services, products, and delivery, the businesses are revolving around technology. And what that means, especially if you're going to take advantage of the promise of new technologies like AI and cloud computing is that you've really got to, as I use the word, harmonize your processes and standardize your approaches. And especially when it comes to data platforms and to the way in which you construct and store your data, the way in which you do computing, the way in which you build models and the way in which you deliver. And if these things are not standard, you add huge complexity. And so we've got to unravel that complexity. And in large complex GSIFIs, that's a big task, and that's what we are trying to do. All right. Alvaro? Alvaro de Tejada: One of them is actually -- sorry, Alvaro Serrano from Morgan Stanley. One of them is kind of a follow-up to the second question maybe for you, Venkat. In one of the slides, you pointed out that 75% of the employees are in support functions, I think, yes, support functions. And obviously, one of the -- at least for me, the surprise of the plan is the cost element as you were referring to. During the plan, how is that number going to come down during the plan in 2028? And beyond that, how low do you think it can go because it's obviously one of the core pillars? And second, more -- maybe a more financial one on, again, maintaining the RWAs flat in the Investment Bank and one of the things coming out is ongoing RWA efficiencies. Is there anything -- maybe this one is for Anna, but is there anything you can point us to that is pretty mechanical around the way the business is done in Investment Banking, maybe less legacy LBO business, more sort of private credit capital-light businesses that we can gain conviction that mechanically the RWAs are going to be flat right now, pointing out to a proportion of contribution today versus 3 years out, something that will gain -- give us confidence that we can keep it flat. Coimbatore Venkatakrishnan: We're going to tag team on both these questions, Alvaro. So first of all, on the cost, just a definitional point. When we call support functions, there's a bit of a legal entity aspect of Barclays. This is what we call Barclays Execution Services. And this includes technology and operations, but it also includes compliance, risk, finance, HR and legal. And so it includes basically the non-revenue generating parts or direct revenue-generating parts of the business. So that's the first thing. The second thing, as I've said, and I'll have Anna chime in, we don't have an explicit target in terms of number of employees. What I've said is there will be productivity benefits from all these investments. We hope to harness this productivity benefit in improving the quality and delivery of services, whether that is to clients or whether that's internally, right? And there will be obviously a gross efficiency cost savings that we've outlined and investment in the group. But we are not outlining a particular people target. I think we are approaching this from something that creates efficiency in order to provide enablement. And then we'll see where we go. Anna? Angela Cross: Yes, sure. If I can just add to that. Our real focus from here on in is really on that technology efficiency. So the majority of cost out, if you like, the efficiency is going to be driven by change delivery, by platform modernization and the kinds of things that Venkat was talking about, about enabling products to market, if you like, much, much faster than we have done before. So that's where we see the sort of meaningful change, if you like, in the cost base. Shall I start on RWAs, or do you want to add? Coimbatore Venkatakrishnan: Yes, you do. But just one thing. It's no accident that the most digitally enabled part of the bank, which is the U.S. Consumer Bank, also has our lowest cost/income ratio, right? It's no accident. Go ahead. Angela Cross: Yes, sure. So on RWAs, I mean, this is not a new thing for the IB. They've been flat for 4 years. They were flat for 2 years before we started the last plan. And whilst we've made considerable progress, 110 basis points, we do think that there's more to go here. And I'd just call out -- so let me talk about a couple of whats. The first would be, if you remember when we did our Investment Banking deep dive, we talked about that review of the loan book being really good stewards of capital. We are 2/3 of the way through that review with 1/3 to go. And it might be helpful actually if we can bring up the slide that's got the relative revenues over RWAs, and you'll really see what's happening in Investment Banking. At the same time, so it's that bottom right-hand chart that I'm calling out there. So absolute levels of RWAs have been coming down in banking as we have reviewed that loan book. That's allowed us to be much more nimble in how we deploy RWAs across the Investment Bank and really deploying them at the moment, as you've seen, in markets just because the market opportunity has been there. The other thing I would call out is much of our growth that we're really leaning on from here on in, some of the things we talked about before, so M&A and ECM, but the International Corporate Bank is a really big part of this part of the plan. It's made tremendous progress in the last 2 years. And that again comes from the treasury coverage model that we talked about in our deep dive. We've increased our deposits by 140% here. And now we have the opportunity to really leverage that by deploying the technology that Venkat is talking about and really driving fee products from here. So we are confident in that trajectory. Venkat? Coimbatore Venkatakrishnan: Yes. I mean I'll just add to what Anna said. I mean structurally, it is the International Corporate Bank and Transaction Banking. It is the continued growth in our prime businesses, which revenue per unit RWA because of just the way the lending is structured is generally better. It is over a very long period of time, the way lending and banking has been changing from direct lending on individual credits to portfolio lending. But that's over a very long period of time. But it's the thing Anna said, it's corporate banking. It is an emphasis on fee businesses and also you know, at the right points of the cycle, intermediation. Yes, go ahead, please. Guy Stebbings: It's Guy Stebbings from BNP Paribas. The first question was on capital in terms of targets. You got the 13% to 14% target. I think you've talked sort of running at the top end of that range throughout this plan. And given this is the plan now to 2028, post Pillar 2A changes given the constructive tone from the regulator. I'm just wondering what do we need to see to sort of potentially move lower down in that range as sort of a formal way you're running from the business? Is it just getting that Pillar 2A change from the regulator? And presumably you've got pretty good visibility as to what you're expecting there. So if things do land as you expect, maybe you could help sort of frame that so we can think about what that means for capital return and RoTE targets. And then the second question was on the mortgage book in the U.K. You referred to the headwind in the first half of this year. Can I just check in terms of the definition of that headwind? Is that sort of a gross headwind? Because I'm mindful that with Kensington and the sort of flow of the book, you might be able to offset some of that as you have some higher LTV, higher-margin business coming through. So can you kind of frame the definition of that headwind? Angela Cross: Yes, sure, Guy. I'll take both of those. So on the first one, if you go back to the beginning of '25, what we said was that because we were carrying more Pillar 2 in advance of IRB implementation, you should expect us to operate at the top of the range or towards the top of the range. That's still what we're saying. It's no different to that. And I do expect there to be some Pillar 2 offset when we get through Basel 3.1 and IRB. I just don't know what they are right now. And what we are trying to do in every single part of this plan is put it in our control. We want our distribution plan to be underpinned by the things that we are doing and that it can't be put off course by the timing of regulatory change or the certainty of that change. So that's all we're saying here. So for us, in the short term, our planning assumption or actually throughout this plan, our planning assumption is that we will be at the top end of the range. And that's obviously -- you should reflect that in the way you think about our distributions, you should reflect that in the way that you calculate our RoTE. But once we get beyond that implementation and we have that clarity, we will, of course, review where we think we should be within that range. I mean we still think that the 13% to 14% range is the right range for Barclays. But at this point in time, we just don't have the regulatory clarity, and we want this plan in our control. So that's the reason for it. And on mortgages, I'm specifically talking about a gross impact, and it relates to the mortgages that were written at the very end of 2020 and beginning of 2021. So as you remember, as we were all coming out of COVID, there was that stamp duty holiday and the mortgage market was very substantial. Those mortgages were written at very wide spreads, like 160 basis points. That's quite meaningfully different from where we are now. So just as they refinance, you're going to see some relatively short-term pressure across the market as a whole. We think it will be gone by the end of half 1. And then beyond that, you're going to see the kind of progress that you've seen in our NII to date. But it is a gross impact. We're obviously enjoying very good levels of net lending, driven very much by Kensington and that broker platform. So it's a short-term hiatus, I would describe it as. Coimbatore Venkatakrishnan: If I may just underline one thing, whether it's capital or looking at our RoTE, there are potential tailwinds, right? We are planning prudently, but what Anna is referring to, whether it's the new capital rules and what relief we get, there are potential tailwinds. We are not banking. Sorry, go ahead. And I'll come back to the back in a minute. Benjamin Toms: Ben Toms from RBC. First one is on Private Bank and Wealth Management. What products are you currently missing from your premier banking proposition? And how easy is it for you to build those yourself? And then secondly, to continue on the U.K. loan book. U.K. retail banks continue to surprise to the upside on loan book growth relative to GDP. I think your guidance is for a 5% loan growth CAGR out to 2028. What's driving the growth in excess of GDP? And what's your outlook for volumes in the mortgage market for the next couple of years? Coimbatore Venkatakrishnan: Let me start on both. We've got a pretty big and complete product suite. There are a couple of gaps in the product suite that are missing, SIPPs, junior ISAs that are coming online. But if you put yourself at a higher level looking at it, starting at the self-directed end of the spectrum, what we've got is direct investment, what we used to call Smart Investor, which is your basically do-it-yourself investment buying stocks, bonds. Then you come to the next piece, which is planning and advice. And that is where we are doing some work, as I said, to create products, which we will talk to you about soon, which are clearly constructed, fairly priced, transparently built and cheaply distributed and -- sorry, efficiently distributed. And there, we are looking to grow in scale and we've got the basic product set. And then we've got our Private Bank, both domestically and internationally, was complete. So I would view it more as a scaling journey than as a completion of product capability. And that is our goal. And look, I think more broadly, the U.K. is a nation of savers. I think it needs to be more of a nation of investors. I think we're going to have a broader tailwind and support for this. I think it's an important role for banks to play, and you'll see us emphasize it. And then if I come to loan growth above GDP, let me begin and then Anna should fill in. We've said 5%, as you say, loan growth versus nominal GDP of 2%. Basically, there are parts of the business in corporate banking and business banking and even in parts of personal loans, where we were underrepresented in the last number of years. Tesco has given us the capability in personal loans, and you can see the increase. You're seeing the increase 18% growth in lending in the U.K. Corporate Bank. If you look at the U.K. Corporate Bank broadly, still loan to deposits is like 35%, 34%. So we have a lot to grow, right, versus what you might normally expect from somebody. Anna? Angela Cross: Yes. I mean, simply put, Ben, I think it's a combination of capability, increased capability. So we talked a lot about the mortgage platform. Actually, we're doing very similar things within the corporate banking environment, making it easier for that customer or client to engage with us and making that journey efficient, quick, giving them certainty, et cetera, that's making a really big difference. I think also the sort of broader product architecture that Venkat talked about, we see it in cards across multiple products. We obviously see it in our mortgage business. So we're just going to market with a much, much broader range and certainly, more of a step change than we've had sort of 2 or 3 years ago. What it isn't is price and what it isn't is risk. So you can imagine as CFO, I've got a very keen eye on those things. So if you think about our corporate lending, it's up by 18% year-on-year. We've got more than 1,000 new clients in 2 years. About half of those are driving some of that lending. But as I look at the risk profile, it's not changed since the beginning of the plan. And as I look at the portfolio margin, it's not changed since the beginning of the plan. So it's really technology, intention to lend and I would say, breadth of product. Coimbatore Venkatakrishnan: Go ahead, please. Tim Piechowski: Tim Piechowski with ACR. I think today in guidance, it's the first time you've pointed us to the 7-year swap rate from the 5-year swap rate on the hedge book. Could you talk about, is there a change in kind of the duration targeting there? And what gives you the confidence to make that change? You're looking at the deposit betas, et cetera? Angela Cross: Yes, sure. Thank you, Tim, for the question. So we actually extended the length of the hedge last year, taking it from roughly 3 years to 3.5 years, and that's why the 7-year swap rates becomes the most relevant rate. That really follows the observation of customer and client behavior because what we do is every single month, we are looking at how the deposit books perform across retail and corporate at a very, very granular level. And what we were observing was really that the customer and client lives were lengthening out, and we were getting more confidence around that. So it's purely a reflection of that change. Andrew Coombs: Andrew Coombs from Citi. So on the Investment Bank, If I look at your 2026 targets, previously, you had a greater than 12% return target. It's now circa 12%. A high 50s cost income is now circa 60%. I'm assuming the change is primarily due to FX, but perhaps you could firstly confirm that. And secondly, when I go back 2 years and think of the original plan, a lot of the revenue growth was assumed to come from market share gains, and you actually assumed a fairly flat wallet. Actually, what's materialized is a much better wallet than you expected, but flat market share. So perhaps you could also just talk to competitive dynamics and how that's played out versus what you thought 2 years ago and how that then fed through to your '28 assumptions as well? And then on the U.S. Consumer Bank, I just wanted to understand some of the moving parts because you talk about greater than 13% NIM for 2026 full year. But I think in your earlier commentary, you said 12.5% for Q1, 14% for the second half post the AA sale. So presumably it's the 14% you would argue we should be thinking about into the outer years. But then similarly, on the loan loss ratio charge, you're actually assuming that's coming down even as the exit NIM is higher. So perhaps you could just square the circle there. Angela Cross: Sure. Shall I start and then I'll hand to you on market shares, and then I'll take it back on. Okay. Thank you. So Andy, you are correct. The material moving part between the last plan and this plan is we previously planned on 1.27, we're now planning on 1.35, dollar rate. Now that has no impact on group capital, no impact on our ability to distribute. But in particular pockets of the bank, you see some concentrated effects. And the IB is one of those. You're going to see it in USCB as well. So that movement in FX is worth about 50 basis points. So all we're doing is we're just truing up our expectations. We're pleased with the progress that it's made so far. I'm not going to mark that plan to market every single passing quarter. It's just that as we're resetting targets, we felt like it was the appropriate thing to do. Venkat? Coimbatore Venkatakrishnan: Yes. And I think -- on the other side, what I would point to is, look, on the Investment Banking side, banking per se, as I said to you, we would like to see greater fee share. What you've seen so far is progress from the hires and the investments we've made, but -- and you've seen greater revenues, obviously, and excellent capital discipline. And as we make these investments, we hope to see the fee share. On markets, I would point you to the fact that in the 3 focus businesses, we've done what we said we would do, and we've done it a year early. And as well as the number of our top 5 clients among the top 100 clients for whom we are top 5, that has gone from 30 to 50 to 60. So there is structural progress being made in these elements. Angela Cross: Okay. Can we bring up the slide at the back of the deck, I think it's 95 or 96, please, on U.S. Consumer Bank, perhaps just to help this. There, 96, perfect. Thank you. So Andy, you're right. There's a lot going on in U.S. Consumer Bank in 2026, specifically being driven by the fact in Q2, we expect to exit the American Airlines partnership, and we'll also purchase Best Egg or complete the purchase of Best Egg in the same quarter. So firstly, that has a NIM impact. So I expect the NIM to go to around 12.5% in the first quarter. What's driving that? Well, it's just the accounting that I called out earlier. It's a movement between non-NII and NII. Then we've always said that because American Airlines was such a high-quality portfolio, the NIM on it is relatively low, but also the loan loss rate on it is relatively low. So taken together, it was a relatively low returning portfolio because it's super prime. So what happens when that leaves the portfolio is the NIM will go up further. And so you're right, in the second half of next year, I'm expecting, if you like, a clean run rate of NIM, which looks more like 14%. Now when I come to loan loss rates, that same impact is going to take us from 400 basis points to 500 basis points, but that will be more than offset by NIM. During '26, in isolation, what you're going to have is a couple of impairment effects. The first is, if you recall, when we buy something, we bring it all on at Stage 1. So it has to mature through Stage 2. So you get what we call stage migration. You're going to get that in the General Motors portfolio. So that's going to elevate impairments slightly. And then for a period of time, we're going to be holding on to some nonperforming loans from the AA portfolio that won't go with them on the sale. So those 2 things together are going to show a little bit of elevation during 2026. So that's why I'm guiding you to around 550 bps, but ongoing, 14% NIM and 500 bps loan loss rate. Coimbatore Venkatakrishnan: Nothing to add. Pui Mong: Sorry, I forgot that this was working. It's Perlie Mong from Bank of America. So thinking about the income guidance at the group level, so it's greater than 5% CAGR. And within that, obviously, Investment Bank is probably below and the Consumer Bank is above. And with the U.K. part also growing volumes greater than 5%. I'm just trying to think about what does it imply about margins. So in terms of product margin, that is, would you expect more of that growth -- income growth coming from the volume side? Or are we basically past the point where deposit margin is growing very substantially because of the hedge? And obviously, '26 will probably be a bit higher because of the more of the hedges coming through in '26. So in '27 and '28, how should we think about the margin piece? That's number one. And number two is that -- so it sounds like Investment Bank RWAs is going to stay relatively flat because you still expect that to come down to about 50% of the group by '28. So roughly speaking, it's not much more to the Investment Bank. And the cost guidance at a group level only modestly growing from now to '28. That suggests Investment Bank is not getting very much cost either. So I'm just trying to think about why you've decided to do that in the context that, obviously, the IB probably is one of the businesses that has performed above expectations in the last cycle. And increasingly, there are questions about with the U.S. peers investing more and putting more capital behind the IB, why would you choose not to do something? Coimbatore Venkatakrishnan: I'll let Anna take the first question, and she can start the second, and I might come in. Angela Cross: There we go, the plan. Thank you, Perlie. There's a lot in your question. Let me try and unpack it a bit. So how do we think about product margin in the U.K. is, I think, your question. So look, there's a bit more to go here. And you can see that from the -- can we go to the structural hedge slide, please? Thank you. Okay. So we are assuming that we are going to be reinvesting the structural hedge at 3.5%. The maturing yield over the next 3 years is materially below that. So 1.5%, 2.1%, 2.7%. So you're going to have a considerable hedge tailwind across at least this plan, probably beyond. And everything that we've done around the tenure of the hedge and extending it from 3% to 3.5% is only going to increase that momentum for longer. So that remains there as, if you like, an underpin for product margins. Then if you think about lending more and particularly within our credit card business, all of the volume that we've written over the last 2 years coming to maturity from its promotional balances, that will start to increase the interest-earning lending in the credit card book. So we expect those things to continue. Now what we're not doing here is planning for any expansion of product margin really, though, because what we've said implicitly is that the growth that we're seeing in lending and some of the margin pressure that we're seeing in the U.K. market pretty much broadly offset. That's our planning assumption. Now it may turn out differently to that, but we are not assuming that product margins either as a totality, if you like, Perlie, get either better or worse, if that makes sense. You just continue with that hedge grinding in the background, products is broadly awash. That's how we think about it or that's how we planned for it. In terms of the Investment Bank, look, what we're trying to do here is construct a plan that is carefully constructed, okay? We're trying to put as much of it within our control as possible. So we're planning on a flat wallet. We're not materially expecting any market share change in markets. We expect some in Investment Banking. The pressure here in the plan is coming more from Transaction Banking, but that's where we're directing our investment. But don't conflate careful planning and lack of ambition. Because what we will do, of course, if the opportunity presents itself, then we will monetize it as we have done to date. Venkat? Coimbatore Venkatakrishnan: I will emphasize that last point. I must say it's nice to be getting a question about why we shouldn't be bigger in the Investment Bank. But I think we've targeted -- we've been very clear to you over the last couple of years about where we are roughly targeting the IB as a percentage of the group. I think what you should expect us to do is exactly what Anna said, which is we're making a plan based on an assumption of a wallet. If there is opportunity, we've done it in the last number of years, which is we take advantage of it. Yes. Sorry, let's start, Chris. Chris Hallam: Chris Hallam from Goldman Sachs. Just a question on the Investment Bank to begin with. Are you able to give any color on perhaps how much leverage exposure is tied up in the Investment Bank? I know we talk about RWAs, but as we shift towards the growth you're seeing in the financing businesses, how relevant that metric is. And when you talk about flat market share in Global Markets, is that a conservative assumption or not given, I guess, the dereg story we're seeing building in the U.S. and also the ambitions one of your European peers has in FICC, specifically in the United States? And then the second question is more broadly on AI. I think or I assume behind the scenes going through all the planning, you've looked at a lot of the opportunity set in that area. It feels as though more generally, there's a narrative that the technologies are becoming more impactful, but perhaps the speed at which you can get them into the enterprise is taking longer than people had expected and maybe slightly at a higher -- slightly higher cost. Is that a fair narrative or one that you would agree with when you think about the work you've done behind the scenes on this topic? Coimbatore Venkatakrishnan: You want to go with the first one? Angela Cross: Yes, sure. So thanks, Chris, for the question. I mean we don't talk about return on leverage balance sheet a lot with this community, but you can imagine we're very focused on it in the background. And there are -- you're right, there are 2 big parts of the bank where leverage is deployed probably most extensively. One of them is obviously retail mortgages. The other one is financing within the Investment Bank. It's very high RoTE business because it's essentially secured lending, but it does consume leverage balance sheet. That's why we have the AT1 strategy that we have. And we're always thinking about what are those returns on the leverage balance sheet versus the cost of those AT1s. That's how we think about it in the background. We have deployed more leverage in the business over the last few years, but so have our U.S. peers. And our perception to date certainly is that they have not been leverage constrained in the way that they have addressed that. And despite that, we've grown the balances by 60%. So it's a business, of course, we're focused on the returns across many lenses, but we're happy with where it's going. Coimbatore Venkatakrishnan: Yes. I'd also say one of the things about the bank and the way we're building the bank is that we have lots of options and lots of opportunities. So just as you have 2 areas which consume leverage, you've also got the U.S. cards business, which helps you offset that because it's capital dense, relatively speaking. And what we are doing on the personal and unsecured side in the U.K., which is also relatively more capital dense. So I spoke on one of the slides about balancing product, income type mix, all these factors are coming in to create the portfolio which we have. Angela Cross: Yes, sure. I think back to you on AI. Coimbatore Venkatakrishnan: Back to me on AI. Yes. So you're right that I think what people are finding is that it's not just sort of enabling a particular type of model or a particular capability on everybody's computers and then get to work. So you have human adoption and then you have, more importantly, the ability to get it to work in the system. To get it to work in the system requires 2 things or 3 things. One is the basic infrastructure, then adding the capability and then the third, the willingness to reengineer your processes. That is what we are trying to convey in the slides we spoke about on technology. So the basic infrastructure is about both data and computing. Then on top of that, you build the model capability, which exists in some of the computing platforms, but which you might put on your own. And then the third is the commitment to reengineer processes, and you've got to really do it end-to-end. So whether it is that BARXBot, whether it is what we are trying to do in credit risk, whether it is what we are trying to do in U.S. cards in the U.S. Consumer Bank and customer service, you can't leave pieces of this undone, okay? And that's the deep organizational commitment. So we recognize it. That's what we are finding behind the scenes, as you said, but we're trying to pick the right projects that will have the biggest impact on the bank and see it through from beginning to end. Yes. Mike Holton: So another question on the income planning assumptions. Coimbatore Venkatakrishnan: Sorry, can you introduce yourself? Mike Holton: Sorry. Yes, Mike Holton from BNY Newton. There are some that you talked about that do seem relatively conservative. Now whether they will be or not, we'll see over the planning period. But to the extent that they are and revenues are better, income is better than you're planning, should we expect as investors for that to flow to the bottom line? So profits are better, RoTE is better? Or over the course of the plan, would you invest that away, maybe make additional accelerated investments in the business such that you still hit or maybe beat your plan by a little bit, but you improve the sustainability perhaps of the profitability, pull some investments forward. So beyond '28, you're set up even better. Angela Cross: Do you want me to start? Okay. So Mike, the first thing I would say is that our targets that we've given you have very deliberately got a greater than sign in front of them. So we're balancing a few things here. The first is that, as I've said a few times, we want to put this within our control, the delivery of the plan. That's really, really important to us and particularly the delivery of the distributions of the plan. So that's number one. Number two, we are balancing here the longer-term growth of the firm. So Venkat has talked a lot about the additional investments that we have and will continue to make. I mean between Venkat and I, it would be relatively easy for us to optimize the returns of the firm across a short-term horizon. That is not what this is about. We are really balancing here, investing more in the business, and that means that the RoTE in the shorter term are probably a bit lower than they would otherwise be. But we think it's really, really important to create a Barclays for 2 years' time when we're standing up maybe during the next phase of the plan, the third phase of the Trilogy, where we're talking about '28 and beyond. We want that momentum to continue. So that's why we've -- not so much on the income forecast, but when I was talking before about the capital capacity of the plan, that's exactly what I was driving at, our ability to flex our investment pathway if we feel that's the right thing to do. But every time we are doing that, we are considering what is the returns on that investment relative to either the business as it stands now. So is it going to enhance those returns further? Or how does it look like versus the returns of a buyback? So we're thinking about all of those things as we deploy that. Coimbatore Venkatakrishnan: Yes. I mean it's going to be -- we've presented a plan to you that is based on prudent financial planning in the way Anna has said, but we want to create a deep infrastructure for this bank, make it, as we said, returns in different environments, produce strong returns in every -- through different environments and sustainably higher returns in the long run, which is a combination of investment and shareholder return, right? Sorry, going to the back and then I'll come here. James Frederick Invine: It's James Invine from Rothschild & Co. Redburn. I've got 2, please. Anna, can you talk about your thoughts on kind of deposit volumes and spreads in Barclays U.K., please? So we saw a pickup in volumes after a few quarters of kind of flat to slightly down. And I think as well, your U.K. net interest income guidance kind of implicitly assumes quite a bit of deposit pressure. So is that migration? Is it product spread pressure? And then, Venkat, just back on the Investment Bank, I mean it sounds like you're very theoretically open to putting more investment in there. But what actually has to happen? So the revenue on risk-weighted assets has gone up. You're talking about a 13% plus RoTE. How much higher do those numbers have to go before you think you'll give this business another GBP 20 billion of risk-weighted assets or something? Angela Cross: Okay. So on U.K. deposits, you can see that the deposits are up quarter-on-quarter by around, I think, GBP 3 billion if we go to the slide. What we continue to see, though, James, is we do continue to see some competitive pressure in the U.K. and specifically that move towards fixed or time deposits. Now seasonally, I would expect some concentration of that in Q1, Q2 just because of the ISA season in the U.K. We always see that. And it feels like as a market, we're well primed to see that. But we are pleased with that deposit progress. What does that underpin? Well, I think just continued improvements in the business. I would say that we've deployed our multi-brands in deposits this year. We don't really talk about that. We talk about it a lot in assets, but we are going to market with a much more sophisticated product architecture in deposits because we are now deploying the Tesco brand here. So that's really helping us. But we are not assuming from here that there is any real easing in that deposit environment. It may happen, it may not. But as I say, we're trying not to make significant market assumptions. Venkat? Coimbatore Venkatakrishnan: Yes. So on the Investment Bank, first of all, investment comes in different ways. Investment comes in people, investment comes in technology, particularly in the markets business, and then investment can come in RWAs. What we've spoken about on the balancing side is basically Investment Bank RWAs as a percentage of the group, where we've set a target of around 50% seems right. We've also indicated flexibility around that number if there's a little opportunity, but 50% seems right. We have been investing heavily on technology and people. And we've spoken about it, whether it's bankers, whether it's trading capability and of course, electronic trading capability. We spoke a little earlier about the investments we've made in prime. So there's been and continues to be tremendous investment in technology and capability. Some of this or a lot of it is going towards things that are relatively capital-light and relatively high in fees. So we are prioritizing stable income. We are prioritizing corporate banking. And of course, electronic trading, which helps with our intermediation. And on the capital side, as I've said, there's a balancing act, and it's about 50% is where we would aim to target. And to get there right now, IB RWAs have to be relatively flat. Angela Cross: Venkat, on the left-hand side, you've got Chris, Jonathan and Amit who are being incredibly patient. So... Coimbatore Venkatakrishnan: All right. In that order, Chris. Christopher Cant: It's Chris Cant from Autonomous. If I could just ask one point of detail and then on the IB again. So your effective tax rate has been quite difficult to predict over the last couple of planning periods. If you could just fill that gap in our models, I think that would be appreciated by all. And then on the Investment Banking side of the equation in terms of stable market shares, I guess one obvious development that's probably coming down the tracks at you in the next 12 months is this regulatory change in the U.S. So are you seeing at the moment any change in the competitive environment? And do you make any allowance in the plan for a potential contraction in product margins as some of your U.S. competitors get more capital capacity, some of which is likely to be deployed into the IB? Angela Cross: Okay. I'll start with the tax rate. So Chris, I'm not going to give you a tax forecast. But I recognize that quarter-by-quarter tax can be a bit lumpy because it relates not only to the changing shape of the business, but also things that may have happened in the past. So I would encourage you to look at it over a sort of full year basis, maybe for the last couple of years and start from there. Always, if we've got significant tax impacts, we typically call them out for you. So start with that. Coimbatore Venkatakrishnan: And Chris, just to clarify, by regulatory change, do you mean capital regulations in the U.S.? Or do you mean individual banks that might be under regulatory structures now that might lift? Christopher Cant: More the former. Coimbatore Venkatakrishnan: The former. Right. Look, U.S. capital regulation is very likely diverging from what's there in the U.K. and what's there in Europe. We have operated this investment bank through multiple capital regimes in different locations, and we adapt. The question is then how do we adapt? I said earlier in our presentation that the secret sauce of our Investment Bank is the synergies, our strength in fixed income and structured financing and the nimbleness of our approach with our clients and deepening the way in which we engage with clients. So we'll see what comes out. We will see whether we are at a relative advantage or disadvantage in certain things. But the most important thing is to keep investing in the infrastructure, the people, the products so that -- and the client relationships so that we can manage it through different points in the market cycle, through different differences in capital regimes. This has always been a very competitive business, and we expect it to continue to be so. Jonathan and then Amit, yes. Jonathan Richard Pierce: It's Jonathan Pierce from Jefferies. If I can take it up a level, if that's okay, a couple of questions. I'm really trying to triangulate the capital generation targets on Slide 71 with the RoTE and the distribution expectations. I mean greater than 230 basis points on circa GBP 400 billion of RWA is obviously getting you to an attributable profit number of over GBP 9 billion. So putting to one side, that's quite a bit ahead of consensus, even if we assume 3% RWA growth, which if the Investment Bank is pretty flat, is quite a lot. That's only going to take us down to about GBP 8 billion of free capital generation, which is obviously huge in the context of the GBP 15 billion plus over the 3 years. So can I just firstly ask do you recognize those numbers? Are these distributions going to be really quite back-end loaded such that when you are stood here in 2 years' time, the next 3 years of distributions are going to be markedly above the greater than GBP 15 billion that you've talked about today. Secondly, connected, the RoTE on that 230 basis points plus, if we use consensus TNAV would be closer to 15%, maybe a little above 15%. I just wonder if you can talk to TNAV growth over the next few years. It would be great if you can reference consensus, but maybe some of the things that are harder for us to model like the own credit unwind, the pension surplus, maybe even the cash flow hedge reserve moves to a positive. How should we be thinking about TNAV 2 or 3 years forward, please, particularly versus consensus? Angela Cross: Thanks, Jonathan. I guess both of those are for me. So let me just start with capital. So I'm not going to comment on your math, Jonathan. Where I agree with you is that the organization is generating a lot of capital, and we expect that to continue. And so when we give you a distribution target of greater than GBP 15 billion, I would concentrate on 2 things within that slide. One is the greater than sign. And the second is this point that we are making that beyond the investment that we've got in the plan, so beyond the doubling of investment and beyond the level of distributions, there is an element of capital creation here that we are holding for additional investment if we think that is the right thing to do. Now if we don't, then we will, of course, return that to shareholders. That's what our capital hierarchy says. It says first, be well capitalized, then deliver it to shareholders, then invest it to meaningfully improve the returns of the group. So that capital hierarchy remains. We have no desire to hold on to excess levels of capital. So your thought process is as ours is. But as I say, I will leave the math to you. In terms of the sort of -- in terms of the RoTE point, we've given you a RoTE target, which is greater than. So again, I'm not going to comment on the math that you've given me. Last time I looked at it, TNAV was broadly -- our expectations of TNAV and consensus TNAV were broadly similar. I think the difference here is probably in the greater than sign simplistically put. Coimbatore Venkatakrishnan: Amit? Amit Goel: Maybe one [Technical Difficulty] again, just say, for example, looking at BUK profitability targets, so '28, greater than 20%, similar to '26, greater than 20% despite a mid-40s cost income versus the low 50s, further progression in terms of the income from the hedge. I mean I guess just wondering why isn't that number, say, greater than 25% or higher, you don't want to show a number like that. So just curious on that. That's the first question. The second, again, just on the IB, just on IB fees, again, this comes back to the market share point. So I understand the flat wallet assumption going into '28. But again, when I look at the trajectory, I think last time we were thinking that there had been investment in '23 and so forth, which should drive market share gains. We saw gains into '24. I think we went from about 3% to 3.3% -- sorry, into '25 or '24, but that's come back down now to around 3% again. So just wondering what's going to create the reacceleration back to the 3.5%, and what gives the conviction on that piece? Coimbatore Venkatakrishnan: Do you want to take BUK and then I'll come back to the IB. And that's Amit Goel, by the way, from Mediobanca. No, it's okay. Angela Cross: You did a good job with that. Coimbatore Venkatakrishnan: I know. I won't say anything. Angela Cross: So a couple of things just to call out, Amit, just to help you. Firstly, again, I'm going to lean on the greater than. The second thing is that although this is not true for the group, for BUK, it is true. We are expecting some impairment normalization within that business. So as we said, it's been running relatively low because we've been recalibrating these impairment models that are consistently overpredicting impairment in the U.K. So we've been running pretty low in BUK. We do expect that to normalize up to around 30 basis points. That's not true of the group. The group is running in totality where I expect it to be. So that's not flattering the group, but I think it is flattering BUK right now. So if you take that plus just lean on the greater than number, then that should hopefully explain. Venkat? Coimbatore Venkatakrishnan: Yes. So I'll begin with an answer on fees, similar to one I often give on markets. So when we have quarter-by-quarter or annual returns and results in markets, people will always ask, why are you better in this or why are you worse than that? Some of it has to do with where we are relatively -- where are our relative strengths and then how do the markets evolve to either give -- play to your relative strengths or not. And you've got to look at it over a long period of time. On Investment Banking fees, as I said, we made the investment in bankers. And debt capital markets is relatively strong. It's equity capital markets and M&A, where we need to do more catching up. And leveraged finance is obviously reasonably strong. So when you then look at that, some of it has to do with the pattern of deals in the last year versus the year before. They were larger, more lumpy deals. Sometimes if you're lucky to be in them, you're good. Otherwise, you're not. So '24 was a helpful year, '25, less helpful. But over the long run, we expect to get that market share simply by having the right bankers and the right product, and we look at this over a longer period. So I will give that kind of answer to you. Right. Anybody else? Going once. All right. Well, listen, thank you very much. Let me say that over the last couple of years, Anna and I have really appreciated the engagement from all of you and your organizations as we've been on this journey. We appreciate your candid feedback, supportive and encouraging. We welcome the opportunity to continue these conversations with you. Some of it will be on the road and one-on-ones. And I want to really thank all my colleagues who have helped put this together, Marina, starting with you and your team and the Investor Relations team. So please go easy on them. And then thank you. If you have a minute or 2, there are refreshments outside, and you can linger or you can run back to your computers. I'll leave that to you. Thank you. Angela Cross: Thank you.
Sebastian Frericks: Good morning, ladies and gentlemen, and welcome to the three months '25/'26 analyst conference of Carl Zeiss Meditec. My name is Sebastian Frericks, I'm the Head of Investor Relations. Our CEO, Andreas Pecher; and our CFO, Justus Wehmer, will present the three months results and guide you through the financials and some prepared remarks. After the presentation, we look forward to the Q&A. I would like to hand over to Andreas. Please go ahead. Andreas Pecher: Thank you. Good morning, dear analysts and investors. Welcome to the three months '25/'26 analyst conference of Carl Zeiss Meditec AG. Maybe some of you know that I've been at Zeiss Executive Board Member since January 2022. Back then, in the very early part of that month, Meditec was valued above EUR 16 billion. Now it is valued at below EUR 2.5 billion. This is not acceptable for all of you and also not for Zeiss. Zeiss has taken the biggest loss of all above EUR 8 billion since then. And the new low point also is in the level of trust when we have to withdraw our full year guidance on January 22. The minimum I can do is to apologize, which I want to do personally and on behalf of the Management Board. I assume more important for you and also Zeiss as the main shareholder is that we reverse the trend and build up trust again by working on our business performance and meet what we said before over and over again. For that, we need to strongly focus on execution now. We will talk about how business conditions have evolved since our last update in December 2025 and what the key building blocks are for the remainder of the fiscal year. Justus will address these topics in more detail later in the presentation. And of course, following the presentation, we'll be happy to take your questions. But before that, Justus and I will walk you through the quarterly overview and financial results. So, let me start with an overview of our first quarter performance. Well, to cut it short, this was not a good quarter, and we're not happy with the results. We had a weak start to the year with both revenue and EBITA coming in below the prior year, driven primarily by currency headwinds and an unfavorable product mix with weaker sales of refractive treatment packs as well as intraocular lenses in China, which weighed on margins. Revenue for the quarter amounted to EUR 467 million, representing a decline of 4.8% year-over-year. On a constant currency basis, revenue declined by 2.1% year-over-year, driven primarily by movements in the U.S. dollar. When fully reflecting all currency headwinds, FX effects amounted to EUR 20 million. FX-adjusted revenue was relatively flat at minus 0.7%. And beyond the U.S. dollar, these currencies -- currency impacts were mainly related to the Chinese yuan. In this adjustment, we are also eliminating all currency effects related to the exports into the ZEISS Group global distribution network. The revenue decline was visible across both equipment and consumables. The quarter was impacted by a soft start into the fiscal year following an exceptionally strong equipment delivery baseline in September last year. And in China, we also saw revenue loss from bifocal intraocular lenses following the withdrawal from the current VBP tender as well as delayed sales of refractive treatment packs due to the later timing of the Chinese New Year holidays. Looking at the revenue mix, equipment accounted for 52%, consumables for 37% and services for 11% of total revenue in the quarter. Order intake reached EUR 471 million, down 9.7% year-over-year or down 6.9% on a currency-adjusted basis, which is mainly related to the strong year-end close in September 2025. Our order backlog increased to EUR 405 million at a slightly higher level compared to the end of last fiscal year. Now turning to profitability. EBITA came in at EUR 8 million, a 77% decline versus the prior year, resulting in an EBITA margin of 1.7% compared to 7.2% last year. The significant decline was mainly driven by negative FX effect and unfavorable product mix and negative operating leverage as our cost base remained largely stable while revenues declined. So, now I'd like to hand over to Justus, who will provide you with more background and will discuss the SBU figures in more detail. Justus Wehmer: Yes. Thank you, Andreas, and also a warm welcome to all of you from my side. So, as usual, I will briefly walk you through ophthalmology performance first and afterwards, microsurgery. So we had a weak start, driven mainly by refractive phasing and a loss of bifocal IOL sales in China. Let's start with the revenue. Reported revenue came in at EUR 357 million, which is down 5.1% year-on-year and foreign exchange adjusted basis, revenue declined by 2.4%. The performance was impacted by several factors, of course, currency headwinds, as already explained by Andreas, strong equipment sales at prior year-end, which created a much slower start in the following month and later phasing of refractive treatment pack sales due to the later occurrence of the Chinese New Year vacations. And ultimately, the loss of the bifocal IOL sales in China, where we have reported that we lost there the right to participate with one lens category in the tender. One item to highlight here is the potential bifocal IOL scrap risk associated to what I just explained and estimated at around EUR 8 million in total, which will fall in quarter 2. This will be treated as a nonrecurring impact, and it's worth noting that registration of the successor model is progressing well. The chance seems good to receive the license before the start of the next tender. Moving to EBITA margin. The EBITA margin declined to minus 0.4%, representing a 5.2 percentage-point decrease year-on-year. This was mainly driven by a 1.9 percentage points decline in gross margin, largely due to the currency effects and an unfavorable product mix. The OpEx ratio weighed on margin by additional 2.8 percentage points, although [ obsolete ] expenses remained stable as particularly the changes in APAC currencies cannot be locally hedged with most of our OpEx in euro. Finally, looking at the revenue split, ophthalmology accounts for 76% of total OPT revenue. And within ophthalmology, consumables represent 46%, equipment accounts for 45% and service contributes 9%. Turning then to microsurgery. Overall, we saw a margin decline, mainly driven again by currency headwinds and an unfavorable product mix. Revenue reached EUR 110 million, which is down 3.7% year-on-year. On a currency-adjusted basis, revenue declined by a more moderate 0.9%. The softer revenue performance despite a relatively modest comparison base is largely explained by exceptionally strong deliveries towards the prior fiscal year-end, which created a pull-forward effect. In addition, we saw an unfavorable mix with slower deliveries of neurosurgical microscopes following the strong year-end close in September '25, which not only impacted revenue phasing, but also weighed on profitability. The EBITA margin decreased to 8.7%, representing a 6.5 percentage-point decline year-on-year. This was mainly driven by a 5.5 percentage-point decline in gross margin, reflecting currency effects and unfavorable product mix and the amortization of capitalized R&D related to KINEVO. In addition, the OpEx ratio weighed on margin by around 1 percentage-point, while [ obsolete ] expenses remained stable. Looking at the revenue split, microsurgery accounts for 24% of total revenue. And within microsurgery, equipment represents the largest share at 79%, service contributes 15% and consumables account for 6%. Let me walk you through our regional development. Overall, EMEA remained stable, while we saw softer performance in the Americas and APAC. Starting with the Americas, the region accounts for 25% of group revenue. Revenue came in at EUR 117 million, down 13% year-over-year, with currency-adjusted revenue declining by 6%. This reflects a weaker investment climate, driven largely by heightened geopolitical volatility and a decline in key markets, including the U.S. Overall, demand momentum in the U.S. remains subdued during the period as a consequence of overall tariff-related price increases. Moving to EMEA. EMEA represents roughly 37% of group revenue and showed a largely stable performance. Revenue reached EUR 174 million, moderately below last year, while currency-adjusted revenue actually grew slightly. This resilience was supported by growth in selected markets, particularly in the Middle East. At the same time, core European markets, including Germany, Spain and the Nordics remained broadly sideways. Finally, Asia Pacific region, APAC represents 38% of revenue, with China contributing 18% in this quarter. Revenue amounted to EUR 178 million, down 3% year-over-year, with a currency-adjusted decline of 2%. Performance across the region was mixed. China remained stable, while India and Australia showed positive trends. This, however, was offset by weaker revenue in Japan and South Korea, which weighed on the overall regional result. Turning to the P&L. Margins came under pressure in the quarter, while operating expenses remained broadly stable. Gross profit declined to EUR 227 million, with the gross margin decreasing to 48.6% from 51.4% last year. This was mainly driven by currency headwinds, a lower contribution from neurosurgical microscopes, IOLs and refractive treatment packs as well as higher amortization of capitalized R&D expenses related to KINEVO. Looking at operating expenses. Total OpEx was flat year-over-year at EUR 226 million. However, as a percentage of sales, OpEx increased to 48.4%, reflecting a negative operating leverage. As a result, profitability was significantly impacted, both EBIT and EBITA declined sharply. Earnings per share decreased to minus EUR 0.06, driven by the sharp EBIT decline and negative financial results, primarily due to higher interest expenses. On an adjusted basis, adjusted earnings per share was EUR 0.03, excluding noncash valuation effects on contingent purchase price liabilities while exchange rates and hedging results were not adjusted. The next table provides a brief overview of the bridge from EBIT to EBITA and to adjusted EBITA. Regular amortizations on purchase price allocations amounted to EUR 7 million in Q1, including D.O.R.C. effect of EUR 6.5 million and smaller effects from former acquisitions. In terms of special items, the current quarter includes legal expenses in connection with the lawsuit related to former IanTECH in the U.S. On the contrary, the prior year benefited from a one-off gain from public grants received in China for our IOL production. Adjusted for special items, EBITA amounted to EUR 10.3 million, with a margin of 2.2%, significant decline compared to previous year. Next, we have a quick overview on the cash flow statement. We saw a clear improvement in operating cash generation. This improvement was mainly driven by a strong reduction in receivables, particularly from third parties as well as income tax refunds, which reflect the weaker operating result in the period. Cash flow from investing activities also improved primarily due to lower investments in property, plant and equipment compared with the prior year. Financing cash flow declined, mainly impacted by the reduction of liabilities to the ZEISS Group treasury. By end of Q1, net financial debt decreased to EUR 282 million at a lower level compared to a year ago. And now I'd like to hand it back to you, Andreas. Andreas Pecher: Thank you, Justus. So let's move to key topics and outlook. I will outline the main triggers behind the current guidance suspension and also share my recent impressions from a visit to China that happened last week. Then Justus will illustrate the key building blocks shaping our outlook for the remainder of the fiscal year. So let me briefly explain what has changed since December 2025 and why we decided to temporarily suspend guidance in January. Well, let me start with the bifocal IOL situation in China. As we communicated at the December '24/'25 analyst conference, full year conference, our bifocal IOL was withdrawn from the existing VBP tender. As a result, it cannot longer be sold to public hospitals under that framework. While the product license itself remained valid, there is still, of course, ambiguity around the VBP withdrawal, and we were still assessing whether limited sales to other markets for the private sector are feasible. At the same time, the treatment of existing inventories remain unclear. In a worst-case scenario, this could require a partial recall and scrapping of stock. We're now seeing only limited resale opportunities for bifocal IOLs more broadly as this product has been removed from the reimbursement scheme following the withdrawal of VBP qualification. So, since January, we have negotiated a partial recall with external distributors in Carl Zeiss China, which will result in an estimated earnings risk of around EUR 8 million for Carl Zeiss Meditec. Second, moving to VBP and competitive dynamics. Our assumption in December was that the second nationwide VBP tender would put some pressure on IOL pricing, but to a lesser extent than the first tender as we learned from other peers, which are subject to consumables VBP. Meanwhile, we've identified the competitive landscape has intensified more than expected. In multifocal categories, several Chinese competitors have successfully passed registration, increasing price competition. As a result, we now expect pricing pressure in premium IOLs to be tougher than previously assumed. Beyond IOLs, competition in equipment is also starting to heat up, supported by expanding local procurement policies. And finally, on equipment demand, we're currently seeing weaker demand in the U.S. and broader Americas market, particularly in the ophthalmology segment, this seems to extend beyond the impact of the strong September deliveries, causing a slower start into the new fiscal year. Based on this, internal sales forecasts have been adjusted to reflect a more cautious CapEx environment for the fiscal year. While putting all this together, regulatory uncertainty in China IOLs, higher competitive pressure and softer equipment demand, we concluded that temporarily suspending guidance was the most responsible step until visibility improves. We will update the market as soon as conditions stabilize and assumptions can be reliably quantified. We're currently working very hard in defining measures, and we'll update you as soon as possible, latest with the half year reporting as previously promised. But before I close and hand back to Justus for the outlook, let me talk briefly about China with a more long-term view. I just came back from, I would say, intensive visit in China last week. And I was meeting there, of course, government officials, for instance, the Shanghai Party Secretary, Chen Jining. He's one of the -- well, he is the highest ranking official in Shanghai. We also had the corporate size, Greater China headquarters campus construction launch ceremony. And of course, we did that alongside many of our customers, the local officials, and lastly, I met a number of our customers, particularly the Aier Group and its CEO, Mr. Li, and of course, our team. And let me be straight in assessing the long-term competitiveness of Zeiss in China. We currently are in a period of, let's call it, vulnerability, not having localized our manufacturing fast enough. The transfer of manufacturing for key consumables and equipment is happening as we speak, and we will be largely completing this over the next 2 years. We have all the support we need from our local team and from the local and regional officials, and I will personally look over this. We expect to be strongly competitive again across our portfolio with our state-of-the-art production facilities in Guangzhou and Suzhou. Having the strongest brand in ophthalmology in China, keep in mind, Zeiss is even more recognized from a brand point of view in China, as in Germany, very close relationships with our key customers and an excellent reputation in the Chinese market from consumers to set that on brand recognition to doctors, to the government. And this can also be demonstrated by the largest ever infrastructure investment corporate ZEISS has made in China today. That, of course, also benefits Carl Zeiss Meditec. Now back to you, Justus. Justus Wehmer: Thank you, Andreas. So let me now outline how we are thinking about the timing of new guidance and the main factors that will shape our outlook. At a high level, we continue to see several external headwinds, including trade barriers, regulatory changes, a softer consumer environment and currencies, which are putting pressure on this fiscal year. Right now, we don't foresee any alleviation of these headwinds in the near term. There are 3 groups of internal factors we are monitoring closely. First, swing factors, which could move performance either way in the near term. This includes the timing of the successor bifocal IOL registration and launch. We have already received, as we mentioned before, positive signals and currently expect to receive the license around March in time for the new volume-based purchasing tender. We are also awaiting the outcome of the VBP tender expected in April or May, which will have an important impact on our IOL business. And lastly, refractive procedure demand around the Chinese New Year period, which will provide a good indication on overall market sentiment. In the first quarter as well as extending into January, our refractive consumption data indicates continued stability, whereas the market was quite weak overall based on our data. We are satisfied about our relative outperformance, but currently cannot count on a growth outcome to offset other pressures in the business. Second, nonrecurring items. In Q2, we expect the scrapping of certain old bifocal IOL inventory. As just explained, we have agreed with Carl Zeiss China and external distributors to take back a certain quantity of intraocular lenses, which will cause a burden of around EUR 8 million to gross profit in the second quarter. We are developing our strategy and reprioritizing R&D projects, which will likely have an impact on IP and cost allocation. And in addition, we anticipate one-time reorganization-related expenses that will mainly affect the second half and beyond. As we have said in our release on January 22, more details on measures will be presented with our half year report. Third, key positive drivers. We expect continued momentum from the VISUMAX 800 and the associated SMILE pro rollout in China, further global traction for the KINEVO 900 S. So overall, while near-term volatility remains elevated, we see both risks and clear operational levers. Once these swing factors crystallize and the one-offs are better quantified, we will be in a much stronger position to provide reliable guidance. Timing-wise, no later than our half year results. And with this, I'd like to conclude our presentation for today, and now we look forward to your questions. Operator: Yes. Thank you so much for the presentation. We will now move on to our Q&A session. [Operator Instructions] And we have already received a question, Mr. Reinberg. Oliver Reinberg: Oliver Reinberg from Kepler Cheuvreux. Just 3 questions, if I may. And the first would be on China refractive. I mean, obviously, the kind of Chinese New Year season is starting soon. And given you have just been in China, can you just provide some kind of feedback, a, what you have seen in terms of stocking ahead of the event and also what kind of feedback you get in terms of the expectation for the season from your clients? Secondly, just on the counteraction you're going to take. I mean, obviously, you're going to execute the plan that was developed before. Can you just provide some kind of flavor to what extent you also consider to accelerate these kind of measures given the kind of current earnings pressure? And then thirdly, just on China and the political background. I mean, buy-local has been a theme for quite a while. Can you be a bit more specific in which equipment parts you specifically see this kind of pressure and whether there's also anything happening in the refractive space. I mean, obviously, there's so far no local competition to SMILE, but if there's any kind of push towards LASIK or anything here? Justus Wehmer: Thank you, Oliver. I can probably take the first 2 questions and Andreas... Andreas Pecher: I can probably take the second and take the third one. Justus Wehmer: Yes, exactly. So, China refractive, yes, you're absolutely right, Oliver. We are actually -- as we are sitting here entering into this Chinese New Year vacation period. And in a nutshell, I think the stocking into the distribution channel is right now tracking on a level that is, I'd say, within our expectations. It is comparable to last year's level, but the proof is then in the pudding. The proof is ultimately in the consumption during the vacation period. And I think only once we know that, we will really have a good indication whether our assumptions for this year's overall consumption are actually correct or maybe higher or outperformed or underperformed. On measures, I can tell you that we are in full steam, so to speak, in the assessment and the decision-making process on what needs to be done. But I have to ask for your patience. As you know, there we have to follow a governance protocol. And we also, frankly spoken, also don't want to share anything premature here in public and clearly also not to feed our competitors with information that might be interesting to them. And on the Chinese political pressure, I think... Andreas Pecher: Maybe I can add to the second one, Oliver. Thanks for those questions. Well, that was the main reason why I stepped in, right, that we don't want to lose the time here. And we talked about that in December already. First measures have been implemented, for instance, the commercial organization that's being rolled out now. And of course, the other items, we're working together as a team to make sure that we develop those plans as fast as we can. That's clear and implement what we can implement. And for other things, we, of course, need the governance. That's clear. So rest assured that this is one of my and the whole team's highest priorities. Now coming to your third question, well, let me first comment with sort of a general statement. What we observe is typically there is buy-local policies for areas where you have local competition coming up, of course, because it makes sense, right? Other things have to be imported. We observe that specifically in the diagnostic areas, and there is some risk in ophthalmic areas. The good thing is we have all this in our hand. We can localize. I mean we have large really good infrastructure in China. We have the right people. I just met them again last week that can do that, and we have the willingness to do that. And in addition, we also have the support from the local governance and officials. I spoke to them last week. They really want us to be successful in this market. So I would say we have everything in place to counter that and take on competition as it arises. Oliver Reinberg: And do you see any risk that this kind of political pressure is also moving toward private space of refractive? Andreas Pecher: I wouldn't say political pressure. I mean, you can call it political pressure. In the end, it is the will to localize manufacturing in parts R&D. And if you follow that, our impression is we have a very good position in that market. And by the way, that's something that I also see in other businesses of size. This is not just in medical. I mean we have that in our vision business as well. And what we see is, as long as we follow those rules, we have a very strong position in those markets. I mean vision is #1, for example, in China. And there is, of course, strong competition. So we have the means to do this and of course, work with the officials to make sure that we can do that. Operator: Thank you so much, Mr. Reinberg, for your questions. We move on to Mr. Jon Unwin. Jonathon Unwin: I actually just had a quick follow-up on Oliver's question on the equipment and the buy-local policies. You mentioned it was mainly in diagnostics, but also in other areas of ophthalmology. Is that all other areas of ophthalmology, so refractive, cataracts and microscopes or one more than the other? So just a quick follow-up there. I'm just interested how order intake has progressed in Q1 and Q2 for microsurgery. Obviously, we saw strong deliveries in the fourth quarter, but have orders progressed well so far year-to-date? And how do you feel about the ability to deliver those in the rest of the year? Andreas Pecher: Maybe I'll take the first question. Thank you for those questions, Jon. Well, it depends in terms of the competition. I would say, generally, it's probably the highest on the cataract side, right? Then microscopes, I would see that more on the lower end coming in. And then the third one is refractive. That's the way I see it. And the good thing is we have a strong position in China. Zeiss overall is more than 7,000 people working for us in China. We see what's going on in the market. We can react. Essentially, we have the control over that. We can localize things quickly. Of course, you all know medical has regulatory restrictions, that's clear, but we can do that, and we're willing to do that. and one after the other. And this is nothing new to Zeiss generally. In general, I mean, we've seen that ambition as well. Years ago, we reacted and we're #1 there. Justus Wehmer: Fine. Then your question on MCS order intake and outlook. I think, yes, the first quarter has been soft, but I just spoke yesterday with the management of that division, and they are totally confident that they will make their numbers and volumes. The funnels, the project funnels are full. The order entry comes in. I obviously can't disclose here data for the current quarter. But I think what I want to convey to you is that for MCS, as we had said in December, for this year, I think that we will clearly benefit from the global roll-in of the KINEVO 900 S and the PENTERO, good sales volumes that we have seen last year, end of last year, also going into this year. So therefore, I think overall, for MCS, we are currently pretty confidently looking into this year. Operator: Thank you so much Mr. Unwin for you questions. We now move on to Mr. Marchesin. Davide Marchesin: I hope you can hear me well now. I have 3 questions, 2 on refractive. The first one is about the rollout of VISUMAX 800. So last year was better than you initially expected in China. Can you just make a comment how Q1 has continued and where are you right now? Second one is also you said that in China, refractive was stable. Can you comment whether this stable is related to volume or value as SMILE pro implies some positive ASP effect? And the last one is you also said in your comments that the planned delivery of neurosurgical instruments was slower than expected. Is it something that you see is just temporary? Or do you see that it will spill over more towards the further quarters? Andreas Pecher: Maybe on the first one, just you saw the picture that we showed, the one with the right background. That's actually me and our team standing together with the management of Aier Group and unveiling one of the VISUMAX pro systems, the SMILE pro systems. Just as a highlight there, they are dearly waiting for that, and they were really, really happy to have us roll that out. But that to just sort of highlight and Justus will go more into the numbers. Justus Wehmer: Yes, Oliver (sic) [ Davide ], happy to share with you that we are going into this year and order entry is currently trending nicely. We are in a neighborhood of 50 VISUMAX 800 in our books for China, out of which already more than 30 have been shipped and installed. So that, I think, is a pretty solid number after the few months that we are in this new fiscal year. And then your second question, what I was referring to the stable was the procedure numbers. And just to also comment maybe on your underlying question, we still see a good pickup in SMILE pro treatments. And from that perspective, I also can confirm that by now, we do not see any further deterioration of margin in the market. So hopefully, that covers your question. And sorry, and you had one on MCS. Once again, I wouldn't derive out of Q1 any conclusions that would indicate softness or weakness for MCS for this fiscal year. As I said, the funnels are very solid. And we also know that this category in the hospitals, so neurosurgical procedures is a money-making procedure. And therefore, we clearly expect that there will be a robust market demand for this year. Operator: Thank you so much Mr. Marchesin. We have a question by the number with the last of digits of 219. Jack Reynolds-Clark: It's Jack Reynolds-Clark from RBC. I hope you can hear me. I had 3, please. So the first is on European core market weakness. Could you run through which subsegments specifically are impacted, i.e., was it refractive versus kind of cataracts versus D.O.R.C.? What do you think is driving the weakness? And do you think it's temporary or longer term? The next is on the U.S. So do you -- or does the ongoing weakness in the U.S. change how you view the attractiveness of the U.S. market for you from a bigger picture perspective in the longer term? And then my third question was on the CEO search. Could you update us on where you are with this and share any kind of developments around your thinking about what it is that you're looking for? Andreas Pecher: I'll take the third one. Justus Wehmer: Yes. Jack, it's Justus. So on the core market segments in Europe, actually, I don't know whether that was maybe mispronounced or misunderstood in my statements because actually, we are not so, how should I say, unhappy with Europe. As I said, we have some regions that still grow nicely and some regions, Germany amongst them, which have a more sidewards development in the first quarter. But that I would not yet take as indication of a softness of the business. So therefore, really nothing particular to point out here. I think if I look back on the 8 years that I'm now here with Meditec, Europe is always a mixed bag. You always have due to local politics and so on, you always have different investment behaviors across the board between South and North and East and West. But I think overall, we have always been able to, in total, then grow year-over-year in Europe. So therefore, really nothing that I would point out here, especially since you were asking about any particular business sectors of ours. The U.S., the weakness that you have commented on, of course, we are not happy with it. But first of all, we have installed in the U.S. a new head of our sales organization, a very industry-known veteran who has also worked in his history partially for some of the major U.S. competitors of ours. So, yes, it's an environment in which we have probably more hostile competitors than in other markets. But we -- I don't think that we should give up on it. And there is products in the pipeline, as you know, whether it's the hydrophobic trifocal lens, which we would expect by next year as well as the VISUMAX 800 flat cutting modality, unfortunately, only also next year. But I think the completion of our portfolio should actually in the next year give us some better opportunities or provide better opportunities for us to be in the U.S. in better shape. And on this third question, I think... Andreas Pecher: Maybe build on the question. Thanks, Jack, for those questions. Justus and I spent 3 weeks ago, we spent a good week in the U.S., of course, talking to customers as always, we always do that, but also to our team. And the new person heading our U.S. sales organization is not coming from the outside. He was at other companies before he came from another one of our markets and has a, yes, a proven track record of bringing a lot of value to those markets. That is, I would say, one of the first changes that came out of the new organization, the new commercial organization. So, as you see, we're in full swing of changing things, as I would say, to the better. On the CEO search, well, shortly said it's in full swing, right? I said before, I personally have a strong interest in keeping that short as my family. But, joke aside, we all have an interest, right, to make sure that we have the long-term person in there. So we are currently looking outside and have actually several candidates. And of course, I hope you understand that we cannot disclose anything more precise today, and we'll announce this as soon as possible. But it will be a person that, I would say, has a solid track record in the medical industry. Operator: Thank you so much for your question. We're moving on to Mr. David Adlington. David Adlington: Three, please. So, firstly, I just wondered, you indicated you put through some price increases in the U.S. to offset tariffs. I just wondered how much price you have put through and whether you're thinking about changing your strategy on price there. Secondly, on gross margins, obviously, quite a big impact from both foreign exchange and an increase in R&D amortization. It would be great to get your thoughts on how gross margins might evolve from here through the rest of the year. And then finally, with the VBP on multifocals coming through, I just wondered what you expected the price impacts to be? And any thoughts around where volumes might go? Justus Wehmer: David, I start, and Andreas, you just if you have anything that you want to highlight and I didn't cover on it. Price increases were, in total, probably in low single -- high single digit. It varies a little bit from category to category. But overall, you can say that cumulatively, it is a high single-digit number of price increase. And of course, that you have to compute it on our transfer prices and therefore, in the end, to offset for the tariff barrier, you basically have to then calculate it backwards from your speed price. And that is something like, as I say, high single digit. But you have to understand to build on that, David, that this hits in the U.S., the very important category of diagnostical products. And the diagnostical product, a, is anyways a very contested market. And secondly, you may say so, it's a market where in an environment like this, price increases, uncertainties on tariffs, some optometrists and ophthalmologists will simply delay their decisions. If you have a field analyzer, if you have an OCT or so, typically, it's something where you can also hold back for a while until you have more clarity on your investment decisions. And that, I think, is overall explaining the situation that we are in. So, hopefully, with a little bit more stability in the transatlantic relations and disappearing sentiment that there might be more movements happening, then we hope that the investment appetite will return. Gross margin, you were asking on, I think, what exactly we are anticipating for the remainder of the year. We clearly would see that the gross margins will recover with higher portions of consumables kicking in over the course of the year with the one caveat that I want to highlight and that leads to your third question on the VBP. Obviously, that also is a function of how aggressive pricing will be reduced in this second round tender. Frankly spoken, the only thing you can refer to is analogies from other consumables in the medical sector in the past. Typically -- again, typically, the second and third tenders were not as brutal in terms of the price impact. But now we have an unknown factor as outlined in our presentation. And also, please understand that I will not give you any detail on our expectations, what others do because as you can imagine, this is competitively sensitive information, and I don't want to have anybody speculating on how we would respond. Andreas Pecher: Yes. Nothing to add. And frankly, nothing I want to add to the last point here as well. Operator: Thank you so much for your question. We're moving on to Ms. Susannah Ludwig. You may speak now. Andreas Pecher: Susannah, if you speak, we cannot hear you yet. Susannah Ludwig: Can you guys hear me now? Andreas Pecher: Yes. Susannah Ludwig: I have 2, please. First, can you confirm if sort of long term, there will be any benefits to COGS from the shift to manufacturing in China and when you would expect to be sort of fully ramped on this shift to manufacturing in China? And then second, I wanted to follow up on what has changed from December to January when you pulled the guidance? So, first, on China, I guess, why had you originally believed that the price cuts would be softer in the VBP? I know you cite the Chinese companies passing sort of registration, but Eyebright had a trifocal approved since January 2025. So had you anticipated that they would be part of the tender? Or were you thinking there was a chance that they would not be? And then on the U.S., were December sales weaker than anticipated? And was that what led to the weaker internal forecast? Or was there something else? Justus Wehmer: Susannah, let me start with the last one. And in the week that we pulled the guidance, there was a pretty hefty discussion on Greenland. And within that discussion, there was at least a serious threat by the U.S. administration that there would be additional, on top of all other tariffs, additional 20% on products out of Germany going in the U.S. So that, of course, would have dramatic impact on our business. And as I said before, the U.S. is our second biggest market, and it's almost 90% device market. So therefore, that explains why this discussion at that moment in time was playing a significant role also for our ability to assess how the U.S. market may develop or not develop. On your question on our expectations for the tender, I think in a nutshell, one Chinese competitor in a tender in a category is already changing things, but we also have seen in the past that the Chinese authorities for good reasons, always try to distribute and don't want to be in a situation in which then suddenly one company is not able to fulfill the entire volumes that have been allocated. So with one player in the game, we were still reasonably confident that our strategy could fold out in a way that it would and therefore, was part of the guidance expectations that we published in December. However, learning then that at least a second player, Chinese player, will be participating with just recently approved lens that can, of course, once again change the volume allotments significantly. And that is one of the key reasons. And your first question was on the long-term benefits of -- Andreas? Andreas Pecher: I can start and you can chime in. There's 2 aspects when it comes to localization in China. The first one, and I think it's the more important one, an urgent one is to make sure that we have access to the market. That's why once those regulations come in, actually are anticipated, we can do that and essentially localize and make sure that we have access to that. The second one, of course, is a question about cost of goods. In general, there is a potential of doing that. And the question is always that we are taking is, are we taking step one means localization together with step two, and that's something that we have to assess essentially also in terms of cost and timing considerations. So, typically, there is a potential to be very clear. And sometimes we do that right away with step one. Sometimes we do that in a step afterwards by localizing also the supply chain. Susannah Ludwig: Great. That was very helpful. Can I just follow up in terms of the U.S.? Could you confirm, I guess, just how December performance looked versus October and November? Justus Wehmer: Susannah, sorry, I missed on that one. I think there is -- within the quarter, nothing in particular that I see. Probably October and November were weaker than December. That's the only pattern that I could share here with you. But I think -- I don't know whether this answers precisely your question, but that is what I... Operator: Thank you, Ms. Ludwig, for your questions. We're moving on to Mr. Graham Doyle. Graham Doyle: Yes. So this is a very complex system versus what we're used to. So it's -- and the UBS tech doesn't always allow me. So it's good you can hear me. Right. I've got 3 questions, please. So, firstly, I think when I was speaking to Sebastian earlier, he was talking about the UV biomaterial being a part of the issue in terms of the registration for the bifocal. And of your -- and I estimate of your sort of EUR 70-ish million revenue of IOLs in China, how much is not based on the UV biomaterial, just to get that? And secondly, just on D.O.R.C., could you just give us an update on how new instruments placements went in Q1? And then lastly, it's a sort of a bigger question. I know you don't often talk about the pipeline, but I think this would be a pretty good opportunity to do, which is, say, R&D as a percentage of sales has been well above the rest of the sector. And we obviously have seen some innovation, but it will be good to get a sense as to what really excites you. So rather than talking about the cost cutting, what excites you in the pipeline today that we might see in the next 1, 2, 3 years that can drive future growth for the group because you've got a great track record in R&D. So it would be good to get a sense as to what's in there. Justus Wehmer: Graham, may I -- just your second question, I missed that one because I was taking notes for the first, sorry. Graham Doyle: Sorry. The second question was just on D.O.R.C. in terms of new unit placements, how has that progressed in Q1? Justus Wehmer: Okay. So, on the UV biomaterial, we're actually in full swing of transitioning. I think it's right now probably more still in the neighborhood of 50%, but actually of the total business volume. But actually, with the one lens that we are expecting to hold the paperwork of the registration in our hands in a couple of weeks, we then actually would have, going forward, completed the transition. And then we have the portfolio on UVE. The D.O.R.C. placements, I think overall, just yesterday, had a discussion on it. We are still growing year-over-year nicely and in full swing of rolling out now also the D.O.R.C. portfolio into Asian markets. Last year, as you may remember, we were focusing first on U.S. and Europe, some European countries. Now Asia kicks in. And we actually also see in some of our key accounts that are loyal, refractive and partially cataract customers, also now high interest in the D.O.R.C. portfolio. So, overall, I think we are quite happy with the development. And I think on R&D, Andreas can talk. Andreas Pecher: I can say a couple of words on that. Well, thank you, first of all, for stating that we've been having a good track record on innovation. Of course, that's the core of the company, right? That's the core actually not just of Carl Zeiss Meditec, but Zeiss, an innovation-driven company. Let's do the following. That's -- how about we talk a bit more about that when we do the May -- latest in May when we do the half year results and show you a couple of the highlights. There's highlights in both the OPT and the MCS pipelines that I'm excited about. They actually go beyond that. That's -- we're always looking at short, midterm innovations, but we're also looking at the long-term innovations where we think we can go into even new markets. The one thing that I'm focusing on right now also is to make sure that we get a higher efficiency and effectiveness of our R&D. You've seen the R&D expenses going up in the last couple of years, which is good. It can be good if you get the right output. And that's one of the things that I'm focusing in my time also here and together, of course, then with the SBUs, I'm sure my successor is going to focus on. So what I want is return on R&D investment, and I want to increase that even more. That would be my statement. And sorry for not telling you any of the exciting products yet, but it's maybe better to also do that and see them. Operator: Thank you so much Mr. Doyle for your questions. We're now moving on to Mr. Falko Friedrichs. Falko Friedrichs: Three questions, please. And the first one, do you have an update on when exactly the VBP implementation for IOLs is expected to go live? My second question is on the downturn in Japan and South Korea. Can you add a bit more flavor on the specific market dynamics you've seen over there and what the expectation is for the rest of the year? And then third and last, can you share your high-level view on what we should keep in mind when modeling sales growth and margin dynamics for the second quarter? Justus Wehmer: Falko, update or your question on go-live of the VBP, again, it's -- there is no official statement at this point in time when the tender is published. And therefore, it's all speculation. I think last time between the tender publishing and then the actual roll-in, there were several months in between, and it started with single provinces applying it. And then until it was rolled out across China, I think it almost took 2 quarters. Assuming this year, this process is swifter, then maybe it's only 1 or 2 months before it becomes effective. But since we don't know the date, and I mean, what's reasonable to assume is, clearly, Chinese New Year is basically now. So it will be then most likely not within the next 2 weeks, then we are already almost crossing into March. And as we said, our team expects the tender being published anywhere March, maybe at the latest April. And then counting on that, probably a period until it's becoming fully effective of whatever, 4, 8 weeks, maybe 12, that would be our estimation at this point in time. Japan, South Korea, my perspective would be that with the focus that we are having on these markets, and I think we shared this in earlier calls and also some registrations, especially for products in Japan. Here, for example, the VISUMAX 800, just to mention one very important product. My expectation clearly is that over the course of the year for Japan, we should see some growth. And Korea, as you know, is already a strong market. There's always a little bit of fluctuation. But again, overall, for Korea, I would also not be too negative on our total outlook for the year. Andreas Pecher: Maybe on Japan, just keep in mind, we still have a fairly low market penetration in Japan, which I would see as an upside. Justus Wehmer: And I mean, high-level question on sales growth for the remainder of the year. Quite frankly, if we -- and now we are back to the rationale on cutting or revoking the guidance. At this point in time, I don't have the data points to give you a sales indication. The project funnels look decent. But if we have a big blast from the tender outcome that can be painful and can take away quite a bit of potential on the top line. And likewise, if the winter peak or the performance of the winter peak is, as we said before, one key indicator for the remainder of the year, also something where, I'd say, in 4 weeks, we can comment on that more comfortably. And therefore, I don't want to start speculation here and now. Falko Friedrichs: Justus, my last question was more referring to the second quarter now, the sales and margin dynamics. Justus Wehmer: In the second quarter, here, I would pretty much probably refer you to our typical seasonal patterns. And with the caveat that we, as we said, have potentially the scrapping issue, but that we would consider as a one-off. But typically, the second quarter is compared to the first quarter, a better one. And at the moment, I would also assume this will be the case in this fiscal year. Operator: Thank you very much, Mr. Friedrichs, for your question. We're having another question by Davide Marchesin. Hello? Can you hear us? We unfortunately cannot hear you. Maybe we can move on to another question while you're figuring out the microphone situation. We have another question by Jon Unwin again. Jonathon Unwin: I just had 2 follow-ups, both actually on equipment. The first one is on cataract equipment, so like phaco machines and biometers. Can you maybe just talk a little bit about the sort of regional trends that you're seeing across the U.S., Europe and China? Because I think there was a comment that the cataract equipment was a bit weak in Q1. And also, are you seeing any increased pressure from new competitor launches, specifically in phaco machines that we've seen recently? So that's my first question. And then my second question is on diagnostics. On my numbers in diagnostics for FY '25, it seemed like this business declined quite significantly, maybe even like low double digits. So is that correct? And do you see this sort of similar level of decline in FY '26? And maybe you can help us understand how much of the pressure there is general market weakness, a result of your own price increases and just general delays of the market? And have you got any intention to simplify the portfolio in diagnostics just to focus on say CLARUS and CIRRUS? Justus Wehmer: Jon, on cataract first, I think U.S., as we are or have fairly, frequently commented, we are certainly not where we are since we do not have this bundle capability. I think outside of U.S., Europe and China, I would see us trending pretty decently. So nothing that we observe in particular changing as impact by new machines being offered by competition. On diagnostics, yes, it's the most contested market. That's correct. And obviously, the price increase in the important U.S. market is not helpful. And -- but it's still early in the year. And there, we also have a bit of a seasonal pattern in this business. So therefore, I would still expect recoveries in the course of the year. We also have with the commercial organization, clearly more focus on this portfolio and the associated efforts in selling this portfolio. On the simplification on the portfolio, you probably understand that this is nothing that we're going to share certainly not on speculation or indicating on any specific products, that certainly nothing that we want to read about than in the public, yes. So I'll leave it there. Andreas, anything? Andreas Pecher: I mean it's an obvious question. That's something that obviously we always do. It's part of normal business to always look at your portfolio, where do you add and where you take out. That's -- yes, no specific comment on that one. Operator: Thank you so much for your questions. Mr. Davide Marchesin, do you have any possibility to unmute yourself because I sent you the invitation and I can see that you're unmuted, but we cannot hear you properly. Sebastian Frericks: If not, we can give feedback to the IR team as well, of course. Operator: Yes, exactly. Maybe it's better to place your questions to the IR after this meeting or you can put it into the chat box and I can read it out loud for you if it's too much trouble. Unfortunately, we cannot hear you. Oh, but I can see in the chat that you just placed your question there. I'll read it out loud. The U.S. was significantly down in the first quarter, minus 12.7% organic. You are the only one company reporting such weak results from the U.S. and all the others are reporting strong equipment investment cycle, example, Siemens and Philips. What are the specific issues you're facing there? Justus Wehmer: Thank you. I think I almost gave the answer already. The diagnostical portfolio in the U.S. is one where we typically see the highest sensitivity in terms of prices and price increases. And whereas if you are referring to companies like Siemens Healthineers and their portfolio, they are typically in categories similar to our KINEVO, for example, where reimbursement policies are more favorable and therefore, investment decisions are then made less dependent on price swings. So therefore, I think that, to me, is basically the key difference here that I would highlight. And maybe, again, if you look carefully on the last quarter of the previous fiscal year, there was a very, very strong August and September in the U.S. for devices, and that was always somewhat at the expense of Q1. Operator: There are 3 more questions by Mr. Marchesin. The second one is the IOL business is just EUR 80 million annual revenue or just slightly above 3% of the group revenues and should be a significant component of your weak performance. Justus Wehmer: I think there is a misunderstanding. The 80 million refers to the IOL volume in China. So that for clarification. So therefore, I'm not sure whether knowing this now, whether the question remains the same. But otherwise, frankly spoken, then maybe it's good to follow up with the IR team because it's a little bit difficult to communicate right now. Operator: All right. Thank you so much. I'm going to read out the last question. Is there the possibility of a buyout of your company by Carl Zeiss? Just to know if there is a technical possibility. Andreas Pecher: Maybe I'd comment on that one. Actually, that's something I wouldn't want to comment on to not feed any speculations or get into sort of insider information. Operator: Okay. Thank you so much. By now, we have not received any further questions. So, ladies and gentlemen, if there are some, please raise your hand and I will happily unmute you. As there are no further questions, I would say we come to the end of today's earnings call. And with this, I would hand over again to Mr. Frericks for some final remarks. Sebastian Frericks: Thanks, everybody, for joining, for asking questions in this call and the discussion. Please reach out to the IR team for anything that may have not gotten answered completely or maybe coming up in the next few days. We'll be around talking to sell side and buy side over the next few weeks quite a bit. So look forward to that and to hear you again on our next call at the very latest on May 12. Bye-bye. Andreas Pecher: Thank you. Bye-bye.
Leonardo Karam: Good afternoon. Welcome to Usiminas conference call in which we will discuss the results for the fourth quarter and full 2025. I'm Leonardo Karam, IR Director at Usiminas. [Operator Instructions] This conference call is being recorded and simultaneously broadcast on the Usiminas YouTube channel. Please note that this conference call is intended exclusively for investors and market analysts. We kindly ask you to identify yourself so that your question can be addressed. We also request that any questions from journalists be directed to Usiminas Media Relations at the email, imprensa@usiminas.com. Before proceeding, we would like to clarify that any statements made during this conference call regarding the company's business outlook as well as projections and operational and financial targets regarding its growth potential are forward-looking statements based on the management's expectations regarding the future of Usiminas. These expectations are highly dependent on the performance of the steel industry, the economic situation of the country and the conditions of international markets and therefore, subject to change. Joining us are CEO, Marcelo Chara; the VP of Finance and IR, Diego Garcia; and Commercial Vice President, Miguel Homes. Initially, Marcelo will make some opening remarks, then Diego will present the results. After that, the questions submitted through the Q&A session will be answered. I will now turn the floor over to Marcelo. Marcelo, you have the floor. Marcelo Chara: Well, thank you, Leonardo. Ladies and gentlemen, a very good afternoon to all of you. It's a pleasure to be here with you to share the results of Q4 and the full year of 2025. 2025 was a challenging year for Usiminas and for all the steel Brazilian industry. And once again, the opportunity of growth and generating income and jobs was compromised due to unfair import of steel and these were manufactured products. In 2025, we reached an adjusted consolidated EBITDA of BRL 2 billion with a growth of 24% vis-a-vis 2024 and a margin of 8%. One of the main drivers to improve the result was the cost drop of the steel units totaling minus 5% of cost to sale per ton. This was more than offset the lower net revenue per ton that was 4%. In Minera��o, the highlights were a record volume of sales of iron ore totaling 9.6 million tons, a high of 14% vis-a-vis 2024 and quality discounts that allowed us to attain better results the first quarter of [ 2023 ]. In the steel unit, the company projects stable steel unit sales. And in the domestic market, connected to seasonality, we expect a recovery of net revenue per ton, driven mainly by a sales mix that is more noble and higher prices. On the other side, the cost per ton will increase, reflecting the most favorable mix. And with this, we project EBITDA margins above the last quarter. Now in the mining unit, the expectation is of lower sales volumes due to the seasonality of the rainy season and prioritizing better -- areas of better profit. The prospect of the economic scenario is moderate for 2026, sustained by a gradual growth of 1.8% of the GDP presented in the focus report. Within this context, the expectation of the steel Brazil industry is increased, but this growth will be totally absorbed by the expected growth of imports of 4%. If this is not -- if we don't have effective measures of commercial defense against unloyal competition, the import volumes in the steel chain have been investigated and confer the urgency to be implemented fast. The government has reacted as we can see in the recent antidumping rights and to elevate the tariffs by 9%. Now we manifest our recognition by the serious technical work by the Ministry of Industry and Commerce in the analysis of the commercial lawsuits. This is important to foster more competitive value, Usiminas is prepared to capture the opportunities of this new context, meeting the ever-growing demand of its customers. At the same time, as we maintain attention to the market in order to curtail the possibilities of not following this that are result of an over surplus of Chinese steel in the international markets, and this impacts the national industry. Our internal agenda for 2026 will be focused on reducing costs, efficiency in our industrial operations and strong financial discipline and strong environmental discipline. It will be important to ramp up our priority CapEx like the PCI plant, the Coke batteries repair and the new Gasometer. These projects will reassure the sustainable growth and the competitiveness of Usiminas at the long run. We would also like to thank all of our employees for their effort, their engagement as well as our suppliers, clients, shareholders and the community for the trust and for the sound relationship that we built throughout the year. And we are confident that 2026 will be a very good year. Thank you very much. Diego, you may proceed. Diego Garcia: Good afternoon to everyone. These are the highlights of the year. Our steel sales throughout the year was 4.4 million tons. It was the second greatest in the past 10 years, the growth of export and the volumes in the domestic market will remain stable. The Mining Unit presented production [ in ] a record sales. The adjusted EBITDA was BRL 2 billion, a strong growth of 46% in mining and 16% in steel unit. The free cash flow of BRL 1 billion reflect the EBITDA generation, working capital in BRL 838 million, partially offset by the CapEx of BRL 1.2 billion. The year ends with a net cash of BRL 444 million, the result of the flow of free cash flow and depreciation of the BRL vis-a-vis the [ doctor ]. Now we had BRL 1.4 billion in net debt. Now our next slide. Now the net revenue was BRL 6.2 billion, a growth of 6.5% vis-a-vis the past quarter, mainly because of the reduction in the steel unit we registered the lowest price per ton. Now this effect was partially offset by 4% increase in the mining unit and by higher prices, although there was a slight drop, this wasn't affected. The EBITDA was slightly before the past quarter. Now we had BRL 2.9 billion that was affected by the impairment of the past quarter. Now the fourth quarter ended with a profit of BRL 129 million. Now let's go to the next slide. In the steel unit, the annual volume and sales was robust and there was a growth in export. The sales volume with a quarterly basis dropped 2%. It was 3.3% in terms of drop in the domestic market, but aligned with Q4, showing us the seasonality, the net revenue reflects the drop in the net revenue per ton because of the import. We have a less favorable mix during Q4. EBITDA improved with the improvement of cost, although we were in an environment of unfavorable price, the deterioration of the net revenue per ton impacted the EBITDA by 26% when we compare it to the past quarter. The adjusted EBITDA was negatively impacted by a less favorable sales mix with products of lower margin. The gain of the CPV of steel maybe due to lower prices of raw material, partially offset this impact. In addition, during Q3, there was an extraordinary sales of fixed assets that wasn't repeated during the fourth quarter. In mining, last year, we ended with a record sales volume and production. As a result, the annual net revenue increased 27%. Although there were lower price, the net revenue per ton reflects lower discounts due to penalty and exchange rate due to the average exchange rate throughout the year, higher by 3% and the plates references dropped $7 per ton analyzing the profitability of the business. The EBITDA per ton dollar increased 2%, although there was negative pressure. Throughout the quarter, the sales volume presented a slight drop of 2%. Despite this, the total net revenue increased 4%. This reflected better prices in the quarter. And here, we had $4 in terms of the price of reference. When we see the revenue, EBITDA dollar increased $4 per ton aligned with the reference prices. Now our financial indicators. The operational -- net operational cash flow was BRL 1.1 billion of an EBITDA of BRL [ 470 ] million, a reduction of working capital of BRL 576 million. The working capital variation was because of a drop in accounts receivable and an increased accounts payable, BRL 192 million. The CapEx was BRL 372 million, and we reached BRL 1.2 billion in the line, aligned with the guidance between BRL 1.2 billion and BRL 1.4 billion. This way, the free cash flow of the quarter was BRL 744 million. Throughout the year, the free cash flow was BRL 989 million, mainly reflecting the EBITDA generation and working capital that we mentioned beforehand it was partially offset by the CapEx of BRL 1.2 billion. Now throughout the quarter, we went from a net debt of BRL 327 million to a free cash of BRL 444 million, reflecting the free cash flow of BRL 744 million that we already mentioned. The gross debt increased around BRL 6 million due to the appreciation of the dollar. Now throughout the year, there was a significant drop of BRL 1.4 billion in our net debt. This was due to the strong cash generation ending with 0.22x negative leverage. Usiminas ends the year with a sound debt profile with no extraordinary maturities until 2028. Leo? Leonardo Karam: Thank you, Diego. Now we go to the Q&A session. Marcelo, first question from Gabriel Barra from Citi and Marcio Farid from Goldman Sachs. They want to know about Compactos and Mining. Gabriel says with the changes in the share for MUSA and he wants to know if there is an update of the project Friable for MUSA. Marcelo Chara: And let's say there have been no changes. Yes, we do have a robust plan in the short, mid- and long-run strategy, and we continue making progress with our licensing program of Compactos. This year, we will have news, and we will see possible instrumentations. And regarding the Friables project, we are constantly reviewing our exploration strategy as well as mines or mining operations, and we created important efficiencies and synergies. And we do -- we believe that the prospects for the short and mid-run will be -- to be continuous in terms of friable material. Leonardo Karam: Thank you, Marcelo. Well, questions about antidumping. So what are we going to do? There are a number of questions regarding antidumping. I'm going to try to divide them in [indiscernible], the efficiency. Gabriel Barra from Citi, [ Guilherme B ] from XP with the approval of the antidumping, what should we expect for hot rolling mills that will be approved by the end of the year? And Guilherme basically asked the same thing. Will we have a definition regarding this request? Miguel Angel Camejo: As Marcelo stated, this definition was published yesterday for measures for hot rolling mills and galvanized. As we have reported antidumping actions from China. And finally, the soundness of these cases were confirmed by the definite measures that were published yesterday. We expect the same type of scenario with hot rolling mill and the hot rolling mill according to the preliminary publication. Now the time line would be July this year for a definite measure. We would also like to remind you that this is -- the deadline would be in December. Due to the importance of the measures and the high impact that these imports have in the steel industry in the Brazilian market, we feel reassured that this will be resolved by the middle of this year. Leonardo Karam: Thank you, Miguel. Our next question from [indiscernible]. Marcelo, in your view, dumpings are valued as of when? And Marcelo, [ Arazi ] wants you to give us details regarding the tariffs that were applied yesterday, what kind of consequences can we expect from here on? Marcelo Chara: Now the measure is valid as of the publication and the measure for cold rolling mill is -- now for the coils would be as of the day of the publication and also we expect it to be next week. The impact will be positive for the industry and the market. When we see the imports from China, these 2 products, they exceed 1.5 million tons during the past 12 months. And in this sense, we would have greater possibilities to sell to the local industry, and Usiminas will be prepared to cater part of this market. Leonardo Karam: Now any concern regarding ways of not complying with this measure. Well, we want to know how to evaluate the risk of triangulation of import volume because the measures were geared towards China. How do you see the effectiveness of this antidumping for galvanized products and cold rolling mill. Marcelo, can we see volume be redirected by Vietnam, how to see this triangulation risk? And he wants to know if these measures are sufficient to see sound margins in the sector once again. What do we need in order to have a profitable industry structurally? Miguel Angel Camejo: Well, the first step -- well, there -- what was published yesterday is important to correct the distortions created by this unfair competition. There are risk because we still have a structural proper because there are surplus in global steel because of the Chinese production. Production last year in China was above 130 million tons. So this created negative impacts in different markets. And obviously, as we presented here in Brazil, we were one of the markets that was most impacted by these imports. Now we have to continue observing. We're working together with government agencies because we don't want the risks to impact us during the upcoming months. When you analyze the antidumping measures for cold rolling mill at the worldwide level, you can apply today for -- there are 40 cases. Out of the 40, 12 are against China and the second, third country, with the greatest amount of cases is Vietnam and Korea. There is a risk. We have to continue monitoring. We are working together with the agency in order to avoid these future risks, and we trust that the government as of yesterday's definition can see the critical situation of the industry and the worldwide steel industry. Leonardo Karam: Thank you, Miguel. Yes, there are more add-ons here. Marcio Farid from Goldman Sachs, Gabriel Barra from Citi, Caio Ribeiro from Bank of America, Marcelo [indiscernible], BTG, [indiscernible] from JPMorgan and Ricardo Monegaglia Safra, everybody wants to know about the next steps. What is the main strategy after tariffs and antidumping? Is it volume or prices? Which effects can we expect throughout 2026 due to these measures? And if Usiminas will be more proactive in price transferring this year. I want to see if there is a different add-on here. And Ricardo wants to know with the combination of increase of 25 [indiscernible] antidumping, how can they affect the discussions in price? If there is an impact in the number of orders when you see these changes. Miguel, you have the floor. Miguel Angel Camejo: Many questions. Let's see if I can answer all of these questions here in my answer. By the -- let's start with the market. We expect a market in 2026 with the growth of consumption of flat steel of around 1%, highly aligned with the expectation of the GDP growth. If we see a similar market, '25, '26, we analyze the total volume of imports of flat steel in 2025 was around 4 million tons and around 60%, 65% comes from China. Therefore, we could conclude that we do have important space to resume our participation in domestic market in the consumption of flat steels in Brazil. Now within this scenario, we would have greater market share, potential increase in internal sales and better mix of product sales when we compare it to export. Now when we see the price, for instance, we see a strong pressure in terms of revenue because of the high imports and unfair competition, which affected our prices and profit. We have to become profit again to face the needs of technology and the face of investments that we have in CapEx plan. We can resume our profit if we have better prices and margins during the upcoming months. Leonardo Karam: Now Daniel Sensel-Schechner from JPMorgan and Ricardo Monegaglia from Safra. We know the great part of the volume of galvanized products goes to the automobile industry that is not exposed to export. Will you change your negotiations with the automobile industry in April? Do you believe that the contracts that will be signed in the upcoming months will be readjusted? Will they be affected by these antidumping measures? Miguel Angel Camejo: I would like to clarify around 60 of coated products are for the automobile industry. As you know, they follow yearly contracts. Part of these contracts are renewed in January. The other part are renewed in April. The contracts that were renewed in January have a cost reduction of 2%, 3%. And we already explained in other calls, the negotiations of the auto industries are not impacted by these imports. They're very little impacted by the imports because this is flat steel. So we don't expect any impact in the negotiations that will take place in the contracts that will be renewed in April. The expectation is to close these contracts at similar levels from January. The contracts of January represent 25% of our total revenue for our industry. Leonardo Karam: Thank you, Miguel. More about this subject. Ricardo Monegaglia wants to know how many measures to normalize the inventories in the industry for imports post tariffs? Miguel Angel Camejo: This is an important point. As a matter of fact, the strong increase of imports throughout the year elevated the inventories of the importers. Now the chain according to the last in the report, the inventories for the chain increased and today would be around 4 months. Our view is that the inventories for the importers are above 6 months. Now the regularization will take some time, will depend the dynamic of the consumption, but it's important to understand that great part of these inventories are characterized by commercial products with no added value. And in our focus during the past year is greater share in greater added value products, especially geared towards the industry. We could see a gradual resumption for more commercial products and obviously, with very little impacts for the industrial sectors or the auto industry. Leonardo Karam: Miguel, still the import costs, is there a space to request to the government increase of the tariff to 25 for more NCNs? Miguel Angel Camejo: Well, we are optimistic and we are positive the increase of 9 [ CMS ] for our sectors done by the government. The government is seeing different tools to mitigate the impacts of a loyal competition in all industry. I would not discard the use of these tools in the future to minimize the risks and the impacts, especially when we talk about triangulation or circumvention back from other origins. Leonardo Karam: Igor Guedes from Genial. We would like to have an idea how -- what about your cold rolling mill? How much does this account in your sales? Now cold rolling mills in the domestic market, yes, it accounts for what kind of share? Unknown Executive: Igor, our cold rolling mills would be around the cold rolling 1 million. Now of course, the import and the loss of share in local steel mills have reduced this volume. It is important to clarify that we have the capacity to increase the production of cold rolling in order to rectify this problem that we had due to unloyal competition. Leonardo Karam: Marcelo. Here, the focus would be more on the operation. Igor Guedes from Genial wants to know, do you expect these antidumping measures to improve the domestic demand at a point that you will reactivate the blast furnace that is closed? Would you turn on this disconnected blast furnace? Marcelo Chara: Igor, excellent question. I can make a comment here regarding the productive structure of our blast furnaces in Ipatinga. We invested BRL 2.7 billion in blast furnace 3. With this retrofit and all the ramp-up process, in addition to we are ending on the PCI powder coal injection that goes through the upper side of blast furnace 3, and we will be able to inject all the furnace systems. All of these measures have allowed us today to be able to replace one of the blast furnaces operating with blast furnace 3 that has over 3,000 cubic meters and [ 2,800 ] cubic meters. Today, the capacity is to have productions that are equivalent to the 3 blast furnaces. So yes, we can supply and increase our steel capacity. Yes, we do have capacity. We are regulating the production capacity according to market conditions, and we are prepared to use a virtual blast furnace 1 with the new performance that we achieved with the new blast furnace 3 that was developed. Leonardo Karam: Marcelo, now a question from Guilherme [indiscernible]. Regarding MUSA, if you could better quantify the drop of volumes for 2026 and the volumes expected for 2026. Marcelo Chara: Now the first quarter is highly associated to the seasonality of rainy season. This year, rains are intense and this affects logistic mines. And this is aligned and what we expect for the year is a full alignment according to iron -- or indicators we have developed, an operation system that is extremely flexible, which allows us to define routes of operation at marginal costs, which are properly identified in such a way if we see price conditions that favor of full sales, we will use this. And this is something that we will monitor throughout the year. We will monitor this evolution, and we will adapt our production to this market dynamic. Leonardo Karam: Thank you, Marcelo. Diego, regarding capital allocation, Daniel Sensel-Schechner from JPMorgan asked a question. You have net cash. What is your capital allocation from here on? Is there a space to improve the balance structure? Is there space for more investments? Diego Garcia: Thank you for your question. Now regarding capital allocation, we have already carried out a CapEx guidance of BRL 1.6 billion, which is significant. We have other CapEx that have been approved. Leonardo Karam: Marcelo, I don't know if you would like to give us information regarding Compactos, but there is not much more to mention. Marcelo Chara: As Diego just stated, now we ended the investment cycle connected to blast furnace and auxiliary circuits. Today, we have a major product that was approved, that was the Coke battery #4 of BRL 1.7 billion that will give us self-sufficiency in Coke during the upcoming 3 years. And at the end of this project together with the hot repair that we're performing a battery 3 that is working exceptionally with excellent impact in emissions reduction. Let's say, we have a clear measure of emissions, very low -- at a record low in the history of Usiminas, and I can convey that our focus on the environmental performance has gone hand-in-hand with priority management, and we have capitalized these investments to make our industrial -- environmental more robust. We have the PCI project, powder coal injection. We're ending it during the first semester, as I mentioned. We have the new Gasometer. This CapEx of BRL 1.6 billion is totally aligned to our strategy to improve cost competitiveness and environmental performance. And in terms of Compactos, I mentioned at the beginning, the intention is to continue with the environmental licensing and throughout 2026. And at the end, we will see how to give continuity. As I mentioned in the beginning, we have a clear view that MUSA is a strategic asset for us, and we can see how we can continue the operation in the long run. Leonardo Karam: Thank you, Marcelo. You answered the next question from Rafael Barcellos of Bradesco about the guidance and to talk about the CapEx of 2026, Diego, regarding cash flows, Guilherme [indiscernible], XP, Rafael Barcellos wants to know the free cash flow was strong during the quarter with the lender of accounts receivable and working capital help us. What can we expect from here on? Is there a space for improvement that comes from these lines? And Rafael says, how should we think about the working capital during 2026? Diego Garcia: I think that we reached the level of working capital that will be stable and in the future will be changed because of the effect of prices and volumes. But it is not reasonable to think a new year with the release of working capital like we saw in 2025. Leonardo Karam: Thank you, Diego. Marcelo, regarding the product structure, Carlos De Alba from Morgan Stanley wants to know due to the footprint of Turn in the Americas, does Usiminas want to invest in an electric furnace in Brazil like in Cubat�o? Marcelo Chara: Well, let's say. As I said -- well, the upstream was disconnected years ago, but there's a downstream that is exception now the hot rolling mills of Cubat�o is one of the most modern from the America, it has over 10 years of operation, but it is at a state of maintenance and the technological update. Well, this is an interesting asset to maximize and to meet the demand of all the domestic market in all segments, industrial oil and gas, well, an electric furnace would mean we have to justify this clearly in terms of volume growth. This will depend on market conditions and the evolution. According to the current situation with the strong impact of imports and the low consumption of steel in Brazil, this is still not in our radar in the short or mid-run. Yes. Well, this is a plant that has an interesting profile in its structure because it has an area of a steel mill -- has the steel area that is perfectly conserved, and it can be activated if it's convenient. But this is not something that we have in our radar in the short or mid-run. Leonardo Karam: Thank you, Marcelo. Miguel, Some questions regarding negotiations with the auto industry. How were the negotiations with the auto industry in January 2026? And what do you expect in April? And when will you review these contracts? Miguel Angel Camejo: Guilherme [indiscernible], as we mentioned, the auto contracts that were renovated in January had a 2%, 3% discount. I would like to remind you that these contracts account for 25% of the total sales to the auto industry. Now the contracts that are renewed in April that are under negotiation, the expectation is to close at similar levels to that of January, most of these contracts are signed on a yearly basis. Some of them are reviewed every 6 months. Leonardo Karam: Thank you, Miguel. Miguel, regarding prices, Guilherme [indiscernible] Goldman, Rafael Barcellos, Bradesco, how do you see the domestic performance of prices throughout the first quarter? And what do you expect in terms of the sales mix, if you can tell us how this will work between industry sector. Now Emerson says that the price of Q4 was affected by the mix change. Can we already see this in January or February or the expectation of normalization is for March and Rafael wants to better understand the magnitude of the average price. Miguel Angel Camejo: We increased prices for distribution sector in January by 5%. For industry, most of the contracts were renewed as of January following the trend of the price increase that comes from Q4. All these contracts are delayed in 3 months in the auto industry, as I mentioned, there is a discount of 2%, 3% for a very small part of these contracts that were renovated in January. Now regarding the mix, we expect our sales mix to normalize in the domestic market during Q4. Going back to a sales mix, which was historic in Usiminas that we can classify as 1/3 of sales for the auto industry, 1/3 for distribution and the other 1/3 for the industry. I think that this gives -- this is the color regarding the expectation of this first quarter. Now you spoke about normalization as of January or March. I think that most of the auto industries came back from the holiday vacations after the first fortnight of January. So after the first 15 days, we can see the normalization of the sales mix here. Leonardo Karam: Diego, now we have questions regarding costs, Diego. I'm going to try to bundle them. Guilherme from XP and Emerson Viera from Goldman Sachs want to know the following, can you give us more visibility regarding cost improvement visibility due to efficiency in order to capture this in the upcoming quarter? And how do you see the evolution of cost during Q1? And Emerson basically says, what can you say about space for continuous gain of efficiency in costs? Diego Garcia: Now regarding the next quarter, as Miguel mentioned, with the normalization of the sales mix, we will have -- we will increase cost because we are selling material of greater value. This will be more than offset by the revenue per ton. This is why we have a favorable outlook for the next quarter. Leonardo Karam: Now regarding efficiency gains, this is one of our continuous targets. I don't know, Marcelo, if you would like to say something. Marcelo Chara: I would -- as Diego mentioned, our main focus is the improvement of efficiency, especially in industrial processes throughout the semester. We already system -- the coal injection system for the blast furnace and progressively, we will replace an important part of coal consumption by coal. And this generates important efficiencies and cost reduction. Throughout 2026, we will continue consolidating these type of projects that allow us to improve our sales cost in a systematic fashion. We are more robust in terms of profitability. Leonardo Karam: With this, we also answered [indiscernible] question. That was price. Now Diego still on costs. Rafael Barcellos from Bradesco BBI and [indiscernible] just want to know how the recent increase of coal prices will affect cost. The drop of COGS that was stronger than we expected some inputs that went through the PML bought in the past at a lower cost, the coal price increase, how do you see the cost from here on? How long does this last? How long does the price transference last? Diego Garcia: For the next quarter, we do not see these effects. The effects of the increase of coal prices, we will feel this, especially during the second quarter. There are -- well, this will not have an effect during Q1 and probably during -- yes, during Q2. Leonardo Karam: Diego, still for you. A question from an individual [indiscernible], I don't know. I cannot -- the payout to shareholders, is there any forecast of payouts for shareholders? Diego Garcia: Last year, we had an important loss because of the impairment. And because of this, we did not -- for the time being, we are not thinking about paying dividends regarding last year again because accrued profit, but we will always assess the situation of the company. And one of our targets is to continue paying our shareholders end to end. Leonardo Karam: We have a question from Gabriel Barra from Citi. He wants to know the transition of the position of CFO. If there will be an important change in focus, could you talk about your priorities at the short run and the long run for this new position, Diego, we will finish with this. Diego Garcia: Thank you, Gabriel. The transition is okay. I found a financial team that is spectacular, and they are helping this transition to be swift, organized, and I would like to thank everyone. Now regarding focus, well, I believe due to the challenging environment of the industry, it is important to control -- to have control in cost and cost efficiency, and we need discipline in our CapEx as well, and we will be focused on this. Leonardo Karam: With this, we ended our Q&A session. We would like to thank everyone for your participation. And should you have any doubts, our IR team is at your disposal. Thank you very much, and have a good afternoon.
Leonardo Karam: Good afternoon. Welcome to Usiminas conference call in which we will discuss the results for the fourth quarter and full 2025. I'm Leonardo Karam, IR Director at Usiminas. [Operator Instructions] This conference call is being recorded and simultaneously broadcast on the Usiminas YouTube channel. Please note that this conference call is intended exclusively for investors and market analysts. We kindly ask you to identify yourself so that your question can be addressed. We also request that any questions from journalists be directed to Usiminas Media Relations at the email, imprensa@usiminas.com. Before proceeding, we would like to clarify that any statements made during this conference call regarding the company's business outlook as well as projections and operational and financial targets regarding its growth potential are forward-looking statements based on the management's expectations regarding the future of Usiminas. These expectations are highly dependent on the performance of the steel industry, the economic situation of the country and the conditions of international markets and therefore, subject to change. Joining us are CEO, Marcelo Chara; the VP of Finance and IR, Diego Garcia; and Commercial Vice President, Miguel Homes. Initially, Marcelo will make some opening remarks, then Diego will present the results. After that, the questions submitted through the Q&A session will be answered. I will now turn the floor over to Marcelo. Marcelo, you have the floor. Marcelo Chara: Well, thank you, Leonardo. Ladies and gentlemen, a very good afternoon to all of you. It's a pleasure to be here with you to share the results of Q4 and the full year of 2025. 2025 was a challenging year for Usiminas and for all the steel Brazilian industry. And once again, the opportunity of growth and generating income and jobs was compromised due to unfair import of steel and these were manufactured products. In 2025, we reached an adjusted consolidated EBITDA of BRL 2 billion with a growth of 24% vis-a-vis 2024 and a margin of 8%. One of the main drivers to improve the result was the cost drop of the steel units totaling minus 5% of cost to sale per ton. This was more than offset the lower net revenue per ton that was 4%. In Minera��o, the highlights were a record volume of sales of iron ore totaling 9.6 million tons, a high of 14% vis-a-vis 2024 and quality discounts that allowed us to attain better results the first quarter of [ 2023 ]. In the steel unit, the company projects stable steel unit sales. And in the domestic market, connected to seasonality, we expect a recovery of net revenue per ton, driven mainly by a sales mix that is more noble and higher prices. On the other side, the cost per ton will increase, reflecting the most favorable mix. And with this, we project EBITDA margins above the last quarter. Now in the mining unit, the expectation is of lower sales volumes due to the seasonality of the rainy season and prioritizing better -- areas of better profit. The prospect of the economic scenario is moderate for 2026, sustained by a gradual growth of 1.8% of the GDP presented in the focus report. Within this context, the expectation of the steel Brazil industry is increased, but this growth will be totally absorbed by the expected growth of imports of 4%. If this is not -- if we don't have effective measures of commercial defense against unloyal competition, the import volumes in the steel chain have been investigated and confer the urgency to be implemented fast. The government has reacted as we can see in the recent antidumping rights and to elevate the tariffs by 9%. Now we manifest our recognition by the serious technical work by the Ministry of Industry and Commerce in the analysis of the commercial lawsuits. This is important to foster more competitive value, Usiminas is prepared to capture the opportunities of this new context, meeting the ever-growing demand of its customers. At the same time, as we maintain attention to the market in order to curtail the possibilities of not following this that are result of an over surplus of Chinese steel in the international markets, and this impacts the national industry. Our internal agenda for 2026 will be focused on reducing costs, efficiency in our industrial operations and strong financial discipline and strong environmental discipline. It will be important to ramp up our priority CapEx like the PCI plant, the Coke batteries repair and the new Gasometer. These projects will reassure the sustainable growth and the competitiveness of Usiminas at the long run. We would also like to thank all of our employees for their effort, their engagement as well as our suppliers, clients, shareholders and the community for the trust and for the sound relationship that we built throughout the year. And we are confident that 2026 will be a very good year. Thank you very much. Diego, you may proceed. Diego Garcia: Good afternoon to everyone. These are the highlights of the year. Our steel sales throughout the year was 4.4 million tons. It was the second greatest in the past 10 years, the growth of export and the volumes in the domestic market will remain stable. The Mining Unit presented production [ in ] a record sales. The adjusted EBITDA was BRL 2 billion, a strong growth of 46% in mining and 16% in steel unit. The free cash flow of BRL 1 billion reflect the EBITDA generation, working capital in BRL 838 million, partially offset by the CapEx of BRL 1.2 billion. The year ends with a net cash of BRL 444 million, the result of the flow of free cash flow and depreciation of the BRL vis-a-vis the [ doctor ]. Now we had BRL 1.4 billion in net debt. Now our next slide. Now the net revenue was BRL 6.2 billion, a growth of 6.5% vis-a-vis the past quarter, mainly because of the reduction in the steel unit we registered the lowest price per ton. Now this effect was partially offset by 4% increase in the mining unit and by higher prices, although there was a slight drop, this wasn't affected. The EBITDA was slightly before the past quarter. Now we had BRL 2.9 billion that was affected by the impairment of the past quarter. Now the fourth quarter ended with a profit of BRL 129 million. Now let's go to the next slide. In the steel unit, the annual volume and sales was robust and there was a growth in export. The sales volume with a quarterly basis dropped 2%. It was 3.3% in terms of drop in the domestic market, but aligned with Q4, showing us the seasonality, the net revenue reflects the drop in the net revenue per ton because of the import. We have a less favorable mix during Q4. EBITDA improved with the improvement of cost, although we were in an environment of unfavorable price, the deterioration of the net revenue per ton impacted the EBITDA by 26% when we compare it to the past quarter. The adjusted EBITDA was negatively impacted by a less favorable sales mix with products of lower margin. The gain of the CPV of steel maybe due to lower prices of raw material, partially offset this impact. In addition, during Q3, there was an extraordinary sales of fixed assets that wasn't repeated during the fourth quarter. In mining, last year, we ended with a record sales volume and production. As a result, the annual net revenue increased 27%. Although there were lower price, the net revenue per ton reflects lower discounts due to penalty and exchange rate due to the average exchange rate throughout the year, higher by 3% and the plates references dropped $7 per ton analyzing the profitability of the business. The EBITDA per ton dollar increased 2%, although there was negative pressure. Throughout the quarter, the sales volume presented a slight drop of 2%. Despite this, the total net revenue increased 4%. This reflected better prices in the quarter. And here, we had $4 in terms of the price of reference. When we see the revenue, EBITDA dollar increased $4 per ton aligned with the reference prices. Now our financial indicators. The operational -- net operational cash flow was BRL 1.1 billion of an EBITDA of BRL [ 470 ] million, a reduction of working capital of BRL 576 million. The working capital variation was because of a drop in accounts receivable and an increased accounts payable, BRL 192 million. The CapEx was BRL 372 million, and we reached BRL 1.2 billion in the line, aligned with the guidance between BRL 1.2 billion and BRL 1.4 billion. This way, the free cash flow of the quarter was BRL 744 million. Throughout the year, the free cash flow was BRL 989 million, mainly reflecting the EBITDA generation and working capital that we mentioned beforehand it was partially offset by the CapEx of BRL 1.2 billion. Now throughout the quarter, we went from a net debt of BRL 327 million to a free cash of BRL 444 million, reflecting the free cash flow of BRL 744 million that we already mentioned. The gross debt increased around BRL 6 million due to the appreciation of the dollar. Now throughout the year, there was a significant drop of BRL 1.4 billion in our net debt. This was due to the strong cash generation ending with 0.22x negative leverage. Usiminas ends the year with a sound debt profile with no extraordinary maturities until 2028. Leo? Leonardo Karam: Thank you, Diego. Now we go to the Q&A session. Marcelo, first question from Gabriel Barra from Citi and Marcio Farid from Goldman Sachs. They want to know about Compactos and Mining. Gabriel says with the changes in the share for MUSA and he wants to know if there is an update of the project Friable for MUSA. Marcelo Chara: And let's say there have been no changes. Yes, we do have a robust plan in the short, mid- and long-run strategy, and we continue making progress with our licensing program of Compactos. This year, we will have news, and we will see possible instrumentations. And regarding the Friables project, we are constantly reviewing our exploration strategy as well as mines or mining operations, and we created important efficiencies and synergies. And we do -- we believe that the prospects for the short and mid-run will be -- to be continuous in terms of friable material. Leonardo Karam: Thank you, Marcelo. Well, questions about antidumping. So what are we going to do? There are a number of questions regarding antidumping. I'm going to try to divide them in [indiscernible], the efficiency. Gabriel Barra from Citi, [ Guilherme B ] from XP with the approval of the antidumping, what should we expect for hot rolling mills that will be approved by the end of the year? And Guilherme basically asked the same thing. Will we have a definition regarding this request? Miguel Angel Camejo: As Marcelo stated, this definition was published yesterday for measures for hot rolling mills and galvanized. As we have reported antidumping actions from China. And finally, the soundness of these cases were confirmed by the definite measures that were published yesterday. We expect the same type of scenario with hot rolling mill and the hot rolling mill according to the preliminary publication. Now the time line would be July this year for a definite measure. We would also like to remind you that this is -- the deadline would be in December. Due to the importance of the measures and the high impact that these imports have in the steel industry in the Brazilian market, we feel reassured that this will be resolved by the middle of this year. Leonardo Karam: Thank you, Miguel. Our next question from [indiscernible]. Marcelo, in your view, dumpings are valued as of when? And Marcelo, [ Arazi ] wants you to give us details regarding the tariffs that were applied yesterday, what kind of consequences can we expect from here on? Marcelo Chara: Now the measure is valid as of the publication and the measure for cold rolling mill is -- now for the coils would be as of the day of the publication and also we expect it to be next week. The impact will be positive for the industry and the market. When we see the imports from China, these 2 products, they exceed 1.5 million tons during the past 12 months. And in this sense, we would have greater possibilities to sell to the local industry, and Usiminas will be prepared to cater part of this market. Leonardo Karam: Now any concern regarding ways of not complying with this measure. Well, we want to know how to evaluate the risk of triangulation of import volume because the measures were geared towards China. How do you see the effectiveness of this antidumping for galvanized products and cold rolling mill. Marcelo, can we see volume be redirected by Vietnam, how to see this triangulation risk? And he wants to know if these measures are sufficient to see sound margins in the sector once again. What do we need in order to have a profitable industry structurally? Miguel Angel Camejo: Well, the first step -- well, there -- what was published yesterday is important to correct the distortions created by this unfair competition. There are risk because we still have a structural proper because there are surplus in global steel because of the Chinese production. Production last year in China was above 130 million tons. So this created negative impacts in different markets. And obviously, as we presented here in Brazil, we were one of the markets that was most impacted by these imports. Now we have to continue observing. We're working together with government agencies because we don't want the risks to impact us during the upcoming months. When you analyze the antidumping measures for cold rolling mill at the worldwide level, you can apply today for -- there are 40 cases. Out of the 40, 12 are against China and the second, third country, with the greatest amount of cases is Vietnam and Korea. There is a risk. We have to continue monitoring. We are working together with the agency in order to avoid these future risks, and we trust that the government as of yesterday's definition can see the critical situation of the industry and the worldwide steel industry. Leonardo Karam: Thank you, Miguel. Yes, there are more add-ons here. Marcio Farid from Goldman Sachs, Gabriel Barra from Citi, Caio Ribeiro from Bank of America, Marcelo [indiscernible], BTG, [indiscernible] from JPMorgan and Ricardo Monegaglia Safra, everybody wants to know about the next steps. What is the main strategy after tariffs and antidumping? Is it volume or prices? Which effects can we expect throughout 2026 due to these measures? And if Usiminas will be more proactive in price transferring this year. I want to see if there is a different add-on here. And Ricardo wants to know with the combination of increase of 25 [indiscernible] antidumping, how can they affect the discussions in price? If there is an impact in the number of orders when you see these changes. Miguel, you have the floor. Miguel Angel Camejo: Many questions. Let's see if I can answer all of these questions here in my answer. By the -- let's start with the market. We expect a market in 2026 with the growth of consumption of flat steel of around 1%, highly aligned with the expectation of the GDP growth. If we see a similar market, '25, '26, we analyze the total volume of imports of flat steel in 2025 was around 4 million tons and around 60%, 65% comes from China. Therefore, we could conclude that we do have important space to resume our participation in domestic market in the consumption of flat steels in Brazil. Now within this scenario, we would have greater market share, potential increase in internal sales and better mix of product sales when we compare it to export. Now when we see the price, for instance, we see a strong pressure in terms of revenue because of the high imports and unfair competition, which affected our prices and profit. We have to become profit again to face the needs of technology and the face of investments that we have in CapEx plan. We can resume our profit if we have better prices and margins during the upcoming months. Leonardo Karam: Now Daniel Sensel-Schechner from JPMorgan and Ricardo Monegaglia from Safra. We know the great part of the volume of galvanized products goes to the automobile industry that is not exposed to export. Will you change your negotiations with the automobile industry in April? Do you believe that the contracts that will be signed in the upcoming months will be readjusted? Will they be affected by these antidumping measures? Miguel Angel Camejo: I would like to clarify around 60 of coated products are for the automobile industry. As you know, they follow yearly contracts. Part of these contracts are renewed in January. The other part are renewed in April. The contracts that were renewed in January have a cost reduction of 2%, 3%. And we already explained in other calls, the negotiations of the auto industries are not impacted by these imports. They're very little impacted by the imports because this is flat steel. So we don't expect any impact in the negotiations that will take place in the contracts that will be renewed in April. The expectation is to close these contracts at similar levels from January. The contracts of January represent 25% of our total revenue for our industry. Leonardo Karam: Thank you, Miguel. More about this subject. Ricardo Monegaglia wants to know how many measures to normalize the inventories in the industry for imports post tariffs? Miguel Angel Camejo: This is an important point. As a matter of fact, the strong increase of imports throughout the year elevated the inventories of the importers. Now the chain according to the last in the report, the inventories for the chain increased and today would be around 4 months. Our view is that the inventories for the importers are above 6 months. Now the regularization will take some time, will depend the dynamic of the consumption, but it's important to understand that great part of these inventories are characterized by commercial products with no added value. And in our focus during the past year is greater share in greater added value products, especially geared towards the industry. We could see a gradual resumption for more commercial products and obviously, with very little impacts for the industrial sectors or the auto industry. Leonardo Karam: Miguel, still the import costs, is there a space to request to the government increase of the tariff to 25 for more NCNs? Miguel Angel Camejo: Well, we are optimistic and we are positive the increase of 9 [ CMS ] for our sectors done by the government. The government is seeing different tools to mitigate the impacts of a loyal competition in all industry. I would not discard the use of these tools in the future to minimize the risks and the impacts, especially when we talk about triangulation or circumvention back from other origins. Leonardo Karam: Igor Guedes from Genial. We would like to have an idea how -- what about your cold rolling mill? How much does this account in your sales? Now cold rolling mills in the domestic market, yes, it accounts for what kind of share? Unknown Executive: Igor, our cold rolling mills would be around the cold rolling 1 million. Now of course, the import and the loss of share in local steel mills have reduced this volume. It is important to clarify that we have the capacity to increase the production of cold rolling in order to rectify this problem that we had due to unloyal competition. Leonardo Karam: Marcelo. Here, the focus would be more on the operation. Igor Guedes from Genial wants to know, do you expect these antidumping measures to improve the domestic demand at a point that you will reactivate the blast furnace that is closed? Would you turn on this disconnected blast furnace? Marcelo Chara: Igor, excellent question. I can make a comment here regarding the productive structure of our blast furnaces in Ipatinga. We invested BRL 2.7 billion in blast furnace 3. With this retrofit and all the ramp-up process, in addition to we are ending on the PCI powder coal injection that goes through the upper side of blast furnace 3, and we will be able to inject all the furnace systems. All of these measures have allowed us today to be able to replace one of the blast furnaces operating with blast furnace 3 that has over 3,000 cubic meters and [ 2,800 ] cubic meters. Today, the capacity is to have productions that are equivalent to the 3 blast furnaces. So yes, we can supply and increase our steel capacity. Yes, we do have capacity. We are regulating the production capacity according to market conditions, and we are prepared to use a virtual blast furnace 1 with the new performance that we achieved with the new blast furnace 3 that was developed. Leonardo Karam: Marcelo, now a question from Guilherme [indiscernible]. Regarding MUSA, if you could better quantify the drop of volumes for 2026 and the volumes expected for 2026. Marcelo Chara: Now the first quarter is highly associated to the seasonality of rainy season. This year, rains are intense and this affects logistic mines. And this is aligned and what we expect for the year is a full alignment according to iron -- or indicators we have developed, an operation system that is extremely flexible, which allows us to define routes of operation at marginal costs, which are properly identified in such a way if we see price conditions that favor of full sales, we will use this. And this is something that we will monitor throughout the year. We will monitor this evolution, and we will adapt our production to this market dynamic. Leonardo Karam: Thank you, Marcelo. Diego, regarding capital allocation, Daniel Sensel-Schechner from JPMorgan asked a question. You have net cash. What is your capital allocation from here on? Is there a space to improve the balance structure? Is there space for more investments? Diego Garcia: Thank you for your question. Now regarding capital allocation, we have already carried out a CapEx guidance of BRL 1.6 billion, which is significant. We have other CapEx that have been approved. Leonardo Karam: Marcelo, I don't know if you would like to give us information regarding Compactos, but there is not much more to mention. Marcelo Chara: As Diego just stated, now we ended the investment cycle connected to blast furnace and auxiliary circuits. Today, we have a major product that was approved, that was the Coke battery #4 of BRL 1.7 billion that will give us self-sufficiency in Coke during the upcoming 3 years. And at the end of this project together with the hot repair that we're performing a battery 3 that is working exceptionally with excellent impact in emissions reduction. Let's say, we have a clear measure of emissions, very low -- at a record low in the history of Usiminas, and I can convey that our focus on the environmental performance has gone hand-in-hand with priority management, and we have capitalized these investments to make our industrial -- environmental more robust. We have the PCI project, powder coal injection. We're ending it during the first semester, as I mentioned. We have the new Gasometer. This CapEx of BRL 1.6 billion is totally aligned to our strategy to improve cost competitiveness and environmental performance. And in terms of Compactos, I mentioned at the beginning, the intention is to continue with the environmental licensing and throughout 2026. And at the end, we will see how to give continuity. As I mentioned in the beginning, we have a clear view that MUSA is a strategic asset for us, and we can see how we can continue the operation in the long run. Leonardo Karam: Thank you, Marcelo. You answered the next question from Rafael Barcellos of Bradesco about the guidance and to talk about the CapEx of 2026, Diego, regarding cash flows, Guilherme [indiscernible], XP, Rafael Barcellos wants to know the free cash flow was strong during the quarter with the lender of accounts receivable and working capital help us. What can we expect from here on? Is there a space for improvement that comes from these lines? And Rafael says, how should we think about the working capital during 2026? Diego Garcia: I think that we reached the level of working capital that will be stable and in the future will be changed because of the effect of prices and volumes. But it is not reasonable to think a new year with the release of working capital like we saw in 2025. Leonardo Karam: Thank you, Diego. Marcelo, regarding the product structure, Carlos De Alba from Morgan Stanley wants to know due to the footprint of Turn in the Americas, does Usiminas want to invest in an electric furnace in Brazil like in Cubat�o? Marcelo Chara: Well, let's say. As I said -- well, the upstream was disconnected years ago, but there's a downstream that is exception now the hot rolling mills of Cubat�o is one of the most modern from the America, it has over 10 years of operation, but it is at a state of maintenance and the technological update. Well, this is an interesting asset to maximize and to meet the demand of all the domestic market in all segments, industrial oil and gas, well, an electric furnace would mean we have to justify this clearly in terms of volume growth. This will depend on market conditions and the evolution. According to the current situation with the strong impact of imports and the low consumption of steel in Brazil, this is still not in our radar in the short or mid-run. Yes. Well, this is a plant that has an interesting profile in its structure because it has an area of a steel mill -- has the steel area that is perfectly conserved, and it can be activated if it's convenient. But this is not something that we have in our radar in the short or mid-run. Leonardo Karam: Thank you, Marcelo. Miguel, Some questions regarding negotiations with the auto industry. How were the negotiations with the auto industry in January 2026? And what do you expect in April? And when will you review these contracts? Miguel Angel Camejo: Guilherme [indiscernible], as we mentioned, the auto contracts that were renovated in January had a 2%, 3% discount. I would like to remind you that these contracts account for 25% of the total sales to the auto industry. Now the contracts that are renewed in April that are under negotiation, the expectation is to close at similar levels to that of January, most of these contracts are signed on a yearly basis. Some of them are reviewed every 6 months. Leonardo Karam: Thank you, Miguel. Miguel, regarding prices, Guilherme [indiscernible] Goldman, Rafael Barcellos, Bradesco, how do you see the domestic performance of prices throughout the first quarter? And what do you expect in terms of the sales mix, if you can tell us how this will work between industry sector. Now Emerson says that the price of Q4 was affected by the mix change. Can we already see this in January or February or the expectation of normalization is for March and Rafael wants to better understand the magnitude of the average price. Miguel Angel Camejo: We increased prices for distribution sector in January by 5%. For industry, most of the contracts were renewed as of January following the trend of the price increase that comes from Q4. All these contracts are delayed in 3 months in the auto industry, as I mentioned, there is a discount of 2%, 3% for a very small part of these contracts that were renovated in January. Now regarding the mix, we expect our sales mix to normalize in the domestic market during Q4. Going back to a sales mix, which was historic in Usiminas that we can classify as 1/3 of sales for the auto industry, 1/3 for distribution and the other 1/3 for the industry. I think that this gives -- this is the color regarding the expectation of this first quarter. Now you spoke about normalization as of January or March. I think that most of the auto industries came back from the holiday vacations after the first fortnight of January. So after the first 15 days, we can see the normalization of the sales mix here. Leonardo Karam: Diego, now we have questions regarding costs, Diego. I'm going to try to bundle them. Guilherme from XP and Emerson Viera from Goldman Sachs want to know the following, can you give us more visibility regarding cost improvement visibility due to efficiency in order to capture this in the upcoming quarter? And how do you see the evolution of cost during Q1? And Emerson basically says, what can you say about space for continuous gain of efficiency in costs? Diego Garcia: Now regarding the next quarter, as Miguel mentioned, with the normalization of the sales mix, we will have -- we will increase cost because we are selling material of greater value. This will be more than offset by the revenue per ton. This is why we have a favorable outlook for the next quarter. Leonardo Karam: Now regarding efficiency gains, this is one of our continuous targets. I don't know, Marcelo, if you would like to say something. Marcelo Chara: I would -- as Diego mentioned, our main focus is the improvement of efficiency, especially in industrial processes throughout the semester. We already system -- the coal injection system for the blast furnace and progressively, we will replace an important part of coal consumption by coal. And this generates important efficiencies and cost reduction. Throughout 2026, we will continue consolidating these type of projects that allow us to improve our sales cost in a systematic fashion. We are more robust in terms of profitability. Leonardo Karam: With this, we also answered [indiscernible] question. That was price. Now Diego still on costs. Rafael Barcellos from Bradesco BBI and [indiscernible] just want to know how the recent increase of coal prices will affect cost. The drop of COGS that was stronger than we expected some inputs that went through the PML bought in the past at a lower cost, the coal price increase, how do you see the cost from here on? How long does this last? How long does the price transference last? Diego Garcia: For the next quarter, we do not see these effects. The effects of the increase of coal prices, we will feel this, especially during the second quarter. There are -- well, this will not have an effect during Q1 and probably during -- yes, during Q2. Leonardo Karam: Diego, still for you. A question from an individual [indiscernible], I don't know. I cannot -- the payout to shareholders, is there any forecast of payouts for shareholders? Diego Garcia: Last year, we had an important loss because of the impairment. And because of this, we did not -- for the time being, we are not thinking about paying dividends regarding last year again because accrued profit, but we will always assess the situation of the company. And one of our targets is to continue paying our shareholders end to end. Leonardo Karam: We have a question from Gabriel Barra from Citi. He wants to know the transition of the position of CFO. If there will be an important change in focus, could you talk about your priorities at the short run and the long run for this new position, Diego, we will finish with this. Diego Garcia: Thank you, Gabriel. The transition is okay. I found a financial team that is spectacular, and they are helping this transition to be swift, organized, and I would like to thank everyone. Now regarding focus, well, I believe due to the challenging environment of the industry, it is important to control -- to have control in cost and cost efficiency, and we need discipline in our CapEx as well, and we will be focused on this. Leonardo Karam: With this, we ended our Q&A session. We would like to thank everyone for your participation. And should you have any doubts, our IR team is at your disposal. Thank you very much, and have a good afternoon.
Operator: Good morning, ladies and gentlemen, and welcome to the Chorus Aviation Inc. Fourth Quarter and Year-End 2025 Financial Results Conference Call. [Operator Instructions] This call is being recorded on Friday, February 13, 2026. I would now like to turn the conference over to Matt LaPierre. Please go ahead. Matt LaPierre: Thank you, operator. Hello, and thank you for joining us today. With me today from Chorus are Colin Copp, President and Chief Executive Officer; and Gary Osborne, Chief Financial Officer. We will begin today's call with a brief summary of the results, followed by questions from the analyst community. As there may be some forward-looking discussion during this call, I ask that you refer to the caution regarding forward-looking statements and information found in our MD&A. This pertains specifically to the results and operations of Chorus Aviation Inc. for the year ended December 31, 2025, as well as the outlook section and other sections of our MD&A where such statements appear. Finally, some of the following discussion involves non-GAAP financial measures, including references to adjusted net income, adjusted EBT, adjusted EBITDA, leverage ratio and free cash flow. Please refer to our MD&A for further information relating to the use of such non-GAAP measures. I'll now turn the call over to Colin Copp. Colin Copp: Good morning, everyone, and thank you for joining us today. 2025 was a pivotal year for Chorus with significant progress, one in which we meaningfully reduced our overhead costs, initiated a quarterly dividend; optimized our capital structure, completed 2 SIBs in combination with our NCIB, substantially reduced our corporate debt; executed agreements to sell 9 Q400 aircraft, acquired Elisen & Associates, a leading engineering firm based in Montreal; and ended the year with adjusted earnings available to common shareholders of $2.27, up from $0.97 the previous year, representing a 134% increase over last year. With our foundation firmly in place, we are well positioned in the marketplace as a world leader and trusted Canadian partner of a growing diversified portfolio of businesses with deep expertise and experience in aviation, aerospace and defense. Along with our fourth quarter results, we made 3 additional announcements in support of our plan to build long-term value, strong free cash flow and provide value creation for our shareholders. First, I was very happy to announce that we concluded an agreement to acquire Kadex Aero Supply, complementary OEM aviation parts, repair and overhaul platform that strengthens our position in the aviation, aerospace and defense business. Kadex broadens our bench strength with OEM parts distribution for many well-established aircraft platforms such as Beechcraft, Cessna, Hawker, and Piper. As well, they distribute a wide range of consumable products of well-known brands such as Shell, Goodyear, Michelin, Champion, and many others to the commercial business and general aviation operators of both fixed wing and rotary wing aircraft. Kadex complements our existing U.S. business at Voyageur, and is well aligned with our strategy of acquiring growth businesses that combine their strengths to accelerate shared success across our group of companies. They are a highly respected company with strong OEM and customer relationships, have a proven operating model and a growing revenue stream that supports our objective on strong free cash flow generation. Kadex is headed by 2 industry leaders who come with many years of experience and expertise, John Lavery and Ken Blow, where we are very excited to have join our team and our growing portfolio of industry experts within the Chorus family. The acquisition is expected to close during the second quarter of 2026, and we look forward to welcoming the entire Kadex team to Chorus. Second, we announced that we are increasing our annual dividend from $0.32 annually to $0.44. This reflects our ability to execute on our plan, driving growth in our free cash flow as well as our ongoing commitment to returning capital to our shareholders in a disciplined manner. And third, consistent with our capital allocation strategy, we will continue to buy back shares and have also announced an NCIB. For the past 2 years, share repurchases have been an important part of how we create value for our shareholders. And in 2025, we bought back $85.2 million in shares, and we will continue to take a disciplined approach to share buybacks. Turning to our operating businesses for 2025 that year marked a consistent execution. Doug and the Jazz team delivered strong performance with steady contracted earnings and solid operational results under the CPA with Air Canada. The team has also made good progress on their cabin refurbishment program, which significantly enhances the customer experience on the Air Canada Express fleet operated by Jazz. In October, Jazz and Air Canada celebrated a landmark announcement with the expansion of flying to 4 new U.S. destinations from Billy Bishop Toronto Airport, which is anticipated to ramp up starting in late March of this year. Also in this quarter, Jazz successfully concluded an agreement with AMFA, the union representing its maintenance employees, for a new 5-year collective agreement. As always, Jazz remains very focused on safety, their operational performance and securing a strong supply of qualified pilots from both Cygnet and throughout the industry. Cory and the Voyageur team are busy focusing on growing opportunities and delivering another strong year while continuing to shift their business mix towards higher-margin opportunities in the defense, specialty MRO and parts space. We see strong upside in the parts business as Voyageur continues its expansion into new platforms such as ATR. Over the past several months, they've acquired 2 ATR aircraft, which are now undergoing part out, and a third ATR is in progress. While their Q4 parts sales were slightly down from plan, this was directly a result of 2 significant part sales packages moving from December into 2026. These sales are both expected to come through in Q1 of this year. On the defense side, Voyageur is now fully supporting Canada's major operation with their engineering expertise and integrating key modifications across the fleet. They're fully staffed, providing frontline in-service support through a team of 20 embedded specialists working alongside D&D personnel in Trenton and on deployments. They're also set to provide in-service support to the D&D aerospace engineering test establishment known as ATE, supplying an aircraft and maintaining an on-site Voyageur presence with AT's Ottawa D&D facility. We see Voyageur is well positioned to further support Canada's expanding defense needs, including major capital commitments in aerospace platforms and the long-term in-service support that they require. Taif and Stephan and the Elisen team who joined us this past year have been off to a great start, working closely with Voyageur to grow their respective businesses. And we were happy to see Elisen awarded the contract by the Quebec Ministry of Transport and Sustainable Mobility to configure a Bombardier Challenger 650 for medical emergency air transport. This marks Elisen's first significant contract since joining Chorus in September. Elisen will lead as the primary contractor and engineering expertise, while Voyageur will provide the maintenance expertise for the reconfiguration. Lynne and the team at Cygnet have also had a very strong year of growth and expansion and recently kicked off their largest cohort of 18 new students. They've been expanding the business with new candidates in their free agent program and the destination porter cadet program, in addition to the Jazz approach cadet program. The work with Canadore College on a new pilot program and the expansion of Cygnet in the North Bay continues to progress well. As our business continues to grow both organically and with new acquisitions, our team of industry experts broaden. Both Elisen and Kadex are great examples of industry-leading businesses, which will be leveraged across the Chorus group of companies to accelerate revenue growth. Today, we are focused on driving long-term value for our shareholders by building a powerful cash generation -- cash-generating portfolio of aviation, aerospace and defense companies, while taking a disciplined capital allocation approach, targeting mid-teen returns. Thanks to a great team of Chorus, we're commencing 2026 with momentum, a stronger portfolio of businesses and a culture focused on performance. And in closing, I'd like to thank our employees across Jazz, Voyageur, Cygnet, and Elisen for their commitment and performance throughout the year, and welcome Kadex to the family. And lastly, I will thank our Board of Directors, shareholders for their continued support. With that, I'll hand it over to Gary for the financials. Gary Osborne: Thank you, Colin, and good morning. We are pleased to report on our fourth quarter and annual 2025 results that continue to generate strong earnings and free cash flows as well as our capital allocation that is focused on growing shareholder value. As Colin noted, we have announced an agreement to acquire Kadex for total consideration of approximately $50 million. Of this total, $43 million will be funded on closing through the use of Chorus' operating credit facility and cash on hand. The remainder of the purchase price will be payable over the next 2 years, subject to meeting certain performance targets. I join Colin in welcoming the Kadex team to our family. Kadex's total estimated purchase price of $50 million comes in at approximately 7.5x EBIT multiple. EBIT was used given Kadex as a per supply company, which has little to no capital requirements. Purchase multiple is below Chorus' most recent enterprise value to EBIT trading range of approximately 9 to 9.5x. All said, we expect the transaction to be immediately accretive to Chorus' earnings and free cash flow from the date of closing. Today, we also provided an information on our capital allocation priorities over the next 4 years. Our capital allocation provides for an anticipated generation of between $500 million and $550 million in free cash flow and net proceeds on asset sales over the next 4 fiscal years. With this, we announced our quarterly dividend will be increasing to $0.11 per share, up 38% from our previous $0.08 per share. This is consistent with our previously announced plan to distribute approximately 25% of free cash flow after payment of amortizing term loans. We also announced our commitment to purchase up to $100 million in shares over the next 4 years, subject to required TSX approvals and the share trading price. This reflects our view that Chorus' shares continue to be undervalued. And consistent with this, we are implementing a normal course issuer bid with authorization to purchase up to approximately 2 million shares over the next year. This further commitment to buy shares builds on the $124 million spent on share buybacks since 2022, where we bought back approximately 19% of the company's outstanding shares. Our announcement includes a flexible capital allocation over the next 4 years of between $170 million and $220 million, allowing for optimization of shareholder returns through organic growth, acquisitions, further share buybacks or dividends, debt repayments and working capital investments. Our capital allocation also highlights our scheduled paydown of $190 million of amortizing term loans over the next 4 years. It is important to note, these debt repayments reduced significantly in 2028 and 2029 as 18 aircraft leased under the CPA has their debt fully repaid by the end of 2028. Further information on our capital allocation is contained in our Investor Relations presentation available on Chorus' website. We also provided guidance -- consolidated guidance for the 2026 fiscal year in our MD&A, including adjusted EBITDA anticipated in the range of $170 million to $185 million and free cash flow of $100 million to $110 million. And now turning to our Q4 2025 results. For the quarter, Chorus generated adjusted earnings available to common shareholders per share of $0.57, a $0.23 or 68% increase over last year, primarily driven by lower net interest expense. For the year, Chorus generated adjusted earnings available to common shareholders of $2.27 or common share basic, which is $1.30 or 134% increase over 2024. Adjusted EBITDA for the quarter was $47.1 million compared to $51 million in Q4 2024, with the decrease primarily attributable to lower aircraft leasing revenue under the CPA. Free cash flow for the quarter was $27 million, consistent with Q4 of 2024. Finally, our year-end leverage ratio was 1.7 compared to 1.4 in the prior year, primarily due to the excess cash held at the end of 2024 and the investment in our SIB in Q4. Our liquidity remains strong with $169 million available at year-end. We expect it to remain strong as we generate free cash flow and realized net proceeds of approximately USD 56 million or about CAD 78 million from the sales of the remaining 8 Dash 8-400s expected to close between February and July of this year. As Colin noted, Voyageur continues to perform well, generating $135 million of revenue for 2025, inclusive of intercompany revenues, about $5 million lower than our projections primarily due to the timing of certain larger aircraft part sales that were delayed from the fourth quarter of 2025, and is pulling down of the UN and World Food Program missions. Voyageur expects to conclude most of the part sales from Q4 in the first quarter of 2026. We are now ready to take questions. Operator: [Operator Instructions] Your first question comes from James McGarragle from RBC Capital Markets. James McGarragle: I like that, the new disclosure you're giving here. So just on that, I mean, one of the slides in your deck kind of pointed to some pretty meaningful amounts of what we call flexible capital allocation. So can you just kind of comment on where you see the best opportunities here? Any line of sight to something we could see a little bit more and more imminently? And just kind of how you're thinking about spending that pretty meaningful amount of money over the next couple of years? Colin Copp: James, it's Colin. Look, I can't give you any specifics on where we're going to put it, that's for sure. I mean, that's why we call it flexible. But I think Gary has outlined fairly well in the MD&A and/or the investor deck there, clearly where we plan to put it. There are very specific areas, whether it could be greater share buyback, it could be -- it could be dividend, it could be certainly into growth, whether that's organic or whether that's acquisition or debt repayment in the future as we kind of look forward. So we've kept it fairly flexible. I don't really have any specifics to give you. There's lots in the pipeline that we're looking at. We've been talking about that for a while. We've executed on 2 acquisitions here. We're -- hopefully, we'll close this other one very soon. So there's lots more to look at on that side and there certainly is organic growth that we're working on in various other areas, whether you think about defense or some of the other stuff that Voyageur is working on. So lots of opportunity. We've just got to be disciplined about where we deploy it. And we're very focused on making sure that we are in the mid-teen IRR range with anything that we're doing. James McGarragle: And just on the margin profile of the Kadex business, can you provide any color there? And just kind of beyond the stand-alone performance of that company, can you just kind of elaborate on some of the synergies that you think that brings to your existing operations, kind of maybe particularly regarding parts supply optimization and utilization across your current business? And after that, I can turn the line over. Gary Osborne: Okay. Thanks, James. So on my comments there, I kind of gave a range of where it is on an EBIT basis and because -- we use that because obviously, they don't have really any CapEx compared to an airline. So if you certainly take the $50 million we've disclosed in payments, divided into the $7.5 million you'll get a pretty good idea of where the EBIT is. So that's as far as we'll go with the margin. But you're getting a good idea what this business produces, and it's a pretty consistent business as far as that goes, and it's got a decent growth profile. And as far as the synergies go, Colin can talk a bit more about it, but we look at the businesses operating separately. All our businesses is operating separately. And you'll see in our investor deck, we talk about really businesses that come together that produce more together as opposed to a synergy type of argument. So we're very pleased with the Kadex purchase. We think it's good and it's a nice stand-alone business, offers more breadth. As far as parts go, you're getting now into new parts with OEMs, and it's been talked about there with various OEMs. So we think it's a nice piece to add on. And then if you look at it, it also builds up that book of business. So if you look at our financials, in our new disclosures in the revenues, you see we're just short of $60 million in parts sales for this year at air parts, where you combine this $60 million with that, roughly $60 million, you got about $120 million plus part sales business. It's quite significant, and it's a nice diversification away from aircraft line. Colin Copp: Yes. Just to clarify a little bit on the acquisition itself as far as structure goes, James, it is -- our view has really been on all of these new businesses, specifically Kadex's acquisition is, it's decentralized, right? So we're looking at opportunities across the organization to create value and revenue growth opportunities. Kadex brings a ton of parts and consumables in the aviation industry that we currently are not in, Voyageur is not in that business. They're very much different businesses. So there's a lot of different areas that we can leverage across the group of companies that Kadex brings in with it. We're excited about it and see some good growth for sure. Operator: Your next question comes from Cameron Doerksen from National Bank. Cameron Doerksen: Just wanted to follow up on the question around Kadex. Just wonder if you can describe how that business has been growing in recent years? I mean it sounds like an interesting business, but just wondering sort of what the growth portfolio has been? And I guess, what you see in the next couple of years for growth? Gary Osborne: Yes. Cameron, it's Gary here. They've been growing quite nicely, somewhere in the 5% to 10% per year on the revenue line. So they've been doing quite well on that side. So we're pleased to bring them along. So we see a lot of growth from that piece, and we'd expect that to kind of continue into the future. As far as their product base, it's pretty diversified. I think you can see that from a little bit of the disclosure and same as their customers. So we're expecting at least 5%, so. Colin Copp: Cameron, I'll just add to that, a little on the product side. The -- they're in, as I think I mentioned in the script there, you might have caught was they're in both the rotary wing and fixed link, and they have quite a broad spectrum of parts as well as consumables that they sell across all spaces in the aviation industry. So they're touching both general aviation, business aviation and commercial aviation with a lot of the consumables that they sell. So it's a very broad spectrum of parts that they're -- and consumables that they're selling. So we see quite a bit of growth and so do they, in various areas. As Gary said, we kind of got a bit of a plan around the 5% range, but we're pretty optimistic about it for sure. Cameron Doerksen: Okay. That's helpful. And it looks like maybe they do some repair and overhaul. I don't know if that's the case or not. But if that is the case, then I guess, how much of that is the business versus the parts and consumables? Colin Copp: Yes. I can't give you a comment on the percentage, but I can tell you it's smaller for sure. But they do repair and overhaul, that's complementary to our existing platform. So we're pretty excited about that. I don't think we've provided anything on... Gary Osborne: No. No, we haven't. Cameron Doerksen: Okay. Fair enough. Maybe just secondly, on -- I guess you mentioned that you're seeing lots of opportunities for Voyageur and the defense and other areas. I guess, any color you can provide on that? And how has the opportunity set, I guess, improved or increased in the last 3 months since we last spoke? Colin Copp: Yes. I think it has, for sure. We've been more and more engaged with the government in various levels on these opportunities. There's more and more requests for information out there. There's a whole host of things that the government is looking at and D&D is working on that we're kind of involved in at various levels. It's like everything, I think when we bought Voyageur and we were first starting to talk about the defense business, it's incredibly lumpy. The growth -- the revenue growth is, because these contracts take time to establish and work on and then they come through and then they're very sticky, and they last for a long time with lots of upside. So we're heavy into and Voyageur is heavy into looking at opportunities and working on them. There's been a lot of interest. They've secured and got the MAISR program running well. They've expanded that a little bit in the last year. So AV is up and running. They've got a couple of other contracts there that are defense related that they're working through. So most of the infrastructure and the facility work that they're doing today is specialty MRO. They have very little standard MRO work, low-margin work going through their facility. And we see that continuing to expand and grow over time. The exact timing of it and what we see is very hard to predict. But there's no question, there's enough activity out there that something is going to happen here soon for sure. Operator: Your next question comes from Alexander Augimeri from CIBC. Alexander Augimeri: I was just hoping if you could give some color on how you think about the cadence of the NCIB over the 4 years? Would you sort of front load it, evenly spread? Gary Osborne: Yes, it's Gary here. I think right now, we're flexible on that piece. I think for your modeling, you can spread it out or whatever. We're really monitoring a bit the share price and where our capital allocation priorities are. But there's no question we don't like where the shares are trading today. So we're leaving some optionality around that. So yes. . Alexander Augimeri: Yes, makes sense. And if I can ask, what leverage ceiling are you comfortable with while executing the repurchase plan and maybe tackling that M&A pipeline you have there? Gary Osborne: Yes. So we've given out a range of 1 to 2x on our leverage, which is adjusted EBITDA to net debt, and we're not moving from that right now. We're at 1.7 in the quarter or ending the year actually. And that's going to have a downward profile as we sit here. As we've disclosed a lot of amortizing debt sitting under the CPA aircraft leasing side, so that's coming down. We do have over CAD 70 million coming in with the aircraft sales coming up. So that will pretty much extinguish that piece there -- or sorry, the $50 million we have on our line at the end of the year. So we feel really good about the profile. 1 to 2 is a nice range for us. It allows us a lot of flexibility as we move ahead, keeps our servicing down. And I think it's something that as we proceed ahead here, I think our shareholders will be good too because it will ensure that our free cash flows and other things are doing quite well. Operator: Your next question comes from Tim James from TD Cowen. Tim James: My first question is the nice 38% increase in the dividend and its relationship to free cash flow which was down in '25 versus '24. Now I realize there's a lot of sort of moving parts in there. But I'm just trying to think about the significant increase in the dividend then. Is that more of a reflection of kind of your forward-looking growth opportunity in free cash flow? Is the plan to adjust the dividend annually or maybe less frequently with larger step-ups? I'm just trying to think about how we take our own view on sort of future free cash flow and then connect the dots to kind of a dividend expectation? Gary Osborne: Sure. Thanks, Tim. If you go to the outlook section, you'll see we've given free cash flow expectations. Also we've shown the scheduled debt payments. And if you look at the $0.44 annually, $0.11 per quarter, it's pretty much mid right smack dab in the middle of the range of free cash flow less debt payments. So it will be a common -- and so when you look at it, 25% is $0.44 a share annually. So we are fairly disciplined with that. We're going to have to always continue to look forward and backwards because you could have a lumpy years in that, but we're committed to 25% after free cash flow after debt payments. So as you go forward, you model, that is how we're going to approach the dividend. So what that would -- it should tell the market. And our commitment is we're trying to grow it, and we would revisit that annually. Tim James: Okay. That's helpful. Just turning to the Kadex acquisition, how should we think sort of strategically about the approach to purchasing parts and consumables? And -- I mean does that business take on much price or volume risk holding sort of assets holding parts and what have you on the balance sheet? Or how do you kind of minimize the risk there in the marketplace for trading those parts? Gary Osborne: Tim, it's Gary again. So when we look at Kadex, they have a relatively small inventory amount versus their sales. Their inventory turns over 2 to 3 times a year on average. So they don't really have a lot of risk on that side. So they've got good efficiency with their inventory. They've got good sales relationships both with the customers and OEMs. So I don't see a lot of risk on that side. It's fairly fast-moving inventory. And remember also, it's a little different than the AV Parts business because the AV Parts business tears down aircraft, it's on older aircraft. These are new parts, new type of equipment, oils, greases, stuff like that. So they're moving on new parts in the equipment. Tim James: Okay. So when you say they're moving -- yes. Colin Copp: I was just going to clarify that the consumable side of the business is really a just-in-time kind of business to some degree. First they look at margins and pricing and all that and determine exactly what kind of volume they carry. But it is a very different business than what Voyageur runs with regards to part out. They're really -- it's a business. Voyageur is a business where you're parting out an airplane, you're sitting on inventory for a period of time, knowing that where these guys are very much focused on new parts, all -- really all other stuff is all brand-new stuff, OEM stuff, and it's being turned at a very rapid rate, and they're very focused on just-in-time inventory and managing their inventory levels down as low as they have to. They don't carry a lot of extra inventory just for the sake of carrying it. Operator: [Operator Instructions] Your next question comes from Konark Gupta from Scotiabank. Konark Gupta: I echo, great work on the presentation deck to highlight some of the things. Maybe first one on Kadex. On the acquisition, was it a bidding process? Or did you approach them? I mean, how did the acquisition come about? Colin Copp: Konark, it's Colin. Yes. So look, I think I talked a little bit about this in the past, maybe not that much. But we very, very much focused on going in and building relationships with these companies. This company was not for sale. This was an acquisition that was a privately owned company that we had a relationship with over a period of time and we built a relationship to get to this point where we can acquire it. Most of what we're looking at today, not all of it, but I'd say the majority, the vast majority are acquisitions like that, that are relationship base that are not on the market for sale. So it's not a competitive process. It was exclusive with us that we worked through and came to in an agreeable price and process. As well, the whole the management team is intact, right? The expertise remains, and that's one of the biggest things that we're focused on is making sure that we -- as we acquire these opportunities, we also have the right expertise that are building the Chorus group of companies. Konark Gupta: That's great. In terms of the pipeline on the amenities side, do you guys see very similar opportunities as Kadex and Elisen like fitting in the Voyageur sort of wheelhouse? Or are there other sort of parallels that you're exploring in addition? Colin Copp: Yes. On the pipeline, we're looking quite broad, but we're sticking to those core areas. I think we -- if you look at the investor deck, there's a pretty clear view of the kind of the core areas that we're staying focused on. And we're not deviating out of those areas. But it is a very broad -- when you look at those 5, I think it's 5 core areas we've listed in there. All of our businesses fit into them. It's quite broad. It gives us a lot of flexibility to consider things. But there are areas that we know well, that we have experienced with generally and then we can build out the verticals or adjacencies in some cases like this where we're going into OEM and consumable parts. But it's -- I think it's -- I guess I would characterize it as it's got lots of opportunity. There's lots of things in there that we're working on. We have a very big list. It takes time. Not all of them are opportunities that would be considered on the market by others. There's certainly a lot of them in there that we're -- we know well and we're in talking to, and they take time to work through for sure, but we're pretty excited about what we see in the pipeline. Konark Gupta: On the free cash and capital allocation, I see the $500 million to $550 million range is predicated on, I think, $422 million to $472 million free cash. The free cash range, is that a range because of certain market factors? Or is it a range because of some assumptions around CPA leasing? Or like what's the variability driver there? Gary Osborne: Yes. So the asset sales I think are self-explanatory. In the free cash flow range, just -- we pick a range to make sure that we've got -- we have a good bottom and a good top. But I think a couple of things. In that deck there, we did assume that the aircraft leases under the CPA that expire in '27 and '28 get extended out to the end of '29. And I think that's a pretty fair representation. We're comfortable with that. But all that being said, we don't have the leases in hand yet. And certainly, in the worst-case scenario, if it didn't, we would sell the aircraft and our capital allocation would have more cash available to it. So we picked a range on the free cash flow that we felt comfortable with moving ahead, made some reasonable assumptions around it. And I don't feel very exposed on it, but I think it's a good range. Konark Gupta: Right. And Gary, is it fair to assume that if the FX remains where it is, which is above your assumptions for CPA, the range could have upside risk from FX alone? Gary Osborne: Yes, I think it could. If you look there, we have 1.35, I think, for this year, 1.30 moving ahead. I wish I could say I could predict the U.S. dollar to Canadian dollar rate moving forward, I think I would be one of the richest men around here if I could do it. But I think we have a conservative rate that we published there. I think it's very deliverable. We have some upside on it, hopefully. But look, I think it's a good range. And we would hope there's a bit of upside to it. Yes. Konark Gupta: Yes. That makes sense. And last one for me before I turn over. On CPA, from the deck at least, it sounds like there's no changes or no amendments at this point, sorry. The fixed fee is running flat at 44, I think, through 2035. And then I think you guys are assuming that the leased aircraft count remains at 39 to 2029. Is there anything I'm missing in these numbers? And what's that window between '29 and '35 looks like for CPA leasing? Gary Osborne: No, you're not missing anything. We just went out 4 years, Konark, because we wanted to make sure that we gave some good guidance over the next 4-year period. And also in there, I think what you just take away very, very predictable earnings, $43.9 million in fixed fee runs out to 2035. We have some aircraft leases under the CPA that expire technically in '27 and '28, which we believe will get renewed. But it's an assumption we're making. But the other thing I would highlight there is, I think sometimes it gets missed is when you look at the debt profile, it is dropping very rapidly within the CPA. And if you then go back to our free cash flow less scheduled debt payments per piece, you'll start to -- if you start to model leases being extended out and essentially no debt against it, you realize that there's a very strong free cash flow less debt payment profile over the next 4 years. And I think that's what we're trying to highlight is, we have room to grow the company, we have room to grow the dividend, we have room to buy back more shares. We have a very -- a significant amount of cash available to us. And in the $500 million to $550 million range in free cash flow, that is essentially our market cap today also. So you look at -- we're just highlighting, there's a lot of cash coming off this and we have flexibility and we have the ability to deploy it in a way that is accretive and beneficial to shareholders. Operator: And there are no further questions at this time. I will turn the call back over to Matt for closing remarks. Matt LaPierre: That concludes today's call, everyone. Thank you for joining, and please have a great day. Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you.
Sebastian Frericks: Good morning, ladies and gentlemen, and welcome to the three months '25/'26 analyst conference of Carl Zeiss Meditec. My name is Sebastian Frericks, I'm the Head of Investor Relations. Our CEO, Andreas Pecher; and our CFO, Justus Wehmer, will present the three months results and guide you through the financials and some prepared remarks. After the presentation, we look forward to the Q&A. I would like to hand over to Andreas. Please go ahead. Andreas Pecher: Thank you. Good morning, dear analysts and investors. Welcome to the three months '25/'26 analyst conference of Carl Zeiss Meditec AG. Maybe some of you know that I've been at Zeiss Executive Board Member since January 2022. Back then, in the very early part of that month, Meditec was valued above EUR 16 billion. Now it is valued at below EUR 2.5 billion. This is not acceptable for all of you and also not for Zeiss. Zeiss has taken the biggest loss of all above EUR 8 billion since then. And the new low point also is in the level of trust when we have to withdraw our full year guidance on January 22. The minimum I can do is to apologize, which I want to do personally and on behalf of the Management Board. I assume more important for you and also Zeiss as the main shareholder is that we reverse the trend and build up trust again by working on our business performance and meet what we said before over and over again. For that, we need to strongly focus on execution now. We will talk about how business conditions have evolved since our last update in December 2025 and what the key building blocks are for the remainder of the fiscal year. Justus will address these topics in more detail later in the presentation. And of course, following the presentation, we'll be happy to take your questions. But before that, Justus and I will walk you through the quarterly overview and financial results. So, let me start with an overview of our first quarter performance. Well, to cut it short, this was not a good quarter, and we're not happy with the results. We had a weak start to the year with both revenue and EBITA coming in below the prior year, driven primarily by currency headwinds and an unfavorable product mix with weaker sales of refractive treatment packs as well as intraocular lenses in China, which weighed on margins. Revenue for the quarter amounted to EUR 467 million, representing a decline of 4.8% year-over-year. On a constant currency basis, revenue declined by 2.1% year-over-year, driven primarily by movements in the U.S. dollar. When fully reflecting all currency headwinds, FX effects amounted to EUR 20 million. FX-adjusted revenue was relatively flat at minus 0.7%. And beyond the U.S. dollar, these currencies -- currency impacts were mainly related to the Chinese yuan. In this adjustment, we are also eliminating all currency effects related to the exports into the ZEISS Group global distribution network. The revenue decline was visible across both equipment and consumables. The quarter was impacted by a soft start into the fiscal year following an exceptionally strong equipment delivery baseline in September last year. And in China, we also saw revenue loss from bifocal intraocular lenses following the withdrawal from the current VBP tender as well as delayed sales of refractive treatment packs due to the later timing of the Chinese New Year holidays. Looking at the revenue mix, equipment accounted for 52%, consumables for 37% and services for 11% of total revenue in the quarter. Order intake reached EUR 471 million, down 9.7% year-over-year or down 6.9% on a currency-adjusted basis, which is mainly related to the strong year-end close in September 2025. Our order backlog increased to EUR 405 million at a slightly higher level compared to the end of last fiscal year. Now turning to profitability. EBITA came in at EUR 8 million, a 77% decline versus the prior year, resulting in an EBITA margin of 1.7% compared to 7.2% last year. The significant decline was mainly driven by negative FX effect and unfavorable product mix and negative operating leverage as our cost base remained largely stable while revenues declined. So, now I'd like to hand over to Justus, who will provide you with more background and will discuss the SBU figures in more detail. Justus Wehmer: Yes. Thank you, Andreas, and also a warm welcome to all of you from my side. So, as usual, I will briefly walk you through ophthalmology performance first and afterwards, microsurgery. So we had a weak start, driven mainly by refractive phasing and a loss of bifocal IOL sales in China. Let's start with the revenue. Reported revenue came in at EUR 357 million, which is down 5.1% year-on-year and foreign exchange adjusted basis, revenue declined by 2.4%. The performance was impacted by several factors, of course, currency headwinds, as already explained by Andreas, strong equipment sales at prior year-end, which created a much slower start in the following month and later phasing of refractive treatment pack sales due to the later occurrence of the Chinese New Year vacations. And ultimately, the loss of the bifocal IOL sales in China, where we have reported that we lost there the right to participate with one lens category in the tender. One item to highlight here is the potential bifocal IOL scrap risk associated to what I just explained and estimated at around EUR 8 million in total, which will fall in quarter 2. This will be treated as a nonrecurring impact, and it's worth noting that registration of the successor model is progressing well. The chance seems good to receive the license before the start of the next tender. Moving to EBITA margin. The EBITA margin declined to minus 0.4%, representing a 5.2 percentage-point decrease year-on-year. This was mainly driven by a 1.9 percentage points decline in gross margin, largely due to the currency effects and an unfavorable product mix. The OpEx ratio weighed on margin by additional 2.8 percentage points, although [ obsolete ] expenses remained stable as particularly the changes in APAC currencies cannot be locally hedged with most of our OpEx in euro. Finally, looking at the revenue split, ophthalmology accounts for 76% of total OPT revenue. And within ophthalmology, consumables represent 46%, equipment accounts for 45% and service contributes 9%. Turning then to microsurgery. Overall, we saw a margin decline, mainly driven again by currency headwinds and an unfavorable product mix. Revenue reached EUR 110 million, which is down 3.7% year-on-year. On a currency-adjusted basis, revenue declined by a more moderate 0.9%. The softer revenue performance despite a relatively modest comparison base is largely explained by exceptionally strong deliveries towards the prior fiscal year-end, which created a pull-forward effect. In addition, we saw an unfavorable mix with slower deliveries of neurosurgical microscopes following the strong year-end close in September '25, which not only impacted revenue phasing, but also weighed on profitability. The EBITA margin decreased to 8.7%, representing a 6.5 percentage-point decline year-on-year. This was mainly driven by a 5.5 percentage-point decline in gross margin, reflecting currency effects and unfavorable product mix and the amortization of capitalized R&D related to KINEVO. In addition, the OpEx ratio weighed on margin by around 1 percentage-point, while [ obsolete ] expenses remained stable. Looking at the revenue split, microsurgery accounts for 24% of total revenue. And within microsurgery, equipment represents the largest share at 79%, service contributes 15% and consumables account for 6%. Let me walk you through our regional development. Overall, EMEA remained stable, while we saw softer performance in the Americas and APAC. Starting with the Americas, the region accounts for 25% of group revenue. Revenue came in at EUR 117 million, down 13% year-over-year, with currency-adjusted revenue declining by 6%. This reflects a weaker investment climate, driven largely by heightened geopolitical volatility and a decline in key markets, including the U.S. Overall, demand momentum in the U.S. remains subdued during the period as a consequence of overall tariff-related price increases. Moving to EMEA. EMEA represents roughly 37% of group revenue and showed a largely stable performance. Revenue reached EUR 174 million, moderately below last year, while currency-adjusted revenue actually grew slightly. This resilience was supported by growth in selected markets, particularly in the Middle East. At the same time, core European markets, including Germany, Spain and the Nordics remained broadly sideways. Finally, Asia Pacific region, APAC represents 38% of revenue, with China contributing 18% in this quarter. Revenue amounted to EUR 178 million, down 3% year-over-year, with a currency-adjusted decline of 2%. Performance across the region was mixed. China remained stable, while India and Australia showed positive trends. This, however, was offset by weaker revenue in Japan and South Korea, which weighed on the overall regional result. Turning to the P&L. Margins came under pressure in the quarter, while operating expenses remained broadly stable. Gross profit declined to EUR 227 million, with the gross margin decreasing to 48.6% from 51.4% last year. This was mainly driven by currency headwinds, a lower contribution from neurosurgical microscopes, IOLs and refractive treatment packs as well as higher amortization of capitalized R&D expenses related to KINEVO. Looking at operating expenses. Total OpEx was flat year-over-year at EUR 226 million. However, as a percentage of sales, OpEx increased to 48.4%, reflecting a negative operating leverage. As a result, profitability was significantly impacted, both EBIT and EBITA declined sharply. Earnings per share decreased to minus EUR 0.06, driven by the sharp EBIT decline and negative financial results, primarily due to higher interest expenses. On an adjusted basis, adjusted earnings per share was EUR 0.03, excluding noncash valuation effects on contingent purchase price liabilities while exchange rates and hedging results were not adjusted. The next table provides a brief overview of the bridge from EBIT to EBITA and to adjusted EBITA. Regular amortizations on purchase price allocations amounted to EUR 7 million in Q1, including D.O.R.C. effect of EUR 6.5 million and smaller effects from former acquisitions. In terms of special items, the current quarter includes legal expenses in connection with the lawsuit related to former IanTECH in the U.S. On the contrary, the prior year benefited from a one-off gain from public grants received in China for our IOL production. Adjusted for special items, EBITA amounted to EUR 10.3 million, with a margin of 2.2%, significant decline compared to previous year. Next, we have a quick overview on the cash flow statement. We saw a clear improvement in operating cash generation. This improvement was mainly driven by a strong reduction in receivables, particularly from third parties as well as income tax refunds, which reflect the weaker operating result in the period. Cash flow from investing activities also improved primarily due to lower investments in property, plant and equipment compared with the prior year. Financing cash flow declined, mainly impacted by the reduction of liabilities to the ZEISS Group treasury. By end of Q1, net financial debt decreased to EUR 282 million at a lower level compared to a year ago. And now I'd like to hand it back to you, Andreas. Andreas Pecher: Thank you, Justus. So let's move to key topics and outlook. I will outline the main triggers behind the current guidance suspension and also share my recent impressions from a visit to China that happened last week. Then Justus will illustrate the key building blocks shaping our outlook for the remainder of the fiscal year. So let me briefly explain what has changed since December 2025 and why we decided to temporarily suspend guidance in January. Well, let me start with the bifocal IOL situation in China. As we communicated at the December '24/'25 analyst conference, full year conference, our bifocal IOL was withdrawn from the existing VBP tender. As a result, it cannot longer be sold to public hospitals under that framework. While the product license itself remained valid, there is still, of course, ambiguity around the VBP withdrawal, and we were still assessing whether limited sales to other markets for the private sector are feasible. At the same time, the treatment of existing inventories remain unclear. In a worst-case scenario, this could require a partial recall and scrapping of stock. We're now seeing only limited resale opportunities for bifocal IOLs more broadly as this product has been removed from the reimbursement scheme following the withdrawal of VBP qualification. So, since January, we have negotiated a partial recall with external distributors in Carl Zeiss China, which will result in an estimated earnings risk of around EUR 8 million for Carl Zeiss Meditec. Second, moving to VBP and competitive dynamics. Our assumption in December was that the second nationwide VBP tender would put some pressure on IOL pricing, but to a lesser extent than the first tender as we learned from other peers, which are subject to consumables VBP. Meanwhile, we've identified the competitive landscape has intensified more than expected. In multifocal categories, several Chinese competitors have successfully passed registration, increasing price competition. As a result, we now expect pricing pressure in premium IOLs to be tougher than previously assumed. Beyond IOLs, competition in equipment is also starting to heat up, supported by expanding local procurement policies. And finally, on equipment demand, we're currently seeing weaker demand in the U.S. and broader Americas market, particularly in the ophthalmology segment, this seems to extend beyond the impact of the strong September deliveries, causing a slower start into the new fiscal year. Based on this, internal sales forecasts have been adjusted to reflect a more cautious CapEx environment for the fiscal year. While putting all this together, regulatory uncertainty in China IOLs, higher competitive pressure and softer equipment demand, we concluded that temporarily suspending guidance was the most responsible step until visibility improves. We will update the market as soon as conditions stabilize and assumptions can be reliably quantified. We're currently working very hard in defining measures, and we'll update you as soon as possible, latest with the half year reporting as previously promised. But before I close and hand back to Justus for the outlook, let me talk briefly about China with a more long-term view. I just came back from, I would say, intensive visit in China last week. And I was meeting there, of course, government officials, for instance, the Shanghai Party Secretary, Chen Jining. He's one of the -- well, he is the highest ranking official in Shanghai. We also had the corporate size, Greater China headquarters campus construction launch ceremony. And of course, we did that alongside many of our customers, the local officials, and lastly, I met a number of our customers, particularly the Aier Group and its CEO, Mr. Li, and of course, our team. And let me be straight in assessing the long-term competitiveness of Zeiss in China. We currently are in a period of, let's call it, vulnerability, not having localized our manufacturing fast enough. The transfer of manufacturing for key consumables and equipment is happening as we speak, and we will be largely completing this over the next 2 years. We have all the support we need from our local team and from the local and regional officials, and I will personally look over this. We expect to be strongly competitive again across our portfolio with our state-of-the-art production facilities in Guangzhou and Suzhou. Having the strongest brand in ophthalmology in China, keep in mind, Zeiss is even more recognized from a brand point of view in China, as in Germany, very close relationships with our key customers and an excellent reputation in the Chinese market from consumers to set that on brand recognition to doctors, to the government. And this can also be demonstrated by the largest ever infrastructure investment corporate ZEISS has made in China today. That, of course, also benefits Carl Zeiss Meditec. Now back to you, Justus. Justus Wehmer: Thank you, Andreas. So let me now outline how we are thinking about the timing of new guidance and the main factors that will shape our outlook. At a high level, we continue to see several external headwinds, including trade barriers, regulatory changes, a softer consumer environment and currencies, which are putting pressure on this fiscal year. Right now, we don't foresee any alleviation of these headwinds in the near term. There are 3 groups of internal factors we are monitoring closely. First, swing factors, which could move performance either way in the near term. This includes the timing of the successor bifocal IOL registration and launch. We have already received, as we mentioned before, positive signals and currently expect to receive the license around March in time for the new volume-based purchasing tender. We are also awaiting the outcome of the VBP tender expected in April or May, which will have an important impact on our IOL business. And lastly, refractive procedure demand around the Chinese New Year period, which will provide a good indication on overall market sentiment. In the first quarter as well as extending into January, our refractive consumption data indicates continued stability, whereas the market was quite weak overall based on our data. We are satisfied about our relative outperformance, but currently cannot count on a growth outcome to offset other pressures in the business. Second, nonrecurring items. In Q2, we expect the scrapping of certain old bifocal IOL inventory. As just explained, we have agreed with Carl Zeiss China and external distributors to take back a certain quantity of intraocular lenses, which will cause a burden of around EUR 8 million to gross profit in the second quarter. We are developing our strategy and reprioritizing R&D projects, which will likely have an impact on IP and cost allocation. And in addition, we anticipate one-time reorganization-related expenses that will mainly affect the second half and beyond. As we have said in our release on January 22, more details on measures will be presented with our half year report. Third, key positive drivers. We expect continued momentum from the VISUMAX 800 and the associated SMILE pro rollout in China, further global traction for the KINEVO 900 S. So overall, while near-term volatility remains elevated, we see both risks and clear operational levers. Once these swing factors crystallize and the one-offs are better quantified, we will be in a much stronger position to provide reliable guidance. Timing-wise, no later than our half year results. And with this, I'd like to conclude our presentation for today, and now we look forward to your questions. Operator: Yes. Thank you so much for the presentation. We will now move on to our Q&A session. [Operator Instructions] And we have already received a question, Mr. Reinberg. Oliver Reinberg: Oliver Reinberg from Kepler Cheuvreux. Just 3 questions, if I may. And the first would be on China refractive. I mean, obviously, the kind of Chinese New Year season is starting soon. And given you have just been in China, can you just provide some kind of feedback, a, what you have seen in terms of stocking ahead of the event and also what kind of feedback you get in terms of the expectation for the season from your clients? Secondly, just on the counteraction you're going to take. I mean, obviously, you're going to execute the plan that was developed before. Can you just provide some kind of flavor to what extent you also consider to accelerate these kind of measures given the kind of current earnings pressure? And then thirdly, just on China and the political background. I mean, buy-local has been a theme for quite a while. Can you be a bit more specific in which equipment parts you specifically see this kind of pressure and whether there's also anything happening in the refractive space. I mean, obviously, there's so far no local competition to SMILE, but if there's any kind of push towards LASIK or anything here? Justus Wehmer: Thank you, Oliver. I can probably take the first 2 questions and Andreas... Andreas Pecher: I can probably take the second and take the third one. Justus Wehmer: Yes, exactly. So, China refractive, yes, you're absolutely right, Oliver. We are actually -- as we are sitting here entering into this Chinese New Year vacation period. And in a nutshell, I think the stocking into the distribution channel is right now tracking on a level that is, I'd say, within our expectations. It is comparable to last year's level, but the proof is then in the pudding. The proof is ultimately in the consumption during the vacation period. And I think only once we know that, we will really have a good indication whether our assumptions for this year's overall consumption are actually correct or maybe higher or outperformed or underperformed. On measures, I can tell you that we are in full steam, so to speak, in the assessment and the decision-making process on what needs to be done. But I have to ask for your patience. As you know, there we have to follow a governance protocol. And we also, frankly spoken, also don't want to share anything premature here in public and clearly also not to feed our competitors with information that might be interesting to them. And on the Chinese political pressure, I think... Andreas Pecher: Maybe I can add to the second one, Oliver. Thanks for those questions. Well, that was the main reason why I stepped in, right, that we don't want to lose the time here. And we talked about that in December already. First measures have been implemented, for instance, the commercial organization that's being rolled out now. And of course, the other items, we're working together as a team to make sure that we develop those plans as fast as we can. That's clear and implement what we can implement. And for other things, we, of course, need the governance. That's clear. So rest assured that this is one of my and the whole team's highest priorities. Now coming to your third question, well, let me first comment with sort of a general statement. What we observe is typically there is buy-local policies for areas where you have local competition coming up, of course, because it makes sense, right? Other things have to be imported. We observe that specifically in the diagnostic areas, and there is some risk in ophthalmic areas. The good thing is we have all this in our hand. We can localize. I mean we have large really good infrastructure in China. We have the right people. I just met them again last week that can do that, and we have the willingness to do that. And in addition, we also have the support from the local governance and officials. I spoke to them last week. They really want us to be successful in this market. So I would say we have everything in place to counter that and take on competition as it arises. Oliver Reinberg: And do you see any risk that this kind of political pressure is also moving toward private space of refractive? Andreas Pecher: I wouldn't say political pressure. I mean, you can call it political pressure. In the end, it is the will to localize manufacturing in parts R&D. And if you follow that, our impression is we have a very good position in that market. And by the way, that's something that I also see in other businesses of size. This is not just in medical. I mean we have that in our vision business as well. And what we see is, as long as we follow those rules, we have a very strong position in those markets. I mean vision is #1, for example, in China. And there is, of course, strong competition. So we have the means to do this and of course, work with the officials to make sure that we can do that. Operator: Thank you so much, Mr. Reinberg, for your questions. We move on to Mr. Jon Unwin. Jonathon Unwin: I actually just had a quick follow-up on Oliver's question on the equipment and the buy-local policies. You mentioned it was mainly in diagnostics, but also in other areas of ophthalmology. Is that all other areas of ophthalmology, so refractive, cataracts and microscopes or one more than the other? So just a quick follow-up there. I'm just interested how order intake has progressed in Q1 and Q2 for microsurgery. Obviously, we saw strong deliveries in the fourth quarter, but have orders progressed well so far year-to-date? And how do you feel about the ability to deliver those in the rest of the year? Andreas Pecher: Maybe I'll take the first question. Thank you for those questions, Jon. Well, it depends in terms of the competition. I would say, generally, it's probably the highest on the cataract side, right? Then microscopes, I would see that more on the lower end coming in. And then the third one is refractive. That's the way I see it. And the good thing is we have a strong position in China. Zeiss overall is more than 7,000 people working for us in China. We see what's going on in the market. We can react. Essentially, we have the control over that. We can localize things quickly. Of course, you all know medical has regulatory restrictions, that's clear, but we can do that, and we're willing to do that. and one after the other. And this is nothing new to Zeiss generally. In general, I mean, we've seen that ambition as well. Years ago, we reacted and we're #1 there. Justus Wehmer: Fine. Then your question on MCS order intake and outlook. I think, yes, the first quarter has been soft, but I just spoke yesterday with the management of that division, and they are totally confident that they will make their numbers and volumes. The funnels, the project funnels are full. The order entry comes in. I obviously can't disclose here data for the current quarter. But I think what I want to convey to you is that for MCS, as we had said in December, for this year, I think that we will clearly benefit from the global roll-in of the KINEVO 900 S and the PENTERO, good sales volumes that we have seen last year, end of last year, also going into this year. So therefore, I think overall, for MCS, we are currently pretty confidently looking into this year. Operator: Thank you so much Mr. Unwin for you questions. We now move on to Mr. Marchesin. Davide Marchesin: I hope you can hear me well now. I have 3 questions, 2 on refractive. The first one is about the rollout of VISUMAX 800. So last year was better than you initially expected in China. Can you just make a comment how Q1 has continued and where are you right now? Second one is also you said that in China, refractive was stable. Can you comment whether this stable is related to volume or value as SMILE pro implies some positive ASP effect? And the last one is you also said in your comments that the planned delivery of neurosurgical instruments was slower than expected. Is it something that you see is just temporary? Or do you see that it will spill over more towards the further quarters? Andreas Pecher: Maybe on the first one, just you saw the picture that we showed, the one with the right background. That's actually me and our team standing together with the management of Aier Group and unveiling one of the VISUMAX pro systems, the SMILE pro systems. Just as a highlight there, they are dearly waiting for that, and they were really, really happy to have us roll that out. But that to just sort of highlight and Justus will go more into the numbers. Justus Wehmer: Yes, Oliver (sic) [ Davide ], happy to share with you that we are going into this year and order entry is currently trending nicely. We are in a neighborhood of 50 VISUMAX 800 in our books for China, out of which already more than 30 have been shipped and installed. So that, I think, is a pretty solid number after the few months that we are in this new fiscal year. And then your second question, what I was referring to the stable was the procedure numbers. And just to also comment maybe on your underlying question, we still see a good pickup in SMILE pro treatments. And from that perspective, I also can confirm that by now, we do not see any further deterioration of margin in the market. So hopefully, that covers your question. And sorry, and you had one on MCS. Once again, I wouldn't derive out of Q1 any conclusions that would indicate softness or weakness for MCS for this fiscal year. As I said, the funnels are very solid. And we also know that this category in the hospitals, so neurosurgical procedures is a money-making procedure. And therefore, we clearly expect that there will be a robust market demand for this year. Operator: Thank you so much Mr. Marchesin. We have a question by the number with the last of digits of 219. Jack Reynolds-Clark: It's Jack Reynolds-Clark from RBC. I hope you can hear me. I had 3, please. So the first is on European core market weakness. Could you run through which subsegments specifically are impacted, i.e., was it refractive versus kind of cataracts versus D.O.R.C.? What do you think is driving the weakness? And do you think it's temporary or longer term? The next is on the U.S. So do you -- or does the ongoing weakness in the U.S. change how you view the attractiveness of the U.S. market for you from a bigger picture perspective in the longer term? And then my third question was on the CEO search. Could you update us on where you are with this and share any kind of developments around your thinking about what it is that you're looking for? Andreas Pecher: I'll take the third one. Justus Wehmer: Yes. Jack, it's Justus. So on the core market segments in Europe, actually, I don't know whether that was maybe mispronounced or misunderstood in my statements because actually, we are not so, how should I say, unhappy with Europe. As I said, we have some regions that still grow nicely and some regions, Germany amongst them, which have a more sidewards development in the first quarter. But that I would not yet take as indication of a softness of the business. So therefore, really nothing particular to point out here. I think if I look back on the 8 years that I'm now here with Meditec, Europe is always a mixed bag. You always have due to local politics and so on, you always have different investment behaviors across the board between South and North and East and West. But I think overall, we have always been able to, in total, then grow year-over-year in Europe. So therefore, really nothing that I would point out here, especially since you were asking about any particular business sectors of ours. The U.S., the weakness that you have commented on, of course, we are not happy with it. But first of all, we have installed in the U.S. a new head of our sales organization, a very industry-known veteran who has also worked in his history partially for some of the major U.S. competitors of ours. So, yes, it's an environment in which we have probably more hostile competitors than in other markets. But we -- I don't think that we should give up on it. And there is products in the pipeline, as you know, whether it's the hydrophobic trifocal lens, which we would expect by next year as well as the VISUMAX 800 flat cutting modality, unfortunately, only also next year. But I think the completion of our portfolio should actually in the next year give us some better opportunities or provide better opportunities for us to be in the U.S. in better shape. And on this third question, I think... Andreas Pecher: Maybe build on the question. Thanks, Jack, for those questions. Justus and I spent 3 weeks ago, we spent a good week in the U.S., of course, talking to customers as always, we always do that, but also to our team. And the new person heading our U.S. sales organization is not coming from the outside. He was at other companies before he came from another one of our markets and has a, yes, a proven track record of bringing a lot of value to those markets. That is, I would say, one of the first changes that came out of the new organization, the new commercial organization. So, as you see, we're in full swing of changing things, as I would say, to the better. On the CEO search, well, shortly said it's in full swing, right? I said before, I personally have a strong interest in keeping that short as my family. But, joke aside, we all have an interest, right, to make sure that we have the long-term person in there. So we are currently looking outside and have actually several candidates. And of course, I hope you understand that we cannot disclose anything more precise today, and we'll announce this as soon as possible. But it will be a person that, I would say, has a solid track record in the medical industry. Operator: Thank you so much for your question. We're moving on to Mr. David Adlington. David Adlington: Three, please. So, firstly, I just wondered, you indicated you put through some price increases in the U.S. to offset tariffs. I just wondered how much price you have put through and whether you're thinking about changing your strategy on price there. Secondly, on gross margins, obviously, quite a big impact from both foreign exchange and an increase in R&D amortization. It would be great to get your thoughts on how gross margins might evolve from here through the rest of the year. And then finally, with the VBP on multifocals coming through, I just wondered what you expected the price impacts to be? And any thoughts around where volumes might go? Justus Wehmer: David, I start, and Andreas, you just if you have anything that you want to highlight and I didn't cover on it. Price increases were, in total, probably in low single -- high single digit. It varies a little bit from category to category. But overall, you can say that cumulatively, it is a high single-digit number of price increase. And of course, that you have to compute it on our transfer prices and therefore, in the end, to offset for the tariff barrier, you basically have to then calculate it backwards from your speed price. And that is something like, as I say, high single digit. But you have to understand to build on that, David, that this hits in the U.S., the very important category of diagnostical products. And the diagnostical product, a, is anyways a very contested market. And secondly, you may say so, it's a market where in an environment like this, price increases, uncertainties on tariffs, some optometrists and ophthalmologists will simply delay their decisions. If you have a field analyzer, if you have an OCT or so, typically, it's something where you can also hold back for a while until you have more clarity on your investment decisions. And that, I think, is overall explaining the situation that we are in. So, hopefully, with a little bit more stability in the transatlantic relations and disappearing sentiment that there might be more movements happening, then we hope that the investment appetite will return. Gross margin, you were asking on, I think, what exactly we are anticipating for the remainder of the year. We clearly would see that the gross margins will recover with higher portions of consumables kicking in over the course of the year with the one caveat that I want to highlight and that leads to your third question on the VBP. Obviously, that also is a function of how aggressive pricing will be reduced in this second round tender. Frankly spoken, the only thing you can refer to is analogies from other consumables in the medical sector in the past. Typically -- again, typically, the second and third tenders were not as brutal in terms of the price impact. But now we have an unknown factor as outlined in our presentation. And also, please understand that I will not give you any detail on our expectations, what others do because as you can imagine, this is competitively sensitive information, and I don't want to have anybody speculating on how we would respond. Andreas Pecher: Yes. Nothing to add. And frankly, nothing I want to add to the last point here as well. Operator: Thank you so much for your question. We're moving on to Ms. Susannah Ludwig. You may speak now. Andreas Pecher: Susannah, if you speak, we cannot hear you yet. Susannah Ludwig: Can you guys hear me now? Andreas Pecher: Yes. Susannah Ludwig: I have 2, please. First, can you confirm if sort of long term, there will be any benefits to COGS from the shift to manufacturing in China and when you would expect to be sort of fully ramped on this shift to manufacturing in China? And then second, I wanted to follow up on what has changed from December to January when you pulled the guidance? So, first, on China, I guess, why had you originally believed that the price cuts would be softer in the VBP? I know you cite the Chinese companies passing sort of registration, but Eyebright had a trifocal approved since January 2025. So had you anticipated that they would be part of the tender? Or were you thinking there was a chance that they would not be? And then on the U.S., were December sales weaker than anticipated? And was that what led to the weaker internal forecast? Or was there something else? Justus Wehmer: Susannah, let me start with the last one. And in the week that we pulled the guidance, there was a pretty hefty discussion on Greenland. And within that discussion, there was at least a serious threat by the U.S. administration that there would be additional, on top of all other tariffs, additional 20% on products out of Germany going in the U.S. So that, of course, would have dramatic impact on our business. And as I said before, the U.S. is our second biggest market, and it's almost 90% device market. So therefore, that explains why this discussion at that moment in time was playing a significant role also for our ability to assess how the U.S. market may develop or not develop. On your question on our expectations for the tender, I think in a nutshell, one Chinese competitor in a tender in a category is already changing things, but we also have seen in the past that the Chinese authorities for good reasons, always try to distribute and don't want to be in a situation in which then suddenly one company is not able to fulfill the entire volumes that have been allocated. So with one player in the game, we were still reasonably confident that our strategy could fold out in a way that it would and therefore, was part of the guidance expectations that we published in December. However, learning then that at least a second player, Chinese player, will be participating with just recently approved lens that can, of course, once again change the volume allotments significantly. And that is one of the key reasons. And your first question was on the long-term benefits of -- Andreas? Andreas Pecher: I can start and you can chime in. There's 2 aspects when it comes to localization in China. The first one, and I think it's the more important one, an urgent one is to make sure that we have access to the market. That's why once those regulations come in, actually are anticipated, we can do that and essentially localize and make sure that we have access to that. The second one, of course, is a question about cost of goods. In general, there is a potential of doing that. And the question is always that we are taking is, are we taking step one means localization together with step two, and that's something that we have to assess essentially also in terms of cost and timing considerations. So, typically, there is a potential to be very clear. And sometimes we do that right away with step one. Sometimes we do that in a step afterwards by localizing also the supply chain. Susannah Ludwig: Great. That was very helpful. Can I just follow up in terms of the U.S.? Could you confirm, I guess, just how December performance looked versus October and November? Justus Wehmer: Susannah, sorry, I missed on that one. I think there is -- within the quarter, nothing in particular that I see. Probably October and November were weaker than December. That's the only pattern that I could share here with you. But I think -- I don't know whether this answers precisely your question, but that is what I... Operator: Thank you, Ms. Ludwig, for your questions. We're moving on to Mr. Graham Doyle. Graham Doyle: Yes. So this is a very complex system versus what we're used to. So it's -- and the UBS tech doesn't always allow me. So it's good you can hear me. Right. I've got 3 questions, please. So, firstly, I think when I was speaking to Sebastian earlier, he was talking about the UV biomaterial being a part of the issue in terms of the registration for the bifocal. And of your -- and I estimate of your sort of EUR 70-ish million revenue of IOLs in China, how much is not based on the UV biomaterial, just to get that? And secondly, just on D.O.R.C., could you just give us an update on how new instruments placements went in Q1? And then lastly, it's a sort of a bigger question. I know you don't often talk about the pipeline, but I think this would be a pretty good opportunity to do, which is, say, R&D as a percentage of sales has been well above the rest of the sector. And we obviously have seen some innovation, but it will be good to get a sense as to what really excites you. So rather than talking about the cost cutting, what excites you in the pipeline today that we might see in the next 1, 2, 3 years that can drive future growth for the group because you've got a great track record in R&D. So it would be good to get a sense as to what's in there. Justus Wehmer: Graham, may I -- just your second question, I missed that one because I was taking notes for the first, sorry. Graham Doyle: Sorry. The second question was just on D.O.R.C. in terms of new unit placements, how has that progressed in Q1? Justus Wehmer: Okay. So, on the UV biomaterial, we're actually in full swing of transitioning. I think it's right now probably more still in the neighborhood of 50%, but actually of the total business volume. But actually, with the one lens that we are expecting to hold the paperwork of the registration in our hands in a couple of weeks, we then actually would have, going forward, completed the transition. And then we have the portfolio on UVE. The D.O.R.C. placements, I think overall, just yesterday, had a discussion on it. We are still growing year-over-year nicely and in full swing of rolling out now also the D.O.R.C. portfolio into Asian markets. Last year, as you may remember, we were focusing first on U.S. and Europe, some European countries. Now Asia kicks in. And we actually also see in some of our key accounts that are loyal, refractive and partially cataract customers, also now high interest in the D.O.R.C. portfolio. So, overall, I think we are quite happy with the development. And I think on R&D, Andreas can talk. Andreas Pecher: I can say a couple of words on that. Well, thank you, first of all, for stating that we've been having a good track record on innovation. Of course, that's the core of the company, right? That's the core actually not just of Carl Zeiss Meditec, but Zeiss, an innovation-driven company. Let's do the following. That's -- how about we talk a bit more about that when we do the May -- latest in May when we do the half year results and show you a couple of the highlights. There's highlights in both the OPT and the MCS pipelines that I'm excited about. They actually go beyond that. That's -- we're always looking at short, midterm innovations, but we're also looking at the long-term innovations where we think we can go into even new markets. The one thing that I'm focusing on right now also is to make sure that we get a higher efficiency and effectiveness of our R&D. You've seen the R&D expenses going up in the last couple of years, which is good. It can be good if you get the right output. And that's one of the things that I'm focusing in my time also here and together, of course, then with the SBUs, I'm sure my successor is going to focus on. So what I want is return on R&D investment, and I want to increase that even more. That would be my statement. And sorry for not telling you any of the exciting products yet, but it's maybe better to also do that and see them. Operator: Thank you so much Mr. Doyle for your questions. We're now moving on to Mr. Falko Friedrichs. Falko Friedrichs: Three questions, please. And the first one, do you have an update on when exactly the VBP implementation for IOLs is expected to go live? My second question is on the downturn in Japan and South Korea. Can you add a bit more flavor on the specific market dynamics you've seen over there and what the expectation is for the rest of the year? And then third and last, can you share your high-level view on what we should keep in mind when modeling sales growth and margin dynamics for the second quarter? Justus Wehmer: Falko, update or your question on go-live of the VBP, again, it's -- there is no official statement at this point in time when the tender is published. And therefore, it's all speculation. I think last time between the tender publishing and then the actual roll-in, there were several months in between, and it started with single provinces applying it. And then until it was rolled out across China, I think it almost took 2 quarters. Assuming this year, this process is swifter, then maybe it's only 1 or 2 months before it becomes effective. But since we don't know the date, and I mean, what's reasonable to assume is, clearly, Chinese New Year is basically now. So it will be then most likely not within the next 2 weeks, then we are already almost crossing into March. And as we said, our team expects the tender being published anywhere March, maybe at the latest April. And then counting on that, probably a period until it's becoming fully effective of whatever, 4, 8 weeks, maybe 12, that would be our estimation at this point in time. Japan, South Korea, my perspective would be that with the focus that we are having on these markets, and I think we shared this in earlier calls and also some registrations, especially for products in Japan. Here, for example, the VISUMAX 800, just to mention one very important product. My expectation clearly is that over the course of the year for Japan, we should see some growth. And Korea, as you know, is already a strong market. There's always a little bit of fluctuation. But again, overall, for Korea, I would also not be too negative on our total outlook for the year. Andreas Pecher: Maybe on Japan, just keep in mind, we still have a fairly low market penetration in Japan, which I would see as an upside. Justus Wehmer: And I mean, high-level question on sales growth for the remainder of the year. Quite frankly, if we -- and now we are back to the rationale on cutting or revoking the guidance. At this point in time, I don't have the data points to give you a sales indication. The project funnels look decent. But if we have a big blast from the tender outcome that can be painful and can take away quite a bit of potential on the top line. And likewise, if the winter peak or the performance of the winter peak is, as we said before, one key indicator for the remainder of the year, also something where, I'd say, in 4 weeks, we can comment on that more comfortably. And therefore, I don't want to start speculation here and now. Falko Friedrichs: Justus, my last question was more referring to the second quarter now, the sales and margin dynamics. Justus Wehmer: In the second quarter, here, I would pretty much probably refer you to our typical seasonal patterns. And with the caveat that we, as we said, have potentially the scrapping issue, but that we would consider as a one-off. But typically, the second quarter is compared to the first quarter, a better one. And at the moment, I would also assume this will be the case in this fiscal year. Operator: Thank you very much, Mr. Friedrichs, for your question. We're having another question by Davide Marchesin. Hello? Can you hear us? We unfortunately cannot hear you. Maybe we can move on to another question while you're figuring out the microphone situation. We have another question by Jon Unwin again. Jonathon Unwin: I just had 2 follow-ups, both actually on equipment. The first one is on cataract equipment, so like phaco machines and biometers. Can you maybe just talk a little bit about the sort of regional trends that you're seeing across the U.S., Europe and China? Because I think there was a comment that the cataract equipment was a bit weak in Q1. And also, are you seeing any increased pressure from new competitor launches, specifically in phaco machines that we've seen recently? So that's my first question. And then my second question is on diagnostics. On my numbers in diagnostics for FY '25, it seemed like this business declined quite significantly, maybe even like low double digits. So is that correct? And do you see this sort of similar level of decline in FY '26? And maybe you can help us understand how much of the pressure there is general market weakness, a result of your own price increases and just general delays of the market? And have you got any intention to simplify the portfolio in diagnostics just to focus on say CLARUS and CIRRUS? Justus Wehmer: Jon, on cataract first, I think U.S., as we are or have fairly, frequently commented, we are certainly not where we are since we do not have this bundle capability. I think outside of U.S., Europe and China, I would see us trending pretty decently. So nothing that we observe in particular changing as impact by new machines being offered by competition. On diagnostics, yes, it's the most contested market. That's correct. And obviously, the price increase in the important U.S. market is not helpful. And -- but it's still early in the year. And there, we also have a bit of a seasonal pattern in this business. So therefore, I would still expect recoveries in the course of the year. We also have with the commercial organization, clearly more focus on this portfolio and the associated efforts in selling this portfolio. On the simplification on the portfolio, you probably understand that this is nothing that we're going to share certainly not on speculation or indicating on any specific products, that certainly nothing that we want to read about than in the public, yes. So I'll leave it there. Andreas, anything? Andreas Pecher: I mean it's an obvious question. That's something that obviously we always do. It's part of normal business to always look at your portfolio, where do you add and where you take out. That's -- yes, no specific comment on that one. Operator: Thank you so much for your questions. Mr. Davide Marchesin, do you have any possibility to unmute yourself because I sent you the invitation and I can see that you're unmuted, but we cannot hear you properly. Sebastian Frericks: If not, we can give feedback to the IR team as well, of course. Operator: Yes, exactly. Maybe it's better to place your questions to the IR after this meeting or you can put it into the chat box and I can read it out loud for you if it's too much trouble. Unfortunately, we cannot hear you. Oh, but I can see in the chat that you just placed your question there. I'll read it out loud. The U.S. was significantly down in the first quarter, minus 12.7% organic. You are the only one company reporting such weak results from the U.S. and all the others are reporting strong equipment investment cycle, example, Siemens and Philips. What are the specific issues you're facing there? Justus Wehmer: Thank you. I think I almost gave the answer already. The diagnostical portfolio in the U.S. is one where we typically see the highest sensitivity in terms of prices and price increases. And whereas if you are referring to companies like Siemens Healthineers and their portfolio, they are typically in categories similar to our KINEVO, for example, where reimbursement policies are more favorable and therefore, investment decisions are then made less dependent on price swings. So therefore, I think that, to me, is basically the key difference here that I would highlight. And maybe, again, if you look carefully on the last quarter of the previous fiscal year, there was a very, very strong August and September in the U.S. for devices, and that was always somewhat at the expense of Q1. Operator: There are 3 more questions by Mr. Marchesin. The second one is the IOL business is just EUR 80 million annual revenue or just slightly above 3% of the group revenues and should be a significant component of your weak performance. Justus Wehmer: I think there is a misunderstanding. The 80 million refers to the IOL volume in China. So that for clarification. So therefore, I'm not sure whether knowing this now, whether the question remains the same. But otherwise, frankly spoken, then maybe it's good to follow up with the IR team because it's a little bit difficult to communicate right now. Operator: All right. Thank you so much. I'm going to read out the last question. Is there the possibility of a buyout of your company by Carl Zeiss? Just to know if there is a technical possibility. Andreas Pecher: Maybe I'd comment on that one. Actually, that's something I wouldn't want to comment on to not feed any speculations or get into sort of insider information. Operator: Okay. Thank you so much. By now, we have not received any further questions. So, ladies and gentlemen, if there are some, please raise your hand and I will happily unmute you. As there are no further questions, I would say we come to the end of today's earnings call. And with this, I would hand over again to Mr. Frericks for some final remarks. Sebastian Frericks: Thanks, everybody, for joining, for asking questions in this call and the discussion. Please reach out to the IR team for anything that may have not gotten answered completely or maybe coming up in the next few days. We'll be around talking to sell side and buy side over the next few weeks quite a bit. So look forward to that and to hear you again on our next call at the very latest on May 12. Bye-bye. Andreas Pecher: Thank you. Bye-bye.
Operator: Greetings. Welcome to the Electrovaya Q1 2026 Financial Results Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, John Gibson, CFO. You may begin. John Gibson: Thank you. Good afternoon, everyone, and thank you for joining today's call to discuss Electrovaya's Q1 2026 financial results. Today's call is being hosted by Dr. Raj Das Gupta, CEO of Electrovaya; and myself, John Gibson, CFO. Today, Electrovaya issued a press release concerning its business highlights, financial results for the quarter ended December 31, 2025. If you would like a copy of the release, you can access it on our website. If you want to view our financial statements and management discussion and analysis, you can access those documents on the SEDAR+ website at www.sedarplus.ca, the SEC's EDGAR website at sec.gov/edgar or at our updated website at www.electrovaya.com. As with previous calls, comments today are subject to the normal provisions relating to forward-looking information. We will provide information relating to our current views regarding market trends, including their size and potential for growth and our competitive position within our target markets. Although we believe that the expectations reflected in such forward-looking statements are reasonable, they do obviously involve risks and uncertainties, and actual results may differ materially from those expressed or implied in such statements. Additional information about factors that could cause actual results to differ materially from expectations and about material factors or assumptions applied in making forward-looking statements may be found in the company's press release announcing the Q1 fiscal 2026 results and the most recent Annual Information Form and Management's Discussion and Analysis under Risks and Uncertainties, as well as in other public disclosure documents filed with Canadian and U.S. securities regulatory authorities. Also, please note that all the numbers discussed on this call are in U.S. dollars, unless otherwise noted. Now I'd like to turn the call over to Raj. Rajshekar Gupta: Thank you, John, and good evening, everyone. It is a pleasure to speak with you today as we review our first quarter fiscal 2026 results. Q1 provided a strong start to the year. Historically, this has been our weakest quarter due to seasonality in our core material handling vertical. Despite that, we continue to demonstrate meaningful momentum. Revenue increased nearly 40% year-over-year, margins improved materially, and we maintained profitability, delivering approximately $2 million in EBITDA and over and about $1 million in net income. I'll begin by highlighting key operational developments during the quarter and year-to-date, followed by updates on our product and manufacturing initiatives. During the quarter, we further strengthened our balance sheet through a combination of solid operational performance, support from our financial partners, and the equity raise completed in November 2025. We ended Q1 with the financial foundation to execute the next phase of our strategy, including expansion of manufacturing capacity in Jamestown, New York, expansion into new verticals, and continued development of next-generation products and technologies. Within our core material handling vertical, we continue to make strong progress. Our new OEM integrated high-voltage battery systems, developed over the past 2 years, are now scheduled to begin commercial deliveries in March 2026. We also made deliveries during the quarter to an existing global defense contractor for our new vehicle platform, expanding our relationship to two distinct applications with that OEM. We expect defense to become a meaningful contributor to revenue this fiscal year and a strategic priority for the company over the long term. In robotics, we initiated commercial deliveries of our latest modular 48-volt battery systems to a robotic OEM partner this January. We view robotics as a high-growth vertical aligned with our technological strengths, and we expect deployments to accelerate. Testing of our initial Airport Ground Support Equipment battery systems continues across multiple locations and climate conditions with a leading U.S. airline. While this process has taken a bit longer than initially anticipated, we remain optimistic and believe this product line represents a meaningful long-term opportunity. We also established a Japanese subsidiary during the quarter to support growing demands across Japan and the broader Asia Pacific region. We are seeing encouraging interest across multiple verticals and believe this presence will support long-term growth in the region. Turning to some product development activities. Demand trends in automation, robotics, advanced mobility, and energy storage for data center infrastructure are increasingly aligned with Electrovaya's core strengths, which include safety, cycle life, and high-power capability. We are making strong progress on several key initiatives, including the rapid charging version of our Infinity technology and new energy storage systems focused on high power, especially 800-volt DC architectures. Our ultra-fast charging power system cell development is advancing well. This product integrates a next-generation anode technology with our Infinity platform, including our ceramic separator technology, to deliver enhanced safety and long cycle life while targeting five-minute charge and discharge capability. We have seen significant application potential, ranging from high intensity robotic systems to data center infrastructure support, and we are targeting commercialization in 2027. In parallel, we are developing energy storage systems, energy storage systems designed for emerging 800-volt DC data center architectures. These systems are intended to provide short duration ride-through capability and manage rapid power fluctuations associated with workload shifts and generator transfers. We are currently in early-stage discussions with potential partners in this area. To support these initiatives, we recently hired a new Head of Energy Storage with extensive industry experience to help guide our technical and commercial strategy for this key area. We are also advancing our next generation ceramic separator technology, which is expected to further improve energy density and thermal stability beyond our current platform. We are already seeing strong results and are moving forward with plans to domestically scale up this strategically important technology. Closer to market, we plan to launch new products for Class III material handling vehicles, as well as next generation software and analytics solutions at MODEX 2026, this coming April. Finally, regarding our Jamestown expansion, we have commenced both interior and exterior facility upgrades. Initial dry room equipment required for cell manufacturing has been delivered, and we've begun hiring key personnel to support equipment installation and automation activities. This expansion remains a critical component to our strategy to increase capacity and support domestic production. With that, I will now turn the call over back to John for a detailed review of our financial results. John Gibson: Thanks, Raj. Electrovaya continued its steady growth into the first quarter of fiscal 2026. As Raj mentioned at the top of the call, the company has historically had lower revenues in this quarter due to customer seasonality. However, Q1 showed significant growth year-over-year, and we entered Q2 fiscal '26 with a strong balance sheet and the capital to continue our engineering focus on new market verticals and support organic growth. Revenue for the quarter was $15.5 million, compared to $11.1 million in the prior year. Year-over-year growth of 39%. Our gross margins for the quarter were 32.9%, an increase of 240 basis points over the prior year gross margin of 30.5%. As is the case with previous quarters, gross margins are primarily driven by product mix. However, managing suppliers, prices, and tariffs continues to be at the forefront of our activities as we scale. Management believes the company is well-positioned to maintain strong margins as we continue through 2026. Operating profit increased significantly year-over-year. Operating profit for Q1 was $1.4 million, compared to an operating loss of $0.2 million in the prior year, and the company generated a net profit of $1 million in the quarter, a significant increase from the net loss of $0.4 million in the prior year. Q1 now represents the fourth consecutive quarter of net profit and positive earnings per share, and we believe we can continue this trend of profitability into fiscal 2026 and beyond. Our adjusted EBITDA was $2 million for the quarter, compared to $0.5 million in the prior year, an increase of $1.4 million or 265%. EBITDA grew in the current year due to improved margins and managing operating costs. Adjusted EBITDA as a percentage of revenue was 13% for the quarter. The company generated positive cash flow from operations of $1.7 million, after accounting for net changes in working capital, compared to cash used in operating activities of $0.3 million in the prior year. The company ended the first quarter with positive net working capital of $51.9 million, compared to $12.6 million in the prior year, a current ratio of 6 compared to 1.6. A clear indicator of improved financial performance and management is committed to continuing this positive trend. At December 31, our total debt was $27.3 million, compared to $15.3 million in the prior year. This debt includes both working capital debt and debt from the EXIM facility. The working capital debt was $10.9 million at the end of the quarter, a decrease of $4.4 million over the prior year. This improved debt balance was driven primarily from cash flows from operations. At the end of the quarter, we had drawn $16.4 million from the EXIM loan. We're still in a period of no cash payments with EXIM, with interest payments starting on March 31, 2026, and principal payments starting March 31, 2027. During the quarter, the company raised gross proceeds of $28 million from an equity issuance. The company has utilized some of this cash for engineering and R&D efforts at the end of the quarter. The company had cash on hand of $22.7 million and availability within its banking facility of $9 million. We believe we have adequate liquidity to support our expansion into these new verticals and our anticipated growth as we continue through fiscal 2026. The company made a solid start to fiscal '26, maintaining disciplined progress across operations, which we see continuing into Q2. We expect to build on this momentum as we continue through the remainder of the fiscal year and are reaffirming our revenue guidance of 30% growth for fiscal '26. Finally, I wanted to elaborate on one of the items detailed in the AGM material relating to the re-domiciling of the company. After our equity financing in November, and based on trading activity being substantially higher on the NASDAQ than the TSX, the company expects to lose its foreign private issuer status and be treated as a U.S. domestic filer under SEC rules. This change will subject the company to the full domestic reporting and governance regime, but absent a change in corporate domicile, without the structural and legal advantages typically available to U.S.-incorporated issuers. In addition, as a U.S. domestic issuer, the company will become eligible for inclusion in certain U.S. equity indices. Taken together, these changes position us to broaden our investor base, improve trading liquidity, and ultimately enhance long-term value for our shareholders. That concludes our financial overview. Raj and I would now be pleased to hold the question and answer session. Operator: [Operator Instructions] Our first question comes from Colin Rusch with Oppenheimer. Colin Rusch: Could you give us a bit of an update in terms of the scope and scale of the customers that are moving into your sales funnel, and then how quickly they're moving through and how quickly they're getting qualified on the product? We're just curious about the velocity of some of that sales activity. Rajshekar Gupta: Thanks, Colin. Are you referring just in general or specific verticals? Colin Rusch: Yes. Specific to material handling, just related to numbers. Rajshekar Gupta: Yes, material handling. So in terms of the end customers, there are -- it's dominated by a number of large Fortune 100 and Fortune 500 companies. The largest two buyers have given us very good indications of their demand over the next -- for the full fiscal year, which is partly how we determined our guidance for the year. And they are large retailers, generally, of course, like to take delivery, especially in the quarters outside of this reported quarter. So there, we have very good visibility. At the same time, we have a pipeline of new customers in various stages. Sometimes they're just testing solutions. More often, they have already done that, and they're ordering small batches of systems to get to pilot and then full, full distribution scale. So there, there are various stages there, and that's a pretty good place to be in that segment. So, we're seeing good from there. We're also now starting to add some additional sales resources to broaden that pool. But in the other verticals, I'll talk about robotics there a bit. So we already have a number of partners we have, and we're already now shipping growing numbers of batteries to a couple of these OEMs. For instance, if you visit our plant today, you'll see quite a large number of smaller 48-volt battery systems under various stages of assembly, and that's for robotic applications. But, in addition to that, we are in discussions with approximately three or four additional OEMs in that space. Of course, you know, when you're working on OEM projects, it takes, there is a time quotient, which is a little longer than a standardized product, which is the material handling product. The long answer to your question. Colin Rusch: No, that, that, that's super helpful. And then I'm just curious about preparations for the pilot on the stationary storage project or, product. How those are proceeding, if you had any incremental interest since announcing the new product, where it's a little bit different, you know, characteristics and, and performance specs. It seems like it's, it's really well-tuned to what we're seeing on the data center side in terms of what the real needs are? So just curious about the, the timing on those pilots and, and growth and potential customers there. Rajshekar Gupta: Great question. So essentially, we're coming out with two products for the energy storage space. One is more of a standardized product, which is based on the existing cell that we currently manufacture. And it's a design for high power applications still, 30-minute, 1-hour energy storage. And for that product, we have pilots scheduled. One is a government-backed, a U.S. government-backed project, which we'll hopefully announce soon. And then we are planning some internal pilots as well before we put them at customer sites. The second product, which I mentioned in our prepared remarks, is that 800-volt DC system. And that is something that we've been in discussions with, I'd say some generation, electricity generation companies. So if you look at these data centers, they're often putting diesel gensets and turbines on-site for jet power generation. But those devices need, when you're looking at these 800-volt architecture, they need a energy storage component to deal with the seconds to minutes of demand response there. And so that's the system we're very excited about. That's under development right now, and that system will utilize this ultra-high power cell that we're developing. Operator: The next question comes from Daniel Magder with Raymond James. Daniel Magder: Just curious, as it relates to these new verticals, given the announced deliveries in the defense sector, do you still expect robotics will be the second largest revenue driver in the near term or could defense potentially leapfrog it? Rajshekar Gupta: We are expecting robotics this year to be larger than defense, but they'll both be present in a material way. The robotics deliveries have just started in the current quarter, so there were zero deliveries in fiscal Q1. Daniel Magder: And I guess just a follow-up here, recognizing you have the EXIM loan, the New York State grants and incentives. Given, obviously, the growth in defense and the current administration's focus on it, are there other potential government programs you think you could potentially be able to tap into? Rajshekar Gupta: We think so. This is something that we're starting to look at. Currently, our number one focus is, of course, getting the partners, the right partners here. So we already have two very good, well-established defense contractor customers. We are in discussions with another two. One of them is planning to test our products. So, I think that's the route we're going at it. Eventually, as perhaps look at some of those opportunities you just mentioned. Daniel Magder: Got it. And, I guess lastly for me, given all the positive progress in other areas, is energy as a service still a key initiative for you? And, just wondering if you could provide any color on how it's progressing. Rajshekar Gupta: It still is a key initiative. It is, we are -- we have, what we've seen is some of the customers we thought would be going down that route, decided to make, purchase orders instead, which is great, of course. However, we are looking at a couple partnership opportunities to support energy as a service. One route is partnering with a group who has a large company who has a long history in supporting similar type of activities. And that's something we're considering pursuing. Operator: The next question comes from Eric Stine with Craig-Hallum. Eric Stine: Just jumping around between calls, so I apologize if I'm touching on things you already have. But maybe just material handling, I know that's, the lion's share or the majority of your outlook here in fiscal '26. But when you think about that growth and when you think about the opportunity going forward, how do you think of that between existing versus adding new customers, and, you know, maybe penetration level with those existing customers that you've currently got? Rajshekar Gupta: So today, Eric, we're already supplying at various stages of penetration level, the world's largest companies. And so you couldn't have a better pool of end customers than we have. They all are relatively early in adoption rates, right? So if you look at the addressable market within our existing customers, it's massive, right? So the need to bring in new end customers is actually not, you know, it's important, but it's the larger opportunity is selling more to the folks who are already buying the product. In terms of penetration rates, I'd say we're still early days. The largest operator of our systems has a very large number of distribution centers globally. So I'd say we're early innings with the existing customer base. Eric Stine: Got it. And maybe following up on that, you know, I know that your thought process has been that your solution is really applicable to all sizes of facilities for those existing customers. And has that come to fruition? Are you thinking any differently about the opportunity? And I guess that just speaks to the size of the overall opportunity. Rajshekar Gupta: Yes. The number of solutions -- battery systems we deploy at a typical distribution center can vary widely. There doesn't seem to be a limit to how large a site we can support. And it's so I'd say that's not really a factor. John Gibson: Yes. And we have a site, Eric, with over 300 batteries deployed in vehicles. Rajshekar Gupta: Yes. Eric Stine: I was actually getting at it the other way, that there are some solutions out there that it's, you know, it's tougher to go to the medium and smaller sizes, which is obviously a big part of the market. Whereas that is an area where, you know, I would think that you do quite well in. Rajshekar Gupta: For sure. So there are plenty of sites operating our solution with probably under 10 systems. So there seems to be a broad range that we can service. Eric Stine: Okay. Let's see. Maybe last one for me, just on the defense side. So just so I'm clear, so what you called out is just, you know, so expansion with one of, I think, you currently have two, defense contractors that you've been working with. So I guess first, just confirming that. And then secondly, when you talk about the two plus two additional you're talking with, I mean, are these -- I know it's hard, you maybe can't disclose a whole lot, but are these similar applications with those contractors or is it using your solution in a wide range of things? Rajshekar Gupta: It appears, you know, we only know so much, but it appears these are different applications. So with the defense contractor we discussed in our prepared remarks, they initially, and they continue to use our solution for an autonomous land-based application. And the second application, which we just made initial deliveries for, is for a hybridized vehicle system. The second defense contractor is a submersible application. But in general, you know, we see defense as a good vertical for this technology, given the safety and high performance of our technology. Operator: The next question comes from Craig Irwin with ROTH Capital Partners. Craig Irwin: So, Raj, I have a bunch of small questions around Jamestown that would be really, you know, important to understand as we shape the future. So the first one is, the CapEx outlook for this year. Can you maybe, shape that as far as the quarterly tempo and what your expectations are in this fiscal year? And then, associated with that, you know, where, where do you stand on the, the hiring and training of the workforce, that would be necessary, sort of in tandem with the installation and, and commissioning of that equipment? Rajshekar Gupta: Yes. Craig, I'll let John answer the first part, and I'll jump on the second part. John Gibson: Hi, Craig. So essentially, where we were at the end of the quarter was we'd drawn $16 million, just over $16 million of the full $50 million EXIM loan. So we expect to spend that money before the end of the fiscal year or at least, you know, 90% of it, kind of before the end of the fiscal year. So from a CapEx perspective, you're going to see an increase, certainly within Q2 and Q3. The majority of it will be within Q3 and Q4, though. So yeah, fully spending or at least spending 90% of that loan, and including that CapEx within the fiscal year. Rajshekar Gupta: Yes. and on the second question, Craig, we are hiring people right now. So, about six months ago, we hired a senior individual from LG Chem, who was closely involved with one of their large-scale giga plants. And more recently, we've started hiring other employees. Some will be located at the site, who have experience with other battery manufacturing sites in the United States, some of which may have been closed down. We also hiring great talent, hoped to, you know, there's a long list of folks we're in process of giving offers to, and it seems to be an opportune time to bring in these types of individuals. If we were building this plant a year ago, it would have been much harder to find this level of talent that we're seeing in the market today. Craig Irwin: Understood. That's a good thing. So, next question is, can you maybe give us some color on the revenue contribution out of the Jamestown facility this year? You know, I know your cell manufacturing is supposed to start at the end of the year, if you could just confirm the timeline for that. But do you expect any cell revenue in 2026 from the Jamestown facility? And, you know, roughly what percentage of revenue would you expect this facility to contribute? Rajshekar Gupta: Yes, Craig, all along, we were anticipating Jamestown, especially at the cell level, contribution starting from fiscal '27. So fiscal '26 for us ends at September 30th, and there will be no cell contribution to revenue. Battery systems, on the other hand, that's different. We will, you will likely see, some revenue generation out of that plant in our fiscal fourth quarter, both probably on a module and system side of things. Craig Irwin: Sorry, I meant calendar year. So I'm assuming that all of the cell manufacturing equipment will be in place in your fiscal year before the end of September, with commissioning work underway. But do you expect cell production in that facility in the first quarter of your fiscal seven, the last three months of this calendar year? Rajshekar Gupta: Potentially, correct. Potentially, yes. Of course, it's going to -- It doesn't start out. We'll make sure the output of the plant is matching what we need, of course, right? There's a bit of a start-up period associated with that, but we could most definitely see some contribution in that quarter. Craig Irwin: Understood. Last question, if I may. Can you update us on 45X, what you think the benefit will be on equipment purchases, whether or not you're seeing tariffed equipment impacted, and what you think the potential contribution is, you know, once you are manufacturing your own cells in Jamestown in fiscal '27? Rajshekar Gupta: So there'll be two parts of 45X. There's the $10 per kWh associated with module production, and then there's $35 per kWh associated with cell production. And under the new rules, under the Big Beautiful Bill Act, you can only get one or the other. So what we anticipate is we will start off with the $10 per kWh as we manufacture modules, and when the cell production hits a certain speed, we'll transfer to the $35 per kWh and for the cells and sacrifice the modules. Operator: Up next is Amit Dayal with H.C. Wainwright. Amit Dayal: Most of my questions have been asked, but just with respect to the outlook for the year, you know, the backlog still is at $100 million-$125 million. So the, you know, the top-line guidance seems a little conservative. You know, can you maybe provide any color on what could drive upside to the 30% growth you are targeting this year? John Gibson: So the growth is based on not just the backlog, but the frontlog as well. So that number you quoted is backlog plus frontlog. So essentially, we're taking purchase orders we've received, purchase orders that we know are coming in, confirmation from customers of demand, and then our, you know, our estimates of run rate. And then what we do is we take that number and discount it back based on historic experience with customer delays or purchase order changes, et cetera. So, yes. Rajshekar Gupta: And Amit, you know, 30% growth is not a bad number. I think there, as you can see in our Q1, right, and some people forget this, there is some seasonality on our core material handling vertical. Sometimes distribution centers open a little later than they plan to, if they're a new site. So there's some of that activity you have to take into account. But, of course, there's some upside. You know, we haven't taken into account meaningful revenue from the airport ground equipment space, which could most certainly come into the current fiscal year. But overall, you know, we're very focused on maintaining growth, maintaining the profitability, and these new product developments and new technology developments, in addition to the Jamestown setup. Amit Dayal: Understood. And then on the solid-state side, any important milestones you are targeting to hit this year? Do these include maybe any pilots that could begin with customers? Rajshekar Gupta: Yes, good question. I didn't discuss the solid-state battery much in the prepared remarks, but we had reached a certain level of development, I'd say, back in the summer, which was looking good, but we were somewhat hamstrung by equipment in terms of to get it to a pilot scale. We ordered the equipment several months back. It has arrived at our lab site already and is being installed. So we will start scaling up cells using our solid-state battery technology really from April onwards. And at that point, if things look good, we will start looking to sample them as well. So there's definitely activity there. We've added a couple of key researchers to our team. Most definitely, we have not forgotten about that technology. On the IP side as well, we're close to being awarded some patents around our solid-state technology, but, you know, we're in the back and forth with the examiners at the moment. Operator: Next question comes from Jeffrey Campbell with Seaport Research Partners. Jeffrey Campbell: Raj, my first question is, I assume the OEM integrated high-voltage batteries refers to Toyota heavy-duty MHE, but you can correct me if I'm wrong. If so, can you give us some color on how many models are integrated at present, and what it might look like over the next couple of years? Rajshekar Gupta: Yes, you're probably correct. You are correct, yeah. The model I referred to is a high-voltage system, which is going into -- there are a couple models of batteries and is going, we believe, into two distinct vehicle systems. And so there are orders for those vehicles already. The reason production is starting in March is it coincides with certification. Jeffrey Campbell: Okay, great. My next question was regarding the solutions you mentioned. I think you're going to have a place where you're going to display your solutions targeting Class III MHE. I was wondering, is this going primarily to robotics applications or will you also support more traditional Class III equipment? Because I believe in the past, you've tended to identify Class III as generally unable to support your margins. Rajshekar Gupta: It is the latter. So it's our expanding in the material handling vertical with a Class III product, which we normally had shied away from. We believe we can maintain those margins. The reason we're developing that product is it has sort of been driven customer-driven, and but we will be able to maintain the margins with that product. It takes advantage of some aspects of the robotic battery systems that we've developed, so there's some overlap in the design of the system. Jeffrey Campbell: Okay. Yes, that's very interesting. And I guess my last question for today is kind of a more open-ended one regarding the next-generation ceramic separator development that's undergoing. I was just wondering, what are the specific areas that you see demanding improvement here? I'm not trying to be coy, but the existing tech is class-leading, so I'm interested in your insight here. Rajshekar Gupta: Yes. That's definitely a valid question. So the current technology is working well. It's very well-validated. Of course, you want to continue to improve that technology, and that's one aspect of what we're doing here. Improvements would be to make it thinner, make it even higher thermal stability, use new novel materials, which we're working on. And also, the current separator is working very well. It's being manufactured under contract in Japan. This one will be manufactured domestically. So that's another, I wouldn't say benefit, it's just an addition. But it supports some activities, like, for instance, this high, super high, ultra-high power cells. It has a benefit there. Potentially, this new material can also be utilized in other cell formats. That would be a major breakthrough for us, but it's too early to say. Jeffrey Campbell: We'll stay tuned for that. That sounds provocative. Operator: We have a follow-up coming from Colin Rusch with Oppenheimer. Colin Rusch: I was missing asking around the ground service equipment opportunity and how we should think about the cadence of that moving forward, going from piloting into a more substantial order and kind of the order of magnitude of that opportunity set for you guys right now? Rajshekar Gupta: So what we're looking at is to go to that more substantial order. We've already received some pilot orders, which are essentially already been delivered or some of them are mostly been delivered, but this would be a go to scale, right away. And so the opportunity we're looking at with this first airline is for, for a reasonably large-scale deployment. Operator: The next question comes from Graham Tanaka with Tanaka Capital Management. Graham Yoshio Tanaka: I'm just putting this all together. You have a lot of moving parts, and I just wonder if you could summarize for the next two years, what are the main areas that can increase gross margins and operating margins versus decreasing? And on the decreasing side, if you could address your semiconductor content and what kind of cost increases you're getting in semiconductors. Rajshekar Gupta: So, overall, you know, as you saw in this current quarter, margins improved, going from about 30% to about 32%. We expect to maintain that level of activity, that level of improvement in the coming quarters. That's sort of what we're anticipating. Those, I'd say, relatively modest improvement in margins, but it comes with, you know, it correlates to improved financial results. The bigger change in margins will occur following Jamestown cell production coming online, and that will be due to, A, you know, the vertical integration, but B, the ability to leverage the 45X production tax credits. And the second part of your question on, I guess you mean-you don't mean semiconductors, you mean input materials. We're, you know, Electrovaya, our batteries are generally more expensive already, so input material price variations have an impact, of course, but I probably have a more nuanced impact than it does on our commodity-driven rivals. Graham Yoshio Tanaka: So, I just want to make sure that if there's any issues on supply or cost increases in semiconductors, which we're seeing across all Silicon Valley companies, whether you can cover any cost increases and can secure all supply that you think you might need in semiconductors. Rajshekar Gupta: So in terms of material inputs, the one that, you know, has fluctuated is lithium carbonate pricing, but it hasn't fluctuated enough for us to have any noticeable impact on margins. We, of course, can also update pricing to our customers, which we haven't needed to, if those prices do go in the wrong direction enough. The only materials which probably are common with the semiconductor space is maybe alumina, but there, again, it's not substantial enough in our bill of materials to have a major impact. Graham Yoshio Tanaka: Right. That's great. I don't know if you can have added it up, but what percent of your business can be coming from military spending? You addressed defense, but it kind of goes into a few different areas. I'm just wondering if that is going to rise as a percentage of the mix and are the margins going to be lower in defense? Thank you. Rajshekar Gupta: So sorry, on the last part, margins in defense, we would expect to be higher. Now, the defense space, at least from our experience, it moves slowly in terms of qualification, and they're very, very careful. A lot of testing validation goes into this. There's also certain certifications. I don't want to get too deep into it, but there's MIL and Navy certification levels that you have to achieve sometimes. So it moves -- It's a sticky space. Once you get designed in, you're designed in. But in terms of how quickly it scales in volume, my anticipation is it scales slowly. Operator: We have no further questions in the queue. I'd like to turn the floor back to management for any closing remarks. Rajshekar Gupta: That concludes our call this evening, and thank you for listening. We look forward to speaking with you again after we report our second quarter 2026 results. Have a wonderful evening. Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Operator: Good morning, ladies and gentlemen. My name is Vanessa, and I will be your conference operator today. [Operator Instructions] At this time, I would like to welcome everyone to the Agnico Eagle Mines Limited Q4 2025 Conference Call. [Operator Instructions] Thank you. Mr. Ammar Al-Joundi, you may begin your conference. Ammar Al-Joundi: Thank you, operator. Good morning, everyone, and thank you for joining our Agnico Eagle Fourth Quarter and Year-end 2025 Conference Call. I'd like to remind everyone that we'll be making a number of forward-looking statements, so please keep that in mind and refer to the disclaimers at the beginning of this presentation. This morning, we're pleased to announce another strong quarter, capping off a remarkable year. In 2025, as gold prices hit new highs throughout the year, Agnico Eagle delivered on our production targets, we delivered on our costs, and we did it responsibly and reliably. While the price of gold went up $1,700 year-over-year, our cash costs went up $76 per ounce. This means we delivered over 95% of this gold price increase to the benefit of our shareholders, delivering on our core mandate of providing gold upside leverage to our owners. In 2025, we repaid almost $1 billion in debt. We built up almost $3 billion in cash, and we returned over $1.4 billion directly to our owners through dividends and share buybacks, all while continuing to invest heavily in our future through the largest exploration budget we've ever had and through continued strong investments into our 5 key growth projects. In an exceptional year for gold, Agnico Eagle delivered on our commitments to our owners, to our employees and to our communities. This strong momentum continues into 2026 and beyond, supported by a stable annual production profile of between 3.3 million to 3.5 million ounces over the next 3 years at peer-leading costs while reporting record reserves, record resources, record inferred ounces and an increase to our dividend. While 2026 cash costs are forecast to be up a little over $100 per ounce compared to last year, more than half of that increase is from the assumption of higher royalties and a stronger Canadian dollar. Excluding those assumptions, our cost increase is about 4% to 5%. This would be at or slightly below the inflation we saw in the industry last year. So good cost control on the factors that we can influence. Our reserves are at a record 55.4 million ounces, up 2%. Our resources are at a record 47.1 million ounces, up almost 10% and our inferred ounces are at a record 41.8 million ounces, up a remarkable 15.5%. 2025 was an exceptional year, and our near-term prospects look even better. But the real story this morning, the real excitement is not in looking back or even the next 3 years. The real excitement this morning is that Agnico Eagle is in the best position we've ever been in, and we're already aggressively advancing our next phase of growth and growth per share. This morning, we want to focus on our plan to increase production by up to 20% to 30% over the next decade with a path to over 4 million ounces of annual production by the early 2030s. This growth is from the highest quality projects in the best jurisdictions in the world. This growth is from projects we already own in jurisdictions we know well with existing teams and in most cases, leveraging off existing infrastructure. This is important because our job isn't simply to grow but rather, it's to grow value for our owners on a per share basis. And in our industry, growing in stable jurisdictions, leveraging existing infrastructure not only delivers to our owners the best return on capital, but also the best risk-adjusted return on capital. Next slide, please. These assets were over the past few years, we've been investing substantial time, energy and money and where our investments are accelerating. We're at a point where we see a step change in production per share starting in 2030, and we're eager to share our progress with you this morning. At Detour Lake, the largest gold mine in Canada, where we're executing a plan with the potential to deliver an additional 300,000 to 350,000 ounces per year through the development of an underground mine, we've added 4.3 million ounces of resources during the past year in the high-grade mineralized corridor that's amenable to this underground mining. And we're tripling our investment from $100 million to $300 million as we accelerate our work towards a go-ahead decision mid-2027 and potential to start underground production as early as 2028. At the Canadian Malartic complex, the second largest gold mine in Canada, where we see an opportunity to add a remarkable 400,000 to 500,000 ounces per year through our fill-the-mill strategy. We've added 9 million ounces of reserves since our last technical update. We're ahead of schedule on the ramp, expected first production from East Gouldie this quarter and ahead of schedule on the first shaft expected to commission in 2027. We're making excellent progress evaluating opportunities to fill-the-mill further via the Marban open pit via Wasamac underground and via a second shaft, all 3 with targeted first production by 2033. At Upper Beaver, which is expected to produce over 200,000 ounces per year, we're ahead of schedule again on both the ramp and the shaft. We're increasing our investment from $200 million to $300 million to accelerate the development of the project with the goal of bringing production forward to 2030. At Hope Bay, where we're working on a study that supports a 400,000 to 425,000 ounce per year operation, we saw a 46% increase in inferred mineral resources, primarily from Patch 7. We expect a study update and potentially a project approval as soon as May of this year. We continue to make good progress at San Nicholas and hope to have permits to move forward shortly. These projects alone have the potential to add 1.3 million to 1.5 million ounces of highly profitable annual production. And in each case, we've made excellent progress, and we're moving forward aggressively. With that introduction, I will now turn over the presentation to our CFO, Jamie Porter, to review our third quarter and full year results. James Porter: Thank you, Ammar. As Ammar mentioned, we delivered record financial results in 2025, driven by a strong operating performance disciplined cost control and a supportive gold price environment. We finished the year with a solid fourth quarter, producing approximately 841,000 ounces of gold at total cash cost of $1,089 and all-in sustaining costs of $1,517 per ounce. Costs increased quarter-over-quarter, primarily due to higher royalties, lower production volumes and higher costs at our Meadowbank mine associated with extending mine life. Despite higher costs, we delivered a number of financial records in the fourth quarter, including record adjusted earnings of approximately $1.4 billion or $2.70 per share and record free cash flow of over $1.3 billion or $2.62 per share. For the full 2025 year, we exceeded the midpoint of our guidance with gold production of 3.45 million ounces, underscoring our consistent track record of execution. Total cash costs and all-in sustaining costs were $979 and $1,339 per ounce, respectively. Both were slightly above the top end of our guidance ranges due to higher royalty costs driven by an average realized gold price of $3,454, nearly $1,000 per ounce above our guidance assumption. We exclude the impact of higher royalties, our total cash cost would have been $937 per ounce, $42 per ounce lower and below the midpoint of our guidance, again, reflecting strong cost discipline and execution by our operating teams. With this performance, we generated strong leverage to the gold price, capturing approximately 95% of the increase in gold price and margin expansion and delivered record financial results across the board, including approximately $4.4 billion in free cash flow for the year. We turn to the next slide. Our record financial performance and continued margin expansion benefited our shareholders, both through increased direct returns and through a materially stronger balance sheet. In 2025, we repaid approximately $950 million of debt and increased our cash position by $1.9 billion, ending the year with $2.9 billion of cash. We delivered record shareholder returns through share buybacks and dividends, totaling approximately $500 million in the fourth quarter and a record $1.4 billion for the full 2025 year. We are in the strongest financial position in our company's history, and we believe we are exceptionally well positioned in the current gold price environment. We expect to continue to increase shareholder returns. We increased the quarterly dividend by 12.5% to $0.45 per share. And at current gold prices, we expect to be more active on share buybacks. To support this, we intend to renew our normal course issuer bid in May and increase the purchase limit up to $2 billion. In 2025, we returned approximately 1/3 of our free cash flow to shareholders, and we see the potential to increase that to 40% or higher this year with flexibility depending on the gold price and the needs of the business. At the same time, we remain focused on further strengthening our financial position. As a reminder, given our strong profitability, we are required to pay a significantly higher cash tax liability related to the 2025 fiscal year this February, which is approximately $1.3 billion, and we have the cash on hand to fund that obligation. Lastly and importantly, we continue to deploy capital in a disciplined manner to advance our highest return organic growth opportunities. While current gold prices are driving strong cash flow generation, we remain committed to disciplined capital allocation with a continued focus on enhancing long-term shareholder value. We move on to the next slide. We have updated our guidance and continue to expect stable production levels over the next 3 years. We're especially proud of the work our team has done as we were able to provide an improved outlook for 2028 relative to consensus, supported by a life of mine extension at Meadowbank and higher levels of production from Canadian Malartic, Fosterville and Kittila. We turn to costs. The midpoint of our 2026 guidance ranges are $1,070 per ounce for cash costs and $1,475 per ounce for all-in sustaining costs. Approximately 60% of the increase in cash costs relative to 2025 reflects higher royalties, driven by a higher budgeted gold price of $4,500 per ounce and the impact of a stronger Canadian dollar. The remaining 40% of the increase reflects expected inflation of approximately 4% to 5% and the impact of lower grade mining sequences. Beginning in 2026, to enhance consistency and comparability across our Nunavut operations, we have adjusted the calculation of total cash costs and all-in sustaining costs to exclude certain payments at Amaruq that are made to the NTI, an organization representing the Inuit of Nunavut. These payments have similar characteristics to mining duties we pay under the Nunavut mining regulations, which are already excluded from the calculation of total cash costs and all-in sustaining costs. Our cash costs and all-in sustaining costs remain hundreds of dollars per ounce below those of our peers, reflecting the quality of our asset base and continued cost discipline. If we look at our capital expenditure guidance, it reflects our focus on reinvesting in the business to lay the groundwork for our next phase of growth. We are accelerating capital at Detour Underground and Upper Beaver through mid-2027. In addition, Hope Bay represents an attractive growth opportunity. If approved, we expect additional capital of approximately $300 million beyond what is currently reflected in the guidance for 2026. Dom, Natasha and Guy will provide further detail on these projects later on the call. Together, these projects represent compelling opportunities that deliver strong returns with significant upside and the potential to create value for decades to come. Overall, our updated guidance reflects a consistent and reliable business at peer-leading costs as we continue to advance our pipeline of growth projects and remain well positioned to deliver meaningful leverage to higher gold prices. With that, I'll turn the call over to Dom. Dominique Girard: Thank you, Jimmy. Good morning, everyone. In my part, I will cover the operation and key project highlights for Quebec, Nunavut and Finland. Q4 has been a very stable, again, consistent quarter that contributed to a strong 2025 on production and costs. Thanks to all employees and management teams for their commitment, engagement, but specifically about the collaboration to keep improving the business. And a good example of that collaboration is about how we are around how we are better usage -- we do a better usage of our data. It is highlighted here in the outlook. At LaRonde, the last 6 months, they've worked on telemetry to analyze the data, the behavior of the equipment and the behavior of the operator to better understand how this was going. And they've been able to improve the number of hours on the transmissions and motors from 3,000 hours up to now 6,000, 7,000, 8,000 hours. This has been done by building an in-house expertise on analyzing data and finding trending and then getting back to the operator, getting back to the trainers to go in that direction. So this is a very good way to be more efficient. And this is also something which is transferable to other operations and other projects that we're currently building. So through that collaboration, now we're transferring that to Goldex and then it's going to go also to other divisions. Same thing with the fleet management system. We're piloting right now at LZ5. So specifically, we're going to have a dispatch system into our ramps for you that have already been underground into a ramp, you could see how it could be a mess sometime. So we're now bringing that to another level. And all that knowledge is going to be rolled out also at Odyssey and Amaruq later this year. Another good news on the outlook is Meadowbank mine life extending up to 2030. Meadowbank has played a very important role in smoothing our 2026, 2030 production profile by bringing those additional ounces. Thanks to the Meadowbank team for this key contribution. Those ounces are, yes, higher risk, but no higher risk. I mean, higher costs, but low risk into, let's say, currently -- current infrastructure. So that's very positive. And thanks for the team also to keep looking for more options to potentially extend it beyond 2030. This is still under review. Next page. Malartic fill-the-mill strategy. So back in 2023, when we released our first or updated study on that, we had 9 million ounces. The mine life was going to 2042. With the good drilling done, we've been able to potentially extend by double that mine life. So with the first shaft, which is illustrated on the first line here at the bottom and the ramp, we're still very in good position to deliver that on time, on budget. But since we are adding more ounces, that could bring us up to 2056, 2057. So this is why the second line is now into play. How could we bring those ounces faster into the time. So the team is working on that to potentially have a second shaft in operation in 2033. That's one part of the vision of the 1 million ounces. Again, back to the 2023, we, at the time, set a vision, okay, how could we bring that to 1 million ounces using just 1/3 of the mill. The first second shaft is a good example. And as well in the last 3 years, we have worked to bring also Marban and Wasamac satellite ore body that's going to be transported to Malartic, and that also could bring more ounces. If you add, you do the sum of that, we're at the 1 million ounces. We are progressing well into the studies, and we're targeting to give you more information on that potentially end of Q3, early Q4 next year that you're going to be able to have a better view on all of them. So very positive news. The-fill-the mill strategy is taking place, and there's still room also at the mill. If you do the sum, all of that, you're going to be at 46,000 ounces per year. So there's still over 25 drills running into the region around Canadian Malartic, and who knows where we're going to be in 3 years from now. Next slide. At Hope Bay, back in 2021 after the acquisition of TMA, we quickly set a target to bring it over, let's say, north of 350,000 ounces per year to make that project economical. So the good news is we are reaching that now, and we are looking to release and to give you more information about that in May this year. The study looks like a 6,000 tonne per day north of 400,000 ounces per year. So we're reaching our target. We're going to be able to start to, let's say, first kick off a 10-year life of mine. This is what we're looking for. And if this goes forward, we're going to be able to spend -- we're well prepared to spend an additional $300 million on top of what we're guiding right now. So it's very positive. And the study is built on strong foundation using Meliadine and Amaruq mine benchmark. So we know what's going to be the cost. We know how we're going to operate that. It is backed with historical background, historical information on the OpEx, on the CapEx, how it's going to cost to build. Secondly, we are over -- we're going to be over 50% of engineering. That was a clear target. We're reaching that. And on the execution, it's not our first barbecue in Nunavut. So we know how to do it. It's going to be the same team using the same contractors or partially same contractors, and we know it's going to be a success. On that, I will pass the mic to my great teammate, Natasha. Natasha Nella Vaz: Thanks, Dom, and good morning, everyone. I'll cover the operational highlights for Ontario, Australia and Mexico. The regions delivered full year production as planned and demonstrated balanced execution across the portfolio. And at the same time, they continue to advance initiatives to further optimize our performance. At Macassa, we're very proud of the team as we've achieved record gold production. And in 2025, anticipating declining reserve grades in the coming years, the team proactively initiated work to increase mill throughput. And now in 2026, we continue to advance these initiatives with a target to increase throughput to 2,150 tonnes per day by the end of 2027. At Fosterville, we're taking a very similar approach to managing declining reserve grades. We now have a plan to increase the milling and mining rate to 3,300 tonnes per day by 2028 through various optimization efforts. And this plan is expected to support annual production of somewhere around 160,000 to 190,000 ounces starting in 2028 and into the early 2030s. And we continue to see significant upside at Fosterville through exploration to support mine life extension. At Detour, despite the pit delays this year, the mill achieved record annual throughput of 28 million tonnes. That represents a 35% increase since the mill expansion began 6 years ago. I just want to take a moment to commend the site team for this achievement. It was a lot of hard work to get there. So I just wanted to say a quick thank you to the team. The team is now focused on further optimization with a revised time line to support a more measured ramp-up to 29 million tonnes, giving the team a little bit more flexibility and to optimize processes and embed sustainable operating practices. Now moving to the next slide. The mill optimization that I just spoke about to 29 million tonnes is part of Detour's next phase of growth, which also includes the development of an underground operation. We're advancing on both fronts, and we have a clear line of sight to achieving 1 million ounces of annual gold production in the early 2030. In 2025, we made good progress in advancing permitting in exploration, in high-intensity drilling, in establishing the key infrastructure on surface and, of course, developing the exploration ramp. So given our increasing confidence in the underground project, we've decided to accelerate approximately $200 million of capital through to mid-2027. This acceleration of capital is expected to derisk project construction and ramp-up and also could accelerate the development towards the main ore zone. At the same time, we're also assessing to begin incremental underground production from a shallower Western extension zone as early as 2028. So since our last project update in June 2024, the mineral resources have increased significantly. As a reminder, only 4 million ounces were included in the underground study update in June 2024, while our year-end mineral resources are now roughly at 6 million ounces in measured and indicated and another 6 million ounces in inferred. And considering the continued exploration success, we feel that there is an opportunity for a larger underground mine than the one we first envisioned. The combination of exploration success and this higher gold price environment has given us a lot of optionality at Detour that we're in the early stages of evaluating. This could include a higher milling capacity, a larger underground scenario or a larger open pit. We said when the study was completed in 2024 that this was just a snapshot in time, and we continue to believe that. So stay tuned. We feel that further opportunity is still ahead at Detour. Now moving to Upper Beaver. The project continues to advance very well there. The exploration ramp is ahead of schedule. And in the fourth quarter, we began shaft sinking and by year-end, the shaft reached a depth of 155 meters. The team has done an excellent job. And given their strong execution, we're now planning to spend an additional $100 million from now until project sanction that's expected in mid-2027. Again, like the Detour underground project, this acceleration of capital is expected to derisk the construction and ramp-up and also accelerate initial production to 2030. Now I've said this before, but the Upper Beaver project could unlock significant long-term value across the company's wider Kirkland Lake camp. In addition to the potential extension of the mineralization at depth at Upper Beaver, the project could also support a centralized mill strategy for satellite deposits that are nearby, like Upper Canada or Anoki-McBean . All in all, the Upper Beaver project is progressing very well. I would like to end by just thanking the teams for their passion, their persistence, their incredible efforts in 2025. It's very much appreciated, and I look forward to continuing to advance the optimization efforts with you and the key projects. With that, I'll pass the call over to Guy. Guy Gosselin: Thank you, Natasha, and good morning, everyone. First of all, I would like to take a moment to thank all of the exploration team at the different mine sites and regional exploration offices across the company for an excellent year for safety, productivity and cost control. We had more than 120 drill rigs in action through the year in 2025 and safely completed nearly 1.4 million meters of core drilling while controlling our unit costs that were slightly lower than previous year. Our commitment to innovation led by our drilling excellence team continue to pay off and will be an important part of our success moving forward as we are undertaking 2026 with an objective to exceed 1.5 million meters of drilling. On Slide 14, the 2025 exploration drill program across our operation and key pipeline project, combined with the acquisition of Marban project next to the Canadian Malartic complex led to a very strong mineral reserve and mineral resources total at year-end 2025. Year-over-year, our mineral reserves are up 2.1% to 55.4 million ounces. Our measure and indicated mineral resources are up by almost 10% to 47 million ounces. And our inferred mineral resources are up by an impressive 15.5% to 42 million ounces, demonstrating the strong exploration upside of our asset. And as we can see on the graph on the right-hand side of that slide, if we look globally since the merger in early 2022, despite the fact that we've mined approximately 15 million ounces over that period of time, we'll still manage to significantly grow our mineral reserves net of mining depletion to a record of 55.4 million ounces through successful exploration, conversion, delivery of studies and smart acquisition over the last 4 years. From a results standpoint, I would like to comment on 3 projects. On Slide 15, in Malartic, the great result produced throughout the year at East Gouldie, Odyssey and the parallel Eclipse zone led to an addition year-over-year of about 470,000 ounces in underground proven and probable reserves and of 2.9 million ounces in inferred mineral resources, including 600,000 ounces from the newly discovered Eclipse zone parallel to the East Gouldie close to our planned mining infrastructure. And on the adjacent Marban project, 128 drill were completed totaling in excess of 39 kilometers of drilling in 2025. An initial mineral reserve declaration of 1.58 million ounces was made from 52 million tonnes at 0.95 gram per tonne as part of our fill-the-mill strategy. The initial mineral reserve was calculated from the existing drill hole database at the time of the acquisition and did not incorporate any of the 2025 drilling. We plan to deliver an updated study of the Marban project at the end of '26, incorporating new drilling as well as additional opportunities for synergy with the Canadian Malartic complex relating to workforce, equipment and facilities in order to optimize Marban as part of our fill-the-mill strategy. Now on Slide 16, at Detour, drilling has continued extremely well in the year with 215 kilometers of drilling completed, mostly focused on the infilling and expansion of the mineral resources towards the west to advance the underground project. 2 areas were specifically targeted, one below and around the center point of the current reserve open pit illustrated here in orange on this graphic. The results in this area continue to support the 2 mining approach with several wide intervals with combined width exceeding 200 meter locally between 1 and 2 gram per tonne, including narrower high-grade intercept reaching up to 10 grams over 10 meters that could be mined sooner from underground while keeping the option to mine a much wider, lower grade surrounding mineralized envelope in a future larger open pit scenario. The other area being targeted is located 3 kilometers to the west and outside to the west of the current ultimate open pit scenario, close to the underground exploration ramp currently being developed. This area also returned strong results up to 10 grams over 10 meters and remains open at depth into the west. At year-end 2025, the resources amenable for underground mine project now stands at 5.5 million ounces in measured and indicated and 5.8 million ounces in inferred. This will provide a much larger mineral resources base for the upcoming update of the Detour underground project compared to the 2024 initial study that incorporated only 4.6 million ounces in the first iteration of the mine plan. And last but not least, at O3, we had 6 drill rigs operating through the year, completing an excellent total of 131,000 meters of drilling in 2025. We continue to see strong results in the Patch 7 area, both at depth and in the southern extension. The excellent result provided through the year led to the addition of 1 million ounces year-over-year in inferred resources, mostly from the Patch 7 area. With the strong addition of mineral resources since the acquisition of the project in 2021, we have a much larger resources base to support the project development -- redevelopment plan that was discussed earlier by Dominique. In 2026, exploration will continue to focus on growing and converting resources to reserve to support the project development and deliver an updated reserve estimate at the end of 2026. So all in all, an excellent year in exploration that translated into a significant addition of reserve to support our short- to medium-term production growth vision, but even more importantly, a very significant increase of 15% in our inferred resources that makes us confident in a bright future. This result keeps demonstrating the phenomenal exploration upside of our portfolio of projects and the outstanding work being done by our great exploration, technical services and operation team across our different operation and key value driver project. And on that, I will return the microphone to Ammar for some closing remarks. Ammar Al-Joundi: Thank you, Guy. At Agnico Eagle, we are proud of our record of growing value per share for our owners over decades, not only by providing full leverage to gold prices, but also importantly, by growing gold production per share. As we look forward, we're excited that even as the second largest producer of gold in the world, we see a clear path to a decade of continued and meaningful increases in production per share at peer-leading costs with exceptional risk-adjusted returns. And we're already working on additional projects that have the potential to add even more growth, including early work on Hammond Reef, Timmins East and Northern Territory. Next slide, please. As you can see, we continue to work hard for all of our stakeholders, and we will continue to build off the same foundational strategic pillars that have served us well over the past 68 years. We're going to continue to focus on the best mining jurisdictions based on geologic potential and political stability. We'll continue to be disciplined with our owners money, making investment decisions based on technical and regional knowledge, creating value through the drill bit and through smart acquisitions where and when it makes sense. We are uniquely well positioned with a quality project pipeline, leveraging existing assets in the best regions in the world and where we believe we have a strong competitive advantage. And we will continue to be focused on creating value on a per share basis and on being leaders in our industry in returning capital to shareholders as evidenced by over 42 years of consecutive and growing dividend payments and increasing share buybacks. In summary, 2025 was a great year for the gold market. 2026 is off to an even stronger, albeit volatile start. And while we don't have a crystal ball to predict prices next week or next month, we do remain constructive and positive on the long-term gold price going forward due to global structural financial and political currents that are not easily changed. Our goal is not only to give our owners full upside leverage to gold prices, but to give them more gold per share over time. We've done that for decades, and we have a solid plan in place to continue to do that over the next decade. all while having the highest quality assets in the best jurisdictions in the world at peer-leading costs. At Agnico Eagle, our business is going well, and we're in the strongest position in our almost 70-year history. Thank you again for joining us on this call. Operator, may I ask that we now open up the call for questions. Operator: [Operator Instructions] And we have our first question from Lawson Winder with Bank of America. Lawson Winder: If I could just tackle the subject of M&A right off the block, and I understand that it's probably a little bit sensitive right now, but any color you could provide would be helpful. But has Agnico decided if they would tender their shares to the offer currently out on Foran. Ammar Al-Joundi: Well, thanks, Lawson. Look, like any M&A activity, the decisions are up to the various shareholders, and there's a lot more shareholders than us. So that's not really something I would be comfortable discussing. Lawson Winder: Okay. I thought I would try anyway, but I completely understand. And then maybe just sticking with that theme, there has been an acceleration in M&A activity in the gold space in recent years, but even in recent quarters. What is the current view from Agnico in terms of M&A? And of course, I mean, I acknowledge that you have tremendous growth potential in the existing portfolio. But I mean, opportunities do emerge from time to time. What is the thinking on that, particularly with respect to jurisdiction, but also just respect to your thoughts on potential urgency around M&A. Ammar Al-Joundi: Well, it's an excellent question. And I'll start M&A, like exploration, like project investment is a capital allocation decision. And it's our owners' money, and we take that seriously. And everything we invest in is designed to create value for our owners on a per share basis. What does that mean for M&A? That means a couple of things. The first part is, are you positioned to be able to identify and assess good opportunities to invest your owners' money, including in M&A. And I think we're very well positioned. You know us. We know everybody in the communities and the regions we work with. We have good relationships. We have, in many cases, a very good understanding of the various assets out there. So we are well positioned, and this is important, like it's easy to buy stuff. it's hard to buy stuff that makes money for your owners. So the first thing is, are you positioned to have a knowledge advantage. And I think we are well positioned there. But what I would say, Lawson, is we are willing to move and we have moved when we see an opportunity on the M&A side that actually creates value per share. We're not interested in just getting bigger. The hard part is actually creating value per share. And so that's going to always be the driver, not only of M&A, but all of our capital allocation decisions. Operator: We have our next question from Fahad Tariq with Jefferies. Fahad Tariq: Maybe just to clarify, there were a few cost productivity initiatives mentioned in this presentation. I remember there were a lot more also mentioned in the last quarter presentation. Is this already incorporated in the 2026 ASIC guidance? Or is this further improvement from the guidance that's provided? Dominique Girard: Dominique speaking. I would say it's partially included, but not all. We all -- it's Natasha and myself role to put the bar at the right place for budget and guidance, but we keep some flexibility in that. Fahad Tariq: Okay. And then just on the underlying inflation, I think the comment was made, and this was in the press release, somewhere around 4% underlying cost inflation. Can you just remind us like -- or any other color on consumables versus labor? Fuel is probably a tailwind at this point. And any key labor agreements that are coming up for renewal in 2026? James Porter: Yes. So Fahad, it's Jamie. I can comment on that. I'd say, I mean, our biggest cost apart from taxes now is labor. It's about 45% of our overall cost structure. And we've seen labor inflation running in around 4%. Across the other consumables, chemicals, reagents, equipment, parts and supplies, there's some fluctuation. But overall, I think across the industry last year, inflation -- cost inflation ran around 5%. So 4% on labor, 5.5%, 6% on everything else. Ammar Al-Joundi: And I'll make the comment. When you observe what's really pushed costs up in the past, it hasn't been so much that labor costs went up 6% instead of 4%. It's been when you can't get the labor and when you can't get the parts. At $5,000 gold, we anticipate there is going to be more pressure on workforces. But one of the advantages we really believe we have at Agnico is our lowest turnover in the industry. We've been the #1 employer in the regions we operate for decades. We have really good relationships with our people. And more than the -- whether it's 5% or 6%, it's going to be, can you keep your turnover low? Are you going to get the kind of productivity that you depend on from really the best workers. And we think we are very well positioned in the market for that. Operator: We have our next question from Josh Wolfson with RBC Capital Markets. Joshua Wolfson: If everything goes according to plan with the project portfolio, I'm wondering if we should expect CapEx to increase in future years? Or should we think about the current run rate as more of a plateau going forward? James Porter: Yes, Josh, it's Jamie here. It's a good question. And I think, I mean, with the 20% to 30% production growth starting in 2030 and ramping up through the decade, you're seeing the benefits of that capital spending. Assuming we go ahead with Hope Bay and approve construction of that project in May of this year, that would add about $300 million to maybe $350 million of capital. So if you factor what we've guided, the $2.1 billion that we guided of the $300 million for Hope Bay, we're about $2.5 billion -- $2.4 billion, $2.5 billion of capital this year, plus another $400 million of capitalized exploration. I think that's an appropriate range over the course of the next few years. We will see capital kind of stay at that elevated level. And then once we start to see that stair step increase in production in 2030, you'd expect the capital to start to come off. Ammar Al-Joundi: And it's important to note, we are voluntarily accelerating these investments. These are not overruns. These are not things we are voluntarily accelerating because at these prices, these projects really do deliver exceptional returns in the sort of 30% to 60% IRR range. And again, our job is to make our owners money. And if we can make them an IRR of 30% to 60%, that's a good thing. So we -- again, to emphasize, these are voluntary decisions we made to accelerate what we think are the best projects in the world. Joshua Wolfson: I hear you. I look forward to these project updates and the IRRs at $5,000 gold. Just on the capital allocation side of things, at current gold prices, even with the new dividend and assuming completion of the $2 billion upcoming NCIB, by our forecast, you're still building pretty meaningful cash at these levels. So when you think about our projections outlined potentially excess of $5 billion in the back half of this year of net cash, how do you think about allocating that in the event gold prices stay at these levels or potentially go higher? James Porter: Yes. Thanks, Josh. I mean, obviously, we want to have as much financial flexibility and financial strength as possible because it just creates optionality in terms of how best to grow value in the business. to Ammar's point, I mean, we've identified the 5 key value drivers and how we think we can expand those. But based on the success that we've had through the drill bit, the projects keep evolving, and there could be the potential for further growth and further accelerations in capital spending. So we do want to make sure that we've got the balance sheet to be able to support that. If we end up between 3% to 5% of our market cap in cash on the balance sheet, I don't think that's a bad place to be. Again, it just gives us that financial foundation to be able to have the capacity to invest in further growth in the business. Joshua Wolfson: Got it. And maybe just to tie in that sort of train of thought and maybe Lawson's questions on M&A. I'm wondering on the M&A side, you sort of outlined, Ammar, the opportunity to create value per share, but there are a lot of projects the company has that look outstanding at current gold prices. So when you think about measuring external opportunities against the internal portfolio, what would make an M&A opportunity really look compelling beyond just per share upside? Ammar Al-Joundi: That's an excellent question, and I'm glad you put it in the context of competing with internal projects because you always want to -- like anything else, you want to pick the best investment for your owners. I think with regard -- so on the one hand, internal projects, you always have more knowledge. You just do. And so that's a bit -- that kind of leans towards -- if I had something at the same return that's internal versus external, your natural reaction would go to the one that you have more confidence in, which is always internal. That said, what would really interest us and what has really driven us for external M&A has really been exploration upside. That -- everything we buy, you know this industry, if you buy a high-quality asset, you end up paying what seems like a full price, but the real value is, are you -- do you have a very strong view on the exploration upside. And that's frankly been the modus operandi of what we've done on the M&A side. The real the real return to our owners has been from expanding what was -- expanding well beyond the initial view of what was there. Operator: We have our next question from Daniel Major with UBS. Daniel Major: Can you hear me okay? Ammar Al-Joundi: Yes. Daniel Major: Great. few questions. First one, can you give us an approximate cost estimate of the ounces coming from the life extension at Meadowbank like out to 2030? Ammar Al-Joundi: Well, I probably should have said to Dom because he's got more updated numbers. I think the last number I saw was sort of in the $2,200 to $2,300. Dominique Girard: Yes, right there. Ammar Al-Joundi: Okay. Good. I just wanted to point out that those are additional ounces. So it's not like the costs went up. These are just additional ounces that make an awful lot of money at current spot prices. Something that's interesting, I'll just throw this out there. Meadowbank is on our books for, I think, $866 million. In 2025, Meadowbank made $870 million in cash flow. So it's been really quite a remarkable asset. Daniel Major: Okay. Yes. And sorry, just to be clear, that 2,200, 2,300 is that's an ASIC, not a total cash cost is correct? Dominique Girard: Yes. Daniel Major: Yes. Okay. Yes, the second one, just to perhaps follow on from the capital allocation question in terms of returning excess cash to Josh's question, yes, I mean, would you consider the combination of buybacks and special dividends in a continued high price scenario? Or would you just extend the EUR 2 billion buyback facility? James Porter: Yes. Thanks. I think we could really do either. I think there's no reason for us to rule out ever paying a special dividend. That would certainly be a consideration in, as you say, a continually rising gold price environment. If we achieve that cap of $2 billion, and we're still generating excess cash beyond what we need or anticipate needing to run the business, then that would certainly be a consideration. Daniel Major: Okay. And then one more, if I could, and it sort of incorporates your current project pipeline and other options. You obviously accelerating capital spend and adding more projects to the pipeline. Do you feel that any point in the organization is reaching a limit in terms of technical and kind of human capital? And if that is the case, in terms of other options like Hammond Reef, Taylor, Holt, et cetera, what could they be worth to somebody else? And would it ever be a consideration to recycle those projects? Ammar Al-Joundi: Again, excellent question. So we always look at how do we get the most money for anything for our owners. So I would say that we are at a point with what we've got on the table very comfortable, but we are using a lot of our people. And so to the extent that we would look at, say, Hammond Reef or some of the others, they would be scheduled to take that into account, the manpower availability. And a lot of these jobs are very highly skilled, highly specific jobs. But your point is a good point. If it makes sense for someone else to own one of those assets, and they view that they can pay our owners more money than we see in it, we would always be open to that. Daniel Major: Okay, great. Thanks and congrats on a great year. Operator: Our next question is from Anita Soni with CIBC. Anita Soni: I think we've talked about capital allocation a lot, but I did want to understand the -- like the way you think about the downside on dividends. I get you guys are conservative and said you never want to cut your dividend. But how did you sort of come up with the 12.5%, say, versus the 25%? Is there some kind of pricing scenario that you're using in order to determine the dividends and that's like the baseline scenario that you use? James Porter: Anita, yes, it's Jamie. There's no specific gold price scenario that we're using in a specific downside scenario to come up with that dividend. The reality is the gold price could pretty well be cut in half, and we'd be okay maintaining that level of dividend. So I'm very confident in an increase. And the increase is $100 million from $800 million to $900 million a year. It's a pretty modest percentage of our overall free cash flow. So very comfortable increasing the dividend to that level. And really, we'll use the share buyback as the -- we will either increase or reduce that depending on our profitability and cash flow generation. Anita Soni: And then secondly, I just wanted to talk a little bit about the projects. So thanks for all the detail on the projects that gives us something to work with to bring to life some of these reserves and resources and that organic pipeline in our models. So could you just -- specifically on Hope Bay, I guess you're putting out an updated study in May. Could you give -- I mean, could you give us a little bit of a teaser on in terms of the CapEx and numbers that we could potentially be looking at? Dominique Girard: Yes, Anita, it's Dominique. Yes, CapEx is going to be around this $2 billion. Again, we're still working on it, but that's where we're looking for. The project is going very well in terms of -- it's like Meliadine, we're preparing the field like we're going to have over 400 rooms, new rooms ready for the construction. We're preparing the landfill. We have currently around 100 people working full time doing engineering to make sure that we're going to be at 50, 60. And this is what you need to be able to have what is the CapEx that's going to be spent. When you have a lot of detail, the good amount of detail, it's easy, you could go in tender, you work with the contractor, the supplier to firm up your number. If that's what we did at Meliadine. We end up 6 months in advance and on budget at the time. So we're looking to do the same thing. Ammar Al-Joundi: And as Dominiquestion sort of said, and I think he used the expression, not our first barbecue in Nunavut. But in Nunavut, because of the logistics if you make a mistake, it's a lot more expensive. And so the team has done a great job on engineering and a great job on preparing the site. I'll add upgrades to the port facility, upgrades to the laydown facility. We've emptied already the previous no building. I mentioned the camp, like all the things between preparation and engineering to make sure that you're in the best possible position for execution, which is important in any project and particularly important in projects that have sort of those kind of logistical challenges. Anita Soni: Just wanted to say congratulations on the growth. That's truly a standout for the senior group. And also on Hope Bay, I think I remember you took a bit of flag for that acquisition 4 or 5 years ago, and it looks like it's going to be -- I mean, just by my rough math, you're like a sub-$300 all-in acquisition and build costs. So congratulations on that. Operator: Our next question comes from Tanya Jakusconek with Scotiabank. Tanya Jakusconek: Can you hear me? Ammar Al-Joundi: Yes, we can, Tanya. Tanya Jakusconek: Okay. Great. I was just going to continue with Hope Bay, if I could, from Anita's question. Dominique, can you remind me, you said if we get the go ahead in May. And by the way, if we do have a mine tour, Dominique, it better be in May or [indiscernible] barbecue for us to attend. Would -- can you just remind me of what exactly you have permitted up there to do for that $300 million that would be spent in 2026? And what exactly would that $300 million go for? Dominique Girard: Yes. We have all the permit to spend that $300 million. It's not an issue. There's some element to do before, let's say, getting into production, but there is no red flag on that. What we're going to spend, it's mainly procurement. It's mainly putting steel, concrete and everything we need. Again, we work with barge season. It's always what we need to spend from mid or let's say, the first barge in September '26, getting to the September '27, we need to put everything on the boat. So it is approximately 8 boats that we need to fill up and to deliver to site and to start some more work. This is one part of the spending. The other part is to do ramp development. So keep preparing the field to be ready for full production in 2030. So that's going to be the other part where we're going to spend money. Tanya Jakusconek: Okay. Okay. Look forward to that study in May. And then I have a second question, which comes back to this capital allocation. again. I wanted to understand, Ammar, from you. First of all, as I look at all of these projects and think about the time frame of 2031 for some of these to come in and '23, should I be thinking that there's about $5 billion of capital to support this growth? Is that somehow how I should be thinking about it? Or maybe Jamie can help me out on that as well. James Porter: Yes, sure. I mean, at a really high level, if you walk through each of the projects, the Detour underground, potentially, if you round up $1 billion Upper Beaver is $1 billion. Hope Bay is $2 billion. Beyond that, we'll be providing an update on San Nicholas likely later this year. But yes, $5 billion to $6 billion of growth spending over the course of '26 through 2030, I think is about the right estimate, Tanya. Ammar Al-Joundi: And I would point out, it's sort of subtle, but the team has done a great job in pretty much keeping the sustaining CapEx steady. Tanya Jakusconek: Okay. And if I can squeeze one more in, I know. But maybe for yourself, Ammar, as you think about this capital allocation and as you think about M&A and as you look at obviously returns to shareholders, one thing is how important is it to own 100% of your assets? And the reason I ask is if Teck was to sell their 50% interest in San Nicholas, would that be something you would consider for your capital allocation? Ammar Al-Joundi: If it made money for our owners on a per share basis, absolutely, we would consider it. Operator: Our next question is from John Tumazos with John Tumazos Independent Research. John Tumazos: We increased the underground resources at Malartic this year, 7.5 million ounces. Should we expect 7.5 million more in the coming year? Or are we getting done with it first. Then second, in terms of converting the inferred resources eventually to reserves, is it more efficient to wait until after 2030 when the first and second shafts might be done, significant development has been completed and the zones can be either visually inspected or channel sampled or close space drilled from underground without the substantial cost of 0.5 mile or 1 mile holes from surface. Guy Gosselin: John, this is Guy. So your first question, this year, we made a big push at converting the outskirt when you look at the pale green mineral inventory in the outskirt of East Gouldie to bring it to the inferred. So this is where you saw the big addition. There's still some mineral inventory in the outskirt, but much less than we were used to have. And it was by design because we wanted to tight fill that mineralized envelope to bring it to infer. And to your second question, we are already kind of doing some with the current infrastructure, with the ramp in the upper part of East Gouldie. We're going to be doing more and more of that conversion to reserve because you're right, achieving kind of the drill spacing to classify it to indicated or reserve is much more cost efficient from underground. So we're going to be doing having access from the current linkage ramp that goes all the way to the East Gouldie and from the upper part of East Gouldie, trying to do as much of the reserve conversion from underground. But there will be also a continuation of drilling from surface. But we've seen over the total number of drill rig that Dominique was mentioning, there is a progressive shift towards much more drilling from underground compared to the drilling from surface. So we were really aiming to bringing it to infer from surface, and we're going to be doing a lot more of the conversion towards reserve from underground. For the reason you mentioned, the fact that in order to achieve the drill spacing at 30- to 40-meter drill spacing, it's much easier to achieve that and less -- and more cost effective to do that from underground. John Tumazos: Is it sort of the maximum capacity to add 2.5 million ounces a year to reserve? Or could it be faster? Guy Gosselin: To resources you meant because in terms of reserves. John Tumazos: No, no. from inferred to reserve. Guy Gosselin: From inferred to reserve, this year, for example, we've added 470,000 ounces and our pace is about that to convert about 0.5 million ounces from resources to reserves moving forward. I think that's the achievable pace we're targeting. John Tumazos: So you got 20 years' worth of that in front of you? I'm kidding you, Guy. Operator: We have our next question from Bennett Moore with JPMorgan Chase. Unknown Analyst: Congrats on a record year. Could you unpack the slowing of the mill ramp and change of sequencing at Detour Lake a bit further and implications on cost and CapEx for the next few years ahead of that growth trajectory into the next decade? Natasha Nella Vaz: Sure. You're talking about the time line, Bennett, for the mill ramp-up at Detour? Unknown Analyst: Yes. And any implications, I guess, also including incremental stripping and things like that. Natasha Nella Vaz: Okay. Sounds good. So I'll start with the mill. So in terms of the mill, we did reach 28 million tonnes this year. It's a remarkable achievement for the team. The mill has been in expansion mode for the last 6 years, Bennett. And so the team was looking to just take a bit of time to stabilize the throughput and ensure that we have the sustainable operating practices in place. And this just gives the team a little bit of flexibility. So with respect to the time line, we're looking at still getting the mill up and running to 29 million tonnes by 2030. And at the same time, when we reran our life of mine plan, we're looking at reaching the 1 million ounces in the early 2030s. So not much of a change on that end yet. Ammar Al-Joundi: Yes. Part of the thing with -- and this is getting maybe a little bit pedantic, but it's not just the throughput, it's make sure you don't have any recovery issues, you don't have any reliability issues. So Natasha's point, it's -- they've done a great job. And I think we have some of the best people in the world on that, and we always take their advice on how to do things the best way. Unknown Analyst: And then coming to Meadowbank, the mine life, it's nice to see extended to 2030, even if it's incrementally higher cost ounces. But wondering if you could give a better understanding of the opportunity beyond 2030 as it relates to an underground-only mine. I mean could this be of similar size and scale as we've seen over recent years? Dominique Girard: Yes. The team are looking, targeting, and again, this is very conceptual 250. Is it something possible by -- we know it is going deeper underground. So we could just keep mining. They're also looking for smallest pushback here and there. They're looking below what we've mined at Goose at the time, below what we've mined at Vault at the time, putting that together to see could we extend the Meadowbank. Of course, the USD 5,000 per ounce gold price is very welcome for Nunavut, for Meadowbank. It is also very welcome because we keep drill -- the drill keep running. And who knows? We just need one hole, and that could change the picture. So it's very positive. Yes, it is higher cost. But as Ammar mentioned, it is on top of with existing infrastructure with minimal CapEx to deliver that. So we are still working on it. Maybe 20, I will say not before 2027, we give you -- we could give you more on that. Let's see how the team is going to be able to work at it. Operator: There are no further questions at this time. I will now turn the call over to Mr. Ammar Al-Joundi for closing remarks. Ammar Al-Joundi: Thank you, operator, and thank you, everyone, for joining us. Please have a, for those of you who get the long weekend, please enjoy it with your families. Thank you. Operator: And thank you, ladies and gentlemen. This concludes today's conference call. We thank you for your participation. You may now disconnect.
Operator: Greetings, and welcome to the Public Storage Fourth Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Brandon Reagan, Director of Investor Relations. Thank you. You may begin. Brandon Reagan: Hello, everyone, and thank you for joining us for our fourth quarter 2025 earnings call. I'm here with the Public Storage leadership team, Joe Russell, Tom Boyle and Joe Fisher. Before we begin, we want to remind you that certain matters discussed during this call may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to certain economic risks and uncertainties. All forward-looking statements speak only as of today, February 13, 2026, and we assume no obligation to update, revise or supplement statements that become untrue because of subsequent events. A reconciliation to GAAP of the non-GAAP financial measures we provide on this call is included in our earnings release. You can find our press release, supplement report, earnings presentation, of which we will refer to during this call, SEC reports and an audio replay of this conference call at our Investor Relations website, investors.publicstorage.com. We ask that you initially limit yourself to 2 questions. However, if you have any additional questions, please feel free to jump back into queue. With that, I'll turn the call over to Joe Russell. Joseph Russell: Thanks, Brandon. Good morning, and thank you for joining us. Today is a significant day for Public Storage. We're here to discuss our fourth quarter and full year results, but more importantly, we're unveiling PS4.0, the next era of Public Storage leadership and strategy. Tom, Joe and I will walk you through the full range of changes we're making to drive accelerated performance and long-term value creation. Then we'll open it up for your questions. Let me start with the leadership transitions and additions we announced yesterday. Succession planning has always been a top priority for our Board, and the objective has been crystal clear: place exceptional talent in every single leadership position at Public Storage. I'm pleased to say we've met that objective. On the management side, I'm thrilled to announce Tom Boyle's promotion to CEO and Trustee. Tom and I have been partners for nearly a decade since we both joined Public Storage in 2016. As you know, Tom has proven to be an exceptional leader in both his CFO and CIO roles with outstanding accomplishments across capital allocation, operations and financial strategy. Tom is more than ready to lead Public Storage into PS4.0. Our Board, management team and I could not be more confident in his skill, drive and vision. Congratulations, Tom. I'm also pleased to welcome Joe Fisher to the executive team as President and CFO. Joe's tenure at UDR as President, CFO and CIO, along with his stature in the REIT industry, made him an exceptional fit for our senior leadership team. Joe joins Public Storage at a great time and adds outstanding depth to our leadership ranks. Welcome, Joe. Tom will cover other significant leadership changes in a moment. At the Board level, Ron Havner is stepping down as Chairman after 15 years of iconic leadership and will continue as a Trustee. Ron is a legend in our industry and has been a tremendous mentor to me and the management team at Public Storage. I can't thank him enough for his dedication and insight. John Reyes, our former CFO and current Trustee, is retiring from the Board. John has guided Public Storage with nearly 3 decades of financial acumen and discipline. His impact on this company is immeasurable. And I'm excited to announce that Shankh Mitra, CEO of Welltower and an independent Public Storage Trustee for the last 5 years, will now take the role of Chairman. Shankh brings a proven track record of value creation, strategic clarity and leadership. We're excited to have him guide and mentor the management team in his new role. And as noted in our press release, Shankh Mitra and Ron Havner have purchased $25 million and $5 million, respectively, of out-of-the-money 10-year options with a 6-year lockout, demonstrating their commitment and confidence of what PS4.0 will deliver to shareholders. Now let's go to Page 4 of the earnings presentation and briefly step back to reflect on our financial performance and highlight how we've built the platform to drive value. From 2023 to 2025, Public Storage has led the sector in same-store revenue growth, NOI growth and NOI margins. Our core FFO per share growth leads the sector, and our total shareholder returns of 18.6% outperformed our peers over that time frame. Over the last 5 years, we built a platform designed to win. Here are a few significant accomplishments. First, deployment of the most robust omnichannel digital ecosystem in the industry, where over 85% of our customers engage with us using self-help tools, and we're infusing AI to optimize conversion and cost. Second, completion of the Property of Tomorrow program, a $600 million investment to rebrand and modernize all 3,400-plus properties with solar on nearly half of the portfolio by the end of 2026. Third, executing accretive growth at scale. We've invested over $12 billion expanding our portfolio by 763 assets, which are delivering outsized growth with more to come in the future. And fourth, inspiring the team through our winning culture, and also being named Best Place to Work for 4 consecutive years. I'm proud of what we've built, and I'm even more excited about what's next. On a personal note, as I retire from Public Storage, I want to thank the investor and analyst community for the opportunity to work with you over the last decade. I've enjoyed our relationship and the healthy respect we've developed. I've lived by a philosophy of telling it like it is, and I know Tom and the team will continue to communicate with you under that same doctrine. And to my Public Storage colleagues, thank you for the tenacity, fellowship and commitment to success. Public Storage has a strong and vibrant culture and has always been a team of winners. I've been humbled to lead you over the last 10 years. I could not be more excited to hand the reins over to Tom and the team and cheer them on as they take Public Storage into its next era. Now I'll pass the call over to Tom. H. Boyle: Thank you, Joe. I'm incredibly humbled and grateful for this opportunity to lead Public Storage forward. Joe, to you and the entire Board of Trustees, thank you for the trust you've placed in me. I'm energized about the next era. And Joe, on behalf of the entire Public Storage team, thank you for a decade of exceptional leadership. Your accomplishments resulted in sector-leading total shareholder returns over the past 1, 3 and 5 years. But beyond the numbers, your personal impact on the team from property managers, corporate teams in Dallas and Glendale, inspired us to be our best through every challenge and opportunity. Thank you for your mentorship. I also want to recognize Ron Havner and John Reyes at the Board level. The 3 of you have built a tremendous foundation for what's next. Now on Page 5, let's talk about where the industry is headed and where we're headed. The pandemic created noise, but the signal is clear: self-storage adoption has increased over the last decade. Generation Z, millennials and the 65-plus cohort are all participating. Today, 10% of the U.S. population uses storage, and that trajectory is building. Storage is an affordable space solution in a high cost of living environment. Competitive supply is slowing as new development becomes harder and more expensive. And while we haven't yet seen a national inflection point on rents, momentum is building in our strongest markets. The trends are there. The self-storage industry also remains highly fragmented. Generational transitions and continued institutionalization of ownership will create more trading activity from here on. Industry fundamentals have been some of the best in real estate longer term. And while they haven't been exciting for a few years, we're not waiting around. We're building the team and the platform for the future today. Moving to Page 6. We're unveiling PS4.0, the fourth era of public storage leadership, 53 years from our founding, by industry visionary Wayne Hughes. This is a generational transition and a strategic vision designed to drive accelerated performance. As Joe said, our objective is simple: build the best team to attack the opportunity ahead, and we have. We have new leaders joining the effort: Joe Fisher, President and CFO, here with us today, most recently with UDR. Ayash Basu, Chief Revenue and Marketing Officer, most recently with Boston Consulting Group. Gwen Montgomery, Chief Human Resources Officer, most recently with Gates Corp. And we have leaders stepping up: Natalia Johnson promoted to President, Chief Digital and Transformation Officer; Chris Sambar, promoted to President and Chief Operating Officer; and Paul Spittle, who's stepping up to head our acquisitions efforts. We've brought in diverse perspectives from multifamily, consulting, manufacturing and telecommunications. This complements our multifaceted and experienced leaders in every part of the company with proven capabilities that have driven our outperformance over the last several years. We've also shifted our headquarters to Frisco, Texas, where our largest corporate presence is today. And with our L.A. team relocating to a new long-term office space, I'm delighted to lead this premier team into the next era. On the next slide, our strategic vision rests on 3 core pillars: PS Next, our value creation engine and own it culture, which will collectively drive performance for our shareholders. First is the launch of the PS Next operating platform to meet the customer where they're going. Today's customer expects a fast, seamless and quality experience, which will rapidly evolve with AI playing an important part of all customer journeys. PS Next combines the industry's leading owned property portfolio with the only scaled omnichannel digital-first platform, advanced data science and exceptional property managers and care center agents. Customers demand more from the brands they do business with today, not only a core reliable in-store experience, which we enhanced with our Property of Tomorrow program, but also the digital and AI-led interactions of the future. We commit to innovate to meet and exceed those expectations across both the customer experience and the operational delivery of that experience. Customer obsession is critical. PS Next will drive both revenues and expenses, building on our margin leadership. Our third-party management platform fits too. The target result is organic growth acceleration. The second pillar, the value creation engine, captures the external growth opportunity. Building on PS Next operational leadership is a critical component for value creation, capital allocation. With PSA's capital resources and costs, we have a capital opportunity each and every year. I've grown increasingly passionate and energized about this opportunity over my time at Public Storage, leading to my expanded role several years ago as Chief Investment Officer. We will allocate our capital resources to: one, improve our portfolio; two, accelerate our per share earnings and cash flow; and three, compound our returns. My vision of our value creation engine is not just about doing more, given our capital resources, but also better across our acquisitions, development, expansions and lending investments. These 4 value creators will differentiate our return profile by fueling our non-same-store growth. Assets that are placed into the PS Next operating platform will earn more cash flow than others in the industry. Data science will lead our underwriting and targeting, leveraging the industry's largest datasets to enhance portfolio composition. Scale advantages compound as we reinforce PS Next and drive earnings growth. And lastly, the industry's best balance sheet is a competitive advantage and prepared to support it all. We have significant capacity paired with a differentiator, $600 million of retained cash flow that's growing and will help us execute our strategy. We're investing in this value creation engine. We're growing deal teams, streamlining processes and infusing data science to increase the speed of execution. We've been active over the last several years amidst a slower transaction market industry-wide. The transaction market is poised to accelerate from here, driven by those generational sales and institutionalization, setting the table for our value creation opportunity. The target result is accretive portfolio growth. The third pillar is what I call the own it culture. As a leadership team, we're enhancing our strong culture that's been built over the past 53 years. With an infusion of new talent and perspectives complementing our strong team, we are raising the bar for performance. We will empower with accountability. And I've been working with Shankh on redesigning our incentives, given their power as we launch our new era at Public Storage. With Shankh and the Board, we have redesigned our NEO incentive program for 2026 with a focus on per share and total return outperformance. And now with the launch, we have the opportunity to rethink the incentive structures throughout the organization to get the incentives right: meaningful incentives, not based on marginal improvements or tweaks, but on the same per share earnings growth and total return for alignment across the teams. Our goal is clear: we will win or lose as a team. The target is more energy, urgency and engagement driving results for our shareholders. We're just getting started. PS4.0 is about customer obsession, strong capital allocation with a focus on per share earnings and cash flow growth. Over the coming year, you'll see these initiatives come to life as we showcase these pillars. Now I'd like to turn over the call to Joe Fisher for his first Public Storage earnings call. Joe, welcome to the team. Joe Fisher: Thank you, Tom, and good morning, everyone. I want to start by saying how excited I am to be here. I've known and followed Public Storage for the last 20 years of my career, and I've known many of you and members of this team for much of that time. I want to first thank Joe Russell, Tom Boyle, Shankh Mitra, Ron Havner and the entire PS team and Board for the opportunity to join this great company. It was clear from our initial discussions last September that the vision and strategy we are unveiling here today was something I wanted to be a part of. Over the past several months, I've spent substantial time with the teams in Dallas and Glendale and onsite at properties getting up to speed. What I've witnessed is a team full of talented, dedicated A players with a will to win. There's a clear excitement for PS4.0 and a shared commitment to drive performance for our stakeholders through our 3 key pillars. Now let's get into the results on Slide 8. First, you'll notice we've made several enhancements to our press release and supplemental. As always, we're seeking to be best-in-class in all areas of our business, and we welcome your feedback. Core FFO in the quarter was $4.26 per share, resulting in full year core FFO of $16.97 per share at the high end of our guidance range. Same-store revenue and NOI growth in the quarter were minus 0.2% and minus 1.5%, respectively. Declines in move-in rents were offset by strong existing customer performance, resulting in in-place rents up 20 basis points and occupancy down 20 basis points. We're confident in our team's ability to continue driving outperformance in revenue growth just as we have in recent years. I've been incredibly impressed by the sophistication of our revenue platform and the intersection of pricing, data analytics, machine learning, AI, marketing, customer experience. And I'm excited to see where Ayash and the team will take it next. Expense growth was contained for the year with Q4 at 4.2%. Property tax growth was offset by continued benefits from payroll optimization, utilities and marketing. Outside the same-store pool, NOI growth of 20% in our non-same-store pool helped drive core FFO per share higher by 1.2% year-over-year. This is a critical area of our value creation engine and our ability to drive core FFO performance well in excess of our stabilized same-store growth. It's also worth noting, if we utilized a same-store definition similar to our peers, 2025 NOI growth would have been positive 0.2% instead of the negative 0.5% reported. On to transactions. During the quarter, we acquired $131 million of accretive new acquisitions that will drive growth through our industry-leading PS Next operating platform. This brings our 2025 total to $953 million with deployment diverse across size, geography and seller type at stabilized yields in the high 6s. On the development and expansion front, we had openings of $409 million during the year. We ended the year with a total development pipeline of $610 million with stabilized yields targeting 8% and remaining amounts unfunded of $416 million. Our lending platform continues to grow with $131 million deployed in 2025, bringing our total outstanding lending business to $142 million at a current rate of approximately 7.9%. Lastly, our fortress balance sheet remains in excellent position from both a metric and liquidity perspective. At quarter end, we had available liquidity of $1.8 billion between our line of credit and cash on hand, plus approximately $600 million per year of annual free cash flow. Our balance sheet remains one of the strongest in the REIT sector with debt plus preferred equity to EBITDA at 4.2x and debt plus preferred equity to enterprise value in the low 20% range. Moving on to guidance on Slide 9. We've established an initial core FFO range of $16.35 to $17, resulting in a midpoint of $16.68 and a year-over-year decline of 1.7%. Negative same-store NOI growth and refinancing activity is being offset by positive contributions from our non-same-store pool and our tenant insurance program. From an economic backdrop perspective, we expect 2026 to look slightly better than 2025, consistent with consensus expectations. Same-store revenue and NOI guidance are minus 1.1% and minus 2.2% at the midpoint, respectively. We believe occupancy for the year will remain roughly stable. Move-in rents will remain negative in the mid-single digits for the year, but will improve throughout the year, and our ECRI contribution will continue to help support total revenue. Specific to Los Angeles, we've guided to the state of emergency staying in place for all of 2026, resulting in a drag on same-store revenue of approximately 80 basis points. With good demand and limited supply, it is a matter of when, not if L.A. returns to strong outperformance down the road. To attain the high end of guidance, we would need to see the state of emergency end sooner and for occupancy, new move-in rates and ECRIs all to perform slightly better. The inverse would take us to the low end. Expense growth is expected to remain constrained again in 2026, with mid-single-digit property tax growth being offset by expense-constraining initiatives in personnel and R&M. In addition, our non-same-store NOI is once again expected to be a significant contributor with year-over-year growth of 16% before factoring in future transaction activity. We also continue to drive cash flow growth in areas beyond property operations, including our tenant insurance business and third-party property management platform. From a capital perspective, we expect to remain active in driving future FFO accretion through our various capital deployment levers. We have substantial amounts of free cash flow and debt capacity. However, we have not factored in additional acquisitions or lending into our guidance at this time. With that, I'd like to turn the call back over to Tom for some closing remarks. H. Boyle: Thanks, Joe. Let me close with this. The opportunity ahead for Public Storage has never been stronger. Our target is clear: elevated customer experience, strong capital allocation, a winning culture and compounding shareholder outperformance. I'm energized by the team and the platform we're building. This is PS4.0. With that, let's open it up for questions. Operator: [Operator Instructions] Our first question comes from the line of Eric Wolfe with Citi. Nicholas Joseph: It's Nick Joseph here with Eric. So I guess just asking about capturing the external growth opportunity you talked about allocating capital aggressively and intelligently. What are the greatest near-term opportunities you're seeing? Is it one-off assets, smaller portfolios, I guess larger M&A, international? And how's that different based on PSA 4.0 than what you were seeing previously? H. Boyle: Yes. Sure, Nick. This is Tom. I think there's a couple components there. One, we were encouraged by what we saw through 2025 in terms of the breadth and variation of seller type as well as size of activity. So we had a good number of single and double type opportunities which are really the bread and butter of the industry and we continue to try to capture as well as small- and medium-sized portfolios. We underwrote a lot. We probably underwrote $7 billion of real estate last year, ultimately transacted on about $1 billion of that. The majority of what we underwrote did not trade. And so there continues to be active dialogue amongst larger portfolios and a breadth of different seller types as we move into 2026. And as we think about -- you also highlighted international. That's an area certainly we spent some time on last year and continue to spend time on going forward as well. So a broad set of opportunities and one that we think is building from here into 2026. In terms of what's different as we head into PS4.0, there's a number of things that I just highlighted that are important to note. It's not just about capturing the opportunity and growing more. As I said, it's about how do we fine-tune and get better. So we're investing in the team. Our data science team has done tremendous work with our revenue management and marketing team over the last several years, and we're spending more time with them now and going forward on capital allocation as we think about targeting sites and underwriting, streamlining our processes and looking to take advantage of the industry's largest data set that we have at our disposal. So all of those things will set us up to be a better buyer and enhance our reputation in the industry, and we look forward to taking advantage of that and deploying capital. The last piece you didn't ask about, but I highlight is just to reinforce the balance sheet opportunity that we have. The company has competitive advantages across the balance sheet as well as retained cash flow, which means we have a capital opportunity every year and one that we want to maximize. Eric Wolfe: That's helpful. This is actually Eric. Sorry to keep switching analysts on you, but you mentioned in your prepared remarks that momentum is building in your markets. But it does look like your same-store revenue guidance, excluding L.A., so putting L.A. aside, it looks like things are expected to get a little bit worse from current levels. So could you just talk about what you expect from same-store revenue growth, again, putting L.A. aside just for the other 85%? And what do you expect the cadence of that same-store revenue growth to be throughout the year? Joe Fisher: Eric, it's Joe. So as you guys all know, year-over-year revenue is a backward-looking indicator. And so that minus 30 bps or so when you back into what the rest of the same-store pool would be doing, excluding L.A., is really a byproduct of what's been taking place more recently, not necessarily the forward indicators that will drive revenue growth into the future. So as we start to pull in the fourth quarter results, which did have a little bit more challenged new move-in environment, although I'd point out that occupancy at year-end did pick up. We do still expect new move-ins to be kind of the worst of 2026 here in the first quarter, although we are seeing improvement relative to the fourth quarter. And so we do think we're going to see a little bit of pressure on year-over-year revenue as we move into the middle of the year from a lagged perspective. The piece that we're excited about is how we think about the exit velocity and what we're seeing kind of underneath the hood as a forward indicator. So occupancy for the year we expect will be relatively static. We continue to see really good existing customer activity in terms of pricing power and length of stay and retention. And then new move-ins, we do forecast that while down mid-single digits for the year, we're going to start low and continue to lift throughout the year. And that's really driven by our view of a little bit of improvement on the macro environment, what we're seeing with existing customers as well as those coming in the funnel. And then, of course, supply decreasing throughout the year. So we do expect that year-over-year revenue starts to improve probably by the fourth quarter of next year -- or this year, rather. H. Boyle: Yes. And Eric, maybe just to add to that, my comments earlier around momentum building, we've been highlighting for some time the strength in some of the markets, be it West Coast, Midwest, Northeast, that continue to show good trends there. And you can obviously see that evidence in fourth quarter performance as well. But I think big picture as we sit here today, we're focused on not knowing exactly which quarter things are going to move around. Obviously, we gave you a range of estimates. The focus is on what is it we can do now with the platform and the team to set us up for success moving forward. And obviously, that's the focus of PS4.0 and where we're headed from here. Operator: Our next question comes from the line of Spenser Glimcher with Green Street. Spenser Allaway: Can you provide an update on move-in rents thus far into 1Q? And then can you just remind us how your pricing strategy has evolved with the growing use of AI? H. Boyle: Yes. Sure, Spenser. Happy to cover that. So we did have a January that was a healthy one. Move-in rents for January, which is I know one of the things you're getting to, down 7% in the month of January, so sequential improvement as we moved into the month of January. We did experience interesting weather across the country in the month of January, so we had lower move-ins but also lower move-outs, occupancy right around where we finished the year on a year-over-year basis, up about 40 basis points over the course of January. So a good start to the year and the start of -- and continuation of the trends that we saw through the fourth quarter and speaks to the trends that Joe just highlighted. Spenser Allaway: Okay. Great. And then are you able just to comment on the pricing strategy and how often you guys are kind of resetting rents just with the growing use of your AI platform? H. Boyle: Yes. As I noted earlier, the data science team and revenue management team have been working together for the last several years and continue to evolve our processes there. I just highlighted we hired a new leader for that effort who is getting up to speed and we're excited about where he and the team are going to take it from here. But continued evolution there as we think about attracting the right customers at the top of funnel, being able to understand what we think their length of stays are going to be and their price elasticities, and then toggling our pricing, promotion, advertising in order to be able to maximize NOI from that customer base as it goes. So continued efforts there, and we're excited about where Ayash and the team are going to take it going forward. Operator: Our next question comes from the line of Juan Sanabria with BMO Capital Markets. Juan Sanabria: Congrats to all, Tom and Joe. Welcome back, Joe. Just on the '26 same-store revenue guidance, Joe, you made an allusion to improving at year-end. Wondering if you could give us a general sense of where you expect to end the year, the fourth quarter run rate, as we think about kind of the trend -- the improving trend throughout the year that is in the forecast. Joe Fisher: Yes. Juan, so we typically don't go into true quarter-by-quarter guidance. What I would say is you've kind of grouped the portfolio into a couple different buckets. And if you look at our coastal markets in combination with some of the Midwest markets, so some of the leaders like Chicago and Minneapolis, that portfolio continues to do really well in terms of plus or minus 2% revenue growth through the year. And we do think that lifts a little bit going into the fourth quarter of next year. When you look at the more supply-challenged markets, so primarily the Sunbelt markets, so Dallas, Atlanta, Florida, et cetera, that's probably going to be down a couple percent on same-store revenue throughout the year. But again, we expect that to start to lift as we get into kind of fourth quarter of this year, just given the fact that we're comping against an easier fourth quarter as we did have a little bit more challenge in new move-ins in the fourth quarter and then given that supply really starts to dissipate as we continue to move throughout the year. Juan Sanabria: Good segue to my next question. Supply, I'm not sure if you saw, but you already kind of put out a revised supply stack for this year -- for the end of last year and this year, they came to the conclusion that supply actually reaccelerated in the back half of the year. So just curious if that jives with what you guys are seeing on the ground. And if you could kind of quantify exposure of assets to supply in '26 versus '25 or any sort of numbers you can put around supply and how you think about it would be helpful. Joseph Russell: Yes, Juan, I think we've been more right than wrong on the trajectory literally over the last 4 or 5 years debating some of the external tracking data sets out there. I think more often than not they seem to overemphasize or overplay potential momentum coming into markets. We don't really see a trend or a change in the trajectory that's been going on now for the last 4 or 5 years, which is year-by-year decelerated deliveries. So hard to justify what kind of data they're looking at to say there's a reacceleration. By all accounts, the development business continues to be quite complicated, quite commanding approval levels, costs, underwriting issues. There certainly are a handful of markets that may see supply as they have over the last year or 2, but we're not seeing any reacceleration. And as you know, we have a very strong team out in the markets nationally. We're being very judicious. We're putting our own development activity, and we see that as a great tool for us to continue to deploy capital even under the umbrella of PS4.0 that Tom and Joe are talking about. Operator: Our next question comes from the line of Samir Khanal with Bank of America. Samir Khanal: I guess with the implementation of 4.0 PS Next, which you all have talked about, I mean, what is the long-term profile, so the growth profile of the company, you think, from same-store NOI or FFO growth perspective? H. Boyle: Well, I think you highlighted a couple different components there, and we can talk more about PS Next if you're interested in it. As we think about PS4.0, in aggregate, the objective is to build on the outperformance that we've been able to put together over the last several years through organic growth. And that is driven by a strong focus on the customer, the customer experience, our leading brand and then also embracing continued digitalization and now AI interactions that are going to be ever more present going forward between us and our customers and build on that outperformance as we think about how we deliver that customer experience. So both on the revenue side as well as the expense side for organic growth outperformance. That's then paired with the value creation engine that we're speaking to, and that is an opportunity year in and year out across 4 different levers. So we think about acquisitions, which we just spoke to -- Joe just spoke to development, our expansion efforts as well as our lending platform, which will all be additive to FFO growth. And you've seen that over the last several years with our non-same-store performance with our operating platform being able to achieve more cash flow than when we purchased the property. And so very encouraged by that opportunity and where we're going, and that will be additive to FFO growth. And then our ancillary businesses, right, some of the things that I just hit on like lending, for instance, also support our third-party management business and our tenant insurance business, which are also having a healthy growth year this year. So looking to drive organic growth performance and outperformance, stronger value creation engine as we look to plug assets into that operating platform and utilize our capital competitive advantages and drive our ancillary businesses all to a stronger FFO growth profile going forward. Samir Khanal: Got it. And I guess on the move of the headquarters to Frisco, I guess what's the operational or financial benefit from that and is there any sort of cost associated with sort of the relocation that we need to think about? H. Boyle: Yes. So I think a few things to highlight there. One, we've had a presence in both Glendale as well as in Dallas for a long time and we've been growing both offices. But as we move through the last 5 to 7 years, we oftentimes would open roles in both places, be in Dallas as well as Glendale, and oftentimes we would fill those roles in Dallas. So we did see the office increase in size there to the point where today our office in Dallas is our largest corporate presence. So it makes sense to relocate the corporate headquarters name tag to that Dallas office, and we're moving into new space there. In addition, as I noted earlier, we're going to be moving into new space in the Glendale area as well with a long-term commitment to be in that market. So it's about finding the right talent across the country and building the team going forward. And we look forward to strong leadership in both offices going forward. Joe Fisher: Samir, just related to cost question, so that is embedded within the corporate transformation costs that the team announced about a year ago. We've incurred roughly $4 million of that, I believe, of that $15 million to $20 million. So we will see more costs this year. A lot of that's due to relocation, hiring, severance, the office change, et cetera. But what the group had talked about in the past was from a return on capital perspective, you have both offices, you have great pools of talent in both locations, but this also allows us to do more with an automation perspective and offshoring perspective to the tune of about $4 million in run rate benefit. So it's a good ROI as well. Operator: Our next question comes from the line of Ronald Kamdem with Morgan Stanley. Ronald Kamdem: Congrats to everyone, first of all. But the question is just thinking about the reacceleration of organic growth that you sort of mentioned. Is there any sort of large capital plan or reinvesting plan that's sort of coming with that? Or you think that could be done sort of based on sort of the existing platform, existing system? H. Boyle: Sure. So let me talk a little bit about the PS Next platform and what it represents and the investments that we'll be continuing to make within that platform. I think we've continuously gotten the question over the last year or 2, like, what's next? And how are you going to take the platform from here? And PS Next is really the answer to that. If you step back about 10 years ago, honestly, storage was behind in terms of digital customer experience and interacting with our customers. 10 years ago, our customers would show up at a property and sign a paper lease, for instance. I think the -- what the team has accomplished over the last 10 years has been impressive, and we've obviously been communicating that over the last several years in terms of how we interact with our customers today across both a stronger digital experience on our website, our eRental platform, our app, but also reinvesting in the brand and the platform there and then also how we deliver that customer experience. So we've spoken about the operating model transformation and getting more efficient and effective throughout how we deliver that customer experience. So that's all shifted us forward into a very omnichannel and digital-first environment but we're now sitting at an inflection point going forward. And that inflection point does center around AI and a further digital investment. And you think about what customers were expecting 10 years ago from an Amazon or a Starbucks, we sought to replicate and deliver a customer experience that was more similar to what consumer businesses were offering at the time. That is moving even further ahead, and customers are expecting more. They're not just expecting options, they're expecting recommendations and fast answers to questions. And we're investing as a team across the platform to deliver AI-infused experiences both across the customer experience, but also to our teams and how we deliver that customer experience. So more to come there as we launch that PS Next platform. In terms of the investments that will go on, they will be throughout that customer delivery, both in terms of team as well as technology platforms, et cetera, and we'll share those as we go. But we're excited about them because the returns on them will be strong. Ronald Kamdem: Great. And then my quick follow-up is just on the top of the funnel demand, some of the other indicators that you sort of look at from website visits and so forth. Maybe can you just talk about what you're seeing there and how that sort of correlates to maybe the slow housing activity we've been seeing? H. Boyle: Yes. Top of funnel activity has been pretty consistent at the start of the year. The one thing I would note is January and the start of February has been pretty unique given the weather across the country. So we've had weeks where you've seen activity really drop off because of the weather and then pick right back up as things warmed up. And so the start of the year has been really embodied by that. But if you kind of look through the peaks and the troughs, as I noted earlier, seeing good trends across move-in customer demand as well as existing customer performance. Move-in rents, again, trending in a better direction into January. The existing customer continues to perform incredibly well. Move-outs down again in January like they were in the fourth quarter, just demonstrating the strength of the storage consumer. Operator: Our next question comes from the line of Nicholas Yulico with Scotiabank. Viktor Fediv: This is Viktor Fediv on with Nick Yulico. I have a follow-up on the external growth opportunity set. So you mentioned that you executed around $1 billion of acquisitions in 2025 while roughly around $7 billion was under consideration. Have you noticed any recent shift in seller expectations? And how is this translating into bid-ask spreads and this 1 to 7 conversion ratio, so to speak? H. Boyle: That's been something that's been really evolving over the last several years, right? I mean we had a time period where cost of debt was really low, cap rates were lower, and it's been a readjustment for both sellers and buyers over the last several years. As time has gone on and you've seen a 10-year Treasury, for instance, just to pick one metric that's been in a relatively tight band for the last several years, there's been an ability to transact more rationally, I think, for both sellers and buyers, and that led to some of our successes last year. And I think momentum is building towards that in 2026 based on our dialogue. No question, in many instances, there's still a healthy disconnect between buyers and sellers, and that's okay. We're ready to transact when sellers are ready to transact and continue to monitor the marketplaces they're in. And -- but we are optimistic around '26 and '27 as the cap rate ranges start to narrow. Joseph Russell: And I'd just add to that, as Tom mentioned in his opening comments, part of the multiyear trend, and this has been going on literally for the last decade plus, is the number of owners coming into the sector with a different set of capital, either constraints or opportunities that can feed activity, either predictable or unpredictable, based on their need to bring assets to market. We saw a fair amount of that in 2025 where some larger portfolios ended up coming to the market. We curated a number of those larger portfolios into the assets that we thought were best suited for our own investment requirements. But that activity and that level of ownership structure within the REIT sector continues to grow, and that, too, is going to create opportunities, some predictable and in some cases some unpredictable. The team is ready to embrace those opportunities. And a lot of those conversations take time to cure. That's why some of the volume that we saw from an underwriting standpoint has yet to play through from a transaction. But step by step, we're more confident more activity along those lines could come through. Viktor Fediv: Got it. And then geographically speaking, where do you kind of want to grow the most and where do you see the most opportunities available for you? And probably do we -- should we expect to see more growth in Texas even more than recently? Yes. H. Boyle: Sure. We have tremendous advantages because of the operating platform we have across the country in terms of understanding trends, having long-term datasets to understand what's taking place in submarkets. And so you may see in the supplemental, for instance, we're acquiring in this state or that state, but what we're really focused on is capturing the opportunity at the submarket level and being able to identify those submarkets where there's a real fit for our portfolio and a fit from a customer demand standpoint where there's an opportunity to deploy capital. And that goes to the data-driven approach that we use today and one that we continue to infuse energy into moving forward. It's a submarket story in storage, and that's the opportunity we're chasing. Operator: Our next question comes from the line of Michael Goldsmith with UBS. Michael Goldsmith: Congratulations to everyone involved, including Joe, Tom and Joe. Lots of exciting announcements about the platform and the customer experience today. How much of what you are doing is reliant on an improving demand environment versus what you can control given the existing demand backdrop? H. Boyle: Yes. Thanks, Michael. Good question. As we sit here today, obviously, I highlighted earlier our views around the industry outlook, which we do think is a strong one over time, and storage has been one of the strongest performing subsectors within real estate over time. The last several years have not been particularly exciting, as I noted earlier. And certainly, as we look at 2026, it looks pretty similar to 2025 in terms of many of the trends. That's not holding us back. In fact, it just energizes us in terms of what it is we can do now with the team and the platform and to be able to take advantage of this environment, both in terms of capital allocation opportunities as well as platform investments to set ourselves up for the future. And we can't guess exactly when same-store trends are going to be what they've been in the past, but what we can do is invest in the platform and control there. And that will benefit us in the interim period and certainly when things improve as well. Michael Goldsmith: And my follow-up question is, you've hired some new executives. You're building out the acquisitions team. Is that built into the G&A number? You did $107 million the last 2 years and guidance is calling for roughly the same. So just trying to understand the trajectory of expense. Joe Fisher: Michael, it's Joe. We have factored in a lot of those expectations related to new hires as well as investments into the platform. So Tom talked a lot about technology, data science, AI, we'll be investing in the platform in that respect as well. So that is captured in those numbers. What we obviously hope to do is go out there and drive performance for shareholders. And as that occurs, performance improves and hopefully compensation improves along with it. Michael Goldsmith: Congratulations again. Good luck in 2026. Joe Fisher: Thank you. Operator: Our next question comes from the line of Todd Thomas with KeyBanc Capital Markets. Todd Thomas: And yes, congrats on all the promotions and appointments. And Joe Russell, best of luck in your next chapter. I wanted to ask with regard to some of the leadership changes, I'm just curious how the Board sees its oversight role evolving under 4.0 here, particularly with regard to capital deployment and capital allocation and sort of tying into that on the balance sheet, should we expect any changes to the company's capital structure leverage policy? PSA used to be unlevered. You mentioned, Tom, it's 4.2x on a net debt-to-EBITDA basis and talked about some of the refinancing headwinds this year and perhaps over the next couple of years. Should we expect any evolution or changes around the company's cap structure moving forward? H. Boyle: I don't know how many parts are in that question, Todd. We'll do our best to cover them all. Joseph Russell: I'll start off, Todd, and then Tom and Joe can add any additional color. So first of all, just as far as the Board's role and where we have gotten to relative to the host of announcements as part of PS4.0. Without question, our Board's always had a high degree of commitment on succession planning, seeding the company with the most robust and talented set of leaders, no change relative to their continued involvement as the team moves forward. In my experience over the last decade with the Board itself, I would say that's an active and continued discussion that's always, a, quite helpful to the management team as a whole. And with the talent and the range of perspective that we have on our Board, and in our case, we feel like we've got a very talented Board with great range of experiences. They're there for counsel, advice and perspective. We're really excited about Shankh taking his role, knowing his knowledge of the REIT industry as a whole and his success at Welltower, et cetera. So all very powerful components of what led to the whole host of decisions that came through the announcements yesterday. To go more specifically into how that translates into some of our more tactical components in the very near term. I'll let Tom talk a little bit more about that and give you more color. H. Boyle: Yes. Thanks, Joe. I think the only other thing that I'd highlight related to the Board and oversight and guidance and perspectives that I look forward to is around the formation of a new investment committee of the Board. And obviously, our Board does have a lot of capital allocation experience and perspectives and so look forward to that. That committee is going to be chaired by Ron Spogli, who's a founder of Freeman Spogli & Co. And him, alongside with Shankh, obviously bring very strong capital allocation perspectives, and I look forward to having lots of good dialogue and perspectives from that group moving forward as we launch our value creation engine. Joe Fisher: Todd, this is Joe, and I'll try to close this question out relatively efficiently. But from a balance sheet perspective, I'm very fortunate as CFO to be able to inherit a fantastic balance sheet. The team has done a phenomenal job, as everybody knows, in terms of setting up the balance sheet for success and having both defensive and offensive capabilities depending on the period of time that we're in. And so from a metric and policy perspective, the team has talked about in the past wanting to be in that 4 to 5x debt-to-EBITDA range. Today, we're at 4.2x. So the expectation is to continue to stay there, continue to manage our liquidity, continue to have phenomenal balance sheet metrics and duration overall. I do think we're in a position where we can be offensive with this to really support the value creation engine. So we have that $600 million of free cash flow each and every year. In addition, we have roughly $1.5 billion of capacity on debt just to go to the midpoint of that debt-to-EBITDA range. So I do think we're in a position to potentially be offensive with the balance sheet depending on the opportunities and accretion that are out there as well as with a balance sheet and platform of this size, there's a multitude of sources to fund the business and that goes beyond just the typical debt sources or equity sources. We have had discussions on, do we look at joint venture capital and dispositions in the future as well. And so there's a lot of different levers to pull here to evaluate value creation for the investor base. Todd Thomas: All right. That's helpful. And then just following up on acquisitions, as you look to sort of accelerate those efforts a little bit, what's been the biggest constraint for acquisitions as you kind of look back over the last several years? Obviously, you've been very active, but I'm just curious, it sounds like the efforts sort of ramping up a little bit. And I'm just curious if you feel there was sort of a constraint and whether you're looking to maybe increase your risk appetite or change your return hurdles at all as you layer assets onto the platform, see the value there. H. Boyle: Yes. Thanks, Todd. I would say I think the question earlier was around buyer and seller expectations and transaction volumes. I'd say that's been probably the biggest impediment to accomplishing more capital allocation over the last several years. But as we look ahead, the value creation engine we're speaking to is not about lowering our return hurdles or getting into assets that we didn't view as attractive in the past. It's around how can we be better in what it is we're doing. How can we build the relationships with a growing team? How can we be faster in terms of how we underwrite and provide feedback to brokers and sellers? How can we get more off-market opportunities and more singles and doubles in those pockets and submarkets that we're attracted in? And if we think -- if we're successful in doing those things, there'll be more activity and better activity for us to deploy our capital into. Operator: Our next question comes from the line of Brad Heffern with RBC Capital Markets. Brad Heffern: Big picture question on move-in rates. Why do you think we haven't found the floor yet? COVID was a long time ago. The consumer's been stable, housing's been stable, supply's declining. So I'm just curious like why are we still seeing these year-on-year declines? And do you think that we get to neutral at some point, maybe late in the year? H. Boyle: Yes. So I guess 2 components there. One is maybe looking back in time, how have we gotten here from a move-in rate standpoint? And I think there's a couple of things there. One is new supply in some of the markets that we operate in continues to come in. And so we spoke about some of the markets in the Sunbelt, for example, Atlanta, Dallas, Charlotte, Orlando, where new supply is weighing on performance. No question that competition of new supply drags down move-in rents. And I think we're still seeing that and absorbing that. The good thing is occupancies are lifting there and that absorption is taking place, which is encouraging in a forward look as it relates to where move-in rents will trend in some of those markets. The flip side is we are seeing move-in rent growth in lots of our markets. So we highlighted some of those stronger markets that Joe mentioned earlier, Minneapolis, Chicago, San Francisco, D.C., for instance, we have move-in rate growth, and that move-in rate growth is supported by good demand and more limited supply. And so it's really not a story of a national phenomenon, but I think really a summation of market dynamics at play. Brad Heffern: Okay. Got it. And then on the new compensation plan, Tom, you mentioned you were working with Shankh. Obviously, Welltower has a new compensation plan as well. Are there any similarities there? Or are they unrelated? H. Boyle: Sure. I think there's a couple things to highlight there. The incentive is an important part of what I call the own it culture. The program that I've been working with Shankh on for the NEOs is very different than the program that he more recently announced in October, and it's more similar to a more traditional plan that you've seen from us, but at the same time very, very different. And the differences relate to the performance period being around a 3-year period with delayed vesting. The focus really is around total shareholder return, absolute and relative performance versus storage as well as the RMZ as well as stretch goals. And I'd say that's one of the biggest components there is stretching the goals for us as an NEO team and obviously stretching those goals out to benefit shareholders as well if we can go out and achieve those stretch goals. So very much aligned with shareholders, 100% performance-based and the shareholders and the team will win together. And that's really the focus around that incentive redesign. It's a big shift. And as we think about taking that as part of the own it culture and PS4.0, we have an opportunity to rethink incentives across the organization. And that is really the goal to infuse energy, urgency and engagement across the organization to drive results. So I'm passionate about how we think about incentives for the organization and excited about where we're going from here. Operator: Our next question comes from the line of Ravi Vaidya with Mizuho Securities. Ravi Vaidya: I wanted to ask about expenses. The expense forecast came in relatively low, about 100 bps below last year's inaugural forecast. Can you comment on some of the line items that are driving this? And maybe if there are any areas where there could be some levels of conservatism built in? Joe Fisher: Ravi, it's Joe. So it's really just a continuation of what you've seen from this team for a number of years now. They continue to attack with a whole series of initiatives, all the various line items while also being cognizant of the delivery of the value to the customer. And so when you look at what took place in 2025, obviously, you saw from a personnel perspective, we kept that constrained. Utilities was constrained, R&M constrained. I think you're seeing a continuation of that within our guidance of that 2.2% midpoint. You have property tax leading the way. But if you jump into things like payroll, there's continued initiatives on that front from an hours perspective as we continue to use machine learning to really understand when are the customers there, what do the customers need and how can we better serve them. So more hours reductions, but a critical offset within that is increasing pay for those property managers on site at the same time. So trying to get a win-win there. I think on the R&M side, you're seeing continued initiatives around how can we reduce costs there. So there's a number of pilots in terms of in-sourcing various aspects of R&M. When you go into the utility side, we've had a pretty consistent solar effort over the last number of years to the tune of $50 million to $70 million a year. So you continue to see constraint from a utility perspective. And then you get into some of the centralization efforts that are taking place, so trying to find a more specialized approach to certain things. So thinking about sales functions, customer relations, bad debt, issue resolution, moving some of those efforts off of the field and into the centralized team to try to get better outcomes. So it's a whole slew of initiatives. There's a whole stack of them that we'd be happy to take you through offline at some point, but a continuation of what the team's done here for a number of years. Ravi Vaidya: Just one more here. Can you offer some more color on your current ECRI policy? If you're expecting any other regulatory or legislative restrictions that are outside of California that may weigh on same-store revenue growth? Do you have a buffer or something like that built into the guide? Because it seems that this has become a category that more municipalities are likely to include in moratoriums. H. Boyle: Great. So I guess 2 parts to that question. One is in terms of how we think about the existing customer rate increase program. And we've communicated in the past we think about that in terms of a number of components. One is, what's the health of the customer base, what do we think the price sensitivity is and their behavior, and we continue to be encouraged by that. As I noted earlier, vacates are down, customer price sensitivity is consistent, and so a very healthy storage consumer. The other side is the replacement cost and what our occupancies are, what demand is for that unit, what marketing costs are, all those sorts of things play into the replacement cost side, and that's something we navigate on a unit-by-unit and property-by-property basis. So those 2 combine to really drive that program, and it's a very data-driven approach to meet the customer and move rents as appropriate based on the dynamics at play at the local market. In terms of the regulatory environment, certainly we've spoken over the last year around some of the California activities and SB 709 specifically. And we're certainly compliant with that and communicating with our customers around the disclosure requirements for customers in California. We're certainly aware of some of the recent pronouncements out of New York, for instance, and other states around pricing transparency storage specific or not and certainly monitoring those around the country and making sure we're in compliance with all of those laws and being transparent with our customers around our pricing approach and what they can expect. Operator: Our next question comes from the line of Michael Griffin with Evercore ISI. Michael Griffin: First off, congrats to the team all around. Joe Russell, best of luck in retirement, and Joe Fisher, welcome to the team. Maybe just stepping back to get some perspective on sort of the PS4.0 initiative, can you give us some context? What was the genesis behind this? Joe, maybe you went to the Board, maybe it came down from the Board. It seems like it's been in the hopper for some time. So just ultimately, what was the catalyst that brought this about given that despite the headwinds the industry has faced, Public has been a leader throughout it? Joseph Russell: Yes, Griff, I wouldn't say there was a trigger or a catalyst. This is, I would say, an outgrowth of what the Board and the management team constantly do, which is look at strategic initiatives, look at generational opportunities in terms of again, our own skills, investments, the deployment, particularly in our case, of a very robust environment where we've continued to optimize and drive the level of success through the portfolio operationally, our tools tied to capital allocation, our balance sheet, et cetera, and then putting that entire set of opportunities into the hands of very skilled and talented leaders in every part of the company. So this is the outgrowth of a very intentional and ongoing strategic process. When Tom and I and some other significant leaders of the company, Natalia Johnson, et cetera, all came into the company about a decade ago, we went through, frankly, a pretty similar process as well, and that internally was called 3.0. We've learned and optimized many things through the last decade. And step by step, we felt and everything percolated to the point it was time for 4.0. So very excited about what it entails. I think the team is going to be transparent around the more direct things that will come from 4.0 based on all the things that Tom and Joe are already speaking to. And we're excited about what's ahead. Time and again, through our history, 53 years now plus, we've led the industry on a whole host of initiatives. We've been very proud of the fact that over the last decade we continue to lead the industry in many areas. And yet again, we're going to challenge ourselves to take the next opportunity to drive forward. So it's a really great time. Super excited about Joe Fisher coming into the company as well as some other key hires, too. So it's a great time for us to launch. And with this launch, we don't stop either. We keep challenging ourselves to reinvent, to optimize, and that's the DNA of Public Storage. Michael Griffin: Great. I certainly appreciate the context there, Joe. And then I know a question was just asked sort of on the regulatory front, but maybe if I could sort of spin it a different way. Obviously, there was one of your peers named in a lawsuit with New York earlier this week. Is stuff like this maybe the canary in the coal mine as it relates to sort of the pricing practices in the industry? I know there have been pushes whether it's at SSA or the trade level around greater disclosures, but like is there a worry that greater, I guess, regulatory oversight from these municipalities could preclude what has been this ECRI pricing strategy regime we've been in, call it, over the past couple years? H. Boyle: Sure, Griff. So I think there's a couple components to that. One, obviously, we saw some of the New York activity, and we continue to work with the National Self Storage Association and the State Self Storage Associations around working with regulators and legislators and frankly ensuring that they understand the benefits of our business, how affordable our business is, how affordable some of our new customer promotional rates are, some of those things that -- and earlier in the conversation we spoke about how affordable it is versus other space alternatives. So being able to communicate that and educate folks, and then obviously part of PS4.0 is a customer focus and improving the customer experience, and that goes everything from pricing all the way through to the day-to-day experience at the property. And so as a team, we're very focused on that customer experience and will be moving forward. Operator: Our next question comes from the line of Hong Zhang with JPMorgan. Hong Zhang: I guess should we expect any changes with the third-party management platform as it relates to PSA 4.0, especially revolving around, I guess, income since you've traditionally ran the platform with less of an immediate profit motive in mind? H. Boyle: Sure. So in terms of the third-party management platform, we're excited, obviously, to launch the PS Next, next-generation operating platform. As part of that, our third-party management clients will benefit from those advances that we make in the customer experience and our operational delivery of that experience. So we're excited to share more with them as well as we move forward. In addition to that, as part of the leadership appointments, Chris Sambar, our Chief Operating Officer, is going to be working very closely with Pete Panos who runs that business day-to-day, and seeking to grow it and to grow our third-party platform from here. In terms of profitability, profitability of that program has increased modestly over time and as that portfolio stabilizes and grows from here, the profitability will grow as well in addition to the lending components and the tenant insurance components which are synergistic with that platform. Hong Zhang: Got it. That leads to my follow-up. I guess, is there any color you could provide about how we should expect growth in the lending program over the near term? H. Boyle: Yes. We think that's an opportunity for us. Joe Fisher walked earlier through the book as it stands. So certainly an opportunity to grow that going forward in support of our third-party management customers and the synergistic benefits, again, around the third-party platform, tenant insurance as well as the capital component of the investment. So something we look forward to growing from here. Operator: Our next question comes from the line of Brendan Lynch with Barclays. Brendan Lynch: Joe, congrats on a terrific career. And Tom and Joe, congrats on your new positions. Maybe a question on what the primary KPIs you are measuring when you think about the customer experience component of the platform enhancements and how we can measure the progress that you're making. H. Boyle: Sure. I think there's a couple there. I think stepping back, obviously PS Next overall is about customer experience, it's about brand, but it's also about our financial and organic growth performance as well. So across that metric, some customer metrics you can look at are certainly some of them operationally that you see move-ins, move-outs, tenant retention that you'll see from a financial standpoint. As we think about the platform overall, the focus is clearly around where we're headed with organic growth and organic growth performance and outperformance over time. Brendan Lynch: Great. That's helpful. And then maybe just quickly on international growth, just give us an update on what your appetite is to maybe test the waters in some of these international markets that you've looked at in the recent past. H. Boyle: Yes. We continue to have appetite to explore international opportunity. Obviously, you've heard from us around Australia in the past. We have a strong presence in Western Europe with our Shurgard platform there. And there are markets around the world where the storage is growing as an industry and customer demographics are supportive of a growing storage industry. And so we evaluate those over time and are looking for the right entry points in order to purchase a platform that will give us access to an expanded pie of both operational as well as capital allocation opportunities into growing storage markets. I will say, and we always caveat that with the U.S. continues to be, by far, the deepest and most vibrant storage market in the world, and we're not taking our eye off that ball, but we do think there's an expanded pie opportunity internationally, but we have to find the right fit and the right platform. Brendan Lynch: Maybe just a quick follow-up on that. When you look at the international portfolios that might be available, how do they compare to U.S. platforms that might have a more advanced data analytics and things of that nature? Like, what is the gap that the PSA platform has relative to the 2 different buckets of potential acquisitions? H. Boyle: Yes. I would say for the most part, the platforms internationally are of a smaller scale and because of that don't have some of the scale and platform and data advantages that we and others here in the U.S. have. And so I think that's probably a pretty clear opportunity. We see that in the U.S. as well as we think about smaller operating platforms and what we can do when we acquire or manage for companies that have a smaller platform to go. So there are real advantages of scale in this business. We've continuously seen that across our portfolio acquisitions over the last 4 or 5 years. And I would say international is right in that same wheelhouse. Operator: Our next question comes from the line of Eric Luebchow with Wells Fargo. Eric Luebchow: Great. Maybe you could talk about the development business a little bit. Your development deliveries have slowed down a bit the past couple of years, down to $300 million this year. And I guess maybe you could talk about kind of whether that's due to the tougher lease-up environment, the higher cost to develop. Anything else you could call out there? H. Boyle: Yes, sure. So the development business is one that, that we're passionate about internally because of the ability for us to pick that submarket, pick the land site, design the building, create the unit mix and then ultimately place it into our operating platform where we can earn more cash flow. So it's one that we have a national team out looking for sites. It's also one that's been navigating through a challenging development environment, one with rising costs and obviously rents coming down in some of the markets with strong population growth. And so as we look at this year, we're anticipating a little less deliveries this year than last year, but we're focused on growing that business over time to take advantage of a growing storage demand environment in many of the submarkets around the country. And we view it as a very strong risk-adjusted capital return. And so as we think about the value creation engine, no question, there's a strong focus on what it is we can do there to grow that business over time. Eric Luebchow: Great. And then just one follow-up. I know you touched a little bit on how you're using AI internally. As we think about the evolution of some of the large language models, potentially including ads over time and customer acquisition and the evolution from traditional paid search, how are you thinking about that, how that may evolve over the next couple of years as a lot of these models become more and more ubiquitous? H. Boyle: Yes. No, I think they are. I think consumers, myself included, probably lots of us on this phone call are using the large language models more and more in our daily lives. And that speaks to the PS Next platform and not only interacting with them through the LLMs, but also as customers land on our website, for instance, or otherwise they can interact with agents or on our app, et cetera. And so we're excited about some of the initiatives we have going internally to take advantage of those LLMs and frankly the customer expectations that continue to move towards that direction. And we think we have exciting things to share there, and we'll do that over the next 6 to 12 months. Operator: Our next question comes from the line of Samuel Ohiomah with Deutsche Bank. Samuel Ademola Ohiomah: I wanted to focus on Shankh as the new Chairman of the Board and his commentary around execution even in an environment of unremarkable growth. So I was wondering if you guys could just talk a bit about what opportunities exist in such an environment and like the idea of buying assets with low occupancy at attractive basis ahead of an eventual turnaround in fundamentals. I guess if you guys could talk a bit about that, I'd really appreciate it. H. Boyle: Sure. So obviously, Shankh's quote speaks for itself. I think as we think about the opportunity ahead here, we do think that there's an opportunity to deploy capital in an environment where industry fundamentals haven't been particularly exciting over the last couple of years, but we have confidence in where they're going. And we're investing in the people and the platform to be able to do that from here. And I think the -- if you look at just, for instance, the basis on the assets that we purchased last year on an attractive basis. And we think overall, valuations are attractive today. Obviously, it depends on the submarket, but we'll continue to deploy capital for the right opportunities and we think that will benefit the platform over time from here. And we have a lot of confidence in the long-term fundamentals of storage. And as those return, that's great, but we're not waiting around for that. We have the opportunity to invest today to benefit the platform over time. Operator: Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Boyle for any final comments. H. Boyle: Great. Thanks very much for everyone joining today. We're energized by the opportunity ahead and look forward to sharing more about PS4.0 down the road. Thanks very much. Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Welcome to the Eutelsat Half Year 2025-2026 Results Presentation. [Operator Instructions] Now I will hand the conference over to the speaker, Jean-François Fallacher, Chief Executive Officer; and Sébastien Rouge, Chief Financial Officer. Please go ahead. Jean-François Fallacher: Hello. Good morning, everyone, and thank you for joining us today. I am Jean-François Fallacher, CEO of Eutelsat. And I am joined on this call by Sébastien Rouge, our new CFO. So before getting into the details, a quick recap of the highlights of the first semester, which has been truly pivotal for Eutelsat. In terms of performance, first half operating verticals were almost stable. Within this, LEO revenues were up nearly 60%, reflecting the ongoing strong commercial dynamic and driving rise in revenues in all 3 connectivity verticals. The adjusted EBITDA margin is just over 52%. It's reflecting the impact of sanction-related loss of video revenues as well as the effect of the product mix with LEO revenues that are still during their ramp-up stage. As a result of the first half year performance, we are able to confirm our full year financial objectives. We made great strides in our refinancing plan with the successful completion of our EUR 1.5 billion capital raise in December, leading to credit rating upgrades from Moody's and Fitch. Subsequently, we have recently announced that we obtained almost EUR 1 billion in expert credit agency financing. We have also secured operational continuity for the OneWeb constellation with the procurement of a total of 440 new LEO satellites with technology enhancements. Finally, the disposal of our passive ground segment asset has been halted. While disappointing, this has no impact on Eutelsat's ability to finance its strategic development plan. And I will come back to this later. Now let's have a quick look at the key financial data. Total revenues for the first half stood at EUR 592 million, stable on a like-for-like basis and down 2.4% reported. Revenues on the 4 operating verticals stood at EUR 574 million. They were down 0.6% on a like-for-like basis, excluding a EUR 20 million negative currency impact. As stated above, LEO revenues grew almost 60% to EUR 111 million and adjusted EBITDA was equating to a margin of 52.1% on a like-for-like basis. That means excluding currency and hedging effect, the EBITDA margin declined by 3.4 points. CapEx was at EUR 291.5 million, but clearly should not be extrapolated for the year as a whole. We will come back to this. Let's now have a look at our H1 performance in more depth. Noting please that all commentary from now on will be on a like-for-like basis, [indiscernible] at a constant currency rate. Let's have a look at our revenues by vertical. I remind they stood in total at EUR 592 million for the last semester. So revenues of the 4 operating verticals excluding other revenues amounted to EUR 574 million. Video is representing 46% of the revenues, EUR 266 million, down 12%. And I am pleased now to note that all the connectivity verticals delivered growth this semester. Fixed connectivity, representing 23% of our revenue was up 17%. Government Services representing 17% of the revenues was up 8% and mobility, representing 13% of the revenues, up 8.5%. Our other revenues amounted to EUR 18 million. This is reflecting the revenue recognition from IRIS2 project. As you know, we are involved in the consortium system development -- in the consortium system development prime. And these other revenues are also including EUR 8 million positive impact from hedging operations. Let's now zoom in the Video business unit -- in the Video segment. First half year revenues were down by 12.3% to EUR 260 million. They are reflecting the impact of further sanctions imposed on Russia. This is amounting to circa EUR 16 million for the full year '25-'26 as a whole, which came on top of the underlying trend in this mature business. Second quarter revenues stood at EUR 133 million, down by 14.1% year-on-year, but broadly stable quarter-on-quarter, as you can see there. And on the commercial front, we had good news. We announced several renewals with quite long-standing partners at very key orbital positions, notably beIN, the media company, for distribution of DTH services across the MENA regions. This is reaffirming the strategic value of our 7/8-degree West video neighborhood. And in Europe, we were very pleased to announce the renewal of the deal with Polsat. We renewed a multiyear multi-transponder contract at a very flagship HOTBIRD Video neighborhood. Let's now take a closer look at the connectivity. Our total connectivity revenues for the first half stood at EUR 307 million, up by 11.8%. Within this mix, GEO revenues stood at EUR 196.8 million, which is a decline of 4.5%. And as you can see, obviously, this decline was more than offset by the strong ongoing momentum in GEO revenues, which rose 60% up to EUR 110.5 million. And second quarter revenues stood by EUR 157.9 million, up by 15% year-on-year and by 5.8% quarter-on-quarter. LEO revenues up 50% at 56.4%, while GEO revenues were stable, as you can see there at EUR 101.5 million. Let's now zoom in each vertical in more detail. I will start with the fixed connectivity vertical. The first half fixed connectivity revenues, they stood at EUR 132 million, up by 17.2% year-on-year. This is clearly reflecting the continued growth on LEO-enabled connectivity solution. As well, we have a one-off impact, and this is resulting for the upfront recognition of revenues relating to a capacity contract with a GEO customer for an amount of circa EUR 7 million. The second quarter revenues stood at EUR 70 million, up EUR 18.3 million year-on-year. On the commercial front, Eutelsat reinforced its presence in Africa with a distribution agreement with MSTelcom in Angola for LEO services for businesses located in hard-to-reach regions as well as new multi-million, multi-year agreement with Paratus for services across Southern Africa. Let's now have a look at the Government Services segment. Revenue stood at EUR 99 million, up 7.7% year-on-year. They are reflecting again here the growth of LEO-enabled solutions, notably with a number of services delivered in Ukraine as well as increased demand from other governments. Second quarter revenue stood at EUR 46 million, down by 2.2% year-on-year. This is mainly reflecting the softer revenues coming from the U.S. as well as lower terminal sales in Q2 than Q1. Key highlights of the past semester, including the successful partnership with Airtel to support the Indian Army's relief operation with LEO connectivity. And we had also some activities in flood impacting Sri Lanka. Elsewhere, Eutelsat obtained approval for the first military-grade manpack terminal with our OneWeb network. This is a terminal for the armed forces developed in partnership with Intellian Technologies. It's now -- this terminal is now available to government and defense customers that will need a portable, resilient connectivity solutions. Now let's have a look at the mobility segment. Revenues stood there at EUR 77 million, up 8.5% year-on-year, reflecting the activation of contracts with aero mobility customers. We now have almost 600 certified antennas installation on planes, out of backlog of over 1,500 aircraft compared to what we had last year, 100 certified antennas and a backlog of 1,000 antenna. So you see the great evolution of our backlog and a number of antennas, which are actually active on planes. This impact is even more visible on the second quarter, where revenue stood at EUR 42 million, up to 34% year-on-year and 21% quarter-on-quarter. On the commercial front, we are happy also to pinpoint the multi-year deal we've inked with CMA CGM Group on maritime. This is a deal we closed with Marlink to integrate OneWeb into the connectivity solutions of CMA CGM global maritime fleet. Elsewhere, Eutelsat's OneWeb LEO network will provide passenger WiFi services on railways. We have signed a deal with Transgabon in partnership with Airtel Gabon. This is also reinforcing the Eutelsat Airtel partnership. And this is the start of business we are going to do in rail connectivity across Africa. Let's now if you wish to have a look at the backlog. The backlog stood at EUR 3.4 billion on end of December '25 versus EUR 3.7 billion earlier. This backlog of EUR 3.4 billion is equivalent to 2.7x the 2024-'25 revenues. And for you to know, connectivity represents 59% of the total backlog versus 56% a year ago. This evolution is reflecting the rapidly increasing weight of LEO business in the mix. And as a reminder, these LEO business contracts tend to be shorter. Moreover, only the success of the take-or-pay contracts, the LEO take-or-pay contracts are -- while what we call pay-as-you-go contracts are not reflected in the backlog at all. As a result, while it remains a useful indicator, the evolution of the backlog is a bit less correlated -- is now less correlated with future revenue trends than it used to be in the past. Let's now turn to the financial performance, and I will pass the floor to Sébastien. Sébastien Rouge: Thank you, Jean-François. Good morning, everybody. Revenues were covered in detail. So let's now jump to group profitability. Adjusted EBITDA stood at EUR 308 million for the half year ended on the 31st of December compared to EUR 335 million a year earlier, so down by 8%. On a like-for-like basis, it's down 6.1%. Operating costs stood at EUR 283 million, up EUR 12 million and well contained in spite of the large growth of the LEO business. They reflected mostly an increase in the -- related cost of goods sold. The adjusted EBITDA margin stood at 52.1% reported versus 55.2% a year earlier, so down 3.1 points. It is a consequence of the impact of sanction-related losses on Video revenue as well as the effect of product mix within LEO revenues during the ramp-up stage. If we look now at the rest of the P&L, the net result was a loss of EUR 236 million, largely reduced from the loss of EUR 873 million a year earlier. This reflected limited other operating losses at EUR 69.6 million as compared to EUR 691 million last year. As a reminder, in the first half of '24-'25, we included goodwill and satellite impairments totaling EUR 650 million. You can note we have also lower D&A at EUR 357 million versus EUR 434 million last year, reflecting notably the end of the amortization of certain intangible assets. As well, we have the positive effect from the securing of operational continuity of the LEO constellation, and that follows the procurement of the additional 340 satellites. Finally, we have a favorable currency impact in D&A. Net financial cost of EUR 95 million versus EUR 99 million last year, notably reflecting lower interest following the full repayment of the 2025 bond. And finally, corporate tax of EUR 21 million versus EUR 7.6 million last year. That's an effective tax rate of 10%. If we move now to our CapEx plan. Gross CapEx amounted to EUR 292 million as compared to EUR 175 million a year earlier. This reflects the timing of key milestones in LEO investment programs. I will remind, it should not be extrapolated for the full year since most of the investment will be deployed in the second half. Nevertheless, because of the phasing of LEO programs as well as an increased vigilance on our GEO spend, CapEx for the full year is now expected around EUR 900 million, while we announced EUR 1 billion to EUR 1.1 billion previously. Going forward, CapEx will remain focused on LEO activities in line with the group's strategic vision, primarily for the OneWeb follow-on program. GEO CapEx will be limited to ensuring service continuity. In this context, the group has canceled the procurement of the so-called Flexsat Americas following a review of its business case, resulting in future CapEx savings over EUR 100 million. Now in terms of financing structure of Eutelsat. The most important thing, on December 31, '25, net debt stood at EUR 1.3 billion, down EUR 1.3 billion as well versus the end of June '25. That is clearly reflecting the net proceeds from the capital increase. As a result, the net debt to adjusted EBITDA ratio stood at 2x as compared to 3.9x at the end of June '25. It will not stay at this level up to the end of the year because of the phasing of CapEx, which is skewed to the second half. The average cost of debt after hedging stood at 4.2%. It was 4.8% in the first half of last year. Weighted average maturity of the group's debt is 2.3 years as compared to 3 years at the end of December '24. We enjoy a great level of liquidity with undrawn credit lines and cash, which stood in total around EUR 2.1 billion. On this good note, now back to Jean-François to comment the outlook and next steps. Jean-François Fallacher: Thank you, Sébastien. On the first half of 2025-'26, clearly, it's been a crucial semester for Eutelsat, most notably with the successful execution of the foundation of the refinancing plan with the success of the EUR 1.5 billion capital raise, that was clearly fully supported by our core shareholders and followed by credit rating upgrades from Moody's, up two notches to Ba3; and Fitch up three notches to BB with stable outlook. Subsequently, as announced, earlier on this, we have secured almost EUR 1 billion Export Credit Agency financing. And our intention is clearly to build on these strongly improved financial fundamentals to undertake the refinancing of our bonds in order to complete the strategic refinancing plan. In parallel, now I'm going to the next slide. We are taking steps. We have taken steps -- important steps to secure the operational continuity of our LEO constellation. We've procured 341 web satellites on top of the previous order of 100 bringing the total number of new satellites to 440. The availability of these satellites will assure full operational continuity for customers of the constellation that will be progressively replacing early batches of satellites that were coming to an end of life. And moreover, we are having the possibility of taking on board hosted payloads on some of these satellites, opening the possibility for Eutelsat OneWeb to a new type of business development. Furthermore, we diversified our options for access to space. We have signed a multi-launch agreement for the future launch of LEO satellites starting in 2027 with France launcher MaiaSpace. Before wrapping up, a quick word on the recent announcement on the transaction to dispose of the passive ground segment. At the end of January, we announced that this transaction will not proceed as all the condition precedents have not been satisfied. In that case, the condition precedent was the approval of the French state. While disappointing the noncompletion of the transaction does not affect our ability to fund the capital expenditure related to our strategic growth trajectory following the refinancing measures that we have undertaken since this announcement. It has no effect on our financial objectives for the current year with the exception of the net debt to EBITDA, which is now expected to stand at around 2.7x at the end of the year versus the 2.5x previously announced this project would have gone through. On the other hand, the effect on the EBITDA margin is positive to the tune up to roughly 5 points as clearly, we will not be paying the leases of circa EUR 75 million, EUR 80 million per annum that was planned to be paid to the acquirer. Let's now turn to our financial objectives. The first half performance was in line with expectations, enabling us to confirm our full year '25-'26 objectives. I'm reminding them now. Combined revenues of the 4 operating verticals in line with the levels of '24-'25 with LEO revenues growing by 50% year-on-year, and adjusted EBITDA margin expected slightly below the level of full year of '24-'25. Gross capital expenditure in full year '25-'26 initially expected in a range of EUR 1 billion to EUR 1.1 billion, now expected to around EUR 900 million. Following the capital increases in December '25 and taking into account the nondisposal of the Ground segment, net debt to EBITDA is estimated at circa 2.7 multiple by end of the year '25-'26, reflecting clearly a robust and self-funded financing structure. Looking further out, Eutelsat demonstrates, I believe, some of the most attractive growth and profitable prospects in the sector with revenues expected in a range between EUR 1.5 billion and EUR 1.7 billion in the end of the full year '28-'29, supported by the strong momentum of LEO revenues, which are significantly outperforming the market. Our operating leverage is expecting to drive to a mid- to high single-digit percentage points of improvement in the EBITDA margin, resulting in a margin of around 65% by '28-'29. In the long term, post full year '28-'29, the B2B connectivity market is expected to pursue its growth, clearly with a double-digit rate driven by the LEO market expansion. So a few words to sum up. First half revenues once again confirmed the significant momentum in LEO revenues. Our financial situation is significantly reinforced following the capital raise of EUR 1.5 billion and the attention of the EUR 1 billion ECF funding and the operational continuity of OneWeb constellation well assured with the procurement of further 440 LEO satellites. So now with both financing secured and operational continuity assured, we can look forward with confidence as we focus on our growth strategy based on the development of our LEO business. I'm thanking you very much for your attention, and we are now ready to take your questions. Operator: [Operator Instructions] The next question comes from Aleksander Peterc from Bernstein. Aleksander Peterc: I just have a first a couple on connectivity. Do you expect government to bounce back? We had a bit of a weaker-than-expected revenue in the reported quarter. So I was wondering if this is just due to one-off installation effects and so on. And conversely, on aviation, do you see the strong traction there continuing given your strong backlog numbers and installed planes numbers that you disclosed in the report? So should we be a bit more bold in our estimates for this vertical going forward? And then secondly, on your debt, do you plan a bond issuance soon? The bond issuance conditions your access to the ECA financing? Is that a near-term event? And once you complete that and you have access to the ECA EUR 1 billion, do you think you have a credible path to investment grade in the medium term? Joanna Darlington: Alex, it's Joa on the line. So I'll take your first question, and then I'll pass the other questions on to the others. So you're right, there's a slight slowdown in Q2 on government services. I think that the first thing to remember is that in Q4 of last year and Q1 of this year, there was quite a high level of equipment sales in the mix, and this obviously reflects the very strong momentum that we saw in government services throughout financial or calendar year 2025. The fact is that, that mix has been slightly different in the second quarter. But I think I would say 2 things. The first thing is that the -- it's absolutely a good signal to have terminal sales in the mix because obviously, you need to install the terminals so that you can then get the service revenues going. And the other thing I would say is these are long-term businesses. So I wouldn't extrapolate a trend based on the performance of one quarter to another. I think on your second question, I mean, yes, obviously, we have been making very strong progress on aviation. You can see that the number of installations has gone up as has the backlog of planes. As a reminder, all of these customers are serviced by our distributors, not directly by us. So this means that the distributors who are Intelsat, Gogo, I mean, obviously, they're Panasonic, they're getting momentum in terms of selling the OneWeb service. So yes, it's a positive sign. We knew that once the kind of we got to a certain critical level of global coverage, then it would unblock the pipeline for Aero, and this is what you're beginning to see. I mean how you adjust your forecast is up to you. I would highlight that for the year as a whole, we are not changing our revenue forecast for the group. And I think your third question about the bond issuance, maybe Sébastien wants to take that. Sébastien Rouge: Look, I think you're right. The last step of the full refinancing of the group after the capital increase, renegotiation with the banks and the setup of the ECA loan is actually to issue some bonds to make sure that we refinance some of the maturities that come in the next years. The only thing we can say is that it's clearly on the radar, and we're in preparation mode. Whenever we are ready, we'll announce that to the market. As far as investment grade is concerned, I had the first interaction with our rating agencies. Before we anchor ourselves completely in investment grade, I think there are a few steps that have to be followed, in particular, phasing and the way IRIS2 will be financed. I think we first have to answer to this question before we entertain a complete clarity vis-a-vis the rating agencies. Aleksander Peterc: Can I just have a very quick follow-up? You have one expensive bond at 9.75%. Would that be a candidate for an early redemption? Sébastien Rouge: Yes, we are looking at this one in particular with -- in the foreseeable future, yes. Operator: The next question comes from Roshan Ranjit from Deutsche Bank. Roshan Ranjit: I have 3 questions, please and I guess, perhaps related to the first one around government. Interesting that you have canceled the Flexsat Americas satellite. I was just wondering what the kind of reasoning behind that is. If I remember correctly, that satellite was clearly directed over the Americas for activity and government business. So are you perhaps seeing less of a U.S. kind of demand? Clearly, you are seeing strong pickup in Europe. But is there a bit of a softening, as you say, the U.S. side, please? And just added to that, if you could give us -- remind us of the mix of U.S. DoD revenues within your government vertical, that would be helpful. The second question is on video. And clearly, the headwinds from the Russian sanctions still impact it. But if I adjust for that on my calculations, I think high single digit, perhaps very low kind of double-digit underlying decline in video. Your previous message was kind of a mid-single-digit decline. So should we think the new normal is kind of high single digit for the video business? And lastly, could you just give us a quick update on IRIS2? I understand that we're supposed to be getting a kind of this rendezvous point in the coming weeks to kind of finalize the numbers and get the ultimate go ahead. Is that still the case? Jean-François Fallacher: Maybe I will take -- thank you for your questions. On the Flexsat Americas, I mean, the decision is not linked to the U.S. or to the continent itself, the U.S. continent itself. Now the decision we have taken is linked to the fact that we didn't see a viable business case or at least the return was going much further down the years, 2030s with the Flexsat Americas, simply linked to the fact that we see more LEO constellations coming, and we thought, basically, we would not have a flying business case anymore if I may say so. And that was the main reason why we decided to cancel now on an amicable basis this -- the construction of this GEO satellite. So this is obviously going to avoid a lot of CapEx to us in the very short term for a business case that was more and more shaky. So that's the main reason of this decision. Maybe I will take the question on the IRIS2, and I will let Joanna tell you a few words about -- on the video and how we see the evolution of our video business. Keep in mind always that on the video business, of course, we can talk about trends, but we have long-term big contracts with a number of different parties. So every year is a bit different. So it's a bit difficult to talk about trends, but I will let Joanna say more on that. On IRIS2, where are we? So we are, as you know, one of the key, let's say, players in the consortium, SpaceRISE consortium together with SES and Hispasat that have won this concession from Europe. We've been working the full year 2025, calendar year 2025 with actually suppliers and the supply chain in order to solidify the constellation we want to build. We are now entering a so-called -- on level 1 with European Commission. And this semester will be key because this is the moment where we will actually finalize our commitments. I'm talking about the SpaceRISE consortium towards Europe to actually build this constellation, this European constellation further. So we are having a very important semester now in this project. So stay tuned. Maybe Joanna, a few words on the video. Joanna Darlington: Yes. So I think -- thanks, Jean-François. So on video, not really a lot more to say. You're right that this year, obviously, is affected by Russia. And I mean, technically, if you remove Russia and recalculate, yes, it gives you a decline, which is a bit higher than mid-single digits. But as you know, because you've been covering the sector for a long time, it can be quite lumpy based on renewals. So again, I wouldn't necessarily extrapolate that into a long-term trend. I think we can probably say that what we've been seeing in the last year or so is a bit higher than mid-single digit underlying. But -- so your other question, I think, was the mix of U.S. DoD within government. It's now less than 50%, and we expect it to continue to decline as we build up with other governments and obviously, notably the framework agreement with the French DoD, but not only. Operator: The next question comes from Ben Rickett from New Street Research. Ben Rickett: I had 2 questions, please. Firstly, in the context of your Flexsat Americas cancellation, I'm just wondering how you think about the long-term viability of your GEO constellation. Do you think you will ever launch a GEO satellite again? And related to that, what level of GEO CapEx should we be expecting going forward? And then second question, it seems increasingly likely that Germany is going to build its own LEO constellation for their military. I don't know how much interaction you've had with the German government, but I'd be interested in your perspective in why Germany is doing this rather than using the IRIS2 constellation. Are there technical limitations with IRIS2? Or are there other factors? Jean-François Fallacher: Thanks very much for your 2 questions. On the GEO satellites in your question, will we ever build new GEO satellites in the future? So first of all, we have one project, one GEO satellite project still live, new GEO satellite with -- together in partnership with Thaicom, so which is a satellite that will fly over Asia. It's a connectivity satellite. So this one, we are feeling very confident, and we are really happy to keep it. We see the business plan still extremely valid over that region. Let's remind that when we look at our fleet of 34 GEO satellites, we have a big number of video GEO satellites. So these satellites have a long life duration. I believe in the future, we will have to invest in new GEO satellites for video because we have a number of regions where actually video is still -- the video business is still going very well. I was just saying, we are proud to have re-signed an important contract with Polsat, which is 1 of our 2 large customers in Poland. So there are a number of geographies where actually video is holding very well. I'm not even quoting Africa, where we have Canal+, MultiChoice as big customers. MENA, where you have seen we have renewed the contract with beIN. Our 7, 8 West position is a very strong one over MENA. So some of these satellites will, at some point, come to an end of life, but that will be post 2035, more in the '35 -- 2035-2040 region. So probably in a few years, we will need to look at the evolution of our GEO satellites, take decisions. Not much I can say now because, I mean, these GEO satellites can be also moved from one place to another place. So all of this is basically going to be looked at carefully. In the very short term, I mean, in the foreseeable short term, there is no such project, but for sure, in the future, there will be additional investments in GEO satellite. That's the first question. The second question about the public announcements of Germany. So just to put back these things in their context, first of all, there are announcements. We are taking them, obviously, very seriously. There are announcements from the German Bundeswehr, so the German MoD wishing to build its own military-grade LEO constellation. Obviously, we are in touch with Germany at multiple level. The reading and the reason why this project came to see the light, I think, it should be more asked to the Germans. We have obviously our ideas. One of them could be that they were expecting a very late arrival of IRIS2. And believe me, we are working very hard to have IRIS2 coming and becoming live in 2030 as was initially explained. So that's the only thing that I want to say. I take the opportunity that you are all here to say that what I'm advocating, we had a press conference this morning, and it's not the first time I'm saying it. Basically, personally, I believe that this is one of the pitfalls or one of the traps that Europe could have, is to fragment and that each country. And we understand that Europe is 27 countries, with 20 sovereign countries -- 27 sovereign countries, and there is always the temptation to build your own national object. But looking at the size and the complexity of building a LEO constellation, I remind, OneWeb, $7 billion invested since the beginning of the project in 2015, 7 years before OneWeb became really operational, and we could start to sell services over this constellation. So I believe, for Europe, that would be a trap, that would be a pity that Europe would fragment and that some of the countries would build their own constellation. I mean nonetheless, obviously, we are respecting the sovereignty of Germany and whatever decision they will take, but we are clearly advocating and trying to convince the Germans not to go that way. Operator: [Operator Instructions] The next question comes from Stéphane Beyazian from ODDO BHF. Stéphane Beyazian: Just a follow-up on the discussion about Germany, and perhaps I could add Italy as well. I mean if these 2 countries were to decide to build their own constellation, I would suspect that this probably changes your guidance for revenues coming from IRIS2 and possibly the return on investment. So yes, I was just wondering to what extent these 2 countries are important in the calculations that have been made about future revenues coming from IRIS2. And second question, I was just wondering if -- obviously, without revealing anything that could be confidential. But is there any major or big contract tender that is ongoing and which is public? I was thinking about the SNCF, which I think is looking for a provider of connectivity. Any update there? I mean any other major contracts that could be coming up and that is publicly known? Jean-François Fallacher: So just on your first question, it's much too early to answer to this question, obviously, but just -- I mean, because, again, I'm insisting, I mean, these are announcements. There is nothing concrete at this stage. Takes very long time to build a constellation. Let's never forget that this constellation, whether it's ours, whether it's IRIS2, are worldwide constellations. Low orbit satellites are flying by construction all over the earth, meaning that the economic model of this constellation cannot be standing on just one region. The economic model of OneWeb, the economic model of this constellation are worldwide. Just a few numbers, they are facts. The French -- the turnover of Eutelsat in France, France represents 7% of our turnover. Full Europe represents 27%, out of my memory, of the total turnover of the group. So I mean, of course, I mean, Germany is an important country, no discussion. Italy is at the same -- I mean, evenly a very important country in Europe, no discussions. But again, I mean, the revenue expectations and the business case we are having post 2030 linked to IRIS2 are also based clearly on international revenues in many other countries than just European countries. I remind that, as we speak, OneWeb is opened and we can sell in 180 countries across the world, not to name maritime, not to name planes, aero. So again, too early to make any statements about that. And we are working extremely hard and very focused on the Eutelsat side on making IRIS2 a success. Your last question, SNCF. Yes, obviously, we are in discussions with SNCF. Much too early to say. I mean SNCF is still in the process of, let's say, preparing their RFP. They have announced it. I believe there will be an RFP somewhere this year on basically the equipment of the French trains. Allow me also to give you an update on our NEXUS contract. We had a bit of, let's say, late start of the revenues in this contract simply because, as you have probably seen, France was having difficulties to finalize the budget for the country. The good news is that this has been now finalized 2 weeks ago. So that will also allow the French MoD to really take actions now. We've been working very closely with them since the announce of this frame contract since summer last year. We have things in the pipe, and hopefully, we'll be able to make some announcements in the second semester that has already engaged because now that the French Army has a budget, I mean, they will be capable of taking some actions and taking -- sorry, and signing purchase orders basically, which is what we expect now. Stéphane Beyazian: And I have a third question. Do you think it's possible? Joanna Darlington: Yes. Stéphane Beyazian: My third question is do you see any area for possible diversification? I'm thinking about earth observation or data analytics. And I would stretch the question to something that is probably a little bit different and more CapEx intensive. There's been a lot of talks also about computing in space. Anything, any color you could provide on that? Jean-François Fallacher: Thank you for your question. It's an excellent question. The first -- so we are not going to go into space observation. This is too far from our current business, although, I mean, it's -- actually, I understand why you think about that. There are 2 things we could quote now: one -- the first one because this is very concrete and this is very material. This is hosted payloads. In the satellites we have purchased to Airbus, 340 satellites, we have actually built an option on these satellites to embark what we call hosted payloads. So this is some, let's say, physical space we have on these satellites. Well, for those of you in the call, which are not familiar, I mean, the size of this OneWeb satellites are the size of, let's say, a big refrigerator or a big washing machine, something like that. We have actually some space that allows us to take an additional payload. So -- and what we would provide to these payload is basically electricity coming from our solar panels and batteries and a little bit of connectivity so that we could have people indeed doing earth observation or some kind of monitoring or whatever payload, scientific payload, military payloads. We can plug them in the space, in our satellite and take them with us in space and fly them with us. So these are -- this is really a new business in which we believe because this is win-win. This is, for us, the possibility to open a new stream of business. And this is for parties, which are having projects to put in space some specific missions and could not do it because it's very expensive to build a platform, to build a satellite. It's very expensive to launch a satellite. It's very expensive to maintain a satellite, to operate a satellite fleet. So that's a win-win. It's a new business line that we have opened with these 340 satellites that we are now marketing, selling to a number of space and new space actors across the globe. And I hope, without revealing anything, that we can have some announcements in the first semester. That's the first thing. The second thing, although it's very early to say, I mean, obviously, the deal with EQT that has been halted has been actually showing -- I mean, putting an eye on the ground assets of Eutelsat. These assets used to be seen as technical assets and operational assets in the past. Through the deal, we have prepared with EQT -- I mean, it became very clear that this asset could be a bit sweated. So we could derive some business from these assets. So clearly, now that the deal has been halted, these assets are still ours, obviously. We have started some kind of carve-out. So we are going to look, obviously, at the possibility to monetize a bit more these assets. So this is, I would say, the second direction. I want to pinpoint on what additional businesses could we -- aside our core business, could we start to launch basically. So -- and we have other projects in the cupboards, but I want to stay there for now because these projects are much too -- at a much too early phase. But we are seeing actually innovation and business development as also a key potential direction for the future. Stéphane Beyazian: And what about the orbital data centers? Anything on that? Or that's part of what you don't want to comment too much today? Jean-François Fallacher: No, we -- I mean, we've obviously seen and read like everyone the starting projects on this area. I mean, at this stage, we have no such projects at Eutelsat. Operator: There are no more questions at this time, so I hand the conference back to the speakers to conclude the call. Jean-François Fallacher: So thank you very much for your questions. Again, first half results confirming the momentum in LEO revenue. Our financial situation significantly reinforced capital raise of EUR 1.5 billion, ECA of EUR 1 billion. More to come as you understood today on the bond side, operational continuity of the constellation on the way with the order of 440 satellites. So now financing secured, operation continuity assured. We are looking forward to the future with confidence and we are focusing on our growth strategy based on the development of the OneWeb LEO constellation. Thank you very much, ladies and gentlemen. Operator: This concludes the call. You may now disconnect.
Operator: Thank you for standing by, and welcome to the Westwood Holdings Group, Inc. Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press 11 on your telephone. If your question has been answered and you would like to remove yourself. As a reminder, today's program is being recorded. And now I would like to introduce your host for today's program, Jill Meyer, Corporate Security Secretary and Director of Fiduciary Services. Please go ahead. Thank you, and welcome to our Fourth Quarter 2025 Earnings Conference Call. Jill Meyer: The following discussion will include forward-looking statements that are subject to known and unknown risks, uncertainties, and other factors, which may cause actual results to be materially different from those contemplated by the forward-looking statements. Additional information concerning the factors that could cause such a difference is included in our press release issued earlier today as well as in our Form 10-Ks for the year ended 12/31/2025, that will be filed with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. You are cautioned not to place undue reliance on forward-looking statements. In addition, in accordance with SEC rules concerning non-GAAP financial measures, the reconciliation of our economic earnings and economic earnings per share to the most comparable GAAP measures is included at the end of our press release issued earlier today. On the call today, we have Brian Casey, our Chief Executive Officer, and Terry Forbes, our Chief Financial Officer. I will now turn the call over to Brian Casey. Brian Casey: Good afternoon, and thanks for joining Westwood Holdings Group, Inc.'s Fourth Quarter 2025 Earnings Call. I am looking forward to sharing our full-year results, key developments from the past quarter, and a look into what this year holds in store. First, here are some of last year's more significant milestones and achievements. Brian Casey: Our ETF franchise now exceeds $200,000,000 including our latest ETF, Enhanced Income Opportunity. In addition, MDST surpassed the $170,000,000 mark in AUM. We closed our second oversubscribed private equity fund, Westwood Energy Secondary Fund II, with more than $300,000,000 in commitments for the fund and two related co-investment funds. Our Managed Investment Solutions team secured its first institutional client, and we had strong full-year sales growth, $2,500,000,000 versus $2,100,000,000, up 20%. Many key equity indices posted new records last year, however, investors were pulled in different directions during the final quarter. The S&P 500 rose less than 3% but still ended the year up 18%. Despite economic headwinds, the U.S. economy did manage to record modest growth against the backdrop of consumer confidence remaining near all-time lows. The Federal Reserve cut short-term rates by 75 basis points from September through December, amid weakening labor market conditions. Signs of fatigue in the long-running bull market in tech stocks started to appear, as investors shifted their focus from the promise of AI towards more tangible near-term financial results. Bond markets generated positive total returns for the year supported by declining yields. Several of our investment strategies demonstrated resilience and competitive positioning across multiple time horizons and asset classes. Within U.S. Value, our SMID Cap strategy is performing well, with top-third rankings over three-year rolling periods. Solid results like these are founded upon our disciplined approach to identifying high-quality businesses trading at attractive valuations. Our Multi-Asset strategies are demonstrating exceptional long-term strength. Credit Opportunities has delivered outstanding results, ranking in the top decile among peers over three- and five-year periods. Income Opportunity is providing attractive returns, posting competitive peer rankings while delivering consistent income to investors. Our Salient energy and real estate strategies continue to deliver competitive long-term performance. Real Estate Income ranks in the top third over rolling three years, and our MLP and Midstream strategies have provided strong absolute returns in an environment favorable to energy infrastructure. Looking ahead, we anticipate continued market uncertainty driven by a variety of economic indicators and policy developments. No matter what happens, we believe our focus on high-quality businesses with strong fundamentals positions us well for the future. As investors broaden their focus beyond mega-cap technology stocks, high-quality companies with low levels of debt, high returns on invested capital, and strong management teams should be viewed very favorably. Against the backdrop of elevated market valuations, good companies trading at a discount to market or peers should prove resilient and offer attractive shareholder returns. Turning to distribution, our team delivered exceptional results last year, demonstrating the appeal of our product lineup and the effectiveness of our distribution strategy. The institutional channel achieved gross sales growth of 36% versus the previous year. This strong performance reflected our ability to gain traction with institutional investors across multiple strategies, particularly in SMID Cap and Small Cap Value. Several significant pipeline opportunities advanced last quarter, including defined contribution plans with major national consultants. We are very pleased with the progress being made by our Managed Investment Solutions team, are holding constructive conversations with clients and prospects regarding customized solutions, and we look forward to additional wins early this year. The infrastructure and liquid real asset strategies we launched last year have attracted strong interest from institutional investors seeking alternatives to traditional equity and fixed income allocations. The intermediary distribution team also achieved outstanding results, posting full-year gross sales growth of 32% versus 2024. This was our strongest annual intermediary performance in several years thanks to the successful execution of our intermediary distribution strategy. Particular strength was demonstrated in our energy and real asset products, which resonated with advisers and clients seeking income and diversification. Our MDST ETF has now achieved the asset scale required for approval on major broker-dealer platforms, and we expect new platform additions this year. The expanding breadth of our offerings, spanning traditional active strategies, income-focused solutions, tactical approaches, and alternative investments, positions us well to meet diverse client needs. We continue to invest in our distribution capabilities, and the momentum we have built provides a strong runway for growth in 2026. Throughout last year, we conducted a deep dive within our wealth to better align our services with the direction of the industry and how we are uniquely positioned to grow our business. Multigenerational families are looking for integrated, high-touch guidance that spans investments, planning, trust, and legacy needs, all of which represent a great long-term opportunity for Westwood Holdings Group, Inc. given the strength of our trust company and our long history serving complex Texas families. As a multifamily office with corporate trustee powers, we are well equipped to understand a family's complete picture and can step in seamlessly when named as executor or successor trustee. Our objective approach, dedicated teams, long-term continuity, and rigorous regulatory oversight combine to provide a level of professionalism that is difficult, if not impossible, for individual fiduciaries to match, while our deep expertise in trust administration allows us to manage complex requirements efficiently and consistently. Throughout the year, we clarified our purpose and vision for our wealth division, rethought our service model, and began transitioning to a more coordinated, team-based delivery structure designed to enhance consistency and scalability. We completed a comprehensive assessment of our competitive position and identified opportunities to strengthen long-term economics by attracting new ultra-high-net-worth families, deepening existing client relationships, and aligning pricing with market standards. This marks the early phase of a disciplined multiyear evolution of our wealth division, and we remain focused on enhancing the client experience, improving scalability, and positioning our business for sustainable long-term growth that benefits clients, employees, and shareholders. Beyond our core business performance, we achieved several significant milestones last quarter that strengthen our competitive position and expand our market opportunities. We launched the Westwood Enhanced Income Opportunity ETF, ticker YLDW, late in the quarter. This offering expands our income-focused ETF lineup; initial acceptance has been strong. Our flagship MDST ETF, Enhanced Midstream Income, surpassed $170,000,000 in AUM, validating our differentiated midstream strategy and opening doors to additional platform approvals. With the addition of YLDW, our total ETF franchise now exceeds $200,000,000 in assets, marking an important milestone for Westwood Holdings Group, Inc. We closed Westwood Energy Secondaries Fund II on December 31, with over $300,000,000 in capital commitments for the fund and two related co-investment funds, double our initial goal. The second fund builds on the success of our inaugural energy secondary strategy and underscores our ability to raise capital in specialized alternative investment strategies. WES II allows institutional investors to access secondary market opportunities in the energy sector, complementing our suite of energy investment solutions. Since launching WES I, our initial flagship energy secondary fund in 2023, we have raised nearly $350,000,000 and have invested over $250,000,000 across both Energy Secondaries flagship funds and three co-investment funds. As we turn the page on last year and look ahead to this year, we remain confident in our strategic positioning and value proposition. Our diverse range of strategies, expanding ETF platform, and robust distribution momentum position us for continued growth. Our achievements last quarter—the launch of YLDW, the milestone success of MDST, closing our second private equity fund, and outstanding sales growth across institutional and intermediary channels—demonstrate our ability to innovate and execute while maintaining our core strengths in active management. With assets under management of $17,400,000,000, strong competitive performance across multiple strategies, and a proven ability to deliver results across market cycles, we are well positioned to capitalize on opportunities as market conditions shift towards active, value-oriented investment approaches. We are committed to delivering value to clients via high-quality investment solutions and to creating long-term value for shareholders. Thank you for your continued support and confidence in Westwood Holdings Group, Inc. I will now turn the call over to our CFO, Terry Forbes. Terry Forbes: Thanks, Brian, and good afternoon, everyone. Today, we reported total revenues of $27,100,000 for the 2025 compared to $24,300,000 in the third quarter and $25,600,000 in the prior year's fourth quarter. Revenues increased from the third quarter due to significant investor interest in our exchange-traded funds and private energy secondaries funds, along with higher performance fees. Revenues increased from 2024's fourth quarter primarily due to higher average assets under management and higher revenues from our ETFs and private energy secondaries funds, partially offset by lower performance fees. For fiscal 2025, total revenues of $97,800,000 compared Terry Forbes: to $94,700,000 in 2024 driven by higher average assets under management and higher revenues from our ETFs and private energy secondary funds. Our fourth quarter income of $1,900,000, or $0.21 per share, compared to the third quarter's $3,700,000, or $0.41 per share, due to higher performance-related incentive compensation in the fourth quarter and unrealized appreciation on strategic private investment in the third quarter, offset by higher revenues. Non-GAAP economic earnings were $3,300,000, or $0.36 per share in the current quarter, versus $5,700,000, or $0.64 per share, in the third quarter. Our fourth quarter income of $1,900,000, or $0.21 per share, compared to the prior year's fourth quarter income of $2,100,000, or $0.24 per share, as a result of higher revenues and the impact in 2024 of changes in the fair value of contingent consideration, offset by higher performance-related incentive compensation expenses and additional professional services costs. Economic earnings were $3,300,000, or $0.36 per share, compared to $3,400,000, or $0.39 per share, in 2024. Our 2025 income was $7,100,000 compared to 2024's $2,200,000 on higher revenues, unrealized appreciation on strategic private investments, and the impact in 2024 of changes in the fair value of contingent consideration, offset by higher professional service and information technology costs. Economic earnings for the year were $14,300,000, or $1.61 per share, compared with $7,000,000, or $0.82 per share, in 2024. Firm-wide assets under management and advisement totaled $17,400,000,000 at quarter end, consisting of assets under management of $16,500,000,000 and assets under advisement of $900,000,000. Assets under management consisted of institutional assets of $8,300,000,000, or 50% of the total, wealth management assets of $4,300,000,000, or 26% of the total, and mutual fund assets of $3,900,000,000, or 24% of the total. Over the year, our assets under management experienced net outflows of $1,000,000,000 and market appreciation of $1,000,000,000, and our assets under advisement experienced net outflows of $18,000,000. Our financial position continues to be very solid, with cash and liquid investments at quarter end totaling $44,100,000 and a debt-free balance sheet. I am happy to announce that our Board of Directors approved a regular cash dividend of $0.15 per common share, payable on 04/01/2026 to stockholders of record on 03/03/2026. That brings our prepared comments to a close. We encourage you to review our investor presentation we have posted on our website reflecting quarterly highlights as well as a discussion of our business, product development, and longer-term trends, revenues, and earnings. We thank you for your interest in our company. We will now open for questions. Operator: Certainly. 11 on your telephone. If your question has been answered, and you would like to remove yourself from the queue, simply press 11 again. We will pause as we compile the queue. This does conclude the question-and-answer of today's program. I would like to hand the program back to Brian Casey for any further remarks. Brian Casey: Well, you, Jonathan. In closing, we felt like we had a really good year in 2025, but we want to acknowledge the outflows in the fourth quarter, which were disappointing. I do want to make a few comments on those. More than 80% of the outflows were from our Large Cap Value product, and that product has really struggled in recent years against a very narrow, low-quality market environment. If you know Westwood Holdings Group, Inc., you know that we are always seeking high-quality companies that are improving, that are mispriced, and that is not what the market has wanted in the last couple of years. So most of those Large Cap outflows, in fact, more than 80% of those flows were from one sub-advisory client that carries a fee of less than 20 basis points. So while it is a big number going out the door, it is less impact on revenue. We did have a new client come in yesterday with $200,000,000, and they will add another $100,000,000 to $200,000,000 over the next couple of months. We also have a new defined contribution plan that will fund on the last day of the first quarter in our SMID product for $450,000,000, and that will take our SMID AUM very close to the $2,000,000,000 threshold AUM level. Our pipeline looks great. We have, you know, we reached another new threshold last night where MDST, our Midstream Enhanced Energy Income fund, crossed the $200,000,000 threshold. We are in the process of due diligence to onboard MDST under one of the largest wirehouses, which will significantly expand our opportunity set. So we are very bullish on the ETF that we started a couple of years ago. So appreciate your time today. I hope everybody enjoys a long weekend. Please visit our website, westwoodgroup.com, if you have any questions. Thank you. Operator: You, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Operator: Thank you for standing by. This is the conference operator. Welcome to the Alkane Resources Second Quarter Fiscal Year 2026 Financial and Operating Results Conference Call and Webcast. [Operator Instructions] The conference is being recorded. [Operator Instructions] Now let me hand the call over to Natalie Chapman, Alkane's Corporate Communications Manager. Natalie Chapman: Hello, everyone. Thank you for joining our call today. Some housekeeping items to note. The accompanying presentation for today's call is available for download from the company's website at alkres.com. Today's press release, the financial statements and the MD&A are all posted on our website and SEDAR+. For those of you on the webcast, please move through the presentation slides yourself as directed by our presenters. Moving on to Slide 2. I'll remind everyone that this conference call contains forward-looking information that is based on the company's current expectations, estimates and beliefs and may also use terms that are non-IFRS performance measures. Please review Alkane's quarter 2 fiscal year 2026 disclosure materials for the risks associated with this forward-looking information and the use of non-IFRS performance measures. Please note that all dollar amounts mentioned on today's call are in Australian dollars, unless otherwise stated. Also, as management reviews the quarter and half yearly results, please remember that Alkane has a June 30 fiscal year-end. So the quarter ending December 31, 2025, is our second quarter of the 2026 fiscal year. And as we closed the merger with Mandalay Resources on August 5, 2025, our group financial and operating first half fiscal 2026 results shown today only include 5 months from the Costerfield and Bjorkdal mines, the former Mandalay operations and a complete 6 months of results from Tomingley. Please move on to Slide 3. Today's speakers from Alkane Resources are Nic Earner, Managing Director and Chief Executive Officer; and James Carter, Chief Financial Officer. I'll now hand the call over to Nic Earner. Nicolas Earner: Hi, everyone, and thanks for joining us today. Let's go to Slide 4, which provides a quick summary highlighting our record achievements on our very successful first half of 2026. Alkane had a record-setting second quarter and first half of fiscal 2026, both operationally and financially. We produced just over 43,600 gold equivalent ounces in Q2, which gives us just over 74,000 gold equivalent ounces for the first half of 2026. And remember here, the ex Mandalay asset production from July, the month of July is not included in that number. And so when we look at our full year, so the full 12 months, including July, including Mandalay assets, we're on track to meet that group 2026 guidance of 160,000 to 175,000 gold equivalent ounces. So given the strong prices for gold, the strong prices for Antimony and our great production results, our mines generated AUD 133 million of operating cash flow for the quarter, which has boosted our already strong financial position. As of quarter end, we had AUD 246 million in cash, bullion and liquid investments on hand. This strong financial position, combined with what we expect to be continued robust free cash flow from our operations, allows Alkane to aggressively grow the company through exploration, capital programs at each of our mines as well as advance the Boda-Kaiser copper-gold porphyry project and opportunistically grow the company inorganically. Now let me move on to Slide 5 to get into more details on the quarter. On a consolidated basis, in Q2, Alkane produced nearly 43,000 ounces of gold and 267 tonnes of Antimony, which equates to nearly 44,000 gold equivalent ounces. All of these are records for Alkane as a company. This was from mining nearly 581,000 tonnes of ore at an average gold grade of just under 2.4 grams per tonne and an average Antimony grade of just under 1%. Recoveries of just over 90% gold and just under 87% Antimony were higher than in Q1. Now I'm going to get into specifics with each mine shortly, but let me summarize, overall, all our mines are operating well and all of them meet our own expectations, which are very high. So let's move on to Slide 6 and look at Ting. In Q2, we processed nearly 319,000 tonnes of ore at an average recovery rate of 89.8% and an average grade of 2.5 grams per tonne. This led the mine to produce a bit over 22,000 ounces of gold. This is 20% higher than we got in Q1. High production came from slightly improved operations, but mostly from the planned mining sequence moving into higher-grade zones, also continued cost management. And this resulted in all-in sustaining costs in Q2 being AUD 2,216 per ounce. The U.S. dollar amount is on the screen there. This is 16% lower than in Q1. So the primary source of ore at Tomingley continues to be from the Roswell underground deposit. During the quarter, and I'm going to describe this is ordinary course of business for us, but I want to give you detail on this. We had some minor challenges. We had some shock credit downtime that delayed our paste fill. We had some lower development rates leading to lower development ore. And we redesigned some stope shapes to improve load recovery. But all these issues were overcome pretty rapidly and like I said, a part of the ordinary course of business. Our processing plant continues to perform well. We're milling in excess of budget. And primarily, this is a result of us inserting a mobile crusher to pre-crushed material prior to entering our processing circuit. So this pre-crushing material entering the circuit has seen a nominal increase in milling rates to approximately 1.3 million tonnes per annum with further optimization on both throughput and cost options for this mobile crusher continuing. Capital expenditure during the quarter was mainly for the Newell Highway realignment project. Construction of this is expected to be completed in about a year from now in 2027. This is a high-return project, which allows us to access the high-grade San Antonio deposits in 2 new open cut mines. Bottom line, improved productivity, lower costs, higher gold grade, higher gold prices. Cash flow from Tomingley was AUD 67 million in the second quarter or a bit over 70% higher than Q1. Moving on to Slide 7. Q2 at Bjorkdal, we processed nearly 330,000 tonnes of ore with an average grade of 1.04 grams per tonne and an average recovery rate of 87.4%. This allowed us to produce just under 10,000 ounces of gold. All-in sustaining costs in Q2 were AUD 4,117 per ounce. Again, the U.S. is on the screen or 2% higher than in Q1. Bjorkdal was a solid quarter mining performance. All production is going well. We've got consistent stope productivity, and we've got stable development activities. We've also started replacing some critical equipment, which has resulted, as you'd hope, in machine availability. Further equipment replacements are continuing in this quarter, current quarter 3. Mill throughput was a little bit slower -- I mean, lower than the previous quarter. This is primarily due to our mill reline, the new linings we put in were wearing slightly slower than the anticipated rate, good for relining, but it limited our maximum allowable mill load. The completion and commissioning of the return water system from the mine as well has also had a positive impact on flow performance to date, which has led to improved recoveries. With the improved productivity and higher gold prices, operating cash flow from Bjorkdal was AUD 35 million for the second quarter. On to Slide 8. At Costerfield, our gold and Antimony mine, we processed nearly 35,000 tonnes of ore. In Q2, we plan to be in a higher grade sequence in the mine. Therefore, we achieved an average gold grade of just under 10.4 grams per tonne and an average Antimony grade of 0.91%. Both of these were higher than in Q1. Gold recovery rates of 93.9% and an Antimony recovery rate of 86.8% were also higher in Q1. Our increased plant efficiency and throughput rates, particularly as well as the grade, allowed the mine to produce 10,790 ounces of gold and 267 tonnes of Antimony or 11,686 gold equivalent ounces. All-in sustaining costs in Q2 were AUD 2,149 per gold equivalent ounce, resulting in a 12% decrease from Q1. And this demonstrates the focus we have on getting high grade in and expanding our production rates. Costerfield summary, steady operational performance during the quarter, strong mining productivity as well, we continue to advance several initiatives to improve our ore quality and recovery. We continue to try and optimize drill and blast optimization, remembering this is a narrow vein stoping environment where we're trying to keep our widths as tight as possible. We continue to focus on operator training, and we are moving towards emulsion explosives because we want to improve some recovery and reduce dilution. So as we prioritize here on Costerfield, operational consistency and grade control, and we use this to underpin our strong production outcomes that we expect to get over the coming quarters. So with this great productivity, with our cost control, high gold prices and, of course, higher gold grade, operating cash flow from Costerfield was AUD 30 million for the second quarter. Now moving on to Slide 9. One of the key strategic initiatives that we have is to drive organic growth by increasing mineral resources, we have an aggressive exploration program across our portfolio. I'm going to tell you about that now. So on Slide 9 here that we're at. At Tomingley in Q2, we invested AUD 2 million for the quarter in several programs. This includes 1 and 2 on the picture, extension drilling under the existing pits of Wyoming and then Caloma North. #4 on the picture, resource infill drilling at Roswell, and we get results here like just under 8 meters at nearly 0.5 ounce per tonne. At #3, discovery of a new zone of gold-rich mineralization at McLeans right next to existing infrastructure, intercepting gold intercepts like 26 meters at 4.36 grams per tonne of gold. Down at # 5, and we own the land under this, drilling in El Paso, which also resulted in several significant intercepts, including 8.2 meters at 3.74 grams per tonne. And then last but not least, at #6, we commenced testing Peak Hill for its gold copper porphyry potential. And number seven, we're conducting geophysical targeting and drill testing for low sulfidation epithermal gold quartz veins at Glen Isla. What I want to show you here is that a lot is happening at Tomingley to expand the resources. And more importantly, the sheer volume and range and distance of this work alone demonstrates big potential and the reason why we continue to focus on exploration. So let's move on to Slide 10, Bjorkdal exploration. Here, we invested AUD 2 million on a program at # 3 there, Storheden on 2 programs to test the Northern and Eastern depth extensions #1 and 2 with the goal of extending the ore body that's currently being mined. So for example, at Storheden, the #3, the results of this drilling highlighted the doubling of the known depth and extent within a series of Bjorkdal, just like the deposit to the south style veins interpreted across 3 target domains. This was all released in December. The highlight results included 34 grams a tonne over 1.6 meters, 142 grams a tonne over 0.6 meters and 111 grams per tonne over 0.5 meter. This narrow vein, high grade, this is the backbone of what we see at Bjorkdal, and we've got the expertise to mine these type of veins, either narrow vein or over broader swarms efficiently. In additional, over at #4 to the right of your page, work has recently commenced to extend the Norrberget resource. So let's move on to Slide 11. At Costerfield, we invested AUD 6 million in Q2 on near-mine drilling with 3 main focus areas. Number one, Brunswick South drilling. We focused there on building the high-grade intercepts we discovered earlier in the year, so earlier in 2025 with progression to infill drilling late in the quarter. And number two, Kendall drilling, we're exploring a series of veins, quite high grade above the currently active Youle workings. And number three, the Sub King Cobra, we call it, we're drilling focused both on infill and extending the mineral resources below the existing Cuffley and Augusta workings. But additionally, perhaps even more excitingly, numbers 4 and 5, True Blue has progressed with 3 diamond rigs predominantly concentrating on infill drilling with a focus on step-out testing at our surface geochemical anomaly there. Meanwhile, #6, we're also testing the potential for a Sunday Creek style mineralization -- mineralization just below Costerfield's historic mines. So moving on to Slide 12. This is the Northern Molong Porphyry project, the entirety of which is shown on the map of this slide or stylized map on this slide, and this is a highly prospective gold and copper corridor. This project also encompasses in the bottom right of your page, our Boda-Kaiser copper gold project. During the quarter, we invested AUD 3 million on several programs, including a mobile magnetotelluric survey we completed across most of the deposit you see there, and we think this will guide us towards future high-value work programs. And we continue to make progress on a 4,500-meter reconnaissance drill program to learn more about the project's potential. Of course, we'll announce results as we receive them. What I want to make clear to you, the reason why we're focused on this is we're looking to further increase the already substantial gold and copper inventory. This project and what can come from it is incredibly leveraged to the current price. As you can see, the exploration work going on at each of our projects. Our goal is to expand resources to increase mine life production levels and drive new discoveries. Undoubtedly, I want you to see that exploration is a key pillar of our strategy that's fundamental to our organic growth objectives. And with that, I'm going to hand over to you now, Jim, to provide a review of our financial performance. Thanks. James Carter: Thanks, Nic. So if everybody could -- we'll turn to Slide 13. And so I'll start with an overview of the key financial highlights for the second quarter ended December and also the 6 months ended -- or the first half, which is the 6 months ended December as well. So we'll focus on these 2026 results because the results for the prior year do not include the former Mandalay operations. So consolidated revenue for the quarter was AUD 256.7 million at an average realized price of AUD 5,785 per ounce or around about USD 3,857 per ounce. And that was 18% higher than our Q1. Average antimony prices were AUD 42,500 per tonne or about USD 28,327 per tonne. And that was 19% higher this quarter than the previous quarter. These are record revenues were achieved in the second quarter. They were a result of strong operations, robust gold and antimony prices. And cash flows for our second quarter could have been a bit higher, about AUD 18 million higher. We had a shipment from Costerfield that sort of departed around the Christmas period. So -- that payment, which normally would be received a little bit quicker sort of because of the Christmas holiday period that came into -- received in early January, and that will be recognized in our Q3 cash flows. Site operating costs on a consolidated basis were AUD 2,031 per gold equivalent ounce produced. That was about 8% lower than the September quarter. This is a result of improved throughput levels, capturing some synergies from the merger and just trying to be -- maintain the cost discipline. All-in sustaining costs were AUD 2,739 per gold equivalent ounce or about USD 1,826 an ounce produced. That's about 8%. That was also 8% lower than the previous quarter. So at these cost levels, we are within our 2026 guidance range. EBITDA for the second quarter was a record AUD 147.2 million. Sustaining capital during the quarter, that was AUD 20 million. That included AUD 10 million for capital development at our Bjorkdal operation in Sweden and AUD 4 million of mining ancillary equipment at Bjorkdal and Tomingley. Our growth capital in the quarter was AUD 9 million, and most of that was at the Tomingley operation on the Newell Highway alignment, which Nic touched on a little bit earlier on the Tomingley slide. So for the event, that gives us access to the eventual mining of the San Antonio open pit in 2027. Exploration expenditures for the second quarter were AUD 11 million, and I think that was all captured by -- in the slides that Nic was talking about just slightly earlier. So if we turn to Slide 14, now, and we're really -- we're having a look at our second quarter cash flow. So in the December quarter, cash flow from our 3 operations was AUD 133 million or 82% higher than the first quarter. Corporate and other expenses were AUD 20 million. That included AUD 7 million for corporate and technical support across the group, AUD 6 million for a cash-back bond, which we were required to put down as part of our Newell Highway realignment project. That's a bond that sort of will come back to us over the course of the next 18 months or so upon successful completion of that project and AUD 3 million for Boda exploration at about AUD 2 million for Lupin closure costs. So after all of that, after sustaining capital growth, exploration, taxes and corporate, we ended the quarter with AUD 218 million in cash. So overall, there a AUD 58 million increase from the September quarter, which was really pleasing. So at December 30, 2025, liquidity remains exceptionally robust. We got cash bullion listed investments totaling AUD 246 million. So we've got a clean balance sheet. debt is just limited to some equipment financing for our mobile equipment across the group. So that's just giving us a really enviable financial foundation that we think that [indiscernible] and the peer group can match, underpins the foundation to grow the business, pursue our organic growth targets, which Nic had spoken about a bit earlier and gives us flexibility to act on strategic value accretive opportunities as they arise. So with that, I will turn the call back to you, Nic. Nicolas Earner: Thanks, Jim. All right. Let's go on to Slide 15. I want to focus on our outlook, which I think you can see has a pretty clear momentum. Leveraging the financial strength Jim just outlined, we're well positioned to scale up our business. We've got a dual track strategy. We're fueling growth while keeping a sharp focus on cost efficiency, a discipline that's reflected through the maintenance of our 2026 guidance. With our record-setting first half behind us, we're carrying a lot of energy into the remainder of the year. We're firmly on track to achieve the annual production minus the July Mandalay of 155,000 to 168,000 gold equivalent ounces. But as I say, let's look at this 3 operations for 12 months, 100% basis, full year guidance is pretty impressive, 160,000 to 175,000 gold equivalent ounces. Now on the cost front, we're disciplined. We want to drive down the cost at Bjorkdal. We're disciplined. We've got a consolidated all-in sustaining cost firmly on track at AUD 2,600 to AUD 2,900 per ounce. So this is US between USD 1,690 and USD 1,885 per ounce. The real story is our impressive commitment to organic growth. We're putting AUD 78, somewhere, it will land somewhere between AUD 78 million and AUD 88 million into growth capital and exploration to unlock the next chapter of this company. Tomingley, I don't want you to see this is just infrastructure. It's a gateway. This realignment of the Newell Highway is the key that unlocks the high-grade large-scale San Antonio deposit in about a year from now. And at Costerfield, our objective here for drilling is clear. We're extending the mine life and building the case for potential future processing expansion. And over at Bjorkdal, our focus is on precision. We're building a high-grade inventory that we want to redefine our future mine studies and increase the mining rate. So this guidance is more than just set of numbers, it's a road map that we're trying to build a larger platform achieving the vast potential of this business. So let's move to Slide 16. What you can see on this slide is more than just a plan. We have a commitment to performance, and we're delivering on that. We're squarely positioned to meet our production targets, but we're not stopping there. We're deploying the drill bit, which I've talked about across the entire portfolio to expand the resource base. This is the bedrock of the strategy, extend mine life and accelerate production growth at all 3 operating mines. And let's not forget Boda-Kaiser. This world-class copper-gold porphyry project remains an important part of our long-term value. We're moving with a purpose on the environmental studies, the permitting and the consultation to advance this project. And in doing so, we're giving ourselves maximum flexibility to consider ways to unlock value. Corporately, our balance sheet is a clear strategic advantage above our peers. In this gold price environment, we expect to continue building our cash position. And as we seek inorganic growth opportunities, we're well positioned to move quickly but with discipline, and we have strong financial flexibility. We're confident, we're focused. We're well positioned to drive long-term value for the shareholders. And with that, I'll hand the call back to the operator to start the Q&A session. Thanks, operator. Over to you. Operator: [Operator Instructions] We're going to take the first question on the line. And it comes from the line of Daniel [indiscernible] from [indiscernible]. Unknown Analyst: Congratulations on the very nice results. I have a question and I guess, a comment. So my question is you announced an ADR -- sponsored ADR program, and you already have an unsponsored ADR program and the shares trade in Canada and also Australia. And I know you talk all the time about increasing liquidity. And I'm just curious whether basically having these 4 venues for where your shares are trading is actually fragmenting liquidity and not really increasing it. That's my first question. Nicolas Earner: Yes. Thanks, Daniel. How about I answer that and you can ask the second part if there was one. Yes, clearly, we took a fair bit of advice out of North America on this one. The clear expectation that we think will occur is that most people will go with the issuer-sponsored ADR because of the increased liquidity that will come there rather than the nonsponsored vision just because the liquidity will be less there. And what's really interesting is what we wanted to do, and it remains to be seen whether this is correct, right? But what we wanted to do was create a vehicle for particularly retail investors in North America to be able to access the stock with liquidity in a clear price point because there would appear to be, particularly as gold has such interest, quite a degree of people that are using that mode and method and who just don't access the TSX and the ASX. So we're watching with interest, and we certainly think that it's something that we should try in this market. Unknown Analyst: Okay. And 2 more, if you don't mind. You talked a lot -- no, no, recently, you mentioned your aspiration to get into the ASX 200. And I recall at the time of the merger with Mandalay, there was a lot of talk about what a wonderful thing it would be to join the ASX 300. But it doesn't seem like joining the ASX 300 has done anything. I mean I look at this Edison report and that shows how undervalued you are compared to your peers and so forth. So I just wonder whether aspiring to join the ASX 200 is just sort of a waste of energy. Nicolas Earner: I -- you've got me a little bit baffled there because -- and happy to get you all comment on in case I've misinterpreted what you said. So if you look at Alkane and Mandalay pre this, Alkane's typical turnover was AUD 1 million a day. And Mandalay's at one point was AUD 0.5 million and then it rose up to be similar. And then post the merger, we are typically AUD 8 million to AUD 9 million. Mandalay is AUD 1 million to AUD 1.5 million. And we have seen a lot of index funds enter our register. And then from the point that we stabilized at in share price of a nominal sort of AUD 1.10, we've seen a drive up to AUD 1.50 with a lot of buying come across in the 12 months. So certainly, the index inclusion appears to have helped the register, the buying the share price to support the visibility of it. And all our understanding is that the ASX 200 will further deepen that pool. Are you looking at information that I'm not looking at, so I've misinterpreted you. Unknown Analyst: No, I just -- I'm not looking at sort of liquidity or trading volume and so on. I'm just looking at the valuation of the company compared to what at least Edison considers your peers. And the stock has been -- remains quite undervalued. And I just wonder whether joining these indices really helps at all. Nicolas Earner: I think if we -- look, I think if we had not joined the indices, then we would be horrendously undervalued, not just undervalued. So if you look at some of the peers that we have, like if you take, for instance, Catalyst and Ora Banda, they have passed into the ASX 200, both with an uplift in buying that's coming from that. And so as to where all these things settle, I think the fundamental basis of our cash flow, our reasonably consistent production performance. Of course, that has to shine through. And the index inclusion should be something that simply flows from that. But there's certainly value in exposure to a very large volume of money in the Australian superannuation funds being an ASX 200 versus ASX 300. Unknown Analyst: Okay. Great. And then if you don't mind, one final thing. So you've built up this large cash pile here, and you talked about the uses. I'm curious what the priorities are. You've got this quite exciting Boda-Kaiser project, and I imagine that will potentially involve a lot of CapEx. Mandalay, as I remember, years ago, used to pay a dividend and some of these large gold companies that you aspire to emulate pay dividends. And then you talk about corporate development and so forth. I'm just curious if you could talk a little bit about your priorities. And just one final thing. This earn-in seems like a very clever deal. But it would seem to me that proving that Mandalay has been -- or is a great deal would go a long way towards convincing people that the next deal is going to be a good one. That's it for me. Nicolas Earner: Yes, sure thing. A couple of different things to unpack within that. So let me -- hopefully, and you can come back to me if I miss one of them, my apologies. So if we look at -- our analysis suggests that right now, we can create more value for our shareholders by delivering on production, reinvesting into the businesses to keep the costs low, expanding the resource base and then also inorganic growth where other businesses are undervalued. And so that's our view. Unknown Analyst: [indiscernible] more undervalued than you are. Nicolas Earner: Yes, of course, me. Unknown Analyst: Okay. Yes. I'm sorry, I interrupted. Nicolas Earner: Yes. No, no, it's not the interruption. It's the assumption that we go and pursue a business that's higher value than we are. Anyway, so -- so then when we look at dividends, if you look at our peers on the ASX, of the top 20 gold companies, about 5 or 6 pay dividends at present. So clearly, as a Board, we look at that each time we meet around dividend and capital allocation. At the moment, our view is that we will continue to look for those internal things to create shareholder value. And then clearly, if we don't see that and our cash balances rising, then we would look to return those to shareholders, yes. So the second part of what you said is we're referring to the Nagambie earn-in. I think the thing that is really key to understand there is that there's a 30-day right of first refusal that Southern Cross [ hold ] on a deal they did with Nagambie a long time ago. I couldn't give you the exact timing. So they may either elect to match that or not. In the event that they don't elect to match that, yes, we're pretty interested in really seeing if the potential that we think could exist there at the Nagambie deposit does because logically, it could absolutely either dovetail into the later years of Costerfield or in an ideal world, allow an expansion of that facility. All those things would need approval. Yes. And last but not least, you spoke about convincing people that the Mandalay deal has been a success in order to do it. Yes, I can't -- of course, I can't say what the parallel history would have been if we hadn't have done the deal. We don't know in this rising gold price environment. But certainly, -- as a combined entity, both of us have had more value realized in our stock and our price to NAV and all the other multiples than we were equivalently on our own. So it certainly appears successful in all of those metrics. And certainly, a share price that's been achieved for Alkane or Mandalay in reverse that just did not appear possible on a stand-alone basis. So certainly, that's the feedback I'm getting from the vast majority of share. Operator: [Operator Instructions] And at this moment, we will proceed with the written questions. Natalie over to you. Natalie Chapman: Thank you, Nadia. I'm heading off to the written questions. So for M&As, where is your focus from a geographic perspective? Do you see any opportunities to build on operations in Australia and Europe? Or are you looking in other regions? Nicolas Earner: Yes. Thank you. Australia, New Zealand, U.S., Canada, Scandinavia. Natalie Chapman: Awesome. Thank you. Mandalay was very excited about True Blue. Is that the highest potential target at Costerfield? Or do you see another target as a priority? Nicolas Earner: Yes. Good question in terms of -- it depends on the time frame that you're talking about. So Kendall and Brunswick South are the near-term targets that we're most excited about. But I don't see either of those containing 300,000, 400,000 ounces at the moment. They appear to be more incremental adding of 1 or 2 years production. So True Blue, we're more excited about from a longer-term perspective because indications are that we may be able to replicate the entire corridor length that we see all the way Augusta to Brunswick, all the old mines, which have pulled over 1 million ounces out at [indiscernible] in the past. So that's -- so time frame-wise, True Blue, yes, is a more exciting prospect for us. Natalie Chapman: What exploration target or opportunity within your existing portfolio most excites you? Nicolas Earner: I think again, it depends on which hat you want to put on. I'm most excited by the potential of discovering a swan -- like a similar Swan Zone type thing as seen at Fosterville, discovering a similar thing deep at Costerfield. But that is a very long-dated bet, but it is the most exciting because of how transformational is in that sheer volume of ounces that they had. Yes. Hopefully, I've answered that, but please write another question if I've misanswered your question. Natalie Chapman: We're halfway through quarter 3 and gold prices are higher than quarter 2. What visibility into quarter 3 results can you share with us at this stage? Nicolas Earner: Yes. So we're -- our full year guidance is on a 12-month basis is 160,000, 170,000 ounces. And on the half year, we were a bit over 80,000 ounces equivalent and just under the top end of that guidance. So we expect a quarter similar to the quarter we just had. So yes, we're very happy with where we're at. Natalie Chapman: When do you think you might be in a position to make a decision on processing expansion at Tomingley? Nicolas Earner: Yes. So I think people may have seen some of the subtlety in what I've described. So at the moment, we're achieving what we were hoping to achieve or had planned to achieve, sorry, with the plant expansion. We're achieving that with pre-crushing. We're probably -- we were hoping to add 450-odd thousand tonnes of extra throughput on the addition of about AUD 45 million capital expansion. And we thought that we would try a whole heap of other things given all the money that we've invested into the circuit. On fine grind and all that sort of stuff. And pre-crushing was one of the things that we considered. And at the moment, we're north of 1.3 million tonnes per annum and with a line of sight of 1.4 million tonnes per annum. So all things going smoothly, I think that we will continue to eke out really small throughput improvements of the existing Tomingley plant because chasing effectively, we'd be putting AUD 45 million in for 100,000 to 150,000 tonnes per annum, which is not quite the case. And we don't have the, in my view, the ore resources yet until we get another major, major discovery of the size of Roswell to warrant updating the plant to say, 2 million tonnes per annum or something. Hopefully, that makes it clear for people. Natalie Chapman: [Operator Instructions] I've got another question in here. Given your strong cash position and the high price of gold, has consideration been given to buying out your hedging position? Nicolas Earner: Yes. I mean, as you can imagine, we talk about this at each Board meeting. We talk about all the financial instruments that we have or could put in place. One of the other things we do is we talk a lot to our shareholder base about it. And the current view at present is to deliver into the hedges in accordance with the schedules that we publish now, quarterly reports. One of the reasons for this is we're in a very, very volatile gold price environment at the moment. And the feedback from a lot of our shareholders is that they wished to be the ones taking the gold risk that we were a known quantity themselves. So that's our current plan. Obviously, we continue to review that. And then even in some of the things with Daniel cash balance, all these other things are things that we take into account. But at the moment, if you're putting together a financial model, just assume that we are delivering into the hedge book. Natalie Chapman: Right. Excellent. We have no further questions. So I'll hand the call over to Nic for closing comments. Nicolas Earner: Great. Thanks, everyone. I appreciate you taking the time to join us today. And look, whilst as per one of the questions Nat just asked, look, we've had a successful year so far, and we really look forward to showing you more of this progress and showcasing for those of you in North America, getting people here in Australia to understand these assets more and reflecting more of the value that exists in these really strong cash flows into our share price. So look forward to our next call in a few months. And as always, reach out if you have any questions. Have a good day, everyone. Appreciate it. Cheers. Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.
Stefaan Gielens: Good morning, everybody. Welcome to the annual results presentation of Aedifica. We will start the session right now. We have more or less 1 hour available, and I do apologize because we really have back-to-back meetings today. So we don't have much time to really go beyond the 1 hour that we've scheduled. As usual, the results will be presented by Ingrid, CFO, and myself. And we will walk you, first of all, through the slide deck, a couple of selected slides from somewhat bigger deck that you will find available on the website and then afterwards, take your questions. So not to lose any more time, starting the presentation. And as a quick introduction before Ingrid will take over and walk you through the numbers, a quick view on what really happened in 2025 and how we perceived 2025. And I think the best way of explaining it is by having a quick look at this slide, looking at what we were planning to do and what we really did. I think one of the first things that, in our view, are quite important is that the investment market and the project development market in healthcare real estate is back up and running. We see clearly a more dynamic market. We'll go into that and the reasons why, but we also see it in our own numbers and what we have been doing. So we have been refueling development pipelines, acquiring standing assets more than we expected, so for close to EUR 300 million. And we do see clearly, compared to 2024, that this number is going upwards. Looking at deliveries coming out of our development pipeline, we were more or less on target with 1 or 2 of these projects that have been delivered just after the new year, but we are actually more or less on target. Now compared to 2024, this is a lower number in nominal value, but it basically reflects the market. In the past couple of years, we haven't been refueling the pipeline as we were used to, but we're now back in a phase where we are refueling the pipeline and these project completions in the future will become more contributing to the growth of the portfolio and the top line. And then asset rotation, there, we did what we wanted to do. The must-have to us was divest the Swedish portfolio because as we explained, it was not contributing in a similar way as other geographies to the EPS of the company. So this was a matter of capital recycling. But towards the summer of 2025, we stopped really pushing hard on divesting because we were live in the market with the Cofinimmo transaction, and that comes in the very near future with a quite ambitious divestment and asset rotation program. So this for 2025 was no longer one of our top priorities. But I think the main thing that comes out of this slide is that we clearly see the changes in the healthcare real estate market that we wanted to see a more dynamic and liquid market, which is basically quite promising for the future. Now this being said, over to Ingrid, so she can present the financials. Ingrid Daerden: Okay. Good morning. So we will have a look on the income statement. First of all, the EPRA earnings, they are up by 4%, driven by an increase of 8% in the operating result, mainly coming following an increase of the net rental income. We also worked on a further improvement of the EBIT margin, so we can show a strong EBIT margin at 87%. The financial charges went up compared to previous year, although we can still have a very low cost of average cost of debt at 2.1%. The increase is mainly related to the fact that there was a slightly higher average amount of debt outstanding in the course of 2025. The low average cost of debt is related to the hedging that the company has in place. At the end of 2025, the hedge ratio still stands at 88%. Then you have the corporate taxes. That's the line where you see most of the variance. So it's mainly related to the change of the fiscal system in the Netherlands, the ending of the FDE regime. In 2024, there was still a one-off refund from previous years of EUR 4.2 million. And this year, we recognized in the account accruals for corporate income taxes in the Dutch entities for EUR 4.84 million, explaining the difference in corporate taxes that you see between the 2 reporting years. So this leads then to the EPRA earnings of EUR 244 million or EUR 5.15 per share. Then we move over to the net result. So the changes that are included from going from the EPRA earnings towards the net result are noncash elements, mainly related to the changes in fair value. So this year, we can show changes in fair value for the investment properties of EUR 75 million. This is the most pronounced in countries like the Netherlands, U.K. and Ireland, where we saw strong increases in the valuation of the investment properties. In the Netherlands, mainly driven by the indexation, U.K. and Ireland supported by a strong tenant cover. Then we have the gains and losses on disposals. So this is not a new element. You have been seeing this in our income statement since the end of Q1. It's related to the disposal of the portfolio in Sweden, which was sold with a small discount of 3.9% compared to the latest fair value, but the amount also includes the recycling of the historical currency translation from equity into the income statement. We will now dive a little bit more into detail on the rental income. So globally, for the portfolio, rental income is up with 7%. When we look on a like-for-like basis, we see an increase of 2.7%. This can be split in between 2.6% coming out of the rent indexation. Then we have positive rent reversion of 0.4%, mainly supported by some contingent rents in the U.K. And then there is a slightly negative impact from the currency translation in the like-for-like of minus 0.3%. When we look at the individual countries, you can see that in most countries, the like-for-like is very close to the indexation that we see in each of those countries. What is standing out is the U.K. related to the contingent rents. This year, we also had a historical catch-up of contingent rents, representing GBP 3.2 million. This is not included in the like-for-like. So in the like-for-like, this figure of 4.7%, it's only contingent rents that are related to the previous 12 months that are included. The second country that is standing out is the Netherlands, where we still had strong indexation and we're also able to increase the rental income on some assets related to the fact that we changed the lease agreement more to a B2C model. Moving over to the debt-to-asset ratio. So at the end of 2025, we can report a debt-to-asset ratio of 40.8%. It was slightly below our expectations related to the fact that there is an increase in the fair value of the investment properties. Our financial policy remains unchanged. So that means that we target a debt-to-asset ratio in the low 40s, and we consider 45% as a maximum. The debt outstanding at the end of the year represents EUR 2.5 billion. We still have a good balance between financial resources, debt resources coming from bank facilities and the debt capital markets. In 2025, we have mainly been focusing on refinancing with the banks and adding new financing to the debt portfolio as well for a total amount of EUR 585 million. The tenors on those maturities are between 3 and 7 years, and the average credit spread is around 110 basis points. We have also been working on extensions. So often credit facilities, they have extension options at the discretion of the lender, and we were able to extend those and keep the same conditions in place. And lastly, as a third point, I would like to add that we increased our treasury note program. So there was an additional EUR 100 million that was added to the program, and that was also fully used by year-end. So this allows us to have strong KPIs regarding the debt. So currently, we have a BBB rating with S&P. There is a positive credit watch related to the transaction that has been announced between Aedifica and Cofinimmo that if the transaction can be executed following expectations, there is a probability that the credit rating would improve towards BBB+. Our interest coverage ratio is strong at 6.2x. The covenant stands at 2x. We have a net debt-to-EBITDA of 7.8x, very few encumbered assets. Most of the financing is still done on an unsecured basis. And 53% of our financing is related to sustainable financing. Most of the cases is sustainability linked KPIs that are integrated in the credit facilities. When we have a look on the debt maturity profile. So there, you can see that there's not a lot of refinancing that needs to be handled for 2026. There are some debt maturities starting to kick in, in 2027 and 2028. The timing of the refinancing of those can have an impact on the average cost of debt for 2026. But we still have a lot of headroom on the committed credit facilities, so more than EUR 740 million. This allows us to be able to be in a position where we can say that the financing needs for the company are covered until May 2027 and with a weighted average debt maturity of 3.4 years. Hedge ratio, as I just mentioned, still high at 88%. It will stay at that level until the end of 2027. Then you see it gradually declining in 2028 and 2029. So what we will do is the same policy as we have been following in the past, where we will add additional swaps to the hedging portfolio based on opportunities that we see in the market. Handing over to Stefaan. Stefaan Gielens: I'm going to walk you quickly through the portfolio slides, but focusing on what I think is probably the most interesting thing, and that is about the operator performance. But starting with the portfolio itself, a quick helicopter view on a couple of things. No surprises here. This is totally in line with everything you've seen in the past. Focus of Aedifica's� portfolio is clearly on seniors housing, so elderly care, senior housing. Numbers haven't really changed compared to previous year. The geographical footprint of the group, there has been some change, namely that we divested Sweden in the first quarter of 2025. As I mentioned already, that was a matter of capital recycling. And that now for the first time, I think Spain is popping up with a very small 1%, but we have been delivering a couple of projects in Spain in 2025. And looking at the future, we are focusing a lot on being more active in the Spanish market. Otherwise, absolutely similar image to previous years, the 4 somewhat bigger countries, each around 20%; Belgium, Germany, the U.K. and Finland. And then the Netherlands coming in at 11% and Ireland, where we started investing in 2021, now standing at 7%. Our tenants. Now this slide, once again, is not really showing you anything new compared to previous years. So it still shows a very strong mix of the somewhat bigger European players like Clariane and Colisee in our portfolio with a lot of local heroes. If I'm not mistaken, the top 10 is exactly the same as it was in 2024. We have a big focus, as you know, for historical reasons on the profit sector in Europe. This sector has been growing and consolidating in the last 10 to 15 years. But we have exposure to not for profit and public operators up to 10%, out of which the Finnish municipalities, 4%, they're popping up on this slide are within the top 10 of our operators today. And then I think what I was referring to earlier on, and in my view, the more interesting slide. So what is happening with the operators in Europe. First, look, occupancy, underlying occupancy, resident occupancy, we have been showing these numbers now for, well, I think, 1 or 2 years. What we do see now end of 2025 is a very strong occupancy throughout the whole portfolio. Looking at the average for the mature care homes in our portfolio, we're above 90% now at 91%. Maybe explaining a couple of things. Mature care homes, we are applying a very simple and straightforward definition. A mature care home is a care home that is trading for more than 2 years. And if that is the case, it enters into these numbers. Secondly, we have been working very hard on improving the coverage, and you will see the numbers at the bottom of the slide in the 5 countries for which we are now showing occupancy numbers, we are reaching almost 100% coverage. So this is not a selected part of the portfolio to show you the best possible occupancy. It is really giving a true image of what is happening in the portfolio. Finland is still not on this slide, but even in Finland now, we made a breakthrough in 2025. We're now starting to collect numbers from a couple of operators. As soon as we reach -- well, statistically relevant coverage, we will start also showing you numbers for Finland. But the numbers that we have for Finland are absolutely in line with what we see for the rest of Europe today. Maybe when looking at the countries themselves, as I said, strong performance throughout the portfolio. But one thing which to us, well, it came as a quite positive surprise even though we had the signs already before is Germany. Germany now at 90% in the portfolio. You know that we have been doing a lot of development activity in Germany pre-2022 with deliveries coming in also after 2022. We now see that the ramping up is really coming to maturity and that the German portfolio also in terms of occupancy is absolutely in line with the rest of Europe. So that's quite strong and positive news also looking at the future. But then something that we now added for the first time is a bit more information about rent covers in our portfolio. You know that we, in the past, already mentioned the U.K. numbers, but now we're adding 3 other countries. Once again, before we dive into these numbers on the back of a quite high coverage. So this is not a selected number of a couple of care homes to show you the best possible situation. It really is reflecting what we see happening in the portfolio. Maybe singling out, first of all, the U.K., you have comparable numbers in the past for the Aedifica� portfolio. It remains a historically high, absolutely very strong rent cover of 2.4. These are numbers on 30 September, but LTM for the last 12 months. It's even a bit higher than it was in the number that we mentioned at the end of '24, 2.3. So the U.K. operated market keeps showing an incredibly strong performance. Then looking at the other countries, Ireland, for the people that attended our Capital Market Days in Dublin, I think, in early 2025, we already mentioned there that we see rent covers in Ireland around 1.7. We're now at 1.8. Once again, a very strong rent cover knowing that we started doing business in Ireland back in '21 by acquiring a couple of standing assets, but soon after we start building the portfolio more to development, in this case, more forward purchasing deals. So this is a fairly young portfolio with mature assets, but fairly young. But what we do see in the portfolio in Ireland is that ramping up is going at quite remarkable speed, meaning that for most of these Irish care homes, 12 months after delivery of the asset, we already see occupancy rates going above 80%, in some cases, even reaching 90%, whereas in the rest of Europe, you probably would start to see these numbers after 2 years. So even when we consider them to be mature, we do see that they come in at somewhat lower numbers and keep growing afterwards. Ireland is really doing much better than the rest of Europe. And on top of that, showing a very strong rent cover. And then you have Belgium and Germany, the 2 countries where we have been explaining in the recent past that we do see operators bottoming out. We're now in Continental Europe, should not expect to see a 2.4 rent cover in the near future because these are countries where there's a lot more public money going into the financing of the operators. But as we mentioned, these countries were clearly bottoming out. What we do see nowadays, and once again, it comes in as a quite strong message is that on the back of the increased occupancy and lots of other signs that we had in the German market, we now also see a very good rent cover in Germany of 1.6. To put things into perspective, you probably know that over the past 10 years, when asked about rent covers and underwriting criteria, we each time said that what we use as a rule of thumb is that when we are underwriting new contracts, we would like to see a rent cover of at least 1.5. Now Germany is back above the 1.5, at 1.6 and Belgium is actually very close to the 1.5. So you do see, I think, on average, quite strong -- very strong to good rent covers throughout the portfolio in Europe. Once again, Finland, because we don't have the data coverage comparable to what we see in the rest of Europe. So I'm not going in too many details, but the limited numbers that we see are definitely not deviating from what you see on the slide. So I think it is really becoming a European trend, occupancy back at almost pre-COVID levels and rent covers growing back to normal territory, even strong territory with differences between some of the countries where in some countries, it goes a bit slower than in other countries. But I think that we do see an operator performance in Europe, which is totally recovering, and it is starting to show in operator activity in Europe. To add or to mention one example recently in Germany, where we have seen Domidep taking over Vitanas. So we do see a lot of signs of an absolutely improved operating climate in Europe. Then going forward to -- well, in this case, lease maturity, I'm not going to spend too much time on this. You know that we have a quite long WAULT and that today is standing at 18 years with a 100% occupancy rate. We really only have a couple of buildings which are vacant today. It's I think also a result of a quite active and proactive asset management that we have been applying certainly in the '22, '23, '24 years. We're transferring buildings to other operators if and when needed, but it results in a very strong occupancy rate. And -- but also maybe pointing out that we are basically activating our asset management in countries like Finland, where on average, the WAULT is a bit lower. It has to do with initial duration of lease contracts that are more around 15 years. But we're making a lot of efforts to make sure that we keep the WAULT also in these countries at a quite high level, resulting in the fact that only 1% of our total portfolio will -- at least 1% of the leases for the total portfolio will come to an end in the next 5 years. So basically, I think that we've managed the portfolio quite well in that respect. And then valuation. Pretty much the same message as in the past. What we do see now is that when you look at the average fair value yield for the whole of the portfolio, we're now at 6%. So we're actually stabilizing around this 6%. If you look at what happened in 2025, you will see that we've seen like-for-like value increases around 1.3%. If you just look at the last quarter, it's plus 0.4% to 0.5% with a couple of countries outperforming. The Netherlands coming in with 4.9% has also to do with the fact that inflation was much higher in the Netherlands compared to, for instance, Finland, where inflation was actually quite low in 2025. But also the U.K., and I think that is still reflecting the exceptionally high operator performance in the U.K. market. But what we do see in all of the countries are clear signs of a market that has bottomed out and is basically already starting to turn to growth again also in terms of value. Some of the countries, we do see pluses and minuses. But on average, a lot of signs that the market is back on its feet. And adding to that, that this is also being underpinned more and more by market evidence because we do see a more active investment market. So it's not just valuers making up their minds. I think we start to see more and more evidence in the market. And then a slide that also is very important to us because this should reflect what we think will happen in the market. It is becoming a more active investment market with lots of potential because operators are back, rent payment capacity is improving. And as we announced at the beginning of 2025, to us, that means that we want to rebuild our development pipeline, and it's actually what we're doing. If I'm not mistaken, end of 2024, we were around EUR 160 million, EUR 170 million. We're now back at EUR 276 million. You do see that we have been quite active in Ireland. I just mentioned that ramping up is going so fast. So there's a clear demand for new capacity in Ireland, and it shows in the numbers. Our pipeline in Finland, where, as you know, we are full developers is growing again. So after a couple of years where we were slowing down, we're building up the pipeline again, and we're doing it on the back of the criteria that we want to see happening. So that means yield on cost of 6.5% and development margins around 15%. And based on those criteria, we're building up the pipeline in Finland today. We remain active in the U.K. given the strong operator performance, but I flagged before, we remain cautious in the U.K. because we want to avoid building the portfolio on the top of the market when prices are relatively high, which is, I think, to a certain extent, the case in the U.K. today. And maybe adding, which is not reflecting in this slide yet, but as I mentioned, that we do see a lot of interesting things happening in the German market that just after the year's end, we signed a first new project in Germany. So you do see a lot of potential to build up the portfolio. And then going to the right side of the slide, it's not just about volume, it's also about getting interesting yields. So we are now at a 6.5% initial yield on cost for the whole of this pipeline, whereas I think end of '24, we were around 6%. And if you go back a bit further in time, it was more around 5.5%. So you do see the market becoming more active, more dynamic, and you do see yields and value potential, which we clearly can achieve in this market already today. So basically, looking back at 2025, actually quite happy with the year, not just in terms of our own results, but more specifically in terms of operators' performance, clearly improving in Europe and becoming -- we're reaching promising territory. And also when we look at investment and development activity, we see a lot more potential in this market. Now then looking forward to the future before handing over to Ingrid, I think it's quite clear that what will be probably catching all the attention in 2026 will be the result of our exchange offer on the Cofinimmo shares. I'm not going to walk you through these slides. You know it. I think that the only -- and the main thing right now is to flag that we are in the middle of the initial acceptance period. Talking to a lot of people and well, coming across a lot of support in the market. So our feeling is that things are going absolutely well at this point in time. You know why we are doing it. So we explained the whole rationale behind this operation. I can only confirm and repeat what, by the way, also is in the prospectus today. But add to that, that we do really believe that this operation comes at the right point in time because we do see the European healthcare market opening up again, and we do see European operators improving their performance. So I think it is absolutely the right point in time to create this platform that is operationally and financially stronger than the 2 companies in a stand-alone situation. But that then is my bridge to Ingrid so that she can explain what are potential scenarios for the future for Aedifica, either stand-alone or combined with Cofinimmo. Ingrid Daerden: Okay. So this year, it was a little bit particular situation, I would say, to give guidance to the market on our financial outlook for 2026. So how did we approach this? So first of all, we had a look on the business plan and Aedifica�based on the current portfolio. On that basis, we can say that we have a stand-alone budget, excluding any impact of transaction costs related to the project, the exchange offer. Based on the assumptions that we have in that model, we come to a rental income of EUR 370 million. This is an increase of 2.5% compared to 2025. I think that I need to add as well that in our pipeline, as you might have seen, we are expecting deliveries for 2026 of EUR 160 million, but they will be delivered in the course of the year. So during the first 3 quarters, we are expecting approximately EUR 35 million to be delivered. And then in the fourth quarter, it will be EUR 50 million. So the increase in rental income coming out of the deliveries will be spread out over the year. Then we have a new investment target, EUR 300 million, in line with what we have been announcing this year. But also in this investment target, an important part of it will probably be related to new projects. So for the announcements that we made in 2025, 75% were projects that are added to the pipeline and hence, only later onwards start to contribute to the rental income. So for this budget, we made the assumption that part of it will kick in around the summertime, part of it will rather only contribute for 3 months to the rental income for the part that is related to the acquisitions. And we also included an assumption on asset rotation. So it's a little bit a standard amount, I would say, EUR 100 million. If you take into account the portfolio of EUR 6 billion, that will be spread over the year in the form of disposals. Then other assumptions that we included and an important one is the average cost of debt. We see it still standing at 2.1% in 2026. This is based on the credit facilities that we currently have in place. Depending on what we will be doing for refinancing, there might be some impact on the average cost of debt. I'm hinting on the fact if we would go to the bond market, something that we had on the planning, taking into account the average debt maturity that is standing around 3.4 years. So going to the bond market, that would have an impact on the average cost of debt because we are doing the refinancing earlier than that currently is foreseen in our budget, and that is also needed from a liquidity perspective. Then we have the assumptions on the exchange ratio. So there, you can see that we are cautious on sterling. So in the past, usually, we had sterling standing at EUR 1.15. So currently, in the budget is EUR 1.13. If we would assume that current sterling would be trading at EUR 1.15 where it currently stands, this would lead to EUR 0.03 additional earnings if you have a full year impact. Then the debt-to-asset ratio, we do not include in our budget any assumptions on changes in fair value. So that means if the valuation of the existing portfolio remains flat, our debt-to-asset ratio probably will be around 42% by year-end. Taking into account all of these assumptions, we are expecting that the EPRA earnings will be above EUR 247 million and the EPS will be above EUR 520 per share. Having said that, I must add to this that probably this stand-alone budget is more like a theoretical exercise because most likely, we will be in the second scenario, where we will take control of Cofinimmo at the end of Q1. So what will be our priorities under that scenario? So first of all, we will have the first consolidation that will start at the end of Q1. So normally, the capital increase is expected to take place on the 30th of March. So there will be, for 2 weeks, contribution to the income statement coming out of the consolidation. We will work on the integration. So the scoping, planning and the execution; we are targeting to do most of the work in 2026. And it will also allow us to start working on the synergies where we do expect that the full run rate impact will occur in the course of 2027. We will also focus on the disposal of the healthcare asset disposals, the EUR 300 million that are related to the approval of the competition authorities. So that will also be one of the priorities in 2026. And then we have the intention to work on a legal merger in the second year half of 2026. So this legal merger will allow us to take 100% control of Cofinimmo and to delist Cofinimmo. So taking into account all of these elements, we do not know the exact holding percentage that we will have during the first consolidation exercise, makes it difficult for us to give EPS guidance for 2026 for the combined entity. So there, we will come back to more detailed guidance for the combined entity at the publication of the half year results, which will happen in the beginning of September. But what we can say is that the dividend policy of Aedifica� remains unchanged. So that means that we will continue to distribute 80% of the recurring consolidated EPRA earnings towards the shareholder in the form of a dividend. Stefaan? Stefaan Gielens: Yes. Okay. I think that we are now coming to the end of the presentation part of this session. Maybe to allow you to have a bit more time to ask questions, I'm not going to make a long speech about the conclusion. I think it was quite clear. We do see a much improved healthcare real estate market. We are quite confident about the future potential, both of the combined entity, Aedifica, Cofinimmo and the market itself. Stefaan Gielens: But this being said, let's switch to the Q&A. [Operator Instructions] So if you have questions, now it's time to start raising your hands. Ingrid Daerden: Steven Boumans. Steven Boumans: I have a question there. You are very constructive on the investment market. Do you also imply that the EUR 300 million stand-alone gross investment target that is a bottom? And second, to what extent could we see some yield compression for the portfolio in '26? Stefaan Gielens: Okay. The EUR 300 million that was mentioned in the stand-alone is, in my view, indeed more a minimum than maximum. So I do believe that there is more to be done in the market, both in terms of asset deals, rebuilding the development pipeline and perhaps even M&A. So yes, I do think that if -- well, we could do probably more. That's one thing. Secondly, yield compression. Yes, always difficult to predict that. This being said, I think that we more or less are now at yields that I think makes sense and will be there for a bit longer time. It might depend from one market to another that there might be some first signs of yield compression kicking in. Sometimes wondering whether that is not happening today in Spain, for instance. But given our expectations in terms of long-term interest rates, I do not see a lot of yield compression kicking in, in the near future. But as I said, the market is really shifting into a much more dynamic mode. So we'll have to see what really happens. Ingrid Daerden: Aakanksha from Citi. Aakanksha Anand: So three questions from my side. The first one, mainly on the acquisition opportunities in the market. So I guess you mentioned that there is an increasing number that you're seeing. Markets are more dynamic now. I just wanted to understand what are the main drivers for the increasing number of deals that are coming to the market now? Is it just because operators want to offload into the property companies, so propcos? Or is it increasing distress in the market? Or is it just the fact that operators are -- the profitability of operators is improving, and that's making it more attractive for more players to enter into the market? So that's first part of the question. And the second part would be on the acquisitions. What are the top 3 geographies where you are most keen on acquisitions? That's the first question, and I'll take the other two as we go along. Stefaan Gielens: Okay. First of all, so the drivers of this increased activity in the market, to me, are definitely more positive drivers and not negative drivers. So it's not distressed. It's much more the fact that operator performance is improving. And some countries definitely are trying to do something about the lack of capacity. Now for instance, the indication I gave about the Irish market, the fact that ramping up is going so incredibly fast is a clear indication that there is need for more capacity. And this, combined with operator performance that is improving, it means that operators are turning back themselves to growth. They want to build more capacity because they can do it right now and they can turn it into a profitable business model. So it is really a quite, I think, positive trend that we see returning to the market. On top of that, we do see increased -- well, first signs of an increased M&A activity in the operator world. We have already been approached by some operators asking us if we would be ready to accompany them in those type of operations, if there is some real estate that they want to take out of the balance sheet when acquiring competitors. So these are things that basically we didn't see in '22, '23 and '24 and that are now more and more popping up again. So it's definitely not distressed situations. It's much more -- well, the market shifting to really growth again. And then the top 3 countries, that's always a tricky question. But today, top of mind, I would clearly say Ireland, Spain and then U.K. and/or Finland, maybe a slight preference still for the U.K. Why do I say Finland? Finland is because we're full-blown developers. And we do see that development activity potential is increasing and allowing us also to make -- well, operator -- sorry, development margins, healthy development margins again in Finland, which in the end is creating equity, allowing us to leverage on that. So I think that these are basically the countries that we do believe are very interesting today. I should add that I'm actually becoming more and more positive for Germany, but it's more the cycle that it starts to go upwards in Germany again. So that's, I think, also a lot driven by timing, not waiting too long before you start building up positions in a country and you have to do it at the right point in time. So Germany might be at the right point in time if what we see happening confirms in 2026. Aakanksha Anand: Okay. That's very clear. The second question will be just on the yield on cost on the pipeline. So it has definitely improved to by about 40 bps compared to last year. So what are the main drivers here? Is it just the tenant profitability improving and you're being able to charge higher rents? Stefaan Gielens: I think in the end, that's probably the most straightforward answer. I have been explaining in the recent past that when we look at the market, basically, what we've seen in Europe is a total disbalance between our cost of capital, cost of construction that went up a lot and then rent payment capacity that was in most of the countries under pressure. And what we do see now is in lots of countries that rent payment capacity is very healthy again and increasing. So -- okay, I think also the cost of capital is slightly improving. So given the fact that buildings have become more expensive, we have a certain cost of capital urging us to go for certain yields. So yes, the third factor being rent payment capacity, and that has clearly improved. So I think that, that is the main driver today in terms of new developments. Aakanksha Anand: Perfect. And the third one, I think Ingrid mentioned lease agreements changed to B2C. I think that was for Netherlands. Could you just put some more color around that? Is it something more country-specific or something we can see more of an increase? Ingrid Daerden: Why I mentioned it is because it did have an impact on the like-for-like. So those are 2 independent living assets where we went to a model that is B2C, that is related and creating additional rental income for the company because we are invoicing directly to the tenant, but it also involves some increase in the maintenance charges that will come to the company. But it is a model that we are exploring a little bit. So something that could be part of our business model, but it will remain marginal in the portfolio as a whole, I would say. Stefaan Gielens: Yes. I think, Aakanksha, at this point in time, it's very country specific. So it's clearly something that we see a lot happening in the Netherlands where also other domestic investors are stepping more into B2C models, but always teaming up with an operator. So there is a third party involved, which is the operator, which is providing care, but this is more independent living where the investor landlord really signs a lease with the resident. What we did in the Netherlands is because we -- these are actually buildings that we acquired a couple of years ago, where we had a master lease with an operator, not for-profit operator. But they, for reasons of their own, they wanted to get out of the master lease, but keep focusing on providing care in these buildings, whereas we -- well, clearly, if we could take over their position, that would immediately for us result into higher rental income with also more operational costs. But in the end, it seems to be a very profitable operation. And it is actually totally in line with lots of investments that we see being done by domestic investors in the Netherlands. So it is a bit of an experiment, promising experiment, but at this point in time, very typical of the Dutch market here. Ingrid Daerden: Frederic Renard from Kepler Cheuvreux. Frederic Renard: Maybe a question on the underlying occupancy rate within your nursing homes. Can you help me reconcile a bit the high occupancy rate that you disclosed in Belgium with the relatively low rent cover of 1.4x. That's maybe -- and linked to that, I would like -- well, you know that Colisee changed its shareholder recently. I'd like to see a bit if you had been able to discuss with Blackstone among other recently. Stefaan Gielens: Yes. Okay. No specific -- Belgium, in the end, the rent cover is not only depending on occupancy. It's actually also depending on the revenue that the operators are getting out of it and cost management. So what you see in Belgium today is the market bottoming out at a rent cover, which is not excellent, but definitely not poor or bad either. But where there is room for improvement and improvement, and this is answering your question, I see it coming mostly from managing staffing costs. So what we do see in Belgium in some assets happening today is something that in the past, you've also seen in Germany and even if you go back a bit further in time in the U.K. is that they have to turn too much to agency workers, which come in at a much higher cost compared to employees and for which they are not really being refinanced, knowing that in Belgium, wages of care takers are actually being refinanced through the social security system. So that is something that the Germans were able to address, the U.K. also, where there is room for improvement in Belgium at this point in time will automatically lead to an improved rent cover. And then secondly, but it is more of a political thing, I think that also my opinion, but once again, which could lead to a lot of improvement in terms of rent covers also in Belgium has to do with the pricing flexibility. I think that in certain parts of the country at this point in time, the prices are overregulated and basically slowing down operators in trying to adjust their revenue to the real cost they are experiencing. So in a nutshell, this is why even at the higher occupancy, you see somewhat lower rent covers in Belgium. But there is a clear path forward to improve these rent covers in Belgium. And then your second question, sorry, you have to remind me quickly. Frederic Renard: On Colisee specifically. Stefaan Gielens: Colisee. You mentioned Blackstone, but we haven't entered into a dialogue with Blackstone at this point in time. But what I can say about Colisee is that we had a dialogue with the local management of Armonea in Belgium, which was a very, let's say, constructive dialogue. So as far as I can tell today, but it's not -- at this point in time, nothing more I can disclose because I do not want to, well, intervene in perhaps ongoing conversations at another level. But we had -- let me repeat what I just said. We had a very constructive dialogue with the local management team in Belgium. So I think that we did what we needed to do and that we stabilized the situation. Frederic Renard: Okay. But I guess you know that at some point, they will try to force you to lower [indiscernible], but we'll see later on. Stefaan Gielens: As I just said, we had the dialogue with them. I'm smiling at this point in time, so you don't see a lot of problem I face here. Ingrid Daerden: Valerie Jacob from Bernstein. Valerie Jacob Guezi: I've got three, if I may. The first one is on your 2026 stand-alone guidance. You're guiding for 2.2% like-for-like growth, stable cost of debt and some net investment. So I just wanted to understand why your guidance is so conservative, if there is something I am missing here. Stefaan Gielens: Okay. Well, I'll take the first part. I think conservative, it's coming from the fact that we have been very conservative in budgeting the portfolio growth. So as I keep repeating, we do see a more active and dynamic market. But we know from experience in the past that you can, at the end of the year, show a very high number in terms of new deals that you have been announcing throughout the year. But it is more the point in time that they become cash flow generating, which is important in terms of your guidance. So yes, I expect that we will be very active in terms of investment and refueling the pipeline, already indicated that the EUR 300 million that we mentioned is perhaps also even or even so conservative. But the real impact of that is something that you will see once all of these new deals start generating cash flow in the portfolio. And that's not on the 1st of January. That will be spread throughout the year. And then secondly, maybe adding to that is that we come out of a period where the pipeline hasn't been refueled a lot. So we have to get back to cruising speed. And to me, cruising speed means that you have a constant flow of deliveries coming out of your pipeline at interesting yields. This is what we're now building up again. And on top of that, you have your ongoing investment activity throughout the year. So once you reach that cruising speed, you will see more impact on the top line. So I think it's more of a timing issue as far as I am concerned. But Ingrid? Ingrid Daerden: Yes. What I would also like to add is, like I said in the beginning, this is a little bit of a theoretical budget because if you would have put in on a stand-alone basis, a much higher assumption on the investments. Because in reality, we think we will invest much more, but we also think that we will take control of Cofinimmo and there will be capital recycling, allowing to finance and to redeploy that capital and to finance the new acquisitions. If you just put it into a model, much more investments, then your DTA goes up or you have to add in as well a capital increase. So you have to think about the stand-alone budget as a theoretical exercise with the EUR 300 million, which is in line with what we did in the previous year and what we are very confident that we can realize in 2026 as well. But for us, the most plausible scenario is the second one, where we will take control of Cofinimmo, where we will be working on the divestments that we have been announcing to the market, and we will redeploy that capital. And then it mainly comes to the timing issue element that Stefaan just has mentioned earlier. Valerie Jacob Guezi: Okay. My second question is about your investment strategies. I mean you are doing a lot of very small development of just like EUR 10 million, EUR 20 million. And I just wanted to understand how you think about this type of deal versus scaling the platform with some large portfolio deal. I mean, you're trading close to NAV now, so you could even raise equity. So I just wanted to understand how you balance the size and the profitability of all your sort of potential investments. Stefaan Gielens: Okay. It's actually a very straightforward answer here. We know from experience that the existing platform with our decentralized model with country teams is giving us access to a lot of local deals and very often also to very interesting deals, meaning relatively higher yielding or when talking about development offering, development margins, which basically are creating equity and allowing us to leverage on that. It's something that has been a strength of Aedifica�in the past, and we want to keep that strength, absolutely. So we're going to keep doing this using the network that we have throughout Europe. But I do agree with you, also looking at the challenges that we will have if this Aedifica�, Cofinimmo combination comes through and the quite ambitious divestment program, including the noncore of Cofinimmo that we also will have to scale up in terms of somewhat more sizable M&A type of deals. So looking at the future, it will be a combination of both. Ingrid Daerden: Vivien Maquet from the Degroof Petercam. Vivien Maquet: Two questions on my end. Maybe first, I did not get it right, but you mentioned that you want to avoid building the portfolio in the U.K. at the top of the market, but you also mentioned that it is your third perfect geography. So I just wanted to get a bit of clarity here. And does it mean that you also see risk of price correction? Because if you think it's the top of the market, then you will assume maybe a risk of price correction. Stefaan Gielens: Yes. Maybe taking that one, first of all, maybe underlining, I'm still a firm believer of the U.K. market. So I was not sending out any negative messages about the U.K. But it's just -- actually, it's always all in the timing. We have acquired a U.K. portfolio back in 2018, 2019 from an investor that wanted to step out of the market because they were afraid of Brexit. Okay, that was a bit of a mixed portfolio, but we managed it and brought it to a higher level of quality. And then we started adding a lot of new buildings and mostly through development of forward deals. And that has been very profitable. What we do see now is that the U.K. market and certainly the operator performance is at a very high level, but it remains at a very high level. I do not see at this point in time any indication of a price correction in the very near future. I would actually say that if you look at how active certain U.S. healthcare REITs have become in the U.K. that you could even make a case that prices might go up or at least performance and activity in the U.K. market might even go up, et cetera. But we're long-term thinkers. And what we want to do is when we look at the metrics of our portfolio, we also look at what is the average cost per room, the average cost per square meter, the average rent per unit, things like that is we keep an eye on that also. So we want to avoid doing too many deals that maybe today from a strictly financial perspective seems interesting, but when you look at all of these other metrics, come out as quite expensive deals, where you know that if the market would correct at a certain point in time, those are the deals where probably you will feel the pain afterwards. So that is what we're trying to manage carefully. And this being said, repeating again, still very positive about the U.K. market. But if rent covers in the U.K. would come down to 1.8, that still is a very, very strong rent cover. But if you're buying a lot of assets that really are depending on the rent cover of 2.4, even at 1.8, you will feel the pain. So that is what we're trying to avoid. Vivien Maquet: Okay, clear. Then a question on the disposals, the EUR 100 million, I assume it does not include any Belgian assets. And maybe can you provide an update on the identification of the EUR 300 million portfolio? Are you working mostly on your, I would say, stand-alone portfolio or any update there would be great. Stefaan Gielens: Yes, maybe the EUR 100 million you were referring to in the stand-alone scenario, as Ingrid said, that's a quite theoretical approach. And basically, what we do see as normal asset rotation for Aedifica�stand-alone is that we -- 1% to 1.5% of the total portfolio every year should rotate and then you get to these type of amounts. In real life, we think that the base case is much more the one where we do combine Aedifica�and Cofinimmo, and then you have this, what you were referring to commitment towards the Belgian competition authorities of having to dispose EUR 300 million of Belgian assets. Do we have -- there's not a lot I can tell you at this point in time for lots of reasons, also keeping in mind that we are in the middle of an acceptance period. And I should clearly avoid telling you anything which is not already publicly known and in the prospectus. But this being said, I confirm what I've been telling the market before. When we were talking to the competition authorities about this, we did some market sound ourselves, of course, very limited to just talking to a couple of parties we know. And we got positive signs that there is interest for these type of portfolios. So that was confirming -- sorry, reassuring for us. And then secondly, yes, we have built a case where Aedifica�stand-alone has identified a portfolio, which we can use to accelerate things if need be and if the opportunity would arise. But after taking control of Cofinimmo and certainly after the legal merger with Cofinimmo, legal merger that we see happening in the second half of 2026, we can, of course, look at the whole of the portfolio. And in any case, think that the divestment will not take place before the summer of 2026 and might take place towards the end of 2026, and that will be after the legal merger. Vivien Maquet: Okay. Then two quick questions on the guidance. First, on the 42% debt to assets, you assume as of 2025, that does not include any revaluation. Ingrid Daerden: No, it doesn't. Vivien Maquet: okay. And then it does not include any potential agreement you will get with Armonea either, right? Stefaan Gielens: I think it does, to be quite honest. Ingrid Daerden: Very difficult to answer that question for us. But let's say that I'm not expecting additional impact coming out of such a kind of agreement. Vivien Maquet: So if you have an agreement, that will be already [indiscernible] and therefore, should not [indiscernible] negative on your guidance, right? Ingrid Daerden: Yes. Stefaan Gielens: But as I said to Frederic earlier on, we had a quite constructive dialogue. So I think we know where we will land, and we know it already today. So it's, yes. Vivien Maquet: Indeed, just to know if it's already in the guidance or not. Ingrid Daerden: Stephanie Dossmann from Jefferies. Stephanie Dossmann: Maybe just a follow-up on the disposal side because just to clarify something, are you able to dispose of assets in the Cofinimmo portfolio ahead of the merger if you agree legally, I would say, with Cofinimmo's management? Stefaan Gielens: Yes, of course. Not today, after taking control and then we have to agree between the 2 companies because basically, in the period between us taking control, which will be mid-March, if everything goes according to plan, of course, and the legal merger that we see happening somewhere in the second half of 2026. In that intermediate period, you still will have 2 companies with their own governance, but with a controlling shareholder, it will be like a group, parent company being Aedifica�, subsidiary being Cofinimmo. Yes, we can agree within the group to team up together to do this. That's possible yes. Stephanie Dossmann: All right. So I don't know if you can give some color on the disposal of the offices. Do you have advanced discussions on those? Stefaan Gielens: Yes. The offices -- sorry. yes. The only thing I can tell you today is that we -- and when I say we, I am really talking Aedifica�at this point in time. We did get a lot of inbound from parties in the market that were making clear that they could have some sort of interest in the portfolio, being it part of the portfolio or the whole of the portfolio, which basically was also a very pleasant surprise to us. But we did not engage at this point in time into any really material discussions. I think it's -- we need to wait until we are in this group situation. But we clearly do have some ideas of what could be possible. That's absolutely the case. Stephanie Dossmann: And will it be piece by piece or as a portfolio? Stefaan Gielens: The only thing I can tell you is that we've got interest -- well, as I said, inbound, just people telling us that when you start acting, please talk to us. And that really goes from the whole portfolio to parts of the portfolio and I guess, also for asset per asset. Stephanie Dossmann: All right. Fair enough. On the rest of the disposals targeted, I mean, the EUR 300 million committed. Will it be more on peripheral assets or to lower exposure to specific operators, such as, of course, the big one you have in your portfolio? Colisee, [indiscernible], Korian? Stefaan Gielens: Once again, very -- I think what you should expect to see is that, that will be a portfolio that reflects the reality of the Belgian Aedifica�portfolio today. So I think more or less answering your question, yes. Stephanie Dossmann: Yes. And maybe on the coming merger or the offer actually, what indicators do you watch to anticipate the tender level, I mean -- and the outcome of the initial period? Do you have feedbacks? I mean, what key indicators do you look at, proxies and so on? Ingrid Daerden: Yes, indeed, we have proxy advisers who give us some informal indications. So... Stephanie Dossmann: Can you say something more? Stefaan Gielens: We are communicating a lot at this point in time also towards retail and towards institutional shareholders. As I mentioned, I think, at the beginning of the session, the feedback that we get is straightforward positive. So that's one thing. We will have to see whether people then tender or not. We keep an eye also on the stock price, of course. And I think the stock price also has a clear indication that the market is a true believer of this combination. So I should turn it in the other way. We do not get any negative feedback or pushback in any way at this point in time. Stephanie Dossmann: Okay. Maybe just the last one, very quick. If I'm correct, there was a slight expansion in the yields in Belgium. What is related to? Stefaan Gielens: Yes. No, no, that could be the case. I think it is really, as you said, a slide. So it could be just a rounding. But this being said, what we do -- basically, what we have seen in the latest quarters is that, well, inflation increasing rents are driving valuation at this point in time because what we do see is that there's not a lot of yield decompression going on either. So yields are more stabilizing. But when you dive into one specific part of the portfolio, it could just very well be a mix -- what we do see in lots of countries with perhaps the exception of the U.K. and the Netherlands where it clearly is a very strong positive. Lots of other countries, it's a combination of pluses and minuses. There might be corrections for certain assets, but there also are upward corrections for other assets So it could be just the impact of these pluses and minuses at a certain point in time. But we do not see anything specific happening with the yields in Belgium. I could say on the contrary, there was for the Belgian market, a quite big deal being done a couple of weeks ago by a listed REIT acquiring from the biggest profit tenant in Belgium at a yield of 5.75. So that is really underpinning the valuation. I think there are still people willing to ask questions, but we are basically out of time. Can you -- I do apologize for this, but as I said, we are a little bit in a situation of having back-to-back meetings today. But if we couldn't address your question, please feel free to reach out to Delphine. We will come back to you ASAP. And once again, my apologies that we can't make more time available at this point in time. I thank you very much for your attendance, and we're pretty sure that we will be in touch in the very near future. Okay. Thank you all. Bye-bye.
Operator: Welcome to the Advance Auto Parts Fourth Quarter and Full Year 2025 Earnings Conference Call. I would now like to turn it over to Lavesh Hemnani, Vice President of Investor Relations. Lavesh Hemnani: Good morning, and thank you for participating in today's call. I'm joined by Shane O'Kelly, President and Chief Executive Officer; and Ryan Grimsland, Executive Vice President and Chief Financial Officer. During today's call, we will be referencing slides which have been posted to the Investor Relations website. Before we begin, please be advised that management's remarks today will contain forward-looking statements. All statements other than statements of historical fact are forward-looking statements, including, but not limited to, statements regarding initiatives, plans, projections, goals, guidance and expectations for the future. Actual results could differ materially from those projected or implied by the forward-looking statements. Additional information can be found under forward-looking statements in our earnings release and risk factors in our most recent Form 10-K and subsequent filings made with the SEC. Shane will begin today's call with an update on the business and our strategic priorities. Later, Ryan will discuss results for the fourth quarter and full year 2025 and provide guidance for 2026. Following management's prepared remarks, we will open the line for questions. Now let me turn the call over to our CEO, Shane O'Kelly. Shane OKelly: Thank you, Lavesh, and good morning, everyone. I want to begin today's call by thanking our Frontline team for all of their hard work in 2025. During the year, we laid the foundation to build a better future for the company and create long-term value for our shareholders. We are undergoing a significant transformation focused on the fundamentals of selling auto parts through initiatives guided by the voice of our customer. These efforts are beginning to improve our competitive position and are translating to stronger financial performance. In 2025, we returned to positive comparable sales growth after 3 consecutive years of negative results. We also expanded adjusted operating income margin by over 200 basis points from near breakeven levels while also navigating a volatile external environment. Our journey has just begun, and the early progress is being recognized by vendor partners, customers and team members. During 2026, we will continue to execute actions aimed at enhancing parts availability and customer service by building on the foundation established in 2025. We expect these efforts to deliver stronger financial performance in 2026, including an acceleration in comparable sales growth to the 1% to 2% range and expansion in adjusted operating income margin to the 3.8% to 4.5% range and a return to positive free cash flow. We expect to generate approximately $100 million in free cash flow in 2026 while allocating more capital to strategic projects and store investments. The progress made by our team in 2025 has created positive momentum that we are carrying into this year, and I am confident in our ability to succeed in 2026. Before I provide an overview of our strategic priorities for this year, let's recap 2025. We entered the year with a renewed emphasis on the blended box and establishing Advance as a consistent, reliable auto parts provider for both Pro and DIY customers. Our team is already driving results through comprehensive actions taken last year. For example, number one, we rationalized our asset footprint by exiting underperforming locations, including over 500 corporate stores and 200 independents. We achieved this with minimal disruption to our day-to-day operations and saved approximately $70 million in operating costs. Number two, we expanded our assortment by 100,000 new SKUs. We improved store availability to the high 90% range from the low 90% range at the start of 2025, and we also reduced product costs by more than 70 basis points. Number three, we increased our average speed of delivery to Pro customers by cutting more than 10 minutes in delivery time from an average of over 50 minutes at the start of 2025. Number four, we moved with speed to substantially complete the consolidation of our distribution center network. We now operate 16 distribution centers in the U.S. compared to nearly 40 DCs at the end of 2023. And number five, we opened 14 new market hubs and now operate 33 market hub locations. We also opened 35 new stores to further enhance density in our strongest markets, and we invested nearly $90 million in store infrastructure upgrades at more than 1,600 stores. Throughout the year, we also navigated a series of external challenges, including a volatile tariff and consumer spending environment. We maintained focus on executing actions to improve availability and service. This enabled us to deliver positive performance in the Pro channel, which strengthened throughout the year. We are progressing on our strategic plan with a stronger balance sheet, having proactively accessed the capital markets during 2025. As we move forward, we will continue to prioritize actions within our control to improve operational performance. In recent months, we have also strengthened key leadership positions through internal promotions and the addition of talented external expertise. These include: Anthony Sarlanis, former Regional Vice President of our Northeast Operations. He was promoted to Senior Vice President of the Pro business. He has been with Advance for over 15 years and brings more than 2 decades of automotive experience to the role. Kunal Das, our former Chief Data Officer, now promoted to Chief Technology Officer. His team has led the development of proprietary AI tools to improve our day-to-day execution. Ron Gilbert. Ron joined Advance in December as Senior Vice President of Supply Chain. He brings more than 20 years of experience in supply chain logistics with a track record of delivering operational efficiencies in complex supply chain systems. And Tony Hurst. Tony joined Advance in January as Senior Vice President of U.S. Stores. He brings more than 25 years of field leadership and store transformation experience across Pro and DIY, with a proven record of simplifying work for the front line. The caliber of our leadership team reinforces my confidence in our ability to grow transaction volumes through strong customer service and to deliver greater productivity in our store and distribution center operations. Since late 2023, we have acted decisively to stabilize the business, conduct a comprehensive review of operational productivity, sell noncore assets and develop a strategic plan. To date, this team has delivered approximately 500 basis points of adjusted operating margin expansion. We continue to believe that our goal of 7% adjusted operating income margin with a mid-40% gross margin are appropriate medium-term targets for the company. As a reminder, about half of our identified margin opportunity is tied to merchandising excellence with the balance being driven by supply chain and store operations. I am pleased with the progress being made in unlocking this margin opportunity. We concluded 2025 with an adjusted operating income margin of 2.5%. And for 2026, we are targeting an additional 130 to 200 basis points of expansion to the 3.8% to 4.5% range. This guidance includes an approximate 45% gross margin rate, which showcases success against our initiatives on the path to a 7% operating margin target. Our goal is to deliver consistent progress on our plan to narrow our margin gap to the industry. We currently believe that we can deliver at least another 100 basis points of margin expansion in 2027, which would mark the third straight year of 100 basis points or more of expansion. Although this pace would imply an outcome below our previous target of achieving 7% in 2027, it is important to note that this is not the result of any change to the execution of our strategic plan. Rather, we are being prudent about 2 factors as we consider the expected time frame for achieving our goals. First, initiatives across our 3 strategic pillars are progressing at varying rates. We have made strong progress in merchandising and completed the consolidation of distribution centers. We are now in the early stages of implementing supply chain and store labor productivity initiatives. I am excited to welcome new leaders overseeing the implementation of these activities. We expect our investments in 2026 to enable further margin expansion in 2027 and beyond. And second, top line momentum has lagged original expectations. Our pace of same-store sales growth has been impacted in part by external economic factors that have resulted in a softer consumer spending environment. While we are pleased with the strong positive comps in our Pro business, including traction with Main Street Pros, we still have a lot of opportunity ahead as we continue to improve availability and service metrics. I want to reiterate, I am pleased with the progress being made on our strategic plan. I remain confident in the ability of our team to deliver against our operational and financial goals. Our quality of execution is improving, and we expect 2026 to be a pivotal year on the path of long-term value creation. Next, let's turn to an update on our strategic plan. As I've indicated previously, our strategy is unchanged and built on 3 pillars that are supported by targeted initiatives to deliver long-term profitable growth. Turning to our key priorities for 2026, which build on the foundational improvements achieved in 2025. Merchandising excellence is expected to be the largest contributor of margin expansion during the year, and our 4 merchandising initiatives for the year include: first, in 2025, we began repositioning Advance as a trusted long-term growth partner. Our focus on operational excellence and streamlining legacy processes has signaled to the vendors that Advance is here for the long term. In 2026, we expect to further deepen our vendor partnerships to jointly grow our businesses. We are doing this through strategic business planning, exploring supply consolidation, eliminating non-value-add supply chain costs, engaging in training opportunities for the field and collaborating on joint marketing efforts. We expect this to translate to better cost opportunities and stronger margins in the year. Second, in 2025, our pricing decisions were made largely in reaction to new tariff programs. However, we still focused on offering compelling value to our customers through fewer, bigger and bolder promotions. During 2026, we expect to deploy a new pricing matrix, which provides our team better intelligence of market-based pricing by channel and by SKU. Our goal is to offer competitive pricing while continuing to operate rationally in the marketplace. We expect the combination of smarter pricing supplemented with seasonally relevant promotions to drive stronger customer engagement and support repeat purchases. Third, 2025 was an important year for our assortment. We addressed product gaps and also improved brand coverage and application job quantities for parts in our stores. We did this by using a specialized data-driven approach as well as improving internal processes and incorporating feedback from customers to develop a new assortment framework that was fully rolled out to all stores last year. This work has expanded parts coverage for brands we carried previously and also enabled us to introduce new brands. Our success with the brake category is a great example of this. Entering 2025, we were running negative comps in brakes, and we finished the year with strong positive comp growth, showing how deep vendor relationships, targeted SKU placements and thorough market planning can help win market share. While we moved fast in 2025 to address parts coverage, we believe we have additional opportunities to amplify our efforts. In 2026, we plan to invest in systems that help us dynamically balance inventory across the network to support stronger financial returns on inventory. We will also continue to expand the universe of parts carried in our network and optimize the presentation of SKUs in our stores. This includes accessing opportunities to provide more value for our customers. We are excited to launch our new owned oil and fluids brand, ARGOS. As a 94-year-old company, we are pleased to back our legacy with a new owned brand in a top maintenance category. This brand was born out of extensive research. Customers ranked affordability, reliability and strength as top product attributes they value. ARGOS offers engine protection and performance comparable to national brands at a price that provides meaningful savings, which will be valued by both Pro and DIY customers. And fourth, earlier this month, we modernized our DIY loyalty program with the launch of Advance Rewards to replace the prior Speed Perks program. Approximately 60% of our DIY transactions are driven by our loyal customer base of approximately 16 million active members. The new program now provides a refreshed tiered point structure that rewards customers as they spend more with us. With Advance Rewards, members will be able to experience exclusive vendor offers, bonus points promotions, sweepstakes and other exciting new features. Based on customer feedback, we discontinued unproductive offers like Fuel Rewards and enhanced the flexibility to redeem coupons, which are very frequently used for purchases in key maintenance categories. The new Advance Rewards also gives us more tools to engage with our customers, which we believe will help drive transaction growth in the DIY channel. Turning to supply chain. We are on track to complete the consolidation of our distribution centers and expect to operate a total of 15 DCs in the U.S. by the end of this year. We believe our DC network is well positioned to support strong service levels and the continued growth of our multi-echelon network. Consolidating DCs is a difficult undertaking, and we have done so without major disruption to our 4,000-plus store network. Over the past 2 years, we have gone from operating 38 DCs in the U.S. to 16 DCs currently, and I want to thank our supply chain team for their efforts over the last 2 years. Throughout 2026, we are going to be focused on simplifying and standardizing DC operations, along with testing and launching labor performance and transportation management tools. We expect our supply chain productivity initiatives to support gross margin expansion in 2027 and beyond. While consolidating the DCs over the past 2 years, we have also accelerated our pace of market hub openings, which serve as an additional distribution node in our network with the retail storefront. A market hub typically carries between 75,000 and 85,000 SKUs and expand same-day parts availability for a service area of about 60 to 90 stores. At the end of 2025, we had 33 market hubs, and we currently plan to add 10 to 15 market hubs in 2026. Most of these openings will be greenfield buildings serving as new points of distribution in markets where they open. We believe that this strategic expansion will enhance our ability to provide additional hard parts coverage in the previously underserved regions while creating incremental opportunities to gain market share. Next, I will provide an update on key priorities for store operations. We are elevating the experience for our team members through training and simplification of tasks. We have launched targeted programs to provide customized short duration training that combines product knowledge and sales behaviors to better serve customers. Our analysis shows a positive correlation in sales performance for stores following the completion of the training programs. We are also beginning to simplify store tasks and streamline communication with stores to help our team members prioritize only the most critical activities. We are investing in industry-leading tools like Zebra Devices to increase team member efficiency while allocating payroll hours to support market-specific customer needs. In addition to these resources, we are continuing to allocate capital to store infrastructure upgrades as part of a multiyear asset management plan. In 2026, we plan to upgrade more than 1,000 stores. We are also improving service standards in our stores. We launched our new store operating model across all stores in Q4. We believe that this operating model supports better allocation of labor hours and vehicles while strengthening collaboration between our customer-facing outside sales team and our internal store teams. To drive consistency in service, our teams are being held accountable to 2 primary metrics. The first one is NPS, which strives for continuous improvement in customer service, and the second is time to serve, where we target under 40 minutes for delivery time for Pro orders. With the right training, service standards and clear metrics for tracking performance, we expect to improve labor utilization and grow our business. While it is still early in the implementation of newer operating standards in our stores, we are seeing signs of improved performance. For example, our efforts to gain share across Main Street Pro is translating to stronger positive comps in that segment. Within DIY, our focus on selling behaviors is driving greater unit productivity with a sequential acceleration in DIY units per transaction in Q4. While we still have considerable work ahead of us, we are pleased with the direction in which we are moving. We believe that an improvement in service standards will also support enhanced productivity of new stores. In 2026, we plan to open 40 to 45 stores and 10 to 15 market hubs as we march toward our goal of opening more than 100 new distribution points over the next 2 years. In closing, I want to recognize the Advance team once again for their hard work and commitment to delivering progress. We remain focused on prioritizing actions to drive sustained improvement over the long term. I'll now hand the call over to Ryan to discuss our financials. Ryan? Ryan Grimsland: Thank you, Shane, and good morning, everyone. I want to begin by thanking our Frontline associates for their commitment to serving our customers and delivering a strong finish to 2025. For the fourth quarter, net sales from continuing operations were approximately $2 billion, which declined 1% compared to last year. This is mainly attributable to the store optimization activity completed in Q1 of 2025. Comparable sales grew 1.1% in the fourth quarter. Following a softer start to the quarter, transactions improved during the last 8 weeks, resulting in positive comparable sales growth over that time frame. In fact, outside of weather-related comparisons, our business has been averaging low single-digit positive comps over the last 6 months, reflecting operational stability as we execute our strategic plan. Brakes, undercar components and engine management led performance, indicating progress in improving coverage and availability of hard parts. Ticket was positive for the quarter and driven by a combination of better unit productivity and higher average prices. Our Frontline team has been focused on providing complete job solutions to our customers, and I want to thank them as their efforts have translated to an acceleration in units per transaction on a 1- and 2-year basis. Overall, average ticket was still below expectations due to some discrete factors. First, same SKU inflation came in just under 3%. This was about 100 basis points lighter than expected due to successful tariff-related negotiations, which were still underway at the start of the quarter. And second, during Q4, we accelerated the transition of some front-room assortment to introduce new brands following recent supplier changes and to support the planned launch of our new own brand ARGOS. These transitions led to a higher-than-expected markdown headwind of about 50 basis points, which impacted comps. This activity has been completed. It is not expected to impact Q1 results. Looking at channel performance, our Pro business grew by nearly 4% during the quarter, with sales strengthening throughout the quarter on both a 1- and 2-year basis. Trends in DIY remain volatile, leading to a low single-digit percent decline in comps. We believe this is largely a continuation of the market trends we have experienced all year. Our core consumer group has been adjusting purchasing habits in response to rising prices. Moving to margins. Adjusted gross profit from continuing operations was $873 million, or 44.2% of net sales, resulting in nearly 530 basis points of gross margin expansion compared to the same period last year. During the quarter, we cycled through approximately 280 basis points of atypical margin headwinds related to our restructuring activity last year. The balance of margin expansion was driven by savings associated with our footprint optimization activity and benefits from our strategic sourcing initiatives. Additionally, LIFO expense came in at $56 million for the quarter, which was lower than previously expected. Adjusted SG&A from continuing operations was $800 million, or 40.5% of net sales, resulting in nearly 340 basis points leverage. This was consistent with expectations for a high single-digit percent expense decline and driven by a reduction in stores compared to last year. As a result, adjusted operating income from continuing operations was $73 million, or 3.7% of net sales, resulting in nearly 870 basis points of year-over-year operating margin expansion. Our Q4 results also include an extra operating week, which contributed $132 million in net sales and $9 million in adjusted operating income. Adjusted diluted earnings per share from continuing operations for the quarter was $0.86 compared to a loss of $1.18 last year. The extra week added $0.08 to fourth quarter EPS. Moving to an update on full year 2025 results. Net sales from continuing operations declined 5% to $8.6 billion, primarily due to store optimization activity that was completed during Q1 2025. Comparable sales grew just under 1% for the year, marking our return to positive comparable sales growth. Both channels improved compared to last year. Our Pro business grew in the low single-digit range, while DIY declined in the low single-digit range. Same SKU inflation contributed about 140 basis points to ticket growth for the year. Adjusted gross profit from continuing operations was $3.8 billion, or 43.9% of net sales, resulting in about 165 basis points of gross margin expansion compared to last year. During the year, we cycled through approximately 90 basis points of atypical margin headwinds related to our restructuring activity from last year. Adjusted SG&A from continuing operations was $3.6 billion, or 41.4% of net sales, resulting in about 50 basis points of leverage driven by operating fewer stores compared to last year. As a result, adjusted operating income from continuing operations was $216 million, or 2.5% of net sales, resulting in 210 basis points of year-over-year operating margin expansion. Adjusted diluted earnings per share from continuing operations was $2.26 for the full year 2025 compared with a loss of $0.29 for full year 2024. We ended the year with free cash flow of negative $298 million, which included approximately $140 million in cash expenses associated with our store optimization activity. The remaining outflow of approximately $160 million impacted our ability to generate positive free cash flow. About half of the variance compared to our expectations was related to a combination of Q4 business performance, timing of certain cash obligations and the delay in receipt of tax refunds. The other half was associated with variances relative to our expectations for timing of certain inventory payables that drove approximately $80 million of cash outflow and reduced our payables balance at the end of the year. Separately, we also lowered the usage of our supplier financing program to $2.5 billion from $2.7 billion last quarter. We entered 2026 with a solid balance sheet, including more than $3 billion in cash and $1 billion undrawn revolving facility, which is more than sufficient to support approximately $2.5 billion in supplier financing payables over the long term. Our net debt leverage improved to 2.4x at the end of the year compared to 2.6x last quarter and is in line with our targeted range of 2 to 2.5x. Turning to 2026 guidance. We expect net sales to decline slightly year-over-year, mainly driven by 2 nonrecurring items from 2025. First, we generated $51 million in liquidation sales in Q1 last year. And second, Q4 included an extra week, which generated $132 million in net sales. In aggregate, both items drive over 200 basis points of headwind to sales growth. Excluding these nonrecurring items, we expect underlying net sales to grow in the range of approximately 1% to 2%. This includes comparable sales growth of 1% to 2% and about 10 to 20 basis points of pressure related to sales normalization at independent locations following a reduction in locations last year. We expect positive comp growth in each quarter with a stronger first half owing to easier comparisons. Same SKU inflation is currently planned in the 2% to 3% range for the full year and assumes no change in the current tariff environment. In terms of channel performance, we expect Pro to outperform DIY, with both channels contributing positively to comp growth. This is expected to be driven by gradual improvement in transactions. With initiatives focused on enhancing availability and service levels, we are excited to get back on the path of consistently delivering positive comparable sales growth and expect our strategic plan to ultimately position us to gain market share in the future. Moving to margins. We expect adjusted operating income margin between 3.8% and 4.5% for 2026, resulting in 130 to 200 basis points of year-over-year margin expansion. We are forecasting gross margin expansion in the range of 110 to 150 basis points to approximately 45%. This margin expansion includes about 20 basis points of year-over-year favorability from cycling nonrecurring items from 2025. The balance of the expansion is expected to be driven by merchandising initiatives related to strategic vendor sourcing and optimization of pricing and promotions. The benefits from merchandising initiatives will be partially offset by investments to improve productivity in our supply chain operations following completion of the consolidation phase of our DC network. Based on the progress of our initiatives, we expect gross margin rate to build throughout the year, starting with Q1 gross margin in the 44% to 45% range. Regarding SG&A, we expect reported full year expenses to be down year-over-year, contributing 20 to 50 basis points of leverage. Specifically regarding Q1, SG&A expense is planned to be down in the 3% to 4% range as we cycle through the store closure activity from last year. Full year 2025 SG&A expense included about $90 million of nonrecurring items to support liquidation sales in the extra week, which is expected to drive about 20 basis points of favorability in 2026. Adjusting for the nonrecurring expense, SG&A is planned to be higher year-over-year with modest leverage driven by positive comp sales growth. We expect to deploy savings generated from better in-store task management, better resource allocation and a reduction in indirect spending to fund general wage inflation, store opening expenses and strategic labor investments in priority markets. As Shane indicated, we have completed the rollout of our new store operating model, which has enabled us to position labor and truck resources based on volume. As we move forward, we will continue to look for opportunities to further optimize payroll hours to enable our team members to dedicate more time to customer service by minimizing time spent on tasking. Moving to other items in our guidance. We expect adjusted diluted EPS in the range of $2.40 to $3.10. Pretax interest expense for full year 2026 is planned at approximately $210 million, which is expected to be partially offset by interest income of approximately $80 million. We expect to increase capital expenditures in 2026 to approximately $300 million, with spending allocated to new stores and greenfield market hub growth, store infrastructure upgrades and strategic investments. Finally, with respect to cash flow, we expect to generate approximately $100 million in free cash flow for the year, supported by stronger comp sales and profitability. Our free cash flow guidance includes modest carryover spending of $10 million to $20 million related to our store optimization activity. To conclude, I want to thank the Frontline team for their contributions, which supported solid financial results in 2025. During 2026, we expect our initiatives to provide added financial momentum to narrow our operating margin gap to the industry. I will now hand the call back to Shane. Shane OKelly: Thank you, Ryan. During 2026, we are building on the foundation established last year with a clear focus on executing our strategy to deliver improved operational performance. I'd like to close by thanking the Advance Auto Parts team for all of their hard work and commitment to serving our customers. Thank you. Operator, we can now open the line for questions. Operator: [Operator Instructions] And our first question today comes from Chris Horvers from JPMorgan. Christopher Horvers: So my first question is, why is your inflation so much lower than what your peers have reported, specifically Zone and O'Reilly. One could interpret this 2 ways: A, where you're pricing below the market, which I don't think that's what's happening; or perhaps simply your prices were too high before all this inflation came in and when you came into the company, and you were forced to narrow the gap. I guess it could also be sourcing differences, but again, sort of the market price is the market price. So if you could help us out there. Ryan Grimsland: Yes, Chris, I appreciate that. It's Ryan. So our SKU inflation, I think, is consistent with peers, but we have some -- if you look at '25, we have some comparison issues. We were wrapping some price investments that we made in the prior year that wrapped in. So in '25, we still had reported around 3% for Q3 and Q4, which I think is somewhat consistent with them. It was a little bit lower than we expected going into Q4, really had to do with -- we're still negotiating some of the tariffs. So that wrap, the 1.4% inflation in 2025 is really impacted by the wrap of price investments we made in the prior year. Shane OKelly: Chris, it's Shane, just to add, you mentioned first, are we pricing below the market? And your hypothesis is that we're not. That's not our strategy. We're -- it's a competitive market, but a rational market, and we participate in that way. We are using AI to do better with our promotions as to when we do a promotion and on what products and where we do it. So that can help us a bit, but we're a rational player in the market. Ryan Grimsland: We monitor our pricing relative to everyone else, and we want to make sure we're competitive every day. We're not doing anything inconsistent with that. Christopher Horvers: And then my follow-up question is on the decision to reduce your supply chain financing in the fourth quarter. I guess one of the hallmarks of this industry is that the vendors finance essentially all of the inventory. So what drove that decision? Was there anything on the other side because your free cash flow did come in lower than expected because of the reasons that you laid out, Ryan? Was there any sort of push from the other side because of the free cash flow dynamics? Or is it something to do with perhaps sort of the margin versus rate negotiation that's implicit in these arrangements? Ryan Grimsland: Yes. Good question. So about half that change in free cash flow from anticipation was due to lowering the payables, as we mentioned earlier. And not -- we're always going to look to see if it makes sense from an economic standpoint to reduce supply chain finance. But only when it makes sense, we're really happy with our program, especially after the structure we put in place this past summer. It's a very stable program, significant capacity in that program. But it was more about leveling the payables based on the new purchases that we have, based on the sourcing of those and the negotiations we've had. As a reminder, this past year, we've had 500 stores we've closed. We accelerated purchases on inventory for -- ahead of the tariffs. We accelerated our assortment work into our top 50 DMAs. So a lot of moving pieces. On top of that, the merchant organization has been transitioning and working through many PLRs with different vendors as we've executed our strategic sourcing work, and we've yielded really good progress on the margin side. All of that mixes differently sometimes from a payables balance. And I think it's more about the mix of our purchases and where the true payables balance should be that caused a reduction in Q4. And we'll continue to look for opportunities there if it makes economic sense in our P&L to do that. But we're still sitting close to 80% of our COGS is on supply chain finance. We think right now, where we are with our vendors, we're in a good position, 2.4x to 2.6x is the right target range to ebb and flow on supply chain finance. Shane OKelly: Last point there, just on a big picture level, we had our annual conference Accelerate down in Orlando this year. And I would submit that our vendor relations are the best they've ever been. I continually meet with senior leaders from vendors who are behind our comeback and supporting us and the degree to which we're now working on innovative programs to help us grow. I feel great about the vendor community and Advance Auto Parts. Operator: The next question comes from Seth Sigman from Barclays. Seth Sigman: Nice progress. I wanted to ask first about the real estate. Can you talk about the impact that the store closings had on comps and margins in 2025? And then I guess, how are you thinking about the opportunity to optimize the store portfolio further from here? And maybe just in general, what are you seeing in terms of the gap in performance across the store base? Ryan Grimsland: Yes. So good question. The liquidation impact was about $51 million on the year. So we kind of walked the bridge to walk that back off of there, to give you a sense of what that looks like. So a little bit of an impact there. We also cycled over that. We had some liquidation impact in '24 in Q4 as well that had a little bit of a drag on that. No further closures we expect. So growing our new stores, we're significantly growing those new stores. Shane, you might want to... Shane OKelly: Yes. So when I came to the company, we had multiple real estate departments. Worldpac had a real estate department, independents, supply chain stores. And so we weren't cohesive about how and where we thought about building out in a market and opening a store. And you think about everything from construction or leases to fixtures to grand opening protocols. And so we've had a lot of effort going on. We've got a unified real estate program under a single leader. In '25, we opened a total of 35 NSOs. This year, we'll do 40 to 45. And by the way, we're opening NSOs in both the U.S. and Canada. And as we do that, think about in the wake of the closures, we think store density is important. So in the wake of the closures, we're #1 or #2 in 75% of our markets. So we want to expand concentrically in those markets where we have existing density and move down the road to the next part of the market. And we think that's a good play because it leverages the existing store base, the outside sales, the Pro customer relationships, the DC connectivity. And so we're getting better at it, and we're pleased with where we're going. Ryan Grimsland: And Seth, just to make sure we clarify, the closing stores were not in our comp numbers that we reported out. They are in our year-over-year. So that's why just giving you the dollar impact versus the comp impact. Seth Sigman: Was there a meaningful impact to the rest of the store base from closing those stores in terms of sales transfer? Ryan Grimsland: Yes. Pro comps did benefit but still positive even after the benefit. So we did have transfer sales from the Pro business that transferred to the new stores, actually outperformed our original expectations going into that work. But still, Pro is positive even if you back that out. Seth Sigman: Okay. And my other follow-up was just thinking about the 7% margin target. The prior guidance was for a lot of the margin progression to be back-end weighted and the annual gains would ramp really in the out years. Guidance now seems to imply bigger gains maybe upfront, and it's great that you're executing what you laid out for '25, and it seems like for '26 as well but maybe more gradual margin gains going forward. I guess what really drives that difference in the cadence? And I'm just wondering, is there any indication that maybe there's more reinvestment that's required here? Or is it just harder than you thought? Ryan Grimsland: Yes, I appreciate the question. So I still think 7% is the right medium-term target, and we're actually pleased with the progress so far, especially in merchandise and excellence and being able to get to a 45% gross profit margin, really driven in large part by the work the merchandising organization has done. And as a reminder, we talked about 500 basis points that we're going after here and about half of that was merchandise and excellence. And that work started in earnest underway this past year. There is 2 other pieces. And when we talked about it, kind of being back-end, weighted a little bit there, was in supply chain, was the biggest one back-end weighted, and that's because we had to get through the consolidation work. So we're working on getting the consolidation of supply chain down. We've now down to 16 DCs. We expect to be 15 by the end of next year. And once we get them consolidated, then we start working on the productivity within those boxes. And Ron on board, is diving in. And so that takes a little bit of time to work through. And then the store operations pillar, those are the primary -- right now, '26 is a primary investment year for both of those, supply chain and store operations, and then yield the benefit that will come out of it. Shane OKelly: Yes. Just touching on the pillars. As Ryan mentioned, pleased with the progress. We're controlling what we can control and moving forward on all 3 of those areas, merchandising, supply chain and store operations. A lot of great stuff coming on the store side as it relates to labor productivity, task simplification. We're investing in store technology and think about that as servers and POS and Zebra Devices. And then for many of our stores, just basic store appearance improvement. So we touched 1,600 stores last year. Think about that as paint, HVAC, parking lots, signage, racking. So feel good about that, and we'll touch another 1,000 stores this year, so making a better environment for our team members and for our customers. So all of that goes into creating progress that I would just say has been -- we're looking to be incrementally better every year in the business. Ryan Grimsland: And since those 2 big pillars, the supply chain and store operations, is a big investment year, a lot going on in those areas, '26 will really help inform what we really believe that cadence to be going forward, but we want to see '26 play out a little bit so we can have a better informed perspective. And if you look at the bridge we put out around our guidance, we're being very specific. We know we have line of sight to those numbers. That's why we gave a little more detail on that bridge, and we want to be able to continue to do that as we march towards 7%. Operator: The next question comes from Simeon Gutman from Morgan Stanley. Simeon Gutman: Nice job on the margin gains so far. My question -- first question is on margin. So thinking about the gross margin gains and even some of the SG&A leverage, can you talk about the execution risk in getting there? Do you have line of sight with the strategic sourcing? These are deals that are already made? Or is there a degree of which you have to execute in order to gain that level of gross margin throughout the year? Same question with SG&A. How do you both achieve this better service and availability with SG&A up so modestly for '26? Ryan Grimsland: Yes, Simeon, great. I'll start and let Shane chime in. On the merch side, we've got really good line of sight. We've made a lot of great progress this year. Some of that benefit is wrapping into next year. There's still some work to be done, but our merchandising organization led by Bruce Starnes has just done a phenomenal job this year executing against that. It's meeting the expectations we had. So some of it is already baked going into the year. Some of it is still work to be done. In fact, some of those conversations are already starting to work on 2027. So the execution has been solid, and we like to see -- we like seeing what's going on there. As far as the other 2 pillars we talked about, that's work that's being done this year, progress on the consolidation and supply chain has been great. And the reason I bring up supply chain, that's going to have a COGS benefit as well long term as we get more productive in that space. Anything you'd add? Shane OKelly: Yes, I would just say it's a mix. There are vendor contracts that we've signed that will create benefits. So that's not just line of sight, but we think we can tuck that in the run rate. But then we have discussions with the vendor where we haven't signed it, but feel good about it. I would highlight Smriti's assortment work where last year, we improved backroom availability, and we made sure we had left and rights that were matching brands, and we had full kits for different products. She's going to continue doing that. We're doing a better job as it relates to planograms and price changes. So there are certainly things that we have that we feel we can count on as it relates to going forward, but there are also things that we still have to achieve, but we have a plan against how we're going to go about it. And I'll just touch on it, you heard it from Ryan. We feel good about the leaders who sit in the seats. And from my perspective, we are done making changes on the core leadership team. And if you look at the executives that we now have in place, you'll see a mix. You see some internal promotions, you see some external hires, but they're each focused on those fundamentals in their particular area. And that gives me confidence around where we're going on your line of sight question. Ryan Grimsland: And Simeon, just to talk about the SG&A question. So a lot of the SG&A reduction, one has come from the rationalization of our store footprint in DCs but also indirect spend. We went through an initiative and really worked through indirect spend. So an example would be we're able to mitigate not all, but a good portion of inflation seen in our general liabilities, our health insurance, and also getting more productive in the spend. So the spend has not been all that productive. And we talked about reallocating our trucks to make sure they meet the right volume base. And we've talked about how we walked into a store and they've got 3 trucks, 2 of them haven't been started in months and don't start. They just need to get reallocated or reduced. So we found opportunities to reduce SG&A where it wasn't being productive. Now if you look on a like-for-like, so remove the cost of SG&A to support the liquidation sales and it's about $90 million, we're actually slightly increasing SG&A next year. And we're investing in labor. We're investing in new stores. We're investing in training. We're investing in the service element and reduction of tasks within our stores. So if we can reduce tasks that our associates are working on that are not productive and we can put more hours in front of a customer, that will be a benefit for us. So that's where we're investing SG&A next year. Simeon Gutman: Okay. A quick follow-up, the $100 million of free cash expected with the $300 million of CapEx, so roughly $400 million of operating cash. I'm sorry if I missed it, but can you just bridge your net income to get to that operating cash? Ryan Grimsland: Yes. So we are increasing -- so it is net income and your operating cash flow, you're about spot on. You're doing the math right. It's about $350 million is operating income driven out of that. Payables, working capital should be about a neutral. What you would expect, though, just given timing and seasonality of our free cash flow is our typical free cash flow seasonality, you'll see in Q1 a cash outflow and then you'll see Q2 through Q4, you'd see the cash inflow. And then remember, there's like $10 million to $20 million of closure expenses that -- from our previous restructuring that will flow into next year. So that will be in there. As we initially had said about $150 million of cash outflow for the strategic initiatives and store closures, about $10 million to $20 million is shifting over. we realized about $140 million this past year. So you see about $10 million to $20 million shifting. And that's really related to the leases and getting out of the old stores. So you should expect less volatility than we saw last year. Operator: The next question comes from Scot Ciccarelli from Truist. Unknown Analyst: This is [ Shervin ] on for Scott. You mentioned external macro factors acting as a headwind to sales. Can you quantify the sales headwind from DIY in your guidance? Like outside of smarter pricing, are there other initiatives you are helping -- like you're taking to help materialize what I would think is pent-up demand from past maintenance deferrals? Shane OKelly: Yes. So let me touch on -- Ryan can talk about the numbers. Well, let me talk macro and what we're doing. So if you look at the health of the consumer, first, we're in a great industry, right, number of cars, miles driven, age of fleet. So I think that's a good backdrop. But it has been interesting to watch the low-income consumer and to some degree, the mid-income consumer in recent weeks where there has been sort of negative general merchandise spending. Now the good news is 90% of our industry is kind of brake-fix. And so that's helpful. But the overall consumer sentiment in those 2 tranches has been negative, and I think it's manifesting in general merchandising spend. Now for us on DIY, we have a number of key things going on. First, we changed and improved our loyalty program. We have 16 million members in Advance Rewards, formerly Speed Perks. And we ditched parts of that program that were expensive for us, that weren't creating loyalty or sales. And think about that as the Fuel Rewards component. We also improved usability, and we issue coupons when you reach certain tiers, and we made it easy for redemptions to occur. Second, we introduced our own brand of oil and performance fluids, ARGOS, really excited about this. I spent a number of years in the oil business, and I understand both the quality of how you need to manufacture the products and how having your own brand can be very compelling. In the past, we had a different brand. By the way, there were royalties for that brand. That brand was in other retailers. That brand is associated with a parent company that's in financial difficulty. So the idea that we move to our own brand that we can control and we pulse the consumer in terms of what they wanted. They wanted the reliability, the value, the strength of the product. So that is going to be great. By the way, combine that with our other private brands. We've got Carquest, we've got DieHard. So we have a great portfolio of private brands that are about half of our sales. We've got stuff going on in marketing, e-commerce, assortment improvements, training and store experience, all of these things geared towards having us do better with the DIY customer going forward. Ryan Grimsland: And I'll just add a couple of data points as we think about it. Both Pro and DIY, we expect to contribute positively to comp growth with Pro outpacing DIY. A couple of things as we think about trends going into the year. First, last year, we spent a lot of time focusing on the Pro and getting the assortment right. You are now seeing us start to do and execute initiatives that we believe will have a positive impact on DIY. Just coming out of the quarter into Q1, DIY trends have remained stable to what we saw in Q4, in Q1 specifically. And we did see improvement sequentially throughout the quarter in our comp performance. In fact, the last period of P13 in Q4 was our highest Pro comp of the year. So some of the work that we're doing, the initiatives around assortment, we're seeing that take hold. So we're excited about the performance in Pro, but we also want to make traction on DIY in the year. Unknown Analyst: That's all helpful. And really quickly, you also mentioned on the call you could see another 100 basis points of operating income expansion in '27. Just curious what comp assumption that's on? Just trying to better understand the sales and earnings leverage relationship. Ryan Grimsland: Yes. Not necessarily giving guidance on the comp percent for that, but I would expect low single digits that we've given in the past. Operator: The next question comes from Bret Jordan at Jefferies. Bret Jordan: On the private label strategy, given the fact that you're rolling out ARGOS, are you expecting to drive private label higher than that 50% of your sales mix? Ryan Grimsland: No. Bret, I would say it should remain consistent. I mean it's replacing a brand that we kind of considered a private label, so kind of within that. It may inch up a little bit higher because we actually think this is a really good brand that can get some penetration. We think it's the right value offering in there. I think we'll be more competitive in that space. So maybe some minor movement, but we don't have any plans necessarily to significantly increase private penetration. We go category by category and what makes sense for the consumer and having the right assortment and brands for them. Bret Jordan: Great. And then on market hubs, could you remind us how many of your hubs that you have today were converted Carquest DCs versus greenfield and maybe what the pipeline of greenfield looks like? I think you said you're going to add 10, but maybe give us some sort of feeling as far as timing and what these things look like physically. Ryan Grimsland: Yes, Bret, more than 20 of our market hubs are conversions. So a good portion of them. We just started opening up our first greenfields this year, really excited about the greenfields. Going forward, the majority of those market hubs will be greenfield locations. Bret Jordan: Okay. And I guess when you think about the pipeline, which you have for identified properties and sort of you talked about 75,000 to 85,000 SKUs, what do we think about for like a square footage and what kind of capital goes into this box? Ryan Grimsland: Yes. The market hubs on average are roughly $2 million, but that does vary depending on whether that's like a build or a lease or takeover, so it varies. But right now, they average about $2 million for a market hub from a CapEx expense standpoint. Operator: The next question comes from Kate McShane of Goldman Sachs. Mark Jordan: This is Mark Jordan on for Kate McShane. As we think about the comp guidance of 1% to 2% for the year, can you break down how you think about ticket and transactions? Because I think if we look at the expectations for same SKU inflation to be 2% to 3%, I think that suggests either other impacts to ticket or some transaction pressure in the year. Ryan Grimsland: Yes. I mean, for the most part, the DIY transactions, we'd expect to be pressured and continued. Obviously, there's inflation embedded in this. So we talked about inflation. So there is a negative DIY transaction, not inconsistent with what we've seen in 2025. But we'd like to see and continue to drive positive transactions. We want to drive transaction growth in the Pro as well. But I would expect that this is a slightly low single-digit transaction and inflation driving it positive. But really, the pressure is on the DIY side there. Nothing significantly different from the trends that we see today. Mark Jordan: Okay. Perfect. And then as we think about the cadence throughout the year, obviously, first half is stronger due to the inflation benefits. But how should we think about maybe some tailwinds from the recent weather events? Are you seeing anything quarter-to-date on transactions that maybe looks encouraging? Ryan Grimsland: So I mean, that's -- the weather is an interesting -- we are seeing weather categories positive. But then also, there's the offset of those categories that are impacted negatively by weather. So it's been fairly neutral so far. Our current trends within the quarter are within our guidance. So we are seeing some good performance there. But failure items, like batteries, those are doing well, but maintenance items, cooler weathers that has an impact. We do expect trends to improve as weather kind of normalizes. The Northeast, Mid-Atlantic, those have been impacted by the storms. I'd say prior to storm burn, if you guys remember storm burn, big deal, we did have an initial buildup of sales. But post the storm, a portion of our stores were closed. So there's that mix. So you got to get past the store closures, and you see some of the weather rebound. But right now, we're tracking in line with our guidance range. Operator: Our final question today will come from Zach Fadem of Wells Fargo. Zachary Fadem: I want to make sure I understand your vendor finance commentary is. It sounds like you're taking suppliers off the program and generating better gross margins from those vendors, but that also translates to weaker free cash flow due to the impact of payables. So first of all, is that right? And is that the game plan going forward from here? Ryan Grimsland: Yes. No impact on gross margin just yet. We don't have a specific target or game plan to go do that. We like our supply chain finance program. Our vendors like it. It's very stable after what we've done this past year with the new structure. This is more of -- it is a lever and an option that we could pull as we're talking to vendors, and we evaluate that, but we would evaluate any other negotiation. The supply chain finance program is stable. It's in place. We like it. But there's no concerted effort that says we are going to reduce it any further. The vendors like that program. If they do come off the program, we would fully expect a positive improvement to our cost of goods, right? Because they're paying to be on the program, we would want a positive impact for us. That's an investment of working capital. And so we do the math and we want to make sure it makes economic sense to our P&L. If we do move them off that program at a greater rate, it would be -- we would expect a P&L positive impact from it. But right now, we think it's stable, and the program at 2.5x, so anywhere between 2.4x and 2.6x based on payables throughout the year is where we expect it to be. There's nothing in the works right now that would indicate a difference in approach. Zachary Fadem: Got it. And then a couple of clarifications or housekeeping items. First of all, any expectation for LIFO capitalized inventory costs in Q1 and '26? Same thing with restructuring costs in Q1 or '26. And it also sounds like Pro comps benefited in '25 from store closures. Any quantification there as we think about '26? Ryan Grimsland: Yes. So I'll hit the first one on LIFO. On LIFO, in '25, we had about 40 basis points of headwind. In '26, in our guidance, it's in our guidance, we expect about 50 basis points of headwind. And in Q1 specifically, we're expecting about $30 million of headwind related to LIFO. Now the warehouse capitalization cost in there, we expect to be flat as we expect inventory to be roughly flat year-over-year. So don't expect an impact on that. But LIFO expense for '26, which is in our guidance, about 50 basis points of headwind that we'll see. On the other one, we haven't quantified externally what it is. What I'd just say is that we did get Pro transfer sales in our comps this past year. Pro would still have been positive net of that transfer sales. So we like how the team executed moving those accounts to the new sister stores. They did a great job in maintaining the service levels with those Pro customers and actually overdelivered our expectation on it, and they're servicing those Pros really strongly. I think the initiatives we have, the new assortment, the service level improvement really helps drive our Pro comps even above that. And we like how that's positioning us going into the year. Operator: This concludes today's Q&A session. So I'll hand the call back to CEO, Shane O'Kelly, for any closing comments. Shane OKelly: Thank you, everybody, for participating in today's call. More importantly, thank you to all of the Advance Auto Parts team members. It's their hard work that we rely on to deliver the results. We appreciate everything that they do. We look forward to sharing our Q1 results in May, and stay tuned for those when they come. Thanks, everybody. Take care. Bye-bye. Operator: This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.